Professional Services Contract – MARK THOMAS AND COMPANY, INC. – PROJECT NO. WT24030 (Updated 04/24/23)
indemnify, and hold harmless the City of Stockton, its officers, officials, employees, and volunteers from and against any and all claims and causes of action which result in liabilities, judgments, awards, losses, damages, expenses, and costs (including reasonable attorneys’ fees, expert and consultant fees, and other expenses of litigation) including, but not limited to, death or injury to persons, or damage to property, which arise out of any violation of federal, state, or municipal law or ordinance, to the extent damages are caused by the Consultant’s negligent services provided under this Agreement, or are in any way caused by the negligent performance of work by the Consultant or Consultant’s officers, agents, employees, or subcontractors. Consultant shall not be obligated to indemnify or defend City for claims finally determined by a court of law or arbitrator to arise from the 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 Consultant to City, the intent hereunder is to provide the maximum defense and indemnity obligations allowed by Consultant 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 the exception that this section shall in no event be construed to require indemnification by Consultant 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, Consultant shall indemnify, defend, and hold harmless the City of Stockton, its officers, officials, employees, and volunteers from and against claims, losses, expenses, and costs including, but not limited to, reasonable attorneys’ fees, arising out of any claim brought against the City by an employee of Consultant, regardless of whether such claim may be covered by any applicable workers compensation insurance.
Consultant’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 Consultant under workers’ compensation acts, disability acts, or other employee benefit acts.
5. SCHEDULE AND TERM. Consultant shall perform the scope of work as described in Exhibit A according to the schedule detailed in Exhibit A, which is attached to this Contract and incorporated by this reference. This Contract shall commence on the date written above and shall expire on August 31, 2028, unless extended by mutual agreement through the issuance of a Contract Amendment. a. Invoices submitted by Consultant to City must contain a brief description of work performed, time used, and include the City project number. Payment shall be made within thirty (30) days of approval of invoice by City. b. Upon completion of work and acceptance by City, Consultant shall have sixty (60) days in which to submit final invoicing for payment. An extension may be granted by City upon receiving a written request thirty (30) days in advance of said time limitation. City shall have no obligation or liability to pay any invoice for work performed which Consultant fails or neglects to
Professional Services Contract – MARK THOMAS AND COMPANY, INC. – PROJECT NO. WT24030 (Updated 04/24/23)
submit within sixty (60) days, or any extension thereof granted by the City, after work is accepted by City.
6. CONFORMANCE TO APPLICABLE LAWS. Consultant shall comply with all applicable federal, State, and Municipal laws, rules, and ordinances. Consultant 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 D). 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.xht ml?lawCode=LAB&division=2.&title=&part=7.&chapter=1.&article=2. d. PREVAILING WAGE RATES
Consultant 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
Professional Services Contract – MARK THOMAS AND COMPANY, INC. – PROJECT NO. WT24030 (Updated 04/24/23)
determined the general prevailing rates of wages 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 authorized by Section 3093 and similar purposes applicable to the work to be done. Consultant 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 Consultant and each subcontractor's responsibility to ensure that the prevailing wage rates of concern is current and paid to the employee.
i. The Consultant 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.p df. The Consultant shall be responsible for posting said wage rates at a prominent location at the work site and shall maintain same in a good readable condition for the duration of the work.
ii. Should the Consultant choose to work on a Saturday, Sunday or on a holiday recognized by the Labor Unions, the Consultant 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 Consultant, 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. PAYROLL RECORDS - The Consultant to whom the contract is awarded shall ensure 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 Consultant’s responsibility to obtain copies of the current prevailing wage rate determination for all
Professional Services Contract – MARK THOMAS AND COMPANY, INC. – PROJECT NO. WT24030 (Updated 04/24/23)
subcontractors. Additionally, certified payroll records must be uploaded to the DIR website as required by labor code.
iv. APPRENTICESHIP STANDARDS - The Consultant 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. SANCTIONS
Deliverables must conform with all applicable federal, state, and local laws.
Such conformity includes compliance with federal sanctions, and Contractor certifies that it has not and will not engage in prohibited transactions with sanctioned persons or entities.
7. RIGHTS AND DUTIES OF CITY. City shall make available to Consultant all data and information in the possession of City which both parties deem necessary to complete the work, and City shall actively aid and assist Consultant in obtaining such information as may be deemed necessary from other agencies and individuals.
8. OBLIGATIONS OF CONSULTANT. Throughout the term of this Contract, Consultant represents and warrants that it has or will have at the time this Contract is executed, all licenses, permits, qualifications, insurance, and approvals of whatsoever nature which are legally required for the Consultant to practice its professions, and Consultant shall, at its own cost and expense, keep in effect during the life of this Contract all such licenses, permits, qualifications, insurance, and approvals. Consultant shall meet with the Public Works Director or other personnel of City or third parties as necessary on all matters connected with the carrying out of Consultant’s services. Such meetings shall be held at the request of either party hereto. Consultant further warrants that it will follow the best current, generally accepted and professional practices to make findings, render opinions, prepare factual presentations, and provide professional advice and recommendations regarding this project.
9. OWNERSHIP OF WORK. All reports, drawings, designs, plan review comments, work product, and all other documents completed or partially completed by Consultant in the performance of this Contract shall become and remain the property of the City. Any and all copyrightable subject matter in all materials is hereby assigned to the City and the Consultant agrees to execute any additional documents that may be necessary to evidence such assignment. All materials shall be delivered to the City upon completion or termination of the work under this Contract. If any materials are lost, damaged, or destroyed before final delivery to the City, the Consultant shall replace them at its own expense. Consultant shall keep materials confidential. Materials shall not be used for purposes other than performance of services under this Contract and shall not
Professional Services Contract – MARK THOMAS AND COMPANY, INC. – PROJECT NO. WT24030 (Updated 04/24/23)
be disclosed to anyone not connected with these services unless the City expressly provides prior written consent.
10. CONTRACT AMENDMENTS. City reserves the right to make such alterations as may be deemed necessary or advisable and to require such extra work as may be required for the proper completion of the work contemplated by Consultant. Any such changes will be set forth in a Contract Amendment 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 Amendment will not become effective until approved by the authorized City official.
11. TERMINATION. The City may terminate this Contract at any time by mailing a notice in writing to Consultant. The Contract shall then be deemed terminated and no further work shall be performed by Consultant. If the Contract is so terminated, the Consultant shall be paid for that percentage of work actually completed at the time the notice of termination is received.
12. CONSULTANT STATUS. In performing the obligations set forth in this Contract, Consultant shall have the status of an independent contractor and Consultant shall not be considered to be an employee of the City for any purpose. All persons working for or under the direction of Consultant are its agents and employees, and are not agents of the City. Subcontractors shall not be recognized as having any direct or contractual relationship with the City. The persons engaged in the work, including employees of subcontractors and suppliers, will be considered employees of Consultant.
The Consultant shall be responsible for the work of subcontractors, which shall be subject to the provisions of this Contract. The Consultant is responsible to the City for the acts and omissions of its subcontractors and persons directly or indirectly employed by them. a. If in the performance of this Contract any third persons are employed by Consultant, such persons shall be entirely and exclusively under the direction, supervision, and control of Consultant. All terms of employment including hours, wages, working conditions, discipline, hiring, and discharging or any other term of employment or requirement of law shall be determined by Consultant.
i. It is further understood and agreed that Consultant must issue W-2 forms or other forms as required by law for income and employment tax purposes for all of Consultant’s personnel.
ii. As an independent contractor, Consultant hereby indemnifies and holds City harmless from any and all claims that may be made against the City based upon any contention by any third party that employer-employee relationship exists by reason of this Contract.
Professional Services Contract – MARK THOMAS AND COMPANY, INC. – PROJECT NO. WT24030 (Updated 04/24/23)
13. ASSIGNMENT. Consultant shall not assign, sublet, or transfer this Contract or any interest or obligation in the Contract without the prior written consent of the City, and then only upon such terms and conditions as City may set forth in writing. Consultant shall be solely responsible for reimbursing subcontractors.
14. HEADINGS NOT CONTROLLING. Headings used in the Contract are for reference purposes only and shall not be considered in construing this Contract.
15. NOTICES. Any and all notices herein required shall be in writing and shall be sent by certified or registered mail, postage prepaid, addressed as follows:
To Consultant: Mark Thomas and Co., Inc. To City: Public Works Director 701 University Avenue City of Stockton
Suite 200 22 E. Weber Ave., Rm. 301
Sacramento, CA 95825 Stockton, CA 95202
16. LICENSES, CERTIFICATIONS, AND PERMITS. Prior to the City’s execution of this Contract and prior to the Consultant’s engaging in any operation or activity set forth in this Contract, Consultant shall obtain a City of Stockton business license, which must be kept in effect during the term of this Contract. Consultant covenants that it has obtained all certificates, licenses, permits and the like required to perform the services under this Contract.
17. RECORDS AND AUDITS. City reserves the right to periodically audit all charges made by Consultant to City for services under this Contract. Upon request, Consultant agrees to furnish City, or a designated representative, with necessary information and assistance.
Consultant agrees that City or its delegate shall have the right to review, obtain, and copy all records pertaining to performance of the Contract. Consultant 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 purposes of determining compliance with this Contract. Consultant agrees to maintain such records for a period of three years from the date that final payment is made.
18. CONFIDENTIALITY. Consultant shall exercise reasonable precautions to prevent the unauthorized disclosure and use of City reports, information or conclusions.
19. CONFLICTS OF INTEREST. Consultant covenants that other than this Contract, Consultant has no financial interest with any official, employee, or other representative of the City. Consultant and its principals do not have any financial interest in real property, sources of income or investment that would be affected in any manner
Professional Services Contract – MARK THOMAS AND COMPANY, INC. – PROJECT NO. WT24030 (Updated 04/24/23)
or degree by the performance of Consultant’s services under this Contract. If such an interest arises, Consultant will immediately notify City.
20. WAIVER. In the event either City or Consultant at any time waive any breach of this Contract by the other, such waiver shall not constitute a waiver of any other or succeeding breach of this Contract, whether of the same or of any other covenant, condition, or obligation.
21. GOVERNING LAW. California law shall govern any legal action pursuant to this Agreement with venue for all claims in the Superior Court of the County of San Joaquin, Stockton Branch or, where applicable, in the federal District Court of California, Eastern District, Sacramento Division.
22. NO PERSONAL LIABILITY. No official or employee of City shall be personally liable to Consultant in the event of any default or breach by City or for any amount due Consultant.
23. INTEGRATION AND MODIFICATION. The response by Consultant to the Request for Proposals and the Request for Proposals on file with the City Clerk are hereby incorporated herein by reference to the extent that such documents do not differ from the provisions and terms of this Contract that shall supersede such response to Request for Proposals. This Contract represents the entire integrated agreement between Consultant and City, supersedes all prior negotiations, representations, or agreements, either written or oral, between the parties, and may be amended only by written instrument signed by Consultant and City. All exhibits and this contract are intended to be construed as a single document. Should any inconsistency occur between the specific terms of this Contract and the attached exhibits, the terms of this Contract will prevail.
24. SEVERABILITY. The provisions of this Contract are severable to the extent that should any of its provisions or terms be declared void in whole or in part by operation of law or agreement of the parties, the remainder of the provisions or terms not expressly declared void shall remain enforceable and in full effect.
25. THIRD PARTY RIGHTS. Nothing in this Contract shall be construed to give any rights or benefits to anyone other than City and Consultant.
26. AUTHORITY. The undersigned hereby represent and warrant that they are authorized by the parties to execute this Contract.
//
//
//
//
//
//
//
EXHIBIT 2 875
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
WORK PLAN SCOPE
The Mark Thomas team has successfully delivered PA&ED projects across the state and within the San Joaquin Valley.
With this experience and knowledge, we’ve developed a detailed work plan that addresses critical and non-critical tasks needed to complete a streamlined PA&ED and 50% design.
TASK 1. PROJECT MANAGEMENT – MARK THOMAS
Mark Thomas will manage the project team and Mark Thomas’s Project Manager will plan, organize, direct, and monitor project work activities and resources in accordance with contracted scope, schedule, and budget. This task will include managing the team, coordinating with the City of Stockton (City), and includes preparing contract paperwork, memos, letters, and emails along with making phone calls and maintaining project files. These activities commence with receiving the Notice-To-Proceed and continue through submittal of the key final project deliverables. The PA&ED is anticipated to take 14 months with an additional 4 months for 50% design for a total of 18 months.
Task 1.1. Project Administration
This task will include managing subconsultant contracts and planning ahead for milestones requiring joint project team efforts. Our project manager will develop and maintain a project schedule, prepare monthly invoices and progress reports, and maintain project files. The monthly progress report will include a summary report of progress, including schedule and budget notes. The project schedule will be updated on a monthly basis.
Mark Thomas will manage the project team which includes general project coordination with the City, preparing contract paperwork, memo’s, letters and emails along with making phone calls, preparing invoices and monthly progress report and maintaining project files. We will update the Critical Path Schedule (CPM) on a monthly basis to track performance and identify issues that could either delay or accelerate the schedule. Each submittal will clearly be shown in the CPM and tracked for internal progress and external review periods. The CPM will be presented as a discussion item at each Project Development Team (PDT) meeting.
Task 1.2. Meetings and Coordination
This task includes coordinating and scheduling meetings, periodically checking in on subconsultant progress, and assisting in communication between team members, City, and other stakeholders. Mark Thomas will attend a project kickoff meeting with the City and hold up to twelve (12) Project Development Team (PDT) meetings and four (4) technical focus meetings with City staff to keep the project on track.
Mark Thomas working with City staff will establish a Project Development Team (PDT) that will include members of the design team, City, SJRRC, and other individuals critical to the project delivery. This task includes preparing agendas and summarizing meeting notes and action items. Action items will be tracked until resolved. This scope assumes a total of 14 meetings over the anticipated 14-month schedule. The majority of the meetings will be conducted virtually. A few meetings will be face-to-face and for budget purposes it is assumed that three will be face-to-face.
EXHIBIT A Page 10 of 48 EXHIBIT 2 876
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
Task 1.3. Quality Assurance / Quality Control
Mark Thomas will use their in-house specific Quality Management Plan that describes the quality procedures that will be implemented for work performed during the development, review, and approval of the PR. This task also includes performing QA/QC work on project milestone deliverables.
TASK 1 DELIVERABLES:
• Project Schedule with monthly updates (up to 14)
• Monthly invoices and progress reports (up to 14)
• Meeting Agendas and Minutes for Kickoff Meeting:
o 1 Kick-off Meeting
o 12 PDT Meetings
o 4 technical focus meetings
• QA/QC documentation
Deliverables to be submitted in .pdf format unless specifically stated otherwise TASK 2. BACKGROUND RESEARCH
The Mark Thomas team will gather and compile available data into a base map to be used as a starting point for the preliminary engineering and environmental studies. Some survey control and photogrammetric topography has been completed as a part the previous project phase and is assumed it can be used for the PA&ED. However, if this information is not available, the project will use GIS level surveys for design and right-of-way.
Task 2.1. Data Collection – MARK THOMAS / HDR
The Mark Thomas team will gather and review available existing information and reports relevant to the project site, history, and planning context from the City, UPRR/BNSF and other local agencies. These may include as-built plans, utility maps, City planning documents, previous study reports, Stockton Diamond Project plans, and local and regional funding plans. Our team will compile record information, Assessor’s Parcel Maps and GIS to depict the approximate location of the existing right of way, property lines, and easements. We assume the City will provide copies of all relevant record maps.
Task 2.2. Base Map – MARK THOMAS
In order to advance design beyond PA&ED phase, budget is earmarked for design in this phase of work and supplemental surveys and mapping will be conducted in the subsequent phase of work for the 65% design phase. The existing aerial mapping and GIS mapping will be compiled into an Electronic Base Map. This will be in AutoCAD format.
TASK 2 DELIVERABLES:
• Compiled existing topography supplemented with GIS mapping – not a separate deliverable but is included with preliminary engineering plans
Deliverables to be submitted in .pdf format unless specifically stated otherwise EXHIBIT A Page 11 of 48 EXHIBIT 2 877
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
TASK 3. ENVIRONMENTAL SERVICES
Task 3.1. Environmental Documentation (CEQA/NEPA) - LSA CEQA Compliance
LSA will work with the City as the CEQA lead agency to provide clearance pursuant to the California Environmental Quality Act (CEQA). The State Legislature established that CEQA environmental review provisions do not apply to a railroad grade separation project that reconstructs an existing grade crossing (CEQA Guidelines Section 15282(g). The project would reconstruct the western Union Pacific Railroad bridge grade separation at Dr. MLK Jr. Boulevard; therefore, the project qualifies for a Statutory Exemption. LSA will prepare a Notice of Exemption (NOE) for review and approval by the City, and upon approval, LSA will file the signed NOE with the San Joaquin County Clerk’s Office. The City will be responsible for the appropriate filing fees.
Note: Although it is not anticipated, but if it is determined that the project does not qualify for a Statutory Exemption due to inclusion of extenuating project components requiring CEQA evaluation, documentation for clearance of the project under CEQA will be prepared but it will be considered additional work and a revised scope and budget would need to be evaluated and negotiated.
NEPA Compliance
The project could utilize federal transportation funds and would therefore require environmental clearance under NEPA as well as CEQA clearance. This scope of work assumes that Caltrans will be the NEPA lead agency under their Memorandum of Understanding with the Federal Highway Administration. 23 CFR 771.117 defines the class of actions that may quality for Categorical Exclusions (CE) under NEPA. CEs are divided into two groups based on the action's potential for impacts. The first group consists of categories of actions that experience has shown almost never cause significant environmental impacts. These categories involve minor construction activities and activities that do not lead to construction. They are listed in subsection (c) of 23 CFR 771.117.
These actions are automatically classified as CEs, except where unusual circumstances occur. The 771.117 (c) list, item number 3 includes the following class of actions:
“Construction of bicycle and pedestrian lanes, paths, and facilities.” While the project will demolish the old railroad bridge and associated facilities, and reconstruct Dr. MLK Jr. Boulevard, the primary purpose of the project is to provide modern, safe, and accessible facilities for all modes of transportation, including bicycles and pedestrians. The new Dr. MLK Jr. Boulevard will provide new and uninterrupted connectivity of communities east and west of the railroad corridor.
FHWA regulation 23 CFR 771.117(b) provides that any action which normally would be classified as a CE but could involve unusual circumstances require Caltrans to conduct appropriate environmental studies to determine whether a categorical exclusion is proper. Unusual circumstances include actions that involve:
Significant environmental impacts;
Substantial controversy on environmental grounds;
Significant impact to properties protected under 4(f) of the USDOT Act or section 106 National Historic Preservation Act; and Inconsistencies with any federal, State, or local law relating to environmental impacts.
EXHIBIT A Page 12 of 48 EXHIBIT 2 878
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
To evaluate whether any unusual circumstance exist with the proposed project, the LSA team will prepare the Draft and Final PES form. The PES form will be based on information data provided by various sources that include the City of Stockton. SJRRC, Stockton Diamond, site visits, and records searches . The PES will assist in scoping the level of environmental documentation needed for the proposed project. The PES will be prepared per the requirements of Chapter 6 of the Caltrans Local Assistance Procedures Manual (LAPM) and the Caltrans SER web site (June 2021). The completed PES form will include both the PES Checklist (Parts A and B) and typed responses to the checklist questions to support the conclusions in the PES.
LSA will prepare the final PES based on comments from the City, SJRRC, and Caltrans and submit the Draft Final PES to the City, SJRRC, and Caltrans for review. Following Caltrans review, LSA will revise the PES per Caltrans comments and submit the PES to Caltrans for signature and approval. The Final signed PES will be distributed to the City, SJRRC, Mark Thomas, and Caltrans.
Task 3.2. Technical Studies
Task 3.2.1. Community Impacts Assessment (CIA) Memorandum - LSA The LSA team will prepare a CIA memorandum that analyzes social, economic, public services, land use and growth impacts in accordance with the current guidance from Caltrans (July 2022 or the current guidance at the time of initiation of the CIA memorandum). The memorandum will also consider whether the project might affect environmental justice communities, local land uses, businesses, neighborhoods/social cohesion, and the delivery of public services. The project is anticipated to result in a potential beneficial impact by improving bicycle and pedestrian facilities thereby improving connectivity between the communities east and west of the railroad corridor. The project is not expected to result in growth inducement. This topic will be addressed at a qualitative level in the CIA memorandum.
Task 3.2.2. Minor Visual Impact Assessment (VIA) – LSA/MARK THOMAS LSA will prepare a Minor VIA in coordination with the Mark Thomas landscape architect, according to the most recent Caltrans Minor VIA annotated outline (August 2023 or the current guidance at the time of initiation of the Minor VIA).
LSA assumes that no visual simulations will be required to support the minor VIA.
Task 3.2.3. Archaeological Survey Report, Historic Resource Evaluation, and Historic Property Survey Report - LSA
As required by Caltrans, LSA proposes to conduct cultural resource studies for the Dr. MLK Jr. Boulevard Underpass Project, Stockton, San Joaquin County, California. These studies are needed for the City of Stockton (City) and the California Department of Transportation (Caltrans) to comply with Section 106 of the National Historic Preservation Act, the Programmatic Agreement Among The Federal Highway Administration, the Advisory Council on Historic Preservation, the California State Historic Preservation Officer, and the California Department of Transportation Regarding Compliance with Section 106 of the National Historic Preservation Act, as it Pertains to the Administration of the Federal-Aid Highway Program in California. Caltrans is the lead agency for Section 106 compliance.
The following tasks will be completed:
EXHIBIT A Page 13 of 48 EXHIBIT 2 879
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
• Area of Potential Effects (APE) Map. LSA will develop an APE map depicting the construction footprint of the project. The APE is defined as the area within which an undertaking may directly or indirectly cause changes in the character or use of historic properties, should any be present. • Record Search. LSA will request an archaeological and historical records review and literature search at the Central California Information Center (CCIC) of the California Historical Resources Information System. The CCIC is an affiliate of the State of California Office of Historic Preservation and is the official state repository of cultural resource reports and records for San Joaquin County. The records search will include a 0.5-mile radius search area around the APE. The objectives of this archival research will be to: (1) establish the status and extent of previously recorded sites, surveys, and excavations in and adjacent to the APE; and (2) note what site types might be expected to occur within the APE based on the existing data from archaeological sites located within
0.5 mile of the APE. LSA will conduct outreach to individuals or historical societies, including the San Joaquin County Historical Society & Museum in Lodi and the Haggin Museum in Stockton, for any information they may have about cultural resources in the APE.
• Survey and Report. A qualified archaeologist will do a field survey of the direct impact portion of the APE, then prepare an Archaeological Survey Report (ASR) and Historic Property Survey Report (HPSR) to Caltrans standards as outlined in the Caltrans Standard Environmental Reference (SER) Volume 2: Cultural Resources (ASR: June 2021 and HPSR: June 2022 or the current guidance at the time of initiation of the ASR and HPSR).
These documents will be used by Caltrans in support of their Section 106 consultation requirements with SHPO.
In addition, LSA will draft outreach letters to Native American tribes, based on a list received from the Native American Heritage Commission. LSA will mail the approved letters and track responses from tribes.
Task 3.2.4. Area of Potential Effect (APE) – LSA/MARK THOMAS In addition to what was identified in the previous task, the Mark Thomas team will work with City to develop an APE map that encompasses the entire project area and indirect parcels that could be impacted by the project. This includes both permanent and temporary impacts.
Task 3.2.5. Initial Site Assessment (ISA) - LSA
Blackburn will complete a Phase I Environmental Site Assessment (Phase I ESA) to assess whether potential sources or indications of hazardous materials conditions are present within or adjacent to the Project area. Blackburn will complete the Phase I ESA in general accordance with ASTM E1527-21 “Standard Practice for Environmental Site Assessment:
Phase I Environmental Site Assessment Process” requirements by performing the following tasks:
Task 3.2.5.1. Project Coordination and Site Review
Blackburn will review the Area of Potential Effects (APE) Map with the project design team (and will review previous environmental documents for the project area, as made available by others.
Task 3.2.5.2. Records and Published Literature Review, Site Reconnaissance, and Owner Interview Blackburn will review published literature for general geology and groundwater conditions at the project. Blackburn will also review on-line regulatory databases GeoTracker (State Water Resources Control Board) and EnviroStor (Department of Toxic Substances Control (DTSC)) to determine if known impacts and/or previous environmental data exists for the project area. Blackburn will conduct interview(s) with available people knowledgeable about project area EXHIBIT A Page 14 of 48 EXHIBIT 2 880
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
history to evaluate potential environmental conditions (as contact information is provided by others). A site reconnaissance will be conducted to observe current land use and indications of potential hazardous material contamination on or adjacent to the project. We assume any required right-of-entry will be obtained by others. The site reconnaissance includes documentation of areas showing evidence of surface staining, storage, dumping, handling, and mixing areas for hazardous materials (such as pesticides and fuel products), and apparent locations of fuel tanks and wells.
Task 3.2.5.3. Historical Research
Blackburn will review historical aerial photography, topographic maps, and Sanborn Maps covering the project and surrounding areas for indications of sources for potential contamination. Blackburn will also conduct a review of a commercial database including federal, state, and county records for indications of the use, misuse, or storage of hazardous and/or potentially hazardous materials on or near the project. Based on the historical research, Blackburn will attempt to identify past and present operations conducted on or adjacent to the Project area to assess the potential for hazardous material impacts.
Task 3.2.5.4. Report
Blackburn will prepare a Phase 1 ESA report (one draft and one final) that includes:
Project and site descriptions.
General geology, groundwater, and surface/subsurface conditions. Findings of our document reviews, owner interviews, site reconnaissance, historical evaluations, and regulatory records reviews.
Location and general extent of known or suspected contamination on or adjacent to the Project, as applicable. Recommendations for further investigation and analysis, if necessary. Limitations of the report.
Vicinity and site maps.
Photo report of general site conditions.
Task 3.2.6. Noise Technical Memorandum - LSA
LSA will prepare a Noise Technical Memorandum for the project. LSA will review applicable noise criteria for the proposed project and surrounding area, including noise standards identified in the Municipal Code and the Caltrans Standard Specifications.
Should it be determined that the project is considered a Type I Project, a detailed noise impact analysis and associated Noise Study Report would be required. However, based on our understanding that this is a Type III Project and based upon Caltrans’ Protocol requirements, LSA will prepare a brief technical memorandum addressing construction noise impacts.
The technical memorandum will document the existing project site conditions relative to noise including the regulatory environment and the physical existing conditions. LSA will identify the applicable State of California and City noise standards. Noise impacts during construction on the project site will be analyzed based on available project specific construction information provided to LSA. United States Environmental Protection Agency (EPA) recommended noise emission levels will be used to calculate the noise levels of equipment used during the construction duration. Impacts resulting from construction noise will be evaluated in terms of maximum levels (Lmax) and/or hourly equivalent EXHIBIT A Page 15 of 48 EXHIBIT 2 881
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
continuous noise levels (Leq) and their frequency of occurrence. Based on the equipment noise levels and applicable noise standards, LSA will recommend noise abatement measures to be implemented during project construction.
LSA has budgeted 4 hours for responding to comments generated during review of the Noise Memorandum.
Task 3.2.7. Biological Compliance Technical Memorandum - LSA Prior to visiting the project area, LSA will obtain a list of special-status species from the California Department of Fish and Wildlife California Natural Diversity Database, the California Native Plant Society Inventory of Rare and Endangered Plants, and the U.S. Fish and Wildlife Service Information for Planning and Consultation (IPaC) online database. LSA will then conduct a biological resources reconnaissance-level survey to document current site conditions and assess the potential for occurrence of special-status plant and animal species and sensitive habitat. The survey will include the project area as well as any staging areas and access points or roads. Based on the project’s location within a largely industrial environment, the occurrence of special-status species, sensitive habitat, and aquatic features potentially subject to regulatory jurisdiction (e.g., wetlands or other waters of the United States) is highly unlikely. Tree pruning/removal and potential impacts to nesting birds and roosting bats will likely be the primary biological constraints for this project. This scope of work does not include a formal tree survey; however, if desired, an LSA arborist can conduct a tree survey of the project site under a separate scope and fee.
LSA will document the results of the database review and biological reconnaissance survey in a Biological Compliance Technical Memorandum according to Caltrans format (July 2010 or the current guidance at the time of initiation of the Biological Compliance Technical Memorandum). Based on the documentation of existing conditions within the project area (including potential habitat for special-status plants and/or animals), LSA will identify potential impacts from the proposed project (including impacts to nesting birds and trees) and identify minimization and avoidance measures to be included in the draft Technical Memorandum. LSA will prepare a preliminary draft Technical Memorandum for submittal to the City and/or other members of the project team for review. Following the internal review, the draft Technical Memorandum will be finalized and submitted to Caltrans for review. Following revisions to the draft Technical Memorandum, the final Technical Memorandum will be prepared and submitted to Caltrans.
The scope summarized above assumes that a Biological Compliance Technical Memorandum will be the appropriate level of biological report required to meet Caltrans’ requirements. If additional resource constraints or impacts are identified that would elevate the report requirements to a Natural Environment Study – Minimal Impacts (NES-MI) or standard Natural Environment Study (NES), a budget augment would be required. A formal delineation of waters of the United States/State is not included as part of this scope of work.
Task 3.3. NEPA CE – LSA
Based on the technical reports identified above, LSA will prepare a Draft CE checklist, determination, and continuation sheets for Caltrans review. LSA will respond to up to two (2) rounds of Caltrans comments on the CE submittal package.
Approval and issuance of the CE will constitute completion of this task.
TASK 3 DELIVERABLES:
• CEQA NOE
• PES Form
• CIA Memo
• Minor VIA
• ASR
• HRER
EXHIBIT A Page 16 of 48 EXHIBIT 2 882
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
• HPSR
• ISA
• ACM/LBP Assessment (Optional)
• Noise Memo
• NEPA CE
• Deliverables to be submitted in .pdf format unless specifically stated otherwise TASK 4. UTILITY AND RAIL COORDINATION
Task 4.1. Existing Utility Mapping - HDR
HDR will work with utility providers to request information regarding their utility facilities within the project area. We will compile existing and available data and incorporate it into the utility base map. HDR’s utility coordination tasks during the development of the PA/ED will include the following:
• Prepare a project limits map with will be sent to each utility owner with a request for their facilities information mapping or to confirm that they do not have facilities within the project area. • Prepare Utility Letters “A” to be sent to each utility owner who could have facilities within the project area. The letters will be drafted on City letter head or if the City prefers, HDR will provide the letters in Word format for the City to place on their letter head. HDR will send the completed letters along with the project limits map to each utility owner.
• Add the utility information received from the owners to the utility base map. If provided by the utility owners, the utility base map will include the size, capacity, and/or operating pressure for each facility. If elevation data is provided it will be included in the utility base plans.
Note: Potholing is not included in this phase of work but will be included in the final design. At this time, meetings with utility owners are not anticipated in the PA/ED phase of work but will be included in the final design phase.
Task 4.2. Rail Coordination- HDR
To support railroad engagement and activities to be developed during the MLK Jr. Drive Bridge PA&ED, HDR will coordinate with freight railroad UP and passenger rail tenant SJRRC/ACE to solicit key inputs that will drive project development. Discussion topics with UP and SJRRC/ACE would include:
• Initial project approach and schedule discussion to align City of Stockton, and SJRRC/ACE to identify preliminary needs, issues, challenges, and opportunities before PA/ED activities commence. • Current and anticipated future railroad operations (including corridor-specific observations and local rail yard functionality), requirements for connectivity between railroads and railroad lines for interoperability and interchange at Stockton and needs for access to the area rail network (BNSF and Central California Traction interchange traffic with UP immediately north of the bridge). • Engineering requirements for the project, including for example, acceptable curvature for main tracks designed on the replacement structure and approaches, or on connection tracks between main tracks and yards and between the main tracks of various railroads; bridge and structure types; and drainage considerations. • Coordination and correspondence with separate SJRRC Stockton Diamond Grade Separation Project, which proposes improvements in the vicinity of the MLK Jr. Drive bridge.
EXHIBIT A Page 17 of 48 EXHIBIT 2 883
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
• Acquisition of data needed from UP to support planning, design, and environmental activities during PA&ED (i.e., valuation / right-of-way maps, track charts, as-built bridge drawings, train counts, bridge strike data, etc.).
Key Assumptions
• Participate in up to two (2) virtual one-hour coordination meetings with UP and up to two (2) one-hour virtual coordination meetings with SJRRC during PA&ED, as required. • Separate design and review coordination meetings will be held with UP at the appropriate submittal milestones during design development, as required by the UP Public Projects Manual and Public Projects Checklist. The level of effort associated with those meetings is included in Task 5.4.
TASK 4 DELIVERABLES:
• Utility Letter “A”
• Utility mapping
• UPRR Meeting Agenda and Minutes (assume 4 total meetings) • Deliverables to be submitted in .pdf format unless specifically stated otherwise EXCLUSTIONS:
• No rail yard re-configuration is anticipated for this project. • Only Track 113 will be re-aligned.
• Post-construction maintenance evaluation is not included in this phase of work.
TASK 5. PRELIMINARY ENGINEERING
Task 5.1. Traffic Studies – F&P
Fehr & Peers will complete a traffic operations analysis, vehicle miles traveled analysis, and active transportation and safety review for the Project, in compliance with CEQA and in accordance with the City of Stockton Transportation Impact Analysis Guidelines.
Task 5.1.1. Data Collection
Fehr & Peers will collect the following data for use in the analysis:
• Three days of AM (7:00 – 9:00 AM) and PM (4:00 – 6:00 PM) peak period traffic count data, including passenger vehicle, heavy vehicle, bicycle, and pedestrian counts, at the following intersections:
o Dr. MLK Jr. Boulevard/S Airport Way
o Dr. MLK Jr. Boulevard /S Pilgrim Street
o Dr. MLK Jr. Boulevard /Aurora Street
o Dr. MLK Jr. Boulevard /S Grant Street/Sikh Temple Street • 72-hour roadway segment count data for Dr. MLK Jr. Boulevard between S Pilgrim Street and Aurora Street • Roadway and intersection geometries and lane configurations • Traffic signal timings for signalized intersections
• Collision history – most recent 5-year period using from the UC Berkeley SafeTREC Transportation Injury Mapping System (TIMS) data
EXHIBIT A Page 18 of 48 EXHIBIT 2 884
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
• Existing bicycle and pedestrian facilities on Dr. MLK Jr. Boulevard between Airport Way and S Grant Street/Sikh Temple Street, including presence and adequacy of sidewalks, curb ramps, crosswalks, and bicycle facilities Task 5.1.2. Traffic Operations Analysis
Traffic operations at the following intersections will be analyzed:
1. Dr. MLK Jr. Boulevard /S Airport Way
2. Dr. MLK Jr. Boulevard /S Pilgrim Street
3. Dr. MLK Jr. Boulevard /Aurora Street
4. Dr. MLK Jr. Boulevard /S Grant Street/Sikh Temple Street AM and PM peak hour intersection operations will be evaluated consistent with methodologies described in the Highway Capacity Manual, 7th Edition (Transportation Research Board, 2022), and applied using Synchro/Simtraffic 11 microsimulation software. Analysis results will include intersection level of service, control delay, and maximum queue lengths for key turning movements.
Peak hour operations will be evaluated for the following scenarios:
• Opening year conditions without improvements (No-Build Alternative) • Opening year condition with MLK one lane in each direction (Under Construction Analysis) • Opening year conditions with improvements (Project Preferred Alternative) • Design year conditions without improvements (No-Build Alternative) • Design year conditions with improvements (Project Preferred Alternative) Fehr & Peers will develop AM and PM peak hour forecasts for the study intersections using the City of Stockton Travel Demand Model. The model was originally developed for the Envision Stockton 2040 General Plan but has been recently updated for the City of Stockton Transportation Master Plan and Impact Fee Study.
The difference method, which adds forecasted traffic change from the model to the existing traffic counts, will be used to forecast design year traffic volumes. The growth between the base year and cumulative year model, along the corridor, will be used to develop a growth rate that will be applied to estimate opening year forecasts.
Task 5.1.3. Effective Active Transportation Network and Safety Review Fehr & Peers will evaluate existing active transportation facilities in the corridor and complete a safety assessment. This will include:
• Documentation of existing active transportation facilities, including an updated level of traffic stress analysis. • Documentation of all fatal/injury collisions and bicycle and pedestrian involved collisions on Dr. MLK Jr.
Boulevard between Airport Way and S Grant Street/Sikh Temple Street.
Task 5.1.4. Recommended Improvements
Fehr & Peers will provide recommended intersection improvements based on the results of the operations analysis and recommended bicycle and pedestrian improvements based on the results of the existing active transportation network and safety review. Existing conditions, collision history, and goals, policies, and improvements noted in prior planning EXHIBIT A Page 19 of 48 EXHIBIT 2 885
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
documents, such as the City of Stockton Bicycle Master Plan and City of Stockton General Plan, will be used to inform recommended improvements.
Task 5.1.5. Vehicle Miles Traveled (VMT)
Fehr & Peers will qualitatively discuss the Project’s impacts to vehicle miles traveled in compliance with CEQA and the City of Stockton Transportation Impact Analysis Guidelines. The Project is not adding additional vehicular travel lanes and is not anticipated to result in induced VMT. Although VMT may temporarily increase during construction if residents choose to detour around the construction site, this would be a short-term impact that cannot easily be mitigated, is necessary for construction, and would not result in a long-term increase in VMT. Additionally, the Project incorporates complete streets improvements. For these reasons, a quantitative VMT analysis is not anticipated to be needed.
Task 5.1.6. Documentation and Meetings
Fehr & Peers will prepare two separate memorandums for the project team:
• One memorandum will summarize the methodologies and results of the intersection operations analysis and VMT analysis
• One memorandum will summarize the results of the existing active transportation network and safety review.
Tables, graphics, and figures will be used as needed to convey the results of the analysis and any recommended improvements.
Fehr & Peers will respond to one set of comments on each draft memorandum and produce the final memorandums.
In addition, Fehr & peers has budgeted to attend up to three meetings throughout the course of the project.
Task 5.2. Preliminary Design
Mark Thomas will develop/refine design alternatives using the traffic forecast and demand projections and prepare geometric drawings for the preferred alternative. Various technical studies will be prepared for the preferred alternative, which are described in more detail below.
Task 5.2.1. Preliminary Design – MARK THOMAS / HDR
Based on the results of the Traffic Analysis and a conceptual alignment review, Mark Thomas will prepare preliminary plans for the widening along Martin Luther King Jr. Boulevard and for the replacement of the existing undercrossing. It is assumed that one alternative alignment will be prepared. The geometrics will include traffic operations data, with basic controlling geometric features shown. As a part of the development of the preliminary plans, Mark Thomas will also identify bicycle, pedestrian, and transit improvements along the corridor.
The preliminary plan set will include the following sheets:
Title Sheet
General Notes, Abbreviations and Legend
Typical Cross Sections
Key Map
Plan and Profile
Track General Notes, typical sections, plan and profile (see Task 5.2.2 for additional information) Existing Utility Plan
EXHIBIT A Page 20 of 48 EXHIBIT 2 886
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
Stage Construction Schematic Layouts (see Task 5.2.3 for additional information) Structure Plans - APS for 2 bridges
The retaining wall information will be shown on the typical sections, plan and profile. Separate sheets for retaining wall design will be developed in a later design phase of the project. Similarly, drainage will also be shown on the plan sheets during this phase of the project.
During the refinement of the project alternatives Mark Thomas will identify features that do not meet current City, Caltrans, and AASHTO Design Standards. Design exceptions will be identified and documented with City staff. In addition, Mark Thomas will keep a decision log for key design decisions made during the PA&ED phase.
During the PA/ED phase, landscaping and planting plans are not included but the location for landscaping and planting will be identified in the plan sheets and a cost placeholder will be added in the cost estimate. Formal landscaping and planting plans will take place during the PS&E phase of the project.
During the PA/ED phase, HDR will identify the potential utility conflicts with the proposed project improvements. This will consist of reviewing existing utility information that was compiled and mapped in Task 4.1 with the proposed construction impacts. HDR will identify potential relocation corridors or solutions to avoid the conflicts. Formal coordination for utility relocations will take place during the PS&E phase of the project.
Task 5.2.2. Track Design - HDR
In support of the PA&ED, HDR will develop the 10% track design milestones.
Construction for the Charter Way Industrial Track/SW Wye (Connector) Bridge will consist of two phases of track design.
Phase 1 will shift approximately 3,000 feet of existing track slightly to the west on the existing structure over MLK Boulevard to allow for demolition of a portion of the eastern half of existing structure that allows space for construction of the new bridge. Phase 2 will realign the track and connections onto the new structure over MLK Boulevard. 10% Milestone – Concept Plans
This will be the first phase of design and shows the basics of the project and satisfies the level of detail for the 10% checklist for both track and structures. The 10% design level will include track alignments, track profiles, phasing schematic, track typical sections, rough grading limits, approximate property ownership impacts, and a preliminary engineer’s opinion of probable construction costs for one build alternative. The 10% plans will be based on survey and include detailed horizontal geometry per the UP Public Project Checklist.
Task 5.2.3. Staging/Traffic Handling – MARK THOMAS
The Mark Thomas team will prepare conceptual plans for the preferred alternative, outlining the stage construction and traffic handling requirements to verify the project is constructible, impacts to bicyclists, pedestrians, transit, and vehicles are reduced, and public safety is in accordance with applicable professional standards. Roadway improvements will be coordinated with existing facilities to assess whether detours are needed to construct the improvements. Wherever possible, all efforts will be made to limit the need for detours for bicyclists and pedestrians. If bicycle and pedestrian detours are necessary, they will be shown on the conceptual plans for preliminary concepts.
EXHIBIT A Page 21 of 48 EXHIBIT 2 887
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
Task 5.2.4. Drainage - HDR
Task 5.2.4.1. Stormwater Quality Control Plan (SWQCP)
A Stormwater Quality Control Plan (SWQCP) is required for projects creating, replacing or expanding impervious surface by 5,000 square feet or more. HDR will prepare the SWQCP in accordance with the City’s standards. Site Design Controls, Source Controls, Volume Reduction Measures (VRMs), Treatment Controls, and Trash Capture Measures will be considered for the Project using Table 2-2, Control Measure Selection Matrix for New Development and Significant Redevelopment Project Categories, of the City’s Stormwater Quality Control Criteria Plan (SWQCCP). A draft SWQCP will be submitted to the City for review (for up to 10% design). The draft plan will be updated with the comments from the City prior to the final submittal.
Task 5.2.4.2. Water Quality Assessment Report (WQAR)
In order to provide the existing physical and regulatory environment information for water quality, HDR will: 1) identify and describe the current and upcoming laws that relate to water quality; 2) describe the beneficial uses as detailed by the Regional Water Quality Control Board (RWQCB) Basin Plan for potentially-affected waters; 3) discuss water quality objectives for potentially-affected waters; 4) list potential sources of pollutants, existing water quality of the receiving water bodies, i.e. Total Maximum Daily Loads (TMDL) or 303(d)impaired water bodies listed; and 5) describe the watershed, existing drainage, and hydrologic conditions. HDR will evaluate the water quality impacts for each proposed alternative and recommend possible best management practices (BMPs) or Project features to address water quality issues. HDR will document our findings in a technical report. The draft report will be updated with the comments from the City prior to the final submittal.
Task 5.2.4.3. Preliminary Drainage Report
HDR will conduct a preliminary Drainage Impact Study to determine existing hydrology and drainage systems within the Project area. The impact of the Project improvements will be documented, and recommendations for conceptual drainage improvements will be included in a technical report. The location and general size of the pump station will be discussed but no studies or engineering calculations will be provided. The Report will also discuss the Treatment BMP approach and the preliminary Treatment BMP concepts being considered for the project and will refer to the SWQP. A planning-level cost estimate for drainage and Treatment BMP improvements will also be included in the report (up to 10% design). The draft report will be updated with the comments from the City prior to the final submittal.
Task 5.2.5. Transportation Management Plan Data Sheet – MARK THOMAS Mark Thomas will prepare a Transportation Management Plan (TMP) Data Sheet for the preferred alternative. The TMP Data Sheet will identify potential traffic impacts, mitigation strategies, traffic control plan elements, construction durations, and traffic management costs associated the construction of the project. TMP Data Sheet will utilize the TMP Data Sheet template for Consultant TMP Projects.
Task 5.3. Geotechnical Studies - KLEINFELDER
Kleinfelder, as a part of the Mark Thomas team, will gather the geotechnical recommendations for the 10% design for the PA&ED Phase of the project based on existing geotechnical data available. Kleinfelder will review readily available data, including as-built Log of Test Borings (LOTBs) from Caltrans Digital Archive of Geotechnical Data (GeoDOG) website, other readily available public agency records, and geotechnical explorations recently performed by Kleinfelder in the vicinity of the SDGS project. Kleinfelder concept design geotechnical recommendations will be provided in one deliverable: a Preliminary Geotechnical Memorandum. Kleinfelder, as a part of the Mark Thomas team, will prepare the geotechnical memorandum.
EXHIBIT A Page 22 of 48 EXHIBIT 2 888
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
Task 5.3.1. Preliminary Geotechnical Memorandum
A Preliminary Geotechnical Memorandum is proposed to provide preliminary recommendations (10% design) to the design team and the City as a supporting document for the PA&ED phase. The proposed memorandum will be based on the review readily available data, including as-built LOTBs Log of Test Borings from the Caltrans Digital Archive of Geotechnical Data (GeoDOG) website, and other readily available public agency records, and geotechnical explorations recently performed by Kleinfelder in the vicinity of the project.
The potential geotechnical/geologic impacts and mitigations will be discussed on a broad basis, including geotechnical conditions (geology, topsoil/soil survey, surface/subsurface conditions, groundwater, and seismic hazards), geotechnical design evaluations. The preliminary acceleration response spectrum and the peak ground acceleration (PGA) will be developed based on the Caltrans ARS Online website. The PGA will be used to determine if the horizontal seismic coefficient of the project site exceeds the standard design parameters. The report will also provide preliminary foundation design considerations, such as potential foundation/wall types, slope stability, and settlement. Generally, the geotechnical evaluation relevant to the proposed project will be presented in a qualitative manner with no specific design recommendations.
Task 5.3.2. PA/ED Phase Geotechnical Exploration
As mentioned previously, no fieldwork or laboratory testing is planned for the PA&ED Phase of the project. The three deliverables described in Tasks 5.3.1 through 5.3.3 will be performed based on published geologic maps and available as-built geotechnical exploration boring data, as described herein. We expect that design level geotechnical investigations will be performed during later phases of the project, which would include subsurface explorations, laboratory testing, and engineering analysis.
Task 5.4. Structures – HDR/MARK THOMAS
Task 5.4.1. Bridge Structures – Advanced Planning Study - HDR In support of the PA&ED, Consultant will develop the Advance planning study for the Charter Way Industrial Track/SW Wye (Connector) grade separation structure in accordance with Union Pacific Railroad- BNSF Railway “Guidelines for Railroad Grade Separation Projects” dated January 5, 2016. Per the UPRR/BNSF guidelines, the Consultant will prepare and submit the preliminary design at the following milestones for railroad review. The proposed approach consists of development of The Bridge Structures Advance Planning Study that will coincide with the requirements listed in the UPRR/BNSF guidelines for a 10% Structures Concept submittal.
Task 5.4.1.1. Bridge Structures Advance Planning Study – (UPRR/BNSF 10% Concept Design) The Bridge Structures Advance Planning Study will include the following:
1. Plan, Elevation and Typical Section of proposed grade separation. Drawings will conform to Bridge Standards - Plan No. 711100 for overhead structures and Plan No. 711200 for underpass structures for the Charter Way Industrial Track/SW Wye (Connector) Bridge assuming a No Build and One Build Alternative.
2. Preliminary phasing plan.
3. Photo log with pictures of the proposed project location. Site pictures will be in controlling directions including but not limited to, North, East, South and West. The plan view should show a reference location and direction for each picture.
EXHIBIT A Page 23 of 48 EXHIBIT 2 889
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
Task 5.4.2. Retaining Wall Structures – MARK THOMAS
Mark Thomas will prepare structure studies for the retaining walls/specialty walls proposed as a part of the underpass replacement; a maximum of two (2) alternatives will be evaluated.
We will perform preliminary engineering to justify the proposed wall types. There will be several retaining wall structures along the widened MLK Blvd. These will be indicated in the plan and profile drawings in plan and elevation views and in the typical cross-sections and no separate plans will be prepared.
Task 5.4.3. Pumping Plant Structure – HDR/MARK THOMAS
The location and approximate footprint of the pump plant station will be indicated on the roadway plan sheets and no separate plans will be prepared.
TASK 5 DELIVERABLES:
• Preliminary plan sheets
• 10% Preliminary Engineering plans, profiles, and typical sections for one build alternative submitted to UPRR/BNSF for review and Comment
• 10% Revision 1 Preliminary Engineering plans, profiles, and typical sections for one build alternative incorporating comments received from UPRR and BNSF on the initial 10% track plans submittal • Geotechnical Memorandum
• 10% Concept Plans for one alternative for the MLK (Charter Way) Industrial Track/SW Wye (Connector) Bridge Submitted to UPRR/BNSF for Review
• Stormwater Quality Control Plan
• Water Quality Assessment Report
• Preliminary Drainage Report
• TMP Data Sheet
• Deliverables to be submitted in .pdf format unless specifically stated otherwise TASK 6. PUBLIC OUTREACH
Task 6.1. Public Meetings Plan & Workback Schedule - HDR HDR will develop in collaboration with the City of Stockton, a Public Meetings Plan and Workback Schedule that will outline the two public meetings opportunities to support the PA/ED phase of the Dr. Martin Luther King Jr. Boulevard Underpass Reconstruction Project. The Public Meetings Plan will outline outreach strategies and tactics to engage meeting attendees the public (residents, businesses, and area motorists) and key project stakeholders. The Public Meeting Plan and Workback Schedule will outline meeting planning strategy, public outreach tools and materials, tactical action steps, schedules, and meeting summary reports.
Task 6.2. Public Meetings – HDR
Engaging with the community will be a very important aspect educating the public on project benefits, garnering support, and obtaining critical input for the Dr. Martin Luther King Jr. Boulevard Underpass Reconstruction Project.
In partnership and collaboration with the City of Stockton, HDR will facilitate the planning and implementation of two EXHIBIT A Page 24 of 48 EXHIBIT 2 890
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
(2) in-person community meeting at a gathering location within the community to engage the public (residents, businesses, and area motorists) and key project stakeholders to support educating the community on the project and to support the circulation of the draft environmental document for comments and feedback.
The public meetings will allow interactive participation and engagement between the project team and the public.
The goal of the meeting is to share information, obtain critical feedback on community concerns, provide answers to community member questions, and obtain community-based feedback.
Activities associated with each meeting will include:
• Plan, organize, facilitate, and conduct one (1) public meeting (approximately 1-1.5 hours in duration) that is open to area residents, businesses, key stakeholders, and community organizations. • Prepare and place two (2) public meeting advertisements in a major community newspaper to promote the public meeting. One ad will be in an English-based publication, while the other ad will be in a Spanish-based publication with translation.
• Prepare one (1) promotional flier for each meeting to detail public meeting elements to the public (200 pieces) for canvassing and public distribution purposes.
• Prepare and distribute one (1) direct mail postcard that is distributed within the project area with up to 2,500 recipients) to promote the public meeting to the public and key stakeholders. • Prepare and distribute one (1) news release for each meeting to local and regional media to promote the public meeting
• One outreach canvassing activity to area businesses within the immediate project area to notify them of the public meeting and to obtain project feedback.
• Obtain a Spanish language translator for each public meeting, as necessary. • Develop and produce a meeting agenda (100 pieces), comment cards (100 pieces), two (2) informational handouts including a project fact sheet and a FAQ sheet (100 pieces each), up to five (5) printed 24-inch x 36- inch informational display boards, and a PowerPoint presentation. Spanish translation will be conducted for select collateral materials for each meeting, as needed. • Prepare a public meeting recap summary that includes a detailed overview of how the workshop was promoted/noticed, organized, facilitated, conducted, documentation of issues and comments from participants, and a list of action items/next steps.
ASSUMPTIONS:
• All advertisement, direct mail print and mailing, flyer/copy printing, collateral translation, meeting venue costs, Audio/Visual rental fees, and meeting translator costs will be billed directly to the City of Stockton and are not included in the fee ODCs.
TASK 6 DELIVERABLES:
• One (1) Public Meeting Plan & Workback Schedule
• Two (2) Public Meetings:
o Two (2) in-person public meeting (approximately 1-1.5 hours in duration) General Information Community Meeting #1
Draft Environmental Document Public Meeting #2
EXHIBIT A Page 25 of 48 EXHIBIT 2 891
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
o Two (2) advertisements in a major community newspaper for each meeting (English & Spanish formats)
o One (1) direct mail postcard for each meeting (with printing, mailing and postage services to up to 2,500 recipients)
o One (1) public meeting promotional flier for each meeting (100 pieces) o One (1) news release for each meeting
o One (1) outreach canvassing activity with up to two (2) HDR staff (up to 8 hours in duration) with canvassing recap report.
o Supportive collateral materials for each public meeting to include meeting agenda (100 pieces), comment cards (100 pieces), one (1) informational handout (100 pieces each), up to five (5) printed 24- inch x 36-inch informational display board.
o PowerPoint presentation for each meeting
o Recap summary report for each meeting
• Deliverables to be submitted to the client in .pdf format if not required in a printed format to support collateral needs for the two public meetings, unless specifically stated otherwise TASK 7. RIGHT OF WAY
Task 7.1. Preliminary Right of Way Exhibit – MARK THOMAS Based on the preferred alternative, Mark Thomas will prepare a Preliminary Right of Way exhibit that documents the impacts to properties adjacent to the underpass. The exhibit will document existing ownership, anticipated acquisitions for the proposed improvements, potential construction and utility easements, and property needs for access during construction.
Task 7.2. Right of Way Data Sheet - MONUMENT
Monument will prepare ROW Data Sheets for each alternative, and a ROW plan for the preferred alternative. We are assuming impacts to up to 12 parcels with up to 3 business. The scope of work for preparing Right-of-Way Data Sheets for each alternative under consideration includes:
• Take an inventory of the affected properties for each selected option. • Using public Assessor’s Roll information, investigate the ownership, lot size, and building size of each affected property.
• Visually inspect each property (exterior street view) and evaluate effects of proposed acquisition. List all businesses on each property and the approximate space they occupy. • Sort each property into product types to determine the universe of real estate data sets to research and create valuation data sets for each product type.
• Prepare an estimate of the probable cost of each full property acquisition or the cost of each partial acquisition (plus damages) using the data sets created and utilizing our various real estate value data bases. • Prepare an estimate of the probable relocation assistance exposure for each residential or non-residential occupant located on each property.
• Prepare an estimate of the immoveable fixtures and equipment associated with each business property. • Prepare an estimate of the total probable loss of business goodwill attributable to each operating business. • Prepare a desktop estimate of the inspection and demolition costs associated with delivering each cleared site.
EXHIBIT A Page 26 of 48 EXHIBIT 2 892
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
• Prepare a desktop estimate of the total services and incidental costs associated with each real estate acquisition program (appraisals, acquisition and relocation agents, title/escrow, and legal services). • Prepare Draft Relocation Impacts Memorandum for under 10 relocations per Caltrans ROW manual 10.02.04 The scope of work will be performed and delivered in the form of a report containing a textual description of the project areas studied, a summary of total probable costs of the study area itemized by major component, and will include detailed spreadsheets showing how the summary sheets were calculated. The spreadsheets contain a parcelby-parcel breakdown of all probable costs.
Task 7.3. Preserving and Perpetuating Survey Monuments – MARK THOMAS Record research will be performed to locate recorded maps including right-of-way maps, records of survey, corner records, and other official maps of record necessary to determine the Right of Way within the project area. Right of Way Lines as shown on record maps in the area will be plotted. The location of the Right of Way lines will be based solely on record mapping and a best fit of the line work based on the topographic data and/or monumentation found during the topographic survey. Time is not included to find physical evidence necessary to resolve the Right of Way and/or parcel lines. No Title reports or plotting of easements is included in this scope of work.
TASK 7 DELIVERABLES:
• ROW Exhibit
• ROW Data Sheet
• Deliverables to be submitted in .pdf format unless specifically stated otherwise TASK 8. PROJECT REPORT EQUIVALENT (PRE)
Task 8.1. Project Report Equivalent (PRE)
Mark Thomas will prepare a Project Report Equivalent (PRE) to document design features and receive approval for the project. Because the project anticipates CEQA and NEPA clearance through a statuary exemption under SB 922 and a Categorical Exclusions (CE) under NEPA, there will be no circulation of an environmental document for public review. As such, no formal Draft Project Report (DPR) will be required. (A DPR provides Caltrans approval for alternatives included in the circulation of a draft environmental document. Since only a single alternative is being included in the evaluation of the project and no circulation will be required, only a PRE will be prepared.) It is anticipated that the PRE will require four (4) submittals to City to receive approval.
Attachments included in the PRE include:
• Location Map
• Geometric Drawings
• Cost Estimate
• Right of Way Exhibit
• TMP Data Sheet
• Storm Water Data Report
• Risk Management Plan and Risk Register
• Safety Analysis Memo
EXHIBIT A Page 27 of 48 EXHIBIT 2 893
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
• Environmental Document (Title page only)
• Advanced Planning Studies
Task 8.2. Cost Estimates
Mark Thomas will prepare an 11-page Cost Estimate for the project and include it as an attachment to the PRE based on Caltrans format. The cost estimate will consider total project costs, including items of work, right of way, structures, utilities, and construction cost escalation. This task also includes support cost estimates for future phases TASK 8 DELIVERABLES:
• Project Report
• Cost Estimate
• Deliverables to be submitted in .pdf format unless specifically stated otherwise
PA&ED PHASE ASSUMPTIONS/EXCLUSIONS
• Datum or unit conversion of base mapping, as-builts, and centerlines are not included. • Supplemental surveys are not included.
• Utility Potholing is not included.
• Geotechnical testing and exploration are not included. • Hazardous materials testing is not included.
• Preparation of permits for jurisdictional agencies is not included. • Conceptual Landscape, Drainage, Staging Plans are not included. • Life Cycle Cost Analysis (LCCA) is not included.
• Floodplain and Location Hydraulics Analysis is not included. • Preparation and approval of Draft Project Report is not included or required.
TASK 9. FUNDING – MARK THOMAS
Mark Thomas will support the City’s efforts to secure additional funds to advance the project. We will identify and evaluate the competitiveness of funding programs that are applicable for the project. The funding program analysis will be documented in a memorandum which will include the following:
• Program name
• Funding cycle schedule
• Program description
• Available funding
• Eligible phases of work
• Project alignment.
The memorandum will also include recommendations on which funding programs to include, a grants pursuit schedule, and action items to position the project to be successful obtaining competitive funds. No detailed grant application packages are included within this scope. Should the City decide to pursue a specific grant application, EXHIBIT A Page 28 of 48 EXHIBIT 2 894
DR. MARTIN LUTHER KING JR. BOULEVARD UNDERPASS RECONSTRUCTION PROJECT PA&ED and 50% Design
City of Stockton
Mark Thomas will provide a separate scope/fee for completion of the grant application package.
TASK 10. 50% DESIGN
Following completion of the PA/ED phase of the project, the project would continue into a 50% design level phase.
This level of effort for this phase is defined as “unchecked details” and roughly based on the definition used by Caltrans. There are still unknowns that will be defined during the PA/ED phase and this scope and fee should be reviewed once the project is better defined and CEQA/NEPA clearances are secured/obtained.
Task 10.1. Utility Relocation Matrix
Based on information compiled during the PA/ED phase, we will identify utilities requiring relocation or “protect-inplace” and we will work with utility providers to request information regarding their utility facilities within the project area. We will compile a utility matrix that show the disposition of utilities within the project area and identify responsible parties for design relocation and construction.
Design of utility relocations will be part of the final design phase and not included in this scope of work. In addition, potholing and positive identification (such as GPR) will be conducted during final design phase.
Task 10.2. Plans
The Mark Thomas team will prepare a 50% design based on comments received during the PA/ED phase. The following sheet are anticipated:
No. Sheets Sheet Type
1 Title
1 General Notes, Abbreviations, Legend
2 Typical Sections
1 Demolition Plan
2 Roadway Plan and Profile
3 Track Package (per UPRR design guidelines) – Notes, Plan, Profile, Track Data, Details
2 Drainage Plan
2 Utility Plan
4 Stage Construction
2 Pavement Delineation
2 Retaining Wall Plan and Profile
2 Structure General Plan
24 TOTAL
Task 10.3. Cost Estimate
Mark Thomas will update the cost estimate for the project prepared for the PA&ED phase. The cost estimate will consider total project costs, including items of work, right of way, structures, utilities, and construction cost escalation.
EXHIBIT A Page 29 of 48 EXHIBIT 2 895
Matt Brogan,
Principal
Etty Mercurio, Sr.
Engineering
Manager (Project
Manager)
Eric Fredrickson, Sr.
Project Manager
(Retaining Walls)
Ryan Bissegger,
Funding Manager
(Funding)
Sr. Project Manager
(Civil)
Project Manager
(Civil)
Sr. Project Manager
(SW/Drainage)
Sr. Technical Lead
(Utilities)
Sr. Technical Lead
(Retaining Walls)
Sr. Project Engineer
Project Engineer
Design Engineer II
Design EngineerI
Sr. Graphic Designer
Intern
Survey Division
Manager
Sr. Survey Manager
(Survey)
Survey Manager
Sr. Project Surveyor
Project Surveyor
Lead Survey
Technician
Sr. Surveyor
Sr. Survey
Technician
Surveyor 2 Person Field Crew
Sr. Project
Coordinator
Project Accountant
HDR
LSA
Kleinfelder
Fehr& Peers
Monument
$426 $380 $291 $307 $291 $232 $291 $291 $291 $202 $175 $160 $131 $168 $77 $356 $267 $241 $211 $201 $181 $171 $156 $143 $377 $157 $144 Local Local
1.0 PROJECT MANAGEMENT
1.1 Project Administration 10 40 80 80 210 $43,535 ‐ ‐ ‐ ‐ ‐ $43,535
1.2 Meetings and Coordination 10 100 10 10 60 190 $62,153 ‐ ‐ ‐ ‐ ‐ $62,153
1.3 Quality Assurance / Quality control 20 20 40 $16,120 ‐ ‐ ‐ ‐ ‐ $16,120OTHER DIRECT COSTS $0 ‐ ‐ ‐ ‐ ‐ $0 Subtotal Phase 1 40 160 10 10 0 60 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 80 80 440 $121,808 $0 $0 $0 $0 $0 $121,808
2.0 BACKGROUND RESEARCH2.1 Data Collection 816 16 40 $6,991 10,150 ‐ ‐ ‐ ‐ $17,140
2.2 Base Map 4 8 20 20 4 56 $12,031 ‐ ‐ ‐ ‐ ‐ $12,031 OTHER DIRECT COSTS $0 ‐ ‐ ‐ ‐ ‐ $0 Subtotal Phase 2 0 0000008000 16 16 0 0 4 8 0 20 0 20 0 0 0 0 4 0 96 $19,021 $10,150 $0 $0 $0 $0 $29,171
3.0 ENVIRONMENTAL SERVICES
3.1 Environmental Documentation (CEQA/NEPA) 10 40 40 90 $31,119 ‐ 8,652 ‐ ‐ ‐ $39,771
3.2.1 Community Impacts Assessment (CIA) Memorandum 0 $0 ‐ 12,565 ‐ ‐ ‐ $12,5653.2.2 Minor Visual Impact Assessment (VIA) 10 10 40 60 $11,662 ‐ 5,878 ‐ ‐ ‐ $17,541
3.2.3 Archeological Survey Report and Historic Property Survey Report 10 20 30 $6,950 ‐ 36,078 ‐ ‐ ‐ $43,029
3.2.4 Initial Site Assessment (ISA) 10 10 10 30 $9,629 ‐ 16,874 ‐ ‐ ‐ $26,503
3.2.5 Noise Technical Memorandum 10 10 $2,915 ‐ 7,884 ‐ ‐ ‐ $10,799
3.2.6 Biological Compliance Technical Memorandum 10 10 $2,915 ‐ 5,683 ‐ ‐ ‐ $8,598
3.3 NEPA CE 10 40 20 40 110 $36,948 ‐ 5,632 ‐ ‐ ‐ $42,580 OTHER DIRECT COSTS $0 ‐ 5,200 ‐ ‐ ‐ $5,200 Subtotal Phase 3 20 90 30 0 130 0 0 0 0 30 0 0 0 40 0 0 0 0 0 0 0 0 0 0 0 0 0 340 $102,138 $0 $104,447 $0 $0 $0 $206,586
4.0 UTILITY COORDINATION AND RAIL COORDINATION
4.1 Existing Utility Mapping 20 20 20 20 80 $16,290 34,232 ‐ ‐ ‐ ‐ $50,522
4.2 Rail Coordination 10 10 $3,800 22,663 ‐ ‐ ‐ ‐ $26,463OTHER DIRECT COSTS $0 $0 Subtotal Phase 4 0 10 0 0 0 20 0 20 0 0 0 20 20 0 0 0 0 0 0 0 0 0 0 0 0 0 0 90 $20,090 $56,896 $0 $0 $0 $0 $76,986
5.0 PRELIMINARY ENGINEERING (30% DESIGN)
5.1 Traffic Studies 0 $0 ‐ ‐ ‐ 59,750 ‐ $59,750
5.2 Preliminary Design 10 40 40 60 40 40 80 120 120 120 80 80 830 $160,013 44,308 ‐ ‐ ‐ ‐ $204,3215.3 Geotechnical Studies 20 20 $5,829 ‐ ‐ 29,124 ‐ ‐ $34,9535.4.1 Bridge Structure ‐ Advanced Planning Studies 0 $0 167,884 ‐ ‐ ‐ ‐ $167,884
5.4.2 Retaining Wall Structures 20 80 80 180 $45,289 ‐ ‐ ‐ ‐ ‐ $45,289
5.4.3 Pumping Plant Structure 40 40 $8,071 ‐ ‐ ‐ ‐ ‐ $8,071 OTHER DIRECT COSTS $0 1,800 ‐ ‐ 5,200 ‐ $7,000 Subtotal Phase 5 1040 40 0 40 60 40 40 80 200 120 120 120 80 80 0 0 0 0 0 0 0 0 0 0 0 0 1070 $219,202 $213,992 $0 $29,124 $64,950 $0 $527,268
6.0 PUBLIC OUTREACH6.1 Stakeholder and Community Outreach 30 30 60 $18,355 95,492 ‐ ‐ ‐ ‐ $113,848 OTHER DIRECT COSTS $0 12,000 ‐ ‐ ‐ ‐ $12,000 Subtotal Phase 6 0 30 0 0 0 30 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 60 $18,355 $107,492 $0 $0 $0 $0 $125,848
7.0 RIGHT OF WAY
7.1 Preliminary Right of Way Exhibit 4 4 30 30 118 $39,241 ‐ ‐ ‐ ‐ ‐ $39,241
7.2 Right of Way Data Sheet 4 4 20 20 48 $9,159 ‐ ‐ ‐ ‐ 12,140 $21,299
7.3 Preserving and Perpetuating Survey Monuments 4 8 16 28 $5,305 ‐ ‐ ‐ ‐ ‐ $5,305 OTHER DIRECT COSTS $0 ‐ ‐ ‐ ‐ ‐ $0
Subtotal Phase 7 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8 12 0 58 0 16 50 0 0 0 0 194 $53,705 $0 $0 $0 $0 $12,140 $65,845
8.0 PROJECT REPORT
8.1 Project Report 10 40 10 20 20 40 40 40 40 260 $59,544 ‐ ‐ ‐ ‐ ‐ $59,544
8.2 Cost Estimates 10 10 20 40 40 40 40 200 $39,247 ‐ ‐ ‐ ‐ ‐ $39,247 OTHER DIRECT COSTS $0 ‐ ‐ ‐ ‐ ‐ $0 Subtotal Phase 8 10 50 20 0 40 20 0 0 0 80 80 80 80 0 0 0 0 0 0 0 0 0 0 0 0 0 0 460 $98,792 $0 $0 $0 $0 $0 $98,792
9.19.0 FUNDING
FUNDING 40 40 $12,272 ‐ ‐ ‐ ‐ ‐ $12,272 OTHER DIRECT COSTS $0 ‐ ‐ ‐ ‐ ‐ $0 Subtotal Phase 9 0 0 0 40 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 40 $12,272 $0 $0 $0 $0 $0 $12,272
10.0 50% Design10.1 Utility Relocation Matrix 840 48 $14,699 ‐ ‐ ‐ ‐ ‐ $14,699
10.2 Plans 10 20 20 50 40 100 200 200 60 700 $123,146 ‐ ‐ ‐ ‐ ‐ $123,14610.3 Cost Estimate 10 10 40 40 100 $17,766 ‐ ‐ ‐ ‐ ‐ $17,766 OTHER DIRECT COSTS $0 ‐ ‐ ‐ ‐ ‐ $0 Subtotal Phase 10 10 38 0 0 20 60 40 0 0 40 100 240 240 60 0 0 0 0 0 0 0 0 0 0 0 0 0 848 $155,610 $0 $0 $0 $0 $0 $155,610 TOTAL HOURS 90 418 100 50 230 250 80 68 80 350 300 476 476 180 80 4 16 12 20 58 20 16 50 0 0 84 80 3638 1902 470.5 150 342 84Anticipated Salary Increases (5% for 2 years) $0 $0 $0 $0 $0 $0 $0 OTHER DIRECT COSTS $8,310 $14,500 $5,200 $0 $5,200 $0 $33,210 TOTAL COST $38,340 $174,137 $29,147 $15,340 $67,038 $57,960 $23,318 $19,820 $23,318 $70,620 $52,390 $76,283 $62,318 $30,285 $6,167 $1,424 $4,276 $2,887 $4,225 $11,630 $3,617 $2,739 $7,793 $0 $0 $13,160 $11,541 $829,303 $389,230 $104,447 $29,124 $64,950 $12,140 $1,429,195
TOTAL COST
COST PROPOSAL FOR PROJECT SCOPE ‐ City of Stockton: Dr MLK Jr. Blvd Undercrossing PA&ED Total MT
Cost
Mark Thomas
Hours
Total
Subconsultants
Please note that the rates shown are for estimating purposes only. See rate schedule for actual rates/ranges. 12/12/2023
EXHIBIT B
EXHIBIT 2
896
REV 2022‐05‐17
Insurance Requirements
(Design - Dr Martin Luther King Jr Blvd Underpass Reconstruction WT24030) Consultant shall procure and maintain for the duration of the contract 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 Consultant, its agents, representatives, or employees.
MINIMUM SCOPE AND LIMIT OF INSURANCE
Coverage shall be at least as broad as:
1. Commercial General Liability (CGL): Insurance Services Office 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 Number CA 0001 covering, Code 1 (any auto), or if Consultant has no owned autos, Code 8 (hired) and 9 (nonowned), with limit no less than $1,000,000 per accident for bodily injury and property damage.
3. Workers’ Compensation insurance as required by the State of California, with Statutory Limits, and Employer’s Liability Insurance with limit of no less than $1,000,000 per accident for bodily injury or disease.
(Not required if consultant provides written verification it has no employees)
4. Professional Liability/Errors and Omissions Insurance appropriate to the Consultant’s profession, with limit no less than $2,000,000 per occurrence or claim, $2,000,000 aggregate.
4. Railroad Protective Liability Insurance. Railroad Protective Liability insurance with a limit of $5,000,000 per occurrence and aggregate of $10,000,000.
If the Consultant maintains broader coverage and/or higher limits than the minimums shown above, the City of Stockton requires and shall be entitled to the broader coverage and/or the higher limits maintained by the contractor. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City of Stockton.
Other Insurance Provisions
EXHIBIT C Page 31 of 48 EXHIBIT 2 897
REV 2022‐05‐17
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
For any claims related to this contract, the Contractor’s insurance coverage shall be primary and non-contributory and at least as broad as ISO CG 20 01 04 13 as respects the City of Stockton, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the City of Stockton, its officers, officials, employees, or volunteers shall be excess of the Contractor’s insurance and shall not contribute with it. This requirement shall also apply to any Excess or Umbrella liability policies. The City of Stockton does not accept endorsements limiting the Contractor’s insurance coverage to the sole negligence of the Named Insured.
Umbrella or Excess Policy
The Contractor may use Umbrella or Excess Policies to provide the liability limits as required in this agreement. This form of insurance will be acceptable provided that all of the Primary and Umbrella or Excess Policies shall provide all of the insurance coverages herein required, including, but not limited to, primary and non-contributory, additional insured, Self-Insured Retentions (SIRs), indemnity, and defense requirements. The Umbrella or Excess policies shall be provided on a true “following form” or broader coverage basis, with coverage at least as broad as provided on the underlying Commercial General Liability insurance. No insurance policies maintained by the Additional Insureds, whether primary or excess, and which also apply to a loss covered hereunder, shall be called upon to contribute to a loss until the Contractor’s primary and excess liability policies are exhausted.
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
EXHIBIT C Page 32 of 48 EXHIBIT 2 898
REV 2022‐05‐17
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.
Self-Insured Retentions
Self-insured retentions must be declared to and approved by the City of Stockton. 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. The CGL and any policies, including Excess liability policies, may not be subject to a self-insured retention (SIR) or deductible that exceeds $25,000 unless approved in writing by City of Stockton. Any and all deductibles and SIRs shall be the sole responsibility of Contractor or subcontractor who procured such insurance and shall not apply to the Indemnified Additional Insured Parties. City of Stockton may deduct from any amounts otherwise due Contractor to fund the SIR/deductible. Policies shall NOT contain any self-insured retention (SIR) provision that limits the satisfaction of the SIR to the Named. The policy must also provide that Defense costs, including the Allocated Loss Adjustment Expenses, will satisfy the SIR or deductible. City of Stockton reserves the right to obtain a copy of any policies and endorsements for verification.
Acceptability of Insurers
Insurance is to be placed with insurers authorized to conduct business in the state with a current A.M. Best’s rating of no less than A:VII, unless otherwise acceptable to the City of Stockton.
Claims Made Policies (Professional & Pollution Only)
If any of the required policies provide claims-made coverage:
1. The Retroactive Date must be shown, and must be before the 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 the contract of work.
3. If coverage is canceled or non-renewed, and not replaced with another claimsmade policy form with a Retroactive Date prior to the contract effective date, the Contractor must purchase “extended reporting” coverage for a minimum of five (5) years after completion of work.
EXHIBIT C Page 33 of 48 EXHIBIT 2 899
REV 2022‐05‐17
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 and a copy of the Declarations and Endorsements Pages of the CGL and any Excess policies listing all policy endorsements. All certificates and endorsements and copies of the Declarations & Endorsements pages are to be received and approved by the City of Stockton 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. 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.
Subcontractors
Consultant shall require and verify that all subcontractors maintain insurance meeting all the requirements stated herein, and Contractor shall ensure that City of Stockton is an additional insured on insurance required from subcontractors.
Duration of Coverage
CGL & Excess liability policies for any construction related work, including, but not limited to, maintenance, service, or repair work, shall continue coverage for a minimum of 5 years for Completed Operations liability coverage. Such Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of the contract of work.
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
The address for mailing certificates, endorsements and notices shall be:
City of Stockton
Its Officers, Officials, Employees, and Volunteers
400 E Main Street, 3rd Floor – HR
Stockton, CA 95202
EXHIBIT C Page 34 of 48 EXHIBIT 2 900
EXHIBIT D Page 35 of 48 EXHIBIT 2 901
EXHIBIT D Page 36 of 48 EXHIBIT 2 902
EXHIBIT D Page 37 of 48 EXHIBIT 2 903
EXHIBIT D Page 38 of 48 EXHIBIT 2 904
EXHIBIT D Page 39 of 48 EXHIBIT 2 905
EXHIBIT D Page 40 of 48 EXHIBIT 2 906
EXHIBIT D Page 41 of 48 EXHIBIT 2 907
EXHIBIT D Page 42 of 48 EXHIBIT 2 908
EXHIBIT D Page 43 of 48 EXHIBIT 2 909
EXHIBIT D Page 44 of 48 EXHIBIT 2 910
EXHIBIT D Page 45 of 48 EXHIBIT 2 911
EXHIBIT D Page 46 of 48 EXHIBIT 2 912
EXHIBIT D Page 47 of 48 EXHIBIT 2 913
EXHIBIT D Page 48 of 48 EXHIBIT 2 914
Dr. Martin Luther King Jr. Boulevard
Underpass Reconstruction,
Project No. WT24030
Public Works Department
May 21, 2024
Agenda Item 15.3
915
LOCATION:
Dr. Martin Luther King Jr. (MLK) Boulevard
Underpass Reconstruction Project
916
Existing Condition:
MLK Boulevard Underpass Reconstruction Project
917
BACKGROUND:
MLK Boulevard Underpass Reconstruction Project
Two existing railroad bridges over MLK Boulevard are
nearly 100 years old
Roadway is narrow and does not meet current standards San Joaquin Regional Rail Commission (SJRRC) – Stockton Diamond Grade Separation Project
SJRRC to partner with the City to improve MLK Boulevard MLK Boulevard Underpass Reconstruction - One Voice
project in 2023 and 2024
Total project cost estimated at $60 million
918
OBJECTIVES:
MLK Boulevard Underpass Reconstruction Project
919
Proposals received for 50% design and environmental services in July 2023
Negotiated Professional Services Contract for $1,429,195 with Mark Thomas and Company, Inc.
Cooperative Agreement with SJRRC to fund 50% of design and environmental services
This phase expected to be complete by end of 2025
Overall project completion: final design, right of way acquisition, construction will pending available grant funding.
PROGRESS:
MLK Boulevard Underpass Reconstruction Project
920
Future Concept:
MLK Boulevard Underpass Reconstruction Project
921
Possible Cross Section:
MLK Boulevard Underpass Reconstruction Project
922
It is recommended that the City Council adopt a resolution authorizing the City Manager to:
Appropriate funds in the amount of $1,000,000 from the Public Facility Fees Street Improvement Fund Balance.
Approve findings pursuant to Stockton Municipal Code section 3.68.070 in support of an exception to the competitive bidding process. Approve a Cooperative Agreement with SJRRC in the amount of $800,000.
Award a Professional Services Contract to Mark Thomas and Company, Inc. of Sacramento, CA, in the amount of $1,429,195 to implement the preliminary design and environmental document phase.
RECOMMENDATION:
MLK Boulevard Underpass Reconstruction Project
923
QUESTIONS?
924
City of Stockton
Legislation Text
File #: 24-0446, Version: 1
APPROVE A RESOLUTION AUTHORIZING A SECOND ISSUANCE OF SPECIAL TAX BONDS ON BEHALF OF THE CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
RECOMMENDATION
It is recommended that City Council approve a resolution authorizing a second issuance of special tax bonds to be issued 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 supplement to fiscal agent agreement, approving the form of limited offering memorandum, approving 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 public improvements for the CFD.
The Council, as the legislative body of the CFD, authorized the issuance of special tax bonds for the CFD in the maximum principal amount of not-to-exceed $25,000,000. In 2022, the City issued the first series of bonds for the CFD in the amount of $9,915,000 (the “2022 Bonds”) for the purpose of financing various public improvements for the CFD.
Holman Investors, LLC (the “Developer”) has requested the City issue a second small series of bonds (the “2024 Bonds”) in the expected amount of $1,590,000 and a not-to-exceed amount of $2,000,000. Staff and the Financing Team (defined later) are proposing to sell the 2024 Bonds as a limited public offering (described later). The 2024 Bonds will be issued on parity with the 2022 Bonds, meaning they have an equal right to the special tax revenue and funds held under the Fiscal Agent Agreement with the 2022 Bonds.
Adopting the resolution is necessary to complete the issuance process for the 2024 Bonds. The City Attorney’s office has approved the resolutions as to form.
DISCUSSION
Background
In 2005, the City formed the City of Stockton, Community Facilities District No. 2005-1 (Cannery City of Stockton Page 1 of 7 Printed on 5/16/2024
powered by Legistar™
925
File #: 24-0446, Version: 1
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”), previously defined as the CFD, which is comprised of undeveloped land owned by the Developer and lots purchased by two merchant builders. The CFD has a total bond authorization of $25,000,000.
The CFD is comprises of the remaining 278± acres in the Cannery Park Master Plan. The CFD is currently being developed with 515 single-family homes. LGI Homes California LLC (“LGI Homes”) and AG EHC II LGIH CA 2 LP (“LGI Homes Landbank”) have acquired 387 single-family lots and KB Home North Bay LLC (“KB Home”) has acquired 128 single-family lots. The remaining developable land consisted of four non-residential parcels and one multi-family parcel. The Developer submitted applications to the City to rezone three out of the four non-residential parcels, resulting in plans for an additional 331 single-family residential units and an additional 250-300 multi-family residential units, The Developer retained 19.70 acres of the non-residential land for future business park / commercial uses. The changes in land use were approved by the Stockton Planning Commission on February 8, 2024 and the Stockton City Council on April 2, 2024.
Below is a table of the status of current development in the CFD:
Completed Homes: Individual Homeowners 213
Remaining Lots: LGI Homes and LGI Homes Landbank 196
Remaining Lots: KB Home 106
Total Homes 515
Each single-family residential lot pays a capital special tax (Special Tax A) of $1,600 per unit per year upon the issuance of a building permit. The City, due to COVID-19 concerns and the potential impact on the housing market, reduced the size of the 2022 Bonds to assist in the reduction of the special tax burden to be paid by the merchant builders from approximately $1,600 per lot per year to approximately $1,200 per lot per year. This had the impact of reducing the amount of bonds to be issued and resulted in the final issuance of the 2022 Bonds in the amount of $9,915,000 which provided $8,000,000 for public capital improvements.
City of Stockton Page 2 of 7 Printed on 5/16/2024
powered by Legistar™
926
File #: 24-0446, Version: 1
The Developer has requested the City issue a second small series of bonds (the “2024 Bonds”) currently estimated in the amount of $1,590,000. The 2024 Bonds are meant to fund the small remainder of bonds that were originally not issued in 2022. Staff and the Financing Team (defined later) are proposing to sell the 2024 Bonds as a limited public offering. The 2024 Bonds will be issued on parity with the 2022 Bonds, meaning they have an equal right to the special tax revenue and funds held under the Fiscal Agent Agreement with the 2022 Bonds.
Due to the small size and the limited amortization of 2024 Bonds, institutional buyers will be the most likely buyers to purchase the 2024 Bonds. A limited public offering is restricted to a limited number of institutional buyers and is less expensive primarily because no appraisal is required. In addition, the Financing Team has agreed to work on the transaction for fees that are generally less than those for a full public offering (“see the estimated costs of issuance later in this document”).
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”.
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 first to developed properties to determine the special tax levy for each parcel. Developed properties are defined as any properties that have pulled a building permit by May 1 of each year. If the special taxes from developed properties are insufficient, the special tax formula will then look to final map and undeveloped properties to fill the gap (See “Special Tax A”). In addition, the City will then apply Special Tax B to any properties that have a Certificate of Occupancy issued by the City (See “Special Tax B”).
The special tax formula consists 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 unit and a maximum annual special tax of $7,500 per acre multifamily, $4,500 per acre commercial, and a maximum annual special tax of $4,145 per acre for light industrial. These rates will not increase during the life of the CFD. 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.
City of Stockton Page 3 of 7 Printed on 5/16/2024
powered by Legistar™
927
File #: 24-0446, Version: 1
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 started at $520 a year for single-family homes and $343.20 for multi-family homes (based on FY 2019/20) and will grow 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 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.
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 resolution to authorize the issuance and sale of the 2024 Bonds.
· Supplemental Agreement No. 1 To Fiscal Agent Agreement: This agreement governs the terms and conditions of the 2024 Bonds and identifies the net proceeds of the 2024 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 the Interest Due on September 1, 2024 (Capitalized Interest) o Pay the costs of issuing the 2024 Bonds
· Limited Offering Memorandum: 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 a preliminary version of the limited offering memorandum (“LOM”) deemed to be essentially City of Stockton Page 4 of 7 Printed on 5/16/2024
powered by Legistar™
928
File #: 24-0446, Version: 1
final. A final version of this document is to be made available shortly after the 2024 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 2024 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 Limited Offering Memorandum): This agreement governs the terms and conditions whereby the City will provide the holders of the 2024 Bonds an annual report updating the status of development in much the same form as some of the tables in the LOM. In addition, should a material event occur, as listed in the agreement, the City will provide immediate disclosure to the holders of the 2024 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 2024 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: Oppenheimer & Co. Inc. as Underwriter will execute this document agreeing to purchase the 2024 Bonds contingent upon the City satisfying the obligations imposed within the agreement. The Underwriter agrees to make a public offering of the 2024 bonds when authorized by the Council.
Financing Schedule
Assuming approval, the financing calendar outlines the remaining steps and the timeline to complete the sale and closing of the 2024 Bonds. It is anticipated that the financing team will participate on a due diligence call the week of May 27th, post the LOM during the week of June 17th, conduct the sale on June 26th, finalize the documents and post the LOM during the weeks July 1st and July 8th and close on July 17th.
Financing Team
The 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: Oppenheimer & Co. Inc.
· Special Tax Consultant: Willdan Financial Services
· Fiscal Agent: U.S. Bank National Association
FINANCIAL SUMMARY
The RMA 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 event was included in the RMA where a portion of Special Tax A will convert to pay for the City’s ongoing maintenance of the capital facilities that were financed.
City of Stockton Page 5 of 7 Printed on 5/16/2024
powered by Legistar™
929
File #: 24-0446, Version: 1
The Rate and Method of Apportionment also includes a Special Tax B of $520 per Single family parcel and $343.20 for Multifamily parcel 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.
The current assessed value of all properties within the CFD is valued at $70.5 million. In addition, the Financing Team obtained the sales prices for the homes sold since the assessed value for the most recent tax roll was established. This established an additional $62.3 million in value for a total of $132.8 million. Assuming the 2024 Bonds are sold in the amount of $1,590,000 and, when combined with the outstanding $9,915,000 of 2022 Bonds, equals an outstanding amount of $11,505,000 plus other overlapping land-secured debt in the amount of $1,214,234. The estimated value-to-lien of the CFD (Total Assessed Value + Sales Prices) / (Total Aggregate Land-Secured Debt) or ($132.8 million) / ($12.7 million) is approximately 10:1.
There is no financial obligation of the City to repay the 2024 Bonds. Repayment of the debt is secured solely from special taxes on property owners within the CFD and certain funds held under the Supplemental Fiscal Agent Agreement.
Based on current market interest rates as of March 12, 2024, the expected principal amount to be issued on the 2024 Bonds is $1,590,000. Interest on the bonds will be payable March 1 and September 1 of each year, commencing September 1, 2024. Principal will be payable on September 1 of each year commencing September 1, 2025 with the final maturity on September 1, 2054.
Below is a table of the estimated costs of issuance for the 2024 Bonds:
Role Company Amount
Bond Counsel Fee and Expenses Jones Hall $30,000.00
Disclosure Counsel Jones Hall $20,000.00
Municipal Advisor Del Rio Advisors LLC $32,500.00
Special Tax Consultant Willdan Financial Services $10,000.00 City Administration Fee City of Stockton $11,925.00
Fiscal Agent / Counsel U.S. Bank $7,500.00
Printing of LOM TBD $2,500.00
Contingency / Rounding Miscellaneous $5,575.00
Total Estimated Costs $120,000.00
In addition, Oppenheimer & Co. Inc., as underwriter, has agreed to work for a fixed fee not-to-exceed of $35,000 and is currently showing their fee at $30,000. The fee is not dependent on the size of the 2024 Bonds.
Below is a table of the estimated sources and uses of funds for the 2024 Bonds:
Sources of Funds
Par Amount $1,590,000.00
Net Premium / Discount ($21.496.80)
Total Sources of Funds $1,568,503.20
Uses of Funds
Project (Improvement) Fund $1,308,949.45
Reserve Fund (Parity) $89,612.50
Capitalized Interest $19,941.25
City of Stockton Page 6 of 7 Printed on 5/16/2024
powered by Legistar™
930
File #: 24-0446, Version: 1
Sources of Funds
Par Amount $1,590,000.00
Net Premium / Discount ($21.496.80)
Total Sources of Funds $1,568,503.20
Uses of Funds
Project (Improvement) Fund $1,308,949.45
Reserve Fund (Parity) $89,612.50
Capitalized Interest $19,941.25
Costs of Issuance $120,000.00
Underwriter’s Discount $30,000.00
Total Uses of Funds $1,568,503.20
SB 450 COMPLIANCE:
In compliance with SB 450, the good faith estimates set forth herein are provided with respect to the 2024 Bonds. Such good faith estimates have been provided to the City by Oppenheimer & Co.
Inc. as the Underwriter. 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 2024 Bonds to be sold is $1,590,000.00.
True Interest Cost: The estimated true interest cost of the 2024 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 2024 Bonds, is 5.484684%.
Finance Charge: The estimated finance charge for the 2024 Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the 2024 Bonds), is $150,000.00 consisting of $120,000.00 in fixed costs of issuance and $30,000.00 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 2024 Bonds, less the finance charge of the 2024 Bonds, as estimated above, and less estimated reserves and capitalized interest, is $1,308,949.45.
Total Payment Amount. The estimated total payment amount, which means the sum total of all payments to pay debt service on the 2024 Bonds, plus the finance charge for the 2024 Bonds, as described above, not paid with the proceeds of the 2024 Bonds, calculated to the final maturity of the 2022 Bonds, is $3,893,953.75.
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 2024 Bonds, the principal amount of 2024 Bonds sold, the amortization of the 2024 Bonds, and market interest rates at the time of sale of the 2024 Bonds and, (b) other market conditions, (c) changes in the City’s financing plan, and/or (d) a combination of such factors.
City of Stockton Page 7 of 7 Printed on 5/16/2024
powered by Legistar™
931
Resolution No.
STOCKTON CITY COUNCIL
A RESOLUTION AUTHORIZING A SECOND ISSUANCE OF SPECIAL TAX BONDS
TO BE ISSUED FOR AND ON BEHALF OF THE CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II), APPROVE AND DIRECT
THE EXECUTION OF A SUPPLEMENT TO FISCAL AGENT AGREEMENT,
APPROVING THE FORM OF PRELIMINARY LIMITED OFFERING MEMORANDUM,
APPROVE SALE OF SUCH BONDS, AND APPROVE 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 “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
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 (the “Bond Authorization”), and pursuant to the provisions of the Act and a Fiscal Agent Agreement, dated as of August 1, 2022 (the “Original Fiscal Agent Agreement”), on August 24, 2022, the City issued, for and on behalf of the District $9,915,000 initial principal amount of City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2022 (the “2022 Bonds”) for the purpose of financing various public improvements authorized to be funded by the District, which 2022 Bonds constituted the first series of bonds issued pursuant to the Bond Authorization; and
The Council, as legislative body of the District, now desires to issue the second 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 Supplemental Agreement No. 1 to Fiscal Agent Agreement (the “Supplement No. 1”) (attached as Exhibit 1, incorporated by reference), between the City and U.S. Bank Trust Company, National Association, as fiscal agent, supplementing the Original Fiscal Agent Agreement and providing for the issuance and terms of the Bonds of the City for the District, and the Council, with the aid 932
of City staff, has reviewed the Supplement No. 1 and found it to be in proper order, and now desires to approve the Supplement No. 1, the issuance of the Bonds and the execution of those and related documents; and
The City proposes to sell the Bonds to Oppenheimer & Co. Inc., 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 Limited Offering Memorandum (attached as Exhibit 2, incorporated by reference) and the Council, with the aid of City staff, has reviewed the Bond Purchase Agreement (attached as Exhibit 3, incorporated by reference) and the Limited Offering Memorandum and found them to be in proper order, and now desires to approve said documents; 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, the Original Fiscal Agent Agreement and Supplement No. 1, 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 2024” in an aggregate principal amount estimated at $1,590,000 (not to exceed $2,000,000) are hereby authorized to be issued. The Bonds shall be executed in the form set forth in, and otherwise as provided in, the Original Fiscal Agent Agreement and Supplement No. 1.
4. 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 2022 Bonds and 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 outstanding 2022 Bonds and the Bonds proposed to be issued and secured by a special tax levied pursuant to the Act on property within the District.
5. The Council hereby approves the Supplement No. 1 and the terms therein, 933
substantially in the form presented to the Council at this meeting. The City Manager, Chief Financial Officer, Administrative Services Director 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 Supplement No. 1, 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 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 Supplement No. 1. The Council hereby authorizes the delivery and performance by the City of the Supplement No. 1.
6. 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 Original Fiscal Agent Agreement.
7. The Council hereby approves the Limited Offering Memorandum with respect to the Bonds, in substantially the form on file with the City Clerk. Distribution of the Limited Offering Memorandum by the City and the Underwriter is hereby approved, and, prior to the distribution of the Limited Offering Memorandum, 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 Limited Offering Memorandum “final” pursuant to Rule 15c 2-12 under the Securities Exchange Act of 1934 (the “Rule”). The execution of the final Limited Offering Memorandum, 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 Limited Offering Memorandum 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 Limited Offering Memorandum 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.
8. 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 $2,000,000 or result in an underwriter’s discount in excess of 2.00%, or a true interest cost in excess of 6.25%. 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. 934
9. All actions heretofore taken by the officers, employees and agents of the City with respect to the establishment of the District 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 of this Resolution.
PASSED, APPROVED, and ADOPTED May 21, 2024 .
KEVIN J. LINCOLN II
Mayor of the City of Stockton
ATTEST:
ELIZA R. GARZA, CMC
City Clerk of the City of Stockton
935
Jones Hall Draft 4.25.24
SUPPLEMENTAL AGREEMENT NO. 1 TO
FISCAL AGENT AGREEMENT
by and between
CITY OF STOCKTON
and
U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,
as Fiscal Agent
Dated as of ___________ 1, 2024
Relating to:
$__________
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds
Series 2024
EXHIBIT 1 936
-iTABLE OF CONTENTS
SECTION 1. Supplement to Original Fiscal Agent Agreement................................................... 2
ARTICLE X
2024 BONDS
Section 10.01. Definitions.................................................................................. 2 Section 10.02. Authorization of 2024 Bonds ..................................................... 3 Section 10.03. Terms of 2024 Bonds ................................................................ 4 Section 10.04. Redemption of 2024 Bonds ....................................................... 5 Section 10.05. Form of 2024 Bonds; Authentication and Delivery .................... 8 Section 10.06. Application of Proceeds of Sale of 2024 Bonds ........................ 8 Section 10.07. 2024 Costs of Issuance Fund.................................................... 9 Section 10.08. Procedure for Disbursement of 2024 Improvement Account...................................................................................... 9 Section 10.09. Security for 2024 Bonds ..........................................................10 Section 10.09. Effect of this Article X ..............................................................10 SECTION 2. Attachment of Exhibit C .......................................................................................10 SECTION 3. Additional Amendments to Original Fiscal Agent Agreement ..............................10 SECTION 4. Partial Invalidity....................................................................................................11 SECTION 5. Execution in Counterparts....................................................................................11 SECTION 6. Governing Law.....................................................................................................11 EXHIBIT A - FORM OF 2024 BONDS
EXHIBIT 1 937
-1-
SUPPLEMENTAL AGREEMENT NO. 1 TO FISCAL AGENT AGREEMENT
THIS SUPPLEMENTAL AGREEMENT NO. 1 TO FISCAL AGENT AGREEMENT (this “Supplemental Agreement No. 1” or “Agreement”), dated as of ___________ 1, 2024, is by and between the CITY OF STOCKTON, 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 the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “District”), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as fiscal agent (the “Fiscal Agent”) under a Fiscal Agent Agreement, dated as of August 1, 2022 (the “Original Fiscal Agent Agreement”) by and between the Fiscal Agent and the City.
RECITALS :
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, the Council, as legislative body of the District, previously authorized the issuance of special tax bonds of the City for the District in the maximum aggregate principal amount of not to exceed $25,000,000 (the “Bond Authorization”); and WHEREAS, pursuant to the provisions of the Act and the Original Fiscal Agent Agreement, on August 24, 2022, the City issued, for and on behalf of the District $9,915,000 initial principal amount of City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2022 (the “2022 Bonds”) for the purpose of financing various public improvements authorized to be funded by the District, which 2022 Bonds constituted the first series of bonds issued pursuant to the Bond Authorization; and WHEREAS, Section 5.09 of the Original Fiscal Agent Agreement authorizes the issuance of Additional Bonds by a Supplemental Agreement (as such terms are defined in the Original Fiscal Agent Agreement) secured under the Original Fiscal Agent Agreement on parity with the 2022 Bonds; and
WHEREAS, after due investigation and deliberation the City has determined that it is in the interests of the City and the District at this time for the City, for and on behalf of the District, to provide for the issuance of City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2024 (the “2024 Bonds”), to provide moneys needed to construct and acquire the facilities necessary for development of property within the District; and
EXHIBIT 1 938
-2-
WHEREAS, this Supplemental Agreement No. 1 is a “Supplemental Agreement” as defined in Section 1.03 of the Original Fiscal Agent Agreement and the 2024 Bonds are “Additional Bonds” as defined in Section 1.03 of the Original Fiscal Agent Agreement and secured under the Original Fiscal Agent Agreement, as amended and supplemented by this Supplemental Agreement No. 1, on parity with the 2022 Bonds; and WHEREAS, the City and the Fiscal Agent desire to enter into this Supplemental Agreement No. 1 pursuant to Sections 5.09 and 8.01 of the Original Fiscal Agent Agreement and to provide for the issuance of the 2024 Bonds; and
WHEREAS, in providing for the issuance of the 2024 Bonds, it is necessary to supplement and amend the Original Fiscal Agent Agreement, as more particularly provided herein, as such supplements and amendments are authorized by Sections 5.09 and 8.01 of the Original Fiscal Agent Agreement; and
WHEREAS, the City has determined that all acts and proceedings required by law necessary to make the 2024 Bonds, when executed by the City for the District, authenticated and delivered by the Fiscal Agent and duly issued, the valid, binding and legal special obligations of the City for the District, and to constitute the Original Fiscal Agent Agreement, as amended and supplemented by this Supplemental Agreement No. 1, a valid and binding agreement for the uses and purposes herein and therein set forth, in accordance with its terms, have been done or taken and the execution and delivery of this Supplemental Agreement No. 1 have been in all respects duly authorized.
SUPPLEMENTAL AGREEMENT :
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:
SECTION 1. Supplement to Original Fiscal Agent Agreement. In accordance with the provisions of Section 5.09 and 8.01 of the Original Fiscal Agent Agreement, the Original Fiscal Agent Agreement is hereby amended by adding a new article thereto, to be designated as Article X. Such Article X shall read in its entity as follows:
ARTICLE X
2024 BONDS
Section 10.01. Definitions. The Original Fiscal Agent Agreement is amended to add and/or modify the following definitions to Section 1.03. “Article X” means this Article X which has been incorporated in and made a part of this Agreement pursuant to Supplemental Agreement No. 1, together with all amendments of and supplements to this Article X entered into pursuant to the provisions of Section 8.01. “Closing Date” means with respect to each series of Bonds, the date upon which there is a physical delivery of the Bonds in exchange for the amount representing the purchase price of the Bonds by the Original Purchaser thereof, for the 2024 Bonds being _______, 2024.
EXHIBIT 1 939
-3-
“Continuing Disclosure Certificate” means (i) with respect to the 2022 Bonds, the Continuing Disclosure Certificate, dated as of September 15, 2022, by and between the City and Willdan Financial Services, 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 and (ii) with respect to the 2024 Bonds, the Continuing Disclosure Certificate, dated as of _______, 2024, by and among the City and Willdan Financial Services 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.
“Interest Payment Dates” means (i) with respect to the 2022 Bonds, March 1 and September 1 of each year, commencing March 1, 2023, and (ii) with respect to the 2024 Bonds, March 1 and September 1 of each year, commencing September 1, 2024. “Supplemental Agreement No. 1” means Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of ___________ 1, 2024, between the City, for and on behalf of the District, and the Fiscal Agent.
“2024 Bonds” means the “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2024,” authorized to be issued under Section
10.02. “2024 Costs of Issuance” means items of expense payable or reimbursable directly or indirectly by the City and related to the authorization, sale and issuance of the 2024 Bonds, which items of expense shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees, expenses and charges of the Fiscal Agent including its first annual administration fee, expenses incurred by the City in connection with the issuance of the 2024 Bonds, financial advisor fees, 2024 Bond (underwriter’s) discount or underwriting fee, legal fees and charges, including bond counsel, disclosure counsel, charges for execution, transportation and safekeeping of the 2024 Bonds and other costs, charges and fees in connection with the foregoing. “2024 Costs of Issuance Fund” means the fund by that name established and held by the Fiscal Agent pursuant to Section 10.07.
“2024 Improvement Account” means the account by that name established in Section 3(B) of this Supplemental Agreement No. 1.
“2024 Reserve Account of the Reserve Fund” means the account by that name established in Section 10.06(B).
“Term 2024 Bonds” means the 2024 Bonds maturing September 1, 20_____ and September 1, ______.
Section 10.02. Authorization of 2024 Bonds. 2024 Bonds in the aggregate principal amount of $__________ are hereby authorized to be issued as Additional Bonds under and subject to the terms of this Agreement, the Act, and other applicable laws of the State of California.
EXHIBIT 1 940
-4-
Section 10.03. Terms of 2024 Bonds.
(A) Form; Denominations. The 2024 Bonds shall be issued as fully registered Bonds without coupons in the denomination of $5,000 or any integral multiple of $5,000 in excess thereof.
(B) Date of Bonds. The 2024 Bonds shall be dated the Closing Date for the 2024 Bonds.
(C) CUSIP Identification Numbers. “CUSIP” identification numbers shall be imprinted on the 2024 Bonds, but such numbers shall not constitute a part of the contract evidenced by the 2024 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 2024 Bonds. In addition, failure on the part of the City or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the City’s contract with such Owners and shall not impair the effectiveness of any such notice.
(D) Maturities, Interest Rates. The 2024 Bonds shall mature and become payable on September 1 in each of the years, and shall bear interest at the rates per annum (based on a 360-day year composed of 12 30-day months) as follows:
Maturity
(September 1)
Principal
Amount
Interest
Rate
CUSIP
(777870)†
(T) Term Bond
(E) Interest and Method of Payment. Interest on the 2024 Bonds shall be payable as provided in Section 2.02(E) of this Agreement, with the Closing Date as used therein being the Closing Date as defined in Section 1.02, and payments shall be made on the 2024 Bonds as provided in Section 2.02(F), with the first Interest Payment Date being September 1, 2024.
EXHIBIT 1 941
-5-
Section 10.04. Redemption of 2024 Bonds.
(A) Redemption. (i) Optional Redemption. The 2024 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 2024 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 2024 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 2024 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 1 942
-6-
(iii) Mandatory Sinking Payment Redemption. The Term 2024 Bonds maturing September 1, _____and September 1, _____ 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 Maturing September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
(maturity)
Term Bonds Maturing September 1, 2046
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
(maturity)
The amounts in the foregoing table shall be reduced pro rata, in order to maintain substantially uniform debt service, as a result of any prior partial optional redemption or mandatory redemption of the 2024 Bonds as directed by the City in an Officer’s Certificate. (B) Notice to Fiscal Agent. The City shall give the Fiscal Agent an Officer’s Certificate containing notice of its intention to redeem 2024 Bonds pursuant to subsections (A)(i) and (A)(ii) not less than 60 days prior to the applicable redemption date, unless waived by the Fiscal Agent.
(C) Purchase of Bonds in Lieu of Redemption. In lieu of redemption under Section
10.04(A), moneys in the Bond Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2024 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 2024 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such 2024 Bonds were to be redeemed in accordance with this Agreement. (D) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least 20 days but not more than 60 days prior to the date fixed for redemption, to the Securities Depositories and to the Municipal Securities Rulemaking Board, and to the respective registered Owners of any 2024 Bonds designated for redemption, at their addresses appearing on the 2024 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 2024 Bonds.
EXHIBIT 1 943
-7-
Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding 2024 Bonds are to be called for redemption, shall designate the CUSIP numbers and 2024 Bond numbers of the 2024 Bonds to be redeemed by giving the individual CUSIP number and 2024 Bond number of each 2024 Bond to be redeemed or shall state that all 2024 Bonds between two stated 2024 Bond numbers, both inclusive, are to be redeemed or that all of the 2024 Bonds of one or more maturities have been called for redemption, shall state as to any 2024 Bond called in part the principal amount thereof to be redeemed, and shall require that such 2024 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 2024 Bonds will not accrue from and after the redemption date.
The City has the right to rescind any notice of the optional redemption of 2024 Bonds under Section 10.04(A)(i) by written notice to the Fiscal Agent on or prior to two Business Days prior to 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 2024 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.
Upon the payment of the redemption price of 2024 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 2024 Bonds being redeemed with the proceeds of such check or other transfer.
Whenever provision is made in this Agreement for the redemption of less than all of the 2024 Bonds of any maturity, the Fiscal Agent shall select the 2024 Bonds to be redeemed, from all 2024 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 2024 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 2024 Bond or 2024 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2024 Bond or 2024 Bonds. (E) Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the principal of, and interest and any premium on, the 2024 Bonds so called for redemption shall have been deposited in the Bond Fund, such 2024 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 2024 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 canceled 2024 Bonds in accordance with its records retention policy then in effect.
EXHIBIT 1 944
-8-
Section 10.05. Form of 2024 Bonds; Authentication and Delivery. (A) Form of 2024 Bonds. The 2024 Bonds, the form of Fiscal Agent’s certificate of authentication, and the form of assignment to appear thereon, shall be substantially in the respective forms set forth in Exhibit C attached hereto and by this reference incorporated herein, with necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement and the Act.
(B) Execution of 2024 Bonds. The 2024 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 signature thereon. If any officer whose signature appears on any 2024 Bond ceases to be such officer before delivery of the 2024 Bonds to the Owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the 2024 Bonds to the Owner. Any 2024 Bond may be signed and attested on behalf of the City by such persons as at the actual date of the execution of such 2024 Bond shall be the proper officers of the City although at the nominal date of such 2024 Bond any such person shall not have been such officer of the City.
Only such of the 2024 Bonds as shall bear thereon a certificate of authentication in the form set forth in Exhibit C hereto, manually executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and such certificate of the Fiscal Agent shall be conclusive evidence that such 2024 Bonds have been duly authenticated and delivered hereunder and are entitled to the benefits of this Agreement. (C) Authentication and Delivery of 2024 Bonds. At any time after the execution of Supplemental Agreement No. 1 and delivery by the City of an Officer’s Certificate that the requirements of Section 5.09 for the issuance of the 2024 Bonds as Additional Bonds have been met, the City may issue the 2024 Bonds for the District in the aggregate principal amount set forth in Section 10.02 and deliver the 2024 Bonds to the Original Purchaser. The Authorized Officers of the City are hereby authorized and directed to deliver any and all documents and instruments necessary to cause the issuance of the 2024 Bonds in accordance with the provisions of the Act and this Agreement, as supplemented by Supplemental Agreement No. 1, to authorize the payment of 2024 Costs of Issuance and costs of the Project by the Fiscal Agent from the proceeds of the 2024 Bonds and to do and cause to be done any and all acts and things necessary or convenient for delivery of the 2024 Bonds to the Original Purchaser. The provisions of Sections 2.06 through 2.13 of the Original Fiscal Agent Agreement shall apply to the 2024 Bonds in a like manner as applied to the 2022 Bonds.
Section 10.06. Application of Proceeds of Sale of 2024 Bonds. (A) The proceeds of the purchase of the 2024 Bonds by the Original Purchaser in the amount of $___________, calculated as 100% of the principal amount of the 2024 Bonds, [less Underwriter’s discount] 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 2024 Improvement Account of the Improvement Fund $___________;
(ii) Deposit in the 2024 Reserve Account of the Reserve Fund $___________; and
EXHIBIT 1 945
-9-
(iii) Deposit in the 2024 Costs of Issuance Fund $___________. (iv) Deposit to the Interest Account of the Special Tax Fund the amount of $___________, as capitalized interest, which shall be used to pay a portion of the interest due on the 2024 Bonds on September 1, 2024.
(B) In accordance with Section 4.03(A), the Fiscal Agent shall establish a separate subaccount within the Reserve Fund known as the “2024 Reserve Account,” into which the amounts set forth in Section 10.06(A)(ii) shall be deposited. (C) The Fiscal Agent may, in its discretion, establish a temporary fund or account in its books and records to facilitate transfers required under this Section 10.06.
Section 10.07. 2024 Costs of Issuance Fund. There is hereby established a separate fund to be known as the “2024 Costs of Issuance Fund”, which shall be held by the Fiscal Agent in trust. Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay 2024 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 and delivered to the Fiscal Agent. The Fiscal Agent shall pay all 2024 Costs of Issuance upon receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee in such Officer’s Certificate, or upon receipt of an Officer’s Certificate requesting payment of a 2024 Costs of Issuance not listed on the initial Officer’s Certificate delivered to the Fiscal Agent on the Closing Date. The Fiscal Agent shall maintain the 2024 Costs of Issuance Fund until 60 days after the Closing Date, and shall transfer any moneys remaining therein on such date, including any investment earnings thereon, to the 2024 Improvement Account. Thereafter, every invoice received by the Fiscal Agent shall be paid from amounts on deposit in the 2024 Improvement Account and the Fiscal Agent shall close the 2024 Costs of Issuance Fund. Moneys in the 2024 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 2024 Costs of Issuance Fund to be used for the purposes of such fund.
Section 10.08. Procedure for Disbursement of 2024 Improvement Account.. (A) Disbursements. Disbursements from the 2024 Improvement Account shall be made by the Fiscal Agent according to the procedure set forth in Section 3.04, and an Officer’s Certificate substantially in the form of Exhibit B to the Original Fiscal Agent Agreement (except that in such Officer’s Certificate, reference shall be made to the 2024 Improvement Account and to the 2024 Bonds).
(B) 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. (C) Closing of Fund. Upon the filing of an Officer’s Certificate stating that the portion of the Project to be financed from the Improvement Fund and the accounts established thereunder has been completed and that all costs of such portion of the Project have been paid or are not required to be paid from the Improvement Fund, the Fiscal Agent shall transfer the amount, if any, remaining in the Improvement Fund to the Bond Fund for application to the payment of EXHIBIT 1 946
-10-
principal of and interest on the Bonds in accordance with Section 4.02 and the Improvement Fund shall be closed.
Section 10.09. Security for 2024 Bonds. The 2024 Bonds shall be Additional Bonds which shall be secured in the manner and to the extent set forth in Articles IV and V, and in this Article X.
Section 10.10. Effect of this Article X. Except as in this Article X expressly provided or except to the extent inconsistent with any provision of this Article X, the 2024 Bonds shall be deemed to be “Bonds” under and within the meaning of Section 1.03, and every term and condition contained in the foregoing provisions of this Agreement shall apply to the 2024 Bonds with full force and effect, with such omissions, variations and modifications thereof as may be appropriate to make the same conform to this Article X.
SECTION 2. Attachment of Exhibit C. The Original Fiscal Agent Agreement is hereby further amended by incorporating therein an Exhibit C setting forth the form of the 2024 Bonds, which shall read in its entirety as set forth in Exhibit A attached hereto and hereby made a part hereof.
SECTION 3. Additional Amendments to Original Fiscal Agent Agreement. The Original Fiscal Agent Agreement was previously amended and is hereby further amended as follows:
(A) Section 2.06 of the Original Fiscal Agent Agreement is amended by adding an additional paragraph thereto at the end of the Section which reads as follows:
“Prior to any transfer of the Bonds outside the book-entry system (including, but not limited to, the initial transfer outside the book-entry system) the transferor shall 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, as amended. The Fiscal Agent shall conclusively rely on the information provided to it and shall have no responsibility to verify or ensure the accuracy of such information.”
(B) Section 3.04(A) of the Original Fiscal Agent Agreement is hereby amended by adding thereto, as a new third sentence thereof, the following: “In connection with the issuance of the 2024 Bonds, there is also hereby created within the Improvement Fund a separate account designated as the “2024 Improvement Account” of the Improvement Fund, which account is hereby established for purposes of accounting for the use and disposition of 2024 Bond proceeds directed to the Improvement Fund pursuant to Section 10.06(A)(i). (C) The first paragraph of Section 4.02(A) is amended and restated in its entirety in to read as follows:
Establishment of Fund. There is hereby established as a separate account within the Reserve Fund established under the Original Fiscal Agent Agreement, a 2024 Reserve Account, to the credit of which a deposit shall be made as required by Section 10.06(A)(ii).
Moneys in the 2024 Reserve Account shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds for the payment of principal of, and interest on, all Outstanding Bonds and shall be subject to a lien in favor of the Owners of all Bonds on an equal basis, provided that amounts in all accounts within the Reserve Fund shall be pledged to all Bonds equally and EXHIBIT 1 947
-11-
ratably. For clarity, the City is establishing the Reserve Fund as a parity reserve fund for all of the Bonds, with reserve accounts established within the Reserve Fund for accounting purposes only.
(D) The second paragraph of Section 8.01 of the Original Fiscal Agent Agreement is amended by deleting the period at the end of clause (D) thereof and by inserting therein, in lieu thereof, the following: “; and (E) in connection with the issuance of Additional Bonds under Section 5.09 hereof.”
(E) Notwithstanding anything in the Original Fiscal Agent Agreement to the contrary, Additional Bonds payable from the Special Taxes on a parity basis with the 2022 Bonds.
References in the Original Fiscal Agent Agreement to the 2022 Bonds, if the context requires reference to the 2022 Bonds and any Additional Bonds in order to maintain the parity relationship of the 2022 Bonds and any Additional Bonds and the security therefor, shall be deemed to refer to “Bonds” as defined in the Original Fiscal Agent Agreement rather than “2022 Bonds” or “2024 Bonds.”
SECTION 4. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this Supplemental Agreement No. 1 shall for any reason be held illegal, invalid or unenforceable, such holding shall not affect the validity of the remaining portions of this Supplemental Agreement No. 1. The City hereby declares that it would have entered into this Supplemental Agreement No. 1 and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the 2024 Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences. clauses, or phrases of this Supplemental Agreement No. 1 may be held illegal, invalid or unenforceable.
SECTION 5. Execution in Counterparts. This Supplemental Agreement No. 1 may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
SECTION 6. Governing Law. This Supplemental Agreement No. 1 shall be construed and governed in accordance with the laws of the State of California applicable to contracts made and performed in such State.
EXHIBIT 1 948
[Signature Page to Supplemental Agreement No. 1 to
Fiscal Agent Agreement dated as of ___________ 1, 2024] IN WITNESS WHEREOF, the City and the Fiscal Agent have caused this Supplemental Agreement No. 1 to Fiscal Agent Agreement to be executed as of ___________ 1, 2024.
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 1 949
A-1
EXHIBIT A TO SUPPLEMENTAL AGREEMENT NO. 1 TO FISCAL AGENT AGREEMENT
EXHIBIT C
FORM OF 2024 BONDS
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
No. $
CITY OF STOCKTON
CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
SPECIAL TAX BOND
SERIES 2024
INTEREST RATE MATURITY DATE BOND DATE CUSIP
September 1, ____ _______, 2024
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: DOLLARS
The City of Stockton (the “City”) for and on behalf of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “District”), for value received, hereby promises to pay solely from the Special Tax (as hereinafter defined) to be collected in The District or amounts in certain funds and accounts held under the Agreement (as hereinafter defined), to the Registered Owner named above, or registered assigns (the “Owner”), on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such principal amount from the Bond Date shown above, or from the most recent Interest Payment Date (as hereinafter defined) to which interest has been paid or duly provided for, semiannually on March 1 and September 1, commencing September 1, 2024 (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 2024 Bond is payable to the Owner hereof in lawful money of the United States of America upon presentation and surrender of this 2024 Bond at a designated corporate trust office of U.S.
Bank Trust Company, National Association (the “Fiscal Agent”). Interest on this 2024 Bond shall be paid by check of the Fiscal Agent mailed by first class mail on each Interest Payment Date to the Owner hereof as of the close of business on the 15th day of the month preceding the month in which the Interest Payment Date occurs (the “Record Date”) at such Owner’s address as it appears on the registration books maintained by the Fiscal Agent, or by wire transfer made on such Interest Payment Date upon written instructions delivered to the Fiscal Agent by the applicable Record Date of any Owner of $1,000,000 or more in aggregate principal amount of 2024 Bonds.
This 2024 Bond is one of a duly authorized issue of bonds approved by resolution of the City Council of the City on ___________, 2024 (the “Resolution”), pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311, et seq., of the California EXHIBIT 1 950
A-2
Government Code (the “Mello-Roos Act”) for the purpose of providing moneys for the construction and acquisition of improvements within the District, and is one of the bonds designated “City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2024” (the “2024 Bonds”). The issuance of the 2024 Bonds and the terms and conditions thereof are provided for by a Fiscal Agent Agreement, dated as of September 1, 2022, as amended and supplemented, including by Supplemental Agreement No. 1 to Fiscal Agent Agreement dated as of ___________ 1, 2024 (together, the “Agreement”), by and between the City and the Fiscal Agent and this reference incorporates the Agreement, as supplemented, herein, and by acceptance hereof the Owner of this 2024 Bond assents to said terms and conditions. The Agreement is authorized under, this 2024 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 2024 Bond are payable, on parity with bonds previously issued by the City for the District in 2022, solely from the annual special tax authorized under the Mello-Roos Act to be collected within The District (the “Special Tax”) and certain funds held under the Agreement.
Interest on this 2024 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 2024 Bond Date shown above; provided however, that if at the time of authentication of this 2024 Bond, interest is in default hereon, this 2024 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 2024 Bonds do not constitute obligations of the City for which the City is obligated to levy or pledge, or has levied or pledged, general or special taxation other than described herein above.
Optional Redemption. The 2024 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 2024 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 Mandatory Redemption from Prepayments. The 2024 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 EXHIBIT 1 951
A-3
of the principal amount of the 2024 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 Mandatory Sinking Fund Redemption. The Term 2024 Bonds maturing September 1, _____and September 1, _____ 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 Maturing September 1, ______
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
(maturity)
Term Bonds Maturing September 1, 2046
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
(maturity)
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 2024 Bonds as directed by the City.
Notice of redemption with respect to the 2024 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, and may be rescinded.
This 2024 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 2024 Bond shall be entered by the Fiscal Agent in books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon.
No transfer or exchange hereof shall be valid for any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon and any redemption premium shall be payable only to the registered owner or to such Owner’s order. The Fiscal Agent shall require the Owner requesting transfer or exchange to pay any tax or other governmental charge EXHIBIT 1 952
A-4
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 2024 Bonds for redemption or (ii) with respect to a 2024 Bond after such 2024 Bond has been selected for redemption.
The Agreement and the rights and obligations of the City thereunder may be modified or amended as set forth therein. The principal of the 2024 Bonds is not subject to acceleration upon a default under the Agreement or any other document.
This 2024 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 2024 Bond have existed, happened and been performed in due time, form and manner as required by law, and that the amount of this 2024 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 2024 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 2024 Bond issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
IN WITNESS WHEREOF, the City of Stockton has caused this 2024 Bond to be dated ____________, 2024, to be signed by the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of its City Clerk.
CITY OF STOCKTON
By:
Mayor
Attested:
By:
City Clerk
EXHIBIT 1 953
A-5
FISCAL AGENT’S CERTIFICATE OF AUTHENTICATION
This is one of the 2024 Bonds described in the Resolution and the Agreement.
Dated: _____________, 2024
U.S. BANK TRUST COMPANY,
NATIONAL ASSOCIATION, as Fiscal
Agent
By:
Authorized Signatory
EXHIBIT 1 954
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 1 955
Jones Hall Draft of May 3, 2024
LIMITED OFFERING MEMORANDUM DATED _______, 2024
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 2024 Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax. Interest on the 2024 Bonds may be subject to the corporate alternative minimum tax. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “TAX MATTERS. $_____________*
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
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 “2024 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, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”). The 2024 Bonds are the second series of special tax bonds issued by the City following the issuance of special tax bonds in 2022 in the initial principal amount of $9,915,000. See “THE 2024 BONDS – Authority for Issuance.” The 2024 Bonds are being issued to (i) construct and/or acquire certain public facilities authorized for the District, (ii) make a deposit to a parity debt service reserve fund, (iii) pay the costs of issuing the 2024 Bonds, and (iv) pay a portion of the interest on the 2024 Bonds through September 1, 2024. See “SOURCES AND USES OF FUNDS.”
The Bonds (consisting of the 2024 Bonds and 2022 Bonds (defined herein)) 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 2024 Bonds represent the second 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 2024 Bonds is payable semiannually on each March 1 and September 1, commencing September 1, 2024. The 2024 Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The 2024 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 2024 Bonds. See “THE 2024 BONDS – Description of the 2024 Bonds” and “APPENDIX F – DTC and the Book-Entry Only System.” The 2024 Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid special taxes. See “THE 2024 BONDS – Redemption.”
The 2024 Bonds, the interest thereon, and any premiums payable on the redemption of any 2024 Bonds, are not an indebtedness of the City (except to the limited extent described in this Limited Offering Memorandum), 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 Limited Offering Memorandum), the State or any of its political subdivisions is liable for the 2024 Bonds. Neither the faith and credit nor the taxing power of the City (except to the limited extent described in this Limited Offering Memorandum) or the State or any of their respective political subdivisions is pledged to the payment of the 2024 Bonds. Other than the Net Taxes, no taxes are pledged to the payment of the 2024 Bonds. The 2024 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 Limited Offering Memorandum.
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 2024 Bonds. Potential investors should read this entire Limited Offering Memorandum to obtain information essential for making an informed investment decision. Investment in the 2024 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 2024 Bonds.
The 2024 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 2024 Bonds, in book-entry form, will be available for delivery through the facilities of DTC on or about ______________, 2024. [Oppenheimer logo]
The date of this Limited Offering Memorandum is: ________________, 2024. ___________________________
*Preliminary; subject to change.
This Limited Offering Memorandum and the information contained herein are subject to completion or amendment. Under no circumstances shall this Limited Offering Memorandum 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 2 956
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® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright (c) 2024 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. None of the City, the Underwriter or their agents or counsel take any responsibility for the accuracy of such numbers.
EXHIBIT 2 957
CITY OF STOCKTON, CALIFORNIA
City Council
Kevin J. Lincoln II, Mayor
Kimberly Warmsley, Vice Mayor and Councilmember, District 5 Michele Padilla, Councilmember, District 1
Dan Wright, Councilmember, District 2
Michael Blower, Councilmember, District 3
Susan Lenz, Councilmember, District 4
Brando Villapudua, Councilmember, District 6
City Staff
Harry E. Black, City Manager
Kimberly Trammel, Chief Financial Officer
Carmen Barragan, Debt and Treasury Manager
Eliza Garza, City Clerk
Lori M. Asuncion, 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
Fiscal Agent
U.S. Bank Trust Company, National Association
Los Angeles, California
EXHIBIT 2 958
i
TABLE OF CONTENTS
Page Page
INTRODUCTION................................................1 SOURCES AND USES OF FUNDS ..................5
THE 2024 BONDS .............................................5 Authority for Issuance ....................................5 Description of the 2024 Bonds .......................5
Redemption*...................................................7 Transfer or Exchange of 2024 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 ................................................26 The Improvements .......................................26 Master Developer’s Financing Plan .............27
OWNERSHIP OF PROPERTY WITHIN THE
DISTRICT.....................................................29 Top Taxpayers .............................................29 The Master Developer..................................31 KB................................................................. 31 LGI Homes ...................................................33
VALUE OF PROPERTY WITHIN THE
DISTRICT AND SPECIAL TAX BURDEN ... 36
Assessed Valuation ..................................... 36 Value to Special Tax Burden Ratios ............ 37
Overlapping Liens and Priority of Lien......... 40
Special Tax Collection and Delinquency
Rate ......................................................... 41 Sample Tax Bill ............................................ 42 SPECIAL RISK FACTORS.............................. 43
Limited Obligation of the City to Pay
Debt Service ............................................ 43 Levy and Collection of the Special Tax........ 43
Concentration of Ownership ........................ 44
Property Values and Property
Development............................................ 44 Other Possible Claims Upon the Value
of Taxable Property ................................. 47 Bankruptcy and Foreclosure Delays............ 47
FDIC/Federal Government Interests in
Properties................................................. 48 No Acceleration Provisions .......................... 49 Loss of Tax Exemption ................................ 49 IRS Audit of Tax-Exempt Bond Issues ........ 49
Voter Initiatives ............................................ 50 Case Law Related to the Mello-Roos
Act............................................................ 51 Pandemic Diseases ..................................... 51 Cybersecurity ............................................... 52 TAX MATTERS................................................ 52 LEGAL MATTERS ........................................... 54 Legal Opinion............................................... 54 No Litigation ................................................. 54 CONTINUING DISCLOSURE.......................... 54
The City........................................................ 54 LGI Homes................................................... 55 NO RATINGS................................................... 55 UNDERWRITING............................................. 55 MUNICIPAL ADVISOR .................................... 56 EXECUTION .................................................... 56 APPENDIX A – Rate and Method of Apportionment of Special Tax APPENDIX B – San Joaquin County and City of Stockton Demographic Information APPENDIX C – Summary of Certain Provisions of the Fiscal Agent Agreement APPENDIX D – Form of Opinion of Bond Counsel
APPENDIX E – Forms of Continuing Disclosure Undertakings APPENDIX F – DTC and the Book-Entry Only System
EXHIBIT 2 959
GENERAL INFORMATION ABOUT THIS LIMITED OFFERING MEMORANDUM Use of Limited Offering Memorandum. This Limited Offering Memorandum is submitted in connection with the sale of the 2024 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Limited Offering Memorandum is not to be construed as a contract with the purchasers of the 2024 Bonds. Statements contained in this Limited Offering Memorandum 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 Limited Offering Memorandum 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 Limited Offering Memorandum 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 Limited Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the 2024 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 Limited Offering Memorandum 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 Limited Offering Memorandum 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 Limited Offering Memorandum, 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 Limited Offering Memorandum.
EXHIBIT 2 960
1 _________________________
LIMITED OFFERING MEMORANDUM
_________________________
$_________*
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
This Limited Offering Memorandum, including the cover page, inside cover and attached appendices, is provided to furnish information regarding the bonds captioned above (the “2024 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 Limited Offering Memorandum 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 C – Summary of Certain Provisions of the Fiscal Agent Agreement.”
INTRODUCTION
This introduction is not a summary of the entire Limited Offering Memorandum. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained throughout the Limited Offering Memorandum, including the cover page, inside cover and attached appendices, and documents summarized or described in this Limited Offering Memorandum. A full review should be made of the entire Limited Offering Memorandum. The offering of the 2024 Bonds to potential investors is made only by means of the entire Limited Offering Memorandum.
Authority for Issuance. The 2024 Bonds are issued pursuant to the provisions of the Mello-Roos 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, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, 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 ___________, 2024 by the City Council of the City (the “City Council”), as legislative body of the District. See “THE 2024 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 * Preliminary; subject to change.
EXHIBIT 2 961
2 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 laws of the State. For economic and demographic information regarding the area in and around the City, see “APPENDIX B – San Joaquin County and City of Stockton Demographic Information.” Description of the 2024 Bonds. The 2024 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 September 1, 2024. The 2024 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 2024 Bonds. Principal and interest (and premium, if any) on the 2024 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 2024 BONDS.”
Use of Proceeds. Proceeds of the 2024 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 2024 Bonds and may also be reimbursed using pay-as-you go financing from the Special Tax. See “THE IMPROVEMENTS.” Proceeds of the 2024 Bonds will also be used to establish a reserve fund (described below) available for payment on the 2024 Bonds, pay a portion of the interest on the 2024 Bonds through September 1, 2024 and to pay the costs of the issuance of the 2024 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 District consists primarily of land developing into 515 single-family residential units. The District also includes a multifamily residential site planned for 210 multifamily residential units and 5 parcels currently zoned for non-residential uses, 4 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. Eight Mile Road Investors, LLC and Holman Investors LLC (together, the “Master Developer”) is the master developer of the District and has been building necessary infrastructure for the development underway and additional development contemplated.
The Master Developer previously sold the 515 currently planned residential lots to two merchant homebuilders:
• KB HOME North Bay LLC, a Delaware limited liability company (“KB”), which is building out Villages A, B and C (128 total lots), and
• LGI Homes – California, LLC, a California limited liability company (“LGI Homes”), which is building out Villages E1, E2, F1 and F2 (387 total lots).
As of April 22, 2024, KB had sold and delivered 22 homes to individual homeowners and LGI Homes had sold and delivered 191 homes to individual homeowners and both builders had homes under construction. As of April 22, 2024, AG EHC II LGIIH CA 2 LP, a Delaware limited partnership (“LGI Landbank”), which is serving as a landbank to LGI Homes, owned 78 of the remaining 189 lots planned to be developed by LGI Homes. See “THE DISTRICT” and EXHIBIT 2 962
3 “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” for additional details on ongoing ownership and development activities in the District.
Security and Sources of Payment for the 2024 Bonds. The City Council annually levies a special tax for facilities on the property in the District (herein, 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 is attached as APPENDIX A to this Limited Offering Memorandum. The Bonds (consisting of the 2024 Bonds, the 2022 Bonds and any Additional 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 2024 Bonds. The 2024 Bonds are also secured by certain funds and accounts established and held under the Fiscal Agent Agreement. In particular, a parity debt service reserve fund (the “Reserve Fund”) has been established under the Fiscal Agent Agreement for the benefit of the all of the Bonds. See “SECURITY FOR THE BONDS.” Pursuant to the Act, the Resolution of Issuance, and the Fiscal Agent Agreement, so long as any 2024 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 2024 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 2024 Bonds represent the second series of bonds issued under the authorization, following issuance of special tax bonds in 2022 (the “2022 Bonds”). The 2022 Bonds are currently outstanding in the principal amount of $9,915,000, and additional series of parity bonds (“Additional Bonds”) are anticipated as development within the District 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 2024 Bonds and is comprised of both developed and undeveloped property. For Fiscal Year 2023-24 taxable property in the District had an assessed EXHIBIT 2 963
4 value of $70,529,026. Based upon the assessed valuation of taxable property in the District for Fiscal Year 2023-24 and an estimated principal amount of the 2024 Bonds and 2022 Bonds of $11,505,000*, as well as overlapping land-secured debt attributable to those parcels of $1,214,234, for a total direct and overlapping debt amount of $12,719,234*, the value-to-lien ratio for such property is approximately 10.44* 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.” Redemption of 2024 Bonds Before Maturity. The 2024 Bonds are subject to optional redemption, mandatory sinking fund redemption and special mandatory redemption from prepaid Special Taxes. See “THE 2024 BONDS – Redemption.”
Risk Factors Associated with Purchasing the 2024 Bonds. Investment in the 2024 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 Limited Offering Memorandum, in considering the investment quality of the 2024 Bonds.
Limited Obligation of the City. The 2024 Bonds, the interest thereon, and any premiums payable on the redemption of any 2024 Bonds, are not an indebtedness of the City (except to the limited extent described in this Limited Offering Memorandum), 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 Limited Offering Memorandum), the State or any of its political subdivisions is liable for the 2024 Bonds. Neither the faith and credit nor the taxing power of the City (except to the limited extent described in this Limited Offering Memorandum) or the State or any of their respective political subdivisions is pledged to the payment of the 2024 Bonds. Other than the Net Taxes, no taxes are pledged to the payment of the 2024 Bonds. The 2024 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 Limited Offering Memorandum.
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 Limited Offering Memorandum and not otherwise defined herein have the meanings ascribed to such terms in the Fiscal Agent Agreement. See “APPENDIX C – Summary of Certain Provisions of the Fiscal Agent Agreement.” The information and expressions of opinion herein speak only as of the date of this Limited Offering Memorandum and are subject to change without notice. Neither delivery of this Limited Offering Memorandum, any sale made hereunder, nor any future use of this Limited Offering Memorandum 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. * Preliminary; subject to change.
EXHIBIT 2 964
5 SOURCES AND USES OF FUNDS
A summary of the estimated sources and uses of funds associated with the sale of the 2024 Bonds follows.
Sources
Principal Amount of 2024 Bonds $
Plus/Less: [Net] Original Issue Premium/Discount
Total Sources $
Uses
Improvement Fund $
Capitalized Interest (1)
Deposit to 2024 Reserve Account of Reserve Fund (2)
Costs of Issuance (3)
Total Uses $
(1) Used to pay a portion of the interest on the 2024 Bonds through September 1, 2024. (2) Equal to the Reserve Requirement with respect to the 2024 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, and the Special Tax Administrator, Underwriter’s discount, as well as the cost of printing the preliminary and final Limited Offering Memorandums.
THE 2024 BONDS
This section generally describes certain of the terms of the 2024 Bonds contained in the Fiscal Agent Agreement. For additional details, see “APPENDIX C – Summary of Certain Provisions of the Fiscal Agent Agreement.”
Authority for Issuance
The 2024 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. 2019-05-21- 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 2024 Bonds are the second series to be issued under the authorization (following issuance of the 2022 Bonds in 2022 in the amount of $9,915,000) and additional series of parity bonds are expected to be issued in the future, as development progresses.
Description of the 2024 Bonds
The 2024 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 bookentry system maintained by DTC. Ultimate purchasers of 2024 Bonds will not receive physical certificates representing their interest in the 2024 Bonds. So long as the 2024 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 2024 Bonds.
Payments of the principal, premium, if any, and interest on the 2024 Bonds will be made directly to DTC, or its nominee, Cede & Co., so long as DTC or Cede & Co. is the registered EXHIBIT 2 965
6 owner of the 2024 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 F – DTC and the Book-Entry Only System.”
The 2024 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 Limited Offering Memorandum.
The principal of, and any redemption premium due with respect to, the 2024 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 2024 Bonds. Interest on the 2024 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 September 1, 2024.
Interest on the 2024 Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on each Interest Payment Date by first class mail to the registered Owner thereof at such registered Owner’s address as it appears on the registration books maintained by the Fiscal Agent at the close of business on the 15th day of the calendar month preceding the Interest Payment Date (the “Record Date”), or by wire transfer made on such Interest Payment Date upon written instructions received by the Fiscal Agent on or before the Record Date preceding the Interest Payment Date, of any Owner of $1,000,000 or more in aggregate principal amount of 2024 Bonds; provided that so long as any 2024 Bonds are in book-entry form, payments with respect to such 2024 Bonds will be made by wire transfer, or such other method acceptable by the Fiscal Agent, to DTC. See “APPENDIX F – DTC and the Book-Entry Only System.”
Each 2024 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 2024 Bond, interest is in default thereon, such 2024 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 2024 Bonds are registered in the name of Cede & Co., as nominee of DTC, payments of the principal, premium, if any, and interest on the 2024 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 F – DTC and the Book-Entry Only System.”
EXHIBIT 2 966
7 Redemption*
Optional Redemption. The 2024 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 2024 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 2024 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 2024 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 Mandatory Sinking Fund Redemption. The 2024 Bonds maturing September 1, ____ and September 1, ____ (the “Term 2024 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 2024 Bonds Due September 1, ____
Mandatory
Redemption Date
(September 1)
Sinking Fund
Payment
* Preliminary; subject to change.
EXHIBIT 2 967
8 Term 2024 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 2024 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 2024 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 2024 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 2024 Bonds designated for redemption, at their addresses appearing on the 2024 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 2024 Bonds.
Such notice will state the redemption date and the redemption price and, if less than all of the then outstanding 2024 Bonds are to be called for redemption, will designate the CUSIP numbers and 2024 Bond numbers of the 2024 Bonds to be redeemed by giving the individual CUSIP number and 2024 Bond number of each 2024 Bond to be redeemed or will state that all 2024 Bonds between two stated 2024 Bond numbers, both inclusive, are to be redeemed or that all of the 2024 Bonds of one or more maturities have been called for redemption, will state as to any 2024 Bond called in part the principal amount thereof to be redeemed, and will require that such 2024 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 2024 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 2024 Bonds of any maturity, the Fiscal Agent will select the 2024 Bonds to be redeemed, from all 2024 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 2024 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 2024 Bond or 2024 Bonds, of the same series and maturity, of authorized denominations in aggregate principal amount equal to the unredeemed portion of the 2024 Bond or 2024 Bonds.
City’s Right to Rescind. The City has the right to rescind any notice of the optional redemption of 2024 Bonds and such notice may be cancelled and annulled if for any reason funds EXHIBIT 2 968
9 will not be or are not available on the date fixed for redemption for the payment in full of the 2024 Bonds then called for redemption. Neither the City nor the Fiscal Agent will have any liability to the Owners of the 2024 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 2024 Bonds so called for redemption are deposited in the Redemption Account, such 2024 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 2024 Bonds
So long as the 2024 Bonds are registered in the name of Cede & Co., as nominee of DTC, transfers and exchanges of 2024 Bonds will be made in accordance with DTC procedures. See APPENDIX F. Any 2024 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 2024 Bond for cancellation, accompanied by delivery of a duly written instrument of transfer in a form approved by the Fiscal Agent. Whenever any 2024 Bond(s) will be surrendered for transfer or exchange, the City will execute and the Fiscal Agent will authenticate and deliver a new 2024 Bond(s), for a like aggregate principal amount of 2024 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 2024 Bonds will be required to be made (i) within 15 days prior to the date established by the Fiscal Agent for selection of 2024 Bonds for redemption or (ii) with respect to a 2024 Bond after that 2024 Bond has been selected for redemption.
EXHIBIT 2 969
10 SECURITY FOR THE BONDS
Pledge of Special Taxes
The Bonds (consisting of the 2024 Bonds, the 2022 Bonds and any Additional 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. Taxable property in the District also is levied a “Special Tax B” component to finance a portion of the cost of municipal services provided to owners of land in the District; see APPENDIX A for details on that special tax component.
The Special Taxes are exempt from the property tax limitation of Article XIIIA of the California Constitution, pursuant to Section 4 thereof as a “special tax” authorized by a two-thirds vote of the qualified electors. The levy of the Special Taxes was authorized by the City pursuant to the 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 EXHIBIT 2 970
11 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 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 2024-25 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.
EXHIBIT 2 971
12 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.
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 EXHIBIT 2 972
13 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 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.
EXHIBIT 2 973
14 The Fiscal Agent is required to deposit the Special Taxes in the Special Tax Fund and 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, as a parity reserve fund to be held by the Fiscal Agent, to the credit of which a deposit shall be made upon issuance of the 2024 Bonds an additional amount so that the total amount in the Reserve Fund equals the Reserve Requirement with respect to all of the Outstanding Bonds. Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds and 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 2024 Bonds, the amount on deposit in the Reserve Fund will be increased by depositing certain proceeds of the 2024 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 the City.
EXHIBIT 2 974
15 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 Tax Fund for EXHIBIT 2 975
16 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 community facilities districts in the Teeter Plan, and the County could decide to discontinue the EXHIBIT 2 976
17 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 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 EXHIBIT 2 977
18 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 post-judgment 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 2024 Bonds are the second series of special tax bonds issued for the District, on parity with the 2022 Bonds, and additional parity bonds (“Additional Bonds”) are anticipated to be issued as development within the District 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:
(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
EXHIBIT 2 978
19 (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 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 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 EXHIBIT 2 979
20 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 Fiscal Agent 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 Fiscal Agent Agreement, additional security for the benefit of such Additional Bonds or any portion thereof.
EXHIBIT 2 980
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 Limited Offering Memorandum (assuming no early redemptions), is set forth below.
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2024
Debt Service Schedule*
Period Ending
(Sept. 1)
2024 Bonds
Principal
2024 Bonds
Interest
2024 Bonds
Total
2022 Bonds
Total
Total Parity
Bonds
* Preliminary; subject to change.
Source: Underwriter.
EXHIBIT 2 981
22 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. 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 2024
Debt Service Coverage Based on Maximum Annual Special Tax* Period
Ending
(Sept. 1)
Maximum
Special Tax
Revenue
Administrative
Costs Net Revenue
Total
Debt Service*
Debt Service
Coverage*
* Preliminary; subject to change.
Source: The Underwriter and Willdan Financial Services.
EXHIBIT 2 982
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 landdeveloper, 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 2024 Bonds are the second series to be issued under the authorization and additional series of parity bonds are expected to be issued in the future, as development within the District 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. As described more herein, the Master Developer recently complete a re-zoning of certain business park/commercial parcels into residential parcels. 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 78 miles east of San Francisco. The City currently occupies a total area of 64.8 square miles. With nearly 320,000 residents, the City is the 11th largest city in California.
Map. The map on the following page shows the boundary of the District.
EXHIBIT 2 983
24 [Reserved for CFD Boundary Map]
EXHIBIT 2 984
25 Environmental Matters
Flood Zone. According to the Federal Emergency Management Agency (FEMA) National Flood Insurance Program, Flood Insurance Rate Map (FIRM), the subject properties are located within Zone X (areas outside of the 0.2% annual chance flood plain), as reflected by FEMA map panel 06077C-0320F (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, including most recently in 2024, 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 November 2034.
Subdivision Agreement. The City entered into a Subdivision Agreement in December 2005 (as amended to date, including most recently in 2019, 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 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. The Subdivision Agreement runs with the property and has no expiration date.
EXHIBIT 2 985
26 Current and Anticipated Development in the District
Development of Initial 515 Single-Family Residential Units. Taxable property in the District consists primarily of land developing into 515 single-family residential units. The Master Developer is the master developer for the project and has been building necessary infrastructure for the development of all the land in the District, including the initial residential units. Of the total 515 currently planned residential units that have been sold by the Master Developer, KB is building out Villages A, B and C (128 total lots) and LGI Homes is building out Villages E1, E2, F1 and F2 (387 total lots). Homebuilding activity is underway by KB and LGI Homes. See “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” for additional details.
Future Development of Additional Residential and Non-Residential Uses. In addition to the 515 single-family residential units, taxable land in the District initially included 4 nonresidential parcels and one multi-family residential site. The Master Developer submitted applications to the City to rezone 3 out of the 4 undeveloped parcels, resulting in additional singlefamily residential (SFR) units additional Multifamily residential units (MFR), and retaining 19.70 acres of commercial uses in the District. The changes in land use were approved by the Stockton Planning Commission on February 8, 2024 and the Stockton City Council on April 2, 2024. If backbone improvements required for development were completed (including the planned Eight Mile Road widening and a new sanitary sewer pump station north of Bear Creek), all residential and commercial development could commence as early as summer 2024. Certain parcels that have been re-zoned to single-family residential uses will be subject to a $1,600 per unit special tax, in accordance with the Special Tax Formula. See APPENDIX A.
The following table shows the current land uses for the parcels that have been recently re-zoned.
APN
Large
Lot Acreage
Re-Zoned Land Use
(Approved April 2, 2024)
122-020-033 4 19.70 Business Park/Commercial
122-020-032 4 12.34 250 – 300 MFR units
122-020-038 (por) 5A 44.18 267 SFR units 122-020-038 (por) 5B 11.70 122-020-043 6 11.89 64 SFR units
___________
Source: Master Developer.
The Improvements
The City expects to utilize proceeds of the Bonds (consisting of the 2024 Bonds, the 2022 Bonds and any Additional Bonds) to reimburse costs expended by the Master Developer for infrastructure facilities constructed and necessary to facilitate development in the District, including a sanitary sewer pump station, 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 singlefamily homes being developed by KB and LGI Homes in the District is complete.
EXHIBIT 2 986
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 April 1, 2024
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 -- 29.00 1,814,330.70 6,296,150.00 Holman Road Bridge - CM, Permit Compliance 608,005.00 -- 27.00 165,428.30 608,005.00 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 Sanitary Sewer Pump Station 1,728,530.00 0.00
Totals $15,757,702.00 $13,698,371.00 $8,811,460.40 $21,800,924.00 Total Contract and Estimated Cost(1) $29,456,073.00
(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 FOR THE BONDS – Special Tax Methodology.”
Master Developer’s Financing Plan
Cost Incurred for the Improvements. The Master Developer has expended over $8.8 million dollars on the construction and installation of Improvements for the District to date. An additional $20.3 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, Holman Road Phase 2, Holman Road Bridge) and dry utilities.
Major future Improvements consist of completion of the sanitary sewer pump station north Bear Creek, 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;
• Sales of lots in the District to merchant builders and other end users; EXHIBIT 2 987
28 • Proceeds of special tax bonds secured by land within the District, including the Bonds; 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 2022 Bonds, the City and the Master Developer entered 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 payas-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.
EXHIBIT 2 988
29 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 and LGI Homes have provided the respective information set forth in the section entitled “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT.” No representation is made by the City or the Underwriter as to the accuracy or adequacy of such information so provided. There may be material adverse changes to this information after the date of this Limited Offering Memorandum. In addition, any Internet addresses included below are for reference only, and the information on those Internet sites is not a part of this Limited Offering Memorandum or incorporated by reference into this Limited Offering Memorandum.
No assurance can be given that development of the property will be completed, or that it will be completed in a timely manner or in the configuration or to the density described herein, or that the Master Developer, KB, LGI Homes or any other property owner will or will not retain ownership of its property in the District. Neither the Bonds nor the Special Taxes are personal obligations of the Master Developer, KB, LGI Homes or of any subsequent landowners; and in the event that a landowner defaults in the payment of the Special Taxes, the District may proceed with judicial foreclosure but has no recourse to the assets of any landowner. As a result, other than as provided herein, no financial statements or information is, or will be, provided about the Master Developer, KB, LGI Homes or any other 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 2024-25 Special Tax levy amount. Additional information concerning the Master Developer, KB, LGI Homes and the LGI Landbank (which is serving as a landbank to LGI Homes) follows thereafter.
EXHIBIT 2 989
30 Table 1
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Top Payers of Projected Fiscal Year 2024-25 Special Tax Levy Property Owner (1)
No. of
Parcels
Assessed
Value -
Land
Assessed
ValueStructure
Total
Assessed
Value
Sales
Price (2)
Bonded
Debt (3)
AG EHC II LGIH CA 2 LP 108 $6,881,449 $0 $6,881,449 N/A $2,412,699 KB HOME NORTH BAY LLC 106 8,813,106 0 8,813,106 N/A 2,368,019 LGI HOMES CALIFORNIA LLC 88 4,828,171 408,000 5,236,171 N/A 1,965,903 INDIVIDUAL HOMEOWNERS 213 17,905,470 31,692,830 49,598,300 111,909,241 4,758,379 Total 515 $38,428,196 $32,100,830 $70,529,026 $111,909,241 $11,505,000
Property Owner (1)
Other
Overlapping
Land Secured
Debt (4)
Aggregate
Bond
Indebtedness*
Maximum
Special Tax
% of Maximum
Special Tax
Estimated FY
2024-25
Special Tax
Levy % of Levy
Value to
Aggregate
Bonded
Debt*
AG EHC II LGIH CA 2 LP $254,635 $2,667,335 $172,800 20.97% $153,848 20.58% 2.58 KB HOME NORTH BAY LLC 249,920 2,617,939 169,600 20.58% 144,962 19.39% 3.37 LGI HOMES CALIFORNIA LLC 207,481 2,173,384 140,800 17.09% 107,823 14.43% 2.41 INDIVIDUAL HOMEOWNERS 502,198 5,260,576 340,800 41.36% 340,800 45.60% 21.27 Total $1,214,234 $12,719,234 $824,000 100.00% $747,432 100.00% 10.44 * Preliminary, subject to change.
(1) Ownership as April 22, 2024.
(2) Sales Price is sales transaction prices for 213 homes conveyed to Individual Homeowners. Value-to-Lien is based on sales price for 213 sold homes and assessed value from San Joaquin County Fiscal Year 2023-24 Secured Tax Roll for 302 builder owned parcels. (3) Bonded Debt allocated by Maximum Special Taxes for Developed and Final Mapped parcels. (4) Overlapping Debt provided by CalMuni as of April 1, 2024.
Source: KB Homes, LGI Homes, San Joaquin County Data, and CalMuni, as compiled by Willdan Financial Services.
EXHIBIT 2 990
31 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. The Master Developer is currently constructing the Holman Road Bridge that will allow for City utilities to be extended north of Bear Creek which will facilitate development of its holdings in those areas.
KB
KB HOME North Bay LLC, a Delaware limited liability company (previously defined as KB), is a subsidiary of KB Home, a Delaware corporation (“KB Home”), whose principal executive offices are located in Los Angeles, California. KB Home is a publicly traded company listed on the New York Stock Exchange under the ticker symbol “KBH.” Founded in 1957, KB Home constructs and sells homes through its operating divisions under the name KB Home. KB Home’s ongoing principal operations are in nine states, including California, Arizona, Nevada, Colorado, Texas, Florida, North Carolina, Idaho and Washington within 45 major markets. KB Home first developed homes in California in 1963. KB Home’s homebuilding operations offer a variety of homes designed primarily for first-time, move-up and active adult homebuyers, including attached and detached single-family homes, townhomes and condominiums.
KB Home is subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in accordance therewith is obligated to file annual, quarterly and current reports, proxy statements and other information with the SEC. Such filings set forth, among other things, certain data relative to the consolidated results of operations and financial position of KB Home and its subsidiaries. KB Home’s SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov, and at KB Home’s website at www.kbhome.com.
The foregoing website addresses and references to filings with the SEC are given for reference and convenience only, and the information on such websites and on file with the SEC does not form a part of this Limited Offering Memorandum and is not incorporated by reference herein. No representation is made in this Limited Offering Memorandum as to the accuracy or adequacy of the information contained on such websites. KB and KB Home are not obligated to advance funds for construction or development or to pay ad valorem property taxes or the Special Taxes and investors should not rely on the information and financial statements contained on such websites in evaluating whether to buy, hold or sell the Bonds. The information contained on such websites may be incomplete or inaccurate and has not been reviewed by the County, the District or the Underwriter.
EXHIBIT 2 991
32 KB Development Plan. KB acquired 128 partially improved lots from the Master Developer, which lots are located in Villages A, B and C. KB’s development plan is to finish the lots and construct homes thereon in a neighborhood known as “The Preserve at Creekside.” As of April 22, 2024, building permits had been issued for 63 homes and 22 homes had been conveyed as to individual homeowners. Final home closings are expected to occur by the end of 2026. KB’s development plans are summarized as follows:
Project/Village No. of Lots Floor Plans Approx. Square
Footage
Estimated Base
Pricing(1)
The Preserve at Creekside 128 6 1,769 – 3,061 $518,990 and up KB anticipates the following absorption schedule for its 128 lots in the District.
Project/Village
No. of
Lots 2023 2024 2025 2026
The Preserve at Creekside 128 18 48 48 14
(1) Base home prices are estimated as of April 22, 2024, and actual base home prices may be lower than estimated. Estimated base home prices exclude lot premiums, options and extras and any incentives or price reductions.
Source: KB.
No assurance can be given that home construction and sales will be carried out on the anticipated timeline and according to the plans outlined herein, or that the home construction and sale plans or base prices set forth above will not change after the date of this Limited Offering Memorandum. KB reserves the right to change its development at any time without notice.
Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation.
KB Financing Plan. To date, KB has financed its land acquisition and various site development costs related to its development within the District through internally generated funds (which may include home sales revenue and funding from its parent company KB Home). KB expects to use internal funding which may include home sales revenue and funding from its parent company KB Home) to complete the development in the District.
Although KB expects to have sufficient funds available to complete its development in the District as described in this Limited Offering Memorandum, there can be no assurance that amounts necessary to finance the remaining development costs will be available from KB, KB Home or any other source when needed. Neither KB, nor any of its subsidiaries or related entities are under any legal obligation of any kind to expend funds for the development of and construction of homes on its property in the District. Any contributions by KB or KB Home to fund the costs of such development are entirely voluntary. KB has no legal obligation to Bondholders to make any such funds available for construction or development, or the payment of ad valorem property taxes or the Special Taxes. Many factors beyond KB’s control, or a decision by KB to alter its current plans, may cause the actual sources and uses to differ from the projections.
If and to the extent that internal funding, including but not limited to home sales revenue and corporate financing from KB’s parent company, is inadequate to pay the costs to complete the planned development by KB within the District and other financing is not put into place, there could be a shortfall in the funds required to complete the remaining planned development by KB in the District.
EXHIBIT 2 992
33 LGI Homes
LGI Homes-California, LLC (previously 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’ plans are summarized as follows:
Community
No. of
Lots
Floor
Plans
Square
Footage
Base
Pricing
Cannery Park 387 6 1,108 – 2,215 $489,900 - $628,900
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 March 2025. As of April 22, 2024, LGI Homes had obtained building permits for 241 homes and had 10 homes in escrow that had not yet closed, with development status summarized as follows.
Total No.
Planned
Units
Final
Mapped
Parcels
Building
Permits
Issued
Homes
Sold and
Escrow
Closed
Homes Under
Construction
and in
Escrow
Homes
Under
Construction
and Not in
Escrow
Completed
Homes
Not Yet
Under Sale
Contract (1)
Finished
Lots With No
Home
Construction
Underway(2)
387 387 241 191 10 29 7 145
____________________
(1) Includes one model home.
(2) One lot has not yet been developed to “finished lot” status, since it is being used as a parking lot.
Source: LGI Homes.
LGI Homes Financing Plan. 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 Limited Offering Memorandum.
As of April 22, 2024, LGI Homes estimated it had remaining costs of approximately $416,000 to be incurred for horizontal improvements to its land in the District and approximately $36,250,000 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 Limited Offering Memorandum, 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.
EXHIBIT 2 993
34 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 Limited Offering Memorandum 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 Limited Offering Memorandum and are not incorporated by reference into this Limited Offering Memorandum.
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 Limited Offering Memorandum or incorporated into this Limited Offering Memorandum by reference.
LGI Homes Landbank Arrangement. AG EHC II LGIH CA 2, LP, a Delaware limited partnership (previously defined as the LGI Landbank) has entered into an agreement with LGI Homes, dated May 3, 2023 (“LGI Option Agreement”) pursuant to which LGI Homes has the option (but not the obligation) to purchase 150 lots in the District from the LGI Landbank pursuant to a set schedule.
LGI Homes is responsible for making special tax payments while the LGI Option Agreement is in place. In the event that LGI Homes does not exercise its option or the right to purchase the lots expires or is terminated, the LGI Landbank being an investor only and not a homebuilder, would likely attempt to sell such lots to another merchant builder. Under the LGI Option Agreement, LGI Homes has the option to take-down lots in accordance with a specified take-down schedule. In addition, LGI Homes can accelerate the takedown of lots and, LGI Homes can, and does, pull building permits and begin house construction on lots held by the LGI Landbank before those lots are taken down.
As of April 22, 2024, LGI Homes had taken down 72 lots in accordance with the specified schedule. Under the LGI Option Agreement, LGI Homes is allowed to pull building permits on lots still owned by the LGI Landbank and has done so. The take-down schedule set forth in the LGI Option Agreement is as follows:
EXHIBIT 2 994
35 LGI Option Agreement – Take-Down Schedule
Option
Period
Date Option
Period
Expires
Cumulative
No. of Lots
1 6/6/2023 18
2 7/6/2023 18
3 8/6/2023 18
4 9/6/2023 36
5 10/6/2023 36
6 11/6/2023 36
7 12/6/2023 54
8 1/6/2024 54
9 2/6/2024 54
10 3/6/2024 72
11 4/6/2024 72
12 5/6/2024 72
13 6/6/2024 90
14 7/6/2024 90
15 8/6/2024 90
16 9/6/2024 108
17 10/6/2024 108
18 11/6/2024 108
19 12/6/2024 126
20 1/6/2025 126
21 2/6/2025 126
22 3/6/2025 144
23 4/6/2025 144
24 5/6/2025 144
25 6/6/2025 150
_____________
Source: LGI Homes.
EXHIBIT 2 995
36 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 and Sales Prices
In connection with valuing property in the District, the City has obtained the 2023-24 County Assessed Valuation of the property in the District. The City has also obtained the sales prices for the 213 homes that had been conveyed to individual homeowners as of April 22, 2024.
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 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.
Limitations of Assessed Valuation. Property values may not be evenly distributed throughout the District; thus, certain parcels may have a greater value than others. This disparity EXHIBIT 2 996
37 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.
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 $70,529,026 assessed valuation of taxable property in the District and an aggregate principal amount of Bonds of $11,505,000*, as well as overlapping land-secured debt attributable to those parcels of $1,214,234, for a total direct and overlapping debt amount of $12,719,234*, the value-to-lien ratio for such property is approximately 10.44* 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 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 2 997
38 Table 3
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Maximum Special Tax, Projected Fiscal Year 2024-25 Special Tax Levy, Allocable Debt and Value-to-Lien Ratios by Development Status Land Use
No. of
Parcels
No.
of
Assessa
ble Lots
Assessed
Values (3)
Assessed
Value -
Structure
Total
Assessed
Value
Bonded
Debt (2)
Other
Overlapping
Land
Secured
Debt
Aggregate
Bond
Indebtedness
% of
Bonded
Debt
Maximum
Special
Tax
% of
Maximum
Special
Tax
Estimated
FY
2024-25
Special Tax
Levy
Developed(1) 313 313 $24,918,176 $32,100,830 $57,019,006 $6,992,359 $737,971 $7,730,331 60.78% $500,800 60.78% $500,800 Undeveloped - Final Map
AG EHC II LGIH CA 2 LP 50 50 3,209,549 0 3,209,549 1,116,990 117,887 1,234,877 9.71% 80,000 9.71% 61,047 KB HOME NORTH BAY LLC 65 65 5,520,240 0 5,520,240 1,452,087 153,253 1,605,340 12.62% 104,000 12.62% 79,362 LGI HOMES CALIFORNIA LLC 87 87 4,780,231 0 4,780,231 1,943,563 205,123 2,148,686 16.89% 139,200 16.89% 106,223 Subtotal - Undeveloped 202 202 13,510,020 0 13,510,020 4,512,641 476,263 4,988,903 39.22% 323,200 39.22% 246,632 Total 515 515 $38,428,196 $32,100,830 $70,529,026 $11,505,000 $1,214,234 $12,719,234 100.00% $824,000 100.00% $747,432 (1) As of May 1, 2024. Per the RMA, parcels are classified as "Developed" if a building permit is issued before May 1 of the preceding fiscal year. (2) Bonded Debt allocated by Maximum Special Taxes for Developed and Final Mapped parcels.
Source: KB Homes, LGI Homes, San Joaquin County Data, and CalMuni, as compiled by Willdan Financial Service.
EXHIBIT 2 998
39 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
No. of
Assessable
Lots
Total Assessed
Values / Sales
Value(1)
Bonded
Debt (2)*
Other
Overlapping
Land Secured
Debt (3)
Aggregate
Bond
Indebtedness*
Maximum
Special Tax
Percentage of
Maximum
Special Tax
FY 2024-25
Estimated Special
Tax Levy (4)
Greater than 20:1 147 147 $81,382,776 $3,283,951 $346,587 $3,630,539 $235,200 28.54% $235,200 15:1 to 19.99:1 67 67 30,982,405 1,496,767 157,968 1,654,735 107,200 13.01% 107,200 10:1 to 14.99:1 0 0 0 0 0 0 0 0.00% 0
5:1 to 9.99:1 2 2 287,746 44,680 4,715 49,395 3,200 0.39% 2,821 3:1 to 4.99:1 114 114 9,545,058 2,546,738 268,782 2,815,520 182,400 22.14% 154,729 Less than 2.99:1 185 185 10,641,982 4,132,864 436,181 4,569,045 296,000 35.92% 247,482 Total 515 515 $132,839,967 $11,505,000 $1,214,234 $12,719,234 $824,000 100.00% $747,432 * Preliminary, subject to change
(1) Value listed is sales price for 213 homes conveyed to individual homeowners, and assessed value from San Joaquin County Fiscal Year 2023-24 Secured Tax Roll for 302 homebuilder owned parcels.
(2) Bonded Debt includes $9,915,000 Series 2022 bonds plus $1,590,000* series 2024 Bonds. Debt is allocated by Maximum Special Taxes for Developed and Final Mapped parcels. (3) Overlapping Debt provided by CalMuni as April 1, 2024. (4) As of May 1, 2024. Per the RMA, parcels are classified as "Developed" if a building permit is issued before May 1 of the preceding fiscal year.
Source: FY 2022-23 San Joaquin County Secured Roll, CalMuni, as compiled by Willdan Financial Services.
EXHIBIT 2 999
40 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. The District also levies a “Special Tax B” component to finance a portion of the cost of municipal services provided to owners of land in the District; see Appendix A for details on that special tax component.
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 1000
41 Table 5
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) Summary of Overlapping Bonded Debt
As of April 1, 2024
2023-24 Local Secured Assessed Valuation: $70,529,026
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 4/1/24 San Joaquin Delta Community College District General Obligation Bonds 0.060% $ 97,816 Lodi Unified School District General Obligation Bonds 0.307 826,075 Lodi Unified School District SFID No. 1 General Obligation Bonds 0.771 286,001 City of Stockton Community Facilities District No. 2019-1 100.000 9,915,000 (1) SJAFCA Levee Construction Maintenance Assessment District 0.016 4,342 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $11,129,234
OVERLAPPING GENERAL FUND DEBT:
San Joaquin County Certificates of Participation 0.065% $ 32,001 Lodi Unified School District Certificates of Participation 0.307 21,678 City of Stockton Pension Obligation Bonds 0.233 122,623 TOTAL OVERLAPPING GENERAL FUND DEBT $176,302
COMBINED TOTAL DEBT $11,305,536 (2)
Ratios to 2023-24 Assessed Valuation:
Direct Debt ($9,915,000)....................................................... 14.06% Total Direct and Overlapping Tax and Assessment Debt...... 15.78% Combined Total Debt ............................................................. 16.03% _____________
(1) Excludes the 2024 Bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.
Source: California Municipal Statistics, Inc.
Special Tax Collection and Delinquency Rate
The following summarizes levy and collection of the Special Taxes and delinquency history for Fiscal Year 2022-23 and the first installment for Fiscal Year 2023-24.
Fiscal Year
Parcels
Levied
Special Tax
Levy
Amount
Collected
Amount
Delinquent
No. of
Delinquent
Parcels
% of Special
Tax Levy
Delinquent
2022/23 71 $155,129 $155,129 $0 0 0.00%
2023/24 (1) 515 $749,094 $371,148 $3,399 6 0.91%
(1) Fiscal year 2023/24 collection and delinquency data only available for first installment of 2023-24 Special Tax lien (out of two installments). The next installment is due April 10, 2024.
Source: San Joaquin County Redemption Data as of February 6, 2024.
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 1001
42 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 2023-24(1)
ASSESSED VALUATION AND PROPERTY TAXES
Assessed Values (2) $464,800.00
% of AV
Projected
Amount
AD VALOREM PROPERTY TAXES 1.0000% $4,648.00
ASSESSMENTS, SPECIAL TAXES, AND PARCEL CHARGES (3)
Lodi USD 2002 Measure K Bond 0.0222% 103.18
Lodi USD 2016 Mesure U Bond 0.0447% 207.76
Lodi SFID 1 2006 Measure L Bond 0.0419% 194.74
SJ Delta College 2004 Measure L Bond 0.0135% 62.74
Cannery Park Zn 2B Storm Drain 21.00
Water Zone 2 2.30
SJC MOSQ & VCTR ABATEMENT 1.48
SJC MOSQ & VCTR CONT 9.46
SJAFCA FLDOM 7.50
SJAFCA LCMA DISTRICT 2.62
Flood Zone 9 7.92
CSA No. 53 Hazardous Waste 4.00
Cannery Park LMAD No. 96-2 Zone A-10 173.44
CFD 2019-1 Cannery Park II (Facilities) 1,600.00
CFD 2019-1 Cannery Park II (Services) 608.32
Total Assessments, Special Taxes, and Parcel Charges $3,006.46 PROJECTED TOTAL PROPERTY TAXES $7,654.46
PROJECTED TOTAL EFFECTIVE TAX RATE 1.65%
(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 1002
43 SPECIAL RISK FACTORS
The purchase of the 2024 Bonds described in this Limited Offering Memorandum 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 2024 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 1003
44 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 KB, LGI Homes and the LGI Landbank (as landbank for LGI Homes). An 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 KB, LGI Homes, the LGI Bandbank 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. 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.
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 EXHIBIT 2 1004
45 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.
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, 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, supply chain disruptions, 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.
EXHIBIT 2 1005
46 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 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.
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 EXHIBIT 2 1006
47 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 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 EXHIBIT 2 1007
48 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 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 EXHIBIT 2 1008
49 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 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 EXHIBIT 2 1009
50 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 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.
EXHIBIT 2 1010
51 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 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.
Pandemic Diseases
The spread of pandemic diseases (such as COVID-19), and responses intended to slow their spread, may result in negative impacts to the homebuilding operations and sales of homes within Improvement Area 3 in the future. There can be no assurances that the spread of pandemic diseases and related shelter in place order and/or social distancing requirements imposed by governmental authorities in response will not materially adversely impact the pace of sales of lots or homes or the willingness of owners of land in Improvement Area 3, including the Master Developer, 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 could see significant volatility attributed to pandemic disease concerns; there can be no assurances that these or other concerns that emerge later will not materially adversely impact the secondary market for the Bonds.
EXHIBIT 2 1011
52 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
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 2024 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 2024 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 2024 Bonds.
Tax Treatment of Original Issue Discount and Premium. If the initial offering price to the public at which a 2024 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 2024 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 2024 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such 2024 Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such 2024 EXHIBIT 2 1012
53 Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the 2024 Bonds who purchase the 2024 Bonds after the initial offering of a substantial amount of such maturity. Owners of such 2024 Bonds should consult their own tax advisors with respect to the tax consequences of ownership of 2024 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 2024 Bonds is sold to the public.
Under the Tax Code, original issue premium is amortized on an annual basis over the term of the 2024 Bond (said term being the shorter of the 2024 Bond’s maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the 2024 Bond for purposes of determining taxable gain or loss upon disposition.
The amount of original issue premium on a 2024 Bond is amortized each year over the term to maturity of the 2024 Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates).
Amortized 2024 Bond premium is not deductible for federal income tax purposes. Owners of premium 2024 Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such 2024 Bonds.
California Tax Status. In the further opinion of Bond Counsel, interest on the 2024 Bonds is exempt from California personal income taxes.
Other Tax Considerations. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the 2024 Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the 2024 Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether, if enacted, such legislation would apply to bonds issued prior to enactment.
The opinions expressed by Bond Counsel are based upon existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of such opinion, and Bond Counsel has expressed no opinion with respect to any proposed legislation or as to the tax treatment of interest on the 2024 Bonds, or as to the consequences of owning or receiving interest on the 2024 Bonds, as of any future date. Prospective purchasers of the 2024 Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion.
Owners of the 2024 Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the 2024 Bonds may have federal or state tax consequences other than as described above. Other than as expressly described above, Bond Counsel expresses no opinion regarding other federal or state tax consequences arising with respect to the 2024 Bonds, the ownership, sale or disposition of the 2024 Bonds, or the amount, accrual or receipt of interest on the 2024 Bonds.
EXHIBIT 2 1013
54 LEGAL MATTERS
Legal Opinion
The legal opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, approving the validity of the 2024 Bonds will be made available to purchasers at the time of original delivery and is attached in substantially final form as APPENDIX D.
Jones Hall, A Professional Law Corporation, San Francisco, California, is also serving as Disclosure Counsel to the City. The City Attorney will pass upon certain legal matters for the City.
Kutak Rock LLP, Irvine, California will pass upon certain legal matters for the Underwriter.
No Litigation
At the time of delivery of and payment for the 2024 Bonds, the City Attorney will deliver his opinion that to the best of its knowledge there is no action, suit, proceeding, inquiry or investigation at law or in equity before or by any court or regulatory agency pending against the City affecting its existence or the titles of its officers to office or seeking to restrain or to enjoin the issuance, sale or delivery of the 2024 Bonds, the application of the proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the Special Tax to pay the principal of and interest on the 2024 Bonds, or in any way contesting or affecting the validity or enforceability of the 2024 Bonds, the Fiscal Agent Agreement or any action of the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Limited Offering Memorandum or any amendment or supplement thereto, or contesting the powers of the City or its authority with respect to the 2024 Bonds or any action of the City contemplated by any of said documents.
CONTINUING DISCLOSURE
The City
The City will covenant for the benefit of owners of the 2024 Bonds to provide certain financial information and operating data relating to the District (the “City Annual Report”) by not later than March 31 following the end of the City’s fiscal year, commencing March 31, 2025, with the report for the fiscal year ending June 30, 2024, and to provide notices of the occurrence of certain listed events (“Notice Events”). These covenants have been made in order to assist the Underwriter in complying with Securities Exchange Commission Rule 15c2-12(b)(5), as amended (the “Rule”). The specific nature of the information to be contained in the Annual Report or the notices of listed events is set forth in APPENDIX E.
In the preceding five years, the City failed to timely comply in certain respects with its previous undertakings with regard to the Rule, including failing to timely file the fiscal years 2021 and 2023 audited financial statements and not including certain data in the “Customer Class by Type of Account and Number of Connections” information for 2019 water bonds. The City filed its 2023 audited financial statements on March 21, 2024, which was 51 days past the filing deadline.
EXHIBIT 2 1014
55 LGI Homes
Although not an “obligated person” under the Rule, in connection with the issuance of the 2022 Bonds, LGI Homes executed a Continuing Disclosure Certificate (the “2022 Bond CDC”) pursuant to which LGI Homes agreed to provide reports and notices of significant events. LGI Homes will also agree for the benefit of the owners of the 2024 Bonds in an additional Continuing Disclosure Certificate (the “2024 Bonds CDC”) to provide certain information on or before March 31 and September 30 of each year, in a Periodic Report, and notice of the occurrence of certain events with respect to itself and the property it owns in the District. The complete text of the 2024 Bonds CDC is set forth in APPENDIX E. LGI Homes may file a single Periodic Report or notice at significant event pursuant to the 2022 Bonds CDC and 2024 Bonds CDC.
LGI Homes’ obligation to provide the Periodic Reports and significant event disclosure will terminate when LGI Homes, its affiliates and LGI Landbank own less than 103 residential lots in the District.
LGI Homes has represented to the City that, with respect to prior continuing disclosure undertakings in California, during the past five years, LGI Homes filed two semi-annual reports with respect to a Rio Vista Community Facilities District that included a few errors in the reported data. Corrected reports were then filed subsequently. Otherwise, during the previous five years, LGI Homes has complied in all internal respects with all continuing disclosure undertakings in California.
NO RATINGS
The City has not applied to a rating agency for the assignment of a rating to the 2024 Bonds and does not contemplate applying for a rating.
UNDERWRITING
The 2024 Bonds are being purchased by Oppenheimer & Co. Inc. (the “Underwriter”), at a purchase price of $________, which represents the aggregate principal amount of the 2024 Bonds ($________) less an Underwriter’s discount of $________ and [less/ plus] an original issue [discount/premium] of $_____________.
The purchase agreement relating to the 2024 Bonds provides that the Underwriter will purchase all of the 2024 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in such purchase agreement.
The Underwriter may offer and sell the 2024 Bonds to certain dealers and others at prices lower than the offering prices stated on the inside cover page hereof. The offering prices may be changed from time to time by the Underwriter.
The Underwriter and its affiliates are full-service financial institutions engaged in various activities that may include securities trading, commercial and investment banking, municipal advisory, brokerage, and asset management. In the ordinary course of business, the Underwriter and its affiliates may actively trade debt and, if applicable, equity securities (or related derivative securities) and provide financial instruments (which may include bank loans, credit support or interest rate swaps). The Underwriter and its affiliates may engage in transactions for their own EXHIBIT 2 1015
56 accounts involving the securities and instruments made the subject of this securities offering or other offering of the District. The Underwriter and its affiliates may make a market in credit default swaps with respect to municipal securities in the future. The Underwriter and its affiliates may also communicate independent investment recommendations, market color or trading ideas and publish independent research views in respect of this securities offering or other offerings of the District.
MUNICIPAL ADVISOR
The City has retained Del Rio Advisors, LLC of Modesto, California, as municipal advisor (the “Municipal Advisor”) in connection with the offering of the 2024 Bonds. All financial and other information presented in this Limited Offering Memorandum has been provided by the City and others from their records. Unless otherwise footnoted, the Municipal Advisor takes no responsibility for the accuracy or completeness of the data provided by the City or others and has not undertaken to make an independent verification or does not assume responsibility for the accuracy, completeness, or fairness of the information contained in this Limited Offering Memorandum. The Municipal Advisor has assisted the City with the structure, timing and terms for the sale of the 2024 Bonds. The Municipal Advisor provides municipal advisory services only and does not engage in the underwriting, marketing, or trading of municipal securities or other negotiable instruments. The fee of the Municipal Advisor is contingent upon the successful closing of the 2024 Bonds.
EXECUTION
The execution and delivery of the Limited Offering Memorandum by the City has been duly authorized by the City Council, acting as the legislative body of the District.
CITY OF STOCKTON
By:
Chief Financial Officer
EXHIBIT 2 1016
A-1
APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
EXHIBIT 2 1017
B-1
APPENDIX B
SAN JOAQUIN COUNTY AND CITY OF STOCKTON
DEMOGRAPHIC INFORMATION
The District is located in the City of Stockton (the “City”), which is located in the center of San Joaquin County (the “County”), California (the “State”). Certain financial and economic data for the City, County and State are presented in this appendix for information purposes only. The 2024 Bonds are not a debt or obligation of the City, County or State, but are a limited obligation of the City secured solely by the Net Taxes generated in the District and certain other funds held pursuant to the Fiscal Agent Agreement, all as described in more detail in this Limited Offering Memorandum.
General
The City. is situated amidst the farmland of California’s San Joaquin Valley, a subregion of the Central Valley, whose boundaries encompass 64.8 square miles of waterways, which make up the California Delta. The City is located 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 was founded by Captain Charles Maria Weber in 1849 after he acquired Rancho de los Franceses and is named after Robert F. Stockton and was the first community in State to not have a name of Spanish or Native American origin. The City is located on the San Joaquin River in northern San Joaquin Valley. With nearly 320,000 residents, Stockton is the 11th largest city in California. According to the United States Census Bureau, the city occupies a total area of
64.8 square miles, of which 61.7 square miles is land and 3.1 square miles (4.76%) is water. The City is a municipal corporation and a charter city, duly organized and existing under the constitution and laws of the State.
Stockton is the largest inland seaport in California. Since the California Gold Rush, it has served as a gateway to the Central Valley. It provided easy access for trade and transportation to the southern gold mines. It has been the location of the oldest chartered university in California, University of the Pacific, since 1923. Historically an agricultural community, Stockton’s economy has since diversified into other industries, which include telecommunications and manufacturing.
Stockton’s central location, relative to both San Francisco, and Sacramento, as well as its proximity to the state and interstate freeway system, together with its comparatively inexpensive land costs, have prompted several companies to base their regional operations in the City.
The County. The County is one of California’s original counties and was created at the time of statehood in 1850. The County covers an area of approximately 1,436 square miles, consisting of 1,399 square miles of land and 27 square miles of water. Captain Charles M. Weber was instrumental in developing the City of Stockton as the County Seat and as a Port of Entry.
Today, ships still deliver cargo to the Port of Stockton by the channel Captain Weber Haddug in the 1800s.
The County is adjacent to Stanislaus County to the south and southeast, Alameda and Contra Costa Counties to the west, Sacramento County to the north, Amador County to the northeast, Calaveras County to the east and a corner of Santa Clara County to the southwest.
EXHIBIT 2 1018
B-2
Population
Population figures for the City, the County and the State for the last five years are shown in the following table.
CITY OF STOCKTON, SAN JOAQUIN COUNTY AND THE STATE OF CALIFORNIA Population Estimates
Calendar Years 2019 through 2023 as of January 1
Calendar
Year
City of
Stockton
San Joaquin
County
State of
California
2019 317,356 764,373 39,605,361
2020 323,456 779,233 39,538,223
2021 323,101 780,515 39,286,510
2022 321,911 782,811 39,078,674
2023 319,731 786,145 38,940,231
Source: State Department of Finance estimates.
Major Employers
The following table lists the largest employers within the City.
CITY OF STOCKTON
Principal Employers
Fiscal Year 2022-23
Employer Name
No. of
Employees
Stockton Unified School District 5,265
Amazon 4,750
St. Joseph’s Medical Center 3,200
City of Stockton 2,118
San Joaquin County Office of Education 1,955
Pacific Gas and Electric 1,550
University of the Pacific 1,329
Lincoln Unified School District 1,125
Kaiser Permanente 1,065
San Joaquin Delta College 813
Source: City of Stockton Annual Comprehensive Financial Report 202-23.
EXHIBIT 2 1019
B-3
The County’s major employers are set forth below in alphabetized order.
COUNTY OF SAN JOAQUIN
Major Employers
(As of March 2024)
Employer Name Location Industry
Adventist Health Lodi Memorial Lodi Hospitals
Amazon Fulfillment Ctr Stockton Mail Order Fulfillment Service Ashley Lane LP Stockton Real Estate
Blue Shield of California Lodi Insurance
Dameron Hospital Stockton Hospitals
Foster Care Svc Stockton Government Offices-County
Leprino Foods Co Tracy Cheese Processors (mfrs)
Lodi Health Home Health Agency Lodi Home Health Service Medline Tracy Physicians & Surgeons Equip & Supls-Whls
NA Chaderjian Youth Stockton State Govt-Correctional Institutions O-G Packing & Cold Storage Co Stockton Fruits & Vegetables-Growers & Shippers Prima Frutta Packing Inc Linden Fruit & Produce Packers Safeway Distribution Ctr Tracy Distribution Centers (whls) San Joaquin County CA Public Stockton Government Offices-County San Joaquin County Human Svc Stockton Government Offices-County San Joaquin County Sch Stockton School Districts
San Joaquin General Hospital French Camp Hospitals
San Joaquin Sheriff's Office French Camp Government Offices-County Sjgov Stockton Government Offices-County
St Joseph's Regional Health Stockton Health Services
Stockton Police Dept Stockton Police Departments
Stockton Unified Sch Dist Stockton Facilities Management Stockton Unified School Dist Stockton Schools
Walmart Supercenter Stockton Department Stores
Waste Management-Lodi Transfer Lodi Consultants-Business NEC
Source: California Employment Development Department, extracted from The America’s Labor Market Information System (ALMIS) Employer Database, 2024 1st Edition.
EXHIBIT 2 1020
B-4
Employment and Industry
The Community Facilities District is included in the Stockton Metropolitan Statistical Area (“MSA”), which includes all of San Joaquin County. The unemployment rate in San Joaquin County was 6.8 percent in December 2023, up from a revised 6.4 percent in November 2023, and above the year-ago estimate of 5.2 percent. This compares with an unadjusted unemployment rate of 5.1 percent for California and 3.5 percent for the nation during the same period.
Set forth below is data from calendar years 2018 to 2022 reflecting the County’s civilian labor force, employment and unemployment. These figures are county-wide statistics and may not necessarily accurately reflect employment trends in the Community Facilities District. Annual Figures for 2023 are not yet available.
STOCKTON-LODI MSA
(San Joaquin County)
Annual Average Labor Force and Employment by Industry
Calendar Years 2018 through 2022
(March 2022 Benchmark)
2018 2019 2020 2021 2022
Civilian Labor Force (1) 324,100 327,100 335,400 336,900 344,400 Employment 304,300 307,700 296,900 308,000 326,400
Unemployment 19,800 19,500 38,500 28,900 18,100
Unemployment Rate 6.1% 5.9% 11.5% 8.6% 5.2%
Wage and Salary Employment: (2)
Agriculture 15,600 15,400 14,600 14,200 13,700
Mining and Logging 100 100 100 100 0
Construction 12,800 13,100 13,000 13,900 15,100
Manufacturing 20,600 20,600 20,300 21,400 22,600
Wholesale Trade 11,800 11,700 10,600 10,800 11,400
Retail Trade 26,700 26,200 24,600 26,200 26,900
Transportation, Warehousing and Utilities 28,400 31,300 38,800 43,000 48,800 Information 1,800 1,600 1,200 1,200 1,200
Financial Activities 7,800 7,900 7,800 8,000 8,200
Professional and Business Services 19,600 20,200 21,300 22,500 24,100 Educational and Health Services 38,800 39,100 37,300 38,000 39,800 Leisure and Hospitality 22,000 22,600 18,500 21,300 24,500 Other Services 7,600 7,800 6,800 7,300 8,000
Federal Government 3,100 3,200 3,300 3,100 3,100
State Government 6,700 6,800 6,800 6,000 5,500
Local Government 33,700 34,900 33,000 32,900 34,100
Total All Industries (3) 257,000 262,500 257,800 269,900 286,900 (1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
EXHIBIT 2 1021
B-5
Construction Activity
The tables below summarize building activity in the City and the County from calendar years 2018 through 2022.
CITY OF STOCKTON
Building Permit Activity
For Calendar Years 2018 through 2022
(Dollars in Thousands)
2018 2019 2020 2021 2022
Permit Valuation
New Single-family $104,468.2 $99,207.4 $129,515.4 $104,348.4 $156,148,5 New Multi-family 0.0 32,175.0 12,061.1 27,536.4 0.0
Res. Alterations/Additions 61,592.1, 66,557.3 11,378.0 78,590.8 141,667.0 Total Residential 166,060.3 197,939.7 152,954.5 210,475.6 297,820.0 New Commercial 21,301.7 20,758.4 25,926.8 44,227.2 138,967.5 New Industrial 68,896.1 104,091.5 7,898.5 43,340.5 249,274.2 New Other 665.0 1,684.1 5,213.4 9,954.5 49,064.0
Com. Alterations/Additions 109,640.5 179,066.8 46,657.9 88,721.6 280,870,3 Total Nonresidential 200,503.3 305,600.8 85,696.6 186,243.8 718,178.7 New Dwelling Units
Single Family 324 302 481 364 497
Multiple Family 0 262 93 45 0
TOTAL 324 564 574 409 497
Source: Construction Industry Research Board, Building Permit Summary.
COUNTY OF SAN JOAQUIN
Building Permit Activity
For Calendar Years 2018 through 2022
(Dollars in Thousands)
2018 2019 2020 2021 2022
Permit Valuation
New Single-family $883,071.1 $843,700.9 $870,859.6 $1,179,358.0 $1,281,631.4 New Multi-family 99,601.4 57,271.1 38,411.8 69,775.2 88,457.7 Res. Alterations/Additions 95,073.4 98,681.9 40,144.4 108,647.1 182,338.5 Total Residential 1,077,745.9 999,653.9 949,415.8 1,357,780.3 1,552,427.6 New Commercial 498,359.0 380,383.3 255,761.2 272,617.0 641,696.7 New Industrial 240,073.7 120,003.8 534,199.5 43,401.3 249,274.2 New Other 31,904.4 61,991.7 33,112.3 58,264.9 107,863.0 Com. Alterations/Additions 249,142.4 363,841.0 135,285.4 272,064.7 450,649.8 Total Nonresidential 1,019,479.5 926,219.8 958,358.4 646,347.9 1,449,483.7 New Dwelling Units
Single Family 2,765 2,564 2,843 3,665 3,168
Multiple Family 593 461 245 178 338
TOTAL 3,358 3,025 3,088 3,843 3,506
Source: Construction Industry Research Board, Building Permit Summary.
EXHIBIT 2 1022
B-6
Effective Buying Income
“Effective Buying Income” is defined as personal income less personal tax and nontax payments, a number often referred to as “disposable” or “after-tax” income. Personal income is the aggregate of wages and salaries, other labor-related income (such as employer contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all sources, and transfer payments (such as pensions and welfare assistance).
Deducted from this total are personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance. According to U.S. government definitions, the resultant figure is commonly known as “disposable personal income.” The following table summarizes the total effective buying income for the City, the County, the State and the United States for the period 2020 through 2024.
CITY OF STOCKTON, SAN JOAQUIN COUNTY AND THE STATE OF CALIFORNIA Effective Buying Income
2020 through 2024
Year Area
Total Effective
Buying Income
(000’s Omitted)
Median
Household
Effective Buying
Income
2020 City of Stockton $6,301,309 $47,701
San Joaquin County 17,868,858 58,141
California 1,243,564,816 65,870
United States 9,487,165,436 55,303
2021 City of Stockton $6,408,269 $49,625
San Joaquin County 18,493,713 59,914
California 1,290,894,604 67,956
United States 9,809,944,764 56,790
2022 City of Stockton $7,510,371 $58,964
San Joaquin County 21,672,926 68,971
California 1,452,426,153 77,058
United States 11,208,582,541 64,448
2023 City of Stockton $7,468,379 $58,873
San Joaquin County 22,168,255 68,912
California 1,461,799,662 77,175
United States 11,454,846,397 65,326
2024 City of Stockton $8,181,528 $66,096
San Joaquin County 24,445,200 76,847
California 1,510,708,521 80,973
United States 11,987,185,826 67,876
Source: Claritas, LLC.
EXHIBIT 2 1023
B-7
Commercial Activity
A summary of historic taxable sales within the City and the County during the past five years in which data is available is shown in the following tables.
The total taxable sales through three quarters during calendar year 2023 in the City were reported to be $4,692,561,996, a 5.65% decrease in total taxable sales through three quarters of $4,973,751,253 reported during calendar year 2022.
CITY OF STOCKTON
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2018 4,094 $3,351,992 6,160 $4,494,043
2019 4,262 3,458,758 6,470 4,694,505
2020 4,797 3,498,450 7,411 4,729,022
2021 4,729 4,477,798 7,347 6,108,929
2022 4,812 4,610,164 7,443 6,724,541
Source: State of California, Board of Equalization.
The total taxable sales through three quarters during calendar year 2023 in the County were reported to be $16,910,383,113, a 2.73% decrease in total taxable sales through three quarters of $17,385,516,538 reported during calendar year 2022.
SAN JOAQUIN COUNTY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions (Dollars in Thousands)
Retail Stores Total All Outlets
Number
of Permits
Taxable
Transactions
Number
of Permits
Taxable
Transactions
2018 9,660 $8,855,169 15,473 $13,457,721
2019 9,978 9,058,063 16,144 14,311,068
2020 11,188 10,122,979 18,358 15,609,880
2021 10,642 15,100,195 17,665 22,244,519
2022 10,884 15,342,203 18,100 23,625,470
Source: State of California, Board of Equalization.
EXHIBIT 2 1024
B-8
Transportation
The City. The City is located on Interstate 5, the West Coast’s major route from Canada to Mexico. The City’s Crosstown Freeway connects Interstate 5 with State Route 99, the State’s other principal north-south freeway. Other freeway connections provide convenient access to the San Francisco Bay area and Reno. Thirty-five major transcontinental truck lines and nearly 200 contract carriers serve the City. The City is also served by Greyhound and the San Joaquin Regional Transit District.
The Port of Stockton, the largest inland deep water seaport in the State, is served by numerous international shipping companies through the Stockton Channel to the San Francisco Bay. The port facility handles dry and liquid bulk commodities and general cargo.
The Stockton Metropolitan Airport serves the San Joaquin Valley with passenger and air freight facilities, including regularly scheduled commercial passenger service.
Railroad service is provided to the City by Burlington Northern, Santa Fe and the Union Pacific railroads. Daily passenger service by Amtrak is available San Francisco and Sacramento.
The County. Major highways in the County include: Interstate 5, Interstate 205, Interstate 580, State Route 99, State Route 4 (Crosstown Freeway/California Delta Highway) and State Route 120. The San Joaquin Regional Transit District provides bus service within the City of Stockton in addition to routes throughout the County and commuter routes to Livermore, Pleasanton, Sacramento and Santa Clara County. Greyhound and Amtrak also provide service.
The Stockton Metropolitan Airport serves the San Joaquin Valley with passenger and air freight facilities.
Education
Within the City, there are 4 colleges, Delta College, California State University Stanislaus extension (public), University of the Pacific, and Humphrey’s College with a total of approximately 13,250 students. There are 6 high schools, 7 middle schools and 35 elementary schools (17 private).
EXHIBIT 2 1025
C-1
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS OF FISCAL AGENT AGREEMENT The following contains a brief summary of certain provisions of the Fiscal Agent Agreement not found in the main body of the Limited Offering Memorandum. Investors are hereby directed to obtain a complete copy of the Fiscal Agent Agreement, which is available from the City or the Fiscal Agent upon request.
Certain Definitions
"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. “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, 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 the Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement.
EXHIBIT 2 1026
C-2
"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 any attorney or firm of attorneys acceptable to the City and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt status of securities issued by public entities.
"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 September 1, 2022. "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. "Closing Date" means the date upon which there is a physical delivery of the Bonds in exchange for the amount representing the purchase price of the Bonds by the Original Purchaser.
"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.
"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. "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, EXHIBIT 2 1027
C-3
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 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: (i) direct obligations of the Export-Import Bank, (ii) certificates of beneficial ownership issued by the Farmers Home Administration, (iii) participation certificates issued by the General Services Administration, (iv) mortgage-backed bonds or passthrough obligations issued and guaranteed by the Government National Mortgage Association, (v) project notes issued by the United States Department of Housing and Urban Development, and (vi) public housing notes and bonds guaranteed by the United States of America.
"Chief Financial Officer " means the duly acting Chief Financial Officer or Treasurer of the City, or if the City has no Chief Financial Officer , such officer of the City serving a similar role. "Fiscal Agent" means the Fiscal Agent appointed by the City and acting as an independent fiscal agent with the duties and powers in the Agreement provided, its successors and assigns, and any other corporation or association which may at any time be substituted in its place, as provided in the Agreement.
"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.
EXHIBIT 2 1028
C-4
"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.
"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 of the City.
"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 the Agreement) 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 the Agreement; 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.
“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.
"Principal Office" means the corporate trust office of the Fiscal Agent set forth in the Agreement, or such other or additional offices as may be designated by the Fiscal Agent. "Record Date" means the fifteenth (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. "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 the Agreement, but only if and to the extent that such agreement is specifically authorized under the Agreement.
EXHIBIT 2 1029
C-5
Certain Covenants
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 the Agreement, and it will faithfully observe and perform all of the conditions covenants and requirements of the Agreement and all Supplemental Agreements and of the Bonds.
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 under the Agreement, to the benefits of the 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.
Against Encumbrances. The City will not encumber, pledge or place any charge or lien upon any of the Special Tax Revenues 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 the Agreement.
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 relating to the expenditure of amounts disbursed from the Special Tax Fund and to the Special Tax Revenues. 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 ten percent (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 Bond 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 ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing.
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.
Private Activity Bond Limitation. The City shall assure that the proceeds of the Bonds are not so used as to cause the 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.
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 Bonds to be "federally guaranteed" within the meaning of Section 149(b) of the Code.
EXHIBIT 2 1030
C-6
Collection of Special Tax Revenues. The City shall comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without limitation, the enforcement of delinquent Special Taxes. On or within five (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 Bond Fund and the Reserve Fund.
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 County Auditor 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 Chief Financial Officer , such data as the County Auditor 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 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.
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 the Agreement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in the Agreement.
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 Bonds which if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and Regulations.
Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the 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 Bonds.
Yield of the Bonds. In determining the yield of the Bonds to comply with the Agreement, 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, without regard to whether or not redemption moneys are received or Bonds are redeemed.
EXHIBIT 2 1031
C-7
Modification or Amendment of the Fiscal Agent Agreement The 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 sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Agreement. 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 Special 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 the 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.
The 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 the Agreement contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power in the Agreement 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;
(C) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Agreement, or in regard to questions arising under the 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;
(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.
If consent of the Owners is required, the 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 the Agreement) and a notice shall have been mailed as hereinafter 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 the Agreement. Any such consent shall be binding upon the Owner of the Bonds giving such EXHIBIT 2 1032
C-8
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 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 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 (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 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 above specifically provided) upon the City and the Owners of all Bonds at the expiration of sixty (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.
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 the Agreement, and shall not be entitled to vote upon, consent to, or take any other action provided for in the Agreement. Upon request, the City shall provide an Officer's Certificate to the Fiscal Agent listing those Bonds which are disqualified pursuant to the Agreement.
Defeasance and Discharge
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 the Agreement, 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 the Agreement, be fully sufficient to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates;
EXHIBIT 2 1033
C-9
and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in the 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 Special Taxes and other funds provided for in the Agreement and all other obligations of the City under the Agreement with respect to such Bonds Outstanding shall cease and terminate, except only the obligations of the City related to certain tax matters and 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 the Agreement; and thereafter Special Taxes shall not be payable to the Fiscal Agent. Notice of such election shall be filed with the Fiscal Agent.
EXHIBIT 2 1034
D-1
APPENDIX D
FORM OF OPINION OF BOND COUNSEL
________________, 2024
City Council
City of Stockton
425 N El Dorado Street
Stockton, California 95202
OPINION: $____________ City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2024
Members of the City Council:
We have acted as bond counsel to the City of Stockton (the “City”) in connection with the issuance by the City of its $____________ City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2024 (the “Bonds”), pursuant to the MelloRoos Community Facilities Act of 1982, as amended, constituting Section 53311, et seq. of the California Government Code (the “Act”) and a Fiscal Agent Agreement dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”) by and between the City, for and on behalf of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II), and U.S. Bank Trust Company, National Association, as fiscal agent. We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of the City contained in the Fiscal Agent Agreement, and in the certified proceedings and other certifications of public officials furnished to us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The City is duly created and validly existing as a public body, corporate and politic, with the power to adopt the resolution authorizing the issuance of the Bonds (the “Resolution”), enter into the Fiscal Agent Agreement, and perform the agreements on its part contained therein, and issue the Bonds.
2. The Bonds have been duly authorized, executed and delivered by the City and are valid and binding limited obligations of the City, payable solely from the sources provided therefor in the Fiscal Agent Agreement.
3. The Fiscal Agent Agreement has been duly entered into by the City and constitutes a valid and binding obligation of the City enforceable upon the City.
EXHIBIT 2 1035
D-2
4. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by the Fiscal Agent Agreement.
5. The interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax.
The opinion set forth in the preceding sentence is subject to the condition that the City comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Bonds in order that such interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The City has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds.
6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California.
Interest on the Bonds may be subject to the corporate alternative minimum tax. We express no opinion regarding any other tax consequences arising with respect to the ownership, sale or disposition of, or the amount, accrual or receipt of interest on, the Bonds.
The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in accordance with principles of equity or otherwise in appropriate cases.
This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Moreover, our opinions are not a guarantee of a particular result, and are not binding on the Internal Revenue Service or any court; rather, our opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations, opinions, and covenants referenced above.
Our engagement with respect to this matter has terminated as of the date hereof.
Respectfully submitted,
A Professional Law Corporation
EXHIBIT 2 1036
E-1
APPENDIX E
FORM OF CONTINUING DISCLOSURE UNDERTAKINGS
CONTINUING DISCLOSURE CERTIFICATE
(City)
$________
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
SPECIAL TAX BONDS
SERIES 2024
This CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate”), dated as of July 1, 2024 is executed and delivered by the CITY OF STOCKTON (the “City”), for and on behalf of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “District”), in connection with the execution and delivery of its City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds Series 2024 (the “Bonds”).
The Bonds are being executed and delivered pursuant to a Fiscal Agent Agreement, dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”).
The City covenants and agrees, for and on behalf of the District, as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.
Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined herein, the following capitalized terms shall have the following meanings:
“Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Dissemination Agent” means, initially, Willdan Financial Services, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation in accordance with Section 8 of this Disclosure Certificate. “Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.
“MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information for purposes of the Rule, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission as such for purposes of the Rule in the future.
EXHIBIT 2 1037
E-2
“Limited Offering Memorandum” means the Limited Offering Memorandum executed by the City in connection with the issuance of the Bonds.
“Participating Underwriter” means Oppenheimer & Co. Inc., as the original underwriter of the Bonds.
“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as it may be amended from time to time. “Special Taxes” means the special taxes of the District levied on taxable property within the District.
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than March 31 following the end of the City’s Fiscal Year (presently June 30), commencing with the report for the fiscal year ending June 30, 2024 due March 31, 2025, provide to the MSRB, in an electronic format as prescribed by the MSRB, an Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. Not later than 15 Business Days prior to the Annual Report Date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). If by 15 Business Days prior to the Annual Report Date the Dissemination Agent (if other than the City) has not received a copy of the Annual Report, the Dissemination Agent shall contact the City to determine if the City is in compliance with the previous sentence.
The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided, that the audited financial statements of the City may be submitted separately from the balance of the Annual Report, and later than the Annual Report Date, if not available by that date. If the City’s Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event. The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder.
(b) If the City does not provide (or cause the Dissemination Agent to provide) an Annual Report by the Annual Report Date, the City shall provide (or cause the Dissemination Agent to provide) to the MSRB in a timely manner, in an electronic format as prescribed by the MSRB, a notice to such effect.
(c) With respect to each Annual Report, the Dissemination Agent shall:
(i) determine prior to each Annual Report Date the then-applicable rules and electronic format prescribed by the MSRB for the filing of annual continuing disclosure reports; and
(ii) if the Dissemination Agent is other than the City, file a report with the City certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, and stating the date it was provided.
Section 4. Content of Annual Reports. The City’s Annual Report shall contain or incorporate by reference the following:
EXHIBIT 2 1038
E-3
(a) The City’s audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the Annual Report Date, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Limited Offering Memorandum, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) For each Annual Report, the following additional information:
(i) A maturity schedule for the outstanding Bonds, and a listing of Bonds, if any, redeemed prior to maturity during the prior Fiscal Year. (ii) Balance in Reserve Fund, and statement of the Reserve Requirement for the Bonds. Statement of projected reserve fund draw, if any. (iii) Balance in other funds and accounts held by the City or Fiscal Agent related to the Bonds.
(iv) A table indicating the levy of Special Taxes, amount collected, delinquent amount and percent of Special Tax levy delinquent for the most recent Fiscal Year. (v) The aggregate assessed value of the properties in the District for the most recent Fiscal Year.
(vi) Identification of each delinquent property owner in the District representing more than 5% of the levy of Special Taxes in the District, and the value-tolien ratios of the corresponding property, together with the following information respecting each such parcel:
(A) the amount delinquent (exclusive of late charges and monthly penalties for reinstatement) and the assessed value of such parcel; (B) the date of the first delinquency;
(C) the status of any foreclosure action by the City;
(D) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed in the California Superior Court; and (E) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of such foreclosure sale. (c) Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB’s Internet web site or filed with the Securities and Exchange Commission. The City shall clearly identify each such other document so included by reference.
EXHIBIT 2 1039
E-4
Section 5. Reporting of Listed Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults, if material.
(3) Unscheduled draws on debt service reserves reflecting financial difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security.
(7) Modifications to rights of security holders, if material. (8) Bond calls, if material, and tender offers.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the securities, if material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the City or other obligated person.
(13) The consummation of a merger, consolidation, or acquisition involving the City or an obligated person, or the sale of all or substantially all of the assets of the City or an obligated person (other than in the ordinary course of business), the entry into a definitive agreement to undertake such an action, or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. (14) Appointment of a successor or additional fiscal agent or the change of name of the fiscal agent, if material.
(15) Incurrence of a financial obligation of the City, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation of the City, any of which affect security holders, if material (for the definition of financial obligation, see clause (e)).
(16) Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation of the City, any of which reflect financial difficulties (for the definition of financial obligation, see clause (e)).
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall, or shall cause the Dissemination Agent (if not the City) to, file a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB, in a timely manner not in excess of 10 business days after the occurrence of the Listed Event. (c) The City acknowledges that the events described in subparagraphs (a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), (a)(14) and (a)(15) of this Section 5 contain EXHIBIT 2 1040
E-5
the qualifier “if material” and that subparagraph (a)(6) also contains the qualifier “material” with respect to certain notices, determinations or other events affecting the tax status of the Bonds.
The City shall cause a notice to be filed as set forth in paragraph (b) above with respect to any such event only to the extent that it determines the event’s occurrence is material for purposes of U.S. federal securities law. Whenever the City obtains knowledge of the occurrence of any of these Listed Events, the City will as soon as possible determine if such event would be material under applicable federal securities law. If such event is determined to be material, the City will cause a notice to be filed as set forth in paragraph (b) above. (d) For purposes of this Disclosure Certificate, any event described in paragraph (a)(12) above is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. (e) For purposes of Section 5(a)(15) and (16), “financial obligation” means a (i) debt obligation; (ii) derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term financial obligation shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule.
Section 6. Identifying Information for Filings with the MSRB. All documents provided to the MSRB pursuant to this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).
Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any Dissemination Agent, with or without appointing a successor Dissemination Agent. Any Dissemination Agent may resign by providing 30 days’ written notice to the City. The initial Dissemination Agent shall be Willdan Financial Services.
Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; and
EXHIBIT 2 1041
E-6
(b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first Annual Report filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to this Disclosure Certificate modifying the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.
A notice of any amendment made pursuant to this Section 9 shall be filed in the same manner as for a Listed Event under Section 5(b).
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. If the City fails to comply with any provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.
Section 12. Duties, Immunities and Liabilities of Dissemination Agent. (a) The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to indemnify and save harmless the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), against any loss, expense and liability which it may incur arising out of or in the exercise EXHIBIT 2 1042
E-7
or performance of its powers and duties hereunder, including the reasonable costs and expenses (including reasonable attorneys’ fees) of defending against any claim of liability, but excluding losses, liabilities, costs and expenses due to an Indemnified Party’s negligence, willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the City hereunder, and shall not be deemed to be acting in any fiduciary capacity for the City, the holders and beneficial owners from time to time of the Bonds or any other party. The obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time, and shall be reimbursed for all reasonable and documented expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriter and the holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be regarded as an original, and all of which shall constitute one and the same instrument.
EXHIBIT 2 1043
E-8
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Certificate as of the date first above written.
CITY OF STOCKTON, for and on behalf of
City of Stockton Community Facilities
District No. 2019-1 (Cannery Park II)
By:
Authorized Officer
Accepted by Dissemination Agent:
WILLDAN FINANCIAL SERVICES,
as Dissemination Agent
By:
Name:
Title:
EXHIBIT 2 1044
E-9
FORM OF CONTINUING DISCLOSURE CERTIFICATE
(LGI Homes)
$________
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
SPECIAL TAX BONDS
SERIES 2024
THIS CONTINUING DISCLOSURE CERTIFICATE (the “Disclosure Certificate”) dated as of July 1, 2024, is executed by LGI Homes – California, LLC, a California Limited Liability Company (the “Developer”) in connection with the execution and delivery by the City of Stockton (the “City”), for and on behalf of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “District”), of its City of Stockton Community Facilities District No. 2019- 1 (Cannery Park II) Special Tax Bonds Series 2024 (the “Bonds”). The Bonds are being executed and delivered pursuant to a Fiscal Agent Agreement, dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”).
The Developer covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the holders and beneficial owners of the Bonds.
Section 2. Definitions. In addition to the definitions set forth above and in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Affiliate” means any person presently directly (or indirectly through one or more intermediaries) under managerial control of the Developer, and about whom information would be material to potential investors in their investment decision regarding the Bonds (including without limitation information relevant to the proposed development of the Property or to the Developer’s ability to pay the Special Taxes levied on the Property prior to delinquency). “Assumption Agreement” means an undertaking of a Major Owner, or an Affiliate thereof, for the benefit of the holders and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Certificate (as modified for such Major Owner’s development and financing plans with respect to the District), whereby such Major Owner or Affiliate agrees to provide periodic reports and notices of significant events, setting forth the information described in sections 4 and 5 hereof, respectively, with respect to the portion of the property in the District owned by such Major Owner and its Affiliates and, at the option of the Developer or such Major Owner, agrees to indemnify the Dissemination Agent (if any) pursuant to a provision substantially in the form of Section 11 hereof.
“Dissemination Agent” means Willdan Financial Services, or any successor Dissemination Agent designated in writing by the Developer, and which has filed with the Developer, the City and the Fiscal Agent a written acceptance of such designation, and which EXHIBIT 2 1045
E-10
is experienced in providing dissemination agent services such as those required under this Disclosure Certificate.
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure Certificate.
“Major Owner” means, as of any date of determination, an owner of land in the District that, together with its Affiliates, owns, or has an option to acquire 103 or more residential lots in the District (or property intended to be subdivided into 103 or more residential lots) in the District. “MSRB” means the Municipal Securities Rulemaking Board, which has been designated by the Securities and Exchange Commission as the sole repository of disclosure information. “Limited Offering Memorandum” means the final limited offering memorandum executed by the City in connection with the issuance of the Bonds. “Participating Underwriter” means Oppenheimer & Co. Inc., the original Underwriter of the Bonds.
“Periodic Report” means any Periodic Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof.
“Property” means (i) the property owned by, or under option to be acquired by, the Developer or an Affiliate in the District as of the date of determination, and (ii) the property in the District that the Developer or an Affiliate sold to a Major Owner who has not assumed the undertakings of this Disclosure Certificate under Section 6(b) that is owned by such Major Owner as of the date of determination.
“Report Date” means March 31 and September 30 of each fiscal year. “Special Taxes” means the special taxes of the District levied on taxable property within the District.
Section 3. Provision of Periodic Reports.
(a) So long as the Developer’s obligations under this Disclosure Certificate have not been terminated pursuant to Section 6 herein, the Developer shall, or, upon written direction of the Developer the Dissemination Agent shall, not later than each Report Date, commencing September 30, 2024, file or cause to be filed with the MSRB, in an electronic format as prescribed by the MSRB, a Periodic Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Fiscal Agent (if different from the Dissemination Agent), the Participating Underwriter and the City. Not later than 15 calendar days prior to the Report Date, the Developer shall provide the Periodic Report to the Dissemination Agent (if different from the Developer). The Developer shall provide a written certification with (or included as a part of) each Periodic Report furnished to the Dissemination Agent (if different from the Developer), the Participating Underwriter and the City to the effect that such Periodic Report constitutes the Periodic Report required to be furnished by it under EXHIBIT 2 1046
E-11
this Disclosure Certificate. The Dissemination Agent, the Participating Underwriter and the City may conclusively rely upon such certification of the Developer and shall have no duty or obligation to review the Periodic Report. The Periodic Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. The Periodic Report may also serve as the periodic report to be filed by the Developer pursuant to its Continuing Disclosure Certificate dated as of August 22, 2022 with respect to the $9,915,000 City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2022.
(b) If the Dissemination Agent does not receive a Periodic Report by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Developer that the Periodic Report has not been provided as required under Section 3(a) above.
The reminder notice shall instruct the Developer to determine whether its obligations under this Disclosure Certificate have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner as for a Listed Event (pursuant to Section 5 below). If the Developer does not provide, or cause the Dissemination Agent to provide, a Periodic Report to the MSRB by the Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to the MSRB in substantially the form attached prescribed by the MSRB, with a copy to the City and the Participating Underwriter. (c) The Dissemination Agent shall: (i) determine prior to each Report Date the thenapplicable rules and electronic format prescribed by the MSRB for the filing of continuing disclosure reports; and (ii) to the extent the Periodic Report has been furnished to it, file the Periodic Report with the MSRB and file a report with the Developer (if the Dissemination Agent is other than the Developer), the City and the Participating Underwriter certifying that the Periodic Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided to and filed with the MSRB.
Section 4. Content of Periodic Reports. The Developer’s Periodic Report shall contain or incorporate by reference the information set forth in Exhibit A relating to the Developer, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Developer or related public entities, which have been submitted to the MSRB or the Securities and Exchange Commission. If the document included by reference is a final official limited offering memorandum, it must be available from the MSRB.
The Developer shall clearly identify each such other document so included by reference.
In addition to any of the information expressly required to be provided in Exhibit A, the Developer’s Periodic Report shall include such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
Section 5. Reporting of Significant Events.
(a) So long as the Developer’s obligations under this Disclosure Certificate have not been terminated pursuant to Section 6 herein, the Developer shall give, or cause to be given, notice of the occurrence of any of the following Listed Events with respect to itself or the Property, if material:
(i) bankruptcy or insolvency proceedings commenced by or against the Developer and, if known, any bankruptcy or insolvency proceedings commenced by or EXHIBIT 2 1047
E-12
against any Affiliate of the Developer that is reasonably likely to have a significant impact on the Developer’s ability to pay Special Taxes for which it is responsible prior to delinquency or to sell or develop the Property;
(ii) failure of the Developer to pay any taxes, special taxes (including the Special Taxes) or assessments due with respect to the Property on or prior to the delinquency date, to the extent such failure is not promptly cured by the Developer upon discovery thereof;
(iii) filing of a lawsuit of which the Developer is aware against the Developer or an Affiliate seeking damages, which, if successful, would have a material and adverse impact on the Developer’s ability to pay Special Taxes for which it is responsible prior to delinquency or to sell or develop the Property;
(iv) material damage to or destruction of any of the improvements on the Property; and
(v) any payment default or other material default by the Developer that continues to exist beyond any applicable notice and cure periods on any loan with respect to the construction of improvements on the Property. (b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, the Developer shall as soon as possible determine if such event would be material under applicable Federal securities law.
(c) If the Developer determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the Developer shall, or shall cause the Dissemination Agent to, promptly file a notice of such occurrence with the MSRB, with a copy to the City and the Participating Underwriter.
Section 6. Duration of Reporting Obligation.
(a) All the Developer’s obligations hereunder shall commence on the date hereof and terminate (except as provided in Section 11) on the earliest to occur of the following:
(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or
(ii) at such time as the Property is no longer owned by a Major Owner, or (iii) the date on which all of the Special Taxes attributable to the Property are paid in full.
The Developer shall give notice of the termination of its obligations under this Disclosure Certificate in the same manner as for a Listed Event under Section 5. (b) If a portion of the Property is conveyed to a Person that, upon such conveyance, will be a Major Owner, the obligations of the Developer hereunder with respect to the Property conveyed to such Major Owner may be assumed by such Major Owner, and if so assumed the Developer’s obligations hereunder with respect to such portion of the Property conveyed will be terminated. In order to effect such an assumption, such Major Owner shall enter into an EXHIBIT 2 1048
E-13
Assumption Agreement in form and substance equivalent to this Disclosure Certificate or as otherwise satisfactory to the City and the Participating Underwriter. However, a Major Owner shall not be required to enter into an Assumption Agreement if such Major Owner is already a party to a continuing disclosure certificate in form and substance similar to this Disclosure Certificate with respect to the Bonds, and under which the property conveyed to such Major Owner will become subject to future Periodic Reports. If not so assumed, the Developer shall use commercially reasonable efforts to report the information, as applicable to the transferee, required herein so long as the transferee is a Major Owner.
Section 7. Dissemination Agent. The Developer may, from time to time, appoint or engage a Dissemination Agent to assist the Developer in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Developer. The Dissemination Agent may resign by providing 30 days’ written notice to the City, the Developer and the Participating Underwriter.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its written consent thereto):
(a) if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, or change in law; and
(b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Fiscal Agent Agreement, with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds.
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Developer from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Periodic Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Periodic Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Periodic Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the Fiscal Agent shall (upon written direction and only to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any holder or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole and exclusive EXHIBIT 2 1049
E-14
remedy under this Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Developer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an “Indemnified Party”), harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the reasonable costs and expenses (including attorneys’ fees) of defending against any claim of liability, but excluding loss, liabilities, costs and expenses due to an Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its services provided hereunder in accordance with its schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Developer, the Fiscal Agent, the Bond owners, or any other party. The obligations of the Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds, but shall be assumed by a Major Owner from and after the date of such assumption when property is sold to a Major Owner and such Major Owner enters into an assumption agreement.
Section 12. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given by regular, overnight, or electronic mail as follows:
To the Developer LGI Homes – California, LLC
2251 Douglas Blvd., Suite 110
Roseville, CA 95661
Attn: Evan Licht
Email: [email protected]
To the Issuer/City: City of Stockton
425 N. El Dorado Street
Stockton, California 95202
Attn: Chief Financial Officer
Email: _______________
To the Participating
Underwriter: Oppenheimer & Co. Inc.
_______________
_______________
Attn: _______________
Email: _______________
Any person may, by written notice to the other persons listed above, designate a different address to which subsequent notices or communications should be sent.
EXHIBIT 2 1050
E-15
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Developer (its successors and assigns), the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of the Developer hereunder shall be assumed by any legal successor to the obligations of the Developer as a result of a sale, merger, consolidation or other reorganization.
Section 14. Counterparts. This Disclosure Certificate may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the Developer has executed this Disclosure Certificate as of the date first above written.
LGI Homes – California, LLC, a
California limited liability company
By:
Name:
Title:
EXHIBIT 2 1051
E-16
EXHIBIT A
PERIODIC REPORT
(MARCH 31, ____ / SEPTEMBER 30, ____)
$9,915,000
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
SPECIAL TAX BONDS
SERIES 2022
$________
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II)
SPECIAL TAX BONDS
SERIES 2024
This Periodic Report is hereby submitted under Section 4 of the Continuing Disclosure Certificate (the “Disclosure Certificate”) dated ________, 2024 executed by the undersigned (the “Developer”) in connection with the issuance of the above-captioned bonds by the City of Stockton (the “City”) with respect to its Community Facilities District No. 2019-1 (Cannery Park II) (the “District”).
Capitalized terms used in this Periodic Report but not otherwise defined have the meanings given to them in the Disclosure Certificate.
I. Property Ownership and Development
The information in this section is provided as of ____________________ (this date must be not more than 30 days before the date of this Periodic Report).
A. Property currently owned by the Developer in the District (the “Property”):
Development name:
Number of lots (or acreage):
B. Updated information regarding land development and home construction activities with respect to the Property described in the Limited Offering Memorandum for the Bonds under the caption “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT—LGI HOMES” or the Periodic Report last filed in accordance with the Disclosure Certificate:
_____________________________________________________________________ _____________________________________________________________________ C. Status of building permits and any material changes to the description of land use or development entitlements for the Property described in the Limited Offering EXHIBIT 2 1052
E-17
Memorandum for the Bonds under the caption “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT — LGI HOMES” or the Periodic Report last filed in accordance with the Disclosure Certificate:
_____________________________________________________________________ _____________________________________________________________________ Status of any land purchase contracts (other than sales to homeowners) with regard to the Property.
_____________________________________________________________________ _____________________________________________________________________ E. Number of Homes in the District sold by the Developer to date: ___________ Number of Homes in the District under contract for sale as of ___________, 20__: ___________
II. Legal and Financial Status of Developer
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any change in the legal structure of the Developer or the financial condition and financing plan of the Developer that would materially and adversely interfere with its ability to complete its development plan described in the Limited Offering Memorandum. _____________________________________________________________________ _____________________________________________________________________ III. Change in Development or Financing Plans
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any development plans or financing plans relating to the Property that are materially different from the proposed development and financing plan described in the Limited Offering Memorandum.
_____________________________________________________________________ _____________________________________________________________________ IV. Limited Offering Memorandum Updates
Unless such information has previously been included or incorporated by reference in a Periodic Report, describe any other significant changes in the information relating to the Developer or the Property contained in the Limited Offering Memorandum under the heading “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT – LGI Homes” that would materially and adversely interfere with the Developer’s ability to develop and sell the Property as described in the Limited Offering Memorandum.
_____________________________________________________________________ EXHIBIT 2 1053
E-18
_____________________________________________________________________ V. Other Material Information
In addition to any of the information expressly required above, provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading. _____________________________________________________________________ _____________________________________________________________________ Certification
The undersigned Developer hereby certifies that this Periodic Report constitutes the Periodic Report required to be furnished by the Developer under the Disclosure Certificate.
ANY STATEMENTS REGARDING THE DEVELOPER, THE DEVELOPMENT OF THE PROPERTY, THE DEVELOPER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE
BONDS, OTHER THAN STATEMENTS MADE BY THE DEVELOPER IN AN OFFICIAL
RELEASE, OR FILED WITH THE MUNICIPAL SECURITIES RULEMAKING BOARD, ARE NOT AUTHORIZED BY THE DEVELOPER. THE DEVELOPER IS NOT RESPONSIBLE FOR
THE ACCURACY, COMPLETENESS OR FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.
THE DEVELOPER HAS NO OBLIGATION TO UPDATE THIS PERIODIC REPORT OTHER THAN AS EXPRESSLY PROVIDED IN THE DISCLOSURE CERTIFICATE.
Dated:
_____________________________
By: _____________________________
_____________________________
_____________________________
EXHIBIT 2 1054
F-1
APPENDIX F
DTC AND THE BOOK-ENTRY ONLY SYSTEM
The following description of the Depository Trust Company (“DTC”), the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds (herein, the “Securities”) to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interest in the Securities and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be.
Neither the issuer of the Securities (the “Issuer”) nor the trustee, fiscal agent or paying agent appointed with respect to the Securities (the “Agent”) takes any responsibility for the information contained in this Appendix.
No assurances can be given that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or premium, if any, with respect to the Securities, (b) certificates representing ownership interest in or other confirmation or ownership interest in the Securities, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Securities, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current “Rules” applicable to DTC are on file with the Securities and Exchange Commission and the current “Procedures” of DTC to be followed in dealing with DTC Participants are on file with DTC.
1. The Depository Trust Company (“DTC”) will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million, one certificate will be issued with respect to each $500 million of principal amount, and an additional certificate will be issued with respect to any remaining principal amount of such issue.
2. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates.
Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned EXHIBIT 2 1055
F-2
subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information contained on this Internet site is not incorporated herein by reference.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as EXHIBIT 2 1056
F-3
possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
11. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.
EXHIBIT 2 1057
1 $_______
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
BOND PURCHASE AGREEMENT
_________, 2024
City of Stockton
425 North El Dorado Street
Stockton, California 95202
Ladies and Gentlemen:
The undersigned, Oppenheimer & Co. Inc., as underwriter (the “Underwriter”), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this “Purchase Agreement”) with the City of Stockton (the “City”) for City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “Community Facilities District”), which upon acceptance will be binding upon the Underwriter and the City. The agreement of the Underwriter to purchase the Bonds (as hereinafter defined) is contingent upon the City satisfying all of the obligations imposed upon it under this Purchase Agreement. This offer is made subject to the City’s acceptance by the execution of this Purchase Agreement and its delivery to the Underwriter at or before 11:59 p.m., California time, on the date hereof, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to the acceptance hereof by the City. All capitalized terms used herein, which are not otherwise defined, shall have the meaning provided for such terms in the Fiscal Agent Agreement, dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”).
1. Purchase, Sale and Delivery of the Bonds.
A. Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein: the Underwriter hereby agrees to purchase from the City and the City hereby agrees to sell to the Underwriter all (but not less than all) of the $______ aggregate principal amount of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II), Special Tax Bonds, Series 2024 (the “Bonds”), dated the Closing Date (as hereinafter defined), bearing interest at the rates and maturing on the dates and in the principal amounts set forth in Appendix A hereto. The purchase price for the Bonds shall be $_______ (being 100% of the aggregate principal amount thereof, plus net original issue premium of $_______, less an Underwriter’s discount of $________).
The Underwriter agrees to make a bona fide initial public offering of all of the Bonds in compliance with federal and state securities laws, at a price not in excess of the initial offering prices (or yields) set forth in Appendix A attached hereto and incorporated herein by reference. Subsequent to the initial public offering, the Underwriter reserves the right to change the public offering prices (or yields) as it deems necessary in connection with the offering of the Bonds, without any EXHIBIT 3 1058
2 requirement of prior notice subject to Section 5 herein, provided that the Underwriter shall not change the interest rates set forth in Appendix A. The Bonds may be offered and sold to certain dealers at prices lower than such initial offering prices.
The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable from the Net Taxes and certain other amounts as provided in the Fiscal Agent Agreement, the Preliminary Limited Offering Memorandum (as hereinafter defined), and the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Act”). The issuance of the Bonds has been duly authorized by the City pursuant to a resolution (the “Resolution”), adopted by its City Council (the “City Council”) on behalf of the Community Facilities District, on ______, 2024.
The proceeds of the Bonds shall be used to (i) construct and/or acquire certain public facilities authorized for the Community Facilities District, (ii) make a deposit to a parity debt service reserve fund, (iii) pay the costs of issuing the Bonds, and (iv) pay a portion of the interest on the Bonds through September 1, 2024.
B. The City hereby acknowledges that the Underwriter is entering into this Purchase Agreement in reliance on the representations, warranties and agreements made by the City on behalf of itself and on behalf of the Community Facilities District herein, and the City shall take all action necessary to enforce its rights hereunder for the benefit of the Underwriter and shall immediately notify the Underwriter if it becomes aware that any representation, warranty or agreement made by the City, on behalf of itself or on behalf of the Community Facilities District, herein is incorrect in any material respect.
C. The City acknowledges and agrees that: (i) the primary role of the Underwriter, as an underwriter, is to purchase securities for resale to investors in an arm’s-length commercial transaction between the City and the Underwriter and that the Underwriter has financial and other interests that differ from those of the City and the Community Facilities District; (ii) the Underwriter is not acting as a municipal advisor, financial advisor or fiduciary to the City, the Community Facilities District, or any other person or entity and has not assumed any advisory or fiduciary responsibility to the City or the Community Facilities District with respect to the transaction contemplated hereby and the discussions, undertakings and proceedings leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the City or the Community Facilities District on other matters); (iii) the only obligations the Underwriter has to the City or the Community Facilities District with respect to the transaction contemplated hereby expressly are set forth in this Purchase Agreement, except as otherwise provided by applicable rules and regulations of the Securities and Exchange Commission or the rules of the Municipal Securities Rulemaking Board (the “MSRB”); and (iv) the City has consulted its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate in connection with the transaction contemplated herein. The City acknowledges that it has previously provided the Underwriter with an acknowledgement of receipt of the required Underwriter disclosure under Rule G-17 of the MSRB and acknowledges that it has engaged Del Rio Advisors, LLC (the “Municipal Advisor”), as its municipal advisor (as defined in Securities and Exchange Commission Rule 15Ba1) and will rely solely on the Municipal Advisor for financial advice with respect to the Bonds.
D. Pursuant to the authorization of the City, the Underwriter has distributed copies of the Preliminary Limited Offering Memorandum dated ______, 2024 relating to the Bonds, EXHIBIT 3 1059
3 which, together with the cover page, inside cover page and appendices thereto and as supplemented is collectively herein called the “Preliminary Limited Offering Memorandum.” By its acceptance of this Purchase Agreement, the City hereby consents to and ratifies the use and distribution by the Underwriter of the Preliminary Limited Offering Memorandum, and the City agrees to execute a final Limited Offering Memorandum relating to the Bonds (the “Limited Offering Memorandum”) which will consist of the Preliminary Limited Offering Memorandum with such changes as may be made thereto, with the approval of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel and Disclosure Counsel (herein called “Bond Counsel”), and the Underwriter, and to provide copies thereof to the Underwriter as set forth in Section 2(S) hereof. The City hereby authorizes and requires the Underwriter to use and promptly distribute, in connection with the offer and sale of the Bonds, the Preliminary Limited Offering Memorandum, the Limited Offering Memorandum and any supplement or amendment thereto. The City further authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Fiscal Agent Agreement, this Purchase Agreement and all information contained herein, and all other documents, certificates and statements furnished by or on behalf of the City or the Community Facilities District to the Underwriter in connection with the transactions contemplated by this Purchase Agreement. The Preliminary Limited Offering Memorandum and/or the Limited Offering Memorandum may be delivered and printed in a “designated electronic format” as defined in the MSRB’s Rule G-32 and as may be agreed to by the City and the Underwriter. The City confirms that it does not object to distribution of the Preliminary Limited Offering Memorandum or the Limited Offering Memorandum in electronic form. A copy of the most recent Preliminary Limited Offering Memorandum sent to a potential purchaser shall be sent electronically (or other equally prompt means) by first class mail not later than the first business day following the day upon which each such request is received.
E. To assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the “Rule”), the City will undertake pursuant to the City Continuing Disclosure Certificate, in the form attached as an appendix to the Limited Offering Memorandum (the “City Continuing Disclosure Certificate”), to provide annual reports and notices of certain enumerated events. A description of this undertaking is set forth in the Preliminary Limited Offering Memorandum and will also be set forth in the Limited Offering Memorandum.
F. Except as the Underwriter and the City may otherwise agree, the City will deliver to the Underwriter, at the offices of Bond Counsel in San Francisco, California, or at such other location as may be mutually agreed upon by the Underwriter and the City, the documents hereinafter mentioned; and the City will deliver to the Underwriter through The Depository Trust Company’s (“DTC”) FAST delivery system, the Bonds, in definitive form (all Bonds bearing CUSIP® numbers printed thereon), duly executed by the City and authenticated by the Fiscal Agent in the manner provided for in the Fiscal Agent Agreement and the Act at 8:30 a.m. California time, on _________, 2024 (the “Closing Date”), and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in paragraph (A) of this Section by wire transfer, payable in federal or other immediately available funds (such delivery and payment being herein referred to as the “Closing”). The Bonds shall be in fully registered book-entry form (which may be typewritten) and shall be registered in the name of Cede & Co., as nominee of DTC, which will act as securities depository for the Bonds, and the specimen Bonds will be made available for checking by the Underwriter not less than 5 days prior to the Closing.
G. Except as the City and the Underwriter may otherwise agree, the City will deliver to the Underwriter, at the offices of Bond Counsel in San Francisco, California, or at such EXHIBIT 3 1060
4 other location as may be mutually agreed upon by the Underwriter and the City, the documents hereinafter mentioned on the Closing Date.
2. Representations, Warranties and Covenants of the Community Facilities District.
The City represents, warrants and covenants to the Underwriter, on behalf of itself and the Communities Facilities District, as the case may be, that:
A. The City is a municipal corporation and charter city duly organized and validly existing pursuant to the Constitution and laws of the State of California (the “State”), and has duly authorized the formation of the Community Facilities District pursuant to resolutions duly adopted by the City Council (the “Community Facilities District Formation Resolution” and, together with the Resolution, the “Community Facilities District Resolutions”) and the Act. The City Council, as the legislative body of the Community Facilities District, has duly adopted the Community Facilities District Formation Resolution, has duly adopted the Ordinance levying the Special Tax (for all purposes herein, as such are defined in the Fiscal Agent Agreement) within the Community Facilities District (the “Ordinance”), and has caused to be recorded in the real property records of San Joaquin County, a notice of special tax lien (the “Notice of Special Tax Lien”). The Community Facilities District Formation Resolution, the Ordinance, and the Notice of Special Tax Lien are collectively referred to herein as the “Formation Documents.” The City Council has duly adopted the Resolution. Each of the Formation Documents remains in full force and effect as of the date hereof and has not been amended. The Community Facilities District is duly organized and validly existing as a community facilities district under the laws of the State. The City has, and at the Closing Date will have, as the case may be, full legal right, power and authority: (i) to execute, deliver and perform its obligations under this Purchase Agreement and the Fiscal Agent Agreement and to carry out all transactions contemplated by each of such agreements; (ii) to enter into the City Continuing Disclosure Certificate; and (iii) to carry out, give effect to and consummate the transactions contemplated by the Formation Documents, the Fiscal Agent Agreement, this Purchase Agreement and the Limited Offering Memorandum.
This Purchase Agreement, the Fiscal Agent Agreement, and the City Continuing Disclosure Certificate are collectively referred to herein as the “City Documents.” B. By all necessary official action of the City, the City has duly authorized and approved the execution and delivery by the City of, and the performance by City of, the obligations on its part contained in, the City Documents and has approved the use and distribution by the Underwriter of the Preliminary Limited Offering Memorandum and the execution, use and distribution by the Underwriter of the Limited Offering Memorandum, and, as of the date hereof, such authorizations and approvals are in full force and effect and have not been amended, modified or rescinded. When executed and delivered by the parties thereto, the City Documents will constitute the legally valid and binding obligations of the City, on its own behalf and on behalf of the Communities Facilities District, enforceable upon the City and the Community Facilities District in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles relating to or affecting creditors’ rights generally. To the best of the City’s knowledge, the City has complied, and will at the Closing Date be in compliance in all respects, with the terms of the City Documents that are applicable to the City, and the Community Facilities District has complied, and will at the Closing Date be in compliance in all respects, with the terms of the City Documents that are applicable to the Community Facilities District.
EXHIBIT 3 1061
5 C. The information in the Preliminary Limited Offering Memorandum (other than statements pertaining to the book-entry system and under the headings “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT,” as to which no view is expressed) as of its date was and as of the date hereof is, and in the Limited Offering Memorandum (other than statements pertaining to the book-entry system and under the headings “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT,” as to which no view is expressed) as of its date is, true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and, upon delivery and up to and including 25 days after the End of the Underwriting Period (as defined in paragraph (D) below), the Limited Offering Memorandum will be amended and supplemented so as to contain no misstatement of any material fact or material omission of any statement necessary to make the statements contained therein, in the light of the circumstances in which such statements were made, not misleading.
D. Up to and including 25 days after the End of the Underwriting Period (as defined below), the City will advise the Underwriter promptly of any proposal to amend or supplement the Limited Offering Memorandum and will not effect or consent to any such amendment or supplement without the consent of the Underwriter, which consent will not be unreasonably withheld. The City will advise the Underwriter promptly of the institution of any proceedings known to it by any governmental agency prohibiting or otherwise materially affecting the use of the Limited Offering Memorandum in connection with the offering, sale or distribution of the Bonds. As used herein, the term “End of the Underwriting Period” means the later of such time as: (i) the Bonds are delivered to the Underwriter; or (ii) the Underwriter does not retain, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public. Unless the Underwriter gives notice to the contrary, the End of the Underwriting Period shall be deemed to be the Closing Date. Any notice delivered pursuant to this provision shall be written notice delivered to the City at or prior to the Closing Date and shall specify a date (other than the Closing Date) to be deemed the “End of the Underwriting Period.” If in the opinion of the Underwriter any such event or proceedings requires the preparation and distribution of a supplement or amendment to the Limited Offering Memorandum, the City shall prepare and furnish to the Underwriter, at the City’s expense, such number of copies of the supplement or amendment to the Limited Offering Memorandum, in (i) a “designated electronic format” consistent with the requirements of the MSRB’s Rule G-32 and (ii) a printed format form in substance mutually agreed upon by the City and the Underwriter as the Underwriter may reasonably request. If such amendment or supplement to the Limited Offering Memorandum shall be made subsequent to the Closing Date, the City also shall furnish, or cause to be furnished, such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably deem necessary to evidence the truth and accuracy of any such supplement or amendment to the Limited Offering Memorandum.
E. As of the time of acceptance hereof and as of the Closing Date, the City and the Community Facilities District, as applicable, have each complied, and will at the Closing Date be in compliance in all material respects, with the Formation Documents and the City Documents, and any immaterial noncompliance by the City or the Community Facilities District, if any, will not impair the ability of the City or the Community Facilities District, as applicable, to carry out, give effect to or consummate the transactions contemplated by the foregoing. From and after the date of issuance of its Bonds, the City will continue to comply with the covenants of the City contained in the City Documents and it shall cause the Community Facilities District to continue to comply with the covenants of the Community Facilities District contained in the City Documents.
EXHIBIT 3 1062
6 F. Except as described in the Preliminary Limited Offering Memorandum, neither the City nor the Community Facilities District is, and as of the Closing Date, neither will be, in any respect material to the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City or the Community Facilities District, as the case may be, is a party or is otherwise subject or bound; and, to the City’s knowledge, no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or event of default under any such instrument which breach, default or event could have an adverse effect on the City’s ability or the Community Facilities District’s ability to perform their respective obligations under the City Documents; and as of such times, except as disclosed in the Limited Offering Memorandum, the authorization, execution and delivery of the City Documents and compliance with the provisions of each thereof, or the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the City or the Community Facilities District of their respective obligations under the City Documents or the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement. The City has received all licenses, permits or other regulatory approvals required, if any, for the pledge, collection and/or application by the Community Facilities District of the Special Taxes (as defined in the Fiscal Agent Agreement) and other moneys pledged to the payment of the principal of and interest on the Bonds under the Fiscal Agent Agreement.
G. Except as may be required under the “blue sky” or other securities laws of any jurisdiction, all approvals, consents, authorizations, elections and orders of, or filings or registrations with, any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the City or the Community Facilities District of their respective obligations under the City Documents, and the performance of the conditions precedent to be performed by the City pursuant to this Purchase Agreement, have been or will be obtained at the Closing Date and are or will be in full force and effect at the Closing Date.
H. At the time of acceptance hereof there is and as of the Closing there will be no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, government agency, public board or body (collectively and individually, an “Action”) pending (notice of which has been served on the City or the Community Facilities District) or to the best knowledge of the City or the Community Facilities District threatened, in which any such Action: (i) in any way questions the powers of the City Council or the existence of the Community Facilities District or the titles of the officers of the City and/or the Community Facilities District to their respective offices; (ii) affects, contests or seeks to prohibit, restrain or enjoin the issuance or delivery of the Bonds or the payment or collection of the Special Taxes or any amounts pledged or to be pledged to pay the principal of and interest on the Bonds, or in any way contests or affects the validity of the City Documents or the consummation of the transactions on the part of the City or the Community Facilities District contemplated thereby; (iii) contests the exclusion of interest on the Bonds from federal or State income taxation or contests the powers of the City or the Community EXHIBIT 3 1063
7 Facilities District which may result in any material adverse change relating to the financial condition of the City or the Community Facilities District; (iv) except as disclosed in the Limited Offering Memorandum, wherein an unfavorable decision, ruling or finding would materially adversely affect the financial position or condition of the City or the Community Facilities District or would result in any material adverse change in the ability of the City to pledge or apply the Special Taxes or to pay debt service on the Bonds; or (v) contests the completeness or accuracy of the Preliminary Limited Offering Memorandum or the Limited Offering Memorandum or any supplement or amendment thereto or asserts that the Preliminary Limited Offering Memorandum or the Limited Offering Memorandum contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and as of the time of acceptance hereof there is and, as of the Closing Date, there will be no known basis for any Action of the nature described in clauses (i) through (v) of this sentence.
I. The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter and at the expense of the Underwriter as the Underwriter may reasonably request in order: (i) to qualify the Bonds for offer and sale under the “blue sky” or other securities laws and regulations of such states and other jurisdictions of the United States of America as the Underwriter may designate; and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds, provided; however, that the City will not be required to execute a special or general consent to service of process or qualify as a foreign corporation in connection with any such qualification in any jurisdiction.
J. The City Documents conform as to form and tenor to the descriptions thereof contained in the Preliminary Limited Offering Memorandum. The City represents that the Bonds, when issued, executed and delivered in accordance with the Fiscal Agent Agreement and sold to the Underwriter as provided herein, will be validly issued and outstanding special tax obligations of the City payable solely from the proceeds of the Net Taxes and amounts in certain funds and accounts established in the Fiscal Agent Agreement, and entitled to the benefits of the Fiscal Agent Agreement. The City will comply with the covenant in the Fiscal Agent Agreement to cause the Special Taxes to be levied and collected at the same time and in the same manner as ordinary ad valorem property taxes. The Fiscal Agent Agreement creates a valid pledge of, first lien upon and security interest in, the Special Taxes, and in the moneys in the Special Tax Fund established pursuant to the Fiscal Agent Agreement, on the terms and conditions set forth in the Fiscal Agent Agreement. The Fiscal Agent Agreement creates a valid pledge of the moneys in certain funds and accounts established pursuant to the Fiscal Agent Agreement, subject in all cases to the provisions of the Fiscal Agent Agreement permitting the application thereof for the purposes and on the terms and conditions set forth therein.
K. Except as disclosed in the Preliminary Limited Offering Memorandum, there are, to the best of the City’s knowledge, no entities with outstanding assessment liens against any of the properties within the Community Facilities District which are senior to or on a parity with the Special Taxes.
L. The issuance and sale of the Bonds is not subject to any transfer or other documentary stamp taxes of the State or any political subdivision thereof.
EXHIBIT 3 1064
8 M. The City shall not knowingly take or omit to take any action that, under existing law, may adversely affect the exclusion from gross income for federal income tax purposes, or the exemption from State of California personal income tax, of the interest on the Bonds. The City has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that the City is a bond issuer whose arbitrage certifications may not be relied upon.
N. Any certificate signed on behalf of the Community Facilities District by any officer or employee of the City authorized to do so and delivered to the Underwriter in connection with the issuance and sale of the Bonds shall be deemed to be a representation and covenant by the Community Facilities District to the Underwriter as to the statements made therein.
O. The City will apply the proceeds of the Bonds in accordance with the Fiscal Agent Agreement and as will be described in the Limited Offering Memorandum.
P. At or prior to the Closing, the City will have duly authorized, executed and delivered the City Continuing Disclosure Certificate. Except as otherwise disclosed in the Preliminary Limited Offering Memorandum and based on a review of its previous undertakings, the City has not failed to comply, in any material respects, with any of its continuing disclosure undertakings previously entered into pursuant to the provisions of the Rule within the last five years.
Q. Between the date of this Purchase Agreement and the date of Closing, the City will not offer or issue any bonds, notes or other obligations for borrowed money not previously disclosed to the Underwriter and the City shall not create, assume or guarantee any indebtedness payable from, or pledge or otherwise encumber, the Special Taxes or other assets, properties, funds or interests that will be pledged as security for the Bonds pursuant to the City Documents.
R. Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon and premium, if any, to maturity or to the date of redemption if redeemed prior to maturity, the City will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Fiscal Agent Agreement.
S. The Preliminary Limited Offering Memorandum was deemed final by a duly authorized officer of the City prior to its delivery to the Underwriter, except for the omission of such information as is permitted to be omitted in accordance with paragraph (b)(1) of the Rule. The City hereby covenants and agrees that, within seven (7) business days from the date hereof, or upon reasonable written notice from the Underwriter within sufficient time to accompany any confirmation requesting payment from any customers of the Underwriter, the City shall cause a final electronic and/or printed form of the Limited Offering Memorandum as set forth in Section 1 above to be delivered to the Underwriter in sufficient quantity to comply with paragraph (b)(4) of the Rule and Rules G-12, G-15, G-32 and G-36 of the Municipal Securities Rulemaking Board.
T. The City hereby approves the preparation and distribution of the Limited Offering Memorandum, consisting of the Preliminary Limited Offering Memorandum with such changes as are noted thereon and as may be made thereto, with the approval of Bond Counsel and the Underwriter from time to time prior to the Closing Date.
U. The City hereby ratifies any prior use of and authorizes the future use by the Underwriter, in connection with the offering and sale of the Bonds, of the Preliminary Limited Offering Memorandum, the Limited Offering Memorandum, this Purchase Agreement and all EXHIBIT 3 1065
9 information contained herein, and all other documents, certificates and written statements furnished by the City to the Underwriter in connection with the transactions contemplated by this Purchase Agreement.
The execution and delivery of this Purchase Agreement by the City shall constitute a representation by the City to the Underwriter that the representations and warranties contained in this Section 2 with respect to the City and the Community Facilities District are true as of the date hereof.
3. Conditions to the Obligations of the Underwriter. The obligation of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the City, on its own behalf and on behalf of the Community Facilities District, contained herein, to the accuracy in all material respects of the statements of the officers and other officials of the City and the Community Facilities District made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the City and the Community Facilities District of their obligations to be performed hereunder at or prior to the Closing Date and, to the following additional conditions:
A. At the Closing Date, the Community Facilities District Resolutions, the Formation Documents, and the City Documents shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds, and with the transactions contemplated thereby, and by this Purchase Agreement, all such actions as, in the opinion of Bond Counsel, shall be necessary and appropriate.
B. At the Closing Date, except as was described in the Preliminary Limited Offering Memorandum, neither the City nor the Community Facilities District shall be, in any respect material to the Bonds, the City Documents or the transactions referred to herein or contemplated hereby, in breach of or in default under, any law or administrative rule or regulation of the State, the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City or the Community Facilities District, respectively, is a party or is otherwise subject or bound, and the performance by the City or the Community Facilities District, respectively, of its obligations under the Bonds, the City Documents, the Community Facilities District Resolutions, this Purchase Agreement and any other instruments contemplated by any of such documents, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State, the United States of America or of any department, division, agency or instrumentality of either thereof or under any applicable court or administrative decree or order or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City or the Community Facilities District, respectively, is a party or is otherwise subject or bound, in any manner which would materially and adversely affect the performance by the City or the Community Facilities District, respectively, of its obligations under the City Documents, the Bonds or the Community Facilities District Resolutions.
C. The information contained in the Limited Offering Memorandum is, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant hereto, true and correct in all material respects and does not, as of the Closing Date or as of the date of any supplement or amendment thereto, contain any untrue statement of a material fact or omit to state a EXHIBIT 3 1066
10 material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
D. The Underwriter shall have the right to cancel its obligation to purchase the Bonds and to terminate this Purchase Agreement by written notice to the City if, between the date of this Purchase Agreement and the Closing Date, in the Underwriter’s sole and reasonable judgment any of the following events shall occur (each a “Termination Event”):
1. Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth on the cover page of the Limited Offering Memorandum, of the Bonds, or the ability of the Underwriter to enforce contracts for the sale of the Bonds, shall have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following:
a. Legislation introduced in or enacted (or resolution passed) by the Congress of the United States of America or the legislature of the State or recommended to the Congress by the President of the United States of America or a member of the President’s Cabinet, the Department of the Treasury, the Internal Revenue Service or any member of Congress or favorably reported for passage to either House of Congress by any committee of such House to which such legislation had been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United States of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department of the United States of America, the Internal Revenue Service or other federal or State authority with appropriate jurisdiction, with the purpose or effect, directly or indirectly, of imposing federal or State income taxation upon such interest as would be received by any owners of the Bonds beyond the extent to which such interest is subject to taxation as of the date hereof; b. Legislation introduced in or enacted (or resolution passed) by the Congress, or shall have been favorably reported out of committee or be pending in committee, or shall have been recommended to the Congress for passage by the President of the United States of America or a member of the President’s Cabinet, or an order, decree, injunction or decision issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release, statement or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, the Resolution or the City Documents, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Fiscal Agent Agreement is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, as contemplated hereby or by the Limited Offering Memorandum or otherwise, is or would be in violation of the federal securities laws as amended and then in effect;
c. A general suspension of trading on the New York Stock Exchange or other major exchange shall be in force, or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on any such exchange, whether by virtue of determination by that exchange or by order of the SEC or any other governmental authority having jurisdiction; EXHIBIT 3 1067
11 d. There shall have occurred (1) an outbreak or escalation of hostilities or the declaration by the United States of a national emergency or war or (2) any other calamity or crisis in the financial markets of the United States or elsewhere or the escalation of such calamity or crisis;
e. Except as disclosed in or contemplated by the Limited Offering Memorandum, any material adverse change in the affairs of the City or the Community Facilities District shall have occurred;
2. The introduction, proposal or enactment of any amendment to the federal or California Constitution or any action by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the City or the Community Facilities District, their property, income, securities (or interest thereon), the validity or enforceability of the Special Tax;
3. Any event occurring or information becoming known which, in the judgment of the Underwriter, makes untrue or incorrect in any material respect any statement or information contained in the Preliminary Limited Offering Memorandum or in the Limited Offering Memorandum or has the effect that the Preliminary Limited Offering Memorandum or the Limited Offering Memorandum contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
4. A general banking moratorium shall have been declared by federal, State of New York or State of California officials authorized to do so or a material disruption in securities settlement, payment or clearance services affecting the Bonds shall have occurred;
5. The imposition by the New York Stock Exchange or other national Securities exchange, or any governmental authority, of any material restrictions not now in force with respect to the Bonds or obligations of the general character of the Bonds or Securities generally, or the material increase of any such restrictions now in force, including those relating to the extension of credit by, or the charge to the net capital requirements of, the Underwriter;
6. A decision by a court of the United States of America shall be rendered, or a stop order, release, regulation or no-action letter by or on behalf of the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made, to the effect that the issuance, offering or sale of the Bonds as contemplated by this Purchase Agreement or by the Limited Offering Memorandum, or any document relating to the issuance, offering or sale of the Bonds is or would be in violation of any provision of the federal securities laws at the Closing Date, including the Securities Act of 1933, the Securities Exchange Act of 1934 and the Trust Indenture Act of 1939;
7. Any amendment is made to the Limited Offering Memorandum that in the Underwriter’s reasonable judgment will materially adversely affect the marketability of the Bonds or the ability of the Underwriter to enforce contracts for the sale of the Bonds;
8. Any proceeding shall have been commenced or be threatened in writing by the Securities and Exchange Commission against the City or the Community Facilities District.
EXHIBIT 3 1068
12 9. The commencement of an Action described in Section 2(H).
Upon the occurrence of a Termination Event and the termination of this Purchase Agreement by the Underwriter, all obligations of the City, the Community Facilities District, and the Underwriter under this Agreement shall terminate, without further liability, except that the City and the Underwriter shall pay their respective expenses as set forth in Section 6 below.
E. At or prior to the Closing Date, the Underwriter shall have received a counterpart original or certified copy of the following documents, in each case satisfactory in form and substance to the Underwriter:
1. Limited Offering Memorandum. The Limited Offering Memorandum and each supplement or amendment, if any thereto, executed by an authorized officer of the City;
2. Fiscal Agent Agreement. The Fiscal Agent Agreement, duly executed and delivered by the City and the Fiscal Agent;
3. Resolutions. Certifications by the City Clerk with respect to each resolution and ordinance of the City Council, for the City or as the legislative body of the Community Facilities District, relating to the City Documents, the transactions contemplated thereby, formation of the Community Facilities District and issuance of the Bonds;
4. City Continuing Disclosure Certificate. The City Continuing Disclosure Certificate executed and delivered by the City;
5. Bond Counsel Opinion. An unqualified approving opinion for the Bonds, dated the Closing Date and addressed to the City, of Bond Counsel, to the effect that the Bonds are the valid, legal and binding obligations of the City and that the interest thereon is excluded from gross income for federal income tax purposes and exempt from personal income taxes of the State, in substantially the form included as Appendix D to the Limited Offering Memorandum, together with a letter of Bond Counsel, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the City may be relied upon by the Underwriter to the same extent as if such opinion was addressed to it;
6. Supplemental Opinion. A supplemental opinion or opinions, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, to the effect that:
(i) this Purchase Agreement has been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding agreement of the City and is enforceable in accordance with its terms, except to the extent that enforceability may be limited by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting creditors’ rights generally or by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on legal remedies against public agencies in the State; (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Fiscal Agent Agreement is exempt from qualification under the Trust Indenture Act of 1939, as amended; and
EXHIBIT 3 1069
13 (iii) the information contained in the Limited Offering Memorandum on the cover and under the captions “THE 2024 BONDS,” “SECURITY FOR THE BONDS,” “TAX MATTERS” and in Appendices C and D to the Limited Offering Memorandum (excluding any financial, statistical and economic data, forecasts, numbers, charts, graphs, estimates, projections, and assumptions and any information regarding The Depository Trust Company and the book-entry system as to which Bond Counsel need express no opinion or view, and further, excluding any material that may be treated as included under such captions by cross-reference), are accurate insofar as such statements purport to summarize certain provisions of the Bonds, the Fiscal Agent Agreement, Bond Counsel’s final approving opinion and the Act; and
7. City Attorney Opinion. An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney to the City and counsel to the Community Facilities District, substantially in the form of Appendix B hereto;
8. Closing Certificate of the City. A certificate, dated the Closing Date, and signed by an authorized officer of the City substantially in the form of Appendix C hereto, together with such additional certifications as Bond Counsel may require;
9. Bank Incumbency Certificate. Certified copies of the general resolution of the Fiscal Agent authorizing the execution and delivery of certain documents by certain officers of the Fiscal Agent, which resolution authorizes the execution of the Fiscal Agent Agreement and the authentication of the Bonds;
10. Fiscal Agent’s Certificate. A certificate of the Fiscal Agent, dated the Closing Date, in form and substance acceptable to the Underwriter and its counsel, substantially in the form of Appendix D hereto;
11. Fiscal Agent’s Counsel Opinion. An opinion of counsel to the Fiscal Agent, dated the Closing Date, addressed to the Underwriter and the City, substantially in the form of Appendix E hereto;
12. Disclosure Counsel Opinion. A letter of Jones Hall, A Professional Law Corporation, as disclosure counsel to the City (“Disclosure Counsel”), dated the Closing Date and addressed to the Underwriter and the City, to the effect that without passing upon or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Preliminary Limited Offering Memorandum and the Final Limited Offering Memorandum and making no representation that they have independently verified the accuracy, completeness or fairness of any such statements, based upon the information made available to them in the course of their participation in the preparation of the Final Limited Offering Memorandum, nothing has come to such counsel's attention which would lead them to believe that the Preliminary Limited Offering Memorandum, as of its date and the date of the Purchase Agreement, and the Final Limited Offering Memorandum, as of its date and as of the Closing Date (but excluding therefrom the appendices thereto, financial statements and statistical data, and information regarding The Depository Trust Company and its book entry system, as to which no opinion need be expressed), contained an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;
EXHIBIT 3 1070
14 13. Opinion of Underwriter’s Counsel. An opinion of Kutak Rock LLP, counsel to the Underwriter (“Underwriter’s Counsel”), dated the date of the Closing, addressed to the Underwriter, in form and substance acceptable to the Underwriter;
14. Special Tax Consultant Certificate. A certificate, dated the Closing Date from Willdan Financial Services substantially in the form attached as Appendix F hereto;
15. Transcript. A transcript of all proceedings relating to the authorization, issuance, sale and delivery of the Bonds, including certified copies of the Fiscal Agent Agreement and all resolutions of the City and the Community Facilities District relating thereto;
16. Nonarbitrage Certificate. A certificate of the City, dated the Closing Date, in a form acceptable to Bond Counsel and the Underwriter, that the Bonds are not arbitrage bonds within the meaning of Section 148 of the Internal Revenue Code of 1986, as amended;
17. Specimen Bonds. Copies of the Specimen Bonds;
18. Form 8038-G. An Information Return for Tax-Exempt Bond Issues (Internal Revenue Service Form 8038-G), in a form satisfactory to Bond Counsel for filing, executed by a duly authorized officer of the City, together with evidence that such Form 8038-G has been mailed;
19. CDIAC Statements. Copies of filings with the California Debt and Investment Advisory Commission (“CDIAC”) relating to the issuance of the Bonds;
20. Letter of Representations. A copy of the Blanket Letter of Representations to DTC relating to the Bonds signed by the City;
21. Certificates Regarding Preliminary Limited Offering Memorandum.
Prior to and in connection with printing and distribution of the Preliminary Limited Offering Memorandum, (i) an executed certificate of the City deeming the Preliminary Limited Offering Memorandum final within the meaning of the Rule, and (ii) an executed certificate of Eight Mile Road Investors, LLC and Holman Investors, LLC (together, the “Master Developer”), substantially in the form under Appendix G hereto, an executed certificate of KB HOME North Bay LLC, a Delaware limited liability company (“KB Home”), substantially in the form under Appendix G hereto and an executed certificate of LGI Homes – California, LLC (“LGI Homes”) substantially in the form under Appendix G hereto.
22. KB Home and LGI Homes Continuing Disclosure Certificates. An executed copy of the KB Home Continuing Disclosure Certificate and LGI Homes Continuing Disclosure Certificate in the form included as an appendix to the Limited Offering Memorandum.
23. Master Developer, KB Home and LGI Homes Bring-Down
Certificates. An executed bring-down certificate from each of the Master Developer KB Home and LGI Homes, each dated as of the Closing Date, in the form set forth in Appendix H hereto.
24. Master Developer Opinion. The opinions of counsel to the Master Developer substantially in the form set forth in Appendix I hereto, addressed to the City and the Underwriter.
EXHIBIT 3 1071
15 25. KB Home and LGI Homes’ Counsel Opinions. The opinions of counsel to KB Home and LGI Homes, each dated the Closing Date and addressed to the City and the Underwriter, in form and substance acceptable to the City and Underwriter.
26. Additional Documents. Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the material representations and warranties of the City, on its own behalf and on behalf of the Community Facilities District, contained herein, and of the statements and information contained in the Limited Offering Memorandum and the due performance or satisfaction by the City at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the City and the Community Facilities District in connection with the transactions contemplated hereby and by the Fiscal Agent Agreement and the Limited Offering Memorandum.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds contained in this Purchase Agreement, or if the obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be terminated for any reason permitted by this Purchase Agreement, this Purchase Agreement shall terminate and neither the City nor the Underwriter shall be under any further obligation hereunder, except that the respective obligations of the Underwriter and the City set forth in Section 6 hereof shall continue in full force and effect.
4. Representations and Agreements of the Underwriter. The Underwriter represents to and agrees with the City that, as of the date hereof and as of the date of the Closing:
A. The Underwriter is duly authorized to execute and deliver this Purchase Agreement and to take any action under the Purchase Agreement required to be taken by it.
B. The Underwriter is in compliance with MSRB Rule G-37 with respect to the City and the Community Facilities District, and is not prohibited thereby from acting as underwriter with respect to securities of the City and the Community Facilities District. The Underwriter is in compliance with MSRB Rule G-17 with respect to the City and the Community Facilities District.
C. The Underwriter has, and has had, no financial advisory relationship with the City or the Community Facilities District with respect to the Bonds, and no investment firm controlling, controlled by or under common control with the Underwriter has or has had any such financial advisory relationship, within the meaning of California Government Code Section 53590, or otherwise.
D. The Underwriter has not paid or agreed to pay, nor will it pay or agree to pay, any entity, company, firm or person (including, but not limited to, the City’s financial consultants, or any officer, agent or employee thereof), other than a bona fide officer, agent or employee working for the Underwriter, any compensation, fee, gift or other consideration contingent upon or resulting from the award of or entering into this Purchase Agreement.
E. The Underwriter has reasonably determined that the City’s undertaking in the City Continuing Disclosure Certificate to provide continuing disclosure with respect to the Bonds is sufficient to effect compliance with the Rule.
EXHIBIT 3 1072
16 5. Establishment of Issue Price.
A. The Underwriter agrees to assist the City in establishing the issue price of the Bonds and shall execute and deliver to the City at Closing an “issue price” or similar certificate, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Appendix J, with such modifications as may be appropriate or necessary, in the reasonable judgment of the Underwriter, the City and Bond Counsel (as defined herein), to accurately reflect, as applicable, the sales price or prices or the initial offering price or prices to the public of the Bonds.
B. Except as otherwise set forth in Appendix A attached hereto, the City will treat the first price at which 10% of each maturity of the Bonds (the “10% test”) is sold to the public as the issue price of that maturity. At or promptly after the execution of this Purchase Agreement, the Underwriter shall report to the City the price or prices at which it has sold to the public each maturity of Bonds. If at that time the 10% test has not been satisfied as to any maturity of the Bonds, the Underwriter agrees to promptly report to the City the prices at which it sells the unsold Bonds of that maturity to the public. That reporting obligation shall continue, whether or not the Closing Date has occurred, until either (i) the Underwriter has sold all Bonds of that maturity or (ii) the 10% test has been satisfied as to the Bonds of that maturity, provided that, the Underwriter’s reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the City or Bond Counsel. For purposes of this Section, if Bonds mature on the same date but have different interest rates, each separate CUSIP number within that maturity will be treated as a separate maturity of the Bonds.
C. The Underwriter confirms that it has offered the Bonds to the public on or before the date of this Purchase Agreement at the offering price or prices (the “initial offering price”), or at the corresponding yield or yields, set forth in Appendix A attached hereto. Appendix A also sets forth, as of the date of this Purchase Agreement, the maturities, if any, of the Bonds for which the Underwriter represents that (i) the 10% test has been satisfied (assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement) and (ii) the 10% test has not been satisfied and for which the City and the Underwriter agree that the restrictions set forth in the next sentence shall apply, which will allow the City to treat the initial offering price to the public of each such maturity as of the sale date as the issue price of that maturity (the “hold-the-offering-price rule”). So long as the hold-the-offering-price rule remains applicable to any maturity of the Bonds, the Underwriter will neither offer nor sell unsold Bonds of that maturity to any person at a price that is higher than the initial offering price to the public during the period starting on the sale date and ending on the earlier of the following:
a. the close of the fifth (5th) business day after the sale date; or b. the date on which the Underwriter has sold at least 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
The Underwriter will advise the City promptly after the close of the fifth (5th) business day after the sale date whether it has sold 10% of that maturity of the Bonds to the public at a price that is no higher than the initial offering price to the public.
D. The Underwriter confirms that:
EXHIBIT 3 1073
17 (i) any selling group agreement and any third-party distribution agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer who is a member of the selling group and each broker-dealer that is a party to such third-party distribution agreement, as applicable:
(A)(i) to report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be reasonable periodic intervals or otherwise upon request of the Underwriter and (ii) to comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter,
(B) to promptly notify the Underwriter of any sales of Bonds that, to its knowledge, are made to a purchaser who is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below), and (C) to acknowledge that, unless otherwise advised by the dealer or broker-dealer, the Underwriter shall assume that each order submitted by the dealer or broker-dealer is a sale to the public.
(ii) any selling group agreement relating to the initial sale of the Bonds to the public, together with the related pricing wires, contains or will contain language obligating each dealer that is a party to a third-party distribution agreement to be employed in connection with the initial sale of the Bonds to the public to require each broker-dealer that is a party to such third-party distribution agreement to (A) report the prices at which it sells to the public the unsold Bonds of each maturity allocated to it, whether or not the Closing Date has occurred, until either all Bonds of that maturity allocated to it have been sold or it is notified by the Underwriter or the dealer that the 10% test has been satisfied as to the Bonds of that maturity, provided that, the reporting obligation after the Closing Date may be at reasonable periodic intervals or otherwise upon request of the Underwriter or the dealer, and (B) comply with the hold-the-offering-price rule, if applicable, if and for so long as directed by the Underwriter or the dealer and as set forth in the related pricing wires.
E. The City acknowledges that, in making the representation set forth in this section, the Underwriter will rely on (i) in the event a selling group has been created in connection with the initial sale of the Bonds to the public, the agreement of each dealer who is a member of the selling group to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in a selling group agreement and the related pricing wires, and (ii) in the event that a third-party distribution agreement was employed in connection with the initial sale of the Bonds to the public, the agreement of each broker-dealer that is a party to such agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds, as set forth in the third-party distribution agreement and the related pricing wires. The City further acknowledges that the Underwriter shall not be liable for the failure of any dealer who is a member of a selling group, or of any broker-dealer that is a party to a third-party distribution agreement, to comply with its corresponding agreement to comply with the requirements for establishing issue price of the Bonds, including, but not limited to, its agreement to comply with the hold-the-offering-price rule, if applicable to the Bonds.
EXHIBIT 3 1074
18 F. The Underwriter acknowledges that sales of any Bonds to any person that is a related party to an underwriter participating in the initial sale of the Bonds to the public (each such term being used as defined below) shall not constitute sales to the public for purposes of this section.
Further, for purposes of this section:
a. “public” means any person other than an underwriter or a related party;
b. “underwriter” means (A) any person that agrees pursuant to a written contract with the City (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Bonds to the public and (B) any person that agrees pursuant to a written contract directly or indirectly with a person described in clause (A) to participate in the initial sale of the Bonds to the public (including a member of a selling group or a party to a third-party distribution agreement participating in the initial sale of the Bonds to the public);
c. a purchaser of any of the Bonds is a “related party” to an underwriter if the underwriter and the purchaser are subject, directly or indirectly, to (A) more than 50% common ownership of the voting power or the total value of their stock, if both entities are corporations (including direct ownership by one corporation of another), (B) more than 50% common ownership of their capital interests or profits interests, if both entities are partnerships (including direct ownership by one partnership of another), or (C) more than 50% common ownership of the value of the outstanding stock of the corporation or the capital interests or profit interests of the partnership, as applicable, if one entity is a corporation and the other entity is a partnership (including direct ownership of the applicable stock or interests by one entity of the other); and
d. “sale date” means the date of execution of this Purchase Agreement by all parties.
6. Expenses.
A. Whether or not the Underwriter accepts delivery of and pays for the Bonds as set forth herein, it shall be under no obligation to pay, and the City shall pay out of the proceeds of the Bonds or any other legally available funds of the City, all expenses incidental to the performance of the City’s obligations hereunder, including but not limited to the cost of printing and delivering the Bonds to the Underwriter; the costs of printing and shipping the Preliminary Limited Offering Memorandum and the Limited Offering Memorandum; the fees and disbursements of the City, the Community Facilities District, the Fiscal Agent, Bond Counsel, Disclosure Counsel, accountants and any other experts or consultants retained by the City or the Community Facilities District in connection with the issuance and sale of the Bonds; and any other expenses not specifically enumerated in paragraph (B) of this Section incurred in connection with the issuance and sale of the Bonds. The City shall also pay for any expenses (included in the expense component of the Underwriter’s discount) incurred by the Underwriter which are incidental to implementing this Purchase Agreement and the issuance of the Bonds, including, but not limited to, meals, transportation and lodging, if any, and any other miscellaneous closing costs. The City acknowledges that it has had an opportunity, in consultation with such advisors as it may deem appropriate, if any, to evaluate and consider the fees and expenses being incurred as part of the issuance of the Bonds.
EXHIBIT 3 1075
19 B. Whether or not the Bonds are delivered to the Underwriter as set forth herein, the City shall be under no obligation to pay, and the Underwriter shall be responsible for and pay, CUSIP® and CDIAC fees and expenses to qualify the Bonds for sale under any “blue sky” laws; the fees and disbursements of Underwriter’s Counsel; and all other expenses incurred by the Underwriter in connection with its public offering and distribution of the Bonds not specifically enumerated in paragraph (A) of this Section.
7. Notices. Any notice of other communication to be given to the City under this Purchase Agreement may be given by delivering the same in writing to the City of Stockton, 425 North El Dorado Street, Stockton, California 95202, Attention: Chief Financial Officer; any notice or other communication to be given to the Underwriter under this Purchase Agreement may be given by delivering the same in writing to Oppenheimer & Co. Inc., 135 Main Street, Suite 1700, San Francisco, California 94105, Attention: Municipal Capital Markets Group. All such notices, requests or other communications may be made by telephone, personal or courier delivery, registered or certified mail, facsimile transmission or electronic communication, provided that delivery by facsimile transmission or electronic communication must be confirmed by the sender. The City and the Underwriter may, by notice given as aforesaid, specify a different address for any such notices, requests or other communications.
8. Parties In Interest. This Purchase Agreement is made solely for the benefit of the City and the Underwriter (including any successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. The City and the Underwriter may not assign this Purchase Agreement. The term “successor” shall not include any holder of any Bonds merely by virtue of such holding.
9. Survival of Representations and Warranties. The representations and warranties of the City under this Purchase Agreement shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the City or the Community Facilities District and regardless of delivery of and payment for the Bonds.
10. Severability. If any provision of this Purchase Agreement is, or is held or deemed to be, invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or jurisdictions, because it conflicts with any provisions of any constitution, statute, rule of public policy or for any other reason, such circumstances shall not make the provision in question invalid, inoperative or unenforceable in any other case or circumstance, or make any other provision or provisions of this Agreement invalid, inoperative or unenforceable to any extent whatsoever.
11. Execution in Counterparts. This Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
12. Effective. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid and enforceable as of the time of such acceptance.
13. No Prior Agreements. This Purchase Agreement supersedes and replaces all prior negotiations, agreements and understanding between the parties hereto in relation to the sale of the Bonds by the City.
EXHIBIT 3 1076
20 14. Governing Law. This Purchase Agreement shall be governed by the laws of the State.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
EXHIBIT 3 1077
S-1
15. Effective Date. This Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
OPPENHEIMER & CO. INC.
By:
Its: Authorized Officer
The foregoing is hereby agreed to and
accepted as of the date first above written:
CITY OF STOCKTON
By:
Authorized Representative
Time of Execution: _____________ p.m. California time
[EXECUTION PAGE OF BOND PURCHASE AGREEMENT –CITY OF STOCKTON COMMUNITY FACILITIES DISTRICT NO. 2019-1 (CANNERY PARK II), SPECIAL TAX BONDS, SERIES 2024)]
EXHIBIT 3 1078
A-1
APPENDIX A
$________
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
MATURITY SCHEDULE
Maturity
(September 1)
Principal
Amount
Interest
Rate Yield Price
10% Test
Satisfied*
10% Test
Not
Satisfied
Subject to
Hold-TheOfferingPrice Rule
(Marked if
Used)
2025
2026
2027
2028
2029
2030
2031
2032
20__(T)
20__(T)
_________________________________
(T) Term Bond.
(C) Priced to optional call at [par] on September 1, 20__. * At the time of execution of this Purchase Agreement and assuming orders are confirmed by the close of the business day immediately following the date of this Purchase Agreement.
EXHIBIT 3 1079
B-1
APPENDIX B
OPINION OF CITY ATTORNEY
[Closing Date]
City of Stockton
425 North El Dorado Street
Stockton, California 95202
Oppenheimer & Co. Inc.
135 Main Street, Suite 1700
San Francisco, California 94105
Re: $________ City of Stockton Community Facilities District No. 2019-1 (Cannery Park II), Special Tax Bonds, Series 2024
Ladies and Gentlemen:
We have acted as City Attorney for the City of Stockton (the “City”) and counsel for City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “Community Facilities District”), in connection with the purchase and sale of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II), Special Tax Bonds, Series 2024 (the “Bonds”). As such Counsel, we have reviewed the Bond Purchase Agreement, dated [BPA Date] (the “Purchase Agreement”), by and between Oppenheimer & Co. Inc. (the “Underwriter”) and the City, the Fiscal Agent Agreement, dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”), the City Continuing Disclosure Certificate, dated [Closing Date] executed by the City (the “City Continuing Disclosure Certificate”), the Preliminary Limited Offering Memorandum, dated [PLOM Date], relating to the Bonds (the “Preliminary Limited Offering Memorandum”), the Limited Offering Memorandum, dated [BPA Date], relating to the Bonds (the “Limited Offering Memorandum”), Resolution No. ________ adopted by the City Council of the City on _______, 2024 (“Bond Resolution”), and such other documents, certificates, records and papers as we have deemed necessary to render the below opinions.
The Bonds, Fiscal Agent Agreement, Purchase Agreement, and the City Continuing Disclosure Certificate, are collectively referred to herein as the “Bond Documents.” Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Purchase Agreement.
With your permission we have assumed, without undertaking to verify the same by independent investigation, the following: (a) the authenticity of original documents and the genuineness of all signatures (other than those of the City and the Community Facilities District); (b) the conformity to the originals of all documents submitted to us as copies; (c) the truth, accuracy, and completeness of the information, representations, and warranties contained in these documents, certificates, records and papers we have reviewed; and (d) compliance with all covenants and agreements contained in such documents.
Based on the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:
EXHIBIT 3 1080
B-2
1. The City is a municipal corporation and charter city duly organized and validly existing pursuant to the Constitution and laws of the State of California;
2. The Community Facilities District is duly organized and validly existing as a community facilities district under the Constitution and laws of the State;
3. The Bond Resolution was duly adopted at a meeting of the City Council, which meeting was duly called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout;
4. The preparation and distribution of the Preliminary Limited Offering Memorandum and the Limited Offering Memorandum have been duly approved by the City Council, acting for itself or as the Legislative Body of the Community Facilities District;
5. The execution and delivery by the City of the Bond Documents, and the Bonds and the performance of its obligations thereunder have been duly authorized by all requisite action of the City Council, acting for itself or as the Legislative Body of the Community Facilities District, and the Bonds and the Bond Documents have been duly executed and delivered by the City, and constitute legal, valid and binding obligations of the City enforceable against the City, in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights in general and to the application of equitable principles if equitable remedies are sought;
6. To the best of our knowledge, no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending or to the best of such counsel’s knowledge, threatened in any way affecting the existence of the City or the Community Facilities District or the titles of the officers of each to their respective offices, or seeking to restrain or to enjoin the execution and delivery of the Bond Documents, or the issuance, sale or delivery of the Bonds or the application of the proceeds thereof or the collection or application of the Special Tax, or the exclusion from gross income for State personal income taxes of interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Bond Documents or any action of the City or the Community Facilities District contemplated by any of said documents or in any way contesting the completeness or accuracy of the Preliminary Limited Offering Memorandum or the Limited Offering Memorandum or the powers of the City or its authority with respect to the Purchase Agreement or any other applicable agreement, or any action on the part of the City or the Community Facilities District contemplated by any of said documents;
7. To the best of our knowledge, the City and the Community Facilities District are not in breach of or in default under any court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City or the Community Facilities District is a party or is otherwise subject or bound, including the Bond Documents, a consequence of which could be to materially and adversely affect the ability of the City or the Community Facilities District to perform their obligations under the Bonds, the Bond Documents or which, with the passage of time or the giving of notice or both, would constitute an event of default thereunder; and;
8. To the best of our knowledge, the adoption of the Bond Resolution and the execution and delivery of the Bonds and the Bond Documents, did not and will not conflict with or constitute a EXHIBIT 3 1081
B-3
breach of or default under any applicable court or administrative decree or order, or under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument to which the City or the Community Facilities District, as the case may be, is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of City or the Community Facilities District to perform their obligations under the Bonds or any Bond Documents.
The opinions set forth above are subject to the following additional qualifications:
General principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law; and limitations imposed by bankruptcy, insolvency, fraudulent conveyance, receivership, conservatorship, reorganization, arrangement, liquidation, moratorium or other similar laws affecting the enforcement of creditors’ rights in general heretofore or hereafter enacted, as such laws may be applied in the event of bankruptcy, insolvency, reorganization, arrangement, receivership, conservatorship, liquidation, readjustment of debt or other similar proceedings of, or moratorium or similar occurrence affecting municipal corporations in the State.
We express no opinion as to matters governing by laws other than the laws of the State and the federal laws of the United States of America, or the enforceability of any choice of law provision in the documents described herein.
This opinion is solely for your benefit in connection with the transactions covered by the first paragraph of this letter and may not be relied upon or used by, circulated, quoted or referred to, nor may copies hereof be delivered to, any other person or for any other purpose without our prior written approval; provided, however, copies of this opinion may be included in the closing transcripts for the transactions connected with the issuance of the Bonds. We disclaim any obligation to update this opinion letter for events occurring or coming to our attention after the date hereof.
Respectfully submitted,
EXHIBIT 3 1082
C-1
APPENDIX C
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
CLOSING CERTIFICATE OF THE CITY
I, the undersigned, hereby certify that I am the Chief Financial Officer of the City of Stockton (the “City”), the City Council (the “City Council”) of which is the Legislative Body for City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “Community Facilities District”), a community facilities district duly organized and existing under the laws of the State of California (the “State”) and I am authorized to execute this Certificate on behalf of the City in connection with the issuance of the above-captioned bonds (the “Bonds”). All capitalized terms herein not otherwise defined shall have the meanings given such terms in the Bond Purchase Agreement (the “Bond Purchase Agreement”), dated [BPA Date], by and between the City and Oppenheimer & Co. Inc..
I further certify on behalf of the City that:
(i) The representations, warranties and covenants of the City contained in the Bond Purchase Agreement, made on behalf of the City and the Community Facilities District, are true and correct in all material respects on and as of the date hereof as if made on the date hereof; (ii) The Community Facilities District Resolutions, Formation Documents and the City Documents are in full force and effect and have not been amended, modified or supplemented; (iii) Except as described in the Limited Offering Memorandum, there is no action, suit, proceeding, inquiry or investigation at law or in equity, or by any court or regulatory agency, public board or body pending, with respect to which the City or the Community Facilities District has been served with process, or to the best knowledge of the City or the Community Facilities District, threatened wherein an unfavorable decision, ruling or finding would: (a) affect the creation, organization, existence or powers of the City or the Community Facilities District, or the titles of their officers to their respective offices, (b) enjoin or restrain the issuance, sale and delivery of the Bonds, the levy or collection of the Special Tax or any other moneys or property pledged or to be pledged under the Fiscal Agent Agreement, or the pledge thereof, (c) in any way question or affect any of the rights, powers, duties or obligations of the City or the Community Facilities District with respect to the Special Taxes or moneys and assets pledged or to be pledged to pay the principal of, premium, if any, or interest on the Bonds, (d) in any way question or affect any authority for the issuance of the Bonds, or the validity or enforceability of the Bonds or the proceedings relating to the issuance of the Bonds, or (e) in any way question or affect the Bond Purchase Agreement or the transactions contemplated thereby, the Limited Offering Memorandum or the City Documents; (iv) The information in the Preliminary Limited Offering Memorandum (other than statements pertaining to DTC and it book-entry system and under the headings “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” and contained in APPENDIX F–DTC AND THE BOOKENTRY ONLY SYSTEM,” as to which no view is expressed) as of its date was and as of the date hereof is, and in the Limited Offering Memorandum (other than statements pertaining to DTC and its EXHIBIT 3 1083
C-2
book-entry system and under the headings “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” and contained in APPENDIX F–DTC AND THE BOOK-ENTRY ONLY SYSTEM,”” as to which no view is expressed) as of its date was and as of the date hereof is, true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(v) The City has complied with all agreements and covenants, and satisfied all conditions, on its part to be complied with or satisfied under the Bond Purchase Agreement and under the Community Facilities District Resolutions, the Formation Documents, the City Documents and the Limited Offering Memorandum at or prior to the date hereof; (vi) No event has occurred since the date of the Limited Offering Memorandum which either makes untrue or incorrect in any material respect as of the date hereof any statement or information contained in the Preliminary Limited Offering Memorandum or the Limited Offering Memorandum (other than statements pertaining to DTC and its book-entry system and under the headings “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT” and contained in Appendix F– DTC and the Book-Entry Only System,” as to which no view is expressed) or is not reflected in the Limited Offering Memorandum but should be reflected therein in order to make the statements and information therein not misleading in any material respect; (vii) The use of and distribution by the Underwriter of the Preliminary Limited Offering Memorandum and the Limited Offering Memorandum in connection with the offer and sale of the Bonds is hereby ratified; and
(viii) The City and the Community Facilities District are each in compliance with all covenants set forth in the Fiscal Agent Agreement.
IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below.
Dated: [Closing Date] CITY OF STOCKTON
By:
Chief Financial Officer
EXHIBIT 3 1084
D-1
APPENDIX D
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
FISCAL AGENT’S CERTIFICATE
The undersigned is an authorized officer of U.S. Bank Trust Company, National Association (the “Bank”), and as such, is familiar with the facts herein certified and is authorized and qualified to state and certify the following:
(i) The Bank is duly organized and existing as a national banking association under the laws of the United States of America, having the full power and authority to accept and perform its duties under a Fiscal Agent Agreement, dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and the Bank, as fiscal agent. Capitalized terms used herein and not otherwise defined have the meanings given to such terms in the Bond Purchase Agreement, dated [BPA Date], by and between the City and Oppenheimer & Co. Inc.; (ii) Pursuant to the Fiscal Agent Agreement, the Bank will apply the proceeds from the Bonds to the purposes specified in the Fiscal Agent Agreement; (iii) The Bank is duly authorized to accept the obligations created by the Fiscal Agent Agreement and to authenticate the Bonds pursuant to the terms of the Fiscal Agent Agreement;
(iv) The Fiscal Agent Agreement has been duly authorized, executed and delivered by the Bank and, assuming due authorization, execution and delivery thereof by the other parties thereto, constitutes a valid and binding agreement of the Bank enforceable against the Bank in accordance with its terms;
(v) The Bonds have been validly authenticated and delivered by the Bank pursuant to the Fiscal Agent Agreement;
(vi) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Bank that has not been obtained is or will be required for the authentication of the Bonds or the consummation by the Bank of the other transactions contemplated to be performed by the Bank in connection with the authentication of the Bonds and the acceptance and performance of the obligations created by the Fiscal Agent Agreement;
(vii) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body that has been served on the Bank or, to the best of its knowledge, threatened in any way affecting the existence of the Bank, or seeking to restrain or to enjoin the execution and delivery of the Fiscal Agent Agreement or the authentication of the Bonds, by the Bank, or in any way contesting or affecting the validity or enforceability, as against the Bank, of the Fiscal Agent Agreement or any action of the Bank EXHIBIT 3 1085
D-2
contemplated by any of said documents, or in which an adverse outcome would materially and adversely affect the ability of the Bank to perform its obligations under the Fiscal Agent Agreement; (viii) The Bank is not in breach of or in default under any applicable law or administrative rule or regulation of the State of California (the “State”) or the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the Bank is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Bank to perform its obligations under the Fiscal Agent Agreement (provided, however, that the Bank does not certify as to compliance with State or federal securities laws); and (ix) The authentication of the Bonds, and the execution and delivery of the Fiscal Agent Agreement by the Bank, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State or the United States of America, or of any department, division, agency or instrumentality of either thereof, or under any applicable court or administrative decree or order, or under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument to which the Bank is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Bank to perform its obligations under the Fiscal Agent Agreement.
Dated: [Closing Date] U.S. BANK TRUST COMPANY, NATIONAL
ASSOCIATION
as Fiscal Agent
By:
Authorized Officer
EXHIBIT 3 1086
E-1
APPENDIX E
FISCAL AGENT’S COUNSEL OPINION
[Closing Date]
Oppenheimer & Co. Inc.
135 Main Street, Suite 1700
San Francisco, California 94105
City of Stockton
425 North El Dorado Street
Stockton, California 95202
Re: City of Stockton Community Facilities District No. 2019-1 (Cannery Park II), Special Tax Bonds, Series 2024
Ladies and Gentlemen:
We have acted as counsel for U.S. Bank Trust Company, National Association, a national banking association (the “Bank”) in connection with the execution by the Bank of a Fiscal Agent Agreement, dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and the Bank, as fiscal agent. We are generally familiar with the Articles of Association and the Bylaws of the Bank and are also familiar with the corporate proceedings of the Bank with regard to its authorization, execution and delivery of the Fiscal Agent Agreement. Capitalized terms used herein shall have the respective meanings ascribed to them in the Fiscal Agent Agreement, except as otherwise defined herein.
We have examined such documents and have reviewed such questions of law as we have considered necessary and appropriate for the purposes of this opinion. In such review, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity with originals of all documents submitted to us as copies. Where questions of fact material to our opinions expressed below were not established independently, we have relied upon statements of officers of the Bank as contained in their certificates.
Based upon the foregoing, we are of the opinion that:
1. The Bank is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America.
2. The Bank has all requisite corporate power, authority and legal right to execute and deliver the Fiscal Agent Agreement and to perform its duties and obligations under the Fiscal Agent Agreement, and has taken all necessary corporate action to authorize the execution and delivery thereof and the performance of its obligations thereunder, including the authentication and delivery of the Bonds in its capacity as fiscal agent under the Fiscal Agent Agreement.
EXHIBIT 3 1087
E-2
3. The Bank has duly authorized, executed and delivered the Fiscal Agent Agreement. Assuming the due authorization, execution and delivery thereof by the other parties thereto, the Fiscal Agent Agreement is a legal, valid and binding agreement of the Bank, enforceable in accordance with its terms against the Bank.
4. To our knowledge, no authorization, approval, consent, or order of any governmental agency or regulatory authority having jurisdiction over the Bank that has not been obtained by the Bank is required for the authorization, execution and delivery by the Bank of the Fiscal Agent Agreement or the authentication and delivery of the Bonds by the Bank under the Fiscal Agent Agreement.
The opinions set forth above are subject to the following qualifications and exceptions:
(a) the opinions are subject to the effect of any applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of general application affecting creditors' rights; and
(b) the opinions are subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing, and other similar doctrines affecting the enforceability of agreements generally (regardless of whether considered in a proceeding in equity or at law).
Our opinions expressed above are limited to the laws of the State of California and the federal laws of the United States of America.
The foregoing opinions are being furnished to you solely for your benefit and may not be relied upon by, nor may copies be delivered to, any other person without our prior written consent.
Very truly yours,
EXHIBIT 3 1088
F-1
APPENDIX F
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
CERTIFICATE OF SPECIAL TAX CONSULTANT
The undersigned hereby states and certifies:
1. That he is an authorized officer of Willdan Financial Services (the “Special Tax Consultant”) and as such is familiar with the facts herein certified and is authorized and qualified to certify the same.
2. That the Special Tax Consultant has prepared the Rate and Method of Apportionment of Special Tax (the “Rate and Method”) for City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “Community Facilities District”) as set forth in Appendix A to the Limited Offering Memorandum for the above-captioned bonds (the “Bonds”) dated [BPA Date].
Capitalized terms not otherwise defined herein shall be defined as provided in the Rate and Method or the Fiscal Agent Agreement, dated as of August 1, 2022, and Supplemental Agreement No. 1 to Fiscal Agent Agreement, dated as of July 1, 2024 (together, the “Fiscal Agent Agreement”), by and between the City and U.S. Bank Trust Company, National Association, as fiscal agent (the “Fiscal Agent”).
3. That the Special Tax, if levied in accordance with the Rate and Method and collected will annually yield sufficient revenue to make timely payments of the annual debt service on the Bonds and 2022 Bonds, and annual Administrative Expenses related to the levy and collection of the Special Tax and the expenses of the Fiscal Agent for the Bonds (no representation is made as to the actual amounts that will be collected in future years).
4. That the Maximum Annual Special Tax, if collected in the maximum amounts permitted pursuant to the Rate and Method on the Closing Date, would generate at least 110% of the Annual Debt Service payable with respect to the Bonds and 2022 Bonds payable from such Special Tax plus estimated Administrative Expenses equal to a maximum of $______ for Fiscal Year 2024- 25, assuming the debt service schedule shown in the Limited Offering Memorandum is true and correct.
5. That all information supplied by the Special Tax Consultant for use in the Limited Offering Memorandum is true and correct, as of the date of the Limited Offering Memorandum and as of the date hereof.
6. That, as of the dates of the Preliminary Limited Offering Memorandum and the Limited Offering Memorandum and as of the date hereof, the information contained in the portion of the Limited Offering Memorandum entitled “SECURITY FOR THE BONDS,” “VALUE OF PROPERTY WITHIN THE DISTRICT AND SPECIAL TAX BURDEN,” and “APPENDIX A,” including all tables and maps sourced to the Special Tax Consultant, and the other data provided by the Special Tax Consultant and included in the Limited Offering Memorandum, do not, to our knowledge, contain any untrue statement of a material fact or omit to state a material fact necessary EXHIBIT 3 1089
F-2
to make the statements made therein, in light of the circumstances under which they were made, not misleading.
7. The Community Facilities District, the City, the Underwriter, Oppenheimer & Co.
Inc., and all the professionals involved in the financing are entitled to rely on this Certificate.
Dated: [Closing Date] WILLDAN FINANCIAL SERVICES
By:
Title:
EXHIBIT 3 1090
G-1
APPENDIX G
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
FORM OF CERTIFICATE OF [EIGHT MILE ROAD INVESTORS, LLC AND HOLMAN INVESTORS, LLC]
[KB HOME NORTH BAY LLC] [LGI HOMES-CALIFORNIA, LLC]
[PLOM Date]
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) 425 North El Dorado Street
Stockton, California 95202
Oppenheimer & Co. Inc.
135 Main Street, Suite 1700
San Francisco, CA 94105
Reference is made to the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2024 (the “Bonds”) and to the Bond Purchase Agreement (the “Bond Purchase Agreement”) to be entered into by and between the City, on behalf of itself and as the legislative body of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “Community Facilities District”), and Oppenheimer & Co. Inc., as underwriter (the “Underwriter”).
This Certificate of [Eight Mile Road Investors, LLC and Holman Investors, LLC] [KB HOME North Bay LLC] [LGI Homes – California, LLC] (“Certificate”) is delivered pursuant to and in satisfaction of Section 3.E.21 of the Bond Purchase Agreement.
Capitalized terms used herein but not otherwise defined have the meanings ascribed to them in the Bond Purchase Agreement.
As used in this Certificate, the phrase “Actual Knowledge of the Undersigned” means, as of the date of this Certificate, the actual knowledge (as opposed to constructive) that the undersigned currently has or has obtained through (i) interviews with such current officers and responsible employees of the Property Owner (defined below) as the undersigned has reasonably determined are likely, in the ordinary course of their respective duties, to have knowledge of the matters set forth in this Certificate, and/or (ii) review of documents reasonably available to the undersigned and which the undersigned reasonably deemed necessary for the undersigned to execute this Certificate. The undersigned has not conducted any extraordinary inspection or inquiry other than such inspections or inquiries as are prudent and customary in connection with the ordinary course of the Property EXHIBIT 3 1091
G-2
Owner’s current business and operations. The undersigned has not contacted individuals who are no longer employed by the Property Owner.
As used in this Certificate, the term “Relevant Entity” means, with respect to the Property Owner, any other Person (i) who, directly or indirectly through one or more intermediaries, is currently controlling, controlled by or under common control with the Property Owner, and (ii) for whom information, including financial information or operating data, concerning such Person is material to an evaluation of the Bonds (i.e. such person or entity’s assets or funds would materially affect the Property Owner’s ability to develop the Property (defined below) as described in the Preliminary Limited Offering Memorandum or to pay its Special Taxes on the Property to the extent the responsibility of the Property Owner prior to delinquency). As used in this Certificate, the term “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
As used in this Certificate, the term “Property” means the real property currently owned by the Property Owner (defined below) within the Community Facilities District, as further described in the Preliminary Limited Offering Memorandum.
The undersigned certifies that he or she is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of [Eight Mile Road Investors, LLC and Holman Investors, LLC] [KB HOME North Bay LLC] [LGI Homes – California, LLC] (the “Property Owner”) and the undersigned, on behalf of the Property Owner further certifies as follows:
(1) The Property Owner is duly organized and validly existing under the laws of the State of California, is in good standing under the laws of the State of California and has all requisite [limited liability company] [corporate] right, power and authority:
(i) to execute and deliver this Certificate;
(ii) to own and develop the Property, as described in the Preliminary Limited Offering Memorandum;
(iii) to execute and deliver the Property Owner Continuing Disclosure Certificate at Closing;
(iv) to perform its obligations under the Property Owner Continuing Disclosure Certificate; and
(v) to carry on its business as described in the Preliminary Limited Offering Memorandum.
(2) The Property Owner agrees to execute at Closing the Property Owner Continuing Disclosure Certificate substantially in the form attached as an appendix to the Preliminary Limited Offering Memorandum, with such additional changes as may be agreed upon by the Underwriter, Bond Counsel and the Property Owner.
EXHIBIT 3 1092
G-3
(3) Except as disclosed in the Preliminary Limited Offering Memorandum, to the Actual Knowledge of the Undersigned, the Property Owner is not aware of any material failures by it or any Relevant Entity to comply in all material respects with any previous continuing disclosure undertaking in a written certificate or agreement executed by it or its Relevant Entities to provide periodic continuing disclosure reports or notices of listed events with respect to community facilities districts or assessment districts in California within the past five years.
(4) The Property Owner and its Relevant Entities are not in breach of or in default under any judgment or decree, or any loan agreement, line of credit, option agreement, development agreement, indenture, fiscal agent agreement, bond or note (collectively, the “Material Agreements”) to which the Property Owner or its Relevant Entities are a party or otherwise subject, which a default or breach, could reasonably be expected to materially and adversely affect the ability of the Property Owner:
(i) to own, develop and sell the Property, as described in the Preliminary Limited Offering Memorandum;
(ii) to pay Special Taxes on the Property (to the extent the responsibility of the Property Owner) prior to delinquency;
(iii) to carry on its business as described in the Preliminary Limited Offering Memorandum; or
(iv) to perform its obligations under the Property Owner Continuing Disclosure Certificate.
(5) Except as described in the Preliminary Limited Offering Memorandum, the Property Owner has no loans outstanding and unpaid and no lines of credit that are secured by the Property.
(6) Except as disclosed in the Preliminary Limited Offering Memorandum, to the Actual Knowledge of the Undersigned, neither the Property Owner nor any of its Relevant Entities is currently in default in, or, in the last five (5) years, has ever defaulted to any material extent in, the payment of special taxes or assessments in connection with the Community Facilities District or any other community facilities districts or assessment districts in California that resulted in a foreclosure action being commenced in a court of law against the delinquent Property Owner or Relevant Entity. (7) Except as disclosed in the Preliminary Limited Offering Memorandum, to the Actual Knowledge of the Undersigned, there is no litigation, inquiry, investigation or administrative proceeding by or before any court, regulatory agency, public board or body, pending against the Property Owner or any Relevant Entity (with service of process to the Property Owner or any Relevant Entity having been accomplished), or to the Actual Knowledge of the Undersigned, overtly threatened in writing against the Property Owner or any Relevant Entity, in each case which, if successful, could reasonably be expected to:
EXHIBIT 3 1093
G-4
(i) materially and adversely affect the ability of the Property Owner to own, develop and sell the Property, as described in the Preliminary Limited Offering Memorandum;
(ii) materially and adversely affect the ability of the Property Owner to pay Special Taxes on the Property (to the extent the responsibility of the Property Owner) prior to delinquency;
(iii) materially and adversely affect the ability of the Property Owner to carry on its business as described in the Preliminary Limited Offering Memorandum; (iv) materially adversely affect the ability of the Property Owner to perform its obligations under the Property Owner Continuing Disclosure Certificate; or (v) restrain or enjoin collection of Special Taxes or other sums to be pledged to pay the principal of and interest on the Bonds.
(8) Except as disclosed in the Preliminary Limited Offering Memorandum or in this Certificate:
(i) the Property Owner and, to the Actual Knowledge of the Undersigned, its Relevant Entities, are able to pay their respective bills as they become due; (ii) to the Actual Knowledge of the Undersigned, there are no proceedings pending against the Property Owner (with service of process to the Property Owner having been accomplished) or overtly threatened in writing in which the Property Owner or any of its Relevant Entities may be adjudicated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from any or all of its respective debts or obligations, be granted an extension of time to pay its respective debts or obligations, or be granted a reorganization or readjustment of its respective debts or obligations; and
(iii) Neither the Property Owner nor, to the Actual Knowledge of the Undersigned, any of its Relevant Entities, has filed for bankruptcy or been declared bankrupt in the last 10 years.
(9) As of the date hereof, to the Actual Knowledge of the Undersigned, the information in the sections of the Preliminary Limited Offering Memorandum entitled “OWNERSHIP OF PROPERTY WITHIN THE DISTRICT—[Master Developer] [KB Home] [LGI Homes]” and “CONTINUING DISCLOSURE—[KB Home] [LGI Homes]” concerning the Property Owner and its Relevant Entities, the Property, the Property Owner’s development and financing plans with respect to the Property, and the Property Owner’s contractual arrangements with respect to the Property (but excluding any information cited as coming from a source other than the Property Owner) is true and correct in all material respects, and contains no untrue statement of a material fact and does not omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
EXHIBIT 3 1094
G-5
(10) Except as disclosed in the Preliminary Limited Offering Memorandum, the Property Owner has not submitted an application for, nor received actual notice of, (i) the formation or authorization of any other assessment district or community facilities district that would include any portion of the Property, or (ii) the authorization or issuance of any debt secured by an assessment or another special tax to be levied on any portion of the Property, other than the Special Tax.
(11) Except as set forth in the Preliminary Limited Offering Memorandum, to the Actual Knowledge of the Undersigned, there are no claims, disputes, lawsuits, actions or contingent liabilities of or against the Property Owner or its Relevant Entities, or among, by or between the Property Owner and any contractors working on the development of the Property, which could reasonably be expected to materially and adversely affect:
(i) the ability of the Property Owner to own and develop the Property, as described in the Preliminary Limited Offering Memorandum; (ii) the ability of the Property Owner to pay Special Taxes on the Property (to the extent the responsibility of the Property Owner) prior to delinquency; (iii) the ability of the Property Owner to carry on its business as described in the Preliminary Limited Offering Memorandum; or
(iv) the ability of the Property Owner to perform its obligations under the Property Owner Continuing Disclosure Certificate.
(12) The Property Owner covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Property Owner will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way:
(i) seeks to challenge or overturn the formation of the Community Facilities District;
(ii) seeks to challenge the adoption of the ordinance levying Special Taxes within the Community Facilities District;
(iii) seeks to invalidate the Community Facilities District or any of the Bonds or any refunding obligations relating thereto; or
(iv) seeks to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto.
The foregoing covenant shall not prevent the Property Owner in any way from bringing any other action, suit, proceeding, inquiry or investigation at law or in equity relating to the following:
EXHIBIT 3 1095
G-6
(a) a claim that the Special Tax has not been levied in accordance with the Rate and Method;
(b) the application or use of the Special Taxes levied and collected; or (c) the enforcement of the obligations of the City or the Community Facilities District under the Fiscal Agent Agreement or any agreements among the Property Owner and its Relevant Entities and the City and/or the Community Facilities District or to which the Property Owner or its Relevant Entities is a party or beneficiary. (13) The Property Owner has received a copy of the Rate and Method containing the prepayment formula. The Property Owner acknowledges that any prepayment of the Special Taxes may only be made in accordance with the Rate and Method. (14) The Property Owner intends to comply with the provision of the Mello-Roos Community Facilities Act of 1982, as amended, relating to the Notice of Special Tax described in California Government Code Section 53341.5 in connection with the sale of the Property.
(15) Based upon its current development plans, including, without limitation, its current budget and subject to economic conditions and risks generally inherent in the development of real property including, but not limited to, the risks described in the Preliminary Limited Offering Memorandum under the section entitled “SPECIAL RISK FACTORS,” the Property Owner anticipates that it will have sufficient funds to develop and sell the Property as described in the Preliminary Limited Offering Memorandum, and pay Special Taxes on the Property (to the extent the responsibility of the Property Owner) prior to delinquency.
(16) If between the date of this Certificate and the Closing Date, any event relating to or affecting such Property Owner, its Relevant Entities, or the ownership, development or sale of the Property shall occur of which the undersigned has actual knowledge and which the undersigned believes would cause the information under the sections of the Preliminary Limited Offering Memorandum indicated in Paragraph 9 hereof (and subject to the limitations and exclusions contained in Section 9 of this Certificate) to contain an untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, Property Owner shall notify the City and the Underwriter and if, in the opinion of counsel to the City or the Underwriter, such event requires the preparation and publication of a supplement or amendment to the Preliminary Limited Offering Memorandum, the Property Owner shall reasonably cooperate with the City in the preparation of an amendment or supplement to the Preliminary Limited Offering Memorandum in form and substance satisfactory to counsel to the City and to the Underwriter. (17) As a condition to the issuance of the Bonds, the Property Owner agrees to deliver a bring-down certificate, dated the Closing Date, in substantially the form attached as Appendix H to the Bond Purchase Agreement. If any event related to or affecting the Property Owner, its Relevant Entities or the ownership, development or sale of the Property occurs, as a result of which it is necessary to modify the form of bring-down certificate, the EXHIBIT 3 1096
G-7
Property Owner agrees to deliver at the time of issuance of the Bonds a form of bring-down certificate revised to reflect such event.
(18) The Property Owner acknowledges and agrees that:
(i) in connection with the purchase and sale of the Bonds under the Bond Purchase Agreement, and with the discussions, undertakings and procedures leading up to the consummation of the purchase and sale of the Bonds under the Bond Purchase Agreement, the Underwriter is and has been acting solely as principal and is not acting as the agent or fiduciary of the Property Owner; (ii) the Underwriter has not assumed a fiduciary responsibility in favor of the Property Owner with respect to (a) the offering of the Bonds contemplated hereby or the process leading thereto (whether or not the Underwriter, or any affiliate of the Underwriter, has advised or is currently advising the Property Owner on other matters), or (b) any other obligation to the Property Owner with respect to the offering contemplated by the Bond Purchase Agreement; and (iii) the Property Owner has consulted its own legal, financial and other advisors to the extent it has deemed appropriate in connection with the offering of the Bonds.
EXHIBIT 3 1097
G-8
On behalf of the Property Owner, I have reviewed the contents of this Certificate and consulted with counsel regarding the meaning of its contents. The Property Owner acknowledges and understands that a variety of state and federal laws, including but not limited to the Securities Act of 1933, as amended, and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended, may apply to the Property Owner, and that under some circumstances certification as to the matters set forth in this Certificate, without additional disclosures or other action, may not fully discharge all duties and obligations of the Property Owner under such laws.
The undersigned has executed this Certificate solely in his or her capacity as an authorized officer or representative of the Developer and he or she will have no personal liability, individually or collectively, arising from or relating to this Certificate. Any liability arising from or relating to this Certificate may only be asserted against the Developer.
This Certificate has been executed as of the date first written above.
[EIGHT MILE ROAD INVESTORS, LLC AND
HOLMAN INVESTORS, LLC] [KB HOME NORTH BAY
LLC] [LGI HOMES – CALIFORNIA, LLC]
By:___________________________________________
Authorized Officer
EXHIBIT 3 1098
H-1
APPENDIX H
$_______
CITY OF STOCKTON
COMMUNITY FACILITIES DISTRICT NO. 2019-1
(CANNERY PARK II)
SPECIAL TAX BONDS, SERIES 2024
BRING-DOWN CERTIFICATE OF [EIGHT MILE ROAD INVESTORS, LLC AND HOLMAN INVESTORS, LLC]
[KB HOME NORTH BAY LLC] [LGI HOMES-CALIFORNIA, LLC]
[Closing Date]
City of Stockton
Community Facilities District No. 2019-1 (Cannery Park II) 425 North El Dorado Street
Stockton, California 95202
Oppenheimer & Co. Inc.
135 Main Street, Suite 1700
San Francisco, CA 94105
Reference is made to the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) Special Tax Bonds, Series 2024 (the “Bonds”) and to the Bond Purchase Agreement (the “Bond Purchase Agreement”) to be entered into by and between the City, on behalf of itself and as the legislative body of the City of Stockton Community Facilities District No. 2019-1 (Cannery Park II) (the “Community Facilities District”), and Oppenheimer & Co. Inc., as underwriter (the “Underwriter”).