B. Pursuant to Chapter 1.16, the Director of C ode Enforcement or aut horized designee shall determine whether the seller was in violation of this chapter. If, after the hearing, the 617
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Director of Code Enforcement or authorized designee determines, beyond a preponderance of the evidence, that the seller violated any provision of this chapter, the seized items will be considered forfeited to the City, a nd any enforcement officer may destroy or otherwise dispose of the seized items no sooner than the 95th day after the Director of Code Enforcement or authorized designee's written decision is mailed or personally served on the seller.
C. If the items are perishable, the enforcement o fficer may dispose of the perishable items immediately. If the seller waives his or her right to a hearing, then the nonperishable seized items will be considered forfeited to the C ity and may be immediately destroyed or otherwise disposed of by the enforcement offi cer. If the seller or agent does not appear for the hearing provided for in this chapter, th e nonperishable seized items shall be deemed abandoned and forfeited to the City and may be immediately destroyed or otherwise disposed of by the enforcement officer w ithout further notice to the seller. If the nonperishable seized items are evidence in a crim inal proceeding, those items shall not be returned or destroyed pending release by the appropriate authorities.
D. Pursuant to California Code of Civil Proce dure Section 1094.6, any action to review the decision of the authorized designee shall be commenced no later than the 90th day after the date that the authorized designee's decision is mailed or personally served on the vendor. (Ord. 18 § 2, 2008, RCC § 5.76.060; Ord. 176 § 2, 2020)
§ 5.72.070. Severability.
If any clause, provision, sentence, or paragraph of this chapter, or the application thereof, is deemed to be invalid as to any person, entity, establishment, or circumstance, such invalidity shall not affect the other provisions of the ordina nce codified in this chapter which shall remain in effect.
(Ord. 18 § 2, 2008, RCC § 5.76.070; Ord. 176 § 2, 2020)
§ 5.72.080. Public nuisance declaration.
Any violation of this chapter is declared to be unlawful and a public nuisance. (Ord. 18 § 2, 2008, RCC § 5.76.080; Ord. 176 § 2, 2020)
§ 5.72.090. Incorporation by reference.
Additional remedies, penalties, and procedures are set forth in Chapter 1.16. (Ord. 18 § 2, 2008, RCC § 5.76.090; Ord. 176 § 2, 2020) 618
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CHAPTER 5.76
COMMERCIAL CANNABIS LICENSING
§ 5.76.010. Purpose and Intent.
A. This chapter shall provide for the regulati on and licensing of medicinal and adult-use cannabis businesses throughout the City in conformance with applicable State and local laws and regulations pertaining to medicinal and adult-use cannabis.
B. The City Council finds that it is necessary for the City to adopt local licensing standards for medicinal and adult-use cannabis businesses fo r the purpose of controlling and regulating the cultivation, distribution, transport, stor age, manufacturing, processing, testing and sale of medicinal cannabis and medicinal cannabis products to qualified patients, and adult-use cannabis and adult-use cannabis products to adults 21 years of age and over.
C. The purpose of this chapter is to regulate all commercial cannabis activity in the City, as defined in the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), to the extent authorized by State law and in a manner designed to minimize negative impacts on the City and neighboring uses, and promot e the health, safety, morals, and general welfare of residents and businesses within the City.
(Ord. 188 § 2, 2020)
§ 5.76.020. Relationship to other laws.
A. Except as otherwise specifically provided herein, this chapter incorporates the requirements and procedures set forth in MAUCRSA. In the event of any conflict between the provisions of this chapter and the provisions of MAUCRSA or any other applicable State or local law or regulation, the more restrictive provision shall control.
B. Except as expressly stated herein, cannabis businesses must comply with all other city codes and regulations. Nothing in this chapter shall be construed as permitting a cannabis business to operate at any time in a manner that is in violation of other applicable State and local laws. (Ord. 188 § 2, 2020)
§ 5.76.030. Definitions.
Unless otherwise defined herein, the terms in th is chapter shall have the same meaning as set forth in MAUCRSA and any rules promulgated pursuant thereto. In addition, the following terms shall be defined as follows:
"Cannabis business" means any person engaged in commercial cannabis activity. "Certificate of accreditation" means a certificat e issued by an accrediting body to a licensed testing laboratory, entity, or site to be registered in the State. "City" means Wildomar, California.
"City Manager" means the City Manager of the City or a duly authorized designee. "Distribution site" means a facility where cannabis and cannabis products are stored or inspected by a distributor for the purposes of distribution.
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"Distributor" means a cannabis business that enga ges in the distribution and transportation of cannabis and cannabis products to other cannabis businesses. "Fee, application" means the fee paid to the City concurrently with the submittal of an application for a license (initial or renewal) for the pur pose of recouping the City's reasonable costs associated with the processing, review and approval or denial of the license application. "Fee, regulatory" means the fee paid to the City by a licensee for the purpose of recouping the City's reasonable regulatory costs in connection with the administration and enforcement of this chapter.
"Good cause" for purposes of denying an initial local license issuance, for suspending or revoking a local license, or for denying a local license renewal, means:
1. The applicant or licensee has violated any of the terms, conditions, or provisions of this chapter, State law, regulations and rules promulgated pursuant to State law, applicable local rules and regulations, or special terms or conditions placed upon its conditional use permit, State license, or local license;
2. The premises has been or is proposed to be operated in a manner that adversely affects the public health, safety or welfare or the safety of the immediate neighborhood in which the establishment is or will be located;
3. The applicant or licensee has knowingly made false statements, misrepresentations or material omissions on an application form, renewal form, or any other document submitted to the City;
4. The applicant or licensee, or any owner of the applicant or licensee, operated a cannabis business in violation of this chapter or Chapter 17.315 of the Code;
5. For renewals, suspensions and revocations, th e licensee fails to allow inspection of the security recordings, activity logs, or busin ess records of the licensed premises by City officials.
"Identification card" or "ID card" means a va lid identification card issued pursuant to Section11362.7 et seq., of the California Health and Safety Code. "Identification card holder" or "ID card holder" means an individual who is a qualified patient who has applied for and received a valid ID card pursuant to Article 2.5 of Chapter 6 of Division 10 of the California Health and Safety Code.
"Licensed premises" means a premises for which a local license has been issued pursuant to this chapter.
"Licensee" means a person who has been issued a local license pursuant to this chapter. "Limited access area" means a building, room or other area that is part of the licensed premises where cannabis is grown, cultivated, stored, wei ghed, displayed, packaged, or sold to other cannabis businesses with limited access to only authorized personnel. "Local license" means a license granted by the local licensing authority, pursuant to this chapter. "Local licensing authority" means the City Manager.
"Manufacturing site" means a premises where a manufacturer engages in the manufacture of cannabis products.
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"Medicinal and Adult-Use Cannabis Regulati on and Safety Act" or "MAUCRSA" means Division 10 of the California Business and Professions Code. "Medicinal cannabis patient" means both a qualified patient without an identification card and an ID card holder.
"Owner" means any of the following:
1. A person with an aggregate ownership interest of 10% or more in the person applying for a license or a licensee, unless the interest is solely a security, lien, or encumbrance.
2. The chief executive officer of a nonprofit or other entity.
3. A member of the board of directors of a nonprofit.
4. An individual who will be participating in th e direction, control, or management of the person applying for a license.
"Physician," as used in this chapter, shall mean an individual who possesses a license in good standing to practice medicine or osteopathy from the State of California. "Primary caregiver" has the meaning set forth in Section 11362.7(d) of the California Health and Safety Code.
"Qualified patient" has the meaning set forth in Section 11362.7(f) of the California Health and Safety Code.
"State law(s)" means and includes Californi a Health and Safety Code Section11362.5 (Compassionate Use Act of1996); California Hea lth and Safety Code Sections 11362.7 to 11362.85 (Medicinal Marijuana Program Act); the MAUCRSA, and all other applicable laws and regulations of the State of California.
"State license" means a State license issued un der MAUCRSA, and includes both an A-license and an M-license, as well as a testing laboratory license. "State licensing authority" means the State agency responsible for the issuance, renewal, or reinstatement of a State license, or the State agency authorized to take disciplinary action against a State licensee.
(Ord. 188 § 2, 2020)
§ 5.76.040. Local license in addition to business license or other permit.
The local license required by this chapter shall be in addition and supplemental to any other business registration or any permit required by any ordinance of the City. (Ord. 188 § 2, 2020)
§ 5.76.050. Local license required.
A. It is unlawful to operate any cannabis busin ess in the City without first having obtained a local license under this chapter.
B. The City may grant a local license prior to the applicant having obtained a State license. A cannabis business must possess the requisite St ate and local licenses prior to receiving a certificate of occupancy from the City.
(Ord. 188 § 2, 2020)
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§ 5.76.060. Local license application process.
A. All applications for local licenses required pursuant to this chapter shall be made upon current forms prescribed by the local licensing authority. All applications for local licenses must be accompanied by the application fee as established by resolution of the City Council as amended from time to time.
B. An applicant shall file with the local licen sing authority the following at the time of application for a local license:
1. An operating plan for the proposed cannabis business including the following information:
a. A general description of the types of products and services to be provided by the facility;
b. A floor plan designating all interior dimensions of the licensed premises and the layout of the cannabis business, including all limited access areas, areas of ingress and egress, and all security cameras. Such floor plan shall also show the principal uses of the floor area depicted therein. For cultivation sites, such floor plan shall distinguish all dimensions of areas in which plants are located; c. For a retailer, a statement confirming whether delivery service of cannabis to any location outside the premises will be provided and the extent of such service, and in the event delivery is provided, a detailed delivery plan detailing how the retailer will comply with all requirement s of this chapter, MAUCRSA, and any other applicable State or local laws.
2. Authorization for the local licensing authority to seek verification of the information contained with-in the application.
3. Proof of the nature of the cannabis business's organizational status, such as articles of incorporation, by-laws, organizational minutes, partnership agreements, or such other documentation acceptable to the City.
4. Proof that the applicant is, or will be, entitled to possession of the premises for which application is made. Evidence of lawful possession consists of properly executed deeds of trust, leases, evidence of ownership of the licensed premises, or other written documents acceptable to the local licensing authority.
5. The applicant shall provide any additiona l information that the local licensing authority may request to process and fully investigate the application. Failure to provide such additional information may result in denial of the application.
C. If the application is incomplete, the appli cant shall have an opportunity to cure the incompleteness within 30 calendar days of written notice of incompleteness by the local licensing authority.
D. The local licensing authority shall issue a license to any applicant who has submitted a complete application and paid the applicati on fee unless the local licensing authority finds that good cause exists to deny the license.
E. The applicant shall pay to the City the re gulatory licensing fee, if any, established by 622
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resolution of the City Council. The initial regulatory licensing fee shall be due in two equal installments upon the issuance of a certifi cate of occupancy for the cannabis business premises and six months thereafter, or upon the expiration of the initial license term, whichever occurs first. The initial regulatory licensing fee shall be pro-rated so that no regulatory license fee is owed for the portion of the license term occurring prior to receipt of a certificate of occupancy. Subsequent regulatory licensing fees shall be paid in full every two years concurrently with the renewal of the license.
F. A local license issued pursuant to this chapter shall specify the date of issuance, the period of licensure, the name of the licensee, the a ddress of the licensed premises, and the nature of the cannabis business licensed. All local licenses are valid for two years. (Ord. 188 § 2, 2020)
§ 5.76.070. Conditions of approval, administrative rules.
A. The local licensing authority may place conditio ns upon the approval of any local license which are, in the opinion of the local licensing authority, reasonably related to the protection of the health, safety and welfare of the neighborhood in which the proposed licensed premises is to be located and of the general public.
B. The local licensing authority is authorized to make rules, policies and procedures consistent with the intent and spirit of this chapter concerning the applications, the application process, the information required of applicants, the a pplication procedures, and the administration and procedures to be used and followed in the application process. (Ord. 188 § 2, 2020)
§ 5.76.080. Changes and modifications of local licenses.
In addition to any applicable requirements in Chapter 17.315 of this Code, the following requirements apply for transfers of or changes to the ownership of a licensee, modifications to a licensed premises, and changes of location of a cannabis business.
A. Change of Ownership. Subsequent to the issuance of a local license, the licensee shall report any transfer of ownership in the cannabis business to the local licensing authority on forms prescribed by the local licensing authority and pay the application fee established by resolution of the City Council.
1. A change of ownership that solely involv es a previously approved owner no longer being an owner of the cannabis business sh all be reported to the local licensing authority within 30 calendar days of the change. The City will remove a previously approved owner from a license only if notarized statements are submitted by all approved owners consenting to the change, or the change is mandated by order of a court of competent jurisdiction.
2. A change in ownership that involves adding a new owner to the previously approved ownership must be approved by the local licensing authority in advance. The local licensing authority shall approve the cha nge in ownership unless there is good cause to deny the change. All owners must s ubmit notarized statements agreeing to the addition of a new owner to the business.
B. Modification of Licensed Premises. A licensee shall not make physical changes, alterations, or modifications to the licensed premises that materially or substantially alters 623
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the licensed premises from the plans approved by the local licensing authority without the prior written approval of the local licensing authority. Material changes include, but are not limited to: an increase or decrease in the total square footage of the licensed premises or the addition, sealing off, or relocation of a wall, common entryway, doorway, or other means of public ingress and/or egress. Applications for modifications of licensed premises shall be made on forms prescribed by the local licensing authority and shall be accompanied by the application fee established by resolution of th e City Council. The local licensing authority shall approve the proposed modification if it m eets all requirements of this chapter and all other applicable State laws and City codes and ordinances, and will not present a threat to the public health, safety or welfare.
C. Change of Location.
1. A licensee may apply to the local licensing authority to change the location previously approved for such local license to any othe r place in the City, but it is unlawful to engage in any commercial cannabis activity at any such place or location until express permission to do so is granted by local licensing authority, the City has issued a conditional use permit to the licensee for the new location, and a certificate of occupancy has been issued for the new location. Applications for changes of location shall be made on forms prescribed by the local licensing authority and be accompanied by the application fee established by resolution of the City Council.
2. In permitting a change of location, the local licensing authority may change any existing conditions of approval on the licen se and/or add new conditions of approval as determined appropriate by the local licensing authority. (Ord. 188 § 2, 2020)
§ 5.76.090. Renewal of local license.
A. A cannabis business that desires to renew its license shall apply for the renewal no less than 30 calendar days prior to the local license's expiration date. If the cannabis business files a renewal application within 30 calendar days prior to expiration, the cannabis business must provide a written explanation detailing the circumstances surroun ding the late filing. The local licensing authority may accept or reject su ch late filing in its discretion. The local licensing authority may elect to administratively continue a local license past its expiration date, provided that the licensee has submitted a renewal application that is pending final action.
B. An application for renewal shall be subm itted on forms provided by the local licensing authority, accompanied by the application fee established by resolution of the City Council.
The following information shall be submitted as a part of the renewal application:
1. Proof that no changes to the ownership of the licensee has occurred since last approved by the local licensing authority.
2. Proof that the licensee is still entitled to the possession and use of the licensed premises.
3. Any other information that the local licensing authority deems necessary to determine whether to renew the local license.
C. The local licensing authority shall renew a local license if the licensee has submitted a 624
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complete application and paid the application fee, unless the local licensing authority finds that good cause exists to deny the license renewal. Notwithstanding the foregoing, the local licensing authority in its discretion may elect not to renew any local license if it determines that the licensed premises has not been u sed for a cannabis business, without reasonable cause as determined by the local licensing authority, during the term of the license.
D. Unless administratively continued pursuant to subsection A, a local license is immediately invalid upon expiration and th e cannabis business shall cease operations. If a local license expires, the local licensing authority may approve a renewal of the expired license at any time up to three months from the expiration date of the license. Afte r the license has been expired for three months, the license may not be renewed by the local licensing authority, and the holder of the expired license must apply for and obtain a new cannabis license to resume operations.
(Ord. 188 § 2, 2020)
§ 5.76.100. Appeal of decision on local license.
Any applicant may appeal the local licensing authority's approval, conditional approval, or denial of an initial local license, renewal thereof, or a change to the license requested under Section
5.76.080, or a revocation or suspension of the license under Section 5.76.210. Such appeal shall be filed with the City Clerk within 10 calendar days of the date of the decision of the local licensing authority and must state the basis for the appeal. The City Clerk will give the appellant written notice of the date, time and place of the a ppeal hearing. The City Council shall hear the appeal de novo and shall not be limited by the rules of evidence. The council may affirm, amend or reverse the decision of the local licensing authority. (Ord. 188 § 2, 2020)
§ 5.76.110. Cannabis business operational requirements.
All cannabis business must comply with the requirements set forth in this section.
A. General Obligation to Operate in Complia nce. A cannabis business shall operate in compliance with all applicable State and lo cal laws and regulations governing cannabis businesses.
B. General Obligation to Pay Taxes. A cannabi s business must pay all applicable taxes pursuant to Federal, State, and local law, including, but not limited to, State and local sales and use taxes and State excise taxes.
C. General Obligation for Compliant Facilities. The licensed premises shall fully comply with all applicable rules, regulations, and laws including, but not limited to, building and safety codes, and the Americans with Disabilities Act.
D. Age Requirement. A cannabis business shall not a llow an individual less than 21 years of age to work within the licensed premises or handle cannabis and cannabis products.
E. Age Restrictions. A cannabis business may not permit an individual less than 21 years of age to enter, or be within, its licensed premises, except that a cannabis business with an M- license from the State may allow persons 18 y ears of age or older within the licensed premises if they are an ID card holder or qualified patient with physician's recommendation from a licensed physician.
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F. Secure Storage of Product. Cannabis a nd cannabis products possessed by a cannabis business shall be kept and stored in a secured manner at all times.
G. Cannabis Consumption on Licensed Premises. Smoking, vaporizing, ingesting, or otherwise consuming cannabis and cannabis products at a licensed premises is prohibited. "Licensed premises" as used in this subsection includes the actual building, as well as any accessory structures, common areas and parking areas. A sign shall be posted at each entrance to a licensed premises that clearly and legibly st ates, "Smoking, vaporizing, ingesting, or otherwise consuming cannabis or cannabis products on these premises or in their vicinity is prohibited and a violation of the Wildomar Municipal Code." H. Prohibition on Alcohol and Tobacco Sales, Distribution, or Consumption on Licensed Premises. A cannabis business shall not sell, pr ovide, store, or distribute any alcoholic beverages or tobacco products, or allow such products to be consumed on the licensed premises.
I. On-Site Signage. On-site signage for a cannabis business that is viewable from the exterior of the cannabis business shall comply with all local signage laws applicable to the licensed premises, including Chapters 17.251 and 17.254 of this Code. Signage may not be designed to appeal to children, or contain any fa lse or misleading statements, or make any misrepresentations.
J. Advertising. A cannabis business shall not a dvertise in a manner intended to encourage persons under 21 years of age to consume cannabis or cannabis products. It is unlawful for any cannabis business to make any claims that a product is safe because it is tested. All advertisements, including off-site advertisi ng signs, shall comply with Chapter 15 of MAUCRSA.
K. Display of License. A cannabis business shall display a copy of its local license issued pursuant to this chapter in a conspicuous pl ace at or near the entrance to the licensed premises.
L. No Physician Evaluations on Licensed Prem ises. A cannabis business shall not permit a physician to evaluate potential medicinal ca nnabis patients or to provide a physician's recommendation for medicinal cannabis within its licensed premises. Cannabis businesses shall not offer or provide any form of remuneration to a physician who provides physician's recommendations for medicinal cannabis.
M. Community Relations Designee. A cannabis business must provide the City with the name, phone number, facsimile number, and email a ddress of an on-site community relations representative or staff member or other representative whom the City can contact regarding operating concerns associated with the ca nnabis business. The cannabis business shall report any change in their community relations designee to the City within 10 calendar days.
N. Accurate Weights and Measures. Scales and weighing mechanisms used by a cannabis business to weigh non-waste products must be ab le to weigh to within 1/100th of a gram, shall be maintained in good working order and shall be subject to annual inspection by either a Riverside County Agricultural Commissioner's office weights and measures official or a licensed scale company.
O. Waste Disposal.
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1. Chemical, Dangerous and Hazardous Waste. Disposal of chemical, dangerous or hazardous waste must be conducted in a manne r consistent with Federal, State and local laws, regulations, rules or other re quirements. This may include, but is not limited to, the disposal of all pesticide or other chemicals used in the cultivation process, certain solvents or other chemi cals used in the production of cannabis concentrate.
2. Cannabis Waste. Cannabis waste shall be stored, managed, and disposed of in accordance with Section 5054 (Destruction of Cannabis Goods Prior to Disposal) of Title 16, Division 42 of th e California Code of Regulations, as that section may be amended or renumbered from time to time.
P. General Sanitary Requirements. A cannabis business must ensure that its licensed premises are maintained in a sanitary manner and activities on its licensed premises are conducted in a sanitary manner.
1. All facilities of a cannabis business must have adequate and sufficient access to bathrooms and hand-washing facilities with running water at a suitable temperature.
2. Hand-washing facilities shall be located where good sanitary practices require workers to wash or sanitize their hands, and provi de effective hand-cleaning and sanitizing preparations and sanitary towel service or suitable drying devices.
3. All workers that engage in the preparati on or dispensing of edible cannabis products must comply with the provisions of all re levant State and local laws regarding the preparation, distribution, and sale of food.
Q. Security Requirements. The licensed premises of a cannabis business must comply with all of the following security requirements:
1. Video Surveillance. The licensed premises must be equipped with a video surveillance system that meets all of the requirements set forth in this subsection. a. Security cameras and digital storage of r ecordings shall be maintained in good condition and used in an on-going manner, 24 hours per day, seven days per week.
b. The security system must maintain at le ast 90 days of digitally recorded video for each security camera in the licensed premises. Security footage should be stored in an MPEG4, MJPEG, H.264, or another format approved by the local licensing authority in writing.
c. Security cameras must provide adequate and sufficient coverage for the facility, which must include, but need to be lim ited to, all limited access areas, all areas of ingress and egress, point of sale, the public areas, storage areas, and any other areas as required by this chapter and the MAUCRSA.
d. The video surveillance system must be equipped with a failure notification system that provides prompt notification to the manager of record of the licensed premises of the cannabis business of any surveillance interruption or complete failure of the surveillance system that lasts longer than 15 minutes. e. The video surveillance system shall have sufficient battery backup to support a 627
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minimum of 15 minutes of recording in the event of a power outage.
2. Alarm System. The licensed premises shall have an audible interior and exterior security alarm system installed on all perimeter entry points and perimeter windows, operated, and monitored by a security company licensed by the Department of Consumer Affairs, Bureau of Security and Investigative Services.
3. Signage Requirement. The licensed premises must comply with the following signage requirements.
a. A sign shall be posted in a conspicuous place near each point of public access which shall be not less than 12 inches wide and 12 inches long, composed of letters not less than one inch in he ight, stating "All Activities Monitored by Video Camera."
b. Limited access areas shall be clearly identified by the posting of a sign which shall be not less than 12 inches wide and 12 inches long, composed of letters not less than one-half inch in height, which shall state, "Limited Access Area— Authorized Personnel Only."
4. Lighting. The business entrance(s) and all window areas shall be illuminated during evening hours. The cannabis business shall co mply with the City's lighting standards regarding fixture type, wattage, illumination levels, and shielding.
5. Commercial-Grade Locks. All points of ingress and egress to a licensed premises shall ensure the use of commercial-grade, nonresidential door locks or window locks.
6. Notification of Local Licensing Authority and Law Enforcement. A cannabis business shall notify the local licensing authority and the appropriate law enforcement authorities within twenty-four hours after discovering any of the following:
a. Significant discrepancies identified during inventory; b. Diversion, theft, loss, or any criminal activity involving the retailer or any employee or agent of the retailer;
c. The loss or unauthorized alteration of records related to cannabis, cannabis patients, primary caregivers, or retailer employees or agents; or d. Any other breach of security.
R. Subletting Prohibited. Licensees are not author ized to sublet any portion of a licensed premises for any purpose, unless all necessary a pplications to modify the existing licensed premises to accomplish any subletting have been approved by the local licensing authority.
S. Recordkeeping. Cannabis businesses shall keep and maintain all records specified in Chapter 16 of the MAUCRSA and shall make the same available for inspection and examination of the local licensing authority or its duly authorized representatives during standard business hours of the licensed facility or at any other reasonable time. Cannabis businesses are required to exercise due diligence in preserving and maintaining all required records.
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§ 5.76.120. Retailer operational requirements.
In addition to the operation requirements in Section 5.76.110, a retailer must comply with the requirements set forth in this section.
A. Limited Hours of Operation. A retailer may only be open to the public and engage in sales between the hours of 8:00 a.m. and 10:00 p.m.
B. Window Displays. Cannabis, cannabis products and cannabis paraphernalia shall not be placed in a window display or otherwise placed in a manner primarily intended for individuals outside of the premises to view the products.
C. Age Restricted Entry. A retailer may not permit an individual less than 21 years of age into the licensed premises, except a retailer with an M-license from the State may permit an individual aged 18 years or older into the licensed premises if the retailer verifies the individual is an ID card holder or qualified patient with a physician's recommendation.
D. Cannabis Paraphernalia Sales. Dispensaries may sell or otherwise provide equipment, supplies, and paraphernalia used to consume cannabis and cannabis products.
E. Electronic Point-of-Sale System Required. Disp ensaries must have an electronic point of sale system. The electronic point of sale system must be capable of producing an electronic or automatic paper record for all transactions associated with any product sold, rented, or otherwise provided to the customer.
F. No Sales of Expired Product. A retailer ma y not sell any expired products, cannabis or cannabis products. A retailer shall not alter, edit, or adjust in any manner an expiration date on any item or product once affixed by its manufacturer.
G. Handling of Edible Cannabis Products. A re tailer that possesses edible cannabis products shall comply with the provisions of all releva nt State and local laws regarding the storage, handling, and sale of food.
H. Delivery of Cannabis and Cannabis Products. A retailer that provides delivery service shall comply with the following requirements:
1. The retailer shall not delivery cannabis or cannabis products to any location outside of California or to any location within California where the delivery of cannabis or cannabis products has been prohibited by the City or County.
2. The delivery service must be approved by the local licensing authority as a part of the licensing process. The deliveries must be conducted in accordance with any relevant State laws, this Code, any applicable local laws in the delivery location, and any conditions imposed upon the license.
3. The retailer must keep in place standard ope rating procedures that ensure the safety and security of those indivi duals engaging in delivery a nd the and security of all cannabis being delivered, including procedures to prevent diversion.
4. A retailer may only deliver cannabis to a specific street address requested by the purchaser. Delivery to parks, schools or any other public facilities is prohibited. 629
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5. Upon arrival at the delivery address and prior to transferring any cannabis or cannabis products, the delivery person must verify and confirm that the identity of the recipient is the same as the person who requested the delivery and that the person is either 21 years of age or a qualified patient or primary caregiver.
6. A retailer shall report to the local licensi ng authority and local law enforcement any vehicle accidents, diversions, losses, or othe r reportable incidents such as thefts or suspicious activity, that occur during transportation and delivery, within 24 hours.
7. The delivery shall keep a delivery manifest that includes the following information:
a. All cannabis that will be transported, accurately inventoried; b. Departure date and approximate time of departure;
c. Arrival date and approximate time of arrival;
d. Name, address, local license number and CUP number of the originating cannabis business;
e. Name and address of the individual requesting the delivery; f. Delivery vehicle make, model, and license plate number; and g. Name and signature of the individual transporting the cannabis.
8. Sale of Live Plants. A retailer may sell and offer for sale seeds and immature cannabis plants, but shall not sell or offer for sale live mature cannabis plants. The retailer may provide light and water to immature cannabis plants being offered for sale but may not engage in any other cultivation activity unless the retailer is licensed and permitted by the State and the City to engage in ca nnabis cultivation. For the purposes of this provision, an immature cannabis plant is defined as a nonflowering cannabis plant that is shorter and narrower than 18 inches.
(Ord. 188 § 2, 2020)
§ 5.76.130. Manufacturing site operational requirements.
In addition to the operational requirements in Section 5.76.110, manufacturers must comply with the requirements set forth in this section.
A. Edible Cannabis Products. Edible cannabis pr oducts shall be manufactured, packaged and labeled in compliance with MAUCRSA and an y implementing regulations adopted by the State.
1. Edible cannabis products must be indivi dually packaged and ready for sale by the manufacturer prior to sale or transfer to another cannabis business.
2. Any person that is involved in the manufacture of edible cannabis products must be a State certified food handler. The valid cer tificate number of such person must be on record at the manufacturing site where that individual produces edible cannabis products.
3. Any facility used by a cannabis business to manufacture edible cannabis products shall be constructed, operated and inspected in accordance with the applicable 630
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building code and applicable food safety requirements.
4. A cannabis business that manufactures edible cannabis products must comply with the provisions of all relevant State and local la ws regarding the preparation, distribution, and sale of food; which shall include, but not be limited to, hand-washing requirements, use of gloves for packaging, and policies prohibiting individuals suffering from symptoms associated with communicable diseases or infections from engaging the production of edible cannabis products.
B. Expiration Date. A cannabis business engaged in the manufacture of cannabis products, including an edible cannabis product, that is perishable shall assign an expiration-date or use-by date, whichever is a ppropriate, to all perishable cannabis products. Once an expiration date or use-by date is assigned to cannabis products , it shall be unlawful for a person to alter that date or affix a new label with a later use-by or expiration date.
C. Extraction Requirements.
1. A manufacturer engaged in extraction may only engage in type of extraction approved by the local licensing authority in its application for a local license. The licensee shall not make any modifications to the met hod of extraction without first obtaining a modification of its local license.
2. Within the limitations set forth by State law, a cannabis business that extracts cannabis or produces cannabis concentrate using a solvent must use a professional-grade, closed-loop extraction system capable of r ecovering the solvent used and must only use a solvent that is permissible under the MAUCRSA and the manufacturer's State license.
(Ord. 188 § 2, 2020)
§ 5.76.140. Cultivation operational requirements.
In addition to the operational requirements in Section 5.76.110, a cultivator must comply with the requirements set forth in this section.
A. Cultivators must comply with the Federal Worker Protection Standard (40 CFR 170).
B. The cultivation of cannabis must be conducted in accordance with all applicable Federal, State, and local laws and regulations governing the use of pesticides.
C. The use of pesticides must be recorded in a log in accordance with 16 CCR Section 1970.
D. The cultivation of cannabis shall be conducted in a secure manner and shall not be visible from a public right-of-way. As used in this subsection D, the term "visible" means capable of being seen without visual aid by an individual of normal acuity.
E. A licensee may not distribute, sell, dispen se, or administer cannabis on the licensed premises of a cultivation site except fo r as authorized by the MAUCRSA and other applicable State law.
(Ord. 188 § 2, 2020)
§ 5.76.150. Distribution operational requirements.
In addition to the operational re quirements in Section 5.76.110, distributors shall comply with 631
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the requirements of this section.
A. Quality Assurance and Testing.
1. Prior to distribution, the distributor sh all inspect cannabis for quality assurance as required by MAUCRSA and to ensure the labeling and packaging of the cannabis and cannabis products conforms to the requirements of this chapter and MAUCRSA.
2. Distributors shall ensure that cannabis and cannabis products in its custody are tested by a licensed testing laboratory in accordan ce with MAUCRSA prior to distributing the cannabis and cannabis products to a retailer.
B. Transportation.
1. A distributor may not transport cannabis to or from another cannabis business outside the State of California.
2. An individual may only transport cannabis on behalf of a distributor if the individual:
a. Is an employee of the distributor and is listed on the distributor's employee list; b. Possesses a copy of the distributor's local license; and c. Possesses a copy of a transportation manifest that meets all the requirements of MAUCRSA and subsection (B)(3).
3. Transportation Manifest.
a. A cannabis business must create a trans portation manifest in accordance with this chapter for every transport and de livery of cannabis. A cannabis business must ensure that a copy of the appropria te transportation manifest accompanies every transport and delivery of cannabi s and is kept for retention by the originating cannabis business in comp liance with Section 5037 (Record Retention) of Title 16, Division 42 of the California Code of Regulations. b. If a cannabis businesses makes multiple pick-ups or deliveries during a single trip, then a separate transportation manifest shall be required for each pick-up or delivery.
c. A transportation manifest will be deemed sufficient if it accurately reflects:
i. All cannabis that will be transpor ted to the address reflected on the manifest, accurately inventoried to include the weight of any raw cannabis or cannabis concentrate and the number of individual cannabis products; ii. Departure date and approximate time of departure;
iii. Arrival date and approximate time of arrival;
iv. Name, address, local license numbe r and CUP number (or, for cannabis businesses outside of Cathedral City, a similar number issued by the cannabis business's local jurisdiction) of the originating cannabis business; v. Name, address, local license and CUP number (or, for cannabis businesses outside of Cathedral City, a similar number issued by the cannabis 632
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business's local jurisdiction) of the receiving cannabis business; vi. Delivery vehicle make, model, and license plate number; and vii. Name and signature of the individual transporting the cannabis.
4. A cannabis business with a local license may only transport cannabis between licensed premises by way of motor vehicle, unl ess the transport is between two licensed premises that are within the same building or at the same street address.
5. A cannabis business with a local license shall transport cannabis in a manner that is secure and not visible from outside the vehicle.
6. An employee transporting cannabis pursuant to this chapter must take a direct route from the distributor to the destination of the other cannabis business(es) and may not make any stops other than those necessary in the ordinary course of business.
C. Bonding. Transporters shall comply with app licable State laws and regulations, if any, requiring that they be bonded and insured.
D. Preparation of Cannabis and Cannabis Products for Transportation.
1. All cannabis and cannabis products must be appropriately and completely tracked in a cannabis business's inventory tracking syst em prior to transportation to another cannabis business. This must include veri fying and documenting the weight of any raw cannabis or cannabis concentrate and the number of individual cannabis products being transported.
2. Preparations for the transport of cannabis and cannabis products must be conducted in a limited access area on camera.
E. Receiving Cannabis and Cannabis Products.
1. A distributor may not receive cannabis or cannabis products unless accompanied by a transportation manifest that meets all of the requirements set forth in subsection (B)(3). The distributor must retain copies of transportation manifests associated with all deliveries of cannabis.
2. Immediately upon receipt, all cannabis and ca nnabis products must be appropriately and completely tracked in the distributor 's inventory tracking system. This must include verifying and documenting the we ight of any raw cannabis or cannabis concentrate and the number of individual cannabis products being transported.
F. Perishable Cannabis Products. A cannabis bus iness must provide adequate refrigeration when engaged in the transportation of perishable cannabis products. (Ord. 188 § 2, 2020)
§ 5.76.160. Testing laboratory operation requirements.
In addition to the operational requirements in Section 5.76.110, a testing laboratory shall comply with the requirements of this section.
A. No Other Ownership. An owner of a testing laboratory shall not have an ownership or other direct financial interest in any other commercial cannabis business license type. 633
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B. Accreditation. A testing laboratory shall obtain and maintain ISO/IEC 17025 accreditation.
C. Operating Procedures. A testing laboratory sh all adopt and adhere to standard operating procedures to ensure the reporting of accurate test results, including, but not limited to, equipment, calibration, and me thodology standards, that are consistent with its ISO/IEC 17025 accreditation.
1. A testing laboratory shall obtain samples of cannabis and cannabis products for testing in accordance with a statistically valid me thod designed to ensure that a sample is representative of the whole. Sampling methods should have at least a 95% confidence rate.
2. A testing laboratory shall destroy and safely dispose of the remains of any samples of cannabis or cannabis products tested upon completion of the analysis and the expiration of any retention time pursuant its standard operating procedures.
3. A testing laboratory shall maintain all testing results as a part of their respective business records and must keep such records in compliance with Section 5037 (Record Retention) of Title 16, Division 42 of the California Code of Regulations. (Ord. 188 § 2, 2020)
§ 5.76.170. Packaging and labeling.
A. Compliance with State Law. All packaging and labeling of cannabis and cannabis products by a cannabis business must, at a minimum meet the requirements of Chapter 12 of MAUCRSA and any implementing regulations, as the same may be amended from time to time or superseded or replaced by subsequent State legislation or by any State department or division.
B. Tamper-Evident, Child-Resistant Packaging Required. Prior to delivery or sale at a retailer to a purchaser, cannabis and cannabis products sh all be labeled and placed in a resealable, tamper-evident, child-resistant package and shall include a unique identifier for the purposes of identifying and tracking cannabis and cannabis products.
C. Cannot Be Attractive to Children. Cannabis packaging and labeling shall not be designed to appeal to children, including, but not limited to, cartoon characters or similar images.
D. State-Mandated Warnings and Information. All cannabis a nd cannabis product labels and inserts shall include the State-mandated warni ngs and information contained in Business and Professions Code Section 26120(c).
(Ord. 188 § 2, 2020)
§ 5.76.180. Visitor requirements.
A. Visitors. Any individual perm itted to enter a limited access area who is not an owner or employee of the cannabis business is a visitor for the purposes of this section.
Notwithstanding the foregoing, State and local employees, or their official designees, shall not be considered a visitor provided the individual is on the licensed premises for purposes of official government business.
B. Visitors Identification and Record Requirements. Prior to permitting a visitor into a limited access area, a cannabis business must check th e individual's valid government issued 634
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identification. The visitor shall be required to sign the cannabis business's visitor log, which must include the individual's name, date of entry, and purpose for entry.
C. Visitors Must Be at Least 21 Years of Age. A cannabis business may not permit a visitor who is less than 21 years of age to enter a limited access area.
D. Visitors Prohibited Conduct. A visitor shall not be permitted to engage in the cultivation, preparation, processing, manufacturing, packag ing, labeling, trans portation, or sale of cannabis.
(Ord. 188 § 2, 2020)
§ 5.76.190. Limitations on City's liability.
To the fullest extent permitted by law, the City shall not assume any liability whatsoever, with respect to approving any local license pursuant to this chapter or the operation of any cannabis business approved for such local license pursuant to this chapter. As a condition of approval a local license granted under this chapter, the applicant or its legal representative shall:
A. Indemnify and hold the City harmless from any and all claims, damages, legal or enforcement actions, including, but not limited to, any actions or claims associated with violation of Federal law associated with the operation of the cannabis business and delivery of cannabis as provided in this chapter; and
B. Maintain insurance in the amounts and of the types that are acceptable to the City pursuant to guidelines and policies set forth by the local licensing authority; and C. Name the City as an additionally insured on all City-required insurance policies; and D. Defend, at its sole expense, any action against the City, its agents, officers, and employees related to the approval of a local license or the operation of the cannabis business; and E. Reimburse the City for any court costs and atto rney fees that the City may be required to pay as a result of any legal challenge (or Fede ral enforcement action) related to the City's approval of a local license or conditional use perm it. The City may, at its sole discretion, participate at its own expense in the defense of any such action, but such participation shall not relieve the operator of its obligation hereunder.
(Ord. 188 § 2, 2020)
§ 5.76.200. Inspections.
A. Recordings made by security cameras at any cannabis business shall be made immediately available to the local licensing authority u pon verbal request for law or regulatory enforcement and criminal inv estigation purposes. Such record ings shall be considered confidential and shall not be released to the public pursuant to Government Code Section6254(f) without the consent of the licensee.
B. The local licensing authority shall have the right to enter all cannabis businesses from time to time unannounced for the purpose of making reasonable inspections to observe and enforce compliance with this ch apter. Such inspections shall be limited to observing the licensed premises for purposes of determining whether the cannabis business is being operated or maintained in compliance with this Code, State law, and other applicable laws and regulations. Any cannabis business licensed pursuant to this chapter may be required 635
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to demonstrate, upon demand by the local licensing authority that the source and quantity of any cannabis or cannabis products found upon th e licensed premises is in full compliance with any applicable local or State law or regulation.
C. The local licensing authority shall have the ri ght to inspect records of medicinal cannabis patients and primary caregivers that have made purchases of medicinal cannabis or medicinal cannabis products from a retailer for the sole purpose of determining whether any and all such individuals are qualified to make such purchases. Such inspections of records shall not be used for any other purposes, nor shall the records be removed off-site by the City without a court order.
D. The local licensing authority may delegate an act required to be performed pursuant to this section to any code enforcement officer or official of the City, including, without limitation, the Chief of Police, the Fire Chief, the Build ing Official, the Finance Director, the City Attorney, or any designee of such officers or officials.
E. Applicants and licensees must cooperate with the local licensing authority and designees who are conducting inspections or investigations relevant to the enforcement of laws and regulations related to this chapter.
(Ord. 188 § 2, 2020)
§ 5.76.210. Enforcement—Suspension and revocation of license.
A. The provisions of this chapter may be enfo rced by the local licensing authority by any means provided for in Chapter 1.16 of this Code in addition to any and all other remedies, civil, equitable or criminal, afforded to the City under the law. The operation of a cannabis business in violation of this chapter or any conditions of approval placed on a licensee's local license is hereby deemed to be a public nuisance.
B. In addition to any other remedies available to the City under the law, a license issued under the terms of this chapter may be suspended or revoked by the local licensing authority if he or she concludes any of the following:
1. The cannabis business or licensee has violated any of the requirements of this chapter, Chapter 17.315, the applicable conditional use permit, or the applicable development agreement.
2. The cannabis business is being operated in a manner which constitutes a nuisance.
3. The cannabis business is being operated in a manner which conflicts with or violates State laws.
4. A licensee's conditional use permit or deve lopment agreement issued pursuant to Chapter 17.315 of this Code has been terminated or revoked.
5. A licensee's State license has been suspended, terminated, or revoked.
C. A license may be suspended or revoked by the local licensing authority as follows:
1. For a first violation within a 24-month period, the license may be suspended for 10 days.
2. For a second violation within a 24-month period, the license may be suspended for 30 636
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days.
3. For a third violation within a 24-month period, the license may be suspended for 60 days.
4. For a fourth or subsequent violation within a 24-month period, the license may be revoked, and no new license may be issued to any owner of the subject cannabis business for a period of at least one year.
D. Notwithstanding subsection B of this section, an y suspension of a local license that is due to the suspension of the licensee 's State license shall be no shorter than the length of time the State license is suspended.
(Ord. 188 § 2, 2020)
637
CITY OF WILDOMAR
CITY COUNCIL REGULAR MEETING
GENERAL BUSINESS
Agenda Staff Report # 3.7
Meeting Date: January 14, 2026
SUBJECT:
Resolution Authorizing Issuance of Special Tax Bonds, Series 2026 for Community Facilities District No. 2023-1 (Avalino) SUBMITTED BY:
Adam Jantz, Finance Manager
PREPARED BY:
Adam Jantz, Finance Manager
ACTION:
1. Adopt a Resolution entitled:
RESOLUTION NO. 2026 - ____
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WILDOMAR, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO) OF THE CITY OF WILDOMAR AUTHORIZING THE ISSUANCE OF ITS SPECIAL TAX BONDS, SERIES 2026 IN A PRINCIPAL AMOUNT NOT TO EXCEED TWELVE MILLION DOLLARS ($12,000,000) AND APPROVING CERTAIN DOCUMENTS AND
TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH
2. Authorize the issuance of the Community Facilities District 2023-1 (Avalino) Special Tax Bonds, Series 2026 in an aggregate principal not to exceed $12,000,000 under certain parameters defined in the Resolution
3. Approve the form of the Financing Documents including the Indenture, the Bond Purchase Agreement, a Continuing Disclosure Certificate and the Preliminary Official Statement.
4. Authorize the City Manager and Finance Manager, or designees, to execute all documents related to the issuance of the Special Tax Bonds for Community Facilities District No. 2023-1 (Avalino) and the ability to make minor changes to these documents as required to carry out the financing.
SUMMARY:
This item will consider the issuance of the Community Facilities District No. 2023-1 (Avalino) Special Tax Bonds, Series 2026 in an aggregate principal amount not to exceed $12,000,000.
BACKGROUND:
On September 13, 2023 the City held a public hearing and an election of all landowners within the proposed District. At the same time, the City adopted a resolution establishing the District and a resolution determining the necessity to incur bonded indebtedness in an aggregate principal amount not to exceed $15,000,000.
The foregoing resolutions specified that Special Taxes will be levied on all parcels of taxable value within the District to pay the principal and interest on any bonds of the District that may 638
be issued and sold. These bonds are being issued to finance City facilities and Elsinore Valley Municipal Water District facilities, and to pay the costs of the District to issue the bonds. The District also incurs annual administrative expenses for determining, apportioning, levying and collecting special taxes and reporting on and paying the principal and interest on the Bonds.
These costs are funded from the ongoing levy of special taxes within the District.
DISCUSSION:
The property within the District that is subject to the Special Taxes is being developed by D.R.
Horton Los Angeles Holding Company, Inc. (D.R. Horton) into 117 single family homes in a project being marketed as Avalino. The project is located in the southwest portion of the City to the southwest of Palomar Street and Washington Avenue at Starbuck Circle. As of November 3, 2025, D.R. Horton had completed and conveyed 79 homes within the District to individual homeowners. As of such date, D.R. Horton owned two model homes, seven completed production homes, nine homes under construction, and 20 near-finished lots. As of December 1, 2025, D.R. Horton has obtained building permits for 112 of the 117 planned homes in the District. D.R. Horton expects to complete and convey all homes in the District to individual homeowners by August 2026. The backbone infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the District has been completed. Remaining improvements include finishing of minor in-tract improvements for the remaining homes to be constructed.
The attached resolution authorizes the issuance of the Special Tax Bonds and authorizes certain representatives of the City to execute documents or otherwise to take actions necessary to facilitate closing of the Bonds, within certain parameters.
Financing Team
The Financing Team for this transaction consists of City staff from the Finance and Public Works Departments, and Counsel from the City Attorney's office; Wilmington Trust, National Association, will act as Trustee; Stradling Yocca Carlson & Rauth LLP, is serving as Bond Counsel and Disclosure Counsel; Spicer Consulting Group, LLC, is Special Tax Consultant; and CSG Advisors Incorporated, is Municipal Advisor. Piper Sandler & Co. is the Underwriter of the Bonds. Piper Sandler was selected based on their response to a competitive request for proposal. Costs associated with the bond issuance will be paid from proceeds of the Bonds.
Stephen G. White, MAI conducted an appraisal (Attachment 6) of certain land and existing improvements within the District to provide and estimate of the market value of such land and improvements. The Appraisal Report provides an estimate of the approximate market value of the "as-is" condition of the property in the District subject to the levy of Special Taxes, assuming that development of the property as currently planned will consist of 117 residential units. The Appraiser concluded that the market value of all of the parcels within the District subject to the Special Tax was $70,395,000 as of November 3, 2025.
Good Faith Estimates
Senate Bill 450 (SB 450) added Section 5852.1 to the California Government Code. SB 450 requires, prior to issuance of bonds, a public agency disclose in a public meeting, good faith financing estimates provided by an Underwriter, Municipal Advisor, or private lender. These estimates include: a) the true interest cost of the bonds; b) the total finance charge of the bonds equal to the sum of all fees and charges paid to third parties; c) the amount of estimated 639
bond proceeds minus the total finance charge of the bonds, and any reserves funded from proceeds of the bonds; and d) the total payment amount. The total payment amount should be calculated to the final maturity of the bonds. The following Good Faith Estimate was prepared by Municipal Advisor, CSG Advisors Incorporated, in consultation with the Underwriter, Piper Sandler, based on market conditions on November 18, 2025. The following estimates have no bearing on, and should not be misconstrued as not to exceed financial parameters as authorized under the Resolution:
a. The true interest cost of the Bonds is estimated at 5.05% calculated as provided in Section 5852.1(a)(1)(A) of the Code.
b. The finance charge of the Bonds, including all fees and charges paid to third parties, is estimated at $296,000.
c. The amount of proceeds received by the District to fund the public improvements, less the finance charge of the Bonds described above, and any reserves or capitalized interest paid or funded with proceeds of the Bonds is $9,469,000.
d. The total payment amount calculated as provided in Section 5852.1(a)(1)(D) of the Code is estimated at $22,035,000.
The actual amounts will depend on market conditions and can be expected to vary from the estimates set forth above.
ACCOUNT CODE:
Fund 613
FISCAL IMPACT:
The Bonds are not obligations of the City, but are rather secured by the Special Taxes of CFD 2023-1. There is no fiscal impact to the City’s general fund. The cost of financing (including underwriting, legal, appraisal and consultant costs), estimated at approximately $296,000, will be paid from proceeds of the bond issuance. Debt service on the Special Tax Bonds and ongoing administration of the District will be funded through Special Taxes levied within the District.
ATTACHMENTS:
Attachment #1 - Resolution Of Issuance (Wildomar (CFD 2023-1) 2026 Special Tax Bonds.docx Attachment #2 - Bond Indenture City Of Wildomar CFD 2023-1 (Avalino).docx Attachment #3 - Preliminary Official Statement City Of Wildomar CFD 2023-1 (Avalino).docx Attachment #4 - District Continuing Disclosure CertIficate Wildomar Avalino.docx Attachment #5 - Bond Purchase Agreement- City of Wildomar CFD No. 2023-1 (Avalino) 2026 Bonds.docx
Attachment #6 - Final Appraisal Report.pdf
Attachment #7 - Community Facilities District 2023-1 Issuance Presentation (Avalino).pdf 640
4923-1893-6954/200945-0010
RESOLUTION NO. 2026-____
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WILDOMAR, CALIFORNIA, ACTING AS THE
LEGISLATIVE BODY OF COMMUNITY FACILITIES
DISTRICT NO. 2023 -1 (AVALINO) OF THE CITY OF
WILDOMAR AUTHORIZING THE ISSUANCE OF ITS
SPECIAL TAX BONDS, SERIES 2026 IN A PRINCIPAL
AMOUNT NOT TO EXCEED TWELVE MILLION DOLLARS
($12,000,000) AND APPROVING CERTAIN DOCUMENTS
AND TAKING CERTAIN OTHER ACTIONS IN
CONNECTION THEREWITH
WHEREAS, the City Council (the “City Council”) of the City of Wildomar (the “City”), has heretofore undertaken proceedings to establish Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar (the “District”) and declared the necessity to issue bonds on behalf of the District pursuant to the terms and provisions of the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the “Act”); and WHEREAS, p ursuant to Resolution Nos. 2023 -48 and 2023-49 adopted by the legislative body of the District on September 13, 2023, certain bond propositions were submitted to the qualified electors within the District, and were approved by more than two-thirds of the votes cast at the election held on September 13, 2023; and WHEREAS, the legislative body of the District desires to issue a first series of bonds for the District at this time under the Act to finance certain public facilities which the District is authorized to finance (the “Facilities”); and
WHEREAS, the District desires to accomplish the financing of certain public facilities through the issuance of bonds in an aggregate principal amount not to exceed $12,000,000 designated as the “Community Facilities Di strict No. 2023 -1 (Avalino) of the City of Wildomar Special Tax Bonds, Series 2026” (the “Bonds”); and WHEREAS, in order to effect the issuance of the Bonds, the District desires to enter into various agreements and approve certain documents in substantial ly the forms presented herein; and
WHEREAS, based on the appraisal of real property prepared by Stephen G. White, MAI (the “Appraisal”) of property within the District, the value of the real property in the District subject to the special tax to pay debt s ervice on the Bonds is more than three times the sum of the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District as calculated in the manner set forth in Section 53345.8(a) of the Act; and
WHEREAS, the City Council has determined in accordance with Section 53360.4 of the Act that a negotiated sale of the Bonds to Piper Sandler & Co. (the “Underwriter”) in accordance with the terms of the Bond Purchase Agreement for the Bonds to be 641
2 4923-1893-6954/200945-0010
entered into by the District and the Underwriter (the “Bond Purchase Agreement”) approved as to form by this City Council herein will result in a lower overall cost to the District than a public sale; and
WHEREAS, pursuant to Government Code Section 8855, the District is required to adopt a debt management policy; and
WHEREAS, the District has determined to adopt the City’s Debt Management Policy adopted by the City Council of t he City on June 14, 2017 as the debt management policy of the District; and
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WILDOMAR, DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS:
SECTION 1. Each of the above recitals is true and correct.
SECTION 2. The issuance of the Bonds is hereby authorized in an aggregate principal amount not to exceed $12,000,000, with the exact principal amount to be determined by the official signing the Bond Purchase Agreement in accordance with Section 5 below.
The City Council hereby determines that it is prudent in the management of the District’s fiscal affairs to issue the Bonds. The Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed on behalf of the District in accordance with Section 5 hereof. All other provisions of the Bonds shall be governed by the terms and conditions of the Bond Indenture (the “Indenture”), which Indenture is hereby approved in substantially the form on file with the City Cler k, with such additions thereto and changes therein as the officer or officers executing the same deem necessary to enhance the security for the Bonds, to cure any ambiguity or defect therein, to insert the offering price(s), interest rate(s), selling compe nsation, principal amount per maturity, redemption dates and prices and such other related terms and provisions as limited by Section 5 hereof or to conform any provisions therein to the Bond Purchase Agreement or the Official Statement delivered to the Un derwriter of the Bonds. Approval of such changes shall be conclusively evidenced by the execution and delivery of the Indenture by one of the following: the Mayor, the City Manager, the Finance Manager, or their written designees (each, an “Authorized Off icer” and collectively, the “Authorized Officers”), each of whom is authorized to execute the Indenture. Capitalized terms used in this Resolution which are not defined herein have the meanings ascribed to them in the Indenture.
SECTION 3. The Bonds shal l be executed on behalf of the District by the manual or facsimile signature of the Mayor of the City or his or her written designee and be attested by the manual or facsimile signature of the City Clerk. Wilmington Trust, National Association is hereby a ppointed to act as trustee, registrar and transfer agent for the Bonds.
SECTION 4 . The covenants set forth in the Indenture to be executed in accordance with Section 2 above are hereby approved, shall be deemed to be covenants of the City Council and shal l be complied with by the District and its officers. The Indenture shall constitute a contract between the District and the Owners of the Bonds. 642
3 4923-1893-6954/200945-0010
SECTION 5. The form of the Bond Purchase Agreement presented at this meeting is hereby approved and each of t he Authorized Officers is hereby authorized to execute the Bond Purchase Agreement, with such additions thereto and changes therein relating to dates and numbers as are necessary to conform the Bond Purchase Agreement to the dates, amounts and interest rat es applicable to the Bonds as of the sale date.
Approval of such additions and changes shall be conclusively evidenced by the execution and delivery of the Bond Purchase Agreement by one or more of such Authorized Officers; provided, however, that the Bon d Purchase Agreement shall be signed only if the Underwriter’s discount does not exceed 0.90% of the principal amount of the Bonds and only if the true interest cost on the Bonds does not exceed ____6.50%. Each of the Authorized Officers is authorized to determine the day on which the Bonds are to be priced in order to attempt to produce the lowest borrowing cost for the District and may reject any terms presented by the Underwriter if determined not to be in the best interest of the District.
SECTION 6 . The form of the Continuing Disclosure Certificate presented at this meeting is hereby approved and each of the Authorized Officers is hereby authorized and directed to execute the Continuing Disclosure Certificate in the form hereby approved, with such add itions therein and changes thereto as the Authorized Officer executing the same deem necessary, with such approval to be conclusively evidenced by the execution and delivery of such certificate.
SECTION 7. The form of the Preliminary Official Statement presented at this meeting is hereby approved and the Underwriter is hereby authorized to distribute the Preliminary Official Statement to prospective purchasers of the Bonds in the form hereby approved, together with such additions thereto and changes therei n as are determined necessary by the Authorized Officers to make such Preliminary Official Statement final as of its date for purposes of Rule 15c2-12 of the Securities and Exchange Commission. Each of the Authorized Officers is hereby authorized to execu te a final Official Statement in the form of the Preliminary Official Statement, together with such changes as are determined necessary by the Authorized Officers, to make such Official Statement complete and accurate as of its date. The Underwriter is fu rther authorized to distribute the final Official Statement for the Bonds and any supplement thereto to the purchasers of the Bonds upon the execution of the final Official Statement as described above.
SECTION 8. In accordance with the requirements of Se ction 53345.8 of the Act, based on the Appraisal, the legislative body of the District hereby determines that the value of the real property in the District subject to the special tax to pay debt service on the Bonds is more than three times the principal amount of the Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District, all as calculated in the manner provided in Section 53345.8(a) of the Act.
SECTION 9. Each Authorized Officer is authorized to provide for all services necessary to effect the issuance of the Bonds. Such services shall include, but not be limited to, printing the Bonds, obtaining legal services, trustee and paying agent services and any other services deemed appropriate as set forth in a certificate of such Authorized Officer. Each Authorized Officer is authorized to pay for the cost of such services, 643
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together with other costs of issuance, from Bond proceeds deposited pursuant to the Indenture.
SECTION 10. The Authorized Officers, the City Clerk and the other officers and staff of the City and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actio ns and execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the Bonds in accordance with the provisions of this Resolution and the fulfillment of the purposes of the Bonds as described in the Indenture , including providing certificates to the Underwriter as to the accuracy of any information relating to the District which is included within the Official Statement. Any document authorized herein to be signed by the City Clerk may be signed by a duly appointed deputy clerk.
SECTION 11 . The District hereby adopts the City’s Debt Management Policy, as amended, supplemented and restated from time to time, as the debt management policy of the District pursuant to California Government Code Section 8855.
SECTION 12. The City Council acknowledges that the good faith estimates required by Section 5852.1 of the California Government Code are disclosed in the staff report and are available to the public at the meeting at which this Resolution is approved.
SECTION 13. This Resolution shall be effective upon its adoption.
PASSED, APPROVED AND ADOPTED this 14th day of January, 2026:
Carlos Marquez
Mayor
APPROVED AS TO FORM: ATTEST:
Thomas D. Jex Janet Morales Garcia, CMC
City Attorney City Clerk
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STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF WILDOMAR )
I, Janet Morales Garcia, City Clerk of the City of Wildomar, California, do hereby certify that Resolution No. ____________ was adopted by the City Council of the City of Wildomar, California, at the Regular meeting of January 14, 2026, and that the same was adopted by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
________________________________
Janet Morales Garcia, CMC
City Clerk
City of Wildomar
645
Stradling Yocca Carlson & Rauth
Draft 12/2/25
4936-2834-6234/200945-0010
BOND INDENTURE
Between
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
$__________
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR
SPECIAL TAX BONDS, SERIES 2026
Dated as of February 1, 2026
646
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions ..................................................................................................................... 1
ARTICLE II
GENERAL AUTHORIZATION AND BOND TERMS
Section 2.1. Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds .......................... 10 Section 2.2. Type and Nature of Bonds and Parity Bonds .............................................................. 10 Section 2.3. Equality of Bonds and Parity Bonds and Pledge of Net Taxes ................................... 11 Section 2.4. Description of Bonds; Interest Rates .......................................................................... 11 Section 2.5. Place and Form of Payment ........................................................................................ 12 Section 2.6. Form of Bonds and Parity Bonds ................................................................................ 13 Section 2.7. Execution and Authentication ..................................................................................... 13 Section 2.8. Bond Register .............................................................................................................. 13 Section 2.9. Registration of Exchange or Transfer ......................................................................... 14 Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds ..................................... 14 Section 2.11. Validity of Bonds and Parity Bonds ........................................................................... 15 Section 2.12. Book-Entry System ..................................................................................................... 15 Section 2.13. Representation Letter .................................................................................................. 16 Section 2.14. Transfers Outside Book-Entry System ....................................................................... 16 Section 2.15. Payments to the Nominee ........................................................................................... 16 Section 2.16. Initial Depository and Nominee .................................................................................. 16
ARTICLE III
CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Section 3.1. Creation of Funds; Application of Proceeds ............................................................... 16 Section 3.2. Deposits to and Disbursements from Special Tax Fund ............................................. 18 Section 3.3. Administrative Expense Fund ..................................................................................... 18 Section 3.4. Interest Account and Principal Account of the Special Tax Fund .............................. 18 Section 3.5. Redemption Account of the Special Tax Fund ........................................................... 19 Section 3.6. Reserve Account of the Special Tax Fund .................................................................. 20 Section 3.7. Rebate Fund ................................................................................................................ 21 Section 3.8. Surplus Fund ............................................................................................................... 24 Section 3.9. Acquisition and Construction Fund ............................................................................ 24 Section 3.10. Investments ................................................................................................................. 25
ARTICLE IV
REDEMPTION OF BONDS AND PARITY BONDS
Section 4.1. Redemption of Bonds ................................................................................................. 27 647
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Section 4.2. Selection of Bonds and Parity Bonds for Redemption ............................................... 29 Section 4.3. Notice of Redemption ................................................................................................. 29 Section 4.4. Partial Redemption of Bonds or Parity Bonds ............................................................ 31 Section 4.5. Effect of Notice and Availability of Redemption Money ........................................... 31
ARTICLE V
COVENANTS AND WARRANTY
Section 5.1. Warranty ..................................................................................................................... 31 Section 5.2. Covenants .................................................................................................................... 31
ARTICLE VI
AMENDMENTS TO INDENTURE
Section 6.1. Supplemental Indentures or Orders Not Requiring Owner Consent ........................... 35 Section 6.2. Supplemental Indentures or Orders Requiring Owner Consent .................................. 36 Section 6.3. Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds .......................................................................................................................... 37
ARTICLE VII
TRUSTEE
Section 7.1. Trustee ......................................................................................................................... 37 Section 7.2. Removal of Trustee ..................................................................................................... 38 Section 7.3. Resignation of Trustee ................................................................................................ 38 Section 7.4. Liability of Trustee ..................................................................................................... 39 Section 7.5. Merger or Consolidation ............................................................................................. 43
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1. Events of Default ........................................................................................................ 43 Section 8.2. Remedies of Owners ................................................................................................... 43 Section 8.3. Application of Revenues and Other Funds After Default ........................................... 44 Section 8.4. Power of Trustee to Control Proceedings ................................................................... 44 Section 8.5. Appointment of Receivers .......................................................................................... 45 Section 8.6. Non-Waiver ................................................................................................................. 45 Section 8.7. Limitations on Rights and Remedies of Owners ........................................................ 45 Section 8.8. Termination of Proceedings ........................................................................................ 46 648
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ARTICLE IX
DEFEASANCE AND PARITY BONDS
Section 9.1. Defeasance .................................................................................................................. 46 Section 9.2. Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness ................................................................................................................ 47
ARTICLE X
MISCELLANEOUS
Section 10.1. Cancellation of Bonds and Parity Bonds .................................................................... 49 Section 10.2. Execution of Documents and Proof of Ownership ..................................................... 49 Section 10.3. Unclaimed Moneys ..................................................................................................... 50 Section 10.4. Provisions Constitute Contract; Governing Law ........................................................ 50 Section 10.5. Future Contracts .......................................................................................................... 51 Section 10.6. Further Assurances ...................................................................................................... 51 Section 10.7. Entire Agreement; Severability ................................................................................... 51 Section 10.8. Notices ........................................................................................................................ 51
Signatures ................................................................................................................................... S-1
EXHIBIT A FORM OF SPECIAL TAX BOND .......................................................................... A-1 EXHIBIT B REQUISITION FOR DISBURSEMENT OF PROJECT COSTS ........................... B-1
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BOND INDENTURE
THIS BOND INDENTURE dated as of February 1, 2026 , by and between COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO) OF THE CITY OF WILDOMAR (the “District”) and WILMINGTON TRUST, NATIONAL ASSOCIATION, as trustee (the “Trustee”), governs the terms of the Community Facilities District No. 2023-1 (Avalino) of the City of W ildomar Special Tax Bonds, Series 2026 and any Parity Bonds issued in accordance herewith from time to time.
RECITALS :
A. The City Council of the City of Wildomar, located in the County of Riverside, California (the “City Council”), has undertaken proceedings and declared the necessity to issue bonds on behalf of the District pursuant to the terms and provisions of the Mello -Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the “Act”).
B. Based upon Resolution Nos. 2023-48 and 2023 -49 adopted by the City Council on September 13, 2023, and an election held on such date, authorizing the levy of a special tax and the issuance of bonds, the District is aut horized to issue bonds in one or more series pursuant to the Act, in an aggregate principal amount not to exceed $15,000,000.
C. Pursuant to Resolution No. 2025-__ adopted on January 14, 2026 , by the City Council, acting as the legislative body of the District, the District is authorized to issue the Bonds (as defined herein) in an aggregate principal amount of $ __________ to finance various Project Costs (as defined herein);
D. The District has determined that all requirements of the Act for the issuance o f the Bonds have been satisfied.
NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the Bonds and any Parity Bonds (as defined herein) which may be issued hereunder from time to time, as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings:
Account. The term “Account” means any account created pursuant to this Indenture.
Act. The term “Act” means the Mello -Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq. of the California Government Code. 650
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Acquisition and Construction Fund . The term “Acquisition and Construction Fund” means the fund by that name established pursuant to Section 3.1 hereof.
Administrative Expense Fund. The term “Administrative Expense Fund” means the fund by that name created and established pursuant to Section 3.1 hereof.
Administrative Expenses . The term “Administrative Expenses” means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and expenses of the Trustee, any fees and related costs fo r credit enhancement for the Bonds or any Parity Bonds which are not otherwise paid as Costs of Issuance, any costs related to the District’s compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder.
Administrative Expenses Cap. The term “Administrative Expenses Cap” means $30,600, which amount shall escalate at 2.00% per Fiscal Year (all as calculated by the District), commencing July 1, 2027.
Alternate Penalty Account. The term “Alternate Penalty Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof.
Annual Debt Service . The term “Annual Debt Service” means the principal amount of any Outstanding Bonds or Parity Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds or Parity Bonds in such Bond Year, if the Bonds and any Parity Bonds are retired as scheduled.
Authorized Investments . The term “Authorized Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein:
(1) For all purposes, including defeasance investments in refunding escrow accounts:
(a) cash; or
(b) obligations of, or obligations guaranteed as to principal and interest by, the U.S. or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the U.S., including U.S. treasury obligations, all direct or fully guaranteed o bligations, Farmers Home Administration, General Services Administration, guaranteed Title XI financing, Government National Mortgage Association (GNMA) and State and Local Government Series; or (c) obligations of government-sponsored agencies that are not backed by the full faith and credit of the U.S. Government: Federal Home Loan Mortgage Corporation (FHLMC) debt obligations, Farm Credit System (formerly: Federal Land Banks, Federal Intermediate Credit Banks and Banks for Cooperatives), Federal Home Loan Banks (FHL Banks), Federal National Mortgage Association (FNMA) debt obligations, Financing Corp. (FICO) debt obligations, Resolution Funding Corp. (REFCORP) debt obligations and U.S. Agency for International Development (U.S.A.I.D.) guaranteed notes.
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(2) For all purposes other than defeasance investments in refunding escrow accounts:
(a) obligations of any of the following federal agencies, which obligations represent the full faith and credit of the United States of America: Export -Import Bank, Rural Economic Community Development Administration, U.S. Maritime Administration, Small Business Administration, U.S. Department of Housing & Urban Development (PHAs), Federal Housing Administration and Federal Financing Bank;
(b) direct obligations of any of the following federal agencies, which obligations are not fully guaranteed by the full faith and credit of the United States of America: senior debt obligations issued by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporatio n (FHLMC), obligations of the Resolution Funding Corporation (REFCORP) and senior debt obligations of the Federal Home Loan Bank System; (c) U.S. dollar denominated deposit accounts, federal funds and bankers’ acceptances with domestic commercial banks (including those of the Trustee and its affiliates) which have a rating on their short term certificates of deposit on the date of purchase of “A-1” or “A-1+” by S&P and “P-1” by Moody’s and maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank); (d) commercial paper which is rated at the time of purchase in the single highest classification “A-1+” by S&P and “P -1” by Moody’s and which matures not more than 270 days after the date of purchase;
(e) investments in a money market fund rated “AAm,” “AAm -G” or better by S&P, including funds for which the Trustee or its affiliates provide investment advisory or other management services;
(f) pre-refunded municipal obligations defined as fo llows: any bonds or other obligations of any state of the United States of America, or any agency, instrumentality or local governmental unit of any such state, which are not callable at the option of the obligor prior to maturity or as to which irrevocabl e instructions have been given by the obligor to call on the date specified in the notice, and
(i) which are rated, based on irrevocable escrow account or fund (the “escrow”), in the highest rating category of S&P and Moody’s or any successors thereto; or (ii) (1) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (1)(b) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate; and (2) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevoc able instructions referred to above, as appropriate;
(g) municipal obligations rated “Aaa/AAA” or general obligations of states with a rating of at least “Aa2/AA” or higher by both Moody’s and S&P; 652
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(h) Investment Agreements (supported by appropriate opinions of counsel); and (i) the Local Agency Investment Fund of the State, created pursuant to Section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name.
The value of the above investments shall be determined as follows:
(a) for the purpose of determining the amount in any fund, all Authorized Investments credited to such fund shall be valued at market value. The Trustee shall determine the market value based on accepted industry standar ds, including the Trustee’s internal systems, and from accepted industry providers. Accepted industry providers shall include, but are not limited to, pricing services provided by Financial Times Interactive Data Corporation, Bank of America Merrill Lynch or Salomon Smith Barney. Notwithstanding anything to the contrary herein, in making any valuation of investments hereunder, the Trustee may utilize computerized securities pricing services that may be available to it, including those available through it s regular accounting system, and rely thereon;
(b) as to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest thereon; and
(c) as to any investment not specified above: the value thereof established by prior agreement between the City and the Trustee.
Authorized Representative of the District . The term “Authorized Representative of the District” means the Mayor, City Manager, Finance Manager, or City Clerk of the City, or any other officer or employee authorized by the City Council of the City or by an Authorized Representative of the District to undertake the action referenced in this Indenture as required to be undertaken by an Authorized Representative of the District.
Bond Counsel. The term “Bond Counsel” mean s Stradling Yocca Carlson & Rauth LLP , or another attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia.
Bond Register. The term “Bond Register” means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds and any Parity Bonds shall be recorded.
Bond Year . The term “Bond Year” means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds or an issue of Parity Bonds shall begin on the Delivery Date and end on the first September 1 which is not more than 12 months after the Delivery Date.
Bonds. The term “Bonds” means the District’s Special Tax Bonds, Series 2026 issued on February __, 2026 in the aggregate principal amount of $__________.
Business Day. The term “Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks or trust companies in New York, New York, Los Angeles, California, 653
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or the city where the corporate trust office of the Trustee is located, are not required or authorized by law, regulation or executive order, to close or to remain closed.
Certificate of an Authorized Representative . The term “Certificate of an Authorized Representative” means a written certificate or warrant request executed by an A uthorized Representative of the District.
City. The term “City” means the City of Wildomar, County of Riverside, State of California.
City Council. The term “City Council” means the City Council of the City.
City Facilities Account. The term “City Facil ities Account” means the account by that name created and established in the Acquisition and Construction Fund pursuant to Section 3.1 hereof.
Code. The term “Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it.
Continuing Disclosure Certificate. The term “Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate dated as of February 1, 2026, as originally executed by the District and as it may be from time to time amended or supplemented in accordance with its terms.
Costs of Issuance . The term “Costs of Issuance” means th e costs and expenses incurred in connection with the formation of the District and the issuance and sale of the Bonds or any Parity Bonds, including the acceptance and initial annual fees and expenses of the Trustee and its counsel, legal fees and expenses , costs of printing the Bonds and Parity Bonds and the preliminary and final official statements for the Bonds and Parity Bonds, fees of financial consultants, costs of the appraisal and all other related fees and expenses, including reimbursement to prope rty owners within the District for design, engineering and legal costs, as set forth in a Certificate of an Authorized Representative of the District.
Costs of Issuance Account. The term “Costs of Issuance Account” means the account by that name created a nd established in the Acquisition and Construction Fund pursuant to Section 3.1 hereof.
Delivery Date. The term “Delivery Date” means, with respect to the Bonds and each issue of Parity Bonds, the date on which the bonds of such issue were issued and deli vered to the initial purchasers thereof.
Depository. The term “Depository” means The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Bonds, or any other securities depository acting as Depository under Article II hereof.
District. The term “District” means Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar established pursuant to the Act and the Resolution of Formation.
Event of Default . The term “Event of Default” mean s an event described in Section 8.1 hereof.
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Fiscal Year. The term “Fiscal Year” means the period beginning on July 1 of each year and ending on the next following June 30.
Gross Taxes. The term “Gross Taxes” means the amount of all Special Taxes received by the District, together with the proceeds collected from the sale of property pursuant to foreclosure for the delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure actions.
Indenture. The term “Indenture” means this Bond Indenture, together with any Supplemental Indenture approved pursuant to Article VI hereof.
Independent Financial Consultant . The term “Independent Financial Consultant” means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District, who, or each of whom: (1) is in fact independent and not under the domination of the District or the City; (2) does not have any substantial interest, di rect or indirect, in the District or the City; and (3) is not connected with the District or the City as a member, officer or employee of the District or the City, but who may be regularly retained to make annual or other reports to the District or the City.
Interest Account. The term “Interest Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof.
Interest Payment Date . The term “Interest Payment Date” means September 1, 2026 and each March 1 and September 1 thereafter; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date.
Investment Agreement. The term “Investment Agreement” means one or more agreements for the investment of funds of the District complying with the criteria therefor as set forth in subsection (2)(h) of the definition of Authorized Investments herein.
Maximum Annual Debt Service . The term “Maximum Annual Debt Servi ce” means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds and any Parity Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds and Parity Bonds payable in such Bond Year eith er at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds and Parity Bonds Outstanding in such Bond Year if the Bonds and Parity Bonds are retired as scheduled.
Moody’s. The term “Moo dy’s” means Moody’s Investors Service, Inc., its successors and assigns.
Net Taxes . The term “Net Taxes” means Gross Taxes minus amounts set aside to pay Administrative Expenses.
Nominee. The term “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.16 hereof.
Ordinance. The term “Ordinance” means Ordinance No. 235 adopted by the City Council on October 11, 2023, providing for the levying of the Special Tax. 655
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Outstanding. The te rms “Outstanding” or “Outstanding Bonds and Parity Bonds” means all Bonds and Parity Bonds theretofore issued by the District, except: (i) Bonds and Parity Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 10.1 hereof; (ii) Bonds and Parity Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds or Parity Bonds), provided that, if such Bonds or Parity Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture or any applicable Supplemental Indenture for Parity Bonds; and (iii) Bonds and Parity Bonds which have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof.
Owner. The term “Owner” means the person or persons in whose name or names any Bond or Parity Bond is registered.
Parity Bonds. The term “Parity Bonds” means all bonds, notes or other similar evidences of indebtedness hereafter issued, payable out of the Net Taxes and which, as provided in this Indenture or any Supplemental Indenture, rank on a parity with the Bonds.
Participants. The term “Participants” means those broker -dealers, banks and other financial institutions from time to time for which the Depository holds Bonds or Parity Bonds as securities depository.
Person. The term “Person” means natural persons, fi rms, corporations, partnerships, associations, trusts, public bodies and other entities.
Prepayments. The term “Prepayments” means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or m ore parcels in the District made in accordance with the RMA.
Principal Account. The term “Principal Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof.
Principal Office of the Trustee . The term “Principal Office of the Trustee” means the office of the Trustee located in Costa Mesa, California, or such other office or offices as the Trustee may designate from time to time, or the office of any successor Trustee where it principally conduct s its business of serving as trustee under indentures pursuant to which municipal or governmental obligations are issued.
Project. The term “Project” means those public facilities described in the Resolution of Formation which are to be acquired or constr ucted within and outside of the District, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the District from time to time.
Project Costs. The term “Project Costs” means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds or any Parity Bonds, including, but not lim ited to, remarketing, credit enhancement, Trustee and other fees and expenses relating to the issuance of the Bonds or any Parity Bonds and the formation of the District, and to pay any other “incidental expenses” of the District, as such term is defined in the Act.
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Rating Agency. The term “Rating Agency” means Moody’s or S&P, or both, as the context requires.
Rebate Account. The term “Rebate Account” means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof.
Rebate Fund. The term “Rebate Fund” means the fund by that name established pursuant to Section 3.1 hereof in which there are established the Accounts described in Section 3.1 hereof.
Rebate Regulations. The term “Rebate Regulations” means any final, te mporary or proposed Regulations promulgated under Section 148(f) of the Code.
Record Date. The term “Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day.
Redemption Account . The term “Redemption Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof.
Regulations. The term “Regulations” means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code.
Representation Letter . The term “Representation Letter” means the Blanket Letter of Representations from the District to the Depository as described in Section 2.13 hereof.
Reserve Account. The term “Reserve Account” means the account by that name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. “Reserve Policy” means a letter of credit, insurance policy, surety bond or other such funding instrument issued by a municipal bond insurance company rated least “Aa2” or higher by Moody’s or “AA” or higher by S&P, delivered to the Trustee for the purpose of providing all or a portion of the Reserve Requirement for Bonds and Parity Bonds.
Reserve Requirement. The term “Reserve Requirement” means that amount as of any date of calculation equal to the lesser of: (i) 10% of the initial principal amount of the Bonds and Parity Bonds, if any; (ii) Maximum Annual Debt Service on the then Outstanding Bond s and Parity Bonds, if any; and (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; provided, however, that the Reserve Requirement shall not exceed $___________ except in connection with the issuance of Parity Bonds.
Resolution of Formation. The term “Resolution of Formation” means Resolution No. 2023- 48 adopted by the City Council on September 13, 2023, pursuant to which the City Council formed the District.
RMA. The term “RMA” means the Rate and Method of Apportionment of Special Tax for the District approved by the qualified electors of the District at the September 13, 2023 election.
Sinking Fund Payment. The term “Sinking Fund Payment” means the annual paym ent to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the 657
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schedules set forth in Section 4.1(b) hereof and any annual sinking fund payment schedule to retire any Parity Bonds which are designated as Term Bonds.
Six-Month Period. The term “Six-Month Period” means the period of time beginning on the Delivery Date of each issue of Bonds or Parity Bonds, as applicable, and ending six consecutive months thereafter, and each six -month period thereafter until the l atest maturity date of the Bonds and the Parity Bonds (and any obligations that refund an issue of the Bonds or Parity Bonds).
Special Tax Administrator . The term “Special Tax Administrator” means the individual or entity appointed by the City to administer the calculation and collection of the Special Taxes.
Special Tax Fund . The term “Special Tax Fund” means the fund by that name created and established pursuant to Section 3.1 hereof.
Special Taxes. The term “Special Taxes” means the Special Tax (as de fined in the RMA) authorized to be levied by the District on property within the District in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval obtained at the September 13, 2023 election in the District, including any scheduled payments and any Prepayments thereof, the net 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 penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third -party or to the City for 100% of the delinquent amount shall no longer be pledged hereunder to the payment of the Bonds or Parity Bonds.
S&P. The term “S&P” means S&P Global Ratings, a Standard & Poor’s Fina ncial Services LLC business, its successors and assigns.
Subaccount. The term “Subaccount” means any subaccount created pursuant to this Indenture.
Supplemental Indenture . The term “Supplemental Indenture” means any supplemental indenture amending or supplementing this Indenture.
Surplus Fund. The term “Surplus Fund” means the fund by that name created and established pursuant to Section 3.1 hereof.
Tax Certificate. The term “Tax Certificate” means the certificate by that name to be executed by the D istrict on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code.
Tax-Exempt. The term “Tax -Exempt” means, with reference to an Authorized Investment, an Authorized Investment the interest earnings on which are excludable from gross income for federal income tax purposes pursuant to Section 103(a) of the Code, other than one described in Section 57(a)(5)(C) of the Code.
Taxable Property. The term “Taxable Property” has the meaning ascribed to it in the RMA.
Term Bonds. The term “Term Bonds” means the Bonds maturing on September 1, 20__ and September 1, 20 __, and any term maturities of an issue of Parity Bonds as specified in a Supplemental Indenture.
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Trustee. The term “Truste e” means Wilmington Trust, National Association, a national banking association duly organized and existing under the laws of the United States, at its principal corporate trust office in Costa Mesa, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3, and any successor thereto.
Underwriter. The term “Underwriter” means, with respect to the Bonds, Piper Sandler & Co., and with respect to each issu e of Parity Bonds, the institution or institutions, if any, with whom the District enters into a purchase contract for the sale of such issue.
Water Facilities Account . The term “Water Facilities Account” means the account by that name created and establi shed in the Acquisition and Construction Fund pursuant to Section 3.1 hereof.
ARTICLE II
GENERAL AUTHORIZATION AND BOND TERMS
Section 2.1. Amount, Issuance, Purpose and Nature of Bonds and Parity Bonds .
Under and pursuant to the Act, the Bonds in the aggregate principal amount of $ __________, together with any Parity Bonds authorized by the City Council in accordance with Section 9.2 hereof, shall be issued for the purposes of financing and/or refinancing the Project, paying Costs of Issuance and funding the Reserve Account; provided that the aggregate principal amount of the Bonds and any Parity Bonds shall not exceed the total indebtedness presently authorized or subsequently authorized by the qualified electors within the District in accordance with the Act. The Bonds and an y Parity Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the Special Tax Fund.
Section 2.2. Type and Nature of Bonds and Parity Bonds . Neither the faith and credit nor the taxing power of the City, the State of California, or any political subdivision thereof other than the District is pledged to the payment of the Bonds or any Parity Bonds. Ex cept for the Net Taxes, no other taxes are pledged to the payment of the Bonds or any Parity Bonds. The Bonds and any Parity Bonds are not general or special obligations of the City nor general obligations of the District, but are limited obligations of t he District payable solely from certain amounts deposited by the District in the Special Tax Fund, as more fully described herein. The District’s limited obligation to pay the principal of, premium, if any, and interest on the Bonds and any Parity Bonds f rom amounts in the Special Tax Fund is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set -off whatsoever. No Owner of the Bonds or any Parity Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and any Parity Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, t he State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds and any Parity Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the D istrict’s property, or upon any of its income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds, any Parity Bonds and inter est thereon, and neither the members of the legislative body of the District or 659
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the members of the City Council nor any persons executing the Bonds or any Parity Bonds are liable personally on the Bonds or any Parity Bonds, by reason of their issuance.
Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or any Pa rity Bonds, or for the performance of any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose.
Section 2.3. Equality of Bonds and Parity Bonds and Pledge of Net Taxes. Pursuant to the Act and this Indenture, the Bonds and any Parity Bonds shall be equally payable from and secured by a first pledge of and lien on the Net Taxes and other amounts in the Special Tax Fund, without priority for number , date of the Bonds or Parity Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any Parity Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the N et Taxes and other amounts in the Special Tax Fund which are hereby set aside for the payment of the Bonds and any Parity Bonds; provided that any delinquent Special Tax sold to an independent third -party or to the City for 100% of the delinquent amount sh all no longer be pledged hereunder to the payment of the Bonds or Parity Bonds. Amounts in the Special Tax Fund shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and any Parity Bonds and, so long as any of the Bonds and any Parity Bonds or interest thereon remain Outstanding, shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision con tained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity Bonds, and none of the Rebate Fund, the Surplus Fund, the Acquisition and Construction Fund or the Administrative Fund shall be construed as a trust fund held for the benefit of the Owners.
Nothing in this Indenture or any Supplemental Indenture shall preclude: (i) subject to the limitations contained hereunder, the redemption prior to m aturity of any Bonds or Parity Bonds subject to call and redemption and payment of said Bonds or Parity Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California; or (ii) the issuance, subject to the limitations contained herein, of Parity Bonds which shall be payable from Net Taxes.
Section 2.4. Description of Bonds; Interest Rates . The Bonds and any Parity Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof.
The Bonds and any Parity Bonds of each issue shall be numbered as desired by the Trustee.
The Bonds shall be designated “ Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Special Tax Bo nds, Series 2026.” The Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table be low payable on September 1, 2026 and each Interest Payment Date thereafter:
Maturity Date
September 1
Principal
Amount
Interest
Rate
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T Term Bonds.
Interest shall be payable on each Bond and Parity Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of such Bond or Parity Bond has been paid; provided, however, that if at the maturity date of any Bond or Parity Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds and Parity Bon ds shall then cease to bear interest. Interest due on the Bonds and Parity Bonds shall be calculated on the basis of a 360 -day year comprised of twelve 30-day months.
Section 2.5. Place and Form of Payment . The Bonds and Parity Bonds shall be payable both as to princ ipal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and Parity Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and sur render thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee. If the Nominee of the Bonds or Parity Bonds is registered to Cede & Co., payment of principal and any premiums shall be made without presentment. Interest on any Bond or Parity Bond shall be payable from the Interest Payment Date next preceding the date of authentication of such Bond or Parity Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest shall be payable from such date of authentication; (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond or Parity Bond, in which event interest shall be payable from the dated date of such Bond or Parity Bond, as applicable; provided, however, that if at the time of authentication of such Bond or Parity Bond, interest is in default, interest on such Bond or Parity Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on such Bond or Parity Bond, interest on such Bond or Parity Bond shall be payable from its dated date. Interest on any Bond or Parity Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond or Parity Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, to such Owner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the 661
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Bonds or of any issue of Parity Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account within the United States of America designated by such Owner.
Section 2.6. Form of Bonds and Parity Bonds . The definitive Bonds may be print ed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of such Bonds and o f the certificate of authentication. Each issue of Parity Bonds and the certificate of authentication therefor shall be in the form provided in the Supplemental Indenture for such issue of Parity Bonds.
Until definitive Bonds or Parity Bonds, as applicabl e, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds or Parity Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limita tions and conditions as are applicable in the case of definitive Bonds or Parity Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds or Parity Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds and Parity Bonds. If the District issues temporary Bonds or Parity Bonds, it shall execute and furnish definitive Bonds or Parity Bonds, as applicable, witho ut unnecessary delay and thereupon any temporary Bond or Parity Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond or Parity Bond of the same issue, maturity, interest rate and principal am ount in any authorized denomination. All temporary Bonds or Parity Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued.
Section 2.7. Execution and Authentication. The Bonds and Parity Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Clerk, or any duly appointed Deputy Clerk, in their capacity as officers of the District, and the seal of the City or the District (o r a facsimile thereof) may be impressed, imprinted, engraved or otherwise reproduced thereon, and attested by the signature of the City Clerk. In case any one or more of the officers who shall have signed or sealed any of the Bonds or Parity Bonds shall c ease to be such officer before the Bonds or Parity Bonds so signed and sealed have been authenticated and delivered by the Trustee (including new Bonds or Parity Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or Parity Bonds or lost, stolen, destroyed or mutilated Bonds or Parity Bonds), such Bonds and Parity Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sea led such Bonds or Parity Bonds had not ceased to hold such office.
Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A attached hereto shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee.
Section 2.8. Bond Register . The Trustee will keep or cause to be kept, at its office, sufficient books for the registration and transfer of the Bonds and any Parity Bonds which shall upon reasonable prior notice be open to inspection by the District during all regular business hours, and, subject to the limitations set forth in Section 2.9 below, upon presentation for such purp ose, the 662
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Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds and any Parity Bonds as herein provided.
The District and the Trustee may treat the Owner of any Bon d or Parity Bond whose name appears on the Bond Register as the absolute Owner of that Bond or Parity Bond for any and all purposes and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Owner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Owner to give written notice to the Trustee of any change in the Owner’s address so that the Bond Register may be revised accordingly.
Section 2.9. Registration of Exchange or Transfer . Subject to the limitations set forth in the following paragraph, the registration of any Bond or Parity Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is reg istered, in person or by his or her duly authorized attorney, upon surrender of such Bond or Parity Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly e xecuted by the Owner or his or her duly authorized attorney.
Bonds or Parity Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds or Parity Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond or Parity Bond issued upon any exchange or transfer, but shall require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be pa id with respect to such exchange or transfer. Whenever any Bonds or Parity Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds or a new Parity B ond or Parity Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of: (i) Bonds or Parity Bonds for a period of 15 days next pr eceding any selection of the Bonds or Parity Bonds to be redeemed; or (ii) any Bonds or Parity Bonds chosen for redemption.
Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds or Parity Bonds . If any Bond or Parity Bond shall become mutilated, the District shall execute, and the Trustee shall authenticate and deliver, a new Bond or Parity Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond or Parity Bond so mutilated, but only upon surrender to the Trustee of the Bond or Parity Bond so mutilated. Every mutilated Bond or Parity Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond or Parity Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District shall execute a nd the Trustee shall authenticate and deliver a new Bond or Parity Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond or Parity Bond so lost, destroyed or stolen. Any Bond or Parity Bond issued in lieu of any Bond or Parity Bond alleged to be mutilated, lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Bonds and Parity Bonds issued hereunder. The Trustee shall not treat both the original Bond or Parity Bond and any replacement Bond or Parity Bond as being Outstanding for the purpose of determining the principal amount of Bonds or Parity Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds or Parity Bonds Outstanding hereunder, but both the original and replacement Bond or Parity Bond shall be treated as 663
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one and the same. Notwithstanding any other provision of this Section, in lie u of delivering a new Bond or Parity Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds or Parity Bonds.
Section 2.11. Validity of Bonds and Parity Bonds . The validity of the authoriz ation and issuance of the Bonds and any Parity Bonds shall not be affected in any way by any defect in any proceedings taken by the District for the financing of the Project, or by the invalidity, in whole or in part, of any contracts made by the District in connection therewith, and shall not be dependent upon the completion of the financing of the Project or upon the performance by any Person of his obligation with respect to the Project, and the recital contained in the Bonds or any Parity Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance.
Section 2.12. Book-Entry System. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each maturity of the Bonds.
Upon initial delivery, the ownership of each such Bond shall be registered in the registration books kept by the Trustee in the name of the Nominee as nominee of the Depository. Except as provided in Section 2.14 hereof, all of the Outstanding Bonds shall be registered in the registration books kept by the Trustee in the name of the Nominee. At the election of the District, any Parity Bonds may also be issued as book -entry bonds registered in the name of the Nominee as provided herein, in which case the references in Sections 2.12 through 2.15 to “Bonds” shall be applicable to such Parity Bonds.
With respect to Bonds registered in the registration books kept by the Trustee in the name of the Nominee, the District and the Trustee shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds.
Without limiting the immediately preceding sen tence, the District and the Trustee shall have no responsibility or obligation with respect to: (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds; (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any notice with respect to the Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the ben eficial interests in the Bonds to be redeemed in the event that the Bonds are redeemed in part; or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Trustee, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds. The District and the Trustee may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Trustee as the holder and absolute o wner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Trustee, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the District’s obligations with respect to payment of the principal, premium, if any, and interest due on the Bonds to the e xtent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Trustee, shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant t o this Indenture. Upon delivery by the Depository to the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, 664
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and subject to the provisions herein with respect to Record Dates, the word Nominee in this Indenture shall refer to such new nominee of the Depository.
Section 2.13. Representation Letter. In order to qualify the Bonds and any Parity Bonds which the District elects to register in the name of the Nominee for the Deposito ry’s book -entry system, an Authorized Representative of the District is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way l imit the provisions of Section 2.12 or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Trustee.
The District agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Authorized Representatives of the District are hereby authorized to take any other actions, not inconsistent with this Indenture, to qualify the Bonds for the Depository’s book-entry program.
Section 2.14. Transfers Outside Book-Entry System. In the event that: (i) the Depository determines not to continue to act as securities depository for the Bonds; or (ii) the District determines that the Depository shall no longer so act, then the District will discontinue the book -entry system with the Depository. If the District fails to identify another qualified secu rities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Trustee in the name of the Nominee, but shall be registered in whatever name or names Persons t ransferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof.
Section 2.15. Payments to the Nominee . Notwithstanding any other provisions of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository.
Section 2.16. Initial Depository and Nominee. The initial Depository under this Indenture shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York.
ARTICLE III
CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Section 3.1. Creation of Funds; Application of Proceeds. (a) There are hereby created and established and shall be maintained by the Trustee the following funds and accounts:
(1) The Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Special Tax Fund (the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account and a Reserve Account). 665
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(2) The Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Rebate Fund (the “Rebate Fund”) (in which there shall be established a Rebate Account and an Alternate Penalty Account).
(3) The Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Acquisition and Construction Fund (the “Acquisition and Construction Fund”) (in which there shall be established a Costs of Issuance Account, a City Facilities Account (in which there shall be established a City Facilities Subaccount a City Fee Subaccount and a City Fee Premium Subaccount) and a Water Facilities Account).
(4) The Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Surplus Fund (the “Surplus Fund”).
The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Trustee. The Trustee shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of this Article III and shall disburse investment earnings thereon in accordance with the provisions of Section 3.10 hereof.
In connection with the issuance of any Parity Bonds, which may be issued only for the purpose of refunding the Bonds as described in Section 9.2, the Trustee, at the direction of an Authorized Representative of the District, may create new funds, a ccounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds and any Parity Bonds. (b) There is hereby established and shall be m aintained by the District, the Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Administrative Expense Fund (the “Administrative Expense Fund”).
(c) The proceeds of the sale of the Bonds shall be received by the Trustee on behalf of the District and deposited and transferred as follows:
(1) $____________ shall be transferred to the Costs of Issuance Account of the Acquisition and Construction Fund to pay the Costs of Issuance of the Bonds; (2) $___________ shall be transferred to the Reserve Account of the Special Tax Fund to fund the Reserve Requirement; and
(3) $__________ shall be transferred to the Acquisition and Construction Fund of which $_________ shall be deposited in the City Facilities Account (with $_______ deposited in the City Facilities Subaccount, $__________ deposited in the City Fee Subaccount and $___________ deposited in the City Fee Premium Subaccount) , and $___________ shall be deposited in the Water Facilities Account.
(d) On the Delivery Date of the Bonds, the District shall transfer $________ representing Special Taxes levied in the District and the Trustee shall deposit such amount in the Special Tax Fund.
The Trustee may, in its discretion, establish temporary funds or accounts in its bo oks and records to facilitate such transfers.
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Section 3.2. Deposits to and Disbursements from Special Tax Fund. (a) Except for Prepayments, which shall be deposited to the Redemption Account of the Special Tax Fund, and the amounts deposited into the Administrative Expense Fund in accordance with Section 3.3 below, the Trustee shall, on each date on which the Special Taxes are received from the District, deposit such Special Taxes in the Special Tax Fund to be held in trust for the Owners.
The Trustee shall transfer the Sp ecial Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to:
(1) the Interest Account of the Special Tax Fund;
(2) the Principal Account of the Special Tax Fund;
(3) the Redemption Account of the Special Tax Fund;
(4) the Reserve Account of the Special Tax Fund;
(5) the District, upon a Certificate of an Authorized Representative, for deposit in the Administrative Expense Fund to the extent that Administrative Expenses exceed or a re expected to exceed the Administrative Expense Cap;
(6) the Rebate Fund; and
(7) the Surplus Fund.
(b) At maturity of all of the Bonds and Parity Bonds and, after all principal and interest then due on the Bonds and Parity Bonds then Outstanding have been paid or pr ovided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose.
Section 3.3. Administrative Expense Fund . Promptly after the receipt of any Special Taxes in a Fiscal Year, the District shall deposit Special Taxes (other than Prepayments, which shall be transferred to the Trustee as set forth in Section 3.2 above) in the Administrative Expense Fund from time to time in the amounts necessary to make timely payment of Administrative Expenses; provided, however, that, except as set forth in the following sentence, the total amount transferred with respect to a Bond Year shall not exceed the Administrative Expenses Cap until suc h time as there has been deposited to the Interest Account and the Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay the interest and principal on all Bonds and Parity Bonds due in such Bond Year a nd to restore the Reserve Account to the Reserve Requirement. Notwithstanding the foregoing, amounts in excess of the Administrative Expenses Cap may be transferred to the Administrative Expense Fund to the extent necessary to collect delinquent Special Taxes as set forth in a Certificate of an Authorized Representative of the District . Moneys in the Administrative Expense Fund may be invested in any Authorized Investments as directed in writing by an Authorized Representative of the District and shall be disbursed as directed in a Certificate of an Authorized Representative..
Section 3.4. Interest Account and Principal Account of the Special Tax Fund . The principal of and interest due on the Bonds and any Parity Bonds until maturity, other than principal due upon red emption, shall be paid by the Trustee from the Principal Account and the Interest Account of the Special Tax Fund, respectively.
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For the purpose of assuring that the payment of principal of and interest on the Bonds and any Parity Bonds will be made when d ue, after making the transfer required by Section 3.3, at least one Business Day prior to each March 1 and September 1, the Trustee shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account ; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds or any Parity Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund (exclusive of the Reserve Account) are inadequate to make the foregoing transfers, then any deficiency shall be made up by transfers from the Reserve Account:
(a) To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds and any Parity Bonds as the same become due. (b) To the Principal Account, an amount such that the balance in t he Principal Account one Business Day prior to September 1 of each year, commencing September 1, 2026, shall equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous Septembe r 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity.
Section 3.5. Redemption Account of the Special Tax Fund. (a) With respect to each September 1 on which a Sinking Fund Payment is due, after the deposits have been made to the Interest Account and the Principal Account of the Special Tax Fund as required by Section 3.4 hereof, the Trustee shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account one Business Day prior to each September 1 on which a Sinking Fund Payment is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity B onds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded, pursuant to Section 3.6 below. Moneys so deposited in the Redemption Account shall be used and applied by the Trustee to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedules set forth in Section 4.1(b) hereof, and to redeem Parity Bonds in accordance with any Sinking Fund Payment schedule in the Supplemental Indenture for such Parity Bonds.
(b) After making the deposits to the Interest Account and the Principal Account of the Special Tax Fund pursuant to Section 3.4 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (a) of this Section, and in accordance with the District’s election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, or to call Parity Bonds for optional redemption as set forth in any Supplemental Indenture for Parity Bonds, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and the premiums, if any, payable on the Bonds or Parity Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund may be applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. 668
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(c) Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.1(c) hereof to the payment of the principal of, premium, if any, and interest on the Bonds and Parity Bonds to be redeemed with such Prepayments. (d) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and Parity Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds or Parity Bonds to be redeemed upon presentation and surrender of such Bonds or Parity Bonds, and, in the case of an optional redemption or a special mandatory redemption from Prepayments, to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds or Parity Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds or Parity Bonds may be m ade by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption or a special mandatory redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(a) or 4.1(c) hereof, as applicable, or in the case of Parity B onds the premium established in any Supplemental Indenture. Any accrued interest payable upon the purchase of Bonds or Parity Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date.
Section 3.6. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The Reserve Requirement may be satisfied in whole or in part by cash, a Reserve Policy, or a combination thereof. The amounts in the Reserve Account shall be applied as follows:
(a) Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds and any Parity Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.7 hereof upon written direction from the District. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Parity Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account, first from the cash on deposit therein, and second from a draw on the Reserve Policy, if any, for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fun d or the Rebate Fund, as applicable, moneys necessary for such purposes. (b) Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in Sections 3.4 and 3.5 above, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement by first, repaying any amounts due under the Reserve Policy, and second to fund the Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will no t be needed to make the deposits required to be made to the Administrative Expense Fund, the Interest Account, the Principal Account or the Redemption 669
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Account of the Special Tax Fund on or before the next September 1. If amounts in the Special Tax Fund together with any other amounts transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, including any amounts necessary to pay costs related to the Reserve Policy, if any, then the District shall include the amount necessary to restore the Reserve Account to the Reserve Requirement, in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates.
(c) In connection with a redemption of Bonds pursuant to Section 4.1(a) or 4. 1(c) or Parity Bonds in accordance with any Supplemental Indenture, or a partial defeasance of Bonds or Parity Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as th e amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to this Indenture to partially defease Bonds or Parity Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. (d) To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds, amounts in the Reserve Account may be applied to pay the principal of and int erest due on the Bonds and Parity Bonds, as applicable, in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this Section shall be withdraw n from the Reserve Account on the Business Day before each March 1 and September 1 and shall be transferred to the Acquisition and Construction Fund or an Account therein, as directed by an Authorized Representative of the District, until all amounts have been disbursed from the Acquisition and Construction Fund (or such fund is closed) and thereafter to the Interest Account of the Special Tax Fund.
Section 3.7. Rebate Fund.
(a) The Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund and shall establish a separate Rebate Account and Alternate Penalty Account therein. All money at any time deposited in the Rebate Account or the Alternate Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. A separate subaccount of the Rebate Account and the Alternate Penalty Account shall be established for the Bonds and each issue of Parity Bonds the interest on which is excluded from gro ss income for federal income tax purposes. All amounts on deposit in the Rebate Fund with respect to the Bonds or an issue of Parity Bonds shall be governed by this Section 3.7 and the Tax Certificate for such issue, unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on the Bonds and Parity Bonds will not be adversely affected if such requirements are not satisfied.
(1) Rebate Account. The following requirements shal l be satisfied with respect to each subaccount of the Rebate Account:
(i) Computations. Within 55 days of the end of each fifth Bond Year, the District shall calculate or cause to be calculated the amount of rebatable arbitrage for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable, in accordance with 670
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Section 148(f)(2) of the Code and Section 1.148-3 of the Rebate Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage described in the Tax Certificate for each issue (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and (C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for this purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Rebate Regulations (the “Rebatable Arbitrage”). The District shall obtain expert advice as to the amount of the Rebatable Arbitrage to comply with this Section.
(ii) Transfers. Within 55 days of the end of each fifth Bond Year for which Rebatable Arbitrage must be calculated as required by the Tax Certificate for each issue, upon the written direction of an Authorized Representative of the District, an amount shall be deposited to each subaccount of the Rebate Account by the Trustee from any funds so designated by the District if and to the extent required, so that the balance in the Rebate Account shall equal the amount of Rebatable Arbitrage so calculated by or on behalf of the District in accordance with clause (i) of this subsection (a)(1) with respect to the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable. In the event that immediately following any transfer required by the previous sentence, or the date on which the District determines that no transfe r is required for such Bond Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds the amount required to be on deposit therein, upon written instructions from an Authorized Representative of the District, the Trustee shall withdraw the excess from the appropriate subaccount of the Rebate Account and then credit the excess to the Special Tax Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in each subaccount of the Rebate Account:
(X) not later than 60 days after the end of: (A) the fifth Bond Year for the Bonds and each issue of Parity Bonds to which this Section 3.7 is applicable; and (B) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year for the Bonds and each issue of Parity Bonds, as applicable; and
(Y) not later than 60 days after the pay ment or redemption of all of the Bonds or an issue of Parity Bonds, as applicable, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code.
In the event that, prior to the time of any payment required to be made from the Rebate Account, the amount in the Rebate Account is not sufficient to make such payment when such payment is due, the District s hall calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to this subse ction (a)(1) shall be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038 -T, or shall be made in such other manner as provided under the Code. 671
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(2) Alternate Penalty Account.
(i) Six-Month Computation. If the 1½% Penalty has been elected for the Bonds or an issue of Parity Bonds, within 85 days of each particular Six -Month Period, the District shall determine or cause to be determined whethe r the 1½% Penalty is payable (and the amount of such penalty) as of the close of the applicable Six -Month Period. The District shall obtain expert advice in making such determinations.
(ii) Six-Month Transfer. Within 85 days of the close of each Six -Month Period, the Trustee, at the written direction of an Authorized Representative of the District, shall deposit an amount in the appropriate subaccounts of the Alternate Penalty Account from any source of funds held by the Trustee pursuant to this Indenture and designated by the District in such written directions or provided to it by the District, if and to the extent required, so that the balance in each subaccount of the Alternate Penalty Account equals the amount of 1½% Penalty due and payable to the United S tates Treasury determined as provided in subsection (a)(2)(i) above. In the event that immediately following any transfer provided for in the previous sentence, or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit in a subaccount of the Alternate Penalty Account exceeds the amount required to be on deposit therein to make the payments required by subsection (iii) below, the Trustee, at the written direction of an Authorized Representative of the District, may withdraw the excess from the applicable subaccount of the Alternate Penalty Account and credit the excess to the Special Tax Fund. (iii) Payment to the Treasury. The Trustee shall pay, as directed in writing by an Authorized Representative of the District, to the United States Treasury, out of amounts in a subaccount of the Alternate Penalty Account, not later than 90 days after the close of each Six-Month Period the 1½% Penalty, if applicable and payable, computed with respect to the Bonds and any issue of Parity Bonds in accordance with Section 148(f)(4) of the Code. In the event that, prior to the time of any payment required to be made from a subaccount of the Alternate Penalty Account, the amount in such subaccount is not sufficient to make such payment when such payment is due, the District shall calculate the amount of such deficiency and direct the Trustee, in writing, to deposit an amount equal to such deficiency into such subaccount of the Alternate Penalty Account from any funds he ld by the Trustee pursuant to this Indenture and designated by the District in such written directions prior to the time such payment is due. Each payment required to be made pursuant to this subsection (a)(2) shall be made to the Internal Revenue Service , Ogden, Utah 84201 on or before the date on which such payment is due, and shall be accompanied by Internal Revenue Service Form 8038-T or shall be made in such other manner as provided under the Code. (b) Disposition of Unexpended Funds . Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds or an issue of Parity Bonds after redemption and payment of such issue and after making the payments described in subsections (a)(1)(iii) or (a)(2)(iii) (whichever is applicable), may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District.
(c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Bonds and any Parity Bonds with respect to which an Account has been created in the Rebate Fund.
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(d) Amendment Without Consent of Owners . This Section 3.7 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income fo r federal income tax purposes of interest on the Bonds and any issue of Parity Bonds issued on a tax-exempt basis. (e) Trustee. The Trustee shall have no responsibility to monitor or calculate any amounts payable to the U.S. Treasury pursuant to this Section and shall be deemed constructively to have complied with its obligations hereunder if it follows the written instructions of the District given pursuant to this Section.
Section 3.8. Surplus Fund. After making the transfers required by Sections 3.4, 3.5, 3.6 and 3.7 hereof, as soon as practicable after each September 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a Certificate of an Authorized Representative directing that certain amounts be retained in the Special Tax Fund because the District has included such amounts as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(b) hereof. Moneys deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized Representative of the District: (i) to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund to pay the princi pal of, including Sinking Fund Payments, premium, if any, and interest on the Bonds and any Parity Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor; (ii) to the Reserv e Account in order to replenish the Reserve Account to the Reserve Requirement; (iii) to the Administrative Expense Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Fund are insufficient to pay Administrative Expenses; (iv) to the Acquisition and Construction Fund to pay Project Costs; or (v) after all Project Costs have been paid, to the District for any other lawful purpose of the District.
The amounts in the Surplus Fund are not pledged to the re payment of the Bonds or the Parity Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds or Parity Bonds, the District shall notify the Trustee in a Certificate of an Authorized Representative and the Trustee shall segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested at the w ritten direction of the District in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimu m tax of individuals under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds or Parity Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax -exempt basis for federal income tax purposes. Such amounts shall be disbursed as directed by an A uthorized Representative of the District.
Section 3.9. Acquisition and Construction Fund.
(a) The moneys in the Costs of Issuance Account shall be disbursed by the Trustee pursuant to a Certificate of an Authorized Representative of the District, and any balance remaining therein after 180 days shall be transferred by the Trustee to an Account within the Acquisition and 673
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Construction Fund as directed in writing by an Authorized Representative of the District. Following such transfer to the Acquisition and Construction Fund, the Costs of Issuance Account shall be closed.
(b) The moneys in the Acquisition and Construction Fund and the Accounts therein (other than the Costs of Issuance Account) shall be applied exclusively to pay the Project Costs.
Amounts for Project Costs shall be disbursed by the Trustee from the Acquisition and Construction Fund or the Accounts therein (other than the Costs of Issuance Account), as specified in a Request for Disbursement of Project Costs, substantially in the form of Exhibit B-1 attached hereto . A properly executed Request for Disbursement of Project Costs must be submitted in connection with each requested disbursement and the Trustee may rely thereon without investigating the accuracy thereof. Amounts in an Account of the Acquisition and Con struction Fund may be transferred to another Account or Accounts therein pursuant to a Certificate of an Authorized Representative of the District.
(c) Upon receipt of a Certificate of an Authorized Representative of the District stating that all or a specifie d portion of the amount remaining in the Acquisition and Construction Fund or the Accounts therein (other than the Costs of Issuance Account) is no longer needed to pay Project Costs, the Trustee shall: (i) transfer all or such specified portion, as appli cable, of the moneys remaining on deposit in the Acquisition and Construction Fund or the Accounts therein (other than the Costs of Issuance Account) to the Interest Account, the Principal Account or Redemption Account of the Special Tax Fund, to the Costs of Issuance Account or to the Surplus Fund, as directed in such certificate, provided that in connection with any direction to transfer amounts to the Surplus Fund there shall have been delivered to the Trustee with such certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or any Parity Bonds which were issued on a tax -exempt basis for federal income tax purposes; and (ii) thereafter, close the Acquisition and Construction Fund (including all Accounts and Subaccounts therein).
Section 3.10. Investments. Moneys held in any of the Funds, Accounts and Subaccounts under this Indenture shall be invested at the written direc tion of the District upon at least two (2) Business Days’ notice in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds, Accounts and Subaccounts. Any loss resulting from such Authorized Investments shall be credited or charged to the Fund, Account or Subaccount from which such investment was made, and any investment earnings on a Fund, Account or Subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the Acquisition and Construction Fund (including the Accounts therein), the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account therein (other than the Reserve Account of the Special Tax Fund) shall be deposited in t hose respective Funds, Accounts and Subaccounts; and (ii) investment earnings on all amounts deposited in the Reserve Account shall be deposited therein to be applied as set forth in Section 3.6. Moneys in the Funds, Accounts and Subaccounts held under th is Indenture may be invested by the Trustee as directed in writing by the District, from time to time, in Authorized Investments subject to the following restrictions (provided that the Trustee is not required to verify compliance with such restrictions an d may rely on the District’s written instructions as evidence of such compliance):
(a) Moneys in the Acquisition and Construction Fund and the Accounts therein shall be invested in Authorized Investments which will by their terms mature, or in the case of an I nvestment Agreement are available without penalty, as close as practicable to the date the District estimates the 674
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moneys represented by the particular investment will be needed for withdrawal from the Acquisition and Construction Fund or the Accounts there in. Notwithstanding anything herein to the contrary, amounts in the Acquisition and Construction Fund or the Accounts therein three years after the Delivery Date for the Bonds and the proceeds of each issue of Parity Bonds issued on a tax -exempt basis which are remaining on deposit in the Acquisition and Construction Fund on the date which is three years following the date of issuance of such issue of Parity Bonds shall be invested by the District only in Authorized Investments the interest on which is exc luded from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals under the Code) or in Authorized Investments at a yield not in exces s of the yield on the issue of Bonds or Parity Bonds from which such proceeds were derived, unless in the opinion of Bond Counsel such restriction is not necessary to prevent interest on the Bonds or any Parity Bonds which were issued on a tax -exempt basis for federal income tax purposes from being included in gross income for federal income tax purposes. (b) Moneys in the Interest Account, the Principal Account, and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds and any Parity Bonds as the same become due.
(c) Moneys in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments (other than the Authorized Investment described in clause (2)(i) of the definition thereof) which, taken together, have a weighted average ma turity not in excess of five years; provided that such amounts may be invested in an Investment Agreement to the later of the final maturity of the Bonds or any Parity Bonds so long as such amounts may be withdrawn at any time, without penalty, for applica tion in accordance with Section 3.6 hereof; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds or an issue of Parity Bonds shall mature later than the respective final maturity date of the Bonds or the issue of Parity Bonds, as applicable.
(d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (1) of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.7 hereof or in Authorized Investments of the type described in clause (2)(e) of the definition thereof.
(e) In the absence of written investment directions from the District, the Trustee shall hold the funds uninvested.
The Trustee shall sell, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such funds and accounts or from su ch funds and accounts. Notwithstanding anything in this Indenture to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture. Any Authorized Investments that are registrable securities shall be registered in the name of the Trustee.
The Trustee may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for making such investment. The Truste e may sell at the best market price obtainable, or present for redemption, any Authorized Investment so purchased 675
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whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account t o which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or which any one or more of its affi liates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or dealing as principal for its own account. The parties acknowledge that the Trustee is not providing investment supervision, recommendations, or advice.
The District acknowledges that, to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of security transactions as they occur, the District speci fically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the District periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder.
ARTICLE IV
REDEMPTION OF BONDS AND PARITY BONDS
Section 4.1. Redemption of Bonds.
(a) Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date on or after September 1, 20 __, in whole or in part, from such maturities as are sel ected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:
Redemption Date Redemption Price
%
In the event that the District elects to redeem Bonds as provided above, the District shall give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee shall be given at least 45 but no more than 60 calendar days prior to the redemption date, or by such later date as is acceptable to the Trustee.
(b) Mandatory Sinking Fund Redemption . The Bonds maturing on September 1, 20__ (the “20 __ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established hereunder, on September 1, 20 __ and on each September 1 thereafter prior to maturity in accordance wi th the schedule of Sinking Fund Payments set forth below. The 2 0__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 676
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20__ Term Bond equal to the principal amount there of, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
_____________
* Maturity.
(c) The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established hereunder, on September 1, 20__ and on each Septem ber 1 thereafter prior to maturity in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
_____________
* Maturity.
If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District shall notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased shall be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the purchase. All Bonds purchased pursuant to this subsection shall be cancelled pursuant to Section 10.1 hereof.
In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds shall be reduced, as nearly as practicable, on a pro rata basis.
(d) Special Mandatory Redemption . The Bonds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on or after September 1, 2026, and shall be redeemed by the Trustee, from 677
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Prepayments deposited to the Redemption Account pursuant to Section 3.2, plus amounts transferred from the Reserve Account pursuant to Section 3.6(c), at the following redemption prices, expresse d as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Date Redemption Price
%
Prepayments and amounts released from the Reserve Account in connection with Prepayments will be allocated to the payment at maturity and redemption of Bonds and any Parity Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds and any Parity Bonds and such amounts shall be applied to redeem B onds and Parity Bonds as nearly as practicable on a pro rata basis among maturities in increments of $5,000; provided, however, that, for Prepayments of less than $50,000, the District may specify in a Certificate of an Authorized Representative that Prepayments be applied to one or more maturities of the Bonds or Parity Bonds so long as there is delivered to the Trustee a Certificate of the Independent Financial Consultant that, following such application of the Prepayments, the maximum Special Taxes that may be levied in each Fiscal Year on Taxable Property is not less than 110% of Annual Debt Service in the Bond Year that begins in such Fiscal Year. (e) The redemption provisions for Parity Bonds shall be set forth in a Supplemental Indenture.
Section 4.2. Selection of Bon ds and Parity Bonds for Redemption . If less than all of the Bonds or Parity Bonds Outstanding are to be redeemed, the portion of any Bond or Parity Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds or Parity Bonds for redemption, the Trustee shall treat such Bonds or Parity Bonds, as applicable, as representing that number of Bonds or Parity Bonds of $5,000 denominations which is obtaine d by dividing the principal amount of such Bonds or Parity Bonds to be redeemed in part by $5,000. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Truste e shall promptly notify the District in writing of the Bonds or Parity Bonds, or portions thereof, selected for redemption.
Section 4.3. Notice of Redemption. When Bonds or Parity Bonds are due for redemption under Section 4.1 above or under another redemption provision set forth in a Supplemental Indenture relating to any Parity Bonds, the Trustee shall give notice, in the name of the District, of the redemption of such Bonds or Parity Bonds. Such notice of redemption shall: (i) specify the CUSIP numbers (if any), th e bond numbers and the maturity date or dates of the Bonds or Parity Bonds selected for redemption, except that where all of the Bonds or all of an issue of Parity Bonds are subject to redemption, or all of the Bonds or Parity Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds or Parity Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds or Parit y Bonds are to be redeemed; (v) in the case of Bonds or Parity Bonds to be redeemed only in part, state the portion of such Bond or Parity Bond which is to 678
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be redeemed; (vi) state the date of issue of the Bonds or Parity Bonds as originally issued; (vii) state the rate of interest borne by each Bond or Parity Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds or Parity Bonds being redeemed as shall be specified by the Trustee. Such notice shall f urther state that on the date fixed for redemption, there shall become due and payable on each Bond, Parity Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and th at from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 45 days prior to the redemption date, the Trustee shall mail a copy of such notice of redemption, by first class mail, postage prepaid, t o the respective Owners thereof at their addresses appearing on the Bond Register, and to the original purchaser of any Bonds or Parity Bonds; provided, however, so long as the Bonds and Parity Bonds are registered in the name of the Nominee, such notice s hall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond or Parity Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds or Parity Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption.
In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Each further notice of rede mption shall be sent not later than the date that notice of redemption is given to the Owners pursuant to the first paragraph of this Section by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds and Parity Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds and Parity Bonds.
Upon the payment of the redemption price of any Bonds and Parity Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear t he CUSIP number identifying, by issue and maturity, the Bonds and Parity Bonds being redeemed with the proceeds of such check or other transfer.
With respect to any notice of optional redemption of Bonds or Parity Bonds, such notice may state that such redemption shall be conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such Bonds or Parity Bonds to be redeemed and that, if the Distric t determines that such moneys will not be received on or prior to the redemption date, said notice shall be of no force and effect and the Trustee shall not be required to redeem such Bonds or Parity Bonds. In the event that such notice of redemption cont ains such a condition and the District determines that such moneys will not be received, the redemption shall not be made, and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, tha t such moneys were not so received.
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Section 4.4. Partial Redemption of Bonds or Parity Bonds . Upon surrender of any Bond or Parity Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Owner, at the expense of the District, a new Bond or Bonds or a new Parity Bond or Parity Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity or, in the case of surrender of a Parity Bond, a new Parity Bond or Parity Bonds subject to the foregoing limitations.
Section 4.5. Effect of Notice and Availability of Redemption Money . Notice of redemption having been duly given, as provided in Section 4.3 hereof, and the amount ne cessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption:
(a) the Bonds and Parity Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture or in any Supplemental Indenture with respect to any Parity Bonds, anything in this Indenture or in the Bonds or the Parity Bonds to the contrary notwithstanding; (b) upon pres entation and surrender thereof at the office of the Trustee (except as provided in Section 4.1(b)), the redemption price of such Bonds and Parity Bonds shall be paid to the Owners thereof;
(c) as of the redemption date the Bonds or the Parity Bonds, or portion s thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds or Parity Bonds, or portions thereof, shall cease to bear further interest; and (d) as of the date fixed for redemption no Owner of any of the Bonds, Parity Bonds or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture or any Supplemental Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.
ARTICLE V
COVENANTS AND WARRANTY
Section 5.1. Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds and any Parity Bonds against all claims and demands of all persons.
Section 5.2. Covenants. So long as any of the Bonds or Parity Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Owners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and Parity Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund:
(a) Punctual Payment; Against Encumbrances. The District covenants that it will receive all Special Taxes in trust for the Owners and will , other than with respect to amounts to be deposited into the Admin istrative Expense Fund in accordance with Section 3.3 hereof, deposit all Special 680
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Taxes with the Trustee immediately upon their apportionment to the District, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by this Indenture.
All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District.
The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond and Parity Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and the Parity Bonds and in accordance with this Indenture to the extent that Net Taxes and other amounts pledged hereunder are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds, any Parity Bonds, and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of the Bonds and any Parity Bonds issued hereunder.
The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Net Taxes except as provided in this Indenture, and will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds, other than Parity Bonds. Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is subordinate in all respects to the ple dge of Net Taxes to repay the Bonds and the Parity Bonds, subject to compliance with the District’s bonded indebtedness limit.
(b) Levy of Special Tax. Beginning in Fiscal Year 2025-26 and so long as any Bonds or Parity Bonds issued under this Indenture are O utstanding, the District covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay:
(1) the principal of and interest on the Bonds and any Parity Bonds when due; (2) the Administrative Expenses; and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement, including any amounts to pay costs related to the Reserve Policy, if any.
The District further covenants that it will take no acti ons that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding.
(c) Commence Foreclosure Proceedings . The District covenants for the benefit of the Owners of the Bonds and any Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $ 7,500 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement. The District may, but shall not be obligated to, advance funds from any source of legally available funds in order to maintain the Reserve Account.
The District may treat any delinquent Special Tax sold to an independent third -party or to the City for at least 100% of the delinquent amount as having been paid. Proceeds of any such sale up to 100% of the delinquent amount will be deposited in the Special Tax Fund. 681
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The District covenants that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Pari ty Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds and any Parity Bonds. (d) Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or other funds in the Special Tax Fund, or which might impair the security of the Bonds or any Parity Bonds then Outstanding; provide d, however, that nothing herein contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims.
(e) Books and Accounts . The District will keep proper books of records and acco unts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of record s and accounts shall at all times during business hours be subject to the inspection of the Trustee or of the Owners or the Owners of any issue of Parity Bonds then Outstanding or their representatives authorized in writing. (f) Federal Tax Covenants . Notwith standing any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds and any Parity Bonds issued on a tax -exempt basis for federal income tax purposes will not be adversely affected for federal income tax purposes, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows:
(1) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or any Parity Bonds or of any other monies or property which would cause the Bonds or any Parity Bonds issued on a tax -exempt basis for federal income tax purposes to be “private activity bonds” within the meaning of Section 141 of the Code. (2) Arbitrage. The District will make no use of the proceeds of the Bonds or any Parity Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be “arbitrage bonds” within the meaning of Section 148 of the Code.
(3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or any Parity Bonds or take or omit to take any action that would cause the Bonds or any Parity Bonds issued on a tax -exempt basis for federal income tax purposes to be “federally guaran teed” within the meaning of Section 149(b) of the Code.
(4) Information Reporting . The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code.
(5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any Parity Bonds or any other amounts or property, regardless of the source, or take any action or 682
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refrain from taking any action that would cause the Bonds or any Parity Bonds issued on a tax-exempt basis for federal income tax purposes to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusi on from gross income for federal income tax purposes of interest on the Bonds and any applicable Parity Bonds. (6) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certific ate executed on the Delivery Date by the District in connection with the Bonds and any issue of Parity Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. (7) Other Tax -Exempt Issues . The District wil l not use proceeds of other tax-exempt securities to redeem any Bonds or Parity Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds issued on a tax-exempt basis. (8) Subsequent Opinions. If the District obtains a subsequent opinion of Bond Counsel other than Stradling Yocca Carlson & Rauth LLP , where such opinion is required in connection with a change or ame ndment to this Indenture or the procedures set forth in the Tax Certificate, it will obtain an opinion substantially to the effect originally delivered by Stradling Yocca Carlson & Rauth LLP , that interest on the Bonds is excluded from gross income for fed eral income tax purposes.
(g) Reduction of Maximum Special Taxes . The District hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern Californi a have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reaso n, the District hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the District below the levels provided in this Section 5.2(g) would interfere with the timely retirement of the Bonds and Parity Bonds . The District determines it to be necessary in order to preserve the security for the Bonds and Parity Bonds to covenant, and, to the maximum extent that the law permits it to do so, the District hereby does covenant, that it shall not initiate proceedin gs to reduce the maximum Special Tax rates for the District, unless, in connection therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce th e maximum Special Taxes that may be levied in each year on property within the District to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds.
(h) Covenants to Defend . The District covenants that, in the ev ent that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(g) above or to limit the power of the District to levy the Special Taxes for the purpose s set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. 683
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(i) Limitation on Right to Tender Bonds . The District hereby covenants that it will not adopt any policy pursuant to Section 53344.1 of the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of su ch a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Parity Bonds when due.
(j) Continuing Disclosure . The District covenants to comply with the terms of the Continuing Disclosure Certificate and with the terms of any agreement executed by the District with respect to any Parity Bonds to assist the Underwriter in complying with Rule 15c2 -12 adopted by the Securities and Exchange Commission; provided, however, that a failure to comply sh all not be considered an event of default hereunder and the Owners shall be limited to enforcing the terms thereof in accordance with the terms of the Continuing Disclosure Certificate. (k) Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds and any Parity Bonds of the rights and benefits provided in this Indenture.
ARTICLE VI
AMENDMENTS TO INDENTURE
Section 6.1. Supplemental Indentures or Orders Not Requiring Owner Consent . The District may from time to time, and at any time, without notice to or consent of any of the Owners, adopt Supplemental Indentures for any of the following purposes:
(a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matter s or questions arising under this Indenture or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Owners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond or Parity Bond payments; (c) to provide for the issuance of any Parity Bonds, and to provide the terms and conditions under which such Parity Bonds may be issued, subject to and in accordance with the provisions of this Indenture;
(d) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds or any Parity Bonds then Outstanding;
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(e) to modify, alter or amend the RMA in any ma nner, so long as the Trustee receives a certificate of an Independent Financial Consultant stating that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is less tha n the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; and (ii) based on the current development plan for par cels within the District, do not reduce the maximum Special Taxes which could be levied upon Taxable Property within the District to an amount which is less than the Administrative Expense Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such amendment; (f) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Owners; or
(g) to modify, alter, amend or supplement this Indenture in any other respect, as may be required to fund all or a portion of the Reserve Requirement with a Reserve Policy.
Section 6.2. Supplemental Indentures or Orders Requiring Owner Consent .
Exclusive of the Supplemental Indentures described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed nece ssary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however, that nothing herein shall permit, or be construed as permitting: (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond or Parity Bond; (b) a reduction in the principal amount of, or redemption premium on, any Bond or Parity Bond or the rate of inte rest thereon; (c) a preference or priority of any Bond or Parity Bond over any other Bond or Parity Bond; or (d) a reduction in the aggregate principal amount of the Bonds and Parity Bonds the Owners of which are required to consent to such Supplemental In denture, without the consent of the Owners of all Bonds and Parity Bonds then Outstanding.
If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Owners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid, to all Owners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the office of the Trustee for in spection by all Owners.
The failure of any Owners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds and P arity Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption there of by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds and any Parity Bonds. In determining whether the Owners of a majority of the 685
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aggregate principal amount of the Bonds and Parity Bonds have consented to the adoption of any Supplemental Indenture, Bonds or Parity Bonds which are owned by the Dist rict or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination.
Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds in instances where such c onsent is required pursuant to the provisions of this Section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds and Parity Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments.
Section 6.3. Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds or any Parity Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Own er of any Outstanding Bond or Parity Bond at such effective date and presentation of such Owner’s Bond or Parity Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity Bonds. If the District shall so determine, new Bonds or Parity Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond or Parity Bond at such effective date such new Bonds or Parity Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may select and des ignate for that purpose, without cost to each Owner of Outstanding Bonds or Parity Bonds, upon surrender of such Outstanding Bonds or Parity Bonds.
The Trustee shall have the right to require such opinions of counsel as it deems necessary concerning: (i) the lack of material adverse effect of the amendment on Owners; and (ii) the fact that the amendment will not affect the tax status of interest with respect to the Bonds.
ARTICLE VII
TRUSTEE
Section 7.1. Trustee. Wilmington Trust, National Association shall be the Trustee for th e Bonds and any Parity Bonds unless and until another Trustee is appointed by the District hereunder.
The Trustee represents that it has (or is a member of a bank holding company system whose bank holding company has) a combined capital (exclusive of borr owed capital) and surplus of at least $100,000,000. The District may, at any time, appoint a successor Trustee satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture.
The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Own ers, to select Bonds and Parity Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds and Parity Bonds when the same are duly presented to it for payment at matu rity or on call and redemption, to provide for the registration of 686
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transfer and exchange of Bonds and Parity Bonds presented to it for such purposes, to provide for the cancellation of Bonds and Parity Bonds all as provided in this Indenture, and to provid e for the authentication of Bonds and Parity Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds and Parity Bonds paid, discharged and cancelled by it.
The Trustee is hereby authorized to pay and redeem the Bonds and Parity Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds and Parity Bonds upon paymen t thereof in accordance with the provisions of Section 10.1 hereof.
The District shall from time to time, subject to any agreement between the District and the Trustee then in force, timely pay to the Trustee following demand therefor compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees, costs and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless against costs, claims, expenses and liabilities, including, without limitation, fees, costs and expenses of its attorneys (not arising from its own negligence or willful misconduct) which it may incur in the exercise and performance of its powers and duties hereunder. The foregoing obligation of the District to indemnify the Trustee shall survive the removal or resignation of the Trustee or the discharge of the Bonds and Parity Bonds.
Section 7.2. Removal of Trustee . The District may at any time at its sole discretion, upon 30 days’ notice, remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company having (or whose parent bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at l east $100,000,000, and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee and notice of the successor Trustee’s identity and address being sent by the successor Trustee to the Owners.
Section 7.3. Resignation of Trustee . The Trustee may at any time resign and be discharged from its duties and obligations hereunder by giving written notice to the District. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in Section 7.2 above by an instrument in writing. Any resignation or removal of the Trustee and appointment of a s uccessor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed by the District within thirty (30) days of giving such notice or removal or resignation, then the Trust ee, or any Owner may petition, at the sole expense of the District, a court of competent jurisdiction for the appointment of a successor Trustee and other appropriate relief, and such court may thereupon, after such notice (if any) as it may deem proper, appoint a successor Trustee under this Indenture. 687
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Section 7.4. Liability of Trustee . The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any Parity Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility or liability for the correctness of the same and makes no representations whatsoever as to the validity or sufficiency of this Indenture, the Bonds or any Parity Bonds, and shall incur no responsib ility or liability in respect thereof, other than in connection with its express duties or obligations specifically set forth herein, in the Bonds and any Parity Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall not have nor be under any responsibility or duty with respect to the issuance of the Bonds or any Parity Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligenc e or willful misconduct. The Trustee shall not be liable for any action taken or omitted by it or any of its officers, employees or agents in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by t his Indenture. The Trustee shall not be liable for any actions taken or omitted to be taken, or any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.
The Trustee shall be entitled to request and receive written instructions from the District and/or Owners and shall have no responsibility or liability for any losses or damages of any nature that may arise from any action taken or not taken by the Truste e in accordance with the written direction of any such party. The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the written direction of the Owners of not less than a majority in aggregate principal amount of the Bonds and Parity Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture.
The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of an Owner and/or the District, pursuant to the provisions of this Indenture, unless such party shall have offere d to the Trustee security or indemnity (satisfactory to the Trustee in its sole and absolute discretion) against the costs, expenses and liabilities which may be incurred by it in compliance with such request or direction.
Neither the Trustee nor any of it s directors, officers, employees, agents or affiliates shall be responsible for nor have any duty to monitor the performance or any action of the District or any of its directors, members, officers, agents, affiliates or employees, nor shall it have any li ability in connection with the malfeasance or nonfeasance by such party. The Trustee may assume performance by all such persons of their respective obligations. The Trustee shall have no enforcement or notification obligations relating to breaches of repr esentations or warranties of any other person. The Trustee shall be conclusively protected in acting upon any notice, resolution, request, consent, order, judgement, decree, certificate, report, Bond, Parity Bond or other paper or document signed or presented by the proper party or parties as provided hereunder, not only as to due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein. The Trustee may, at the expense of the District, request, rely on and act in accordance with officer’s certificates and/or opinions of counsel, and shall incur no liability and shall be fully protected in acting or refraining from acting in accordance with such officer’s certificates and opinions of counsel.
The Trustee shall not be bound to recognize any person as the Owner of a Bond or Parity Bond unless and until such Bond or Parity Bond is submitted for inspection, if required, and his title thereto is satisfactorily established to the Trustee, if disputed. 688
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Whenever in the administration of its express obligations under this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, the Trustee may, at the expense of the Distri ct, request, rely on and act in accordance with officer’s certificates and/or opinions of counsel (unless other evidence in respect thereof be herein specifically prescribed), and shall incur no liability and shall be fully protected in acting or refrainin g from acting in accordance with such officer’s certificates and opinions of counsel, but in its discretion the Trustee may but shall not be obligated to accept other evidence of such matter or may require such additional evidence as to it may seem reasona ble. It is understood and agreed that no such act shall broaden or imply the Trustee’s acceptance of a broadening of the scope of the Trustee’s duties and obligations hereunder unless the Trustee shall provide written acceptance thereof.
The Trustee shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it actually receives. No provision in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers.
The Trustee shall not be deemed to have knowledge of any default or event of default under this Indenture until an officer at the Trustee’s corporate trust office responsible for the administration of its duties hereunder shall have actual knowledge thereof or the Trustee shall have received written notice thereof at its corporate trust office.
The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds and any Parity Bonds.
Before taking any action under Article VIII hereof the Trustee may require that indemnity and security satisfactory to the Trustee in its sole and exclusive discretion be furn ished to it for and from any expenses and liabilities and to protect it against any liability it may incur hereunder, in each case, in the absence of its own negligence or willful misconduct.
The immunities extended to the Trustee also extend to its directors, officers, employees and agents (including its counsel).
The Trustee shall not be liable for any action taken or not taken by it in accordance with the direction of the Owners of 25% (or other percentage provided for herein) in aggregate principa l amount of Bonds and Parity Bonds Outstanding relating to the exercise of any right, power or remedy available to the Trustee. In the event of conflicting instructions hereunder, the Trustee shall have the right to decide the appropriate course of action and will be protected in so doing.
The permissive right of the Trustee to do things enumerated in this Indenture shall not be construed as a duty or in any way expand or impliedly expand the scope of the Trustee’s duties hereunder, and, with respect to su ch permissive rights, the Trustee shall not be answerable for other than its negligence or willful misconduct.
The Trustee may execute any of the trusts or powers hereof and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if 689
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appointed by it with reasonable care. The Trustee shall be entitled to rely on and shall not be liable for any action taken or omitted to be taken by the Trustee in accordance with the advice of counsel or other professionals retained or consulted by the Trustee.
The Trustee may become the Owner or pledgee of the Bonds and Parity Bonds with the same rights it would have if it were not Trustee.
The Trustee shall perform such duties and only such duties as are speci fically set forth in this Indenture and no implied duties or obligations shall be read into this Indenture against the Trustee.
These duties shall be deemed purely ministerial in nature, and the Trustee shall not be liable except for the performance of such duties.
If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person.
The District shall, to the extent permitted by law, indemnify and save the Trustee and its officers, directors, agents, and employees harmless from and against (whether or not litigated) all claims, losses, costs, expenses, liability and damages, including legal fees and expe nses, arising out of: (i) the use, maintenance, condition or management of, or from any work or thing done on, the Project; (ii) any breach or default on the part of the District in the performance of any of its obligations under this Indenture and any oth er agreement made and entered into for purposes of the Bonds and Parity Bonds; (iii) any act of the City, the District or of any of its agents, contractors, servants, employees or licensees with respect to the Project; (iv) any act of any assignee of, or purchaser from, the City, the District or of any of its or their agents, contractors, servants, employees or licensees with respect to the Project; (v) the construction or acquisition of the Project or the expenditure of Project Costs; (vi) the exercise and performance by the Trustee of its powers and duties hereunder or any related document; (vii) the sale of the Bonds and Parity Bonds and the carrying out of any of the transactions contemplated by the Bonds and Parity Bonds or this Indenture; or (viii) any untrue statement or alleged untrue statement of any material fact or omission or alleged omission to state a material fact necessary to make the statements made in light of the circumstances in which they were made, not misleading in any official statemen t or other disclosure document utilized in connection with the sale or marketing of the Bonds and Parity Bonds. The indemnification set forth in this Section shall extend to the Trustee’s officers, agents, employees, successors and assigns. No indemnific ation will be made under this Section or elsewhere in this Indenture or other agreements for willful misconduct or negligence by the Trustee, its officers, agents, employees, successors or assigns. The District’s obligations hereunder shall remain valid and binding notwithstanding maturity and payment of the Bonds and Parity Bonds, or the resignation or removal of the Trustee.
In accepting the trust hereby created, the Trustee acts solely as Trustee for the Owners and not in its individual capacity, and al l persons, including, without limitation, the Owners, the District and the City, having any claim against the Trustee arising from this Indenture shall look only to the funds and accounts held by the Trustee hereunder for payment, except as otherwise provi ded herein.
Under no circumstances shall the Trustee be liable in its individual capacity for the obligations evidenced by the Bonds and any Parity Bonds.
THE TRUSTEE MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS
OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR 690
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FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE DISTRICT OF THE PROJECT, OR ANY PORTION THEREOF. In no event shall the Trustee be liable for incidental, indirect, punitive, special or consequent ial loss or damage of any kind whatsoever (including, but not limited to, loss of profit), in connection with or arising out of the Project or this Indenture for the existence, furnishing, functioning or use and possession of the Project, irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
The Trustee shall not be liable to the parties hereto or deemed in breach or default hereunder if and to the extent its performance hereunder is prevented by reason of force majeure. The term “force majeure” means an occurrence that is beyond the control of the Trustee and could not have been avoided by exercising due care. Force majeure shall include, but not limited to, any act or provision of any present or future law or regulation or governmental authority; acts of God; earthquakes; fires; floods; wars; terrorism; civil or military disturbances; sabotage; epidemics; quarantine restrictions; riots; interruptions, loss or malfunctions of utilities, computer (hardware or software) or communications service; accidents; labor disputes; acts of civil or military authority or governmental actions; or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility, or other similar occurrences.
The Trustee shall be entitled to request and receive written instructions from the District or other parties and shall have no responsibility or liability for any los ses or damages of any nature that may arise from any action taken or not taken by the Trustee in accordance with the written direction of the District or such other parties. The Trustee shall have the right to accept and act upon directions given pursuant to this Indenture and delivered using electronic notice; provided, however, that the District shall provide to the Trustee an incumbency certificate listing each Authorized Representative of the District with the authority to provide such directions and c ontaining specimen signatures of such authorized officers, which incumbency certificate shall be amended whenever a person is to be added or deleted from the listing. If the District elects to give the Trustee directions using electronic notice and the Tru stee in its discretion elects to act upon such directions, the Trustee’s understanding of such directions shall be deemed controlling. The District understands and agrees that the Trustee cannot determine the identity of the actual sender of such directio ns and that the Trustee shall conclusively presume that directions that purport to have been sent by an authorized officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Representative of the District. The D istrict shall be responsible for ensuring that only an Authorized Representative of the District shall transmit such directions to the Trustee and that each Authorized Representative of the District treat applicable user and authorization codes, passwords and/or authentication keys with extreme care. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and a compliance with such directions, notwithstanding such directions conflict or are inconsistent with a subsequent written direction. The District agrees (i) to assume all risks arising out of the use of electronic notice to submit directions to the Trustee, including, without limitation, the risk of the Trustee acting on unauthorized directions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting directions to the Trustee and that there may be more secure methods of transmitting directions than the method(s) selected by the District; and (iii) that the security procedures (if any) to be followed in connection with its transmission of directions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances. 691
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Section 7.5. Merger or Consolidation . Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding.
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1. Events of Default. Any one or more of the following events shall constitute an “Event of Default”:
(a) default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond or Par ity Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) default in the due and punctual payment of the interest on any Bond or Parity Bond when and as the same shall become due and payable; or
(c) except as described in subsections (a) or (b), default by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds or any Parity Bonds, which default continues for a per iod of 30 days after the District has been given notice in writing of such default by the Trustee or the Owners of twenty -five percent (25%) in aggregate principal amount of the Outstanding Bonds and Parity Bonds.
The Trustee agrees to give notice to the Owners as soon as practicable upon the occurrence of an Event of Default under subsections (a) or (b) above and within 30 days of the Trustee’s actual knowledge of an Event of Default under subsection (c) above.
Section 8.2. Remedies of Owners . Upon the occurrence of a n Event of Default, any Owner may pursue any available remedy at law or in equity to enforce the payment of the principal of, premium, if any, and interest on the Outstanding Bonds and Parity Bonds, and to enforce any rights of the Trustee under or with respect to this Indenture, including:
(a) by mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, offic ers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) by suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or
(c) by a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust.
If an Event of Default shall have occurred and be continuing and if requested and directed so to do by the Owners of at least twenty -five percent (25%) in aggregate principal amount of Outstanding Bonds and Parity Bonds and if indemnified to its satisfaction, the Trustee shall be 692
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obligated to exercise such one or more of the rights and powers conferred by this Article VIII, as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the Bonds and Parity Bonds.
No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumul ative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law.
Section 8.3. Application of Revenues and Other Funds After Default . All amounts received by the Trustee pursuant to any right given or action taken by the Owners under the provisions of this Indenture relating to the Bonds and Parity Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds and Parity Bonds:
First, to the payment of the costs, fees and expenses of the Trustee in declaring such Event of Default and in performing its duties and obligations hereunder, including reasonable compensation to its agents, attorneys and counsel;
Second, to the payment of the fees, costs and expenses of the Owners in declaring such Event of Default and in carrying out the provisions of this Article VIII, including reasonable compensation to its agents, attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and
Third, to the payment of the whole amount of interest on and principal of the Bonds and Parity Bonds then due and unpaid, wit h interest on overdue installments of principal and interest to the extent permitted by law at the net effective rate of interest then borne by the Outstanding Bonds and Parity Bonds; provided, however, that in the event that such amounts shall be insuffic ient to pay the full amount of such interest and principal, then such amounts shall be applied in the following order of priority:
(a) first to the payment of all installments of interest on the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing; (b) second, to the payment of all installments of principal, including Sinking Fund Payments, of the Bonds and Parity Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing; and
(c) third, to the payment of interest on overdue installments of principal and interest on the Bonds and Parity Bonds on a pro rata basis based on the total amount then due and owing.
Section 8.4. Power of Trustee to Control Proceedings . In the event that the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its obligations hereunder, whether upon its own discretion or upon the request of the Owners of twenty -five percent (25%) in aggregate prin cipal amount of the Bonds and Parity Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds and Parity Bonds, with respect to the continuance, discontinuance, withdrawal, compro mise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, 693
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compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds and Parity Bonds hereunder opposing such discontinuance, withdrawal, compromise, settlement or other such litigation. Any suit, action or proceeding which any Owner of Bonds or Parity Bonds shall have the right to bring to enforce any right or remedy hereunder may be brought by the Trustee for the equal benefit and protection of all Owners of Bonds and Parity Bonds similarly situated and the Trustee is hereby appointed (and the successive respective Owners of the Bonds and Parity Bonds issued hereunder, by taking and holding the same, shall be conclusively deemed so to have appointed it) the true and lawful attorney in fact of the respective Owners of the Bonds and Parity Bonds for the purposes of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners of the Bonds and Parity Bonds as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact.
Section 8.5. Appointment of Receivers . Upon the occurrence of an Event of Default hereunder, and upon the filing of a suit or other commencement of judicial proceedings to enforce the rights and of the Owners of the Bonds and Parity Bonds under this Indenture, the Trustee shall be entitled, as a matter of right to which the District expressly agrees, to the appointment of a receiver or receivers of the Net Taxes and other amounts pledged hereunder, pending such proceedings, with such powers as the court making such appointment shall confer.
Section 8.6. Non-Waiver. Nothing in this Article VIII or in any other provision of this Indenture, or in the Bonds or th e Parity Bonds, shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds and Parity Bonds to the respective Owners of the Bonds and Parity Bonds at the respective dates of maturity, as herein provided, or to pay the Trustee its fees and expenses as provided in Section 8.3 hereof, out of the Net Taxes and other moneys herein pledged for such payment.
A waiver of any default or breach of duty or contract by the Trustee or any Owners shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission of the Trustee or any Owner of any of the Bonds or Parity Bonds to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein; and every power and remedy conferred upon the Trustee or the Owners by the Act or by this Article VIII may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee or the Owners, as the case may be.
Section 8.7. Limitations on Rights and Remedies of Owners . No Owner of any Bond or Parity Bond issued hereunder shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon this Indenture, unless: (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds and Parity Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own na me; (c) said Owners shall have tendered to the Trustee indemnity and security reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity and security shall have been made to, the Trustee.
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Such notification, request, tender of indemnity and securit y and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds and Parity Bonds of any remedy hereunder; it being understood and intended that no one or more Owners of Bonds and Parity Bonds s hall have any right in any manner whatever by his or their action to enforce any right under this Indenture, except in the manner herein provided, and that all proceedings at law or in equity to enforce any provision of this Indenture shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners of the Outstanding Bonds and Parity Bonds.
The right of any Owner of any Bond and Parity Bond to receive payment of the principal of and interest and premium (if any) on such Bond and Parity Bond as herein provided or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of this Section or any other provision of this Indenture.
Section 8.8. Termination of Proceedings . In case any Owner shall have proceeded to enforce any right under this Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been discontinued or abandoned for an y reason, or shall have been determined adversely, then and in every such case, the District, the Trustee and the Owners shall be restored to their former positions and rights hereunder, respectively, with regard to the property subject to this Indenture, and all rights, remedies and powers of the Owners shall continue as if no such proceedings had been taken.
ARTICLE IX
DEFEASANCE AND PARITY BONDS
Section 9.1. Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outsta nding Bond or Parity Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond or Parity Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond or Parity Bond under this Indenture and any Supplemental Indenture relating to such Parity Bond shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds and Parity Bonds pursuant to this Section, the Trustee shall execute and deliver to the District all such instruments as may be desirable to e vidence such discharge and satisfaction, and the Trustee shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds and Parity Bonds.
Any Outstanding Bond or Parity Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond or Parity Bond is paid in any one or more of the following ways:
(a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same become due and payable; 695
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(b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond or Parity Bond, as and when the same shall become due and payable; or
(c) by depositing with the Trustee or another escrow bank appointed by the District, in trust, federal securities described in subparagraph (1) of the definition of Authorized Investments, in which the District may lawfully invest its money, in such amount as will be sufficient , together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bon d or Parity Bond, as and when the same shall become due and payable.
If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds and Parity Bonds shall not have been surrendered for payment, all obligati ons of the District under this Indenture and any Supplemental Indenture with respect to such Bond or Parity Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond or Parity Bond no t so surrendered and paid all sums due thereon, and except for the covenants of the District contained in Section 5.2(f) or any covenants in a Supplemental Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Trustee. In connection with a defeasance under (c) above, there shall be provided to the District a verification report from an i ndependent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Out standing Bonds and Parity Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bo nds or Parity Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture.
Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds an d Parity Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds and Parity Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or inter est on the Bonds and Parity Bonds when due. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Owners whose Bonds or Parity Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred.
Section 9.2. Conditions for the Issuance of Parity Bonds and Other Additional Indebtedness. The District may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Net Taxes and other amounts deposited in the Special Tax Fund and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Indenture; provided, however, that Parity Bonds may only be issued for the purpose of refunding all or a portion of the Bonds or Parity Bonds then Outstanding subject to the following 696
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specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds:
(a) The District shall be in compliance with all covenants set forth in this Indenture and any Supplemental Indenture then in effect and a certificate of the District to that effect shall have been filed with the Trustee; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the District will be in compliance with all such covenants. (b) The issuance of such Pa rity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Indenture duly adopted by the District which shall specify the following:
(1) the purpo se for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited; (2) the authorized principal amount of such Parity Bonds; (3) the date and the maturity date or dates of such Parity Bonds; provided that:
(i) each maturity date shall fall on a September 1; (ii) all such Parity Bonds of like maturity shall be identical in all respects, except as to number; (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; and (iv) the maturity of such Parity Bonds to be issued shall not exceed the maturity of the Bonds and Parity Bonds being refunded; (4) the description of th e Parity Bonds, the place of payment thereof and the procedure for execution and authentication;
(5) the denominations and method of numbering of such Parity Bonds; (6) the amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds;
(7) the amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement;
(8) the form of such Parity Bonds; and
(9) such other provisions as are necessary o r appropriate and not inconsistent with this Indenture.
(c) The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Tr ustee (unless the Trustee shall be directed by the District to accept any of such documents bearing a prior date):
(1) a certified resolution of the City Council, acting as the legislative body of the District, authorizing the issuance of such Parity Bonds; 697
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(2) a written request of the District as to the delivery of such Parity Bonds; (3) an opinion of Bond Counsel and/or general counsel to the District to the effect that: (i) the District has the right and power under the Act to execute and deliver the Supplemental Indenture relating to such Parity Bonds, and such Supplemental Indenture has been duly and lawfully executed by the District, and the Indenture and such Supplemental Indenture are in full force and effect and are valid and binding upon the District and enfor ceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights); (ii) this Indenture creates the valid pledge which it purports t o create of the Net Taxes and other amounts as provided in this Indenture, subject to the application thereof to the purposes and on the conditions permitted by this Indenture; and (iii) such Parity Bonds are valid and binding limited obligations of the Di strict, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors’ rights) and the terms of this Indenture and the Supplemental Indenture executed and delivered in connection with such Parity Bonds and are entitled to the benefits of this Indenture and such Supplemental Indenture, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Indenture and such Supplemental Indenture; (4) a certificate of the District containing such statements as may be reasonably necessary to show compliance with the requirements of this Indenture; (5) a certificate of an Independent Financial Consultant certifying that in each Bond Year the Annual Debt Service on the Bonds and Parity Bonds to remain Outstanding following the issuance of the Parity Bonds proposed to be issued is less than the Annual Debt Service on the Bonds and Parity Bonds Outstanding prior to the issuance of such Parity Bonds; and (6) such further documents, money and securities as are required by the provisions of this Indenture and the Supplemental Indenture providing for the issuance of such Parity Bonds.
ARTICLE X
MISCELLANEOUS
Section 10.1. Cancellation of Bonds and Parity Bonds . All Bonds and Parity Bonds surrendered to the Trustee for payment upon maturity or for redemption shall be upon payment therefor, and any Bond or Parity Bond purchased by the District as authorized herein and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds and Parity Bonds, as provided by law, and, upon request of the District, furnish to the District a certificate of such destruction.
Section 10.2. Execution of Documents and Proof of Ownership . Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Owners may be in any number of concurrent instruments of similar tenor and may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of a ny such instrument, or of any instrument appointing any such 698
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attorney, and of the ownership of Bonds or Parity Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner:
(a) The fact and date of the execution by any Owner or his or her attorney of any such instrument, and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where a ny such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority.
(b) As to any Bond or Parity Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond or Parity Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond or Parity Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary.
Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond or Parity Bond shall bind every future Owner of the same Bond or Parity Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent.
Section 10.3. Unclaimed Moneys . Anything in this Indenture to the contrary notwithstanding, any money held b y the Trustee in trust for the payment and discharge of any of the Outstanding Bonds and Parity Bonds which remain unclaimed for two years after the date when such Outstanding Bonds or Parity Bonds have become due and payable, if such money was held by the Trustee at such date, or for two years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds or Parity Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds or Parity Bonds; provided, however, that, before being required to make any such payment to the District, the Trustee, at the expense of the District, shall cause to be mailed by first -class mail, postage prepaid, to the registered Owners of such Outstanding Bonds or Parity Bonds at their addresses as they appe ar on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District.
Section 10.4. Provisions Constitute Contract; Governing Law . The provisions of this Indenture shall constitute a contract between the District and the Owners and the provisions hereof shall be governed by and construed in accordance with the laws of the State of California.
In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Owners o r the Trustee, then the District, the Trustee and the Owners shall be 699
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restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.
After the issuance and delivery of the Bonds, this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner.
Section 10.5. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes and other amounts pledged hereunder.
Section 10.6. Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds or any Parity Bonds the rights and benefits provided in this Indenture.
Section 10.7. Entire Agreement; Severability. This Indenture and the exhi bits hereto set forth the entire agreement and understanding of the parties related to this transaction and supersedes all prior agreements and understandings, oral or written. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds and any Parity Bonds issued pursuant hereto shall remain valid and the Owners shall retain all valid rights and benefits accorded to them under the laws of the State of California.
Section 10.8. Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be mailed, first class, postage prepaid, or personally delivered to the City Manager of the City of Wildomar, 23873 Clinton Keith Road, Suite 110 , Wildomar California 92595, all notices to the Trustee in its capacity as Trustee shall be mailed, first class, postage prepaid, or personally delivered to the Trustee, Wilmington Trust, National Association, 650 Town Center Drive, Suite 800, Costa Mesa, California 92626.
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IN WITNESS WHEREOF, COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO) OF THE CITY OF WILDOMAR has caused this Indenture to be signed by an Authorized Representative of the District and Wilmington Trust, National Association in token of its acceptance of the trust created hereunder, has caused this Indenture to be signed in its corporate name by its officers identified below, all as of the day and year first above written.
COMMUNITY FACILITIES DISTRICT NO. 2023-1
(AVALINO) OF THE CITY OF WILDOMAR
By:
City Manager of the City of Wildomar, acting
on behalf of Community Facilities District No.
2023-1 (Avalino) of the City of Wildomar
ATTEST:
City Clerk of the City of Wildomar, acting
on behalf of Community Facilities District
No. 2023-1 (Avalino) of the City of
Wildomar
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
701
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EXHIBIT A
FORM OF SPECIAL TAX BOND
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A N EW YORK CORPORATION (“DTC”), TO THE DISTRICT OR TRUSTEE FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAY MENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. , HAS AN INTEREST HEREIN.
R-____ $___________
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR
SPECIAL TAX BOND, SERIES 2026
INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP:
___% September 1, 20__ February __, 2026 ___
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: __________________ DOLLARS
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO) OF THE CITY OF WILDOMAR (the “District”) which was formed by the City of Wildomar (the “City”) and is situated in the County of Riverside, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter define d), to the Owner named above, or registered assigns, 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 Interest Payment D ate (as hereinafter defined) next preceding the date of authentication hereof, unless: (i) the date of authentication is an Interest Payment Date, in which event interest shall be payable from such date of authentication; (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of aut hentication is prior to the close of business on the first Record Date, in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, inte rest on this Bond shall be payable from the last Interest Payment Date to which the 702
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interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated D ate set forth above.
Interest will be paid semiannually on September 1, 2026 and each March 1 and September 1 thereafter (each an “Interest Payment Date”), at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment.
The principal of and premium, if any, on this Bond are payable to the Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of the Trustee (as such term is defined in t he Indenture), initially Wilmington Trust, National Association (the “Trustee”). Interest on this Bond shall be paid by check of the Trustee mailed, by first class mail, postage prepaid, or in certain circumstances described in the Indenture by wire transfer to an account within the United States of America, to the Owner hereof as of the close of business on the fifteenth 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 Trustee.
This Bond is one of a duly authorized issue of “ Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Special Tax Bonds, Series 2026 ” (the “Bonds”) issued in the aggregate principal amount of $__________ pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, being Section 53311 et seq. of the California Government Code (the “Act”) for the purpose of financing public improvements, funding a reserve account , and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City, acting in its capacity as the legislative body of the D istrict (the “Legislative Body”), on January 14, 2026, and a Bond Indenture executed in connection therewith dated as of February 1, 2026 (the “Indenture”), by and between the District and the Trustee, and this reference incorporates the Indenture herein, and by acceptance hereof the Owner of this Bond assents to said terms and conditions. The Indenture is adopted under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California.
Pursuant to the Act a nd the Indenture, the principal of, premium, if any, and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District (the “Special Taxes”) and certain other a mounts pledged to the repayment of the Bonds as set forth in the Indenture. Any amounts for the payment hereof shall be limited to the Net Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund established under the Indenture, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the o wners of the Bonds that under certain circumstances described in the Indenture it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds.
The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date on and after September 1, 20 __, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:
703
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4936-2834-6234/200945-0010
Redemption Date Redemption Price
%
The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 20 __ and on each September 1 thereafter prior to maturity in accordance with the schedule of Sinking Fund Payments set forth below. The 20 __ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed 20 __ Term B ond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
_____________
* Maturity.
The Bonds maturing on September 1, 20__ (the “20 __ Term Bonds”) shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 2 0__ and on each September 1 thereafter prior to maturity in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption p rice for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
_____________
* Maturity.
The Bonds are subject to special mandatory redemption as a whole, or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on and after 704
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September 1, 2026 , and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption Account plus amounts transferred from the Reserve Account in connection with such transfers, at the following redemption prices, expressed as a percentage of the principal amoun t to be redeemed, together with accrued interest to the redemption date:
Redemption Date Redemption Price
%
Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 45 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books; provided, however, so long as the Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. Neither a failure of the Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redem ption will cease to accrue interest on the specified redemption date, provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds.
This Bond shall be registered in the name of the Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary.
The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other aut horized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor.
The Trustee shall not be required to register transfers or make exchanges of: (i) any Bonds for a period of 15 days next preceding any selection of the Bo nds to be redeemed; or (ii) any Bonds chosen for redemption.
The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture.
THE BONDS DO NOT CONSTITUTE GENERAL OBLIGATIONS OF THE CITY OR OF THE DISTRICT. NEITHER THE CITY NOR THE DISTRICT IS OBLIGATED TO LEVY OR
PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS
OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER 705
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AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY,
THE STATE OF CALIFORNIA OR ANY O F ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION.
This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee.
IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California.
IN WITNESS W HEREOF, Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar has caused this Bond to be dated the Dated Date, to be signed on behalf of the District by the Mayor of the City by her facsimile signature and attested by the facsimile signature of the City Clerk of the City.
Mayor of the City of Wildomar, acting on behalf of
Community Facilities District No. 2023-1 (Avalino)
of the City of Wildomar
ATTEST:
City Clerk of the City of Wildomar, acting on
behalf Community Facilities District No.
2023-1 (Avalino) of the City of Wildomar
[FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION AND REGISTRATION]
This is one of the Bonds described in the within-defined Indenture.
Dated: February __, 2026 WILMINGTON TRUST, NATIONAL
ASSOCIATION as Trustee
By:
Authorized Signatory
706
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[FORM OF LEGAL OPINION]
The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth LLP, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office.
City Clerk of the City of Wildomar
[FORM OF ASSIGNMENT]
For value received the undersigned do(es) hereby sell, assign and transfer unto
whose tax identification number is ,
the within-mentioned registered Bond and hereby irrevocably constitute(s) and appoint(s)
attorney to transfer the same on the books of the Trustee with full power of substitution in the premises.
Dated:
Signature guaranteed:
NOTE: Signature(s) must be guaranteed by an
eligible guarantor institution.
NOTE: The signatures(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.
707
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EXHIBIT B-1
FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS
$___________
SPECIAL TAX BONDS, SERIES 2026
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR)
Wilmington Trust, National Association (the “Trustee”), is hereby requested to pay from the [City Facilities][Water Facilities] Account of the Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Acquisition and Construction Fund, established by the Bond Indenture, dated as of February 1, 2026 , by and between the Trustee and Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar (the “District”), the amount specified to the payee named below for payment of the Project Costs set forth in Attachment No. 1 hereto.
Payee:
Address:
Purpose:
Amount: $
The amount is due and payable under purchase order, contract or other authorization a nd has not formed the basis of any prior request for payment. The conditions for the release of this amount from the [City Facilities][Water Facilities] Account, including those conditions in Section 3.9(b) of the Indenture have been satisfied.
There has not been filed with nor served upon the District notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultan eously with the payment of such amount, other than materialmen’s or mechanic’s liens accruing by mere operation of law.
Dated: COMMUNITY FACILITIES DISTRICT NO. 2023-1
(AVALINO) OF THE CITY OF WILDOMAR
By:
Name:
Title: _____________________________________
708
Stradling Yocca Carlson & Rauth
Draft 12/16/25
4915-3243-9418v3/200945-0010
PRELIMINARY OFFICIAL STATEMENT DATED JANUARY __, 2026
NEW ISSUE—BOOK-ENTRY ONLY NO RATING
In the opinion of Stradling Yocca Carlson & Rauth LLP, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds described herein is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations. $10,665,000*
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR
SPECIAL TAX BONDS, SERIES 2026
Dated: Delivery Date Due: September 1, as shown on inside cover page The Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Special Tax Bonds, Series 2026 (the “Bonds”) are being issued by Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar (the “District”) to: (i) finance certain public improvements benefitting the development within the District, including public improvements to be owned by the City, and water and sewer facilities to be owned and operated by the Elsinore Valley Municipal Water District; (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), and pursuant to that certain Bond Indenture, dated as of February 1, 2026 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”).
The Bonds are secured by a pledge of and lien upon Net Taxes (as defined herein) derived from a certain annual Special Tax (as defined herein) to be levied on taxable parcels within the District and from certain other funds pledged under the Indenture, all as further described herein. The Special Tax is to be levied according to the rate and method of apportionment approved by the City Council of the City and the qualified electors within the District. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” The Bonds will be issued in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). Individual purchases of the Bonds may be made in principal amounts of $5,000 and integral multiples thereof and will be in book -entry form onl y. Purchasers of the Bonds will not receive certificates representing their beneficial ownership of the Bonds but will recei ve credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transf er to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable on each March 1 and September 1, commencing September 1, 2026. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants, who will remit such payments to the Beneficial Owners of the Bonds.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF RIVERSIDE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL
OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to mat urity as set forth herein. See the caption “THE BONDS — Redemption.”
Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain risk factors that should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds.
THIS COVER PAGE CONT AINS CERTAIN INFORMA TION FOR GENERAL REF ERENCE ONLY. IT IS NOT INTENDED TO BE A SUMMARY OF THE SECUR ITY OR TERMS OF THIS ISSUE. INVESTORS ARE ADVISED TO READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION.
MATURITY SCHEDULE
(See Inside Cover Page)
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed on for the City and the District by Burke, Williams & Sorensen, LLP, Riverside, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth LLP, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. It is anticipated that the Bonds in book-entry form will be available for delivery on or about February __, 2026.
[PIPER LOGO]
Dated: __________, 2026
* Preliminary, subject to change.
This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold, nor may offers to buy them be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. 709
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$10,665,000*
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR
SPECIAL TAX BONDS, SERIES 2026
MATURITY SCHEDULE
BASE CUSIP®† ________
$________ Serial Bonds
Maturity Date
(September 1)
Principal
Amount Interest Rate Yield Price CUSIP No.†
$________ ___% Term Bonds due September 1, 20__ Yield: ___% Price: ____ CUSIP No.† _____ $________ ___% Term Bonds due September 1, 20__ Yield: ___% Price: ____ CUSIP No.† _____
* Preliminary, subject to change.
† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by FactSet Research Systems Inc. Copyright© 2026 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only.
None of the District, the City, the Underwriter or their agents or counsel assume responsibility for the accuracy of such numbers.
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CITY OF WILDOMAR
COUNTY OF RIVERSIDE, CALIFORNIA
CITY COUNCIL
Carlos Marquez, Mayor
Dustin Nigg, Mayor Pro-Tem
Ashlee DePhillippo, Councilmember
Joseph Morabito, Councilmember
Bridgette Moore, Councilmember
CITY ADMINISTRATORS
Chris Mann, City Manager
Adam Jantz, Finance Manager
CITY ATTORNEY
Burke, Williams & Sorensen, LLP
Riverside, California
BOND AND DISCLOSURE COUNSEL
Stradling Yocca Carlson & Rauth LLP
Newport Beach, California
MUNICIPAL ADVISOR
CSG Advisors Incorporated
San Francisco, California
SPECIAL TAX CONSULTANT
Spicer Consulting Group, LLC
Murrieta, California
APPRAISER
Stephen G. White, MAI
Fullerton, California
TRUSTEE
Wilmington Trust, National Association
Costa Mesa, California
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Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by t he City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by a person in a ny jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matte rs of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in accordance with, and as 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 opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City, the District or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documen ts respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE S ECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
Certain statements included or incorporated by reference in this Official State ment constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securi ties Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a “plan,” “expect,” “estimate,” “project,” “budget,” or similar words. Such forward -looking statements include, but are not limited to certain statem ents contained in the information under the captions “THE DISTRICT ” and “PROPERTY OWNERSHIP AND THE DEVELOPMENT.”
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD -LOOKING STATEMENTS. THE
DISTRICT DOES NOT P LAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD -LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN EVALUATING SUCH STATEMENTS,
POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS WHICH COULD
CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
The City maintains a website. However, the information presented on such website is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the Bonds. 712
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TABLE OF CONTENTS
Page
INTRODUCTION ................................................................................................................................................ 1 The District ....................................................................................................................................................... 1 Sources of Payment for the Bonds .................................................................................................................... 2 Appraisal Report ............................................................................................................................................... 3 Description of the Bonds .................................................................................................................................. 3 Tax Exemption.................................................................................................................................................. 4 Professionals Involved in the Offering ............................................................................................................. 4 Continuing Disclosure ...................................................................................................................................... 4 Parity Bonds for Refunding Purposes Only ...................................................................................................... 5 Bond Owners’ Risks ......................................................................................................................................... 5 Other Information ............................................................................................................................................. 5 FINANCING PLAN ............................................................................................................................................. 6 Estimated Sources and Uses of Funds .............................................................................................................. 6 THE BONDS ........................................................................................................................................................ 6 General Provisions ............................................................................................................................................ 6 Debt Service Schedule ...................................................................................................................................... 8 Redemption ....................................................................................................................................................... 8 Registration, Transfer and Exchange .............................................................................................................. 12 SOURCES OF PAYMENT FOR THE BONDS ................................................................................................ 12 Limited Obligations ........................................................................................................................................ 12 Special Taxes .................................................................................................................................................. 13 Reserve Account of the Special Tax Fund ...................................................................................................... 19 No Teeter Plan ................................................................................................................................................ 19 Parity Bonds for Refunding Purposes Only .................................................................................................... 19 THE DISTRICT .................................................................................................................................................. 19 General Description of the District ................................................................................................................. 19 Authorized Uses of Bond Proceeds ................................................................................................................ 20 Appraisal Report ............................................................................................................................................. 20 Estimated Appraised Value-to-Lien Ratios .................................................................................................... 21 Direct and Overlapping Debt .......................................................................................................................... 24 Delinquency History ....................................................................................................................................... 25 PROPERTY OWNERSHIP AND THE DEVELOPMENT ............................................................................... 26 General ............................................................................................................................................................ 26 D.R. Horton .................................................................................................................................................... 27 SPECIAL RISK FACTORS ............................................................................................................................... 28 Risks of Real Estate Secured Investments Generally ..................................................................................... 29 Insufficiency of Special Tax Revenues........................................................................................................... 29 Impact of Economic Conditions on the Development in the District ............................................................. 30 Increasing Mortgage Interest Rates ................................................................................................................ 31 Concentration of Ownership ........................................................................................................................... 31 Property Insurance .......................................................................................................................................... 31 Property Values .............................................................................................................................................. 31 Natural Disasters ............................................................................................................................................. 32 Hazardous Substances .................................................................................................................................... 33 Enforcement Delays – Bankruptcy ................................................................................................................. 34 Special Tax Delinquencies.............................................................................................................................. 34 FDIC/Federal Government Interests in Parcels .............................................................................................. 34 713
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Direct and Overlapping Indebtedness ............................................................................................................. 35 Payment of Special Taxes is not a Personal Obligation of the Property Owners ........................................... 36 No Acceleration Provision .............................................................................................................................. 36 Limited Obligations ........................................................................................................................................ 36 Proposition 218 ............................................................................................................................................... 37 Ballot Initiatives.............................................................................................................................................. 37 Litigation with Respect to Community Facilities Districts ............................................................................. 37 Loss of Tax Exemption ................................................................................................................................... 38 No Ratings – Limited Secondary Market ....................................................................................................... 39 Limitations on Remedies ................................................................................................................................ 39 Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds ................................................................................................................................................... 39 Cybersecurity .................................................................................................................................................. 39 CONTINUING DISCLOSURE .......................................................................................................................... 40 District Continuing Disclosure ....................................................................................................................... 40 Developer Continuing Disclosure ................................................................................................................... 40 TAX EXEMPTION ............................................................................................................................................ 40 LEGAL OPINION .............................................................................................................................................. 42 ABSENCE OF LITIGATION ............................................................................................................................ 42 NO RATING ...................................................................................................................................................... 42 UNDERWRITING ............................................................................................................................................. 42 FINANCIAL INTERESTS ................................................................................................................................. 43 MUNICIPAL ADVISOR ................................................................................................................................... 43 MISCELLANEOUS ........................................................................................................................................... 43
APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX............................. A-1 APPENDIX B CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION................................ B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL ................................................................... C-1 APPENDIX D APPRAISAL REPORT ...................................................................................................... D-1 APPENDIX E SUMMARY OF THE INDENTURE ................................................................................ E-1 APPENDIX F FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE ..........................F-1 APPENDIX G FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE .................... G-1 APPENDIX H BOOK-ENTRY ONLY SYSTEM ..................................................................................... H-1 714
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$10,665,000*
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR
SPECIAL TAX BONDS, SERIES 2026
INTRODUCTION
The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the “Official Statement”), is to provide certain information concerning the issuance by Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar (the “District”) of its Special Tax Bonds, Series 2026 in the aggregate principal amount of $10,665,000* (the “Bonds”). The proceeds of the Bonds will be used to: (i) finance certain pu blic improvements benefiting the development within the District, including public improvements to be owned by the City of Wildomar (the “City”), and water and sewer facilities to be owned and operated by the Elsinore Valley Municipal Water District; (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds.
The Bonds are authorized to be issued pursuant to the Mello -Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California) (the “Act”), a resolution adopted on January 14, 2026, by the City Council of the City, acting as the legislative body of the District, and a Bond Indenture, dated as of February 1, 2026 (the “Indenture”), by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as such term is defined herein) and all moneys in the Special Tax Fund as described in the Indenture.
This Introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement.
The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement.
All capitalized terms used in this Official Statement and not defined have the meanings set forth in Appendix E.
The District
General. The City is located in the western portion of the County of Riverside (the “County”), California (the “State”). The District contains approximately 22 net taxable acres and is located in the southwest portion of the City, to the southwest of Palomar Street and Washington Avenue at Starbuck Circle.
The property within the District is being developed by D.R. Horton Los Angeles Holding Company, Inc., a California corporation (“D.R. Horton”) into 117 single-family homes in a project being marketed as “Avalino.” As of November 3, 2025 (the date of value of the Appraisal Report (as defined below)), D.R. Horton had completed and conveyed 79 homes within the District to individual homeowners. As of such date D.R.
Horton owned two model homes, seven completed production homes, nine homes under construction and 20 near-finished lots. As of December 1, 2025, D.R. Horton has obtained building permits for 112 of the 117 planned homes in the District. D.R. Horton expects to complete and convey all homes in the District to individual homeowners by August 2026.
The backbone infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the District has been completed. Remaining improvements include finishing of minor in-tract improvements for the remaining homes to be constructed . See the captions “THE DISTRICT” and “PROPERTY OWNERSHIP AND THE DEVELOPMEN T” for further information with respect to the District, D.R. Horton and development within the District.
* Preliminary, subject to change.
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Formation Proceedings. The District was formed on September 13, 2023 pursuant to the Act. The Act was enacted to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency (as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities a nd services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness.
Pursuant to the Act, on August 9, 2023 , the Cit y Council adopted Resolution No. 2023-37 (the “Resolution of Intention”), stating its intention to form the District and to authorize the levy of a special tax on the taxable property within the District, and Resolution No. 2023-38, stating its intention t o incur bonded indebtedness in an aggregate principal amount not to exceed $ 15,000,000 for the purpose of financing the purchase, construction, expansion or rehabilitation of certain public facilities to serve the area within the District.
Subsequent to a noticed public hearing on September 13, 2023, the City Council adopted Resolution Nos. 2023-48 and 2023 -49 (collectively the “Resolution of Formation ”). The Resolution of Formation:
(i) established the District; (ii) authorized the levy of a special tax within the District; (iii) determined the necessity to incur bonded indebtedness in an amount not to exceed $ 15,000,000 within the District; and (iv) called an election within the District on the proposition of incurring bonded indebtedness, levying the special tax and setting an appropriations limit.
On September 13, 2023, an election was held within the District in which the property owner within the District approved the proposition authorizing the issuance of bonds in an amount not to exceed $15,000,000. A Notice of Special Tax Lien for the District was recorded in the office of the County Recorder on September 28, 2023, as Document No. 2023-0286646. On October 11, 2023, the City Council adopted Ordinance No. 235 (the “Ordinance”) which authorizes the levy of a special tax pursuant to the Rate and Method of Apportionment approved at the September 13, 2023 election (the “Rate and Method”), a copy of which is attached hereto as Appendix A.
Sources of Payment for the Bonds
Special Taxes. As used in this Official Statement, the term “Special Tax” means the annual Special Tax which has been authorized pursuant to the Act and the Rate and Method to be levied upon taxable property within the District. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” See the caption “THE DISTRICT.”
Under the Indenture, the District has pledged to repay t he Bonds and any Parity Bonds (as defined herein) from the Special Tax revenues remaining after the payment of certain annual Administrative Expenses of the District (the “Net Taxes”) and from other amounts in the Special Tax Fund established under the Indenture.
The Special Taxes are the primary source of security for the repayment of the Bonds and any Parity Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds and any Parity Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, to the limited extent described in the Indenture. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund.” Foreclosure Proceeds. The District will covenant in the Indenture for the benefit of the owners of the Bonds and Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $7,500 by the October 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such 718
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foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on any parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” There is no assurance that the property within the District can be sold for the appraised or assessed values described herein, or for a price sufficient to pay the principal of and interest on the Bonds in the event of a default in payment of Special Taxes by the current or future landowners within the District. See the caption “SPECIAL RISK FACTORS — Property Values.”
EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY
OR GENERAL OBLIGATIONS OF THE DISTRICT, BUT ARE LIMITED OBLIGATIONS OF THE
DISTRICT PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE, AS MORE FULLY DESCRIBED HEREIN.
Appraisal Report
An appraisal of the taxable land and existing improvements within the District was prepared by Stephen G. White, MAI, Fullerton, California (the “Appraiser”). The appraisal report is dated November 17, 2025 and entitled “Appraisal Report Covering Community Facilities District No. 2023-1 (Avalino) of t he City of Wildomar” (the “Appraisal Report”). The Appraisal Report provides an estimate of the approximate market value of the “as-is” condition of the property in the District subject to the levy of Special Taxes, assuming that development of the property as currently planned will consist of 117 residential units. Based on the extraordinary assumptions, assumptions and limiting conditions in the Appraisal Report, the Appraiser concluded that the market value of all of the taxable parcels within the Dist rict subject to the Special Tax was $ 70,395,000 as of November 3, 2025 (the “Date of Value”).
The Appraisal Report is based upon a variety of assumptions and limiting conditions that are described in Appendix D. The District makes no representation as to the accuracy of the Appraisal Report. See “THE DISTRICT — Appraisal Report” and “— Estimated Appraised Value-to-Lien Ratios.” There is no assurance that property within the District can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by a property owner. See “THE DISTRICT” and “SPECIAL RISK FACTORS — Property Values” herein and Appendix D.
Description of the Bonds
The Bonds will be issued and delivered as fully registered Bonds, registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be available to actual purchasers of the Bonds (the “Beneficial Owners”) in the denominations of $5,000 or any integral multiple thereof, under the book -entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
The Bonds are subject to optional redemption, special mandatory redemption and mandatory sinking fund redemption prior to maturity as described herein. See the caption “THE BONDS — Redemption.” For a 719
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more complete description of the Bonds and the basic documentation pursuant to which they are being sold and delivered, see the caption “THE BONDS” and Appendix E — “SUMMARY OF THE INDENTURE.” Tax Exemption
In the opinion of Stradling Yocca Carlson & Rauth LLP , Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds described herein is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals. In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See the caption “TAX EXEMPTION” with respect to tax consequences relating to the Bonds, including with respect to the alternative minimum tax imposed on certain large corporations.
Set forth in Appendix C is the form of opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and cer tain tax consequences incident to the ownership of the Bonds, see the caption “TAX EXEMPTION.” Professionals Involved in the Offering
Wilmington Trust, National Association, Costa Mesa, California, will act as Trustee under the Indenture. Piper Sandler & Co. (the “Underwriter”) is the Underwriter of the Bonds. Certain proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson & Rauth LLP, Newport Beach, California, Bond Counsel and Disclosure Counsel to the District in connection with the issuance of the Bonds. Certain legal matters will be passed on for the City and the District by Burke, Williams & Sorensen, LLP , Riverside, California, City Attorney, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Other professional services have been performed by Spicer Consulting Group, LLC, Murrieta, California, as Special Tax Consultant (the “Special Tax Consultant”), CSG Advisors Incorporated , San Francisco, California, as Municipal Advisor, and by Stephen G. White, MAI , Fullerton, California, as Appraiser.
For information concerning circumstances in which certain of the above -mentioned professionals, advisors, counsel and consultants may have a fin ancial or other interest in the offering of the Bonds, see the caption “FINANCIAL INTERESTS.”
Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate to be executed by the District (the “District Continuing Disclosure Certificate”), the District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access system ( “EMMA”), maintained on the Internet at http://emma.msrb.org, certain annual financial information and operating data and notices of certain enumerated events. These covenants are being made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission (“Rule 15c2-12”). See “CONTINUING DISCLOSURE,” Appendix F — “FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE.” The Underwriter does not consider D.R. Horton to be an “obligated person” with respect to the Bonds for purposes of Rule 15c2-12. Notwithstanding the foregoing, to assist in the marketing of the Bonds , D.R.
Horton will agree to provide, or cause to be provided to EMMA, certain updates with respect to the development within the District and notices of certain enumerated events. See Appendix G for a description of the specific nature of the semiannual reports and enumerated event notices to be filed by D.R. Horton. 720
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See “CONTINUING DISCLOSURE, ” Appendix F — “FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE ” and Appendix G — “FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE.”
Parity Bonds for Refunding Purposes Only
The District will covenant in the Indenture not to issue additional indebtedness secured by the Net Taxes on a parity with the Bonds ( “Parity Bonds”) other than for refunding all or a portion of the Bonds or Parity Bonds. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Parity Bonds for Refunding Purposes Only.” Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied in the future on the property within the District, which could adversely affect the willingness of the landowners to pay the Special Taxes when due. See the captions “THE DISTRICT — Direct and Overlapping Debt” and “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” Bond Owners’ Risks
Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the caption “SPECIAL RISK FACTORS” for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors.
Other Information
This Official Statement speaks only as of it s date, and the information contained herein is subject to change.
Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All referenc es herein to the Indenture, the Bonds and the Constitution and laws of the State, as well as the proceedings of the City Council, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined in this Official Statement have the meanings set forth in Appendix E.
Copies of the Indenture and other documents and information are available for inspection and copies may be obtained from the City, 23873 Clinton Keith Road, Suite 110, Wildomar California 92595 , Attention:
City Clerk.
[Remainder of Page Intentionally Left Blank]
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FINANCING PLAN
Estimated Sources and Uses of Funds
The following table sets forth the expected sources and uses of Bond proceeds and certain Special Taxes collected in Fiscal Year 2025-26.
Sources of Funds
Principal Amount of Bonds $
Plus Original Issue Premium
Special Taxes
Total Sources $
Uses of Funds:
Acquisition and Construction Fund $
Reserve Account
Cost of Issuance(1)
Total Uses $
(1) To pay costs of issuance of the Bonds, including legal fees, underwriter’s discount, printing costs, Appraiser, Special Tax Consultant and Trustee fees.
THE BONDS
General Provisions
The Bonds will be dated their date of delivery and will bear interest at the rates per annum set forth on the inside cover page hereof, payable semiannually on each March 1 and September 1, commencing September 1, 2026 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set forth on the inside cover page of this Official Statement. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. The Bonds will be issued in fully registered form in denominations of $5,000 or any integral multiple thereof.
Interest on any Bond will be payable from the Interest Payment Date next preceding the date of authentication of such Bond, unless: (i) such date of authentication is an Interest Payment Date, in which event interest will be payable from such date of authentication; (ii) the date of authentication is after the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day (each, a “Record Date”) but prior to the immediately succeeding Interest Payment Date, in which event interest will be payable from the Interest Payment Date immediately succeeding the date of authentication; or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest will be payable from the dated date of such Bond, as applicable; provided, however, that if at the time of authentication of such Bond, interest is in default, inte rest on such Bond will be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on such Bond, interest on such Bond will be payable from its dated date.
Interest on any Bond will be paid to the person whose name appears as its owner in the registration books held by the Trustee on the close of business on the Record Date. Principal of, premium, if any, due upon redemption is payable upon presentation and surrender of the Bonds at the principal corporate trust office of the Trustee in Costa Mesa, California.
The Bonds will be issued as fully registered bonds and will be registered in the name of Cede & Co., as nominee of DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. So long as 722
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DTC is the securities depository all payments of principal and inte rest on the Bonds will be made to DTC and will be paid to the Beneficial Owners in accordance with DTC’s procedures and the procedures of DTC’s Participants. See APPENDIX H — “BOOK-ENTRY-ONLY SYSTEM.” In the event the Bonds are not held in book -entry form, interest will be paid by check of the Trustee mailed by first class mail, postage prepaid, to the Bondowner at its address on the registration books kept by the Trustee. Pursuant to a written request prior to the Record Date of a Bondowner of at least $ 1,000,000 in aggregate principal amount of Bonds or of any issue of Parity Bonds, payment will be made by wire transfer in immediately available funds to a designated account in the United States.
[Remainder of Page Intentionally Left Blank]
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Debt Service Schedule
The following table presents the annual debt service on the Bonds (including sinking fund redemptions), assuming that there are no optional or special mandatory redemptions. See the caption “—Redemption” below.
Year Ending
September 1 Principal Interest Total Debt Service
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
Total
Redemption
Optional Redemption. The Bonds may be redeemed at the option of the District from any source of funds on any Interest Payment Date on or after September 1, 20__, in whole or in part, from such maturities as are selected by the District and by lot within a maturity, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption:
Redemption Date Redemption Price
%
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In the event that the District elects to redeem Bonds as provided above, the District will give written notice to the Trustee of its election to so redeem, the redemption date and the principal amount of the Bonds of each maturity to be redeemed. The notice to the Trustee will be given at least 45 but no more than 60 calendar days prior to the redemption date, or by such later date as is acceptable to the Trustee.
Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20__ (the “20__ Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so call ed for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
The Bonds maturing on September 1, 20__ (the “20__ Term Bonds” and together with the 20__ Term Bonds, the “Term Bonds”) will be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account established under the Indenture, on September 1, 20__, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The 20__ Term Bonds so called for redemption will be selected by the Trustee by lot and will be redeemed at a redemption price for each redeemed 20__ Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
* Maturity.
If the District purchases Term Bonds during the Fiscal Year immediately preceding one of the sinking fund redemption dates specified above, the District will notify the Trustee at least 45 days prior to the redemption date as to the principal amount purchased, and the amount purchased will be credited at the time of purchase to the next Sinking Fund Payment for the Term Bond so purchased, to the extent of the full principal amount of the purchase. All Term Bonds purchased will be cancelled pursuant to the Indenture. 725
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In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis.
Special Mandatory Redemption from Special Tax Prepayments . The Bon ds are subject to special mandatory redemption as a whole or in part on a pro rata basis among maturities and by lot within a maturity, on any Interest Payment Date on or after September 1, 2026, and will be redeemed by the Trustee, from any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method (the “Prepayments”) deposited to the Redemption Account pursuant to the Indent ure, plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the redemption date:
Redemption Date Redemption Price
%
Prepayments and amounts released from the Reserve Account in connection with Prepayments will be allocated to the payment at maturity and redemption of Bonds and any Parity Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds and any Parity Bonds and such amounts shall be applied to redeem Bonds and Parity Bonds as nearly as practicable on a pro rata basis among maturities in increments of $5,000; provided, however, that, for Prepayments of less than $50,000, the District may specify in a Certificate of an Authorized Representative that Prepayments be applied to one or more maturities of the Bonds or Parity Bonds so long as there is delivered to the Trustee a Certifica te of the Independent Financial Consultant that, following such application of the Prepayments, the maximum Special Taxes that may be levied in each Fiscal Year on Taxable Property is not less than 110% of Annual Debt Service in the Bond Year that begins in such Fiscal Year.
See the caption “SPECIAL RISK FACTORS — Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds” for a discussion of the potential for a lower than expected yield on the Bonds as a result of a special mandatory redemption from prepayment of Special Taxes or proceeds of bonds of other community facilities districts.
Notice of Redemption. So long as the Bonds are held in book-entry form, notice of redemption will be sent by the Trustee to DTC an d not to the Beneficial Owners of the Bonds under the DTC book -entry only system. Neither the District nor the Trustee is responsible for notifying the Beneficial Owners, who are to be notified in accordance with the procedures in effect for the DTC book -entry system. See Appendix H — “BOOK-ENTRY ONLY SYSTEM.”
The Trustee will give notice, in the name of the District, of the redemption of Bonds. Such notice of redemption will: (i) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds are subject to redemption, or all of the Bonds of one maturity are to be redeemed, the bond numbers of such issue need not be specified; (ii) state the date fixed for redemption and surrender of the Bonds to be redeemed; (iii) state the redemption price; (iv) state the place or places where the Bonds are to be redeemed; (v) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeem ed; (vi) state the date of issue of the Bonds as originally issued; (vii) state the rate of interest borne by each Bond being redeemed; and (viii) state any other descriptive information needed to identify accurately the Bonds being redeemed as specified b y the Trustee. Such notice will further state that on the date fixed for redemption, there will become due and payable on each Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon will cease to accrue and be payable. At 726
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least 30 days but no more than 45 days prior to the redemption date, the Trustee will mail a copy of such notice of redemption, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register, and to the original purchaser of any Bonds; provided, however, so long as the Bonds are registered in the name of the Nominee, such notice shall be given in such manner as complies with the requirements of the Depository. The actual receipt by the Owner of any Bond of notice of such redemption is not a condition precedent to redemption, and neither the failure to receive nor any defect in such notice will affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as provided in the Indenture will be conclusive as against all parties and the Owner is not entitled to show that he or she failed to receive notice of such redemption.
In addition to the foregoing notice, further notice will be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice will in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed.
Each further notice of redemption will be sent not later than the date that notice of redemption is given to the Owners pursuant to the Indenture by first class mail or facsimile to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds.
Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose will to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.
With respect to any notice of optional redemption of Bonds, such notice may state that such redemption is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium , if any, and interest on such Bonds to be redeemed and that, if the District determines that such moneys will not be received on or prior to the redemption date, said notice will be of no force and effect and the Trustee will not be required to redeem such Bonds. In the event that such notice of redemption contains such a condition and the District determines that such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received.
Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed will be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Trustee will treat such Bonds, as applicable, as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The procedure for the selection of Parity Bonds for redemption may be modified as set forth in the Supplemental Indenture for such Parity Bonds. The Trustee will promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption.
Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District will execute and the Trustee will authenticate and delive r to the Owner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity.
Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in the Indenture, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such re demption: (i) the Bonds, or portions thereof, designated for redemption will, on the date fixed for redemption, become due and payable at the redemption 727
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price thereof as provided in the Indenture, anything in the Indenture or in the Bonds to the contrary notwithstanding; (ii) upon presentation and surrender thereof at the office of the Trustee, the redemption price of such Bonds will be paid to the Owners thereof; (iii) as of the redemption date the Bonds, or portions thereof so designated for redemption will be deemed to be no longer Outstanding and such Bonds, or portions thereof, will cease to bear further interest; and (iv) as of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption will be entitled to any of the benefits of the Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available.
Registration, Transfer and Exchange
Registration. The Trustee will keep sufficient books for the registration and transfer of the Bonds. The ownership of the Bonds will be established by the Bond registration books held by the Trustee.
Transfer or Exchange. Subject to the limitations set forth in the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to the Trustee and duly executed by the Owner or his or her duly authorized attorney.
Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee may not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but will require the Owner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds are surrendered for registration of transfer or exchange, the District will execute and the Trustee will authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee is not required to register transfers or make exchanges of: (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or (ii) any Bonds chosen for redemption.
SOURCES OF PAYMENT FOR THE BONDS
Limited Obligations
The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources.
The Special Taxes are the primary source of repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses in an amount not to exceed the Administrative Expenses Cap (as defined in the Indenture)) and from amounts held in the Special Tax Fund. Special Tax revenues include the proceeds of the annual Special Tax levy received by the District, including any scheduled payments and Prepayments thereof, and the net proceeds of the redemption of delinquent Special Taxes or sale of property sold as a result of foreclosure of the lien of delinquent Special Taxes to the amount of said lien, and penalties and interest thereon; provided that any delinquent Special Tax sold to an independent third -party or to the City for 100% of the delinquent amount will no longer be pledged under the Indenture to the payment of the Bonds or Parity Bonds.
In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein, for the exclusive benefit of the Owners of the Bonds.
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY,
THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 728
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BONDS. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY BUT ARE
LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM THE NET TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN.
Special Taxes
Authorization and Pledge . In accordance with the provisions of the Act, the City established the District on September 13, 2023 for the purpose of financing of various public improvements required in connection with the proposed development within the District. At a special election held on September 13, 2023, the qualified elector within the District authorized the District to incur indebtedness in an amount not to exceed $15,000,000 for the District and the levy of the Special Taxes on property within the District to repay such bonds and to finance the Facilities (as defined below). The qualified elector within the District also voted to approve the Rate and Method which authorized the Special Tax to be levied to repay indebtedness of the District, including the Bonds.
The Bonds will be repaid only from annual Net Taxes derived from the levy and collection of Special Taxes pursuant to the Rate and Method. The Rate and Method permits the prepayment of Special Taxes for an Assessor’s Parcel (as defined in the Rate and Method), and any such Prepayments will be applied to redeem Bonds and Parity Bonds, if any. The Net Taxes collected from the annual Special Tax levy and the proceeds of any Prepayment have been pledged under the Indenture to the repayment of the Bonds and Parity Bonds.
The Special Taxes levied in any Fiscal Year may not exceed the maximum rates authorized pursuant to the Rate and Method. See “— Rate and Method of Apportionment of Special Tax” and Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX.” There is no assurance that the Net Taxes will, in all circumstances, be adequate to pay the principal of and interest on the Bonds and Parity Bonds when due.
See the caption “SPECIAL RISK FACTORS — Insufficiency of Special Tax Revenues.” Rate and Method of Apportionment of Special Tax. The Rate and Method applicable to the District is contained in Appendix A — “RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX. ” The meaning of the defined terms used in this section are as set forth in Appendix A.
In general, the Rate and Method imposes a different Maximum Special Tax on Taxable Property within the District depending upon whether such Taxable Property is classified as: (i) ”Developed Property” (in general, all Assessor’s Parcels which are included in a Final Map recorded prior to the January 1 preceding the Fiscal Year in which the Special Tax is being levied and for which a building permit for new construction has been issued before May 1 preceding such Fiscal Year), (ii) ”Approved Property” (in general, parcels of Taxable Property included in a Final Map recorded prior to the January 1 preceding the Fiscal Year in which the Special Tax is being levied but for which no building permit was issued before May 1 preceding such Fiscal Year), (iii) ”Undeveloped Property ” (in general, Taxable Property that is not “Developed Property, ” “Approved Property” or “Provisional Undeveloped Property ”) or (iv) ”Provisional Undeveloped Property ” (in general, Taxable Property that would o therwise be classified as Exempt Property but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in the Rate and Method). Different Maximum Special Tax rates are also applicable to Developed Property depending upon: (a) its status as either “Residential Property ” or “Non-Residential Property,” (b) in the case of Residential Property, its status as “Single Family Residential Property ” or “Multifamily Property” or (c) in the case of Single Family Residential Property, the Building Square Footage of the structure.
Pursuant to the Rate and Method, the District is required to determine the “Special Tax Requirement” for each Fiscal Year. The Special Tax Requirement for the District is the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds and Parity Bonds due in the calendar year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of 729
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funds from an escrow account, (iv) any amount required to replenish any reserve funds established in association with the Bonds and Parity Bonds , (v) an amount up to any anticipated shortfall (based on the prior year’s delinquency rate) due to Special Tax delinquencies, and (vi) for the collection or accumulation of funds for the acquisition or construction of facilities authorized by the District or the payment of debt service on Bonds and Parity Bonds anticipated to be issued, provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on Approved Property or Undeveloped Property, and less (vii) any amounts available to pay debt service or other periodic costs on the Bonds and Parity Bonds pursuant to the Indenture.
The Special Tax Requirement for the District is to be satisfied first by levying the Special Tax Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax. If additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Assessor’s Parcel of Approved Property at up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel. If additional moneys are still needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel. If additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax on each Assessor’s Parcel of Developed Property for which the Maximum Special Tax is the Backup Special Tax will be increased Proportionately from the Assigned Special Tax up to 100% of the Backup Special Tax. Finally, if additional moneys are needed to satisfy the Special Tax Requirement, the Special Tax will be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property at up to 100% of the Ma ximum Special Tax applicable to each such Assessor’s Parcel. Notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor’s Parcel of Residential Property as a result of a delinquency in the payment of the Special Tax applicable to any other Assessor’s Parcel be increased by more than 10% above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default.
Based on building permits issued as of December 1, 2025 within the District, 112 parcels will be classified as Developed Property and five parcels will be classified as Approved Property for the Fiscal Year 2026-27 Special Tax levy.
For Fiscal Year 2026-27, the Assigned Special Tax rates for Developed Property that is classified as Single Family Residential Property range from $ 5,106.53 per taxable unit with a Building Square Footage of less than 2,000 square feet to $5,884.40 per taxable unit with a Building Square Footage of greater than 3,000 square feet. For Fiscal Year 2026-27, the Assigned Special Tax rate for Approved Property, Non -Residential Property which is Developed Property and Provisional Undeveloped Property is $30,101.16 per acre.
On each July 1 the Assigned Special Tax rates for Developed Property and for Approved Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
Annual Debt Service for the Bonds has been structured so that Developed Property at buildout levied at the Assigned Special Tax rates, assuming no delinquencies, will generate in each Fiscal Year not less than the Administrative Expenses Cap plus 110% of debt service payable with respect to the Bonds in the calendar year that begins in that Fiscal Year, assuming that Special Taxes are levied and collected on such Developed Property pursuant to the Rate and Method.
Table 1 below sets forth the Assigned Special Tax rates for Developed Property, the estimated Fiscal Year 2026-27 Special Tax levy and the percent of such levy based on land use category. In Fiscal Year 2025- 26, the District levied Special Taxes on 84 parcels of Developed Property in the amount of $453,659.28. 730
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TABLE 1
CITY OF WILDOMAR
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
ASSIGNED SPECIAL TAX RATES FOR FISCAL YEAR 2026-27
Land Use Type
Residential
Floor Area
(sq. ft.)
Assigned Special
Tax Rates
Fiscal Year
2026-27
Special Tax
Levy Rates
Fiscal Year
2026-27(1)*
Percent of
Maximum/
Assigned
Rate*
No. of
Units
Aggregate
Estimated
Special Taxes
Fiscal Year
2026-27*
Percent
of Total
Residential Property < 2,000 $ 5,106.53 $ 4,693.24 91.9% 21 $ 98,558.07 17.3% Residential Property 2,000-2,250 5,219.02 4,796.63 91.9 21 100,729.14 17.7 Residential Property 2,251-2,500 5,352.73 0.00 0.0 0 0.00 0.0 Residential Property 2,501-2,750 5,485.38 5,041.43 91.9 21 105,870.05 18.6 Residential Property 2,751-3,000 5,822.85 5,351.58 91.9 23 123,086.40 21.6 Residential Property >3,000 5,884.40 5,408.15 91.9 26 140,611.94 24.7 Approved Property N/A 5,781.46 0.00 0.0 5 0.00 0.0 Total 117 $ 568,855.60 100.0%
* Preliminary, subject to change.
(1) Includes the Fiscal Year 2026-27 Administrative Expenses Cap of $ 30,600. The Administrative Expenses Cap escalates at 2% per Fiscal Year.
Source: Spicer Consulting Group, LLC.
Backup Special Tax Rates . The Backup Special Tax for an Assessor’s Parcel within a Final Map classified as Single Family Residential Property for Fiscal Year 2026-27 shall be $5,781.46 per Residential Unit.
Notwithstanding the foregoing, if all or any portion of the applicable Final Maps and/or condominium plan contained within the boundaries of the District is subsequently changed or modified, then the Backup Special Tax for Single Family Residential Property or Approved Property in such Final Map or condominium plan area that is changed or modified shall be recalculated as follows: (1) determine the total Backup Special Taxes anticipated to apply to the changed or modifi ed Final Map or condominium plan area prior to the change or modification; (2) the result of step 1 shall be divided by the total number of Residential Units constructed and/or anticipated to be constructed within such changed or modified Final Map or cond ominium plan area, as reasonably determined by the CFD Administrator. The result of step (2) is the Backup Special Tax per Residential Unit which shall be applicable to Assessor’s Parcels of Single Family Residential Property or Approved Property in such changed or modified Final Map or condominium plan area. Notwithstanding the foregoing, the Backup Special Tax for an Assessor’s Parcel of Developed Property for which a certificate of occupancy has been granted may not be revised.
On each July 1, the Backup Special Tax rate shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
Prepayment of Special Taxes . The Special Tax obligation may be fully prepaid and permanently satisfied for (i) Assessor’s Parcels of Developed Property, (ii) Assessor’s Parcels of Approved Property or Undeveloped Property for which a Building Permit has been issued, (iii) Approved Property or Undeveloped Property for which a Building Permit has not been issued and (iv) Assessor’s Parcels of Provisional Undeveloped Property that are not Exempt Property . The Special Tax obligation may be partially prepaid for Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property.
The Prepayment amount is calculated based on the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount, the Administrative Fee s and Expenses and less a credit for the resulting reduction in the Reserve Requirement for the Bonds (if any), all a s specified in Section G of the Rate and Method attached as Appendix A. Prepayments of Special Taxes will be applied to effect an extraordinary redemption of Bonds and Parity Bonds. See “THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments.” 731
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Estimated Debt Service Coverage . Based on building permits issued as of December 1, 2025, 112 taxable parcels within the District will be classified as Developed Property for the Fiscal Year 2026-27 Special Tax levy. Annual Debt Service for the Bonds in each Fiscal Year has been structured so that Special Taxes levied on 117 parcels of Developed Property at the Assigned Special Tax rates, assuming no delinquencies, will generate in each Fiscal Year not less than 110% of debt service payable with respect to the Bonds in the calendar year that begins in that Fiscal Year, plus the Administrative Expenses Cap. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. The Assigned Special Tax rates for Developed Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
In connection with the issuance of the Bonds, the Special Tax Consultant will certify that the Maximum Special Tax that may be levied in each Fiscal Year on Assessor’s Parcels within the District classified as Taxable Property will be at least equal to the sum of: (i) 110% of Maximum Annual Debt Service on the Bonds; plus (ii) the Administrative Expenses Cap.
Limitation on Special Tax Levy and Potential Impact on Coverage. Pursuant to Section 53321(d) of the Government Code, the special tax levied against any Assessor’s Parcel for which an occupancy permit for private residential use has been issued will not be increased as a consequence of delinque ncy or default by the owner of any other Assessor’s parcel within the District by more than 10% above the amount that would have been levied in that fiscal year had there never been any such delinquencies or defaults. As a result, in the event the Special Tax is levied at less than the Assigned Special Tax rate, it is possible that the District may not be able to increase the tax levy to the Assigned Special Tax in all years.
Levy, Collection and Application of Special Taxes. The Special Taxes are levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to property owners within the District.
The District will covenant in the Indenture that each year it will levy Special Taxes up to the maximum rates permitted under the Rate and Method in an amount sufficient, together with other amounts on deposit in the Special Tax Fund, to pay the principal of and interest on any Outstanding Bonds and Parity Bonds, to replenish the Reserve Account to the Reserve Requirement and to pay Administrative Expenses.
The District will make certain covenants in the Indenture which are intended to ensure that the current maximum Special Tax rates and method of collection of the Special Taxes are not altered in a manner that would impair the District’s ability to collect sufficient Special Taxes to pay debt service on the Bonds, Parity Bonds and Administrative Expenses when due.
First, the District will covenant in the Indenture that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District’s authority to levy the Special Tax for so long as the Bonds and any Parity Bonds are Outstanding.
Second, the District will covenant in the Indenture, to the maximum extent that the law permits it to do so, not to initiate proceedings to reduce the maximum Special Tax rates for the District, unless, in connec tion therewith, the District receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that: (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is less than the Administrative Expenses Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds.
Third, the District will covenant in the Indenture that, in the event that any initiative is adopted by the qualified electors within the District which purports to reduce the maximum Special Tax below the levels specified in the preceding paragraph or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with 732
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such covenants. The District can provide no assurance that any such legal action will be successful. See the caption “SPECIAL RISK FACTORS — Proposition 218.”
Fourth, the District will covenant in the Indenture that it will not adopt any policy pursuant to the Act permitting the tender of Bonds or Parity Bonds in full payment or partial payment of any Special Taxes unless the District has first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Net Taxes to pay the principal of and interest on the Bonds and Parity Bonds when due.
See Appendix E under the caption “COVENANTS AND WARRANTY.” Although the Special Taxes constitute liens on taxed parcels within the District, they do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future in certain situations without the consent or knowledge of the City or the landowners in the District. See the captions “THE DISTRICT — Direct and Overlapping Debt ” and “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.” There is no assurance that property owners will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so, all as more fully described under the caption “SPECIAL RISK FACTORS.”
Proceeds of Foreclosure Sales . The net proceeds received following a judicial foreclosure sale of property within the District resulting from a property owner’s failure to pay the Special Taxes when due are included within the Net Taxes pledged to the payment of principal of and interest on the Bonds and any Parity Bonds under the Indenture.
Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of any Special Tax or receipt by the District of Special Taxes in an amount which is less than the Special Taxes levied, the City Council, as the legislative body of the District, may order that Special Taxes be collected by a Superior Court action to foreclose the lien within specified time limits. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. Under the Act, the commencement of judicial foreclosure following the nonpayment of a Special Tax is not mandatory. However, the District will covenant in th e Indenture for the benefit of the owners of the Bonds and any Parity Bonds that it will: (i) commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of $ 7,500 by the October 1 following the close of each Fiscal Y ear in which such Special Taxes were due; and (ii) commence judicial foreclosure proceedings against all parcels with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95% of the total Special Tax levied; and (iii) diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; provided that, notwithstanding the foregoing, the District may elect to defer foreclosure proceedings on a ny parcel so long as the amount in the Reserve Account is at least equal to the Reserve Requirement.
The District will covenant in the Indenture that it will deposit the net proceeds of any foreclosure in the Special Tax Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current payments of principal and interest on the Bonds and any Parity Bonds, to bring the amount on deposit in the Reserve Account up to the Reserve Requirement and to pay any delinquent instal lments of principal or interest due on the Bonds and any Parity Bonds. See APPENDIX E — “SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants” herein.
If foreclosure is necessary and other funds (including amounts in the Reserve Account) have b een exhausted, debt service payments on the Bonds could be delayed unless the foreclosure proceedings produce sufficient net foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be fu rther slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the City and the District. See the caption “SPECIAL RISK FACTORS — Enforcement Delays – Bankruptcy.” Moreover, no assurances can be given that the real property 733
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subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the net proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. See the caption “SPECIAL RISK FACTORS — Property Values. ” Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency, the Special Tax will have the same lien priority as is provided for ad valorem taxes.
Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the Treasurer-Tax Collector of the County in the same manner and at the same time as ad valorem property taxes, although it is possible that the District could elect to provide handbills to pr operty owners within the District.
When the County apportions Special Taxes to the District each Fiscal Year, the District will deposit an amount not to exceed the Administrative Expenses Cap into the Administrative Expense Fund (however, amounts in excess of the Administrative Expenses Cap may be transferred to the Administrative Expense Fund to the extent necessary to collect delinquent Special Taxes) and the District will transmit the balance of the Special Taxes to the Trustee for deposit in the Special Tax Fund established by the Indenture.
Except for Prepayments, which will be deposited to the Redemption Account of the Special Tax Fund, and the amount deposited into the Administrative Expense Fund as described above, the Trustee will, on each date on which the Special Taxes are received from the District, deposit the Special Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee will transfer the Special Taxes on deposit in the Special Tax Fund on the dates, in the amounts and in the following order of priority, to:
First: To the Interest Account, an amount such that the balance in the Interest Account one Business Day prior to each Interest Payment Date is equal to the installment of interest due on the Bonds and any Parity Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account will be used for the payment of interest on the Bonds and any Parity Bonds as the same become due.
Second: To the Principal Account, an amount such that the balance in the Principal Account one Business Day prior to September 1 of each year, commencing September 1, 2026, is equal the principal payment due on the Bonds and any Parity Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds and any Parity Bonds as the same become due at maturity.
Third: To the Redemption Account, the amount needed to make the balance in the Redemption Account one Business Day prior to each September 1 on which a Sinking Fund Payment is due equal to the Sinking Fund Payment due on any Outstanding Bonds and Parity Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency will be made up by an immediate transfer, from the Reserve Account, if funded, pursuant to the Indenture; and thereafter, to pay the principal and premium, if any, due in connection with an optional redemption of Bonds or Parity Bonds.
Fourth: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement.
Fifth: To the District, upon the request of the District, for deposit in the Administrative Expense Fund the amount of any Administrative Expenses for the current Bond Year in excess of the Administrative Expenses Cap as directed by the City. 734
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Sixth: To the Rebate Fund established by the Indenture to the extent directed by the City pursuant to the Indenture.
Seventh: To the Surplus Fund established by the Indenture such remaining amounts in the Special Tax Fund after making the foregoing transfers on September 1.
Reserve Account of the Special Tax Fund
In order to secure further the payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account and thereafter to maintain in the Reserve Account an amount equal to the Reserve Requirement. The term “Reserve Requirement” is defined in the Indenture to mean, that amount as of any date of calculation, equal to the lesser of: (i) 10% of the initial principal amount of the Bonds and P arity Bonds, if any; (ii) Maximum Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; and (iii) 125% of average Annual Debt Service on the then Outstanding Bonds and Parity Bonds, if any; provided, however, that the Reserve Requirem ent shall not exceed $ __________ except in connection with the issuance of Parity Bonds. The Reserve Requirement may be satisfied in whole or in part by cash, a Reserve Policy (as defined in the Indenture), or a combination thereof . On the date of issuan ce of the Bonds, the Reserve Requirement will be satisfied from a deposit of $__________ into the Reserve Account from proceeds of the Bonds.
Subject to the limits on the maximum annual Special Tax levy set forth in the Rate and Method and in the Indenture, the District will covenant in the Indenture to levy Special Taxes in an amount sufficient, in light of the other intended uses of the Special Tax proceeds, to maintain the balance in the Reserve Account at the Reserve Requirement. Amounts in the Reserve Account are to be applied: (i) to pay debt service on the Bonds, or any Parity Bonds, including Sinking Fund Payments, to the extent that other monies are not available therefor; (ii) to redeem Bonds or Parity Bonds in the event of prepayment of Special Taxes, to optionally redeem Bonds or Parity Bonds or in connection with a partial defeasance of Bonds or Parity Bonds, in accordance with the Indenture; and (iii) to pay any rebate requirements. See Appendix E under the caption “CREATION OF FUNDS AND APPLICATION OF PROCEEDS — Reserve Account of the Special Tax Fund.” No Teeter Plan
Although the Riverside County Board of Supervisors has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) which allows each entity levying secured property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, the District is not included in the County Teeter Plan. Consequently, the District may not draw on the County Tax Loss Reserve Fund in the event of delinquencies in Special Tax payments within the District.
Parity Bonds for Refunding Purposes Only
The District will covenant in the Indenture not to issue Parity Bonds except as provided in the Indenture and only for the purposes of refunding all or a portion of the Bonds and any Parity Bonds. See Appendix E under the caption “DEFEASANCE AND PARITY BONDS.”
THE DISTRICT
General Description of the District
The District contains approximately 22 net taxable acres and is located in the southwest portion of the City, to the southwest of Palomar Street and Washington Avenue at Starbuck Circle. 735
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The property within the District is being developed by D.R. Horton into 117 single -family homes in a project being marketed as “Avalino.” As of November 3, 2025 (the date of value of the Appraisal Report)), D.R.
Horton had completed and conveyed 79 homes within the District to individual homeowners. As of such date D.R. Horton owned two model homes, seven completed production homes, nine homes under construction and 20 near-finished lots. As of December 1, 2025, D.R. Horton has obtained building permits for 112 of the 117 planned homes in the District. D.R. Horton expects to complete and convey all homes in the District to individual homeowners by August 2026.
The backbone infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the property within the District has been completed. Remaining improvements include finishing of minor in-tract improvements for the remaining homes to be constructed.
Water and sewer service to the property within the District is currently supplied by the Elsinore Valley Municipal Water District. Electricity is currently supplied by Southern California Edison and gas by Southern California Gas Company. Public education instruction is provided by the Lake Elsinore Unified School District.
Substantially all of the property in the District is designated by the California Department of Conservation to be in an Alquist-Priolo Earthquake Study Zone (the Wildomar Fault of the Elsinore Fault Zone) and in a Liquefaction Zone. To mitigate the risk o f property damage due to liquefaction, engineered fill was incorporated between five to 10 feet of the surface of each home. In addition, in the Covenants, Conditions and Restrictions (“CC&R’s) recorded on the property in the District, approximately 30 fe et from the rear property line of ten lots which back into Palomar Street are designated as a “fault set-back area.” Pursuant to the CC&R’s, the owner of these lots may not construct any habitable structures (defined in the CC&R’s as any structure that has human occupancy of 2,000 hours or more per year) in the fault set-back area.
The District is not located in a flood plain area. Based on maps adopted by the Department of Forestry and Fire Protection of the State of California, the property in the District is located in an area designated as a very high fire hazard severity zone or high fire hazard severity zone, depending on the location of the lot. The property in the District may be subject to unpredictable seismic activity, fires, flood, or othe r natural disasters.
See “SPECIAL RISK FACTORS — Natural Disasters.”
A map showing the location of the District and an aerial photograph thereof appear following the Table of Contents.
Authorized Uses of Bond Proceeds
Proceeds of the Bonds are authorized to be used to pay for the costs of construction of City facilities, including, but not limited to, certain storm drain and street improvements and other public facilities as well as the costs of certain water and sewer system improvements to be owned and o perated by the Elsinore Valley Municipal Water District. See the caption “FINANCING PLAN.” Appraisal Report
The estimated assessed value of the property within the District, as shown on the County’s assessment roll for Fiscal Year 2025-26 is approximately $33,632,467, which as a result of timing of the County’s determination of the assessed values for Fiscal Year 2025-26, does not reflect the development activity and home closings that have taken place since such value was determined.
A pr operty’s assessed value is not necessarily indicative of its market value. In order to provide information with respect to the value of the taxable property within the District, the City engaged the Appraiser to prepare the Appraisal Report. The Appraiser has an “MAI” designation from the Appraisal Institute and has prepared numerous appraisals for the sale of land-secured municipal bonds. The Appraiser was selected by the City and has no material relationships with the City or the owners of the land wit hin the District other than the 736
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relationship represented by the engagement to prepare the Appraisal Report. The City instructed the Appraiser to prepare its analysis and report in conformity with City -approved guidelines and the Appraisal Standards for Land Secured Financings published in 1994 and revised in 2004 by the California Debt and Investment Advisory Commission. A copy of the Appraisal Report is included as Appendix D — “APPRAISAL REPORT” to this Official Statement.
Subject to the assumptions and limiting conditions set forth in the Appraisal Report, the Appraiser concluded that, as of November 3, 2025 , the market value of the Taxable Property within the District was $70,395,000. Reference is made to Appendix D for a complete list of the extraord inary assumptions, assumptions and limiting conditions and a full discussion of the appraisal methodology and the basis for the Appraiser’s opinions.
The Appraisal Report indicates the Appraiser’s opinion as to the market value of the property referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change in the future.
In the event that any of the extraordinary assumptions, assumptions and limiting conditions are not actually realized, the value of the property within the District may be less than the amount reported in the Appraisal Report. The City, the Underwriter and the District make no representation as to the accuracy of the Appraisal Report. There is no assurance that the property within the District can be sold for the prices set forth in the Appraisal Report or that any parcel can be sold for a price sufficient to pay the Special Tax for that parcel in the event of a default in payment of Special Taxes by the landowner. See “SPECIAL RISK FACTORS — Property Values” and Appendix D — “APPRAISAL REPORT.”
Estimated Appraised Value-to-Lien Ratios
The aggregate appraised value of property within the District is $ 70,395,000. Dividing the aggregate estimate of value by the principal amount of the Bonds results in value to lien ratio of 6.60-to-1* for the District.
There is currently no other direct or overlapping special tax or assessment debt on the property within the District.
Including the overlapping general obligation debt in the District and the Bonds, the estimated appraised value to lien ratio for the District is approximately 6.46-to-1*. See “SPECIAL RISK FACTORS — Direct and Overlapping Indebtedness.”
Table 2 below sets forth the appraised value -to-lien ratio of the Taxable Property within the District based on the appraised values set forth in the Appraisal Report, the principal amount of the Bonds (allocated based on the estimated Fiscal Year 2026 -27 Special Tax levy) and overlapping general obligation debt and is based on ownership status as of the Date of Value . Based on ownership status as of the Date of Value (and assuming no additional transfers of property) and building permits issued as of December 1, 2025 , individual homeowners and D.R. Horton are expected to be responsible for approximately 70.58% and 29.42%, respectively, of the estimated Fiscal Year 2026-27 Special Tax levy.
Table 3 below sets forth the estimated appraised value-to-lien ratios for Taxable Property within the District by various ranges based upon the principal amount of the Bonds and overlapping general obligation debt.
* Preliminary, subject to change.
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TABLE 2
CITY OF WILDOMAR
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
ESTIMATED APPRAISED VALUE-TO-LIEN RATIOS
Property Owner(1)
No. of
Parcels
Appraised
Property
Value(2)
Percentage
of
Appraised
Value
Maximum
Fiscal Year
2026-27
Special
Tax(3)
Percentage of
Maximum
Fiscal Year
2026-27
Special Tax
Estimated
Fiscal Year
2026-27
Special Tax
Levy(4)*
Percentage of
Estimated
Fiscal Year
2026-27
Special Tax
Levy
CFD 2023-1
Bonds (5)*
All Other
Overlapping
Debt Issued (6)
Appraised
Value-to-
Lien
Ratio*
Developed Property(7)
Individually Owned 79 $ 57,275,000 82.79% $ 459,415 67.55% $ 415,971 70.58% $ 7,527,506 $ 159,177 7.45:1 D.R. Horton 33 11,907,500 17.21 191,737 28.19 173,379 29.42 3,137,494 66,346 3.72:1 Total Developed Property 112 $ 69,182,500 100.00% $ 651,152 95.74% $589,350 100.00% $ 10,665,000 $ 225,523 6.35:1
Approved Property(7)
DR Horton 5 $ 1,212,500 1.72% $ 28,907 4.26% $ 0 0.00% $ 0 $ 0 N/A Total Approved Property 5 $ 1,212,500 1.72% $ 28,907 4.26% $ 0 0.00% $ 0 $ 0 N/A
Total 117 $ 70,395,000 101.72% $ 680,059 100.00% $ 589,350 100.00% $ 10,665,000 $ 225,523 6.46:1
* Preliminary, subject to change.
(1) Property ownership status as of November 3, 2025.
(2) Based on the appraised value set forth in the Appraisal Report as of November 3, 2025. (3) Based on the greater of the Assigned Special Tax rate or the Backup Special Tax rate on Developed Property depending on the Land Use Category (as defined in the Rate and Method).
See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Rate and Method of Apportionment of Special Tax.” (4) Estimated Fiscal Year 2026-27 Special Tax Levy based on 112 parcels of Developed Property, five parcels of Approved Property and an Administrative Expense Cap for Fiscal Year 2026-27 of $30,600. The estimated levy on Developed Property shown is equal to 91.9% of the Assigned Special Tax rates on Developed Property. See “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Rate and Method of Apportionment of Special Tax.” (5) Allocated based on the estimated Fiscal Year 2026-27 Special Tax levy. (6) Includes overlapping debt set forth in Table 4 below. (7) Development status based on building permits issued as of December 1, 2025.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
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TABLE 3
CITY OF WILDOMAR
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
VALUE-TO-LIEN STRATIFICATION*
Value-to-Lien Category
No. of
Parcels
Taxable
Property
Percentage
of Taxable
Property
Appraised
Value(1)
Percentage
of Appraised
Value
Estimated
Fiscal Year
2025-26
Special Tax
Levy
Percent Share
of Estimated
Fiscal Year
2026-27
Special Tax
Levy
CFD 2023-1
Bonds (2)
Percent
Share of
2023-1
Bonds
All Other
Overlapping
Debt(3)
Aggregate
Value-to-Lien
Less than 3.00:1(4) 16 14.29% $ 3,927,500 5.68% $ 81,940 14.40% $ 1,536,217 14.40% $ 32,485 2.50:1
3.00:1 to 5.00:1 8 7.14 2,760,000 3.99 39,822 7.00 746,596 7.00 15,788 3.62:1
5.01:1 to 7.00:1 9 8.04 5,220,000 7.55 45,587 8.01 854,681 8.01 18,073 5.98:1 Greater than 7.00:1(4) 79 70.54 57,275,000 82.79 401,506 70.58 7,527,506 70.58 159,177 7.45:1 Totals 112 100.00% $ 69,182,500 100.00% $568,856 100.00% $10,665,000 100.00% $ 225,523 6.35:1
* Preliminary, subject to change.
(1) Based on the appraised value set forth in the Appraisal Report as of November 3, 2025, the Date of Value. (2) Allocated based on the estimated Fiscal Year 2026-27 Special Tax levy. (3) Includes overlapping debt set forth in Table 4 below. (4) The minimum value to lien in the District is 2.34:1*. The maximum value to lien in the Greater than 7.00:1 category is 8.07:1*.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
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Direct and Overlapping Debt
The District is included within the boundaries of overlapping local agencies providing governmental services. Some of these local agencies have outstanding bonds, and/or the authority to issue bonds, payable from taxes or assessments. The existing and authorized overlapping indebtedness payable from taxes and assessments that may be levied upon the property within the District as of November 3, 2025 is shown in Table 4 below. In addition to current debt, new community facilities districts and/or special assessment districts could be formed in the future encompassing all or a portion of the property within the District; and such districts or the agencies that formed them could issue more bonds and levy additional special taxes or assessments.
TABLE 4
CITY OF WILDOMAR
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
DIRECT AND OVERLAPPING DEBT
I. Appraisal Value (1) $70,395,000
II. Land Secured Bond Indebtedness
Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels in
CFD No.
2023-1 (3)
Amount
Applicable
CITY OF WILDOMAR CFD NO. 2023-1, SERIES 2026(2) CFD $10,665,000 $ 10,665,000 100.000% 117 $10,665,000* TOTAL LAND SECURED BONDED DEBT $10,665,000*
Authorized but Unissued Direct and Overlapping Indebtedness Type Authorized Unissued % Applicable Parcels in
CFD No.
2023-1 (3)
Amount
Applicable
CITY OF WILDOMAR CFD NO. 2023-1, SERIES 2026(2) CFD $15,000,000 $ 0 100.000% 117 $ 0* $ 0*
TOTAL OUTSTANDING AND UNISSUED LAND SECURED INDEBTEDNESS $10,665,000
III. General Obligation Bond Indebtedness
Outstanding Direct and Overlapping Bonded Debt Type Issued Outstanding % Applicable Parcels in
CFD No.
2023-1 (3)
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $ 19,215,000 0.022% 117 $ 4,290 MT. SAN JACINTO JR. COLLEGE DISTRICT DEBT SERVICE GO 295,000,000 233,100,000 0.025 117 57,867 LAKE ELSINORE UNIFIED SCHOOL DISTRICT DEBT SERVICE GO 98,915,000 88,845,000 0.184 117 163,366 TOTAL OUTSTANDING GENERAL OBLIGATION BONDED DEBT (2) $ 225,523 Authorized but Unissued Direct and Overlapping Indebtedness Type Authorized Unissued % Applicable Parcels in
CFD No.
2023-1 (3)
Amount
Applicable
METROPOLITAN WATER DEBT SERVICE GO $850,000,000 $ 0 0.022% 117 $ 0 MT. SAN JACINTO JR. COLLEGE DISTRICT DEBT SERVICE GO 295,000,000 0 0.025 117 0 LAKE ELSINORE UNIFIED SCHOOL DISTRICT DEBT SERVICE GO 303,000,000 204,085,000 0.184 117 375,266 TOTAL UNISSUED GENERAL OBLIGATION INDEBTEDNESS (2) $ 375,266
TOTAL OUTSTANDING AND UNISSUED GENERAL OBLIGATION INDEBTEDNESS $ 600,789
TOTAL OF ALL OUTSTANDING DIRECT AND OVERLAPPING BONDED DEBT $10,890,523* TOTAL OF ALL OUTSTANDING DIRECT AND UNISSUED DIRECT OVERLAPPING INDEBTEDNESS $11,265,789*
IV. Ratios to Appraisal Value
Outstanding Land Secured Bonded Debt 6.60:1*
Total Outstanding Bonded Debt 6.46:1*
* Preliminary, subject to change.
(1) Based on the appraised value set forth in the Appraisal Report as of November 3, 2025, the Date of Value. (2) Parity Bonds may be issued for refunding purposes only.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC. 740
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Table 5 below describes the estimated Fiscal Year 2025-26 effective tax burden for D.R. Horton’s development in the District based on the average sales price for closed homes in the District , the Fiscal Year 2025-26 Special Tax levy on Developed Property and Fiscal Year 2025-26 actual levies for all other overlapping taxing jurisdictions. Based on t he foregoing and the projected debt service on the Bonds, the Administrative Expenses Cap of $30,600 (which amount shall escalate at 2.00% per Fiscal Year), in Fiscal Year 2025-26, the estimated effective tax rates to be levied on Developed Property in the District is approximately 1.98%.
TABLE 5
CITY OF WILDOMAR
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
ESTIMATED FISCAL YEAR 2025-26 TAX OBLIGATION
FOR A SAMPLE OF DEVELOPED PROPERTY
Home Price(1) $725,000
Ad Valorem Property Taxes:
Ad-Valorem Tax Rate (1.00%) $ 7,250
Lake Elsinore Unified School (0.04700%) 341
Mt. San Jacinto Jr. College (0.00254%) 18
Metro Water West (0.00700%) 51
Total General Property Taxes $ 7,660
Assessment, Special Taxes & Parcel Charges:
Flood Control Stormwater / Cleanwater / Santa Ana $ 4 MWD Standby charge 9
CFD No. 2022-1 - Maintenance Services Tax A 842
CFD No. 2022-1 - Safety Services Tax B 498
CFD No. 2023-1 - Facilities Special Tax(2) 5,371
Total Assessments & Special Taxes $ 6,724
Estimated Total Property Tax $ 14,384
Estimated Effective Tax Rate (3) 1.98%
(1) Based on the average sales price for closed homes in the District. (2) Reflects the Fiscal Year 2025-26 Special Tax levy.
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC.
Delinquency History
The first installment of the Special Tax levy becomes delinquent on December 10 and the second installment becomes delinquent on April 10 of each year. Fiscal Year 2024-25 was the first year of the Special Tax levy. Table 6 below sets forth the Special Tax levy, collections and delinquency rates in the District as of November 15, 2025.
TABLE 6
CITY OF WILDOMAR
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
SPECIAL TAX LEVIES, DELINQUENCIES AND DELINQUENCY RATES Delinquencies as of November 15, 2025
Fiscal
Year
Amount
Levied
Parcels
Levied
Parcels
Delinquent
Amount
Delinquent
Percent
Delinquent
2024-25 $11,253 2 0 $0 0.00%
2025-26 $453,659 84 N/A N/A N/A
Source: County of Riverside Assessor’s Office; Spicer Consulting Group, LLC. 741
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PROPERTY OWNERSHIP AND THE DEVELOPMENT
The information about the property in the District under this caption has been provided by representatives of D.R. Horton, and has not been independently confirmed or verified by the Underwriter, the City or the District. The Underwriter, the City, and the District make no representation as to the accuracy or adequacy of the information contained in this caption. There may be material adver se changes in this information after the date of this Official Statement. Neither the Bonds nor the Net Taxes securing the Bonds and any Parity Bonds are personal obligations of D.R. Horton or any affiliate thereof or any other property owner and, in the event that any property owner defaults in the payment of its Special Taxes, the District may proceed with judicial foreclosure but has no direct recourse to the assets of any property owner or any affiliate thereof. See the caption “SPECIAL RISK FACTORS.”
Notwithstanding the belief of D.R. Horton that it will have sufficient funds to complete its planned development in the District, no assurance can be given that amounts necessary to fund the remaining planned development by D.R. Horton in the District will be available when needed. None of D.R. Horton, or any other entity or person is under any legal obligation of any kind to expend funds for the development of the property as planned by D.R. Horton in the District. Any contributions by D.R. Horton or any other entity or person to fund the costs of its development are entirely voluntary. If and to the extent the aforementioned sources are inadequate to pay the costs to complete the planned development by D.R. Horton within the District, the remaining por tions of such development may not be completed. D.R. Horton 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. See the caption “SPECIAL RISK FACTORS.” General
The District contains approximately 22 net taxable acres and is located in the southwest portion of the City, to the southwest of Palomar Street and Washington Avenue at Starbuck Circle.
The property within the District is being developed by D.R. Horton into 117 single-family homes in a project being marketed as “Avalino.” As of November 3, 2025 (the date of value of the Appraisal Report), D.R.
Horton had completed and conveyed 79 homes within the District to individual home owners. As of such date D.R. Horton owned two model homes, seven completed homes, nine homes under construction and 20 near - finished lots. As December 1, 2025, D.R. Horton has obtained building permits for 112 of the 117 planned homes in the District. D .R. Horton expects to complete and convey all remaining homes to be constructed in the District to individual homeowners by August 2026.
The backbone infrastructure (sewer, water, storm drains, utilities, and arterial roads) necessary to develop the proper ty within the District has been completed. Remaining improvements include finishing of minor in-tract improvements for the remaining homes to be constructed. The table below shows the planned product mix of homes in the District as of November 3, 2025. 742
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COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
(As of November 3, 2025)
Owned by D.R. Horton
Plan
Total
Units
Planned
Estimated
Home
Square
Footage Closings
Completed
Homes/Homes
Under
Construction(1)
Finished
Lots
Base Home
Prices(2)
1 22 1,898 16 3 3 $717,990
2 22 2,239 13 5 4 735,990
3 22 2,537 15 3 4 759,490
4 24 2,929 15 5 4 819,990
5 27 3,015 20 2 5 809,990
Total 117 79 18 20
(1) Completed Homes/Homes Under Construction consist of two model homes, seven completed production homes and nine homes under construction.
(2) Base home prices shown exclude lot premiums, options and extras and any incentives or price reductions. Base sales prices are subject to change.
No assurance can be given that D.R. Horton’ home construction and sales will be carried out on the schedule 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 Official Statement. Additionally, homes sold may not result in closed escrows as sales contracts are subject to cancellation. In changing market conditions, builders will often revise the product lines and prices and the rate of sales can fluctuate. D.R. Horton continuously evaluates its product lines and prices in light of the then current market conditions. See “SPECIAL RISK FACTORS” herein for a discussion of risk factors.
D.R. Horton
General. As previously defined in this Official Statement “D.R. Horton” is D.R. Horton Los Angeles Holding Company, Inc., a California corporation. D.R. Horton is a wholly -owned subsidiary of D.R. Horton, Inc., a Delaware corporation (“D.R. Horton, Inc.”). D.R. Horton, Inc. is a public company whose common stock is traded on the New York Stock Exchange under the symbol “DHI.” Founded in 1978 and headquartered in Arlington, Texas, D.R. Horton, Inc. constructs and sells homes through its operating divisions in 126 markets in 36 states under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes and Freedom Homes.
D.R. Horton, Inc. 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 an d other information, including financial statements, with the Securities and Exchange Commission (the “SEC”). Such filings, particularly, D.R. Horton, Inc.’s Annual Report on Form 10 -K for the fiscal year ended September 30, 2025, as filed with the SEC on November 19, 2025, and D.R. Horton’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, as filed with the SEC on July 23, 2025, set forth certain data relative to the consolidated results of operations and financial position of D.R. Horton, Inc. and its subsidiaries, including D.R.
Horton, as of such dates.
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, includin g D.R. Horton, Inc. The address of such Internet web site is www.sec.gov. All documents subsequently filed by D.R. Horton, Inc. pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in such manner as the SEC prescribes.
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Copies of D.R. Horton, Inc.’s Annual Report and each of its other quarterly and current reports, including any amendments, are available from D.R. Horton, Inc.’s website at www.drhorton.com.
The foregoing websites are and references to filings with the SEC are given for reference and convenience only, and the information on such websites and on file with the SEC does not form a part of this Official Statement and is not incorporated by reference herein. No representati on is made in this Official Statement as to the accuracy or adequacy of the information contained on such websites. D.R. Horton is not obligated to advance funds for construction or development or to pay ad valorem property taxes or the Special Taxes and investors should not rely on the information and financial statements contained on such websites in evaluating whether to buy, hold or sell the Bonds. The information contained on such websites may be incomplete or inaccurate and has not been reviewed by the City, the District or the Underwriter.
Financing Plan. To date, D.R. Horton has financed its land acquisition and various site development costs related to its property in the District through internally generated funds. As of November 15, 2025, D.R.
Horton has expended approximately $69.8 million on land acquisition and development and homebuilding costs in the District. D.R. Horton expects to incur approximately $ 4.1 million on remaining land development, homebuilding, marketing, and sales costs for its project in the District. D.R. Horton expects to use home sales revenues and internal funding to complete its development within the District, and believes that it will have sufficient funds available to complete its planned development as described in this Official Statement.
Notwithstanding the belief of D.R. Horton that it will have sufficient funds to complete its planned development in the District, no assurance can be given that sources of financing available to D.R. Horton will be sufficient to complete the property development and home construction as currently anticipated. While D.R.
Horton has made such internal financing available in the past, there can be no assurance whatsoever of its willingness or ability to do so in the future. Neithe r D.R. Horton, nor any of its related entities, including its parent D.R. Horton, Inc., has any legal obligation of any kind to make any such funds available or to obtain loans. Other than pointing out the willingness of D.R. Horton to provide internal fi nancing in the past, D.R.
Horton has not represented in any way that it will do so in the future. If and to the extent that internal financing and home sales revenues are inadequate to pay the costs to complete D.R. Horton’s planned development in the District and other financing by D.R. Horton is not put into place, there could be a shortfall in the funds required to complete the proposed development by the Developer and portions of the project may not be developed.
The development and financing plans d escribed in this Official Statement are solely projections as of the date of this Official Statement. Such plans are subject to change. No assurance can be given that such plans will remain in their current state or that the plans will ultimately be carried out according to the description set forth above.
Except as described in this Official Statement and except for those consents, permits, authorizations, certifications and approvals of governmental entities required in the ordinary course of developme nt, D.R.
Horton has no actual knowledge of any impediment to construction or obtaining land use entitlements which could be reasonably expected to have a material adverse effect on its ability to complete the planned development of its property within the District as described in the Official Statement. Although the information in this Official Statement reflects the current development expectations of D.R. Horton, no assurance can be given that home construction and sales will be carried out on the schedule and according to the plans described herein, or that the home construction and sale plans or base prices set forth herein will not change after the date of this Official Statement. D.R. Horton reserves the right to change its development at any time without notice. Additionally, homes under contract to be sold may not result in closed escrows as sales contracts are subject to cancellation.
See “SPECIAL RISK FACTORS – Concentration of Property Ownership.”
SPECIAL RISK FACTORS
The Bonds have not been rated by any rating agency, and the purchase of the Bonds involves significant risks that are not appropriate for certain investors. The following is a discussion of certain risk factors which 744
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should be considered, in addition to o ther matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluat ing the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. See “— Property Values” below.
Risks of Real Estate Secured Investments Generally
The Bond Owners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation: (i) adverse changes in local market con ditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or buildings and/or sites in the event of sale or f oreclosure; (ii) changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii) natural disasters (in cluding, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions; and (v) increased delinquencies due to rising mortgage costs and other factors.
No assurance can be give n that the property owners within the District will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See the caption “— Enforcement Delays — Bankruptcy” for a discussion of certain limitations on the D istrict’s ability to pursue judicial proceedings with respect to delinquent parcels.
Insufficiency of Special Tax Revenues
As discussed below, the Special Taxes may not produce revenues sufficient to pay the debt service on the Bonds either due to nonpayment of the amounts levied or because acreage within the District becomes exempt from taxation due to the transfer of title to a public agency.
In order to pay debt service on the Bonds, it is generally necessary that the Special Taxes be paid in a timely manner. Should the Special Taxes not be paid on time, the District has established a Reserve Account under the Indenture to be maintained in an amount equal to the Reserve Requirement to pay debt service on the Bonds to the extent other funds are not availa ble. See “SOURCES OF PAYMENT FOR THE BONDS — Reserve Account of the Special Tax Fund.” The District will covenant in the Indenture to maintain in the Reserve Account an amount equal to the Reserve Requirement, subject, however, to the availability of Net Taxes in amounts sufficient to do so and to the limitation that the District may not levy the Special Tax in any Fiscal Year at a rate in excess of the maximum amounts permitted under the Rate and Method. See Appendix A and Appendix E hereto. As a result, if a significant number of Special Tax delinquencies occurs within the District, the District could be unable to replenish the Reserve Account to the Reserve Requirement due to the limitations on the amount of the Special Tax that may be levied. If such defaults were to continue in successive years, the Reserve Account could be depleted and a default on the Bonds could occur.
The Act provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. In addition, the Act provides that, if property subject to the Special Tax is ac quired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested in the courts, but it is doubtful that they would be upheld as to, for example, property owned by the federal government. If for any reason property within the District becomes exempt from taxation by 745
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reason of ownership by a non-taxable entity such as the federal government or another public agency, subject to the limitation of the Maximum Special Tax, the Special Tax will be reallocated to the remaining taxable parcels within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon their willingness and/or ability to pay the Special Tax. Moreover, if a substantial portion of additional land within the District became exempt from the Special Tax because of public ownership, or otherwise, the Maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default will occur with respect to the payment of such principal and interest.
The District will covenant in the Indenture that, under certain circumstances, it will institute foreclosure proceedings to sell any property with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. See “SOURCES O F PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales ” for provisions which apply in the event of such foreclosure and which the District is required to follow in the event of delinquencies in the payment of the Special Tax.
In the event that sales or foreclosures of property are necessary, there could be a delay in payments to Owners of the Bonds (if the Reserve Account has been depleted) pending such sales or the prosecution of such foreclosure proceedings and receipt by the City on beha lf of the District of the proceeds of sale. The District may adjust the future Special Tax levied on taxable parcels in the District, subject to limitations described above under the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Rate and Method of Apportionment of Special Tax ,” to provide an amount required to pay interest on and principal of the Bonds, and the amount, if any, necessary to replenish the Reserve Account to an amount equal to the Reserve Requirement, and to pay all current expe nses. There is, however, no assurance that the total amount of the Special Tax that could be levied and collected against taxable parcels in the District will be at all times sufficient to pay the amounts required to be paid by the Indenture, even if the Special Tax is levied at the Maximum Special Tax rates. See “— Enforcement Delays — Bankruptcy.”
No assurance can be given that the real property subject to sale or foreclosure will be sold, or if sold, that the proceeds of sale will be sufficient to pay any delinquent installments of the Special Tax. The Act does not require the City to purchase or otherwise acquire any lot or parcel of property to be sold at foreclosure if there is no other purchaser at such sale. The Act and the Indenture do specify that the Special Tax will have the same lien priority as for ad valorem property taxes in the case of delinquency. 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.
Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 20 days must elapse after the date on which the notice of levy of the interest in real property was served on the judgment debtor before the sale of such lot or parcel can be made. Furthermore, if the purchaser at the sale is the judgment creditor (e.g., the District), an action may be commenced by the delinquent property owner within 90 days after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation, which repeals the one year redemption period, has not been tested and there can be no assurance that, if tested, such legislation will be upheld. (Section 701.680 of the Code of Civil Procedure of the State.)
Impact of Economic Conditions on the Development in the District Certain events and factors which negatively affect the regional, State and national economies could have an adverse effect on the pace at which the D.R. Horton can complete the rema ining infrastructure and future homes, and demand by, and the ability of individuals to purchase homes within the District. Such events and 746
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factors could include rising inflation and intere st rates, persistent supply chain issues and global market instability caused by geopolitical events. Any adverse impact of the foregoing and other economic factors on the project in the District and the real estate market in general cannot be predicted.
Increasing Mortgage Interest Rates
Increases in mortgage interest rates could have a negative impact on the estimated absorption rates of the planned for-sale residential units in the District described herein. With respect to entry -level households, increased mortgage interest rates may adversely impact the affordability of homes and may increase mortgage payment levels for owning a lower-priced home relative to renting a residence, thereby making purchasing less attractive. With respect to move-up households, higher mortgage interest rates may impact the desire of current homeowners to move from their present home due to the fact that their present home likely has a relatively low mortgage interest rate. In addition, in such instances, a new home would likely have a higher interest rate on a new mortgage loan as well as a higher purchase price and property taxes. Such considerations may decrease the desire for move-up households to purchase a new home. The foregoing factors could reduce demand for and/or the ability to achieve the sales prices of the planned for-sale homes within the District as described herein.
Concentration of Ownership
Based on ownership status as of November 3, 2025 (and assuming no additional transfers of property), individual homeowners and D.R. Horton are expected to be responsible for approximately 70.58% and 29.42%, respectively, of the estimated Fiscal Year 2026-27 Special Tax levy.
The timely payment of principal of and interest on the Bonds depends upon the willingness and ability of the current and future property owners in the District to pay the Special Taxes prior to delinquency. General and local economic conditions and governmental requirements or restrictions may affect the willingness of the current property owners, or any successor property owners, to pay the Special Taxes, and there is no assurance that the current property owners, or any successor property owners, will pa y such Special Taxes even if financially able to do so. Due to the concentration of ownership of the property within the District, a failure by D.R. Horton or any successor property owner thereto to pay the Special Taxes may result in a default in the payment of debt service on the Bonds. See “PROPERTY OWNERSHIP AND THE DEVELOPMENT.” Property Insurance
In recent years, homeowners in many areas in the State have experienced significant increases in premiums for property and homeowners’ insurance policies a s well as difficulty in obtaining such insurance from commercial insurance companies. The increases have been driven by, among other factors, the risk of wildfire damage to property in the State. Such increases in the overall cost of homeownership could have a material adverse effect on the rate of absorption of the remaining units in the District and on a homeowner’s willingness and/or ability to pay the Special Taxes.
In addition, no assurances can be made that adequate homeowners’ insurance coverage will be available in the future from reputable insurance companies, with premiums comparable to historical rates, or at all. The inability to obtain adequate insurance coverage could impact the ability of the homeowners’ in the District to reconstruct their homes in the event of damage.
Property Values
The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District’s on ly remedy is to commence foreclosure proceedings against the delinquent parcel in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires or floods, st ricter land use regulations, delays in development or other events will adversely impact the 747
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security underlying the Special Taxes. See “THE DISTRICT — Appraisal Report ” and Appendix D — “APPRAISAL REPORT.”
The Appraiser has estimated, on the basis of certain assumptions and limiting conditions contained in the Appraisal Report, that as of the Date of Value, the market value of the land and improvements within the District was approximately $70,395,000. See “THE DISTRICT — Appraisal Report.” The Appraisal Report indicates the Appraiser’s opinion as to the market value of the properties referred to therein as of the date and under the conditions specified therein. The Appraiser’s opinion reflects conditions prevailing in the applicable market as of the Date of Value. The Appraiser’s opinion does not predict the future value of the subject property, and there can be no assurance that market conditions will not change adversely in the future.
Prospective purchasers of the Bonds should not assume that the taxable land within the District could be sold for the appraised amount or for the assessed values at a foreclosure sale for delinquent Special Taxes. In arriving at the estimate of market value of the property in the District, the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur following a reasonable marketing period, which is not always present in a foreclosure sale. See Appendix D for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions used by the Appraiser. Any event which causes one of the Appraiser’s assumptions to be untrue could result in a reduction of the value of the taxable land and improvements within the District from the market value estimated by the Appraiser.
No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received, that such bid will be sufficient to pay all delinquent Special Taxes. See “SOURCES OF PA YMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.”
Natural Disasters
The District, like all California communities, may be subject to unpredictable seismic activity, fires, flood, or other natural disasters. Southern California is a seismically active area. Seismic activity represents a potential risk for damage to buildings, roads, bridges and property within the District. In addition, land susceptible to seismic activity may be subject to liquefaction during the occurrence of such event.
Substantially all of the property in the District is designated by the California Department of Conservation to be in an Alquist-Priolo Earthquake Study Zone (the Wildomar Fault of the Elsinore Fault Zone) and a Liquefaction Zone. To mitigate the r isk of property damage due to liquefaction, engineered fill was incorporated between five to 10 feet of the surface of each home. In addition, in the CC&R’s recorded on the property in the District, approximately 30 feet from the rear property line of ten lots which back into Palomar Street are designated as a “fault set -back area.” Pursuant to the CC&R’s, the owner of these lots may not construct any habitable structures (defined in the CC&R’s as any structure that has human occupancy of 2,000 hours or more per year) in the fault set-back area.
The District is not located in a flood plain area.
In recent years, wildfires have caused extensive damage throughout the State, including within the County. Certain of these fires have burned thousands of acre s and destroyed hundreds and in some cases thousands of homes. In some instances entire neighborhoods have been destroyed. Several fires in recent years damaged or destroyed property in areas that were not previously considered to be at risk from such events.
In 2024 and 2025, the Department of Forestry and Fire Protection of the State of California (“CalFire”), under the direction of the Office of the State Fire Marshal, released updated Fire Hazard Severity Zone (“FHSZ”) maps for California which evaluates “Hazard,” being the likelihood and expected fire behavior over a 30 to 50- year period without considering mitigation measures such as home hardening, recent wildfire or fuel reduction efforts. On the other hand, “Risk” is the potential damage a fire can do to the area under existing conditions, 748
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accounting for any modifications such as fuel reduction projects, defensible space, and ignition resistant building construction. The mapping process evaluated both the probability of an area burning and the expected fire behavior under extreme fuel and weather conditions. Factors such as fire history, vegetation type and density, terrain features, local fire weather patterns, predicted flame lengths, and ember transport potential were considered in the mapping process. For more information, see the CalFire website.
In the updated FHSZ maps, the State Fire Marshal classified the state responsibility areas (the “SRAs”), where the State has financial responsibility for wildfire protection and prevention, and designated the local responsibility areas (the “LRAs”), where such responsibility falls on the local agencies. These zones are classified as either “Moderate,” “High” or “Very High” and are based on statewide criteria and severity of fire hazard that is expected to prevail in those areas. Under current State law, local agencies are required to adopt CalFire’s updated LRA map for its area within 120 days of receiving the recommended FHSZ designation from CalFire. The City adopted CalFire’s LRA map for FHSZ designations within the City on June 11, 2025. Based on such maps, the property in the District is located in an area designated as a very high FHSZ or high FHSZ, depending on the location of the lot.
The City experiences high winds known as Santa Ana winds which frequently accompany and magnify the intensity of wildfires. There is a risk of homes within the District being destroyed by wildfires and no assurance can be given as to the severity or frequency of wildfires within the vicinity of the District.
Additionally, property located adjacent to burn areas can be subject to mudslides and flooding, which can cause significant damage and destruction to property.
On January 16, 2025, Governor Gavin Newsom issued Executive Order N -10-25 (the “Governor’s Order”) which canceled penalties, costs and interest on overdue property taxes (including special taxes) within certain ZIP codes affected by the Palisades and Eaton Fires in Los Angeles County during calendar year 2025.
Similar orders in the aftermath o f a natural disaster could cause a delay in the payment of property taxes, including special taxes, by certain property owners in any community facilities district affected by such orders.
Unless the majority of property owners within any such community f acilities district pay their special taxes voluntarily or have mortgage impound accounts, it any affected community facilities district may need to draw upon a reserve fund to make debt service payments on outstanding bonds and it is possible that outstand ing bonds will experience a payment default. In the event of a major fire or other natural disaster affecting the District, a similar order affecting the District could impact the debt service payments for the Bonds.
In the event of a severe earthquake, fire, flood or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes.
Hazardous Substances
While government taxes, assessments and charges are a common claim against the value of a parcel, other less common claims may also be relevant. One of the most serious in terms of the potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act o f 1980, sometimes referred to as “CERCLA” or the “Super Fund Act,” is the most well-known and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent and similar in effect. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of a parcel whether or not the owner (or operator) had anything to do with creating or handling the hazardous substance.
The effect, therefore, should any of the parcels within the District be affected by a hazardous substance, is to reduce the marketability and value by the costs of remedying the condition. 749
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The District is not aware of the presence of any federally or state classified hazardous substances in violation of any environmental laws, located on the property within the District. Howeve r, it is possible that such materials do currently exist and that the District is not aware of them.
It is possible that property in the District may be liable for hazardous substances in the future as a result of the existence, currently, of a substance p resently classified as hazardous but which has not been released or the release of which is not presently threatened, or the existence, currently, on the property of a substance not presently classified as hazardous but which may in the future be so classified. Additionally, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling such substance.
All of these possibilities could have the effect of reducing the value of the applicable property.
Enforcement Delays – Bankruptcy
In the event of a delinquency in the payment of the Special Taxes, the District is required to commence enforcement proceedings under the circumstances described under the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” However, prosecution of such proceedings could be delayed due to crowded local court calendars or by bankruptcy, insolvency and other laws generally affecting creditors’ rights (such as the Soldiers’ and Sailors’ Relief Act of 1940) and by the laws of the State relating to judicial and non-judicial foreclosure. Although bankruptcy proceedings would not cause the liens of the Special Taxes to become extinguished, bankruptcy of a person or entity with an interest in the ap plicable property could result in a delay in the enforcement proceedings because federal bankruptcy laws provide for an automatic stay of foreclosure and tax sale proceedings. Any such delay could increase the likelihood of delay or default in payment of the principal of and interest on the Bonds. The various legal opinions to be delivered in connection with the issuance of the Bonds, including Bond Counsel’s approving legal opinion, are qualified as to the enforceability of the Bonds and the Indenture by reference to bankruptcy, reorganization, moratorium, insolvency and other laws affecting the rights of creditors generally or against public entities such as the District.
Special Tax Delinquencies
Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to the properties within the District on the regular ad valorem property tax bills sent to owners of such properties by the County Tax Collector. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments.
See APPENDIX E — “SUMMARY OF THE INDENTURE — COVENANTS AND WARRANTY — Covenants” for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See “— FDIC/Federal Government Interests in Parcels ” for a discussion of the policy of the Federal Deposit Insurance Corporation regarding the payment of special taxes and assessment and limitations on the District’s ability to foreclosure on the lien of the Special Taxes in certain circumstances.
FDIC/Federal Government Interests in Parcels
The ability of the District to collect interest and penalties specified by the Act and to foreclose the lien of delinquent Special Taxes may be limited in certain respects with regard to parcels in which the Federal Deposit Insurance Corporation (the “FDIC”), or other federal government entities such as Fannie Mae or Freddie Mac, has or obtains an interest.
In the case of the FDIC, in the event that any financial institution making a loan which is secured by parcels is taken over by the FDIC and the applicable Special Tax is not paid, the remedies available to the District may be constrained. The FDIC’s policy statement regarding the payment of state and local real property taxes (the “Policy Statement”) provides that taxes other than ad valorem taxes which are secured by a valid lien in 750
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effect before the FDIC acquired an interest in a property will be paid unless the FDIC determines that abandonment of its interests is appropriate. The Policy Statement provides that the FDIC generally will not pay installments of non-ad valorem taxes which are levied after the time the FDIC acquires its fee interest, nor will the FDIC recognize the validity of any lien to secure payment except in certain cases where the Resolution Trust Corporation had an interest in property on or prior to December 31, 1995. Moreover, the Policy Statement provides that, with respect to parcels on which the FDIC holds a mortgage lien, the FDIC will not permit its lien to be foreclosed out by a taxing authority without its specific consent, nor will the FDIC pay or recognize liens for any penalties, fines or similar claims imposed for the nonpayment of taxes.
The FDIC has taken a position similar to that expressed in the Policy Statement in legal proceedings brought against Orange County in United States Bankruptcy Court and in Federal District Court. The Bankruptcy Court issued a ruling in favor of the FDIC on certain of such claims. Orange County appealed that ruling, and the FDIC cross-appealed. On August 28, 2001, the Ninth Circuit Court of Appeals issued a ruling favorable to the FDIC except with respect to the payment of pre -receivership liens based upon delinquent property tax.
The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to parcels in which the FDIC has or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure sale would prevent or delay the foreclosure sale.
In the case of Fannie Mae and Freddie Mac, in the event a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, or a private deed of trust secured by a parcel of taxable property is owned by a federal government entity or federal government sponsored entity, such as Fannie Mae or Freddie Mac, the ability to foreclose on the parcel or to collect delinquent Special Taxes may be limited. Federal courts have held that, based on the supremacy clause of the United States Constitution “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, anything in the Constitution or Laws of any State to the contrary notwithstanding. ” In the absence of Congressional intent to the contrary, a state or local agency canno t foreclose to collect delinquent taxes or assessments if foreclosure would impair the federal government interest. This means that, unless Congress has otherwise provided, if a federal government entity owns a parcel of taxable property but does not pay taxes and assessments levied on the parcel (including Special Taxes), the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments.
Moreover, unless Congress has otherwise provided, if the federa l 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 delinquen t taxes and assessments on a parity with the Special Taxes and preserve the federal government’s mortgage interest. For a discussion of risks associated with taxable parcels within the District becoming owned by the federal government, federal government entities or federal government sponsored entities, see “—Insufficiency of Special Tax Revenues.”
The District’s remedies may also be limited in the case of delinquent Special Taxes with respect to parcels in which other federal agencies (such as the Intern al Revenue Service and the Drug Enforcement Administration) have or obtain an interest.
Direct and Overlapping Indebtedness
The ability of an owner of property within the District to pay the applicable Special Taxes could be affected by the existence of other taxes and assessments imposed upon taxable parcels. See “THE DISTRICT — Direct and Overlapping Debt” herein. The City and other public agencies whose boundaries overlap those of 751
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the District could impose additional taxes or assessment liens on the pr operty within the District in order to finance public improvements or services to be located or provided inside of or outside of such area. The lien created on the property within the District through the levy of such additional taxes may be on a parity with the lien of the Special Taxes applicable to the property within the District.
The imposition of additional liens on a parity with the Special Taxes may reduce the ability or willingness of property owners to pay the Special Taxes and increase the possi bility that foreclosure proceeds will not be adequate to pay delinquent Special Taxes. The District will covenant in the Indenture not to issue Parity Bonds other than for refunding all of a portion of the Bonds or Parity Bonds.
Payment of Special Taxes is not a Personal Obligation of the Property Owners An owner of a taxable parcel is not personally obligated to pay Special Taxes. Rather, Special Taxes are an obligation which is secured only by a lien against the taxable parcel. If the value of a taxable parcel is not sufficient, taking into account other liens imposed by public agencies, to secure fully Special Taxes, the District has no recourse against the property owner.
No Acceleration Provision
Neither the Bonds nor the Indenture contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture.
Limited Obligations
The Bonds and interest thereon are not payable from the general funds of the City. Except with respect to the Net Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City or District property.
The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City’s or the District’s property or upon any of the City’s or the District’s income, receipts or revenues, except the Net Taxes and other amounts pledged under the Indenture.
The District’s legal obligations with respect to any delinquent Special Taxes are limited to: (i) payments from the Reserve Account to the extent of funds on deposit therein; and (ii) the institution of judicial foreclosure proceedings under certain circumstances with respect to any parcels for which Special Taxes are delinquent. See the caption “SOURCES OF PAYMENT FOR THE BONDS — Special Taxes — Proceeds of Foreclosure Sales.” The Bonds cannot be accelerated in the event of any default.
The obligation to pay Special Taxes does not constitute a personal obligation of the current or subsequent owners of the respective parcels which are subject to such liens. See the caption “— Payment of Special Taxes is Not a Personal Obligation of the Property Owners. ” Enforcement of Special Tax payment obligations by the District is limited to judicial foreclosure in the Superior Court of California, County of Riverside. There is no assurance that any current or subsequent owner of a parcel subject to a Special Tax lien will be able to pay the amounts due or that such owner will choose to pay such amounts even though financially able to do so.
Failure by owners of the parcels to pay Special Tax installments when due, delay in foreclosure proceedings, or the inability of the District to sell parcels that have been subject to foreclo sure proceedings for amounts sufficient to cover the delinquent installments of Special Taxes levied against such parcels may result in the inability of the District to make full or timely payments of debt service on the Bonds, which may in turn result in the depletion of the Reserve Account. See the caption “— Enforcement Delays — Bankruptcy.” 752
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Proposition 218
An initiative measure entitled “The Right to Vote on Taxes Act” (“Proposition 218”) was approved by the voters at the November 5, 1996 statewide gen eral election. Among other things, Proposition 218 added a new Article XIII C to the California Constitution which states that “. . . the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, asse ssment, fee or charge. ” The Act provides for a procedure which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. While the application of Proposition 218 in this context has not yet been interpreted by the courts and the matter is not completely free from doubt, it is not likely that Proposition 218 has conferred on the voters the power to effect a repeal or reduction of the Special Tax if the result thereof would be to impair the security of the Bonds.
It may be possible, however, for voters or the City Council, acting as the legislative body of the District, to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the future levy of Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Nevertheless, to the maximum extent that the law permits it to do so, the District will covenant that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates for the District, unless, in connection therewith, (i) such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the District to an amount which is less than the Administrative Expenses Cap plus 110% of the Annual Debt Service due in each corresponding future Bond Year with respect to the Bonds and Parity Bonds Outstanding as of the date of such proposed reduction; and (ii) the District is not delinquent in the payment of the principal of or interest on the Bonds or any Parity Bonds. The District also will covenant that, in the event an initiative is adopted which purports to reduce or otherwise alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants.
Ballot Initiatives
Under the California Constitution, the power of initiative is re served to the voters for the purpose of enacting statutes and constitutional amendments. Articles XIII A, XIII B, XIII C, and XIII D of the California Constitution were adopted pursuant to measures qualified for the ballot pursuant to the State’s constitu tional initiative process, including through Proposition 13 in 1978, Proposition 218 in 1996 and Proposition 26 in 2010.
From time to time, other initiative measures could be adopted by California voters. The adoption of any such initiative might place limitations on the ability of the State, the City, or other local agencies to increase revenues or to increase appropriations. In addition, such initiatives may include provisions which apply retroactively.
Litigation with Respect to Community Facilities Districts Shapiro. The California Court of Appeal, Fourth Appellate District, Division One, issued its opinion in City of San Diego v. Melvin Shapiro (2014) 228 Cal.App.4th 756 (the “San Diego Decision ”). The case involved a Convention Center Facilities District (the “CCFD”) established by the City of San Diego ( “San Diego”). The CCFD is a financing district much like a community facilities district established under the provisions of the Act. The CCFD is comprised of all of the real property in San Diego. However, the special tax to be levied within the CCFD was to be levied only on hotel properties located within the CCFD.
The election authorizing the special tax was limited to owners of hotel pr operties and lessees of real property owned by a governmental entity on which a hotel is located. Thus, the election was not a registered voter election. Such approach to determining who would constitute the qualified electors of the CCFD was 753
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modeled after Section 53326(c) of the Act, which generally provides that, if a special tax will not be apportioned in any tax year on residential property, the legislative body may provide that the vote shall be by the landowners of the proposed district whose proper ty would be subject to the special tax. The Court held that the CCFD special tax election was invalid under the California Constitution because Article XIIIA, Section 4 thereof and Article XIIIC, Section 2 thereof require that the electors in such an elec tion be the registered voters within the district.
Horizon. The Sacramento County Superior Court issued a ruling in Horizon Capital Investments, LLC v. City of Sacramento et al. (Case No. 34-2017-80002661), which was a case involving an election to approv e the levy of a special tax within a community facilities district (“CFD”) formed under the Act.
In 2017, the City of Sacramento initiated proceedings to form a CFD to finance certain costs to operate and maintain a streetcar line. As permitted by the Act, the proposed district included non-contiguous parcels of non-residential property. Because there were fewer than 12 registered voters residing within the territory of the proposed CFD, the City Council submitted the special tax proposed to be levied within the proposed CFD to the owners of land within the proposed CFD, as required by the Act. The proposed special tax received the requisite two-thirds vote in the landowner election.
Petitioners Horizon Capital Investments, LLC et al. filed a writ of mand ate and complaint for reverse validation and declaratory relief. Petitioners argued, and the superior court agreed in its final ruling, that under section 4(a) of article XIII A of the California Constitution (which provides that “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district [sic], may impose special taxes on such district…”) the phrase “qualified electors” means the registered voters of the entire City of Sacramento and not just the owners of the property within the boundaries of the proposed CFD. Citing the San Diego Decision, the tentative ruling states that the phrase “qualified electors of the district” refers to the registered voters of the entity imposing the special tax, which in this case was the City of Sacramento. Because the vote within the proposed CFD was by landowners only and not by all registered voters in the City of Sacramento, the final ruling states that the special tax is invalid.
The superior court’s final ruling is not binding upon other courts within the State and does not directly apply to the District, the Special Taxes, or the Bonds. The City of Sacramento did not appeal the superior court’s ruling.
The Special Tax Election in the District . With respect to the San Diego Decision, the facts of such case show that there were thousands of registered voters within the CCFD ( viz., all of the registered voters in San Diego). The elections held in the District had less than 12 registered voters at the time of the election to authorize the Special Taxes. In the San Diego Decision, the court expressly stated that it was not addressing the validity of landowner voting to impose special taxes pursuant to the Act in situations where there are fewer than 12 registered voters. Thus, by its terms, the court’s holding in the San Diego Decision does not apply to the Special Tax election in the District. Moreover, Section 53341 of the Act provides that any “action or proceeding to attack, review, set aside, void or annul the levy of a special tax…shall be commenced within 30 days after the special tax is approved by the voters.” Similarly, Section 53359 of the Act provides that any action to determine the validity of bonds issued pursuant to the Act be brought within 30 days of the voters approving the issuance of such bonds. The petitioners in Horizon filed the writ of mandate within 30 days of the landowner election.
Voters in the District approved the Special Tax to be levied in accordance with the Rate and Method on September 13, 2023.
Loss of Tax Exemption
As discussed under the heading “TAX MATTERS,” interest on the Bonds could cease to be excluded from 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 District or the City. In addition, it is possible that future changes in applicable federal tax laws could cause interest on the Bonds to be included in gross income for federal income 754
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taxation or could otherwise reduce the equivalent taxable yield of such interest and thereby reduce the value of the Bonds.
No Ratings – Limited Secondary Market
The District has not applied to have the Bonds rated by any nationally recognized bond rating company, and it does not expect to do so in the future.
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain financial and operating information, there can be no assurance that such information will be available to Bond owners on a timely basis. The failure to provide the required annual financial information does not give rise to monetary damages but merely an action for specific perform ance. Occasionally, because of general market conditions, lack of current information, the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in con nection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.
Limitations on Remedies
Remedies available to the Owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of interest on the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency reorganization, fraudulent conveyance or transfer, moratorium or other similar laws affecting generally the enforcement of creditor’s rights, by equitable principles and by the exercise of judicial discretion and by limitations on remedies against public agencies in the State of California. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners.
Potential Early Redemption of Bonds from Prepayments or Community Facilities District Bond Proceeds
Property owners within the District are permitted to prepay their Special Taxes at any time. Such prepayments could also be made from the proceeds of bonds issued by or on behalf of an overlapping community facilities district. Such prepayments will result in a redemption of the Bonds on the Interest Payment Date for which timely notice may be given under the Indenture following the receipt of the prepayment. The resulting redemption of Bonds that were purchased at a price greater than par could reduce the otherwise expected yield on such Bonds. See the caption “THE BONDS — Redemption — Special Mandatory Redemption from Special Tax Prepayments.”
Cybersecurity
The City, like many other public and private entities, rely on computer and other digital networks and systems to conduct their operations. The City is potentially subject to multiple cyber threats, including without limitation hacking, viruses, ransomware, malware and other attacks. No assurance can be given that the efforts of the City to manage cyber threats and attacks will be succ essful 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 t he Bonds, including without limitation the County tax collector for the levy and collection of Special Taxes and the Trustee. No 755
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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 affect the Bond owners.
CONTINUING DISCLOSURE
District Continuing Disclosure
Pursuant to a Continuing Disclosure Certificate, dated as of February 1, 2026 (the “Disclosure Certificate”), to be executed and delivered by the District at the time of issuance of the Bonds, the District will covenant for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial information and operating data relating to the District by March 31 following the end of the District’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing with the report for the Fiscal Year ending June 30, 2025, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the District with EMMA. The initial Annual Report to be filed by March 31, 2026, shall consist of this Official Statement and the audited financial statements of the District, if any. The specific nature of the information to be contained in the Annual Report and the notice of enumerated events is set forth in Appendix F — “FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12.
The City has retained Spicer Consulting Group, LLC to serve as Dissemination Agent for the continuing disclosure undertaking related to the Bonds, and has adopted policies and procedures with respect to its continuing disclosure practices.
Developer Continuing Disclosure
The Underwriter does not consider D.R. Horton to be an “obligated person” with respect to the Bonds for purposes of Rule 15c2-12. Notwithstanding the foregoing, to assist in the marketing of the Bonds, D.R.
Horton will execute a continuing disclosure certificate (the “Developer Continuing Disclosure Certificate”) pursuant to which it will covenant to provide semiannual reports until satisfaction of certain conditions set forth in the Developer Continuing Disclosure Certificate. The semiannual reports to be provided by the D.R. Horton will contain updates regarding the development within the District as outlined in Section 4 of the Developer Continuing Disclosure Certificate attached hereto as APPENDIX G. In addition to semiannual reports, D.R.
Horton will agree to provide notices of certain events set forth in the Developer Continuing Disclosure Certificate.
D.R. Horton’s Southern California Division is the division which will be responsible for complying with its obligations under its Property Owner Continuing Disclosure Certificate. D.R. Horton has advised the City and Underwriter that, based on a review of prior continuing disclosure obligations in Southern California, encompassing D.R. Horton ’s _______ and _______ Divisions, D.R. Horton has not failed to comply in any material respect with any previous undertaking by it to provide periodic continuing disclosure reports or notice of listed events with respect to community facilities district or assessment district fina ncings in Southern California within the past five years.
TAX EXEMPTION
In the opinion of Stradling Yocca Carlson & Rauth LLP , Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals.
However, it should be noted that, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), generally certain corporations with more than 756
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$1,000,000,000 of average annual adjusted financial statement income, interest (and original issue discount) with respect to the Bonds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed by Section 55 of the Code on such corporations.
In the further opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax.
The excess of the stated redemption price at maturity of a Bond over the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receip t of cash attributable to such excludable income. The amount of original issue discount deemed received by the Beneficial Owner will increase the Beneficial Owner’s basis in the applicable Bond.
Bond Counsel’s opinion as to the exclusion from gross income of interest (and original issue discount) on the Bonds is based upon certain representations of fact and certifications made by the District, the City and others and is subject to the condition that the District, the City and others making such representat ions comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds to assure that interest (and original issue discount) on the Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause the interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District and the City will covenant to comply with all such requirements.
The amount by which a Beneficial Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium, which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Beneficial Owner’s basis in the applicable Bond (and the amount of tax-exempt interest received), and i s not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Beneficial Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an amount equal to or less (und er certain circumstances) than the original cost of the Bond to the Beneficial Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable Bond premium.
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 the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of other similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the C ode (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Bonds or their market value.
SUBSEQUENT TO THE ISSUANCE OF THE BONDS THERE MIGHT BE FEDERAL, STATE, OR
LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY CHANGES TO OR
INTERPRETATIONS OF FEDERAL, STATE, OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE,
OR LOCAL TAX TREATMENT OF THE BONDS INCLUDING THE IMPOSITION OF ADDITI ONAL
FEDERAL INCOME OR STATE TAXES BEING IMPOSED ON OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THESE CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT
SUBSEQUENT TO THE ISSU ANCE OF THE BONDS STATUTORY CHANGES WILL NOT BE
INTRODUCED OR ENACTED OR JUDICIAL OR REGULATORY INTERPRETATIONS WILL NOT OCCUR HAVING THE EFFECTS DESCRIBED ABOVE. BEFORE PURCHASING ANY OF THE BONDS,
ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISO RS REGARDING
POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. 757
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Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) on the Bonds for federal income tax purposes with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth LLP.
Although Bond Counsel will render an opinion that interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes provided that the District and the City continue to comply with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of interest (and original issue discount) with respect to the Bonds may otherwise affect the tax liability of certain persons.
Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds.
Should interest on the Bonds (including any original issue discount) become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture.
A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C.
LEGAL OPINION
The legal opinion of Bond Counsel a pproving the validity of the Bonds, in substantially the form set forth as Appendix C hereto, will be made available to purchasers of the Bonds at the time of original delivery of the Bonds. Certain legal matters will be passed upon for the City and the D istrict by Burke, Williams & Sorensen, LLP, Riverside, California, City Attorney, and for the District by Stradling Yocca Carlson & Rauth LLP, Disclosure Counsel, for the Underwriter by Kutak Rock LLP, Irvine, California, and for the Trustee by its counsel. Bond Counsel undertakes no responsibility to the purchasers of the Bonds for the accuracy, completeness or fairness of this Official Statement.
ABSENCE OF LITIGATION
There is no action, suit, proceeding or investigation at law or in equity before or by any court, public board or body now pending against and notice of which has been received by the City or the District or, to the best knowledge of their respective officers, threatened in writing, seeking to restrain or enjoin the execution or delivery of the Bonds or contesting or affecting the validity of the Bonds or any proceedings of the City or the District taken with respect to the execution and delivery thereof or the pledge or application of the Special Taxes for the payment of the Bonds or the use of the Bond proceeds..
NO RATING
The District has not made, and does not contemplate making, an application to any rating organization for the assignment of a rating on the Bonds.
UNDERWRITING
The Bonds are being purchased by Piper Sandler & Co. (the “Underwriter”). The Underwriter has agreed to purchase the Bonds at a price of $ __________ (being the $________ aggregate principal amount of the Bonds, less an Underwriter’s discount of $_________ and plus original issue premium of $_________). The Bond Purchase Agreement relating to the Bonds provides that the Underwriter will purchase all of the Bonds if 758
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any are purchased, the obligation to make such purchase being subject to certain terms and conditions set forth in the Bond Purchase Agreement, the approval of certain legal matters by counsel and certain other conditions.
The Underwriter’s compensation is contingent upon the successful issuance of the Bonds.
Under certain circumstances, the Underwriter may offer and sell the Bonds to certain dealers and others at prices lower or yields higher than those stated on the page immediately following the cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter.
FINANCIAL INTERESTS
The fees being paid t o the Underwriter and its counsel, Bond Counsel, Disclosure Counsel and the Trustee are contingent upon the issuance and delivery of the Bonds. From time to time, Stradling Yocca Carlson & Rauth LLP, represents the Underwriter on matters unrelated to the Bonds.
MUNICIPAL ADVISOR
The District has retained CSG Advisors Incorporated, San Francisco, California, as Municipal Advisor for the sale of the Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained in this Official Statement.
CSG Advisors Incorporated , is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.
MISCELLANEOUS
So far as any statements made in this Official Statement involve matters of opinion, assumptions, projections, anticipated events or estimates, whether or not expressly stated, they are set forth as such and not as presentations of fact, and actual results may differ substantially from those set forth therein. Neither this Official Statement nor any statement that may have been made verbally or in writing is to be construed as a contract with the Owners of the Bonds.
The summaries of certain provisions of the Bonds, statutes and other documents or agreements referred to in this Official Statement do not purport to be complete, and reference is made to each of them for a complete statement of their provisions. Copies are available for review by making requests to the City.
The execution and delivery of this Official Statement by the City Manager of the City has been duly authorized by the City Council of the City acting in its capacity as the legislative body of the District.
COMMUNITY FACILITIES DISTRICT NO. 2023-1
(AVALINO) OF THE CITY OF WILDOMAR
By:
City Manager of the City of Wildomar
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APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
COMMUNITY FACILITIES DISTRICT NO. 2023-1 (AVALINO)
OF THE CITY OF WILDOMAR
A Special Tax (all capitalized terms not otherwise defined herein are defined in Section A, “Definitions”, below) shall be applicable to each Assessor’s Parcel of Taxable Property located within the boundaries of the City of Wildomar Community Facilities District No. 2023 -1 (Avalino) of the City of Wildomar ( “CFD No. 2023-1”).
The amount of Special Tax to be levied in each Fiscal Year on an Assessor’s Parcel shall be determined by the City Council of the City of Wildomar, acting in its capacity as the legislative body of CFD No. 2023 -1, by applying the appropriate Special Tax for Developed Property, Approved Property, Undevel oped Property, and Provisional Undeveloped Property that is not Exempt Property as set forth below. All of the real property, unless exempted by law or by the provisions hereof in Section F, shall be taxed for the purposes, to the extent and in the manner herein provided.
A. DEFINITIONS
The terms hereinafter set forth have the following meanings:
“Accessory Dwelling Unit” means a residential unit of limited size including a smaller second unit that shares an Assessor’s Parcel as a Single Family Residential Property with a stand-alone Residential Unit.
“Acre” or “Acreage” means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor’s Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded parcel map or instrument. The square footage of an Assessor’s Parcel is equal to the Acreage multiplied by 43,560.
“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code of the State of California.
“Administrative Expenses” means the following actual or reasonably estimated costs directly related to the administration of CFD No . 2023-1: the costs of computing the Special Taxes and preparing the Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting Special Taxes to the Trustee; the costs of the Trustee (including legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2023-1 or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2023-1 or any designee thereof of complying with continuing disclosure requirements of the City, CFD No. 2023-1 and any major property owner associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2023-1 or any designee thereof related to an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the City’s annual administration fees and third party expenses. Administration Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2023 -1 for any other a dministrative purposes of CFD No. 2023-1, including attorney’s fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes.
“Approved Property” means all Assessor’s Parcels of Taxable Property: (i) tha t are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, (ii) that have an assigned Assessor’s Parcel Number from the County shown on an Assessor’s Parcel Map for the individual lot included on the Final Map, and (iii) that have not been issued a building permit on or before May 1st preceding the Fiscal Year in which the Special Tax is being levied.
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“Assessor’s Parcel” means a lot or parcel of land designated on an Assessor ’s Parcel Map with an assigned Assessor’s Parcel Number.
“Assessor’s Parcel Map” means an official map of the Assessor of the County designating parcels by Assessor’s Parcel Number.
“Assessor’s Parcel Number” means that number assigned to an Assessor’s Parcel by the County for purposes of identification.
“Assigned Special Tax” means the Special Tax of that name described in Section D below.
“Backup Special Tax” means the Special Tax of that name described in Section D below.
“Bonds” means any obligation to repay a sum of money, including obligations in the form of bonds, certificates of participation, long -term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long -term contracts, or any refunding thereof, to which the Special Tax of CFD No. 2023-1 has been pledged.
“Building Permit ” means the first legal document issued by the City giving official permission for new construction. For purposes of this definition, “Building Permit” may or may not include expired or cancelled building permits, or any subsequent building permit document(s) authorizing new construction on an Assessor’s Parcel that are issued or changed by the City after the first original issuance, as d etermined by the CFD Administrator, provided that following such determination the Maximum Special Tax that may be levied on all Assessor’s Parcels of Taxable Property will be at least 1.1 times annual debt service on all outstanding Bonds plus the estimated annual Administrative Expenses.
“Building Square Footage” or “BSF” means the square footage of assessable internal living space, exclusive of garages or other structures not used as living space, as determined by reference to the Building Permit for such Assessor’s Parcel.
“Calendar Year” means the period commencing January 1 of any year and ending the following December 31.
“CFD” or “CFD No. 2023 -1” means Community Facilities District No. 2023 -1 (Avalino) of the City of Wildomar established by the City under the Act.
“CFD Administrator” means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement, and providing for the levy and collection of the Special Taxes.
“City” means the City of Wildomar, State of California. “City Council” means the City Council of the City of Wildomar, acting as the legislative body of CFD No. 2023-1.
“Condominium Plan” means a condominium plan pursuant to California Civil Code, Section 6624.
“County” means the County of Riverside, State of California.
“Developed Property” means all Assessor’s Parcels that: (i) are included in a Final Map that was recorded prior to the January 1st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) for which a Building Permit for new construction was issued on or before May 1st preceding the Fiscal Year in which the Special Tax is being levied.
“Exempt Property” means all Assessor’s Parcels designated as being exempt from Special Taxes as provided for in Section F.
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“Final Map” means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a Condominium Plan pursuant to California Civil Code Section 6624 that creates individual lots for which Building Permits may be issued without further subdivision.
“Fiscal Year” means the period commencing on July 1st of any year and ending the following June 30th.
“Indenture” means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same.
“Land Use Category” means any of the categories listed in Table 1 of Section D.
“Maximum Special Tax ” means for each Assessor’s Parcel, the maximum Special Tax, determined in accordance with Section D below, that can be levied by CFD No. 2023-1 on such Assessor’s Parcel.
“Multifamily Property” means all Assessor’s Parcels of Developed Property for which a Building Permit has been issued for the purpose of constructing a building or buildings comprised of attached Residential Units available for rental by the general public, not fo r sale to an end user, and under common management, as determined by the CFD Administrator.
“Non-Residential Property ” means all Assessor's Parcels of Developed Property for which a Building Permit(s) was issued for a non -residential use. The CFD Admini strator shall make the determination if an Assessor’s Parcel is Non-Residential Property.
“Partial Prepayment Amount” means the amount required to prepay a portion of the Special Tax obligation for an Assessor’s Parcel, as described in Section G.2.
“Prepayment Amount ” means the amount required to prepay the Special Tax obligation in full for an Assessor’s Parcel, as described in Section G.1.
“Proportionately” means for Taxable Property that is (i) Developed Property, that the ratio of the actual Special Tax levy to the Assigned Special Tax is the same for all Assessor’s Parcels of Developed Property, (ii) Approved Property, that the ratio of the actual Special Tax levy to the Maximum Special Tax is the same for all Assessor’s Parcels of Approved Property, and (iii) Undeveloped Property or Provisional Undeveloped Property, that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre is the same for all Assessor’s Parcels of Undeveloped Property or Provisional Undeveloped Property, as applicable.
“Provisional Undeveloped Property” means all Assessor’s Parcels of Taxable Property that would otherwise be classified as Exempt Property pursuant to the provisions of Section F, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in Section F.
“Residential Property” means all Assessor’s Parcels of Developed Property for which a Building Permit has been issued for purposes of constructing one or more Residential Units.
“Residential Unit” or “RU” means a residential unit that is used or intended to be used as a domicile by one or more persons, as determined by the CFD Administrator. An Accessory Dwelling Unit that shares an Assessor’s Parcel with a Single Family Residential Property shall not be considered a Residential Unit for purposes of this RMA.
“RMA” means this Rate and Method of Apportionment of Special Taxes.
“Single Family Residential Property ” means all Assessor’s Parcels of Residential Property other than Multifamily Property.
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“Special Tax” or “Special Taxes” means any of the special taxes authorized to be levied within CFD No. 2023- 1 pursuant to the Act to fund the Special Tax Requirement.
“Special Tax Requirement “ means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs as sociated with the release of funds from an escrow account, (iv) any amount required to replenish any reserve funds established in association with the Bonds (provided that the same amount was not previously levied), (v) an amount up to any anticipated shor tfall (based on the prior year’s delinquency rate) due to Special Tax delinquencies and (vi) for the collection or accumulation of funds for the acquisition or construction of facilities authorized by CFD No. 2023-1 or the payment of debt service on Bonds anticipated to be issued, provided that the inclusion of such amount does not cause an increase in the levy of Special Tax on Approved Property or Undeveloped Property as set forth in Steps Two or Three of Section E., less (vii) any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture.
“Taxable Property” means all Assessor’s Parcels within CFD No. 2023-1, which are not Exempt Property.
“Taxable Unit” means either a Residential Unit or an Acre.
“Trustee” means the trustee, fiscal agent, or paying agent under the Indenture.
“Undeveloped Property” means all Assessor’s Parcels of Taxable Property which are not Developed Property, Approved Property, or Provisional Undeveloped Property.
B. SPECIAL TAX
Commencing Fiscal Year 2023-2024 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes on all Taxable Property, up to the applicable Maximum Special Tax, to fund the Special Tax Requirement.
C. ASSIGNMENT TO LAND USE CATEGORY FOR SPECIAL TAX
Each Fiscal Year, beginning with Fiscal Year 2023-2024, each Assessor’s Parcel within CFD No. 2023-1 shall be classified as Taxable Property or Exempt Property. In addition, each Assessor’s Parcel of Taxable Property shall be further classified as D eveloped Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property.
Assessor’s Parcels of Developed Property shall further be classified as Residential Property or Non-Residential Property. Each Assessor’s Parcel of Resident ial Property shall further be classified as a Single Family Residential Property or Multifamily Property. Each Assessor’s Parcel of Single Family Residential Property shall be further assigned to a Land Use Category based on its Building Square Footage.
In the event that there are Assessor’s Parcel(s) for which one or more Building Permits for Residential Units have been issued and the County has not yet assigned final Assessor’s Parcel Number(s) to such Assessor’s Parcel(s) (in accordance with the Final Map or Condominium Plan), the amount of the Special Tax levy on such Assessor’s Parcel for each Fiscal Year shall be determined as follows: (1) the CFD Administrator shall first determine an amount of the Maximum Special Tax for such Assessor’s Parcel, bas ed on the classification of such Assessor’s Parcel as Undeveloped Property; (2) the amount of the Special Tax for the Residential Units on such Assessor’s Parcel for which Building Permits have been issued shall be determined based on the Developed Property Special Tax rates and such amount shall be levied as Developed Property in accordance with Step 1 of Section E below; and (3) the amount of the Special Tax on the Taxable Property in such Assessor’s Parcel not subject to the Special Tax levy in clause (2) shall be equal to: (A) the percentage of the Maximum Special Tax rate levied on Undeveloped Property pursuant to Step 3 of Section E below, multiplied by the total of the amount determined in clause (1), less (B) the amount determined in clause (2).
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D. MAXIMUM SPECIAL TAX
1. Developed Property
The Maximum Special Tax for each Assessor’s Parcel of Single Family Residential Property in any Fiscal Year shall be the greater of (i) the Assigned Special Tax for such Assessor’s Parcel or (ii) the Backup Special Tax.
The Maximum Special Tax for each Assessor’s Parcel of Multifamily Property and Non -Residential Property shall be the applicable Assigned Special Tax described in Table 1 of Section D.
a. Assigned Special Tax
Each Fiscal Year, each Assessor’s Parcel of Single Family Residential Property, Multifamily Property or Non- Residential Property shall be subject to an Assigned Special Tax. The Assigned Special Tax for Fiscal Year 2023-2024 applicable to an Assessor's Parcel of Developed Property shall be determined pursuant to Table 1 below.
TABLE 1
ASSIGNED SPECIAL TAX FOR DEVELOPED PROPERTY
FISCAL YEAR 2023-2024
Land Use Category
Taxable
Unit Building Square Footage
Assigned
Special Tax Per
Taxable Unit
1. Single Family Residential Property RU Less than 2,000 sq. ft $4,812.00
2. Single Family Residential Property RU 2,000 sq. ft to 2,250 sq. ft $4,918.00
3. Single Family Residential Property RU 2,251 sq. ft to 2,500 sq. ft $5,044.00
4. Single Family Residential Property RU 2,501 sq. ft to 2,750 sq. ft $5,169.00
5. Single Family Residential Property RU 2,751 sq. ft to 3,000 sq. ft $5,487.00
6. Single Family Residential Property RU Greater than 3,000 sq. ft $5,545.00
7. Multifamily Property Acre N/A $28,365.00
8. Non-Residential Property Acre N/A $28,365.00
On each July 1, commencing July 1, 2024, the Assigned Special Tax rate for Developed Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
b. Multiple Land Use Categories
In some instances an Assessor’s Parcel of Develop ed Property may contain more than one Land Use Category. The Maximum Special Tax levied on an Assessor’s Parcel shall be the sum of the Maximum Special Tax for each Taxable Unit for all Land Use Categories located on the Assessor’s Parcel. The CFD Administrator’s allocation to each type of property shall be final.
c. Backup Special Tax
The Backup Special Tax for an Assessor’s Parcel within a Final Map classified as Single Family Residential Property shall be $5,448 per Residential Unit.
Notwithstanding the foregoing, if all or any portion of the applicable Final Maps and/or condominium plan contained within the boundaries of CFD No. 2023-1 is subsequently changed or modified, then the Backup Special Tax for Single Family Residential Property or Approved Property in such Final Map or condominium plan area that is changed or modified shall be recalculated as follows:
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1. Determine the total Backup Special Taxes anticipated to apply to the changed or modified Final Map or condominium plan area prior to the change or modification.
2. The result of paragraph 1 above shall be divided by the total number of Residential Units constructed and/or anticipated to be constructed within such changed or modified Final Map or condominium plan area, as reasonably determined by the CFD Administrator.
The result of paragraph 2 is the Backup Special Tax per Residential Unit which shall be applicable to Assessor’s Parcels of Single Family Residential Property or Approved Property in such changed or modified Final Map or condominium plan area contained within the boundaries of CFD No. 2023-1.
Notwithstanding the foregoing, the Backup Special Tax for an Assessor’s Parcel of Developed Property for which a certificate of occupancy has been granted may not be revised.
On each July 1, commencing July 1, 2024, the Backup Special Tax rate shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
2. Approved Property
The Maximum Special Tax for each Assessor’s Parcel of Approved Property expected to be classified as Single Family Residential Property shall be the Backup Special Tax computed pursuant to Section D.1.c above.
The Maximum Special Tax for each Assessor’s Parcel of Approved Property not expected to be classified as Single Family Residential Property shall be $28,365 per Acre.
On each July 1, commencing July 1, 2024, the Maximum Special Tax rate for Approved Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
3. Undeveloped Property and Provisional Undeveloped Property
The Maximum Special Tax for each Assessor’s Parcel of Undeveloped Property and Provisional Undeveloped Property shall be $28,365 per Acre.
On each July 1, commencing July 1, 2024, the Maximum Special Tax rate for Un developed Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year.
E. METHOD OF APPORTIONMENT OF THE SPECIAL TAX
Commencing Fiscal Year 2023-2024 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes on all Taxable Property in accordance with the following steps:
Step One: (i) Prior to the first issuance of Bonds, the Special Tax shall be levied at 100% of the applicable Assigned Special Tax rates on Developed Property and (ii) subsequent to the first issuance of Bonds, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax rates in Table 1 to satisfy the Special Tax Requirement.
Step Two: If additional moneys are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Approved Property at up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement. 765
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Step Three: If additional moneys are needed to satisfy the Special Tax Requirement after the first two steps have been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.
Step Four: If additional moneys ar e needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax levy on each Assessor's Parcel of Developed Property for which the Maximum Special Tax is the Backup Special Tax shall be increased in equal percentages from the Assigned Special Tax up to 100% of the Backup Special Tax as needed to satisfy the Special Tax Requirement.
Step Five: If additional moneys are needed to satisfy the Special Tax Requirement after the first four steps have been completed, the Special Tax shall be levied Proportionately on each Assessor’s Parcel of Provisional Undeveloped Property up to 100% of the Maximum Special Tax applicable to each such Assessor’s Parcel as needed to satisfy the Special Tax Requirement.
Notwithstanding the above, under no circumstances will the Special Taxes levied in any Fiscal Year against any Assessor’s Parcel of Residential Property as a result of a delinquency in the payment of the Special Tax applicable to any other Assessor’s Parcel be inc reased by more than ten percent (10%) above the amount that would have been levied in that Fiscal Year had there never been any such delinquency or default.
F. EXEMPTIONS
The City shall classify as Exempt Property, in the chronological order in which th ey become exempt, (i) Assessor’s Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor’s Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor’s Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowner s' association, (iv) Assessor’s Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor’s Parcels which are privately owned and are encumbered by or restricted solely for public uses, (vi) Assessor’s Parcels which are classified as Non-Residential Property or (vii) Assessor’s Parcels restricted to other types of public uses determined by the City Council, provided that no such classification would reduce the sum of all Taxable Property to less than 22.47 Acres.
Notwithstanding the above, the City Council shall not classify an Assessor’s Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than 22.47 Acres. Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than 22.47 Acres will be classified as Provisional Undeveloped Property, and will be subject to Special Tax pursuant to Step Five in Section E.
G. PREPAYMENT OF SPECIAL TAX
The following additional definitions apply to this Section G:
“CFD Facilities” means $10,500,000 expressed in 2023 dollars, which shall increase by the Construction Inflation Index on July 1, 2024, and on each July 1 thereafter, or such lower amount (i) determined by the City Council as sufficient to provide the facilities under the authorized bonding program for CFD No. 2023-1, or (ii) determined by the City Council concurrently with a covenant that it will not issue any more Bonds to finance additional facilities to be supported by Special Tax levied under this RMA.
“Construction Fund” means an account specifically identified in the Indenture or functionally equivalent to hold funds, which are available for expenditure to acquire or construct facilities eligible to be financed by CFD No. 2023-1.
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“Construction Inflation Index ” means the greater of (i) 2% and (ii) the annual percentage change in the Engineering News-Record Building Cost Index for the c ity of Los Angeles, measured as of the Calendar Year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News- Record Building Cost Index for the City of Los Angeles.
“Future Facilities Costs” means the CFD Facilities minus (i) amounts deposited in the Construction Fund, (ii) amounts deposited in any escrow accounts funded by the Outstanding Bonds and anticipated to fund public facilities costs, and (iii) public facility costs funded by interest earnings on the Construction Fund actually earned prior to the date of prepayment, but in no event shall such amount be less than zero.
“Outstanding Bonds” means all previously issued Bonds issued and secured by the levy of Special Tax which will remain outstanding after the first interest and/or principal payment date following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Special Tax.
1. Prepayment in Full
The Special Tax obligation may be prepaid and permanently satisfied for (i) Assessor’s Parcels of Developed Property, (ii) Assessor’s Parcels of Approved Property or Undeveloped Pr operty for which a Building Permit has been issued, (iii) Assessor’s Parcels of Approved Property or Undeveloped Property for which a Building Permit has not been issued and (iv) Assessor’s Parcels of Provisional Undeveloped Property. The Special Tax obligation applicable to an Assessor’s Parcel may be fully prepaid and the obligation to pay the Special Tax for such Assessor’s Parcel permanently satisfied as described herein; provided that a prepayment may be made only if there are no delinquent Special Ta xes with respect to such Assessor’s Parcel at the time of prepayment. An owner of an Assessor’s Parcel intending to prepay the Special Tax obligation for such Assessor’s Parcel shall provide the CFD Administrator with written notice of intent to prepay, and within 5 business days of receipt of such notice, the CFD Administrator shall notify such owner of the amount of the non -refundable deposit determined to cover the cost to be incurred by the CFD in calculating the Prepayment Amount (as defined below) for the Assessor’s Parcel. Within 15 days of receipt of such non -refundable deposit, the CFD Administrator shall notify such owner of the Prepayment Amount for the Assessor’s Parcel. Prepayment must be made not less than 60 days prior to the redemption date for any Bonds to be redeemed with the proceeds of such prepaid Special Taxes.
The Prepayment Amount shall be calculated as follows (some capitalized terms are defined below):
Bond Redemption Amount
plus Redemption Premium
plus Future Facilities Amount
plus Defeasance Amount
plus Administrative Fees and Expenses
less Reserve Fund Credit
Equals: Prepayment Amount
The Prepayment Amount shall be determined as of the proposed prepayment date as follows:
1. Confirm that no Special Tax delinquencies apply to such Assessor’s Parcel.
2. For an Assessor’s Parcel of Developed Property, compute the Maximum Special Tax for the Assessor’s Parcel. For an Assessor’s Parcel of Approved Property or Undeveloped Property for which a Building Permit has been issued, compute the Maximum Special Tax for the Assessor’s Parcel as though it was already designated as Developed Property, based upon the Building Permit which has been issued for the Assessor’s Parcel. For an Assessor’s Parcel of Approved Property or Undeveloped Property for which 767
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a Building Permit has not been issued, or Provisional Undeveloped Property, compute the Maximum Special Tax for the Assessor’s Parcel.
3. Divide the Maximum Special Tax derived pursuant to paragraph 2 by the total amount of Maximum Special Taxes that could be levied assuming build out of all Assessor’s Parcels of Taxable Property based on the applicable Maximum Special Tax for Assessor’s Parcels of Developed Property not including any Assessor’s Parcels for which the Special Tax obligation has been previously prepaid.
4. Multiply the quotient derived pursuant to paragraph 3 by the principal amount of the Outstanding Bonds to determine the amount of Outstanding Bonds to be redeemed with the Prepayment Amount (the “Bond Redemption Amount”).
5. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the “Redemption Premium”).
6. Determine the Future Facilities Costs.
7. Multiply the quotient derived pursuant to paragraph 3 by the amount determined pursuant to paragraph 6 to determine the amount of Future Facilities Costs for the Assessor’s Parcel (the “Future Facilities Amount”).
8. Determine the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds on which Bonds can be redeemed from Special Tax prepayments.
9. Determine the Special Taxes levied on the Assessor’s Parce l in the current Fiscal Year which have not yet been paid.
10. Determine the amount the CFD Administrator reasonably expects to derive from the investment of the Bond Redemption Amount and the Redemption Premium from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the Prepayment Amount.
11. Add the amounts derived pursuant to paragraphs 8 and 9 and subtract the amount derived pursuant to paragraph 10 (the “Defeasance Amount”).
12. Verify the administrative fees and expenses of the CFD, the cost to invest the Prepayment Amount, the cost of redeeming the Outstanding Bonds, and the cost of recording notices to evidence the prepayment of the Special Tax obligation for the Assessor’s Parcel and the redemption of Outs tanding Bonds (the “Administrative Fees and Expenses”).
13. The reserve fund credit (the “Reserve Fund Credit ”) shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero.
14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Amount and the Administrative Fees and Expenses, less the Reserve Fund Credit.
15. From the Prepayment Amount, the Bond Redemption Amount, the Redemption Premium, and Defeasance Amount shall be deposited into the appropriate fund as established under the Indenture and be 768
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used to redeem Outstanding Bonds or make debt service payments. The Future Facilities Amount shall be deposited into the Construction Fund. The Administrative Fees and Expenses shall be retained by the CFD.
The Prepayment Amount may be sufficient to redeem other than a $5,000 increment of Bonds. In such event, the increment above $5,000 or an integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next redemption from other Special Tax prepayments of Outstanding Bonds or to make debt service payments.
As a result of the payment of the current Fiscal Year’s Special Tax levy as determined pursuant to paragraph 9 above, the CFD Administrator shall remove the current Fiscal Year’s Special Tax levy for the Assessor’s Parcel from the County tax roll. With respect to any Assessor’s Parcel for which the Special Tax obligation is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of Special Tax obligation and the release of the Special Tax lien for the Assessor’s Parcel, and the obligation to pay the Special Tax for such Assessor’s Parcel shall cease.
Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of Maximum Special Tax that may be levied on all Assessor’s Parcels of Taxable Property after the proposed prepayment will be at least 1.1 times maximum annual debt service on the Bonds that will remain outstanding after the prepayment plus the estimated annual Administrative Expenses.
Tenders of Bonds in prepayment of the Special Tax obligation may be accepted upon the terms and conditions established by the City Council pursuant to the Act. However, the use of Bond tenders shall only be allowed on a case-by-case basis as specifically approved by the City Council.
2. Prepayment in Part
The Special Tax obligation for an Assessor’s Parcel of Developed Property, Approved Property, Undeveloped Property, or Provisional Undeveloped Property may be partially prepaid. For purposes of determining the Partial Prepayment Amount, the provisions of Section G.1 shall be modified as provided by the following formula:
PP = ((PE – A) x F) + A
These terms have the following meaning:
PP = Partial Prepayment Amount
PE = the Prepayment Amount calculated according to Section G.1 F = the percent by which the owner of the Assessor’s Parcel(s) is partially prepaying the Special Tax obligation
A = the Administrative Fees and Expenses determined pursuant to Section G.1 The owner of an Assessor’s Parcel who desires to partially prepay the Special Tax obligation for the Assessor’s Parcel shall notify the CFD Administrator of (i) such owner’s intent to partially prepay the Special Tax obligation, (ii) the percentage of the Special Tax obligation such owner wishes to prepay, and (iii) the company or agency that will be acting as the escrow agent, if any. Within 5 days of receipt of such notice, the CFD Administrator shall notify such property owner of the amount of the non-refundable deposit determined to cover the cost to be incurred by the CFD in calculating the Partial Prepayment Amount. Within 15 business days of receipt of such non -refundable deposit, the CFD Administrator shall notify such owner of the amount of the Partial Prepayment Amount for the Assessor’s Parcel. A Partial Prepaym ent Amount must be made not less than 60 days prior to the redemption date for the Outstanding Bonds to be redeemed with the proceeds of the Partial Prepayment Amount.
With respect to any Assessor’s Parcel for which the Special Tax obligation is partially prepaid, the CFD Administrator shall (i) distribute the Partial Prepayment Amount as provided in Paragraph 15 of Section G.1, and (ii) indicate in the records of the CFD that there has been a partial prepayment for the Assessor’s Parcel and 769
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that a portion of the Special Tax obligation equal to the remaining percentage (1.00 - F) of the applicable Special Tax will continue to be levied on the Assessor’s Parcel pursuant to Section E.
H. TERMINATION OF SPECIAL TAX
For each Fiscal Year that any Bonds are outstanding the Special Tax shall be levied on all Assessor’s Parcels subject to the Special Tax pursuant to Section E. The Special Tax shall cease not later than the 2065 -2066 Fiscal Year, however, Special Taxes will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all the required interest and principal payments on the CFD No. 2023-1 Bonds have been paid; (ii) all authorized facilities of CFD No. 2023-1 have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Taxes remain uncollected and (iv) all other obligations of CFD No. 2023-1 have been satisfied.
I. MANNER OF COLLECTION
The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2023 -1 may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor’s Parcels as permitted by the Act.
J. APPEALS OF SPECIAL TAXES
Any taxpayer may file a written appeal of the Special Taxes levied on his/her Assessor’s Parcel(s) with the CFD Administrator, provided that the appellant is current in his/her payments of Special Taxes. During pendency of an appeal, all Special Taxes previously levied must be paid on or before the payment date established when the levy was made. The appeal must specify the reasons why the appellant claims the Special Tax is in error. The CFD Administrator shall review the appeal, meet with the appellant if the CFD Administrator deems necessary, and advise the appellant of its determination. If the CFD Administrator agrees with the appellant , the CFD Administrator shall grant a credit to eliminate or reduce future Special Taxes on the appellant’s Assessor’s Parcel(s). No refunds of previously paid Special Taxes shall be made unless approved by the CFD Administrator.
The CFD Administrator sh all interpret this RMA and make determinations relative to the annual levy and administration of the Special Taxes and any taxpayer who appeals, as herein specified.
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APPENDIX B
CERTAIN ECONOMIC AND DEMOGRAPHIC INFORMATION
The following information relating to the City of Wildomar (the “City”) and the County of Riverside, California (the “County”), California (the “State”) is supplied solely for purposes of information. Neither the City nor the County is obligated in any manner to pay principal of or interest on the Bonds or to cure any delinquency or default on the Bonds. The Bonds are payable solely from the sources described in the Official Statement.
General
The City was founded in 1886 and incorporated as a general law city effective July 1, 2008 in Riverside County. The City encompasses approximately 24 square miles along Interstate 15 in Riverside County.
Population
The following table offers population figures for the City and the County for 2021 through 2025.
Area 2021 2022 2023 2024 2025
City of Wildomar 36,693 36,432 36,688 37,060 37,077
County of Riverside 2,423,069 2,435,510 2,467,690 2,491,037 2,495,640
Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties, and the State, 2021-2025, with 2020 Census Benchmark. Sacramento, California, May 2025.
Building Activity
The following tables provide summaries of the building permit valuations and the number of new dwelling units authorized in the City and County from 2020 through 2024.
BUILDING PERMIT VALUATIONS
City of Wildomar
2020-2024
(Dollars in Thousands)
2020 2021 2022 2023 2024
Valuation ($000):
Residential $12,585,611 $15,563,559 $17,373,268 $ 5,254,037 $ 95,152,201 Non-residential 20,283,426 2,750,536 23,721,559 655,114 14,187,238 Total* $32,869,037 $18,314,095 $ 41,094,827 $ 5,909,151 $ 109,339,439 Residential Units:
Single family 50 52 61 6 105
Multiple family 0 0 23 26 280
Total 50 52 84 32 385
* Totals may not add to sums because of rounding.
Source: Construction Industry Research Board.
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BUILDING PERMIT VALUATIONS
County of Riverside
2020-2024
(Dollars in Thousands)
2020 2021 2022 2023 2024
Valuation ($000):
Residential $2,519,303 $2,262,642 $2,921,112 $3,306,086 $2,650,677 Non-residential 1,153,778 1,154,998 1,701,615 1,676,498 1,436,925 Total* $3,673,081 $3,417,640 $4,622,727 $4,982,584 $4,087,602 Residential Units:
Single family 8,443 7,360 8,863 8,894 6,882
Multiple family 723 1,126 2,861 6,428 2,275
Total 9,166 8,486 11,724 15,322 9,157
* Totals may not add to sums because of rounding.
Source: Construction Industry Research Board.
Employment
The following tables show the largest employers located in the City and the County as of June 30, 2024.
LARGEST EMPLOYERS
City of Wildomar
(as of June 30, 2024)
Rank Name of Business Employees Type of Business
1. Lake Elsinore Unified School District 2,381 School District
2. Inland Valley Medical Center 945 Medical Center
3. Southern California Edison 232 Utilities Company
4. Cornerstone Community Church & School 130 Religious Center
5. Stater Bros Markets 124 Supermarket
6. Kaiser Permanente Wildomar Medical Offices 120 Medical Offices
7. Albertson’s 105 Supermarket
8. Animal Friends of the valleys 83 Animal Clinic
9. Wildomar Senior Leisure Community 67 Assisted Living Facility
10. FCP Inc. 62 Industrial Business
Source: City of Wildomar Comprehensive Annual Financial Report for the year ending June 30, 2024. 772
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LARGEST EMPLOYERS
County of Riverside
(as of June 30, 2024)
Rank Name of Business Employees Type of Business
1. County of Riverside 23,722 County Government
2. Amazon 14,317 E-Commerce
3 University of California-Riverside 8,593 University
4. State of California 8,398 State Government
5. Walmart 6,465 Retail Company
6. Moreno Valley Unified School District 6,020 School District
7. Kaiser Permanente Riverside Medical Center 5,817 Medical Center
8. Riverside Unified School District 5,431 School District
9. Stater Brothers Market 4,990 Retail
10. Mt. San Jacinto Community College District 4,638 School District
Source: County of Riverside Comprehensive Annual Financial Report for the year ending June 30, 2024.
Employment and Industry
Employment data by industry is not separately reported on an annual basis for the City but is compiled for the Riverside -San Bernardino -Ontario Metropolitan Statistical Area (the “MSA”), which includes all of Riverside and San Bernardino Counties. In addition to varied manufacturing employment, the MSA has large and growing commercial and service sector employment, as reflected in the table below.
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The following table represents the Annual Average Labor Force and Industry Employment for the period from 2020 through 2024.
RIVERSIDE-SAN BERNARDINO-ONTARIO METROPOLITAN STATISTICAL AREA
INDUSTRY EMPLOYMENT & LABOR FORCE - BY ANNUAL AVERAGE
2020 2021 2022 2023 2024
Civilian Labor Force(1) 2,073,400 2,108,400 2,140,500 2,180,300 2,209,100 Employment 1,868,300 1,951,600 2,049,900 2,078,100 2,093,800 Unemployment 205,100 156,700 90,700 102,300 115,300
Unemployment Rate 9.9% 7.4% 4.2% 4.7% 5.2%
Agriculture 14,100 13,700 13,800 13,200 13,700
Mining and Logging 1,300 1,400 1,500 1,500 1,600
Construction 104,900 110,100 114,700 115,400 116,200
Manufacturing 96,000 96,100 100,000 98,500 95,200
Wholesale Trade 65,600 67,400 69,500 68,900 68,600
Retail Trade 168,800 177,000 181,000 183,000 182,600
Transportation, Warehousing and Utilities 172,500 198,800 214,400 206,000 205,200 Information 12,400 12,500 13,000 13,300 13,000
Finance and Insurance 24,600 24,400 23,800 22,300 21,700 Real Estate and Rental and Leasing 19,500 20,700 22,200 22,700 22,400 Professional and Business Services 152,100 166,600 173,900 164,400 161,800 Educational and Health Services 248,800 254,300 267,900 287,800 306,000 Leisure and Hospitality 141,300 160,200 180,900 187,600 185,300 Other Services 40,200 43,600 47,400 49,400 50,700
Federal Government 22,100 21,100 20,900 21,200 21,500
State Government 31,300 30,400 28,400 28,600 28,000
Local Government 194,600 190,500 200,700 210,400 220,700 Total All Industries 1,509,900 1,588,800 1,674,000 1,694,100 1,714,100
(1) Labor force data is by place of residence; includes self-employed individuals, unpaid family workers, household domestic workers, and workers on strike.
Source: State of California, Employment Development Department.
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The following table summarizes the labor force, employment and unemployment figures for the period from 2020 through 2024 for the City, the County, the State and the nation as a whole.
CITY OF WILDOMAR,
COUNTY OF RIVERSIDE,
STATE OF CALIFORNIA AND UNITED STATES
Average Annual Civilian Labor Force, Employment and Unemployment Year and Area Labor Force Employment(1) Unemployment(2) Unemployment
Rate (%)(3)
2020
City of Wildomar 16,200 14,500 1,700 10.3%
County of Riverside 1,100,500 988,600 111,900 10.2
State of California 18,956,600 17,039,800 1,916,800 10.1 United States 160,472,000 147,795,000 12,947,000 8.1
2021
City of Wildomar 16,300 15,100 1,200 7.2%
County of Riverside 1,119,000 1,036,100 82,900 7.4
State of California 18,954,600 17,564,900 1,389,700 7.3 United States 161,204,000 152,581,000 8,623,000 5.3
2022
City of Wildomar 16,400 15,700 700 4.2%
County of Riverside 1,140,400 1,091,800 48,700 4.3
State of California 19,218,300 18,393,900 824,400 4.3
United States 164,287,000 158,291,000 5,996,000 3.6
2023
City of Wildomar 16,700 15,900 800 4.8%
County of Riverside 1,165,500 1,110,100 55,400 4.8
State of California 19,471,000 18,551,800 919,200 4.7
United States 167,116,000 161,037,000 6,080,000 3.6
2024
City of Wildomar 16,900 16,000 900 5.2%
County of Riverside 1,181,300 1,118,600 62,700 5.3
State of California 19,644,100 18,600,900 1,043,100 5.3 United States 168,106,000 161,346,000 6,761,000 4.0
Note: Data is not seasonally adjusted.
(1) Annual averages, unless otherwise specified.
(2) Includes persons involved in labor-management trade disputes. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded figures in this table.
Source: U.S. Department of Labor – Bureau of Labor Statistics, California Employment Development Department. 202 4 Benchmark.
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Personal Income
Personal Income is the income that is received by all persons from all sources. It is calculated as the sum of wage and salary disbursements, supplements to wages and salaries, proprietor s’ income with inventory valuation and capital consumption adjustments, rental income of persons with capital consumption adjustment, personal dividend income, personal interest income, and personal current transfer receipts, less contributions for government social insurance.
The personal income of an area is the income that is received by, or on behalf of, all the individuals who live in the area; therefore, the estimates of personal income are presented by the place of residence of the income recipients.
Total personal income in Riverside County increased by 76.1% between 2013 and 2023. The following tables summarize personal income for Riverside County for 2013 through 2023.
PERSONAL INCOME
Riverside County
2013-2023
(Dollars in Thousands)
Year Riverside County
Annual
Percent Change
2013 $76,069,949 2.7%
2014 79,630,223 4.7
2015 84,597,340 6.2
2016 88,997,439 5.2
2017 92,451,456 3.9
2018 96,994,918 4.9
2019 103,647,288 6.9
2020 115,370,344 11.3
2021 126,493,256 9.6
2022 126,174,731 -0.3
2023 133,968,557 6.2
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
The following table summarizes per capita personal income for Riverside County, California and the United States for 2013-2023. This measure of income is calculated as the personal income of the residents of the area divided by the resident population of the area.
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PER CAPITA PERSONAL INCOME
Riverside County, State of California and the United States 2013-2023
Year Riverside County California United States
2013 $33,565 $48,076 $44,401
2014 34,786 50,619 46,287
2015 36,590 53,817 48,060
2016 38,050 55,863 48,971
2017 39,060 58,214 51,004
2018 40,582 60,984 53,309
2019 43,086 64,219 55,566
2020 47,615 70,098 59,123
2021 51,558 76,882 64,460
2022 50,995 76,941 66,244
2023 53,750 81,255 69,810
Source: U.S. Department of Commerce, Bureau of Economic Analysis.
Taxable Sales
The table below presents taxable sales for the years 2020 through 2024 for the City.
TAXABLE SALES
City of Wildomar
2020-2024
(Dollars in Thousands)
Year Permits Taxable Transactions
2020 780 $176,000,837
2021 676 223,006,883
2022 727 266,301,085
2023 777 262,619,293
2024 798 257,727,634
Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2020-2024.
The table below presents taxable sales for the years 2020 through 2024 for the County.
TAXABLE SALES
County of Riverside
2020-2024
(Dollars in Thousands)
Year Permits Taxable Transactions
2020 69,284 $42,313,474
2021 64,335 55,535,196
2022 66,738 62,117,153
2023 68,670 61,094,594
2024 70,577 60,826,953
Source: Taxable Sales in California, California Department of Tax and Fee Administration for 2020-2024.
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APPENDIX C
FORM OF OPINION OF BOND COUNSEL
Upon issuance of the Bonds, Stradling Yocca Carlson & Rauth LLP, Bond Counsel, proposes to render its final approving opinion in substantially the following form:
February __, 2026
Community Facilities District No. 2023-1 (Avalino)
of the City of Wildomar
Wildomar, California
Re: $__________ Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Special Tax Bonds, Series 2026
Ladies and Gentlemen:
We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the City of Wildomar (the “City”) taken in connection with the formation of Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar (the “District”) and the authorization and issuance of the District’s Special Tax Bonds, Series 2026 in the aggregate principal amount of $_________ (the “Bonds”) and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the City, the initial purchasers of the Bonds and others. We have not un dertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us.
The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California), a resolution adopted by the City Council of the City, acting in its capacity as the legislative body of the District (the “City Council”) on January 14, 2026 (the “Resolution”), and a Bond Indenture (the “Indenture”) dated as of February 1, 2026, by and between the District and Wilmington Trust, National Association, as trustee (the “Trustee”). All capitalized terms not defined herein shall have the meaning set forth in the Indenture.
Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that:
(1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture.
The Bonds are limited obligations of the District but are not a debt of the C ity, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Net Taxes, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. (2) The Indenture has been duly executed and delivered by the District. The Indenture creates a valid pledge of, and the Bonds are secured by, the Net Taxes and the amounts on depos it in certain funds and accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms; provided, however, we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to indemnification, penalty, contribution, choice of law, choice of forum or waiver provisions contained therein.
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(3) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals; however, it should be noted that, with respect to applicable corporations as defined in Section 59(k) of the Internal Revenue Code of 1986, as amended (the “Code”), interest (and original issue discount) with respect to the Bon ds might be taken into account in determining adjusted financial statement income for purposes of computing the alternative minimum tax imposed on such corporations.
(4) Interest (and original issue discount) on the Bonds is exempt from State of California personal income tax.
(5) The difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deem ed received by a Bond Owner will increase the Bond Owner’s basis in the applicable Bond.
(6) The amount by which a Bond Owner’s original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond Owner’s basis in the applicable Bond (and the amount of tax - exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Owner.
The opinion expressed in paragraph (3) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is subject to the condition that the District and the City comply with all requirements of the Code, that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District and the City have covenanted to comply with all such requirements.
Except as set forth in paragraphs (3), (4), (5) and (6) above, we express no opinion as to any tax consequences related to the Bonds.
Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate executed by the District and the City and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson & Rauth LLP.
Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. We call attention to the fact that the rights and obligations under the Bonds, the Indenture and the Tax Certificate may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, by the application of equitable principles and the exercise of judicial discretion in appropriate cases and by the limitations on legal remedies against public agencies in the State of California.
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We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the Owners of the Bonds with respect to matters contained in the Official Statement or other offering material.
The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain mat ters not directly addressed by such authorities. Such opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur).
Respectfully submitted,
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APPENDIX D
APPRAISAL REPORT
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APPENDIX E
SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Indenture which are not described elsewhere.
This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof.
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APPENDIX F
FORM OF DISTRICT CONTINUING DISCLOSURE CERTIFICATE
THIS CONTINUING DISCLOSURE CERTIFICATE (this “Disclosure Certificate ”), dated as of February 1, 2026, is executed and delivered by Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar (the “District”) in connection with the issuance of the Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Special Tax Bonds, Series 2026 (the “Bonds”). The Bonds are being issued pursuant to a resolution adopted by the City Council of the City of Wildomar, acting as the legislative body of the District on January 14, 2026 and a Bond Indenture by a nd between the District and Wilmington Trust, National Association, as Trustee, dated as of February 1, 2026 (the “Indenture”).
The District covenants as follows:
SECTION 1. Purpose of the Disclosure Certificate . This Disclosure Certificate is being executed and delivered, for the benefit of the Owners 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 in the Indenture an d the Rate and Method of Apportionment, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the District pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person who (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispos e of ownership of, any Bond (including a person holding Bond through a nominee, depository or other intermediary), or (b) is treated as the owner of any Bond for federal income purposes.
“City” shall mean the City of Wildomar, County of Riverside, California.
“Disclosure Representative” shall mean the Finance Manager of the City, or such other officer or employee as the District shall designate in writing to the Dissemination Agent from time to time.
“Dissemination Agent ” shall mean, initially, Spicer Co nsulting Group, LLC, or any successor Dissemination Agent designed in writing by the District.
“EMMA” shall mean the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found at www.emma.msrb.org, or any other repository of disclosure information that may be designated by the Securities and Exchange Commission in the future.
“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. “Listed Events” shall mean any of the events listed in Section 5 of this Disclosure Certificate.
“MSRB” shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities a nd Exchange Commission, filings with the MSRB are to be made 783
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through the Electronic Municipal Market Access (EMMA) website of the MSRB, currently located at http://emma.msrb.org.
“Official Statement” shall mean the District’s official statement with respect to the Bonds.
“Participating Underwriter” shall mean Piper Sandler & Co.
“Rate and Method of Apportionment” means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation.
“Resolution of Formation” means the resolutions adopted by the City Council pursuant to which the City Council formed the District.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
(a) Not later than March 31 of each year commencing March 31, 2026, the District shall, or shall cause the Dissemination Agent to, provide to EMMA and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate, which initial Annual Report shall consist solely of the Official Statement and audited financial statements of the District , if any . If the Dissemination Agent is other than the District, then not later than 15 business days prior to the date referred to in the prior sentence hereof, the District shall provide the Annual Report (in a form suitable for filing with EMMA) to the Dissemination Agent. 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 Distric t may be submitted separately from and later than the balance of the Annual Report, if any, if they are not available by the date required above for the filing of the Annual Report.
(b) In the event that the Dissemination Agent is an entity other than the District, then the provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report, the District shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to the due date for an Annual Report the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the District to determine if the District will be filing the Annual Report in compliance with subsection (a). The District shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it h ereunder. The Dissemination Agent may conclusively rely upon such certification of the District and shall have no duty or obligation to review such Annual Report.
(c) If the Dissemination Agent is other than the District and if the Dissemination Agent is unable to verify that an Annual Report has been provided to EMMA by the date required in subsection (a), the Dissemination Agent shall send a notice in a timely manner to EMMA, in the form required by EMMA. If the District acts as its own Dissemination Agent, it shall file a notice with EMMA no later than the date specified in subsection (a) for filing an Annual Report if the District fails to file the Annual Report by that date.
(d) If the Dissemination Agent is other than the District, the Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name and address of the repository if other than the MSRB through EMMA; and
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(ii) promptly after receipt of the Annual Report, file a report with the District certifying that the Annual Report has been provided to EMMA and the date it was provided.
(e) Notwithstanding any other provision of this Disclosure Certificate, all filings shall be made in accordance with the MSRB’s EMMA system or in another manner approved under the Rule.
SECTION 4. Content of Annual Reports. The District’s Annual Reports shall contain or include by reference:
(a) Financial Statements. The audited financial statements of the District, if any, for the prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting S tandards Board. If the District’s audited financial statements, if any are prepared, are not available by the time the Annual Report is required to be filed pursuant to Section 3, the Annual Report shall contain unaudited financial statements, and the aud ited financial statements shall be filed in the same manner as the Annual Report when they come available.
(b) Financial and Operating Data. The first Annual Report due by March 31, 2026 shall consist of the Official Statement and audited financial statements of the District, if any. Thereafter, the District’s Annual Report shall contain or incorporate by reference the following:
(i) the principal amount of Bonds outstanding as of the September 2 preceding the filing of the Annual Report;
(ii) the balance in each fund under the Indenture as of the September 2 preceding the filing of the Annual Report;
(iii) the aggregate assessed valuation of the Taxable Property within the District;
(iv) any changes to the Rate and Method of Apportionment of the Special Tax approved or submitted to the qualified electors for approval prior to the filing of the Annual Report;
(v) a table setting forth the annual Special Tax delinquency rate within the District at June 30 for each fiscal year on which a delinquency exists, listing for each fiscal year the total Special Tax levy, the amount delinquent and the percent delinquent;
(vi) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes within the District; and
(vii) an update of the value-to-lien of the property within the District based on the assessed value and the Special Tax levy for then current fiscal year, which update may be provided in a form similar to Table 2 in the Official Statement; provided that such update need not include overlapping special tax, assessment or general obligation indebtedness.
(c) Any or all of the items listed in (a) or (b) above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to EMMA or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB through EMMA. The District shall clearly identify each such other document so included by reference.
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SECTION 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the District shall give, or cause the Dissemination Agent to give, notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds:
1. principal and interest payment delinquencies;
2. unscheduled draws on debt service reserves reflecting financial difficulties;
3. unscheduled draws on credit enhancements reflecting financial difficulties;
4. substitution of credit or liquidity providers, or their failure to perform;
5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB);
6. defeasances;
7. tender offers;
8. bankruptcy, insolvency, receivership or similar proceedings of the obligated person;
9. ratings changes; and
10. default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of the obligated person, any of which reflect financial difficulties.
(b) Additionally, the District shall give or cause the Dissemination Agent to give notice to EMMA in a timely manner not in excess of ten (10) business days after the occurrence of any of the following events with respect to the Bonds, if material:
1. unless described in paragraph 5(a)(5), notices or determinations by t he Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds;
2. merger, consolidation, or acquisition involving the obligated person, or the sale of all or substantially all of the as sets of the 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;
2. appointment of a successor or additional fiscal agent or the change of the name of a fiscal agent;
3. nonpayment related defaults;
4. modifications to the rights of Bondholders;
5. bond calls;
6. release, substitution or sale of property securing repayment of the Bonds; and 786
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7. incurrence of a Financial Obligation of the obligated person, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of the obligated person, any of which affect security holders.
(c) In the event that the District’s fiscal year changes, the District shall report or shall instruct the Dissemination Agent to report such change in the same manner and to the same parties as Listed Events would be reported pursuant to Section 5(a).
(d) The District hereby agrees that the undertaking set forth in this Disclosure Certificate is the responsibility of the District, and the Dissemination Agent, if other than the District, shall not be responsible for determining whether the District’s instructions to the Dissemination Agent under this Section comply with the requirements of the Rule.
(e) For purposes of this Disclosure Certificate, any event described in paragraph 5(a)(8) above is considered to occur when any of the fo llowing occur: the appointment of a receiver, fiscal agent, or similar officer for the District 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 District, 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 District.
SECTION 6. Termination of Reporting Obligation . The obligations of the District and the Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such ter mination occurs prior to the final maturity of the Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under Section
5. SECTION 7. Dissemination Agent . The District may, from time to time, appoint or engag e a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Spicer Consulting Group, LLC. The Dissemination Agent may resign by providing (i) thirty days written notice to the District, and (ii) upon appointment of a new Dissemination Agent hereunder.
SECTION 8. Amendment.
(a) This Disclosure Certificate may be amended, by written agreement of the parties, without the consent of the Owners, and any provision of this Disclosure Certificate may be waived, if all of the following conditions are satisfied: (1) such amendment or waiver is made in connection with a chang e in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the District or the type of business conducted thereby, (2) the undertakings in this Disclosure Certificate as so amended or waived would, in the opinion of a nationally recognized bond counsel, have complied with the requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, and (3) the amendment or waiver either (i) is approved by the Owners of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of Owners or (ii) does not, i n the determination of the District, materially impair the interests of the Owners or Beneficial Owners of the Bonds.
(b) To the extent any amendment to this Disclosure Certificate results in a change in the type of financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual Report 787
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provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided.
(c) If an amendment is made to the basis on which financial statements are prepared, 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. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles a nd the impact of the change in the accounting principles on the presentation of the financial information.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the District 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 District 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 District shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Owner 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 District and/or the Disseminatio n Agent to comply with their respective obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the District or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. Where an entity other than the District is acting as the Dissemination Agent, the Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the District agrees to indemnify and save the Dissemination Agent and its officers, directors, e mployees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorney’s fees) of defending ag ainst any claim of liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful misconduct. Any Dissemination Agent shall be paid (i) compensation by the District for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any informatio n provided to it by the District pursuant to this Disclosure Certificate. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to comme nce any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Certificate. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Certificate.
SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds; and it shall create no rights in any other person or entity.
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SECTION 13. Merger. Any person succeeding to all or substantially all of the Dissemination Agent’s corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act.
This Disclosure Certificate is executed as of the date and year first set forth above.
COMMUNITY FACILITIES DISTRICT NO. 2023-1
(AVALINO) OF THE CITY OF WILDOMAR
By:
Disclosure Representative
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APPENDIX G
FORM OF DEVELOPER CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (this “Disclosure Certificate”), dated as of _____, 2025, is executed D.R. Horton Los Angeles Holdin g Company, Inc., a California corporation (the “ Developer”), in connection with the issuance of the Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar Special Tax Bonds, Series 2026 (the “Bonds”). The Bonds are being issued pursuant to a Resolution of Issuance adopted on January 14, 2026, by the City Council of the City of Wildomar, acting as the legislative body of the District, and the Bond Indenture, dated as of February 1, 2026, ( the “Indenture”), by and between Community Facilities District No. 2023-1 (Avalino) of the City of Wildomar (the “District”) and Wilmington Trust, National Association, as trustee (the “Trustee”). 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 Partici pating Underwriter (as defined below) and the holders and Beneficial Owners of the Bonds.
Section 2. Definitions. In addition to the definitions set forth above and in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Disclosure Certificate, the following capitalized terms shall have the following meanings:
“Assumption Agreement” means an undertaking of a Major Owner or a Relevant Entity thereof, for the benefit of the holders and Benef icial 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 property of the Major Owner within the District), whereby such Major Ow ner or Relevant Entity agrees to provide semi -annual reports and notices of significant events, setting forth the information described in Sections 4 and 5 hereof, respectively, with respect to the portion of the property in the District owned by such Major Owner and its Relevant Entities.
“Beneficial Owner” shall mean any Person, which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including Persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.
“City” means the City of Wildomar, California.
“Dissemination Agent” means the Developer, or any successor Dissemination Agent designated in writing by the Developer, with the written consent of the District, and which has filed with the Developer, the District and the Participating Underwriter a written acceptance of such designation, and which is experienced in providing dissemination agent services such as those required under this Disclosure Certificate. “EMMA System” shall mean the Electronic Municipal Market Access System of the MSRB or such other electronic system designated by the MSRB (as defined below) or the Securities and Exchange Commission. “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 taxable parcels in the District that is responsible in the aggregate for 20% or more of the Special Taxes in the District levied or anticipated to be levied during the then-current fiscal year.
“MSRB” means the Municipal Securities Rulemaking Board. 790
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“Official Statement” means the final official statement, dated _____, 2026, executed by the District in connection with the issuance of the Bonds.
“Participating Underwriter” means Piper Sandler & Co., the original underwriter of the Bonds. “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. “Property” means (i) the property owned by the Developer or a Relevant Entity and subject to the Special Taxes as of the date of determination, and (ii) the property in the District that the Developer or Relevant Entity sold to a Major Owner who has not assumed the undertakings of this Disclosure Certificate under Section 7(b) that is owned by such Major Owner as of the date of determination. “Relevant Entity” means, with respect to the Developer, any other Person (i) directly, or indirectly through one or more intermediaries, is controlling, controlled by or under common control with such Person, and (ii) for whom information, inclu ding financial information or operating data, concerning such Person referenced in clause (i) is material to an evaluation of the District and the Bonds (i.e., information relevant to (a) the Developer’s development plans with respect to its Property and the payment of its Special Taxes on the Property, or (b) such Person’s assets or funds that would materially affect the Developer’s ability to develop its Property as described in this Official Statement or to pay its Special Taxes on the Property). For purposes hereof, the term “control” (including the terms “controlling,” “controlled by” or “under common control with”) means the present 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. “Report Date” means (a) February 1 of each year, and (b) August 1 of each year. “Semi-Annual Report” means any Semi-Annual Report provided by the Developer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. “Special Taxes” means the special taxes levied on the Property within the District. “State” shall mean the State of California.
Section 3. Provision of Semi-Annual Reports.
(a) Until the obligations under this Disclosure Certificate are terminated pursuant to Section 7, the Developer shall, or, upon written direction of the Developer, the Dissemination Agent shall, not later than the Report Date, commencing August 1, 2026, provide to the MSRB through the EMMA System, in an electronic format and accompanied by identifying information as prescribed by the MSRB, a Semi -Annual Report that is consistent with the requirements of Section 4 of this Disclosure Certificate. If, in any year, February 1 or August 1 falls on a Saturday, Sunday or a holiday, such deadline shall be extended to the next following day that is not a Saturday, Sunday, or holiday. If the Developer utilizes the Dissemination Agent to file the Semi -Annual Report, then not later th an 15 calendar days prior to the Report Date, the Developer shall provide the Semi - Annual Report to the Dissemination Agent (if different from the Developer), and shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent, the Participating Underwriter, and the District to the effect that such Semi -Annual Report constitutes the Semi - Annual Report required to be furnished by it under this Disclosure Certificate. The Dissemination Agent, the Participating Underwriter and the District may conclusively rely upon such certification of the Developer and shall have no duty or obligation to review the Semi-Annual Report. The Semi-Annual Report may be submitted as a single document or as separa te documents comprising a package and may incorporate by reference other information as provided in Section 4 of this Disclosure Certificate. 791
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(b) If the Dissemination Agent (if different from the Developer) does not receive a Semi -Annual Report from the Developer and cannot verify that a Semi-Annual Report has been filed with the MSRB through the EMMA System by 15 calendar days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Developer that the Semi-Annual 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 7 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 Semi-Annual Report to the MSRB through the EMMA System b y the Report Date as required in subsection (a) above, the Dissemination Agent shall, in a timely manner, provide to the MSRB through the EMMA System, in an electronic format as prescribed by the MSRB, a notice in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall:
(i) determine prior to each Report Date the then -applicable rules and electronic format prescribed by the MSRB for the filing of continuing disclosure reports; and (ii) to the extent the Semi -Annual Report has been fu rnished to it, file a report with the Developer (if the Dissemination Agent is other than the Developer), the Participating Underwriter and the District certifying that the Semi-Annual Report has been provided to the MSRB through the EMMA System pursuant to this Disclosure Certificate, and stating the date it was provided.
Section 4. Content of Semi-Annual Reports. Each Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit B, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Developer or public entities, which are available to the public on the EMMA System or filed with the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the MSRB. The Developer shall clearly identify each such other document so included by reference.
In addition to any of the information expressly required to be provided in Exhibit B, each Semi-Annual 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) Until the obligations under this Disclosure Certificate are terminated pursuant to Section 7, 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 against any Relevant Entity of the Developer that owns property subject to the Special Taxes that in the reasonable judgment of the Developer could have a material adverse impact on the Developer’s ability to pay its Special Taxes prior to delinquency or to sell or develop the Property as described in the Official Statement or most recent Semi-Annual Report;
(ii) failure to pay any taxes, special taxes (including the Special Taxes) or assessments prior to delinquency with respect to the Property prior to the delinquency date, to the extent such failure is not promptly cured by the Developer or a Relevant Entity upon discovery thereof; (iii) filing of a lawsuit against the Developer or if known, a Relevant Entity of the Developer, seeking damages which, if successful could have, or a final judgment in a lawsuit against the Developer or if known, a Relevant Entity which has, a material and adverse impact on the Developer’s 792
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(or a Relevant Entity’s, if the Relevant Entity owns property within the District) ability to pay Special Taxes prior to delinquency or to sell or develop the Property as described in the Official Statement or most recent Semi-Annual Report;
(iv) any conveyance by the Developer or a Relevant Entity of any of the Property to an entity that is not a Relevant Entity of the Developer, the r esult of which conveyance is to cause the transferee to become a Major Owner and the related assumption of any obligation by a Major Owner pursuant to Section 7;
(v) material damage to or destruction of any of the improvements on the Property; and (vi) any payment default or other material default by the Developer that continues to exist beyond any applicable notice and cure periods on any loan or line of credit with respect to the construction of improvements on the Property that would have a material adve rse effect on the Developer’s most recently disclosed development plan or financing with respect to the Property, or the ability of the Developer or any Relevant Entity to pay its Special Taxes prior to delinquency; (b) If a Listed Event occurs, the Developer shall in a timely manner not in excess of 10 business days after obtaining knowledge of the Listed Event 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, file in a timely manner not in excess of 10 business days after obtain ing knowledge of the Listed Event of the occurrence of such Listed Event, a notice of such occurrence with the MSRB, in an electronic format as prescribed by the MSRB.
Section 6. Identifying Information for Filings with the MSRB; Format for Filings with the MSRB. All documents provided to the MSRB under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB. Any report or filing with the MSRB pursuant to this Disclosure Certificate must be submitted in electronic format, accompanied by such identifying information as is prescribed by the MSRB.
Section 7. Duration of Reporting Obligation.
(a) All of the Developer’s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 12) on the earliest to occur of the following:
(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, (ii) the date on which all of the Special Taxes attributable to the Property have been paid or prepaid in full;
(iii) at such time as (A) the Property is no longer owned by a Major Owner and (B) the Developer no longer has any obligations under this Disclosure Certificate with respect to any Major Owner as a result of such obligations having been assumed under one or more Assumption Agreements entered into pursuant to Section 7(b) below; or
(iv) the date on which the Developer and all Relevant Entities of the Developer, collectively, own 23 or fewer residential lots in the District subject to the Special Tax.
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.
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(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 or by a Relevant Entity thereof, and if so assumed the Developer’s obligations hereunder with respect to that portion of the Property conveyed will be terminated. In order to effect such an assumption, such Major Owner or a Relevant Entity shall enter into an Assumption Agreement in form and substance equivalent to this Disclosure Certificate or as otherwise sati sfactory to the District and 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 Semi -Annual 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 8. Dissemination Agent. The Developer may, from time to time, with the written consent of the District, 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, without cause, with the written consent of the District, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Developer.
The Dissemination Agent may resign by providing thirty days’ written notice to the District, the Developer, and the Participating Underwriter. The Dissemination Agent shall not be responsible for the content of any report or notice prepared by the Developer. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Developer in a timely manner and in a form suitable for filing.
Section 9. 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 a change in law; and
(b) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the same manner as provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the inter ests of the holders or Beneficial Owners of the Bonds.
Section 10. 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 fort h in this Disclosure Certificate or any other means of communication, or including any other information in any Semi - Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any information in any Semi -Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a Listed Event.
Section 11. Default. In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the District 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 or Dissemination Agent, as the case may be, to comply with 794
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its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an event of default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Developer or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance. Neither the Developer nor the Dissemination Agent shall have any liability to the owners of the Bonds or any other party for monetary damages or financial liability of any kind whatsoever relating to or arising from this Disclosure Certificate.
Section 12. 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 reasonable exercise or performance of its powers and duties hereunder, including the reasonable costs and expense s (including attorneys’ fees) of defending against any claim of liability, but excluding any loss, expense and liabilities due to the Indemnified Party’s negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent (if other than the Developer) shall be paid compensation for its services provided hereunder from the Administrative Expense Fund established under the Indenture in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, wh ich 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 Participating Underwriter, the Beneficial 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.
Section 13. Notices. Any notice or communications to be among any of the parties to this Disclosure Certificate may be given by electronic mail, regular mail, or overnight mail as follows:
To the District: City of Wildomar Community Facilities District No. 2023- 1 (Avalino)
City of Wildomar
23873 Clinton Keith Road
Wildomar, CA 92595
Attention: Finance Manager
Email: [email protected]
To the Participating Underwriter: Piper Sandler & Co.
3626 Fair Oaks Boulevard, Suite 100
Sacramento, CA 95864
Attention: Public Finance
[email protected]
To Developer: D.R. Horton Los Angeles Holding Company, Inc. 980 Montecito Drive, Suite 300
Corona, CA 92879
Attn: Dean James Pernicone,
Email: [email protected]
With a Copy to: O’Neil LLP
19800 MacArthur Blvd., Suite 650
Irvine, California 92612
Attn: Sandra A. Galle
Email: [email protected]
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Any Person may, by written notice to the other Persons listed above, designate a different address or email address to which subsequent notices or communications should be sent.
Section 14. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the District, the Developer, 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.
IN WITNESS WHEREOF, the Developer has executed this Disclosure Certificate as of the date first above written.
D.R. Horton Los Angeles Holding Company, Inc.,
a California corporation
By: ____________________________________________
Bonnie Chiu,
Vice President
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APPENDIX H
BOOK-ENTRY ONLY SYSTEM
The information in this Appendix concerning DTC and DTC’s book-entry only system has been obtained from sources that the District and the Underwriter believe to be reliable, but neither the District nor the Underwriter takes any responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.
The Depository Trust Company ( “DTC”), New York, NY, will act as securities depository for the Bonds.
The Bonds will be issued as fully -registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.
DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 count ries) that DTC’s participants ( “Direct Participants”) deposit with DTC. DTC also facilitates the post -trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book -entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, a ll 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 cleari ng 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 fil e with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. Th e ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Own ers 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. Tr ansfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co ., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 797
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Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Particip ants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and divi dend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail informa tion from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name, ” and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disburse ment 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.
A Bond Owner shall give notice to elect to have its B onds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant’s interest in the Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC’s records and followed by a book -entry credit of tendered Bond s to the Trustee’s DTC account.
DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository i s not obtained, physical certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book -entry only transfers through DTC (or a successor securities depository). In that event, bonds will be printed and delivered to DTC.
THE TRUSTEE, AS LONG AS A BOOK -ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE
OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY
BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE
VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. 798