Harveston CFD 01-2 Official Statement Series A

NEW ISSUE
RATINGS
Series A Bonds Insured Rating:
S&P: AAA
(Ambac Insured)
Series A Bonds Underlying Rating:
S&P: BBB
Series B Bonds: NOT RATED
(See “RATINGS – Ratings on Insured Bonds” herein)
In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described herein,
under existing law, the interest on the 2006 Bonds is excludable from gross income of the owners thereof for federal income tax purposes and is not
included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Internal Revenue
Code of 1986, as amended, but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain
corporations. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See “LEGAL MATTERS – Tax
Exemption” herein.
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 01-2 (HARVESTON)
$14,470,000 2006 SPECIAL TAX REFUNDING BONDS, SERIES A AND
$3,075,000 2006 SPECIAL TAX REFUNDING BONDS, SUBORDINATE SERIES B
Dated: Date of Delivery
Due: September 1, as shown on the inside cover
The Temecula Public Financing Authority Community Facilities District No. 01-2 (Harveston) 2006 Special Tax Refunding Bonds, Series A (the
“Series A Bonds”) and its 2006 Special Tax Refunding Bonds, Subordinate Series B (the “Series B Bonds” and, collectively with the Series A Bonds, the
“2006 Bonds”) are being issued under the Mello-Roos Community Facilities Act of 1982 (the “Act”) and a Fiscal Agent Agreement, dated as of September 1,
2006 (the “Fiscal Agent Agreement”), by and between the Temecula Public Financing Authority (the “Authority”) and U.S. Bank National Association,
as Fiscal Agent (the “Fiscal Agent”), and are payable from proceeds of Special Taxes (as defined herein) levied on property within the Temecula Public
Financing Authority Community Facilities District No. 01-2 (Harveston) (the “District”) according to the rate and method of apportionment of special tax
approved by the qualified electors of the District and by the Board of Directors of the Authority, acting as the legislative body of the District.
The proceeds of the 2006 Bonds will be used, along with certain funds on hand, (i) to refund on September 1, 2006, the District’s outstanding Special
Tax Bonds, 2002 Series A, (ii) to pay the costs of issuing the 2006 Bonds, (iii) to establish a Senior Subaccount within the Reserve Fund for the Series
A Bonds all or a portion of which may be funded by a reserve surety for the Series A Bonds in satisfaction of the Reserve Requirement for the Series A
Bonds, and (iv) to establish a Subordinate Subaccount within the Reserve Fund for the Series B Bonds in satisfaction of the Reserve Requirement for the
Series B Bonds. See “PLAN OF FINANCE; ESTIMATED SOURCES AND USES OF FUNDS” herein.
The 2006 Bonds will be issued in denominations of $5,000 or integral multiples in excess thereof. The 2006 Bonds, when delivered, will be initially
registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC will act as securities depository
for the 2006 Bonds as described herein under “THE 2006 BONDS – Book-Entry and DTC.”
The payment of principal of and interest on the Series A Bonds when due will be insured by a financial guaranty insurance policy to be issued by
Ambac Assurance Corporation simultaneously with the delivery of the Series A Bonds.
PAYMENT OF THE SERIES B BONDS IS NOT SECURED BY THE FINANCIAL GUARANTY INSURANCE POLICY. THE SERIES B BONDS
ARE PAYABLE FROM SPECIAL TAXES ON A SUBORDINATE BASIS TO THE SERIES A BONDS, AS DESCRIBED HEREIN. THE SERIES B
BONDS ARE NOT RATED BY ANY AGENCY, INVOLVE A HIGH DEGREE OF RISK AND ARE NOT SUITABLE FOR ALL INVESTORS. SEE
“BONDOWNERS’ RISKS.”
The 2006 Bonds are subject to optional redemption, mandatory redemption from prepayments of Special Taxes and mandatory sinking payment
redemption as described herein.
THE 2006 BONDS, THE INTEREST THEREON, AND ANY PREMIUM PAYABLE ON THE REDEMPTION OF ANY OF THE 2006
BONDS, ARE NOT AN INDEBTEDNESS OF THE AUTHORITY, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN
THE FISCAL AGENT AGREEMENT), THE STATE OF CALIFORNIA (THE “STATE”) OR ANY OF ITS POLITICAL SUBDIVISIONS,
AND NEITHER THE AUTHORITY, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT
AGREEMENT), THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE FOR THE 2006 BONDS. NEITHER THE FAITH
AND CREDIT NOR THE TAXING POWER OF THE AUTHORITY, THE DISTRICT (EXCEPT TO THE LIMITED EXTENT SET FORTH
IN THE FISCAL AGENT AGREEMENT), THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT
OF THE 2006 BONDS. OTHER THAN THE SPECIAL TAXES LEVIED WITHIN THE DISTRICT, NO TAXES ARE PLEDGED TO THE
PAYMENT OF THE 2006 BONDS. THE 2006 BONDS ARE NOT A GENERAL OBLIGATION OF THE AUTHORITY OR THE DISTRICT,
BUT ARE LIMITED OBLIGATIONS OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES PROVIDED
IN THE FISCAL AGENT AGREEMENT.
This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must
read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the
2006 Bonds. Investment in the 2006 Bonds involves risks which may not be appropriate for some investors. See “BONDOWNERS’ RISKS”
herein for a discussion of certain special risk factors that should be considered in evaluating the investment quality of the 2006 Bonds.
MATURITY SCHEDULE
(See Inside Cover)
Please refer to the inside cover page for a summary of the principal amounts, interest rates, reoffering yields and CUSIP® numbers for the 2006
Bonds.
The 2006 Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Quint & Thimmig
LLP, San Francisco, California, Bond Counsel, and subject to certain other conditions. McFarlin & Anderson LLP, Lake Forest, California is acting as
Disclosure Counsel. Certain legal matters will be passed on for the Authority and the District by Richards, Watson & Gershon, Los Angeles, California,
the Authority’s Special Counsel. It is anticipated that the 2006 Bonds, in book-entry-only form, will be available for delivery to DTC in New York, New
York on or about September 1, 2006.
Dated: August 9, 2006
MATURITY SCHEDULE
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 01-2
(HARVESTON)
2006 SPECIAL TAX REFUNDING BONDS, SERIES A
$6,980,000 Serial Series A Bonds
Base CUSIP® No. 87972R†
Maturity
(September 1)
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Principal
Amount
$250,000
260,000
270,000
285,000
295,000
305,000
320,000
330,000
345,000
360,000
Interest
Rate
4.000%
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
4.000
Yield
3.55%
3.60
3.65
3.70
3.73
3.77
3.80
3.85
3.93
4.00
CUSIP ®
No. †
AB7
AC5
AD3
AE1
AF8
AG6
AH4
AJ0
AK7
AL5
Maturity
(September 1)
2017
2018
2019
2020
2021
2022
2023
2024
2025
Principal
Amount
$370,000
385,000
405,000
420,000
435,000
455,000
475,000
495,000
520,000
Interest
Rate
4.000%
4.000
4.125
4.250
4.300
4.300
4.375
4.375
4.500
Yield
4.08%
4.16
4.24
4.35
4.42
4.47
4.50
4.55
4.60
CUSIP®
No.†
AM3
AN1
AP6
AQ4
AR2
AS0
AT8
AU5
AV3
$3,635,000 4.500% Term Series A Bonds due September 1, 2031, Yield 4.67% CUSIP® No.87972RAX9†
$3,855,000 4.500% Term Series A Bonds due September 1, 2036, Yield 4.70% CUSIP® No.87972RAY7†
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 01-2
(HARVESTON)
2006 SPECIAL TAX REFUNDING BONDS, SUBORDINATE SERIES B
$750,000 Serial Series B Bonds
Base CUSIP® No. 87972R†
Maturity
(September 1)
2007
2008
2009
2010
2011
2012
Principal
Amount
$50,000
50,000
55,000
55,000
55,000
60,000
$260,000
$525,000
$1,540,000
Interest
Rate
3.750%
3.900
4.000
4.150
4.300
4.400
Yield
3.75%
3.90
4.00
4.15
4.30
4.40
CUSIP ®
No. †
AZ4
BA8
BB6
BC4
BD2
BE0
Maturity
(September 1)
2013
2014
2015
2016
2017
2018
Principal
Amount
$65,000
65,000
70,000
70,000
75,000
80,000
Interest
Rate
4.500%
4.600
4.700
4.800
4.850
4.875
Yield
4.50%
4.60
4.70
4.80
4.85
4.90
CUSIP®
No.†
BF7
BG5
BH3
BJ9
BK6
BL4
5.00% Term Series B Bonds due September 1, 2021, Yield 4.95 % CUSIP® No. 87972RBP5†
5.00% Term Series B Bonds due September 1, 2026, Yield 5.05% CUSIP® No. 87972RBQ3†
5.10% Term Series B Bonds due September 1, 2036, Yield 5.10% CUSIP® No. 87972RBR1 †
†CUSIP® A registered trademark of the American Bankers Association.
Copyright © 1999-2006 Standard & Poor’s, a Division of The McGraw-Hill Companies,
Inc. CUSIP® data herein is provided by Standard & Poor’s CUSIP® Service Bureau. This data is not intended to create a database and does not serve in any way
as a substitute for the CUSIP® Service Bureau. CUSIP ® numbers are provided for convenience of reference only. Neither the Authority nor the Underwriter takes
any responsibility for the accuracy of such numbers.
TEMECULA PUBLIC FINANCING AUTHORITY
BOARD OF DIRECTORS
Ron Roberts, Chairperson
Charles W. Washington, Vice Chairperson
Jeff Comerchero, Member
Maryann Edwards, Member
Michael S. Naggar, Member
AUTHORITY / CITY STAFF
Shawn Nelson, Executive Director and City Manager
Genie Roberts, Authority Treasurer and City Finance Director
Susan Jones, MMC, Authority Secretary and City Clerk
SPECIAL SERVICES
Bond Counsel
Quint & Thimmig LLP
San Francisco, California
Authority Counsel
Richards, Watson & Gershon
A Professional Corporation
Los Angeles, California
Disclosure Counsel
McFarlin & Anderson LLP
Lake Forest, California
Special Tax Consultant
Psomas
Riverside, California
District Administrator
NBS Government Finance Group
Temecula, California
Financial Advisor to the Authority
Fieldman, Rolapp & Associates
Irvine, California
Fiscal Agent/Dissemination Agent
U.S. Bank National Association
Los Angeles, California
Appraiser
Stephen G. White, MAI
Fullerton, California
GENERAL INFORMATION ABOUT THE OFFICIAL STATEMENT
Useof Official Statement. This Official Statement is submitted in connection with the offer and sale
of the 2006 Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other
purpose. This Official Statement is not to be construed as a contract with the purchasers of the 2006 Bonds.
All summaries of the documents referred to in this Official Statement are made subject to the provisions of
such documents, respectively, and do not purport to be complete statements of any or all of such provisions.
Estimates and Forecasts. When used in this Official Statement and in any continuing disclosure
by the Authority in any press release and in any oral statement made with the approval of an authorized
officer of the Authority or any other entity described or referenced herein, the words or phrases “will likely
result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “forecast,” “expect,”
“intend,” and similar expressions identify “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934,
as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are
subject to risks and uncertainties that could cause actual results to differ materially from those contemplated
in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some
assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances
may occur. Therefore, there are likely to be differences between forecasts and actual results and those
differences may be material. The information and expressions of opinion herein are subject to change
without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under
any circumstances, give rise to any implication that there has been no change in the affairs of the District or
any other entity described or referenced herein since the date hereof. The Authority does not plan to issue
any updates or revision to the forward-looking statements set forth in this Official Statement.
Limited Offering. No dealer, broker, salesperson or other person has been authorized by the
Authority or the District to give any information or to make any representations in connection with the offer
or sale of the 2006 Bonds other than those contained herein and if given or made, such other information or
representation must not be relied upon as having been authorized by the Authority, the District 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 2006 Bonds by a person in any jurisdiction in which it is unlawful for such
person to make such an offer, solicitation or sale.
Involvement of Underwriter. The Underwriter has submitted the following statement for inclusion
in this Official Statement: The Underwriter has reviewed the information in this Official Statement in
accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied
to the facts and circumstances of this transaction, but the Underwriter does not guaranty the accuracy or
completeness of such information.
Stabilization of Prices. In connection with this offering, the Underwriter may overallot or effect
transactionswhich stabilize or maintain the market price of the 2006 Bonds at a level above that which might
otherwiseprevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The
Underwriter may offer and sell the 2006 Bonds to certain dealers and others at prices lower than the public
offering prices set forth on the inside cover page hereof and said public offering prices may be changed from
time to time by the Underwriter.
Ambac Assurance Corporation (“Ambac Assurance”) makes no representation regarding the Series
A Bonds or the advisability of investing in the Series A Bonds and makes no representation regarding, nor
has it participated in the preparation of the Official Statement other than the information supplied by Ambac
Assurance and presented under the captions “BOND INSURANCE FOR THE SERIES A BONDS” and
APPENDIX H –“Specimen Financial Guaranty Insurance Policy” herein.
THE 2006BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS CONTAINED IN SUCH ACT. THE 2006 BONDS HAVE NOT BEEN REGISTERED
OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Community Facilities District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purpose of the 2006 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sources of Payment for the 2006 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bond Insurance for Series A Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors Associated with Purchasing the 2006 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professionals Involved in the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
1
1
3
3
4
4
6
6
6
6
7
CONTINUING DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PLAN OF FINANCE; ESTIMATED SOURCES AND USES OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . 7
THE 2006 BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Description of the 2006 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Terms of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Transfer and Exchange of 2006 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Book-Entry and DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Debt Service Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Coverage of Annual Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECURITY FOR THE 2006 BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate and Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Teeter Plan Not Applicable to Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds of Foreclosure Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Tax Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ambac Assurance Surety Bond for Series A Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment of Moneys in Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Bonds for Refunding Purposes Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
15
15
16
18
18
20
20
21
22
23
23
BOND INSURANCE FOR THE SERIES A BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ambac Assurance Corporation Financial Guaranty Insurance Policy . . . . . . . . . . . . . . . . . . . .
Ambac Assurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents by Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
24
25
25
26
THE AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Authority for Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
THE COMMUNITY FACILITIES DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Location and Description of the District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Specific Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Development Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Tax Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct and Overlapping Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Value-to-Lien Ratios and Estimated Special Tax Allocation by Property Ownership
Overlapping Community Facilities and Assessment Districts . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Overlapping Direct Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Assessed Value-to-Lien Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appraised Property Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-i-
27
27
33
33
34
35
36
36
39
40
42
44
44
44
44
BONDOWNERS’ RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risks of Real Estate Secured Investments Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concentration of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustable Rate and Unconventional Mortgage Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Failure to Develop Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Taxes Are Not Personal Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The 2006 Bonds Are Limited Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appraised Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property . . . . .
Disclosure to Future Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Government Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Local, State and Federal Land Use Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Endangered and Threatened Species . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Levy and Collection of the Special Tax; Insufficiency of the Special Tax . . . . . . . . . . . . . . . .
Exempt Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depletion of Subaccounts within the Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Delay and Limitations in Foreclosure Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bankruptcy and Foreclosure Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments by FDIC and Other Federal Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of Special Tax Not a Personal Obligation of the Property Owners . . . . . . . . . . . . . . .
Factors Affecting Parcel Values and Aggregate Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No Acceleration Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Community Facilities District Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Billing of Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collection of Special Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right to Vote on Taxes Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ballot Initiatives and Legislative Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limited Secondary Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss of Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limitations on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
46
46
47
48
48
48
48
49
49
50
50
50
51
51
52
53
53
54
54
55
56
56
56
56
57
57
57
58
58
59
59
SPECIAL RISK CONSIDERATIONS SPECIFIC TO THE SERIES B BONDS . . . . . . . . . . . . . . . . . .
Subordination of Series B Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limited Secondary Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No Ratings of Series B Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No Insurance; Remedies Controlled by Ambac Assurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
59
59
59
60
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No General Obligation of the Authority or the District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
60
60
60
61
RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Ratings on Insured Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
PROFESSIONAL FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
APPENDIX A –
APPENDIX B –
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
APPENDIX G
APPENDIX H
APPENDIX I
–
–
–
–
–
–
–
General Information About the City of Temecula . . . . . . . . . . . . . . . . . . . . . . . . A-1
Rate and Method of Apportionment for Community Facilities District
No. 01-2 (Harveston) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Supplemental Appraisal Report and Summary Appraisal Report . . . . . . . . . . . . . C-1
Summary of Certain Provisions of the Fiscal Agent Agreement . . . . . . . . . . . . . D-1
Form of Continuing Disclosure Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
Form of Opinion of Bond Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Book-Entry System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
Specimen Financial Guaranty Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
Boundary Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
-ii-
OFFICIAL STATEMENT
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 01-2 (HARVESTON)
$14,470,000 2006 SPECIAL TAX REFUNDING BONDS, SERIES A AND
$3,075,000 2006 SPECIAL TAX REFUNDING BONDS, SUBORDINATE SERIES B
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and
guide to, and is qualified by, more complete and detailed information contained in the entire Official
Statement, including the cover page and appendices hereto, and the documents summarized or described
herein. A full review should be made of the entire Official Statement. The offering of the 2006 Bonds to
potential investors is made only by means of the entire Official Statement.
General
This Official Statement, including the cover page and appendices hereto, is provided to furnish
information regarding the issuance and sale by the Temecula Public Financing Authority (the “Authority”),
on behalf of the Temecula Public Financing Authority Community Facilities District No. 01-2 (Harveston)
(the “District” or the “Community Facilities District”) of $14,470,000 aggregate principal amount of the
Temecula Public Financing Authority Community Facilities District No.01-2 (Harveston) 2006 Special Tax
Refunding Bonds, Series A (the “Series A Bonds”), and $3,075,000 aggregate principal amount of the 2006
Special Tax Refunding Bonds, Subordinate Series B (the “Series B Bonds,” and, collectively with the
Series A Bonds, the “2006 Bonds”).
The 2006 Bonds are issued pursuant to the Act (as defined below) and the Fiscal Agent Agreement,
dated as of September 1, 2006 (the “Fiscal Agent Agreement”), by and between the Authority, for and on
behalf of the District, and U.S. Bank National Association, as Fiscal Agent (the “Fiscal Agent”), and are
payable from proceeds of Special Taxes (as defined herein) levied on property within the District according
to the rate and method of apportionment of special tax approved by the qualified electors of the District and
by the Board of Directors of the Authority, acting as the legislative body of the District. See “THE
AUTHORITY – Authority for Issuance” herein. The Authority may issue additional bonds (“Parity Bonds”)
secured under the Fiscal Agent Agreement on a parity with the Series A Bonds but only for purposes of
refunding outstanding 2006 Bonds and any such Parity Bonds will be secured under the Fiscal Agent
Agreement on a senior basis to the Series B Bonds. See “SECURITY FOR THE 2006 BONDS – Additional
Bonds for Refunding Purposes Only.” The 2006 Bonds, along with any Parity Bonds, are referred to as the
“Bonds.”
Capitalizedterms usedin thisOfficial Statement and not otherwise definedherein have the meanings
given such terms in the Fiscal Agent Agreement, some of which are set forth in Appendix D hereto
“Summary of Certain Provisions of the Fiscal Agent Agreement.”
The Authority
The Authority was formed on April 10, 2001, pursuant to a Joint Exercise of Powers Agreement
between the City of Temecula, California (the “City”) and the Redevelopment Agency of the City of
Temecula, in accordance with Articles 1 through 4 (commencing with Section 6500) of Chapter 5,
Division 7, Title 1 of the Government Code of the State of California (the “State”). See “THE
AUTHORITY” and “THE COMMUNITY FACILITIES DISTRICT – Location and Description of the
District.”
The Community Facilities District
The District was established by the Board of Directors of the Authority on March 26, 2002, pursuant
to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the California
Government Code, and referred to herein as the “Act”), following a public hearing and a landowner election
at which the then qualified electors of the District, by more than a two-thirds vote, authorized the District
1
to incur bonded indebtedness in the aggregate not-to-exceed amount of $25,000,000, and approved the levy
of special taxes (the “Special Taxes”) on certain real property located in the District.
Once duly established, a communities facilities district is a legally constituted governmental entity
established for the purpose of financing specific facilities and services within defined boundaries. Subject
to approval by a two-thirds vote of the qualified voters within a communities facilities district and
compliance with the provisions of the Act, a communities facilities district may issue bonds and may levy
and collect special taxes to repay such bonded indebtedness and interest thereon.
Subsequent to the formation of the District, the Temecula Public Financing Authority formed
Community Facilities District No. 03-6 (Harveston II) (“Community Facilities District No. 03-6”).
Community Facilities District No. 03-6 was formed and established by the Board of Directors of the
Authority on November 25, 2003, pursuant to the Act, following a public hearing and a landowner election
at which the then qualified electors of Community Facilities District No. 03-6, by more than a two-thirds
vote, authorized Community Facilities District No. 03-6 to incur bonded indebtedness in the aggregate not-toexceed amount of $5,500,000, and approved the levy of a special tax on certain real property located in
Community Facilities District No. 03-6 for the payment of debt service and administrative expenses of
Community Facilities District No. 03-6. The special taxes of Community Facilities District No. 03-6 are not
available to pay debt service on the Series A Bond or Series B Bonds but are secured by a lien on property
in the District that is on parity with the liens securing the Special Taxes levied to pay the Bonds and to pay
ad valorem taxes. Community Facilities District No. 03-6 is coterminous with part of the District. The
Authority issued bonds on behalf of Community Facilities District No. 03-6 in the amount of $4,845,000 on
September 9, 2004.
The District is comprised of approximately 510 gross acres of land located in the northwest portion
of the City, in the southwesterly portion of the County of Riverside (the “County”). The District is located
to the northeast of the I-15 Freeway, northwest of Winchester Road, and west of Margarita Road. The
District is part of a master-planned community that includes a large residential area surrounding the 17-acre
lake and park in the center of the community. The master-planned community is planned for a total of
approximately 2,0361 residential units, including approximately 1,6211 single-family dwelling units, a 300unit apartment complex and an approximately 115-unit retirement residence. In addition, there is expected
to be an approximately 111.75-acre commercial site at the southerly end of the community and a 2.45-acre
retail center in the center of the community. There is a private Lake House/Village Club, a park surrounding
the lake connected to a paseo to the 20-acre community park, a child care center, a community facility and
an elementary school.
The master-planned community is being developed in four phases, which are referred to as Phase 1,
Phase 2, Phase 2B and Phase 3 and comprise the central portion of the community. As of May 8, 2006, the
single-family detached residential portion of Phase 1 is nearing completion with approximately 341 of 360
homes built and occupied. A 300-unit apartment site is substantially completed and occupancies have
commenced, and the retirement residence is expected to be under construction in the near future. In addition,
Phase 1 includes the completed lake and Lake Park, the Welcome Center/Commercial Site, the completed
Lake House/Village Club, the child care center and the Ysabel Barnett Elementary School.
Phase 2 is expected to include 7 different tracts or neighborhoods of homes, containing atotal of 681
homes; and two of these tracts or product types (Ashville and Lake Front Cottages) are a carryover from
Phase 1. All 7 tracts are under construction or completed. Phase 2 also includes the 20-acre community park
which is now complete and which includes a lighted soccer field and two lighted baseball fields.
Phase 2B is expected to include two different tractscontaining a total of 198 detached homes, though
only 191 of the lots are included within the boundaries of the District and included in the Appraisal (as
defined below). The models are now complete and construction of the production homes is underway.
Phase 3 is expected to include 4 different tracts containing a total of 382 homes, including 64
attached homes and 318 detached homes. The land is currently in blue-top condition, and construction of
the model and production homes has begun. There is also an approximately 111.75-acre commercial site at
1 Estimated total of 2,036 includes 7 lots in Phase 2B which are not within the boundaries of the District.
2
the southerly end of the community extending southerly to the I-15 Freeway. Rough grading of this site is
almost complete though the specific development and timing of construction has not yet been determined.
As of May 8, 2006, there were nine major landowners within the District, six of which have home
construction projects underway, either by the landowner or by an associated Merchant Builder (as defined
below). Based on ownership information as of the May 8, 2006 date of the Supplemental Report to the
Summary Appraisal Report dated February 3, 2006, approximately 79.14% of the estimated Special Taxes
in Fiscal Year 2006-07 will be payable by individual homeowners.
Purpose of the 2006 Bonds
The proceeds of the 2006 Bonds will be used, together with certain funds on hand, (i) to refund on
September1, 2006, the $17,310,000aggregate outstanding principal amount of Community Facilities District
No. 01-2 (Harveston) Special Tax Bonds, 2002 Series A (the “Prior Bonds”), (ii) to pay the costs of issuing
the 2006 Bonds, (iii) to establish a Senior Subaccount within the Reserve Fund and acquire a reserve surety
forthe SeriesA Bonds, and (iv)to establish aSubordinate Subaccount within the Reserve Fund for the Series
B Bonds. See “PLAN OF FINANCE” herein. For a description of the improvements financed with proceeds
of the Prior Bonds, see “THE COMMUNITY FACILITIES DISTRICT – Acquisition of Improvements.”
Capitalized terms used in this Official Statement and not otherwise defined herein have the meanings given
such terms in the Fiscal Agent Agreement, some of which are set forth in Appendix D hereto “Summary of
Certain Provisions of the Fiscal Agent Agreement.”
Sources of Payment for the 2006 Bonds
The Bonds are secured by and payable from a first pledge (which pledge shall be effected in the
manner and to the extent provided in the Fiscal Agent Agreement) of all of the Special Tax Revenues (as
defined below) and all moneys deposited in the Bond Fund (including the Special Tax Prepayments Account
therein) and, until disbursed as provided in the Fiscal Agent Agreement, in the Special Tax Fund, subject in
any event to the priority for the disposition of amounts in the Bond Fund for the payment of debt service due
on the Series A Bonds and to replenish the Senior Subaccount of the Reserve Fund to the amount of the
Senior Subaccount Reserve Requirement prior to the use of amounts therein for the payment of debt service
due on the Series B Bonds and to make deposits to the Subordinate Subaccount of the Reserve Fund. The
Bonds, other than the Series B Bonds, are further secured by a first pledge of all of the moneys deposited in
the Senior Subaccount of the Reserve Fund, and the Series B Bonds are further secured by a first pledge of
all of the moneys deposited in the Subordinate Subaccount of the Reserve Fund. “Special Tax Revenues,”
is defined in the Fiscal Agent Agreement as the proceeds of the Special Taxes received by the Authority,
including any scheduled payments and any prepayments thereof, interest thereon and proceeds of the
redemption or sale of property sold as a result of foreclosure of the lien of the Special Taxes to the amount
of said lien and interest thereon. “Special Tax Revenues” do not include any penalties collected in
connection with delinquent Special Taxes, which may be forgiven or disposed of by the Authority in its
discretion, and if collected, will be used in a manner consistent with the Act. “Special Taxes” are defined
in the Fiscal Agent Agreement as the special taxes levied within the District pursuant to the Act, the
ordinance adopted by the legislative body of the District providing for the levy of the Special Taxes and the
Fiscal Agent Agreement. Special Tax Revenues constituting payment of the portion of the Special Tax levy
for Administrative Expenses are to be deposited by the Treasurer in the Administrative Expense Fund and
are not pledged to payment of the Bonds. (Up to $75,000 of Special Tax Revenues for Administrative
Expenses may be deposited in the Administrative Expense Fund on apriority basis. Additional amounts may
be deposited in the Administrative Expense Fund after deposits for debt service on the Bonds and for
replenishment of the Reserve Fund. See “SECURITY FOR THE 2006 BONDS – Special Tax Fund.”) The
Special Taxes are levied in accordance with the Rate and Method of Apportionment of Special Tax (the
“Rate and Method”) recorded as a lien on the property pursuant to the Notice of Special Tax Lien. Special
taxes of Community Facilities District No. 03-6 cannot be used to pay debt service on the 2006 Bonds.
Pursuant to the Act, the Rate and Method, the Resolution of Formation (as defined herein) and the
Fiscal Agent Agreement, so long as any 2006 Bonds are outstanding, the Authority has covenanted in the
Fiscal Agent Agreement to annually levy the Special Tax against the land within the District not exempt from
Special Taxes under the Act and the Rate and Method (“Taxable Property”) in accordance with the
proceedings for the authorization and issuance of the 2006 Bonds and with the Rate and Method in an
amount sufficient (i) to pay debt service due on all 2006 Bonds for the calendar year that commences in such
3
Fiscal Year; (ii) to pay Administrative Expenses; and (iii) to replenish the Senior Subaccount and
Subordinate Subaccount of the Reserve Fund. See “SECURITY FOR THE 2006 BONDS – Teeter Plan Not
Applicable to Special Taxes” herein.
The Rate and Method exempts from the Special Tax up to 16.5 acres of Property Owner Association
Property and up to 93.3 acres of Public Property located within the District. As of June 30, 2006,
approximately 5.95 acres of Property Owner Association Property and approximately 64.56 acres of Public
Propertywere exempt from the Special Tax. See “SECURITY FOR THE 2006 BONDS – Rate and Method”
and “BONDOWNERS’ RISKS – Exempt Properties.”
The Authority has also covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings
to be commenced and prosecuted against certain parcels with delinquent installments of the Special Tax.
For a more detailed description of the foreclosure covenant, see “SECURITY FOR THE 2006
BONDS – Proceeds of Foreclosure Sales.”
NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE DISTRICT
(EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR ANY
POLITICALSUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE 2006 BONDS.
OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE
PAYMENT OF THE 2006 BONDS. THE 2006 BONDS ARE NOT A GENERAL OBLIGATION OF
THE AUTHORITY, BUT ARE LIMITED OBLIGATIONS PAYABLE SOLELY FROM THE
SOURCES PLEDGED UNDER THE FISCAL AGENT AGREEMENT.
Bond Insurance for Series A Bonds
Payment of the principal and interest on the Series A Bonds when due will be insured by a financial
guaranty insurance policy to be issued by Ambac Assurance Corporation (“Ambac Assurance”)
simultaneously with the delivery of the Series A Bonds. See “BOND INSURANCE FOR THE SERIES A
BONDS,” “RATINGS – Ratings on Insured Bonds” and APPENDIX H – “Specimen Financial Guaranty
Insurance Policy” herein. The Series B Bonds will not be insured and are not rated.
Appraisal
An appraisal of the land and existing improvements within the District, dated February 3, 2006 (the
“Summary Appraisal Report”), as supplemented by a Supplemental Report, dated May 8, 2006 (referred to
herein as, the “Supplemental Appraisal Report,” and together with the Summary Appraisal Report, the
“Appraisal”), has been prepared by Stephen G. White, MAI of Fullerton, California (the “Appraiser”) in
connection with issuance of the 2006 Bonds. The purpose of the Appraisal was to estimate the aggregate
minimum market value of the “as is” condition of all of the Taxable Property, as segregated by property type,
separate tracts of homes and/or ownership. It is noted that valuation of the completed-sold homes for the
built-out tracts is based on the most recent sale price for each home (original builder sale or more recent
sale), or the assessed value where a sales price was not available. The Appraisal also reflects the public bond
financing, with the tax rates to the homeowners of up to approximately 1.9%, including special taxes.
TheAppraisal is based on certain assumptions and limiting conditions. Subject to these assumptions
and limiting conditions, the Appraiser estimated that the fee simple minimum market values of the Taxable
Property within the District (subject to the lien of the Special Taxes), as of January 15, 2006, as confirmed
as minimum market values as of May 8, 2006, were as follows:
4
Built Out Tracts - Phases 1 and 2
Owner Occupied
Owner Occupied
Owner Occupied
Owner Occupied
Owner Occupied
Subtotal
Tract Name/Proposed
Tract Use
No. of Home
Sites/Units
Sherbourne
Wellsley Court
Easton Place
Lake Front Cottages
Chatham
70
70
88
139
78
445
70
70
88
139
78
445
$32,330,000
34,040,000
36,170,000
58,430,000
44,040,000
$205,010,000
113
162
119
109
43
0
109
109
$24,880,000
18,540,000
45,930,000
47,750,000
93
92
46,270,000
106
0
19,910,000
85
787
3
356
17,950,000
$221,230,000
Tracts Under Construction - Phases 1, 2 and 2B
Greystone Homes (1)
Ashville
William Lyon Homes, Inc.
Savannah
Lennar Homes
Auburn Lane
Owner Occupied
Sausalito
Substantially Owner Occupied (1
completed home owned by PLC
Harveston LLC – Christopher Homes)
Walden
Acacia Credit Fund 9-A LLC – Meritage
Homes of California, Inc.
Charleston
Acacia Credit Fund 9-A LLC – Meritage
Aberdeen
Homes of California, Inc.(2)
Subtotal
Winchester Hills I, LLC
Residential Land
Cape May Apartments
Retirement Residence Site
Commercial Site /
Welcome Center
Phase 3 - Commercial
Acreage Site
Subtotal
(2)
382 DU
300 DU
2.29 ac.
$63,350,000
29,700,000
930,000
2.45 ac.
2,000,000
111.75 ac.
26,000,000
$121,980,000
Total
(1)
Minimum
Market Value
No. of DU
or Acs.
Other Properties - Phases 1 and 3
MW Housing Partners III, L.P.
The Morgan Group
Temecula Retirement Residence Limited
Partnership
Harveston LLC
No. of
Completed-Sold
Homes as of
May 8, 2006
$548,220,000
The Summary Appraisal Report indicates LEN-Inland, LLC was an owner of a portion of the property within the
Ashville project as of January 15, 2006. As of June 30, 2006, Greystone Homes, Inc., a Delaware corporation
(“Greystone Homes”), completed acquisition from LEN-Inland, LLC of the lots which were subject to an option
agreement between such parties and LEN-Inland, LLC no longer owns lots within the District. Lennar Homes is
acting as the Merchant Builder for Greystone Homes.
The 85 home sites excludes 7 home sites which are not within the boundaries of the District.
The fee simple minimum market values include the value of completed-sold homes, completedunsold homes, homes under construction, vacant residential lots and acreage of the vacant retirement
residence site, the commercial site with the welcome center and the vacant commercial acreage. The values
reported in the Appraisal result in an estimated overall value-to-lien ratio of approximately 24.51:1,
calculated with respect to the 2006 Bonds and including $4,825,636 of the $4,845,000 special tax bonds
issued by Community Facilities District No. 03-6. The value-to-lien ratios of individual parcels will differ
from the foregoing aggregate value-to-lien ratio. See “ – Estimated Value-to-Lien Ratios and Estimated
Special Tax Allocation by Property Ownership,” Table 6 and “ – Estimated Assessed Value-to-Lien Ratios”
in the “THE COMMUNITY FACILITIESDISTRICT” section. See “BONDOWNERS’ RISKS – Appraised
Values,” “BONDOWNERS’ RISKS – Burden of Parity Liens, Taxes and Other Special Assessments on the
5
Taxable Property” herein and APPENDIX C – “Supplemental Appraisal Report and Summary Appraisal
Report” appended hereto for further information on the Appraisal and for limiting conditions relating to the
Appraisal.
Tax Exemption
Assuming compliance with applicable requirements of the Internal Revenue Code of 1986, in the
opinion of Bond Counsel, interest on the 2006 Bonds will not be includable in the gross incomes of the
Bondowners for federal income tax purposes although it may be includable in the calculation for certain
taxes. Also in the opinion of Bond Counsel, interest on the 2006 Bonds will be exempt from State personal
income taxes. See “LEGAL MATTERS – Tax Exemption” herein.
Risk Factors Associated with Purchasing the 2006 Bonds
Investment in the Series B Bonds, and, in the absence of the financial guaranty insurance policy, the
Series A Bonds, involves risks that may not be appropriate for some investors. The scheduled payment of
principal of and interest on the Series A Bonds when due will be insured by a financial guaranty insurance
policy and will be payable from Special Tax Revenues on a basis senior to that of the Series B Bonds. See
“BOND INSURANCE FOR THE SERIES A BONDS.” See the section of this Official Statement entitled
“BONDOWNERS’ RISKS” for a discussion of certain risk factors which should be considered, in addition
to the other matters set forth herein, in considering the investment quality of the 2006 Bonds.
Forward-Looking Statements
Certain statements included or incorporated by reference in this Official Statement 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 Securities 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 statements contained in the
information under the caption “THE COMMUNITY FACILITIES DISTRICT” herein.
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,
PERFORMANCEOR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. NEITHER THE AUTHORITY NOR THE DISTRICT PLANS
TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET
FORTH IN THIS OFFICIAL STATEMENT.
Professionals Involved in the Offering
U.S. BankNational Association, Los Angeles, California, will serveas the fiscal agent, paying agent,
registrar, authentication agent, transfer agent, and dissemination agent for the 2006 Bonds and will perform
the functions required of it under the Fiscal Agent Agreement forthe payment of the principal of and interest
and any premium on the 2006 Bonds and all activities related to the redemption of the 2006 Bonds. Quint
& Thimmig LLP, San Francisco, California, is serving as Bond Counsel to the Authority. Richards, Watson
& Gershon, A Professional Corporation, is serving as Special Counsel to the Authority. McFarlin &
Anderson LLP, Lake Forest, California, is acting as Disclosure Counsel to the District. Stone & Youngberg
LLC is acting as Underwriter and as Remarketing Agent in connection with the issuance and delivery of the
2006 Bonds. Bond Counsel and Disclosure Counsel have served as counsel to the Underwriter in other
transactions.
Psomas, Riverside, California, is acting as Special Tax Consultant in connection with issuance of
the 2006 Bonds. Fieldman, Rolapp and Associates, Irvine, California, acted as Financial Advisor to the
Authority. The appraisal work was done by Stephen G. White, MAI of Fullerton, California.
6
NBS Government Finance Group is actingas District Administratorof the annual Special Tax levies
in the District but has not been involved in the offering of the 2006 Bonds.
Payment of the fees and expenses of Bond Counsel, Disclosure Counsel, the Fiscal Agent and the
Underwriter, and of a portion of the fees and expenses of the Financial Advisor and the Special Tax
Consultant, is contingent upon the sale and delivery of the 2006 Bonds.
Other Information
This Official Statement speaks only as of its date, and the information contained herein is subject
to change. Brief descriptions of the 2006 Bonds, certain sections of the Fiscal Agent Agreement, security
for the 2006 Bonds, special risk factors, the Authority, the District, Harveston, LLC, the Merchant Builders,
other landowners, information regarding the development plan for the property within the District and other
information are included in this Official Statement. Such descriptions and information do not purport to be
comprehensive or definitive. The descriptions herein of the 2006 Bonds, the Fiscal Agent Agreement, and
other resolutions and documents are qualified in their entirety by reference to the complete texts of the 2006
Bonds,the Fiscal Agent Agreement, such resolutions and other documents. All such descriptions are further
qualified in their entirety by reference to laws and to principles of equity relating to or affecting generally
the enforcement of creditors’ rights. Copies of such documents may be obtained upon written request from
the Temecula Public Financing Authority, 43200 Business Park Drive, Temecula, California 92590. The
Authority may charge for copying and mailing any documents requested.
CONTINUING DISCLOSURE
The Authority. The Authority for and on behalf of the District has covenanted for the benefit of the
owners of the 2006 Bonds to provide annually certain financial information and operating data relating to
the 2006 Bonds, the District, ownership and development of the property in the District which is subject to
the Special Tax, the occurrence of delinquencies in payment of the Special Tax, and the status of foreclosure
proceedings, if any, respecting Special Tax delinquencies (the “Annual Report”), and to provide notice of
the occurrence of certain enumerated events,if material. Such information is to be provided by the Authority
not later than eight months after the end of the Authority’s Fiscal Year (which currently would be March 1),
commencing with the report due for the 2005-06 Fiscal Year; provided, however, that for the first Annual
Report due with respect to Fiscal Year 2005-06, provision of a copy of the Official Statement relating to the
2006Bonds together with the audited financial statements required by the Continuing Disclosure Agreement
shall satisfy the requirements of the Continuing Disclosure Agreement. The Authority, the City and related
entities have never failed to comply in all material respects with any previous undertakings with regard to
said Rule to provide annual reports or notices of material events.
Filing of Annual Reports; Form of Reports. Each Annual Report will be filed by the Fiscal Agent,
as dissemination agent, with each Nationally Recognized Municipal Securities Information Repository and
with each State Repository, if any. These covenants have been made in order to assist the Underwriter in
complying with Securities and Exchange Commission Rule 15c2-12(b)(5); provided, however, a default
under the Continuing Disclosure Agreement will not, in itself, constitute a default under the Fiscal Agent
Agreement, and the sole remedy under the Continuing Disclosure Agreement in the event of any failure of
the Authority or the Dissemination Agent, as applicable, to comply with the Continuing Disclosure
Agreement will be an action to compel performance. For a complete listing of items of information which
will be provided in the Annual Reports, see APPENDIX E – “Form of Continuing Disclosure Agreement.”
PLAN OF FINANCE; ESTIMATED SOURCES AND USES OF FUNDS
Payment of 2006 Bonds. Proceeds of the 2006 Bonds, together with other available moneys, will
be applied on September 1, 2006, to refund all$17,310,000 of the Prior Bonds thenoutstanding. The moneys
and securities held in the Refunding Fund are pledged to the payment of Prior Bonds and not to the payment
of the 2006 Bonds.
7
The balance of the proceeds of the 2006 Bonds will be used (i) to pay the costs of issuing the 2006
Bonds and (ii) to establish a Senior Subaccount within the Reserve Fund and acquire a reserve surety for the
Series A Bonds and to establish a Subordinate Subaccount within the Reserve Fund for the Series B Bonds.
Estimated Sources and Uses of Funds. The proceeds from the sale of the 2006 Bonds will be
deposited into the respective accounts and funds established by the Authority under the Fiscal Agent
Agreement, as follows:
Sources:
PrincipalAmount of 2006 Bonds
Less: Original Issue Discount
Less: Underwriter’s Discount
Plus: Prior Bond Funds
Total Sources
Uses:
Deposit into Senior Subaccount within the
Reserve Fund(1)
Deposit into Subordinate Subaccount within the
Reserve Fund(2)
Deposit into Refunding Fund(3)
Deposit to Improvement Fund
Deposit into Cost of Issuance Fund(4)
Deposit into Administrative Expense Fund
Total Uses
(1)
(2)
(3)
(4)
Series A Bonds
Series B Bonds
Total
$14,470,000.00
(244,602.45)
(160,792.73)
4,495,399.65
$18,560,004.47
$3,075,000.00
(2,447.25)
(46,894.77)
0.00
$3,025,657.98
$17,545,000.00
(247,049.70)
(207,687.50)
4,495,399.65
$21,585,662.45
$440,387.50
14,598,799.95
2,944,661.06
556,155.96
20,000.00
$18,560,004.47
$440,387.50
$202,728.76
$202,728.56
2,771,200.05
0.00
51,729.17
0.00
$3,025,657.98
17,370,000.00
2,944,661.06
607,885.13
20,000.00
$21,585,662.45
See “PLAN OF FINANCE” above. 50% of the Senior Subaccount Reserve Requirement will be provided through the
Series A Reserve Surety.
Equal to the Series B Reserve Requirement as of the date of issuance of the Series B Bonds.
Includes an estimated amount for interest on the Prior Bonds.
Includes, among other things, the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the
Special Tax Consultant, the Appraiser, and the Fiscal Agent, and the cost of printing the Preliminary and final Official
Statements. With respect to the Series A Bonds, the allocation to costs of issuance includes the premium for the Financial
Guaranty Insurance Policy and the Reserve Fund Policy.
THE 2006 BONDS
Description of the 2006 Bonds
The 2006 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 semi-annually on each March 1 and September 1, commencing
on March 1, 2007 (each, an “Interest Payment Date”), and will mature in the amounts and on the dates set
forth on the inside cover page hereof. The 2006 Bonds will be issued in fully-registered form in
denominations of $5,000 each or any integral multiple thereof and when delivered, will be registered in the
name of Cede & Co., as nominee of The Depository Trust Company (“DTC”), New York, New York. DTC
will act as securities depository for the 2006 Bonds. Ownership interests in the 2006 Bonds may be
purchased in book-entry-form only, in denominations of $5,000 or any integral multiple thereof within a
single maturity.
Interest will be calculated on the basis of a 360-day year composed of twelve 30-day months. Each
2006 Bond shall bear interest from the Interest Payment Date next preceding the date of authentication
thereof unless (i) it is authenticated on an Interest Payment Date, in which event it shall bear interest from
such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close of
business on the Record Date (as defined below) preceding such Interest Payment Date, in which event it shall
bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date preceding
the first Interest Payment Date, in which event it shall bear interest from the date of issuance of the 2006
Bonds; provided, however, that if at the time of authentication of a 2006 Bond, interest is in default thereon,
8
such 2006 Bond shallbear interest from the Interest Payment Date to which interest has previously been paid
or made available for payment thereon.
So long as the 2006 Bonds are in book-entry form, the principal of, and interest and premium, if any,
payable on the 2006 Bonds shall be payable when due, by wire transfer of the Fiscal Agent to DTC, which
will in turn remit such principal, interest and premium, if any, to its Participants, which Participants will in
turn remit such principal, interest and premium, if any, to the Beneficial Owners of the 2006 Bonds as
described below under “Book-Entry and DTC” and in APPENDIX G – “Book-Entry System.”
In the event that the 2006 Bonds are not registered in the name of Cede & Co., as nominee of DTC
or another eligible depository as described below, both the principal and any premium on the 2006 Bonds
shallbe payable bycheck in lawful money of the United States of America upon surrender of the 2006 Bonds
at the principal office of the Fiscal Agent as specified in the Fiscal Agent Agreement; and interest on the
2006 Bonds (including the final interest payment upon maturity or earlier redemption) shall be payable by
check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the registered owner
thereof at such registered owner’s address as it appears on the registration books maintained by the Fiscal
Agent at the close of business on the Record Date preceding the applicable Interest Payment Date, or by wire
transfer to an account within the United States of America on such Interest Payment Date upon written
instructions of any Owner of $1,000,000 or more in aggregate principal amount of 2006 Bonds received
before the applicable Record Date, which instructions shall continue in effect until revoked in writing, or
until such 2006 Bonds are transferred to a new Bondowner.
The registered owner of any 2006 Bond will be the person or persons in whose name or names a
2006 Bond is registered on the registration books kept for that purpose by the Fiscal Agent in accordance
with the terms of the Fiscal Agent Agreement. The “Record Date” with respect to any 2006 Bonds, means
the fifteenth day of the month next preceding the applicable Interest Payment Date, whether or not such day
is a Business Day.
So long as the 2006 Bonds are in book-entry-only form, all references in this Official Statement
to the owners or holders of the 2006 Bonds means DTC and not the Beneficial Owners.
Terms of Redemption
The 2006 Bonds are subject to redemption upon the circumstances, on the dates and at the prices set
forth as follows:
Optional Redemption of Series A Bonds. The Series A Bonds maturing on or after September 1,
2017, are subject to optional redemption prior to their statedmaturity on anyInterest Payment Date occurring
on or after September 1, 2016, as a whole, or in part among maturities of the Series A Bonds so as to
maintain substantially level debt service on the Bonds and by lot within a maturity, at a redemption price
equal to the principal amount of the Series A Bonds to be redeemed, together with accrued interest thereon
to the date fixed for redemption, without premium.
Optional Redemption of Series B Bonds. The Series B Bonds are subject to optional redemption
prior to their stated maturity on any Interest Payment Date, as a whole, or in part among maturities of the
Series B Bond so as to maintain substantially level debt service on the Bonds and by lot within a maturity,
at a redemption price (expressed as a percentage of the principal amount of the Series B Bonds to be
redeemed), as set forth below, together with accrued interest thereon to the date fixed for redemption:
Redemption Date
Redemption Price
any Interest Payment Date from and including
March 1, 2007 to and including March 1, 2015
September 1, 2015 and March 1, 2016
September 1, 2016 and any Interest Payment
Date thereafter
9
102%
101
100
Mandatory Sinking Payment Redemption of Series A Bonds. The Series A Bonds maturing on
September 1, 2031, are subject to mandatory sinking payment redemption in part on September 1, 2026, and
oneach September 1 thereafter to maturity,by lot, at a redemption price equal to the principal amount thereof
to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from
sinking payments as follows:
Redemption Date
(September 1)
Sinking Payments
2026
2027
2028
2029
2030
2031 (maturity)
$540,000
565,000
590,000
620,000
645,000
675,000
The Series A Bonds maturing on September 1, 2036, are subject to mandatory sinking payment
redemption in part on September 1, 2032, and on each September 1 thereafter to maturity, by lot, at a
redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the
date fixed for redemption, without premium, from sinking payments as follows:
Redemption Date
(September 1)
Sinking Payments
2032
2033
2034
2035
2036 (maturity)
$705,000
735,000
770,000
805,000
840,000
The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level
debt service on the Bonds as a result of any prior partial redemption of the Series A Bonds pursuant to an
optional redemption or mandatory redemption from prepaid Special Taxes as specified in writing by the
Treasurer to the Fiscal Agent.
Mandatory Sinking Payment Redemption of Series B Bonds. The Series B Bonds maturing on
September 1, 2021, are subject to mandatory sinking payment redemption in part on September 1, 2019, and
oneach September 1 thereafter to maturity,by lot, at a redemption price equalto the principal amount thereof
to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from
sinking payments as follows:
Redemption Date
(September 1)
Sinking Payments
2019
2020
2021 (maturity)
$85,000
85,000
90,000
The Series B Bonds maturing on September 1, 2026, are subject to mandatory sinking payment
redemption in part on September 1, 2022, and on each September 1 thereafter to maturity, by lot, at a
redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the
date fixed for redemption, without premium, from sinking payments as follows:
10
Redemption Date
(September 1)
Sinking Payments
2022
2023
2024
2025
2026 (maturity)
$95,000
100,000
105,000
110,000
115,000
The Series B Bonds maturing on September 1, 2036, are subject to mandatory sinking payment
redemption in part on September 1, 2027, and on each September 1 thereafter to maturity, by lot, at a
redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the
date fixed for redemption, without premium, from sinking payments as follows:
Redemption Date
(September 1)
Sinking Payments
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036 (maturity)
$120,000
130,000
135,000
140,000
150,000
155,000
165,000
175,000
180,000
190,000
The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level
debt service on the Bonds as a result of any prior partial redemption of the Series B Bonds pursuant to an
optional redemption or mandatory redemption from prepaid Special Taxes as specified in writing by the
Finance Director to the Fiscal Agent.
Redemption from Special Tax Prepayments. Special Tax Prepayments and any corresponding
transfers from the applicable Senior Subaccount or Subordinate Subaccount within the Reserve Fund shall
be used to redeem the 2006 Bonds on the next Interest Payment Date for which notice of redemption can
timely be given, by lot within a maturity and allocated proportionately among the Series A Bonds and the
SeriesB Bonds based upon the then outstanding principal of each such series, andallocated among maturities
within a series of the 2006 Bonds so as to maintain, as much as practicable, substantially level debt service
on the Bonds, in each case at a redemption price (expressed as a percentage at the principal amount of the
2006 Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for
redemption:
Redemption Date
Redemption Price
any Interest Payment Date from and including
March 1, 2007 to and including March 1, 2015
September 1, 2015 and March 1, 2016
September 1, 2016 and any Interest Payment
Date thereafter
102%
101
100
Purchase In Lieu of Redemption. In lieu of any redemption, moneys in the Bond Fund may be used
and withdrawn by the Fiscal Agent for purchase of Outstanding 2006 Bonds, upon the filing with the Fiscal
11
Agent of an officer’s certificate requesting such purchase, at public or private sale as and when, and at such
prices (including brokerage and other charges) as such officer’s certificate may provide, but in no event may
2006 Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the
date of purchase and any premium which would otherwise be due if such 2006 Bonds were to be redeemed
in accordance with the Fiscal Agent Agreement.
Notice of Redemption. The Fiscal Agent shall cause notice of any redemption to be mailed by first
class mail, postage prepaid, at least thirty (30) days but not more than sixty (60) days prior to the date fixed
for redemption, to the Underwriter, to the Securities Depositories, to one or more Information Services, and
to the respective registered Bondowners of any 2006 Bonds designated for redemption, at their addresses
appearing on the Bond registration books in the principal office of the Fiscal Agent; but such mailing shall
not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any
defect therein, shall not affect the validity of the proceedings for the redemption of such 2006 Bonds.
Such notice shall state the redemption date and the redemption price and, if less than all of the then
Outstanding 2006 Bonds are to be called for redemption, shall designate the CUSIP ® numbers and Bond
numbers of the 2006 Bonds to be redeemed by giving the individual CUSIP® number and Bond number of
each 2006 Bond to be redeemed or shall state that all 2006 Bonds between two stated Bond numbers, both
inclusive, are to be redeemed or that all of the 2006 Bonds of one or more maturities have been called for
redemption, shall state as to any 2006 Bond called in part the principal amount thereof to be redeemed, and
shall require that such 2006 Bonds be then surrendered at the principal office of the Fiscal Agent for
redemption at the said redemption price, and shall state that further interest on such 2006 Bonds will not
accrue from and after the redemption date.
Partial Redemption. Whenever provision is made in the Fiscal Agent Agreement for the redemption
of less than all of the 2006 Bonds or any given portion thereof, the Fiscal Agent shall select the 2006 Bonds
to be redeemed, from all 2006 Bonds or such given portion thereof not previously called for redemption,
among maturities as directed in writing by the Authority Treasurer (who shall specify 2006 Bonds to be
redeemed so as to maintain, as much as practicable, the same debt service profile for the 2006 Bonds as in
effect prior to such redemption, unless otherwise specified herein), and by lot within a maturity in any
manner which the Fiscal Agent deems appropriate.
Upon surrender of 2006 Bonds redeemed in part only, the Authority shall execute and the Fiscal
Agent shall authenticate and deliver to the registered Bondowner, at the expense of the Authority, a new
2006 Bond or 2006 Bonds, of the same series and maturity, of authorized denominations in aggregate
principal amount equal to the unredeemed portion of the 2006 Bond or 2006 Bonds.
Effect of Redemption. From and after the date fixed for redemption, if funds available for the
payment of the principal of, and interest and any premium on, the 2006 Bonds so called for redemption shall
have been deposited in the Bond Fund, such 2006 Bonds so called shall cease to be entitled to any benefit
under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and no
interest shall accrue thereon on or after the redemption date specified in such notice.
Transfer and Exchange of 2006 Bonds
Any 2006 Bond may, in accordance with the terms of the Fiscal Agent Agreement, be transferred
upon the books of the Fiscal Agent required to be kept pursuant to the Fiscal Agent Agreement by the person
in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such 2006
Bond for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to
the Fiscal Agent duly executed. 2006 Bonds may be exchanged at the principal office of the Fiscal Agent
for a like aggregate principal amount of 2006 Bonds of authorized denominations and of the same series and
maturity. The Fiscal Agent shall collect from the Bondowner requesting a transfer or exchange any tax or
other governmental charge required to be paid with respect to such transfer or exchange.
No transfer or exchange shall be required to be made of any 2006 Bonds (i) fifteen days prior to the
date established by the Fiscal Agent for selection of 2006 Bonds for redemption, (ii) with respect to a Bond
after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest
Payment Date.
12
Book-Entry and DTC
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository
for the 2006 Bonds. The 2006 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 2006 Bond certificate will be issued for each maturity of each
series of the 2006 Bonds, each in the aggregate principal amount of such maturity, and will be deposited with
DTC. All references in this Official Statement to the Bondowners or an owner of 2006 Bonds shall mean
DTC or its designee and not the beneficial owners of the 2006 Bonds. See APPENDIX G – “Book-Entry
System.”
Debt Service Schedule
The following table represents the annual debt service for the 2006 Bonds (including mandatory
sinking fund redemptions on their respective September 1 redemption dates), assuming that there are no
optional redemptions or mandatory redemptions from prepayments of Special Taxes.
Series A
Period
Ending
9/1/2007
9/1/2008
9/1/2009
9/1/2010
9/1/2011
9/1/2012
9/1/2013
9/1/2014
9/1/2015
9/1/2016
9/1/2017
9/1/2018
9/1/2019
9/1/2020
9/1/2021
9/1/2022
9/1/2023
9/1/2024
9/1/2025
9/1/2026
9/1/2027
9/1/2028
9/1/2029
9/1/2030
9/1/2031
9/1/2032
9/1/2033
9/1/2034
9/1/2035
9/1/2036
Total
Principal
$250,000
260,000
270,000
285,000
295,000
305,000
320,000
330,000
345,000
360,000
370,000
385,000
405,000
420,000
435,000
455,000
475,000
495,000
520,000
540,000
565,000
590,000
620,000
645,000
675,000
705,000
735,000
770,000
805,000
840,000
$14,470,000
Interest
$626,713.76
616,713.76
606,313.76
595,513.76
584,113.76
572,313.76
560,113.76
547,313.76
534,113.76
520,313.76
505,913.76
491,113.76
475,713.76
459,007.50
441,157.50
422,452.50
402,887.50
382,106.26
360,450.00
337,050.00
312,750.00
287,325.00
260,775.00
232,875.00
203,850.00
173,475.00
141,750.00
108,675.00
74,025.00
37,800.00
$11,874,690.14
Aggregate
Debt Service
Subordinate Series B
Series A Bonds
Debt Service
$876,713.76
876,713.76
876,313.76
880,513.76
879,113.76
877,313.76
880,113.76
877,313.76
879,113.76
880,313.76
875,913.76
876,113.76
880,713.76
879,007.50
876,157.50
877,452.50
877,887.50
877,106.26
880,450.00
877,050.00
877,750.00
877,325.00
880,775.00
877,875.00
878,850.00
878,475.00
876,750.00
878,675.00
879,025.00
877,800.00
$26,344,690.14
13
Principal
$50,000
50,000
55,000
55,000
55,000
60,000
65,000
65,000
70,000
70,000
75,000
80,000
85,000
85,000
90,000
95,000
100,000
105,000
110,000
115,000
120,000
130,000
135,000
140,000
150,000
155,000
165,000
175,000
180,000
190,000
$3,075,000
Interest
$151,205.00
149,330.00
147,380.00
145,180.00
142,897.50
140,532.50
137,892.50
134,967.50
131,977.50
128,687.50
125,327.50
121,690.00
117,790.00
113,540.00
109,290.00
104,790.00
100,040.00
95,040.00
89,790.00
84,290.00
78,540.00
72,420.00
65,790.00
58,905.00
51,765.00
44,115.00
36,210.00
27,795.00
18,870.00
9,690.00
$2,935,737.50
Series B Bonds
Debt Service
$201,205.00
199,330.00
202,380.00
200,180.00
197,897.50
200,532.50
202,892.50
199,967.50
201,977.50
198,687.50
200,327.50
201,690.00
202,790.00
198,540.00
199,290.00
199,790.00
200,040.00
200,040.00
199,790.00
199,290.00
198,540.00
202,420.00
200,790.00
198,905.00
201,765.00
199,115.00
201,210.00
202,795.00
198,870.00
199,690.00
$6,010,737.50
Total 2006 Bond
Debt Service
$1,077,918.76
1,076,043.76
1,078,693.76
1,080,693.76
1,077,011.26
1,077,846.26
1,083,006.26
1,077,281.26
1,081,091.26
1,079,001.26
1,076,241.26
1,077,803.76
1,083,503.76
1,077,547.50
1,075,447.50
1,077,242.50
1,077,927.50
1,077,146.26
1,080,240.00
1,076,340.00
1,076,290.00
1,079,745.00
1,081,565.00
1,076,780.00
1,080,615.00
1,077,590.00
1,077,960.00
1,081,470.00
1,077,895.00
1,077,490.00
$32,355,427.64
Coverage of Annual Debt Service
Annual debt service on the 2006 Bonds has been based on the maximum Special Tax which may be levied
on property categorized as Residential Developed Property as of April 1, 2006. Assuming development remains
constant atthe April 1, 2006, level, the Taxable Undeveloped Property provides additional coverage of debt service
on the 2006 Bonds. See “SECURITY FOR THE 2006 BONDS – Rate and Method.” See also Table 4 under the
caption “THE COMMUNITYFACILITIES DISTRICT – Special Tax Collections” for a description of the projected
Special Tax levies if all residential property is constructed.
Table 1
Temecula Public Financing Authority
Community Facilities District No. 01-2 (Harveston)
Series A Bonds Debt Service Coverage(1)
Year
2007
Est.
Residential
Developed
Property
Special
Taxes (1)
$1,060,625
Estimated
Admin.
Expenses
$40,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
1,060,625
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
40,000
(1)
Maximum
Net Residential Undeveloped
Property
Developed
Special
Property
Taxes(1)
Special Taxes
$1,020,625 $1,104,367
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,020,625
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
1,104,367
Total Net Series A
Debt
Special
Service
Taxes
$2,124,993 $876,714
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
2,124,993
876,714
876,314
880,514
879,114
877,314
880,114
877,314
879,114
880,314
875,914
876,114
880,714
879,008
876,158
877,453
877,888
877,106
880,450
877,050
877,750
877,325
880,775
877,875
878,850
878,475
876,750
878,675
879,025
877,800
Series A
Coverage
from Res.
Dev.
Series A
Property
Total
Net Taxes Coverage
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.17
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
1.16
2.42
2.42
2.42
2.41
2.42
2.42
2.41
2.42
2.42
2.41
2.43
2.43
2.41
2.42
2.43
2.42
2.42
2.42
2.41
2.42
2.42
2.42
2.41
2.42
2.42
2.42
2.42
2.42
2.42
2.42
Series B
Debt
Service
$201,205
199,330
202,380
200,180
197,898
200,533
202,893
199,968
201,978
198,688
200,328
201,690
202,790
198,540
199,290
199,790
200,040
200,040
199,790
199,290
198,540
202,420
200,790
198,905
201,765
199,115
201,210
202,795
198,870
199,690
2006
Bonds
Total
Coverage
1.97
1.97
1.97
1.97
1.97
1.97
1.96
1.97
1.97
1.97
1.97
1.97
1.96
1.97
1.98
1.97
1.97
1.97
1.97
1.97
1.97
1.97
1.96
1.97
1.97
1.97
1.97
1.96
1.97
1.97
Based on development status as of April 1, 2006, and assumes no further development of the property in the District. Once
sufficient development occurs such that the Assigned Special Tax is levied at less than 91% of the Assigned Special Tax, the
Special Tax on non-delinquent residential parcels may not be increased by more than 10% as a consequence of delinquency or
default by the owner of any other parcel or parcels. State law provides that in the case of any special tax to pay for public facilities
and to be levied against any parcel used for private residential purposes, the special tax shall not be increased as a consequence
of delinquency or default by the owner of any other parcel or parcels with the District by more than 10%. Currently, the Special
Tax on Developed Property is levied at 100% of the Assigned Special Tax.
14
SECURITY FOR THE 2006 BONDS
General
The Bonds are secured by a first pledge (which pledge shall be effected in the manner and to the
extent provided in the Fiscal Agent Agreement) of all of the Special Tax Revenues and all moneys deposited
in the Bond Fund (including the Special Tax Prepayments Account therein) and, until disbursed as provided
in the Fiscal Agent Agreement, in the Special Tax Fund, subject in any event to the priority for the
disposition of amounts in the Bond Fund for the payment of debt service due on the Series A Bonds and to
replenish the Senior Subaccount of the Reserve Fund to the amount of the Senior Subaccount Reserve
Requirement prior to the use of amounts therein for the payment of debt service due on the Series B Bonds
and to make deposits to the Subordinate Subaccount of the Reserve Fund. The Bonds, other than the Series
B Bonds, are further secured by a first pledge of all of the moneys deposited in the Senior Subaccount of the
Reserve Fund, and the Series B Bonds are further secured by a first pledge of all of the moneys deposited
in the Subordinate Subaccount of the Reserve Fund. The Special Tax Revenues and all moneys deposited
into the Special Tax Fund, the Bond Fund and the Reserve Fund, including the Senior Subaccount and the
Subordinate Subaccount therein (except as otherwise specifically provided in the Fiscal Agent Agreement),
are dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided in
the Fiscal Agent Agreement and in the Act until all of the Bonds have been paid and retired or until moneys
or Federal Securities have been set aside irrevocably for that purpose in accordance with the Fiscal Agent
Agreement, subject in any event to the priority of the disposition of amount in the Bond Fund in the Fiscal
Agent Agreement. Special Tax Revenues constituting payment of the portion of the Special Tax levy for
Administrative Expenses are to be deposited by the Treasurer in the Administrative Expense Fund and are
not pledged to payment of the Bonds. Up to $75,000 of Special Tax Revenues for Administrative Expenses
may be deposited in the Administrative Expense Fund on a priority basis. Additional amounts may be
deposited in the Administrative Expense Fund after deposits for debt service on the Bonds and for
replenishment of the Reserve Fund. See “SECURITY FOR THE 2006 BONDS – Special Tax Fund.”
Amounts in the Administrative Expense Fund, the Improvement Fund, the Refunding Fund and the
Costs of Issuance Fund are not pledged to the repayment of the 2006 Bonds. The improvements financed
with the proceeds of the Prior Bonds and from amounts in the Improvement Fund are not in any way pledged
to pay the debt service on the Bonds. Any proceeds of condemnation or destruction of any portion of the
improvements are not pledged to pay the debt service on the Bonds and are free and clear of any lien or
obligation imposed under the Fiscal Agent Agreement.
Special Taxes
The Authority has covenanted in the Fiscal Agent Agreement to comply with all requirements of the
Act so as to assure the timely collection of Special Taxes, including without limitation, the enforcement of
delinquent Special Taxes. The Fiscal Agent Agreement provides that the Special Taxes are payable and will
be collected in the same manner and at the same time and in the same installment as the general taxes on real
property, and will have the same priority, become delinquent at the same times and in the same proportionate
amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on
real property; provided, the Authority may provide for direct collection of the Special Taxes in certain
circumstances.
Because the Special Tax levy is limited to the maximum Special Tax rates set forth in the Rate and
Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of Special
Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on the 2006
Bonds.
Although the Special Tax, when levied, will constitute a lien on parcels subject to taxation within
the District, it does not constitute a personal indebtedness of the owners of property within the District.
There is no assurance that the owners of real property in the District will be financially able to pay the annual
Special Tax or that they will pay such tax even if financially able to do so. See “BONDOWNERS’ RISKS”
herein.
NEITHER THE FAITH AND CREDIT OF THE AUTHORITY NOR THE TAXING POWER OF
THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE OR
15
ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OFTHE 2006 BONDS.
OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE PLEDGED TO THE
PAYMENT OF THE 2006 BONDS. THE 2006 BONDS ARE NOT A GENERAL OBLIGATION OF THE
AUTHORITY, BUT ARE LIMITED OBLIGATIONS OF THE PAYABLE SOLELY FROM SOURCES
PLEDGED IN THE FISCAL AGENT AGREEMENT.
Rate and Method
General. The Special Tax is levied and collected according to the Rate and Method set forth in
APPENDIX B – “Rate and Method of Apportionment for Community Facilities District No. 01-2
(Harveston).” The qualified electors of the District approved the Rate and Method on March 26, 2002.
Capitalized terms used in the following paragraphs but not defined herein have the meanings given them in
the Rate and Method.
The Rate and Method provides the means by which the Board of Directors of the Authority may
annually levy the Special Taxes within the District up to the Maximum Special Tax. The Rate and Method
provides that the Annual Special Tax may not be levied after Fiscal Year 2051-52.
Minimum Annual Special Tax A Requirement. Annually, at the time of levying the Special Tax for
the District, the Authority will determine the amount of money to be collected from Taxable Property in the
District (the “Special Tax A Requirement”), which will be the amount required in any Fiscal Year to pay the
following:
(i)
the debt service on all Fixed Rate Bonds for the calendar yearthat commences in such Fiscal
Year;
(ii)
the debt service on all Variable Rate Bonds, if any, as provided in the Rate and Method
(upon issuance of the 2006 Bonds, there will be no outstanding Variable Rate Bonds);
(iii)
the periodic costs on the Bonds, including but not limited to, credit enhancement, liquidity
support and rebate payments on the Bonds;
(iv)
the Administrative Expenses; and
(v)
anyamount required to establish or replenish any bond or interest rate reserve funds for any
outstanding Bonds; less
(vi)
a credit for funds available to reduce the annual Special Tax levy under the Fiscal Agent
Agreement.
Inaddition, the Authoritywill determine the amountof money to be collected from Taxable Property
in the District to pay the “Special Tax B Requirement.” “Special Tax B Requirement” means that amount
required in any Fiscal Year for the District to pay the estimated costs of providing services, including the
salaries of City staff related to, and a proportionate share of City overhead costs for the maintenance of the
approximately 7.5 acres of landscaped parkland and the approximately 8.5 acres of lake property located in
Planning Area 3 of the Harveston Specific Plan in an amount not to exceed $214,651.63 for Fiscal Year
2006-07, increasing by 1% each Fiscal Year thereafter. In no event shall “Special Taxes” include any Special
Tax B, and moneys derived from the levy of Special Tax B do not constitute Special Taxes for purposes of
the Fiscal Agent Agreement and will not be available for, and are not pledged to, the payment of the Bonds.
Developed and Undeveloped Property; Exempt Property. The Rate and Method declares that for
each Fiscal Year, each Assessor’s Parcel within the District shall be classified as Developed Property,
Taxable Public Property, Taxable Property Owner Association Property or Undeveloped Property and shall
be subject to Special Taxes in accordance with the Rate and Method.
(i)
“Developed Property” means all Assessor’s Parcels that are not exempt from the Special
Tax,exclusive of Property Owner Association Property and Public Property, for which (i) a
Final Subdivision was recorded prior to the January 1 st preceding the Fiscal Year in which
16
the Special Tax is being levied and (ii) a building permit was issued after January 1, 2001,
but prior to the April 1 st preceding the Fiscal Year in which the Special Tax is being levied.
(ii)
“Undeveloped Property” means all Assessor’s Parcels of Taxable Property which are not
Developed Property, Taxable Property Owner Association Property or Taxable Public
Property.
(iii)
“Taxable Property” means all of the Assessor’s Parcels within the boundaries of the District
that are not exempt from the Special Tax pursuant to law or the Rate and Method.
(iv)
Exemptions: The Rate and Method provides that no Special Taxshall be levied on up to 16.5
acres of Property Owner Association Property and on up to 93.3 acres of Public Property. (As of June 30,
2006, approximately 5.95 acres of Property Owner Association Property and approximately 64.56 acres of
PublicProperty were exempt from the Special Tax.) The District Administrator will assign tax-exempt status
to Assessor’s Parcels in the chronological order in which such Parcels are known to the District
Administrator to become Property Owner Association Property or Public Property. Once an Assessor’s
Parcel has been classified as Public Property, its tax-exempt status will be permanent, independent of its
future uses. Public Property includes property used for rights-of-way or any other purpose and owned by
or irrevocably offered for dedication to the federal government, the State, the County, the City or any other
public agency.
Maximum Special Tax. The Maximum Special Tax is defined in the Rate and Method as follows:
(i)
Undeveloped Property: The Maximum Special Tax A for Undeveloped Property that is
Service Commercial Property shall be $1,960 per Acre. The Maximum Special Tax A for
Undeveloped Property that is Taxable Property Owner Association Property or Taxable
Public Property shall be $6,126 per Acre. The Maximum Special Tax A for Other
Undeveloped Property shall be $6,126 per Acre plus any Extraordinary Special Tax A or
One-Time Special Tax A that may be applicable. The Extraordinary Special Tax A and the
One-Time Special Tax A are special taxes which may be levied on Other Undeveloped
Property related to Variable Rate Bonds and related to conversion to Fixed Rate Bonds.
Upon issuance of the 2006 Bonds, the Extraordinary Special Tax A and the One-Time
Special Tax A are no longer applicable. The Maximum Special Tax B for Other
Undeveloped Property is approximately $712.82 per Acre for Fiscal Year 2006-07 and shall
increase by an amount equal to 1.00% of the maximum tax rates in effect for the prior Fiscal
Year. The Maximum Special Tax for each Assessor’s Parcel classified as Other
Undeveloped Property, shall be Maximum Special Tax A plus Maximum Special Tax B.
(ii)
Developed Property: The Maximum Special Tax A for each Assessor’s Parcel classified as
Developed Property shall be the greater of (i) the amount derived by application of the
Assigned Special Tax A, or (ii) the amount derived by application of the Backup Special
Tax A.
The sum of the Assigned Special Tax A and the Assigned Special Tax B for Developed Property
ranges from $311.34 to $1,685.34 per unit. See “APPENDIX B – Rate and Method of Apportionment for
Community Facilities District No. 01-2 (Harveston) – Table 1” herein for a listing of the Assigned Annual
Special Tax rates for various sizes of Units.
The Backup Special Tax A for Developed Property in each Fiscal Year is $6,126 per acre for
Residential Property and Other Non-Residential Property, and $1,960 per acre for Service Commercial
Property.
Method of Apportionment. The Rate and Method provides that the Authority shall levy Annual
Special Taxes as follows:
First: For each subsequent Fiscal Year after refunding of the Prior Bonds, Special Tax A
shall be levied Proportionately on each Assessor’s Parcel of Developed Property at up to 100% of
the applicable AssignedSpecial Tax A as needed to satisfy the Special Tax A Requirement. Special
17
Tax B shall be levied Proportionately on each Assessor’s Parcel of Developed Property at up to
100% of the applicable Assigned Special Tax B as needed to satisfy the Special Tax B Requirement;
Second: If additional moneys are needed to satisfy the Special Tax A Requirement after the
first step has been completed, Special Tax A shall be levied Proportionately on each Assessor’s
Parcel of Undeveloped Property that is Service Commercial Property at up to $1,960 per Acre and
Proportionately on each Assessor’s Parcel of Other Undeveloped Property at up to $3,212 per Acre
and if additional moneys are needed to satisfy the Special Tax B Requirement after the first step has
been completed, Special Tax B shall be levied Proportionately on each Assessor’s Parcel of Other
Undeveloped Property at up to 100% of the applicable Assigned Special Tax B;
Third: If additional moneys are needed to satisfy the Special Tax A Requirement after the
first two steps have been completed, Special Tax A shall be levied Proportionately on each
Assessor’s Parcel of Other Undeveloped Property at up to $6,961 per Acre;
Fourth: If additional moneys are needed to satisfy the Special Tax A Requirement after the
first three steps have been completed, then the levy of Special Tax A on each Assessor’s Parcel of
Developed Property whose Maximum Special Tax A is determined through the application of the
Backup Special Tax A shall be increased Proportionately from the Assigned Special Tax A up to the
Maximum Special Tax A for each such Assessor’s Parcel;
Fifth: If additional moneys are needed to satisfy the Special Tax A Requirement after the
first four steps have been completed, then the Special Tax A shall be levied Proportionately on each
Assessor’s Parcel of Taxable Property Owner Association Property up to the Maximum Special
Tax A for Taxable Property Owner Association Property; and
Sixth: If additional moneys are needed to satisfy the Special Tax A Requirement after the
first five steps have been completed, then the Special Tax A shall be levied Proportionately on each
Assessor’s Parcel of Taxable Public Property up to the Maximum Special Tax A for Taxable Public
Property.
Prepayment of Annual Special Taxes. The Special Tax A Annual Special Tax obligation for an
Assessor’s Parcel of Developed Property, Update Property (i.e., an Assessor’s Parcel of Undeveloped
Property for which a building permit has been issued but which has not yet been classified as Developed
Property, Taxable Property, Owner-Association Property or Taxable Public Property or Undeveloped
Property that is Service Commercial Property) may in certain circumstances be prepaid in whole or in part,
provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect
to such Assessor’s Parcel at the time the Annual Special Tax obligation would be prepaid. The Prepayment
Amount for an applicable Assessor’s Parcel after the issuance of 2006 Bonds is calculated based on Bond
Redemption Amounts and other costs, all as specified in “APPENDIX B – Rate and Method of
Apportionment for Community Facilities District No. 01-2 (Harveston) – Section J” herein. Any such
prepayment will result in a redemption of Bonds prior to maturity. See Redemption from Special Tax
Prepayments under the caption “THE 2006 BONDS – Terms of Redemption.”
Teeter Plan Not Applicable to Special Taxes
The County has adopted a Teeter Plan as provided for in Section 4701 et seq. of the California
Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes
are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of
actual tax collections. By policy, the County does not include assessments, reassessments and special taxes,
including the Special Taxes of the District, in its Teeter program.
Proceeds of Foreclosure Sales
Pursuant to Section 53356.1 of the Act, in the event of any delinquency in the payment of the Special
Tax, the District may order the institution of a Superior Court action to foreclose the lien therefor within
specifiedtime limits. In such an action, the real property subject to the unpaid amount may be sold at judicial
foreclosure sale. Such judicial foreclosure action is not mandatory. Under the Fiscal Agent Agreement, on
or about February 15 and June 15 of each Fiscal Year, the Treasurer shall compare the amount of Special
18
Taxes theretofore levied in the District to the amount of Special Tax Revenues theretofore received by the
Authority, and:
Individual Delinquencies. If the Treasurer determines that any single parcel subject to the
Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount
of $5,000 or more, then the Treasurer will send or cause to be sent a notice of delinquency (and a
demand for immediate payment thereof) to the property owner within 45 days of such determination,
and (if the delinquency remains uncured) foreclosure proceedings will be commenced by the
Authority within 90 days of such determination. Notwithstanding the foregoing, the Treasurer may
defer such action if the amounts in the subaccount of the Reserve Fund (taking into account amounts
available to be drawn under the Reserve Fund Policy) aggregate at least equal an amount equal to
the Maximum Reserve Fund Amount.
Aggregate Delinquencies. If the Treasurer determines that the total amount of delinquent
Special Tax for the prior Fiscal Year for the entire District (including total individual delinquencies
described above) exceeds 5% of the total Special Tax due and payable for the prior Fiscal Year, the
Treasurer shall notify or cause to be notified property owners who are then delinquent in the
payment of Special Taxes (and demand immediate payment of the delinquency) within 45 days of
such determination, and the Authority will commence foreclosure proceedings within 90 days of
such determination against each parcel of land in the District with a Special Tax delinquency.
It should be noted that any foreclosure proceedings commenced as described above could be stayed
by the commencement of bankruptcy proceedings by or against the owner of the delinquent property. See
“BONDOWNERS’ RISKS – Bankruptcy and Foreclosure Delay.”
No assurances can be given that a judicial foreclosure action, once commenced, will be completed
or that it will be completed in a timely manner. See “BONDOWNERS’ RISKS – Potential Delay and
Limitations in Foreclosure Proceedings.” If a judgment of foreclosure and order of sale is obtained, the
judgment creditor (the District) must cause a Notice of Levy to be issued. Under current law, a judgment
debtor (property owner) has 120 days (or in certain limited cases a shorter period) from the date of service
of the Notice of Levy and 20 days from the subsequent notice of sale in which to redeem the property to be
sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set
aside the sale, which must be brought within 90 days of the date of sale. If, as a result of such action, a
foreclosure sale is set aside, the judgment is revived and the judgment creditor is entitled to interest on the
revived judgment as if the sale had not been made. The constitutionality of the aforementioned legislation,
whichrepeals the formerone-year redemption period,has not been tested;and there can be noassurance that,
if tested, such legislation will be upheld. Any parcel subject to foreclosure sale must be sold at the minimum
bid price, unless a lesser minimum bid price is authorized by the owners, of 75% of the principal amount of
the 2006 Bonds Outstanding.
No assurances 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 Special Tax installment. The Act does
notrequire the Authority or the District to purchase or otherwise acquire anylot or parcel of property offered
for sale or subject to foreclosure if there is no other purchaser at such sale, but it permits the Authority or
the District to submit a credit bid if it chooses to do so. If the Authority or the District does purchase such
property through a credit bid, the credit bid is not required to be paid for 24 months. The Act does specify
that the Special Tax will have the same lien priority in the case of delinquency as for ad valorem property
taxes.
If delinquencies in the payment of Special Taxes exist, there could be a default or delay in payments
to the Bondowners of the 2006 Bonds pending prosecution of foreclosure proceedings and receipt by the
District of foreclosure sale proceeds, if any. However, within the limits of the Rate and Method and the Act,
the District may adjust the Special Taxes levied on all property within the District in future fiscal years to
provide an amount, taking into account such delinquencies, required to pay debt service on the 2006 Bonds.
There is, however, no assurance that the maximum Special Tax rates will be at all times sufficient to pay the
amounts required to be paid on the 2006 Bonds by the Fiscal Agent Agreement.
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Special Tax Fund
Pursuant to the Fiscal Agent Agreement, except as described below, all Special Tax Revenues
received by the Authority will be deposited in the Special Tax Fund, which will be held by the Fiscal Agent
on behalf of the Authority. Moneys in the Special Tax Fund shall be held by the Fiscal Agent for the benefit
of the Authority and the Bondowners. Pending disbursement, moneys in the Special Tax Fund will be
subject to a lien in favor of the Bondowners and the Authority established under the Fiscal Agent Agreement.
Disbursements. Moneys in the Special Tax Fund will be disbursed as needed to pay the obligations
of the District as provided in the Fiscal Agent Agreement. The Authority shall promptly remit any Special
Tax Revenues received by it to the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund,
except that, any Special Tax Revenues constituting payment of the portion of the Special Tax levy for
Administrative Expenses up to an amount not to exceed $75,000 in any Fiscal Year shall be deposited by the
Treasurer in the Administrative Expense Fund and any proceeds of Special Tax Prepayments shall be
transferred by the Treasurer to the Fiscal Agent for deposit by the Fiscal Agent directly in the Special Tax
Prepayments Account established in the Bond Fund. Additional amounts may be deposited by the Treasurer
in the Administrative Expense Fund as described below.
No later than three Business Days prior to each Interest Payment Date, the Fiscal Agent shall
withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority
(i) to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any
expected transfers from the Improvement Fund, the Senior Subaccount of the Reserve Fund and the Special
Tax Prepayments Account to the Bond Fund, such that the amount in the Bond Fund equals the principal
(including any sinking payment), premium, if any, and interest due on the Bonds (other than the Series B
Bonds) on such Interest Payment Date, (ii) to the Bond Insurer, any amounts owed by the Authority to the
Bond Insurer in respect of amounts drawn on the Reserve Fund Policy (including, but not limited to,
repayment of any withdrawals under the Reserve Fund Policy which have not theretofore been prepaid); (iii)
to the Senior Subaccount of the Reserve Fund an amount, taking into account amounts then on deposit in the
Senior Subaccount and amounts available to be drawn under the Reserve Fund Policy for purposes of the
Senior Subaccount of the Reserve Fund (after any amounts paid to the Bond Insurer under the preceding
clause (ii)), such that the amount in the Senior Subaccount is equal to the Senior Subaccount Reserve
Requirement; (iv) prior to any transfers referred to in the succeeding clause (v), (vi) and (vii) in connection
with any March 1 Interest Payment Date of the Series B Bonds, there shall be withheld in the Special Tax
Fund, for use in connection with the principal due on the Bonds (other than the Series B Bonds) on the
succeeding September 1 payment date, an amount equal to one-half of the principal (including one-half of
any scheduled mandatory sinking payment due on the Bonds, other than the Series B Bonds) due on the
Bonds (other than the Series B Bonds) on the next succeeding September 1; (v) to the Bond Fund an amount,
taking into account any expected transfers referred to in clause (i) and from the Subordinate Subaccount of
the Reserve Fund, as well as the requirements of the preceding clauses (i), (ii) and (iii), such that the amount
in the Bond Fund equals the principal (including any sinking payment), premium, if any, and interest due on
the Bonds (including the Series B Bonds) on the next Interest Payment Date, (vi) to the Subordinate
Subaccount of the Reserve Fund an amount, taking into account amounts then on deposit in the Subordinate
Subaccount, such that the amount in the Subordinate Subaccount is equal to the Subordinate Subaccount
Reserve Requirement; and (vii) in connection with transfers with respect to any September 1 Interest
Payment Date, following the satisfaction of the requirements of the preceding clause (i) through (vi) above
for such September 1, the Fiscal Agent shall transfer to the Administrative Expense Fund an amount, not to
exceed the then remaining amount on deposit in the Special Tax Fund, as may be specified in an Officer’s
certificate delivered to the Fiscal Agent as necessary to pay Administrative Expenses.
Investment. Moneys in the Special Tax Fund will be invested and deposited as described in
“ – Investment of Moneys in Funds” below and APPENDIX D – “Summary of Certain Provisions of the
Fiscal Agent Agreement.” Interest earnings and profits resulting from such investment and deposit will be
retained in the Special Tax Fund to be used for the purposes of such Fund.
Bond Fund
The Fiscal Agent will hold the Bond Fund for the benefit of the Bondowners. There is created in
the Bond Fund, as a separate account to be held by the Fiscal Agent, the Special Tax Prepayments Account.
Moneys in the Bond Fund and the account therein shall be disbursed for the payment of the principal of, and
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interest and any premium on, the 2006 Bonds and for the other purposes as provided below, and, pending
such disbursement, shall be subject to a lien in favor of the owners of the 2006 Bonds.
Special Tax Prepayments Account. Moneys in the Special Tax Prepayments Account shall be
transferred by the Fiscal Agent to the Bond Fund on the next date for which notice of redemption of Bonds
can timely be given under the Fiscal Agent Agreement, and notice to the Fiscal Agent can timely be given
under the Fiscal Agent Agreement, and shall be used (together with amounts transferred from the applicable
Subaccount in the Reserve Fund) to redeem Bonds on the redemption date selected in accordance with the
Fiscal Agent Agreement.
Bond Fund Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw from
the Bond Fund and pay to the Owners of the Bonds the principal, and interest and any premium, then due
and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments or
an optional redemption of the Bonds or redemption from Special Tax prepayments, such payments to be
made in the prioritylisted in the succeeding paragraphs. Notwithstanding the foregoing, amounts in the Bond
Fund as a result of the closing of the Improvement Fund shall be used to pay the principal of and interest on
the Bonds prior to the use of any other amounts in the Bond Fund for such purpose.
On each Interest Payment Date amounts on deposit in the Bond Fund shall be used to make the
following payments in the order of priority listed, with each requirement to be satisfied in full prior to any
use of amounts for the next succeeding requirement: (i) payment of all interest due and owing (including any
past due interest not yet paid) on the Bonds, other than the Series B Bonds, (ii) payment of all principal due
and owing (including any past due principal and any principal due by reason of sinking payments) on the
Bonds, other than the Series B Bonds, (iii) payment of all interest due and owing (including any past due
interest not yet paid) on the Series B Bonds, and (iv) payment of all principal due and owing (including any
past due principal and any principal due by reason of sinking payments) on the Series B Bonds. If the
requirements of any of the preceding clauses (i) through (iv) can be met in part, but not in full, available
amounts will be applied pro rata to payment of the applicable Bonds referenced in such clause.
In the event that amounts in the Bond Fund are insufficient for the purposes set forth in clauses (i)
and (ii) of the preceding paragraph, the Fiscal Agent will withdraw from the Senior Subaccount of the
Reserve Fund to the extent of anyfunds or Permitted Investments therein, and then drawon the Reserve Fund
Policy, to the extent amounts are available under the Reserve Fund Policy, amounts to cover the amount of
such Bond Fund insufficiency. Amounts so withdrawn from the Senior Subaccount shall be deposited in the
Bond Fund and used solely to make payments on the Bonds (other than the Series B Bonds).
In the event that amounts in the Bond Fund are insufficient for the purpose set forth in clauses (iii)
and(iv) of the second preceding paragraph, the Fiscal Agent will withdraw from the Subordinate Subaccount
of the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund
insufficiency. Amounts so withdrawn from the Subordinate Subaccount shall be deposited in the Bond Fund
and used solely to make payments on the Series B Bonds.
Investment. Moneys in the Bond Fund and the Special Tax Prepayment Account shall be invested
and deposited in accordance with the provisions of the Fiscal Agent Agreement relating to investment of
moneys. See “APPENDIX D – Summary of Certain Provisions of the Fiscal Agent Agreement.”
Reserve Fund
Pursuant to the Fiscal Agent Agreement, there is established a Reserve Fund to be held by the Fiscal
Agent. Within such fund, two subaccounts designated as the Senior Subaccount and the Subordinate
Subaccount shall be established, to the credit of which subaccounts deposits shall be made as required by
the Fiscal Agent Agreement, and to the credit of which Senior Subaccount the Fiscal Agent shall hold the
Reserve Fund Policy. The amount to be available to be drawn under the Reserve Fund Policy as of the date
ofissuance of the 2006 Bonds, i.e., an initial amount equal to 50% of the Senior Subaccount Reserve Amount
under the Surety Bond issued by Ambac Assurance guaranteeing certain payments into the Senior
Subaccount in the Reserve Fund with respect to the Series A Bonds, together with an amount equal to 50%
of the Senior Subaccount Reserve Amount to be deposited to the Senior Subaccount from proceeds of the
Series ABonds is equal to the Senior Subaccount Reserve Requirement as of the date of issuance of the 2006
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Bonds. The amount to be deposited to the Subordinate Subaccount from proceeds of the Series B Bonds is
equal to the Subordinate Subaccount Reserve Requirement as of the date of issuance of the 2006 Bonds.
Moneys in the Senior Subaccount shall be held by the Fiscal Agent for the benefit of the Owners of
the Bonds (other than the Series B Bonds) as a reserve for the payment of principal of, and interest and any
premium on, the Bonds (other than the Series B Bonds) and shall be subject to a lien in favor of the Owners
of the Bonds (other than the Series B Bonds). The Reserve Fund Policy shall be held by the Fiscal Agent
for the credit of the Senior Subaccount and the benefit of the Series A Bonds, to be drawn upon as provided
in the Fiscal Agent Agreement. In any case where the Senior Subaccount of the Reserve Fund is funded with
a combination of cash and the Reserve Fund Policy, the Fiscal Agent shall (i) deplete all cash balances and
Permitted Investments in the Senior Subaccount of the Reserve Fund before drawing on the Reserve Fund
Policy,and (ii) once all cash balances andPermitted Investments have been exhausted, the Fiscal Agent shall
draw on the Reserve Fund Policy.
Moneys in the Subordinate Subaccount shall be held by the Fiscal Agent for the benefit of the
Owners of the Series B Bonds as a reserve for payment of principal of, and interest and any premium on, the
Series B Bonds and shall be subject to a lien in favor of the Owners of the Series B Bonds.
If Special Taxes are prepaid and 2006 Bonds are to be redeemed with the proceeds of such
prepayment, a proportionate amount in the applicable Subaccount within the Reserve Fund (determined on
the basis of the principal amount of Bonds to be redeemed and the then outstanding principal amount of the
Bonds, the series of Bonds to be redeemed (i.e., Series A Bonds and Parity Bonds, and Series B Bonds), and
in any event without taking into account any amounts available to be withdrawn under the Reserve Fund
Policy), shall be transferred on the Business Day prior to the redemption date bythe Fiscal Agent to the Bond
Fund to be applied to the redemption of the Bonds. Notwithstanding the foregoing, in no event shall any
transfer be made pursuant to the Fiscal Agent Agreement which results in the (i) amounts on deposit in the
Senior Subaccount being an amount less than the amount of the Senior Subaccount Reserve Requirement to
be in effect following the redemption of such Bonds; or (ii) amounts on deposit in the Subordinate
Subaccount being an amount less than the amount of the Subordinate Subaccount Reserve Requirement to
be in effect following the redemption of such Bonds. Also, in no event shall there be a draw on the Reserve
Fund Policy to make any transfer provided for in this paragraph. The amount available to be drawn on the
Reserve Fund Policy shall be reduced in accordance with the Fiscal Agent Agreement and the Reserve Fund
Policy.
Moneys in the Reserve Fund will be invested and deposited as described in “Investment of Moneys
in Funds” below. See APPENDIX D – “Summary of Certain Provisions of the Fiscal Agent Agreement” for
a description of the timing, purpose and manner of disbursements from the Reserve Fund.
Ambac Assurance Surety Bond for Series A Bonds
The Fiscal Agent Agreement requires the establishment of a Senior Subaccount of the Reserve Fund
in an amount equal to the Senior Subaccount Reserve Requirement. The Fiscal Agent Agreement authorizes
the Authority to obtain a Surety Bond in place of fully funding the Senior Subaccount of the Reserve Fund.
Accordingly, application has been made to Ambac Assurance Corporation (“Ambac Assurance”) for the
issuance ofa Surety Bond forthe purposeof funding one-half of the Senior Subaccount Reserve Requirement
(see APPENDIX E – “Summary of Certain Provisions of the Fiscal Agent Agreement” herein). The Series
A Bonds will only be delivered upon the issuance of such Surety Bond. The premium on the Surety Bond
is to be fully paid at or prior to the issuance and delivery of the Series A Bonds. The Surety Bond provides
that upon the later of (i) one (1) day after receipt by Ambac Assurance of a demand for payment executed
bythe Fiscal Agent certifying that provision for the payment of principal of or interest on the Series A Bonds
when due has not been made or (ii) the interest payment date specified in the Demand for Payment submitted
to Ambac Assurance, Ambac Assurance will promptly deposit funds with the Fiscal Agent sufficient to
enable the Fiscal Agent to make such payments due on the Series A Bonds, but in no event exceeding the
Surety Bond Coverage, as defined in the Surety Bond.
Pursuant to the terms of the Surety Bond, the Surety Bond Coverage is automatically reduced to the
extent of each payment made by Ambac Assurance under the terms of the Surety Bond and the Authority is
required to reimburse Ambac Assurance for any draws under the Surety Bond with interest at a market rate.
Upon such reimbursement, the Surety Bond is reinstated to the extent of each principal reimbursement up
22
to but not exceeding the Surety Bond Coverage. The reimbursement obligation of the Authority is
subordinate to the Authority’s obligations with respect to the payment of the Series A Bonds, but is senior
to the Authority’s obligations with respect to the payment of the Series B Bonds.
In the event the amount on deposit, or credited to, the Senior Subaccount of the Reserve Fund
exceeds the amount of the Surety Bond, any draw on the Surety Bond shall be made only after all the funds
in the Senior Subaccount of the Reserve Fund have been expended. In the event that the amount on deposit
in, or credited to, the Senior Subaccount of the Reserve Fund, in addition to the amount available under the
SuretyBond, includes amounts available under a letter of credit, insurance policy, surety bond or other such
funding instrument that may be obtained after the issuance of the 2006 Bonds (the “Additional Funding
Instrument”), draws on the Surety Bond and the Additional Funding Instrument shall be made on a pro rata
basis to fund the insufficiency. The Fiscal Agent Agreement provides that the Senior Subaccount shall be
replenished in the following priority: (i) principal and interest on the Surety Bond and on any future
Additional Funding Instrument shall be paid from first available moneys transferred to the Reserve Fund on
a pro rata basis; and (ii) after all such amounts are paid in full, amounts necessary to fund the Senior
Subaccount of the Reserve Fund to the required level, after taking into account the amounts available under
the Surety Bond shall be deposited from next available moneys transferred to the Reserve Fund.
The Surety Bond does not insure against nonpayment caused by the insolvency or negligence of the
Fiscal Agent, and the Surety Bond cannot be drawn upon to make payments on the Series B Bonds.
In the event that Ambac Assurance were to become insolvent, any claims arising under the Surety
Bond would be excluded from coverage by the California Insurance Guaranty Association, established
pursuant to the laws of the State of California.
Investment of Moneys in Funds
Moneys in any fund or account created or established by the Fiscal Agent Agreement and held by
the Fiscal Agent will be invested by the Fiscal Agent in Permitted Investments, as directed by an Authorized
Officer, that mature prior to the date on which such moneys are required to be paid out under the Fiscal
Agent Agreement. In the absence of any direction from an Authorized Officer, the Fiscal Agent will invest,
to the extent reasonably practicable, any such moneys in money market funds rated in the highest rating
category by Moody’s or S&P, (including those for which the Fiscal Agent or its affiliates or its subsidiaries
provide investment, advisory or other services). See APPENDIX D – “Summary of Certain Provisions of
the Fiscal Agent Agreement” for a definition of “Permitted Investments.”
Additional Bonds for Refunding Purposes Only
Bonds secured on a parity with the Series A Bonds (each a series of “Parity Bonds”) may be issued
for refunding purpose only where the issuance of such Parity Bonds results in a reduction of Annual Debt
Service on all Outstanding Bonds. In addition, the Authority shall obtain a certificate of a Tax Consultant
to the effect that (i) the amount of the maximum Special Taxes that may be levied in each Fiscal Year on
Developed Property, less an amount sufficient to pay annual Administrative Expense (as determined by the
Treasurer), shall be at least one hundred ten percent (110%) of the total Annual Debt Service for each such
Fiscal Year (a) on the Bonds (other than the Series B Bonds) to remain outstanding following the issuance
of the Parity Bonds and(b) on the proposed Parity Bonds; and (ii) the amount of the maximum Special Taxes
that may be levied in each Fiscal Year on Residential Property (including Single Family Property and
Apartment Property as such terms are defined in the Rate and Method) for which the City has issued
certificates of occupancy, shall be at least one hundred percent (100%) of (a) the total Annual Debt Service
for each Fiscal Year on (x) the Bonds (other than the Series B Bonds) to remain outstanding following the
issuance of the Parity Bonds, and (y) on the proposed Parity Bonds, plus (b) an amount sufficient to pay
annual Administrative Expenses (as determined by the Treasurer).
In addition, the District Value (as defined in the Fiscal Agent Agreement) shall be at least twentyfive (25) times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding (other than the
Series B Bonds), plus (ii) the aggregate principal amount of the series of Parity Bonds proposed to be issued,
plus (iii) the aggregate principal amount of any fixed assessment liens on the parcels in the District subject
to the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other
community facilities district bonds then outstanding (other than the Series B Bonds) and payable at least
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partially from special taxes to be levied on parcels of land within the District (the “Other District Bonds”)
equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator
of which is the amount of special taxes levied for the Other District Bonds on parcels of land within the
District,and the denominator of which is the total amount of special taxes levied for the Other District Bonds
on all parcel of land against which the special taxes are levied to pay the Other District Bonds (such fraction
to be determined based upon the maximum special taxes which could be levied in the year in which
maximum annual debt service on the Other District Bonds occurs), based upon information from the most
recent available Fiscal Year. See APPENDIX D – “Summary of Certain Provisions of the Fiscal Agent
Agreement.”
Nothing in the Fiscal Agent Agreement shall prohibit the Authority from issuing bonds or otherwise
incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof for the benefit
of the Series B Bonds.
BOND INSURANCE FOR THE SERIES A BONDS
Ambac Assurance Corporation Financial Guaranty Insurance Policy
Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the
“Financial Guaranty Insurance Policy”) relating to the Series A Bonds effective as of the date of execution
and delivery of the Series A Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac
Assurancewill pay to The Bankof New York, New York, New York or any successor thereto (the “Insurance
Trustee”) that portion of the principal and interest on the Series A Bonds which shall become Due for
Payment but shall be unpaid by reason of Nonpayment by the Obligor (as such terms are defined in the
Financial Guaranty Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee
onthe later of the date on which such principal and interest becomes Due for Payment or within one business
dayfollowing the date on which Ambac Assurance shall have received noticeof Nonpayment from the Fiscal
Agent. The insurance will extend for the term of the Series A Bonds and, once issued, cannot be canceled
by Ambac Assurance. See APPENDIX H –“Specimen Financial Guaranty Insurance Policy” herein.
The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on
mandatory sinking fund installment dates, if any, in the case of principal, and on stated dates for payment,
in the case of interest. If the Series A Bonds become subject to mandatory redemption and insufficient funds
are available for redemption of all outstanding Series A Bonds, Ambac Assurance will remain obligated to
payprincipal of and interest on outstanding Series A Bonds on the originally scheduled interest and principal
payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the
principal of the Series A Bonds, the insured payments will be made at such times and in such amounts as
would have been made had there not been an acceleration, except to the extent that Ambac Assurance elects,
in its sole discretion, to pay all or a portion of the accelerated principal and interest accrued thereon to the
date of acceleration (to the extent unpaid by the Obligor). Upon payment of all such accelerated principal
and interest accrued to the acceleration date, Ambac Assurance’s obligations under the Bond Insurance
Policy shall be fully discharged.
In the event the Fiscal Agent has notice that any payment of principal of or interest on a Series A
Bond which has become Due for Payment and which is made to an Owner by or on behalf of the Obligor has
been deemed a preferential transfer and theretofore recovered from its Owner pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such
Owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds
are not otherwise available.
TheFinancial Guaranty Insurance Policy does not insure anyrisk other thanNonpayment, as defined
in the Policy. Specifically, the Financial Guaranty Insurance Policy does not cover:
1.
payment on acceleration, as a result of a call for redemption (other than mandatory
sinking fund redemption, if any), or as a result of any other advancement of maturity;
2.
payment of any redemption, prepayment or acceleration premium; or
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3.
Fiscal Agent.
nonpayment of principal or interest caused by the insolvency or negligence of the
If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal
requires surrender of Series A Bonds to the Insurance Trustee together with an appropriate instrument of
assignment so as to permit ownership of such Series A Bonds to be registered in the name of Ambac
Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment of interest
pursuantto the Financial GuarantyInsurance Policyrequires proofof Owner entitlement to interest payments
and an appropriate assignment of the Owner’s right to payment to Ambac Assurance.
Upon payment of the insurance benefits, Ambac Assurance will become the owner of the Series A
Bonds, appurtenant coupon, if any, or right to payment of principal or interest on such Series A Bonds and
will be fully subrogated to the surrendering Owner’s rights to payment.
In the event that Ambac Assurance were to become insolvent, any claims arising under the Policy
would be excluded from coverage by the California Insurance Guaranty Association, established pursuant
to the laws of the State of California.
Ambac Assurance Corporation
Ambac Assurance is a Wisconsin-domiciled stock insurance corporation regulated by the Office of
the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District
of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U.S. Virgin Islands, with
admitted assets of approximately $9,417,000,000 (unaudited) and statutory capital of approximately
$5,879,000,000 (unaudited) as of March 31, 2006. Statutory capital consists of Ambac Assurance’s
policyholders’ surplus and statutory contingency reserve. Standard & Poor’s Credit Markets Services, a
Division of The McGraw-Hill Companies, Moody’s Investors Service and Fitch Ratings have each assigned
a triple-A financial strength rating to Ambac Assurance.
Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the
insuring of a bond by Ambac Assurance will not affect the treatment for federal income tax purposes of
interest on such bond and that insurance proceeds representing maturing interest paid by Ambac Assurance
under policy provisions substantially identical to those contained in its Financial Guaranty Insurance Policy
shall be treated for federal income tax purposes in the same manner as if such payments were made by the
obligor of such bond.
Ambac Assurance makes no representation regarding the Series A Bonds or the advisability of
investing in the Series A Bonds and makes no representation regarding, nor has it participated in the
preparation of,the Official Statement other than the information supplied by Ambac Assurance and presented
under the heading “BOND INSURANCE FOR THE SERIES A BONDS” and APPENDIX H – “Specimen
Financial Guaranty Insurance Policy.”
Available Information
Theparent company ofAmbac Assurance, Ambac Financial Group, Inc. (the “Company”), is subject
to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and in accordance therewith files reports, proxy statements and other information with the Securities and
Exchange Commission (the “Commission”). These reports, proxy statements and other information may be
read and copied at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The
SECmaintains an internet site athttp://www.sec.gov that containsreports, proxy and information statements
and other information regarding companies that file electronically with the SEC, including the Company.
These reports, proxy statements and other information can also be read at the offices of the New York Stock
Exchange, Inc. (the “NYSE”), 20 Broad Street, New York, New York 10005.
Copies of Ambac Assurance’s financial statements prepared in accordance with statutory accounting
standards are available from Ambac Assurance. The address of Ambac Assurance’s administrative offices
and its telephone number are One State Street Plaza, 19th Floor, New York, New York, 10004 and
(212) 668-0340.
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Incorporation of Certain Documents by Reference
The following documents filed by the Company with the Commission (File No. 1-10777) are
incorporated by reference in this Official Statement:
1)
The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005,
and filed on March 13, 2006;
2)
The Company’s Current Report on Form 8-K dated and filed on April 26, 2006; and
3)
The Company’s Quarterly Report on Form 10-Q for the fiscal quarterly period ended
March 31, 2006, and filed on May 10, 2006.
Alldocuments subsequently filed bythe Company pursuant to the requirements of the Exchange Act
after the date of this Official Statement will be available for inspection in the same manner as described
above in “Available Information.”
THE AUTHORITY
The Temecula Public Financing Authority was established pursuant to a Joint Exercise of Powers
Agreement, dated April 10, 2001 (the “Joint Powers Agreement”), by and between the City and the
Redevelopment Agency of the City of Temecula. The Joint Powers Agreement was entered into pursuant
to the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1
of the Government Code of the State of California. The Authority was formed for the primary purpose of
assisting in the financing and refinancing of public capital improvements in the City.
The Authority is administered by a five-member Board of Directors, which currently consists of the
members of the City Council of the City. The Authority has no independent staff. The Executive Director
of the Authority is the City Manager of the City, and the Treasurer of the Authority is the City’s Finance
Director. The Executive Director administers the day-to-day affairs of the Authority, and the Finance
Director has custody of all money of the Authority from whatever source.
Authority for Issuance
The 2006 Bonds are issued pursuant to the Act and the Fiscal Agent Agreement. In addition, as
required by the Act, the Board of Directors of the Authority has taken the following actions with respect to
establishing the District and authorizing issuance of the 2006 Bonds:
Resolutions of Intention: On December 11, 2001, the Board of Directors of the Authority adopted
ResolutionNo. TPFA01-07 stating its intention to establish the District and to authorize the levy of a special
tax therein, and on the same day the Board of Directors adopted Resolution No. TPFA 01-08 stating its
intention to incur bonded indebtedness in an amount not to exceed $25,000,000 within the District for the
purpose of financing the improvements and refunding of the 1998 Winchester Hills Bonds. See “PLAN OF
FINANCE; ESTIMATED SOURCES AND USES OF FUNDS” herein.
Resolution of Formation: Immediately following the conclusion of a noticed public hearing on
March 26, 2002, the Board of Directors adopted Resolution No. TPFA 02-03 (the “Resolution of
Formation”), which established the District and authorized the levy of a special tax within the District.
Resolution of Necessity: On March 26, 2002, the Board of Directors adopted Resolution No. TPFA
02-04 declaring the necessity to incur bonded indebtedness in an amount not to exceed $25,000,000 within
the District and submitting that proposition to the qualified electors of the District.
Resolution Calling Election: On March 26, 2002, the Board of Directors adopted Resolution No.
TPFA 02-05 calling an election by the landowners for the same date on the issues of the levy of the Special
Tax, the incurring of bonded indebtedness and the establishment of an appropriations limit.
26
Landowner Election and Declaration of Results: On March 26, 2002, an election was held within
the District in which the then two landowners eligible to vote, being the then qualified electors within the
District, unanimously waived all time limits for holding the election and ballot arguments, and approved a
ballot proposition authorizing the issuance of up to $25,000,000 in bonds to refund the 1998 Winchester Hills
Bonds and to pay for the acquisition and construction of the improvements, the levy of a special tax and the
establishment of an appropriations limit forthe District. On March 26, 2002, the Board of Directors adopted
ResolutionNo. TPFA02-06, pursuant to which the Board of Directors approved the canvass of the votes and
declared the District to be fully formed with the authority to levy the Special Taxes to incur the bonded
indebtedness and to have the established appropriations limit.
Special Tax Lien and Levy: A Notice of Special Tax Lien was recorded in the real property records
of Riverside County on May 15, 2002, as Document No. 2002-254462.
Ordinance Levying Special Taxes: On April 9, 2002, the Authority adopted Ordinance
No. TPFA 02-01 levying the Special Tax within the District.
Resolution Authorizing Issuance of the 2006 Bonds: On July 11, 2006, the Authority adopted
Resolution No. TPFA 06-03 approving issuance of the 2006 Bonds.
THE COMMUNITY FACILITIES DISTRICT
Location and Description of the District
The District is located in the northern portion of the City and is bounded generally on the west by
Interstate 15, on the north by the boundary line with the City of Murrieta, on the east by Margarita Road and
byWinchester Hills Road on the south. The property within the District is a portion of the property governed
by the Harveston Specific Plan (as defined below). It consists of completed homes, occupied homes, homes
under construction, semi-improved land and finished lots.
Harveston, LLC, the Merchant Builders and other major landowners currently own or have options
to acquire the residential portions of the property in the District which remain to be developed and are in the
process of developing it with a mixture of residential projects. Merchant builders include Lennar Homes of
California, Inc., a California corporation (“Lennar Homes”), William Lyon Homes, Inc., a California
corporation(“William Lyon Homes, Inc.”) and Meritage Homesof California, Inc.1 , a Californiacorporation
(“Meritage Homes of California, Inc.”). (As of May 8, 2006, one additional merchant builder, Christopher
Homes, for which PLC Harveston LLC acts as a land bank, had closed sales on all but one of its homes.)
(See the subcaption“Lennar Homes of California, Inc.; Harveston,LLC” for adescription of Lennar Homes,
Greystone Homes andLennar Corporation.) Property in some cases is held in the name of separately created
limited liability companies. See “ – Property Ownership” herein.
Lennar Homes purchased property within the master-planned community from Winchester Hills I,
LLC, a California limited liability company (“Winchester Hills I, LLC”), pursuant to a Purchase Agreement
and Escrow Instructions, dated June 3, 1998, between Lennar Homes and Winchester Hills I, LLC.
Winchester Hills I, LLC remained owner of most of approximately 111.75 acres within the District. The
property purchased by Lennar Homeswas subsequently transferred to Harveston, LLC (the “Harveston, LLC
Property”). Pursuant to the Agreement and Covenants Running With the Land, dated July 1, 1998, as
amended by the First Amendment to Agreement and Covenants Running With the Land, dated June 29, 2001
and recorded June 29, 2001 as Document No. 2001-300715 (the “Agreement and Covenants”) (see “–
Development Agreements” below), Lennar Homes applied for and processed applications for the Harveston
SpecificPlan approval encompassing both the property retained by Winchester Hills I, LLC (the “Winchester
Property”) and the Harveston, LLC Property. The Agreement and Covenants has been assigned to
Harveston, LLC as successor to Lennar Homes.
The District is part of a master-planned community that includes a large residential area surrounding
the 17-acre lake and park in the center of the community. The District is a portion of a master-planned
1 Acacia Credit Fund 9-A, LLC acts as a land bank for Meritage Homes of California, Inc.
27
communityplanned for a total of approximately 2,0361 dwelling units, including 1,395 detached homes, 226
attached homes, plus a 300-unit apartment complex and a 115-unit retirement residence. There is also an
approximately 111.75-acre commercial site at the southerly end of the community extending southerly to the
I-15 Freeway. In addition, there is expected to be a 2.45-acre retail center in the center of the community.
There is a private Lake House/Village Club, a park surrounding the lake connected to a paseo to the 20-acre
community park, a child care center, a community facility and an elementary school within the community.
The master-planned community is planned to be developed in four phases, which are referred to as
Phase 1, Phase 2, Phase 2B and Phase 3 and comprise the central portion of the community. Phase 2,
Phase 2B and Phase 3 are also within Temecula Public Financing Authority Community Facilities District
No. 03-6, for which $4,845,000 aggregate principal amount of bonds were issued in September 2004.
The single-family detached residential portion of Phase 1 is nearing completion with approximately
341 of 360 homes built and occupied. A 300-unit apartment site is substantially completed and occupancies
have commenced, and the retirement residence is expected to be under construction in the near future. In
addition, Phase 1 includes the completed lake and Lake Park, the Welcome Center/Commercial Site, the
completed Lake House/Village Club, the child care center and the Ysabel Barnett Elementary School.
Phase 2 is expected to include 7 different tracts or neighborhoods of homes, containing a total of 681
homes; and two of these tracts or product types (Ashville and Lake Front Cottages) are a carryover from
Phase 1. All 7 tracts are under construction or completed. As of May 8, 2006, approximately 457 of the
units were built andoccupied. Phase 2 also includes the 20-acre community park which is now complete and
which includes a lighted soccer field and two lighted baseball fields.
Phase 2B is expected to include two different tracts containing a total of 198 detached homes,
although only 191 of the lots are included within the boundaries of the District and included in the Appraisal.
The models are now complete and construction of the production homes is underway. As of May 8, 2006,
3 of the units were completed and sold.
Phase 3 is expected to include 4 different tracts containing a total of 382 homes, including 64
attached homes and 318 detached homes. As of July 1, 2006, the land is currently in blue-top condition, and
Lennar Homes has indicated construction of 3 model homes and 31 production homes has started in the
Prescott community, and construction of 3 model homes has started in the Barrington community. The first
production homes in Prescott are scheduled for closing in October of 2006. There is also a 112-acre
commercial site at the southerly end of the community extending southerly to the I-15 Freeway. Rough
grading of this site is almost complete though the specific development and timing of construction has not
yet been determined.
As of May 8, 2006, there were nine major landowners within the District, six of which have projects
underway either by the landowner or by an associated Merchant Builder. The Merchant Builders include
Lennar Homes (which is building homes for itself and for Greystone Homes), William Lyon Homes, Inc.,
and Meritage Homes of California, Inc.2 (the “Merchant Builders”). (As of May 8, 2006, one additional
merchant builder, Christopher Homes had closed sales on all but one of its homes.) In addition, other
property owners include (i) MW Housing Partners III, L.P., a California limited partnership (“MW Housing
Partners III, L.P.”) which is a separate entity, not affiliated with Lennar Homes, which has entered into an
arrangement wherebyMW Housing Partners III, L.P. acts as a land bank forLennar Homes; (ii) The Morgan
Group (“The Morgan Group”) which acquired the apartment site in June 2004; Temecula Retirement
Residence Limited Partnership (“Temecula Retirement Residence LimitedPartnership”), an Oregon limited
partnership, which owns an approximately 2.29 acre site fora proposed retirement residence; (iv)Harveston,
LLC which owns the approximately 2.45-acre Welcome Center site; and (v) Winchester Hills I, LLC, a
California limited liability company which owns most of the 111.75-acre commercial site.
LNR Properties is the developer of the apartment complex, and The Morgan Group will continue
to own and manage the apartments. Temecula Retirement Residence Limited Partnership’s retirement
1 Estimated total of 2,036 includes 7 lots in Phase 2B which are not within the boundaries of the District.
2 Acacia Credit Fund 9-A, LLC acts as a land bank for Meritage Homes of California, Inc.
28
residence project will be managed by Holiday Retirement Corp., an Oregon corporation. Principals of
Holiday Retirement Corp. are principals in Temecula Retirement Residence Limited Partnership.
MW Housing Partners III, L.P. acquired the residential land in Phase 3 from Harveston LLC in
November 2005. MW Housing Partners III, L.P. is a separate entity, not affiliated with Lennar Homes,
which has entered into an arrangement whereby MW Housing Partners III, L.P. acts as a land bank entity for
Lennar Homes. Lennar Homes has indicated that it is planned that there will be multiple takedowns of lots
in Phase 3 by Lennar Homes from MW Housing Partners III, L.P. Lennar Homes has indicated that as of
July 1, 2006, 52 lots had been acquired by Lennar Homes and that two additional lots were acquired by
Lennar Homes on July 21, 2006.
Brief descriptions of MW Housing Partners III, L.P. which owns land in Phase 3, and Lennar Homes,
which is the Merchant Builder for the MW Housing Partners III, L.P. property in Phase 3, as well as the
Merchant Builder for the Greystone Homes property in Phase 2 and the Lennar Homes project in Phase 2,
are set forth below:
Lennar Homes of California,Inc.; Harveston, LLC. Lennar Homes is a California corporation based
in Aliso Viejo, California that has been in the business of developing residential real estate communities in
Californiasince 1995. Lennar Homes is the Administrative Member of Harveston, LLC, a Delaware limited
liability company (“Harveston, LLC”). Lennar Homes is also acting as the Merchant Builder of the lots in
Phase 2 owned by Greystone Homes and is building homes on lots which Lennar Homes owns in Phase 2.
Lennar Homes has also been engaged as the general contractorto develop the MW Housing Partners III, L.P.
optioned lots in Phase 3 pursuant to Subdivision Agreements, and has an option to acquire all of the MW
Housing Partners III, L.P. optioned lots pursuant to the Option Agreements. As of July 1, 2006, Lennar
Homes has purchased 52 of such lots from MW Housing Partners III, L.P.
Lennar Homes is a wholly-owned subsidiary of Lennar Homes Inc., a Florida corporation, which is
awholly-owned subsidiary of Lennar Corporation. Lennar Corporation, founded in 1954 and publicly traded
under the symbol “LEN” since 1971, is one of the nation’s largest home builders, operating under a number
of brand names, including Lennar Homes, US Home Corporation, and Greystone Homes in Southern
California. Lennar Homes develops residential communities both within the Lennar Corporation family of
builders and through consolidated and unconsolidated partnerships in which Lennar Homes maintains an
interest.
In its SEC filing on form 8-K filed June 26, 2006, Lennar Corporation reported a 3% decline in new
home orders for the three months from March1, 2006 through May 31, 2006 in comparison to the same three
months in 2005 (although for the six months from December 1, 2005 to May 31, 2006, the new home orders
were approximately equal to the new home orders for same time period in the prior fiscal year). For Lennar
Corporation’s West region (California, Colorado, Arizona and Nevada), Lennar Corporation reported over
a 5% decline in new home orders for the six months ended May 31, 2006 in comparison to the same time
period in the prior fiscal year. Lennar Corporation’s fiscal year runs from December 1 to November 30 of
each year. Lennar Corporation also reported signs of a slowing homebuilding industry in many geographic
markets, including lower new orders and higher cancellation rates.
Lennar Corporation is subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith files reports, proxy statements and other information with
the SEC. Such filings, particularly the Annual Report on Form 10-K and its most recent Quarterly Report
on Form 10-Q, may be inspected and copied at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such files can also be accessed over the
Internet at the SEC’s website at www.sec.gov. Copies of such material can be obtained from the public
reference section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In
addition, the aforementioned material may also be inspected at the office of the NYSE at 20 Broad Street,
New York, New York 10005.
The Internet addresses and references to filings with the SEC are included for reference only, and
the information on these Internet sites and on file with the SEC are not a part of this Official Statement and
are not incorporated by reference into this Official Statement.
29
MW Housing Partners III, L.P. Property within Phase 3 was purchased by MW Housing Partners
III, L.P. from Harveston, LLC in November 2005. The planning areas currently owned by MW Housing
Partners III, L.P. are expected to be developed by Lennar Homes pursuant to the Subdivision Agreements
and acquired by Lennar Homes under the Option Agreements, so that Lennar Homes can build homes on
such property.
MW Housing Management III, LLC, a California limited liability company, is the general partner
of MW Housing Partners III, L.P. WRI CP Investments III, LLC, a Washington limited liability company,
and MacFarlane Housing, LLC, a Delaware limited liability company, are the co-managers andco-members
of MW Housing Management III, LLC. MW Housing Partners III, L.P. is not an affiliate of Lennar Homes
or Lennar Corporation.
Phase 3 - MW Housing Partners III, L.P.; Lennar Homes Projects. Phase 3 has tentative (for 64
lots) and final (for 318 lots) tract map approval for development into 382 single-family residential lots. To
date, MW Housing Partners III, L.P. has not utilized mortgage financing for such purchase, and currently
there is no deed of trust or mortgage recorded against Phase 3. However, MW Housing Partners III, L.P.
remains free to mortgage this property in the future if it would desire to utilize mortgage financing.
Option Agreements and Subdivision Agreements. On or about November 22, 2005, MW Housing
Partners III, L.P. and Lennar Homes entered into two separate Option Agreements – one for 252 units in the
Emery, Danbury and Prescott communities andone for 130 units in the Barrington community (collectively,
the “Option Agreements”). Concurrently with execution of the Option Agreements, MW Housing Partners
III, L.P. and Lennar Homes also entered into two separate Subdivision Development Agreements for the
same communities (collectively, the “Subdivision Agreements”) under whichMW Housing Partners III, L.P.
engaged Lennar Homes as its general contractor for the development work needed to finish 252 units in the
Emery, Danbury and Prescott communities and 130 units in the Barrington community. The total of 382 lots
shall be referred to herein as the “MWHP Optioned Lots.”
Under the terms of the Option Agreements, Lennar Homes has the right, but not the obligation, to
purchase all of the MWHP Optioned Lots in accordance with the below table entitled “Takedown Schedule
and Option Price” in consideration of (a) the payment of a nonrefundable initial option payment under the
Option Agreements (the “Initial Option Payment”) by Lennar Homes (which payment was made), (b) the
payment of the purchase price for each MWHP Optioned Lot purchased, (c) payment of continuing monthly
payments (the “Additional Option Payments”) by Lennar Homes, which are calculated as an accrual on the
total costs expended by MW Housing Partners III, L.P. relative to the acquisition and development of the
MWHP Optioned Lots, and (d) the performance of the obligations of Lennar Homes under the Option
Agreements and other project documents, including the Subdivision Agreements. In addition, under the
Option Agreements, Lennar Homes is required to pay all taxes and other charges levied against the property
during the term of the option. If Lennar Homes would decline or fail to exercise its option to purchase the
finished lots developed on MW Housing Partners III, L.P.’s property, MW Housing Partners III, L.P. , being
an investor and not a homebuilder, would likely attempt to sell such lots to another merchant builder.
The Initial Option Payment paid by Lennar Homes pursuant to the Option Agreements to MW
Housing Partners III, L.P. was equal to 15% of the aggregate purchase price for all 382 homesites and was
fully-earned and nonrefundable when paid. However, the Initial Option Payment under each Option
Agreement will be credited ratably against the purchase price of the homesites purchased pursuant to the
applicable Option Agreement.
30
Takedown Schedule and Option Price
(Pursuant to the Option Agreements)
Date of Scheduled
Acquisition
June 23, 2006
August 24, 2006
October 24, 2006
January 24, 2007
April 24, 2007
July 24, 2007
October 24, 2007
December 21, 2007
January 24, 2008
March 24, 2008
Totals
Emery, Danbury & Prescott
Number of
Lots
Scheduled
To Be
Acquired
Option Price**
36*
$ 6,599,906
30
$ 5,499,922
48
$ 8,799,874
45
$ 8,249,882
43
$ 7,883,221
30
$ 5,499,922
16
$ 2,933,291
4
$ 733,323
n/a
n/a
n/a
n/a
252
$46,199,341
Barrington
Number of Lots
Scheduled
To Be
Acquired(1)
18*
15
15
15
15
15
15
n/a
15
7
130
Option Price**
$ 3,650,349
$ 3,041,957
$ 3,041,957
$ 3,041,957
$ 3,041,957
$ 3,041,957
$ 3,041,957
n/a
$ 3,041,957
$ 1,419,580
$26,363,628
*
34 of the 36 units in Emery, Danbury and Prescott were acquired on June 23; the remaining 2 units were acquired on July 21, 2006; all 18 units
in Barrington were acquired on time.
**
Before any credit for the Initial Option Payment.
(1)
Pursuant to the Option Agreements, Lennar Homes has the right to purchase more homesites on any given takedown date so long as on any given
closing date, Lennar Homes shall have purchased not less than the aggregate amount of homesites that would otherwise have been purchased pursuant
to the original schedule. For the Barrington project, Lennar Homes currently intends to purchase homesites in advance of the dates set forth in the table.
____________________
Source: Lennar Homes
Lennar Homes does not have any further unilateral rights to extend the deadlines set forth in the
Takedown Schedule, butLennar Homes andMW Housing Partners III, L.P. may, by mutual agreement, allow
further extensions. As discussed below in “Other Land Bank Projects,” Lennar Homes is currently
negotiating with MW Housing Partners III, L.P. for revisions to take-down schedules, including the above
referenced take-down schedule. As of the date of this Official Statement, no agreement for further extensions
on the MWHP Optioned Lots has been entered between MW Housing Partners III, L.P. and Lennar Homes.
As of July 1, 2006, Lennar Homes had purchased 52 of the 54 lots scheduled to be purchased from
MW Housing Partners III, L.P. The remaining 2 lots were purchased by Lennar Homes on July 21, 2006.
Lennar Homes has paid the Initial Option Payment, and Lennar Homes is current in the payment of the
Additional Option Payments. MW Housing Partners III, L.P.’s only remedy under the Option Agreements
in the event Lennar Homes fails to takedown the MWHP Optioned Lots in accordance with the Option
Agreements is to terminate the applicable Option Agreement and, at MW Housing Partners III, L.P.’s
election, to terminate the applicable Subdivision Agreement. Upon Lennar Homes’ failure to acquire any
of the homesites by the applicable scheduled closing date, MW Housing Partners III, L.P. may elect to
terminate the option granted under the applicable Option Agreement in its entirety or only as to a lesser
number of homesites subject to the applicable Option Agreement. Upon termination of Lennar Homes’
option as to some or all of the MWHP Optioned Lots, MW Housing Partners III, L.P., being an investor and
not a homebuilder, would likely attempt to sell such lots to another merchant builder.
Pursuant to the Subdivision Agreements, MW Housing Partners III, L.P. engaged Lennar Homes as
MW Housing Partners III, L.P.’s construction manager, developer and general contractor to cause certain
improvements to be constructed in order to improve the unfinished lots to finished lots. So long as Lennar
Homes performs its obligations under the Subdivision Agreements, MW Housing Partners III, L.P. is
required to pay or reimburse Lennar Homes for the cost of the components of work identified in the budget
included in the Subdivision Agreements. If the actual cost of completion of such component exceeds the
portion of the amount allocated to such component in the budget, Lennar Homes is solely responsible for
paying such excess costs (other than excess financing costs). MW Housing Partners III, L.P.’s prior written
approval of project costs in excess of the budget shall constitute authorization for Lennar Homes to incur
31
such additional costs at Lennar Homes’ own expense, but shall not result in the modification of the budget
or in an increase in the amount of project costs for which MW Housing Partners III, L.P. is responsible.
Under the Subdivision Agreements and the Option Agreements, Lennar Homes and MW Housing
Partners III, L.P. have agreed to fund the costs of development of the 382 homesitesin the followingmanner:
x
Lennar Homes made its Initial Option Payment concurrently with MW Housing Partners III,
L.P.’s acquisition of Phase 3. Such Initial Option Payment was applied by MW Housing
Partners III, L.P. toward purchase of the property, and MW Housing Partners III, L.P.
contributed its own funds to pay the balance of the purchase price.
x
MW Housing Partners III, L.P. is obligated to make monthly disbursements to Lennar Homes
to pay for the development of the homesites, including all costs set forth in the project budget
attached to the Subdivision Agreements. However, Lennar Homes is responsible to maintain
insurance with agreed policy amounts and coverages, and to pay the property taxes that come
due during the option term.
x
On or before the 8 th day of each month, Lennar Homes must deliver to MW Housing Partners
III, L.P. a disbursement request for all development costs paid by Lennar Homes during the
preceding month. MW Housing Partners III, L.P. pays amounts up to the project budget only;
any costs in excess of the budget are the responsibility of Lennar Homes.
x
On or before the 10th day of each month (until the option is terminated or all homesites are
purchased), Lennar Homes must pay to MW Housing Partners III, L.P. the Additional Option
Payment. The amount is calculated to provide MW Housing Partners III, L.P. with a return on
the total unrecovered amount that it has paid to acquire and develop the MWHP Optioned Lots
as of the last day of the preceding month.
x
On or before the 25th day of each month, MW Housing Partners III, L.P. must deliver to Lennar
Homes the amounts payable pursuant to the disbursement request.
x
On or before 1 business day prior to the closing date of homesites, Lennar Homes shall pay into
escrow the purchase price for the homesites being acquired.
Other Land Bank Projects. Lennar Homes has a large portfolio of land banking projects with MW
Housing Partners III, L.P. Like the Harveston project, Lennar Homes has the option to purchase property
according to take-down schedules. In some of these other projects, Lennar Homes has not purchased
property in accordance with the take-down schedules beyond any contractual extension periods, and is
currently negotiating with MW Housing Partners III, L.P. for revisions to such take-down schedules. Such
negotiations include revisions to take-down schedules for the MWHP Optioned Lots. Lennar Homes has
requested a revision to the Option Schedule for the Emery, Danbury and Prescott lots, but no such revision
has been approved, To date, Lennar Homes has been taking homes pursuant to the original Option
Agreement. MW Housing Partners III, L.P. has, on other occasions, extended the take-down schedules, but
it has no obligation to do so. The failure to purchase property in accordance with the take-down schedules
could result in the termination of the option agreements for those projects in which Lennar Homes has not
met the purchase schedule. In the case of a termination, MW Housing Partners III, L.P., being an investor
and not a homebuilder, would likely attempt to sell such lots to another merchant builder. The termination
of an option agreement in another project due to a failure to acquire property in accordance with the
applicable take-down schedule would not, by itself, impact the rights of Lennar Homes under the Option
Agreements or the Subdivision Agreements.
Development Plan. As explained above, Lennar Homes has an option to purchase all 382 MWHP
Optioned Lots in Phase 3, and upon acquiring such lots, Lennar Homes expects to offer 3-4 floor plans in
each such planning area with anticipated home sizes ranging from approximately 1,713 to 3,668 square feet.
Construction of 3 model homes and 31 production homes has started in the Prescott community, and
construction of 3 model homes has started for the Barrington community. Lennar Homes anticipates initial
escrow closings in Prescott to begin in October, 2006. Total buildout of all units is expected by October,
2008. Lennar Homes’ anticipated product mix by planning area is detailed in the table below.
32
Planning Area
1
2
3A
3B
4
4B
5
(1)
Average Lot
Size (sq. feet)
2,700
2,700
4,950
4,950
5,850
5,850
2,400
Home Size
(sq. feet)
1,966 – 2,316
1,966 – 2,316
2,434 – 3,063
2,434 – 3,063
2,504 – 3,668
2,504 – 3,668
1,713
No. of
Units
29
47
60
70
49
63
64
Anticipated
Sale Price (1)
$382,000
$382,000
$509,400
$509,400
$525,000
$525,000
$344,000
As of July 1, 2006; the home sizes and sales prices are estimates and are subject to change.
Source: Lennar Homes
As of July 1, 2006, Lennar Homes estimated that the total development and construction cost
(including land acquisition, land development, home construction and carrying costs) to be incurred with
respect to Phase 3 would be approximately $275 million. This figure includes approximately $72.5 million
to be paid by Lennar Homes as the purchase price for the MWHP Optioned Lots (which includes site
development costs of approximately $9 million), approximately $3 million in additional site development
costs (over and above the amount paid as part of the purchase price of the MWHP Optioned Lots), and
approximately $199.3 million in home construction and sales. The foregoing figures do not include the land
banking financing return payable to MW Housing Partners III, L.P. as part of the Additional Option
Payments. MW Housing Partners III, L.P. does not expect to construct the homes, but rather, to sell the
finished lots to Lennar Homes pursuant to the Option Agreements. If Lennar Homes does not acquire the
lots as anticipated and MW Housing Partners III, L.P. terminates one or the other Option Agreements, it is
likely that MW Housing Partners III, L.P. would look for other merchant builders to sell the finished lots to
for development. There can be no assurance that Lennar Homes will acquire the MWHP Optioned Lots, or
if Lennar Homes fails or declines to do so, no assurance as to the terms on which a sale by MW Housing
Partners III, L.P. to a different homebuilder might occur, and if it did occur, whether or not it would cause
a delay in the anticipated development schedule.
If Lennar Homes acquires all 382 lots under the Option Agreements, Lennar Homes anticipates that
the entire $275 million of the development and construction costs will be funded from its own internal
financing sources offset by residential home sales. No assurance can be given that Lennar Homes will have
sufficient internal financing sources to complete the home construction as currently planned, or that any
financing ultimately obtained will be sufficient to complete the development of the project and construction
of homes as currently planned.
Specific Plan
The Harveston Specific Plan (“Harveston Specific Plan”) was adopted in August 2001. The
Harveston Specific Plan serves as a planning guide to implement the intent of the City’s General Plan. The
Harveston Specific Plan development concept includes a centrally located lake/park complex. Uses such as
recreation, education and residential dwellings are planned to be provided adjacent to or within a Village
Center which is proposed to include a variety of uses such as retail, restaurant, office, daycare, worship and
a private club facility and fitness center.
Environmental Conditions
Environmental Impact Report. In connection with the Harveston Specific Plan approval and pursuant
to the Agreement and Covenants, Lennar Homes was responsible for the application and processing of an
environmental impact report (the “EIR”) for both the Harveston, LLC Property and the Winchester Property.
The EIR was approved in August, 2001.
Biological Resources. Based upon the biological studies performed for the site, the property within
the District does not include significant onsite biological resources. The Harveston Specific Plan proposes
an arroyo park, which will include the creation of a riparian habitat to be developed consistent with the
mitigation requirement of the U.S. Army Corps of Engineers (the “Corps of Engineers”) and California
Department of Fish and Game (“CDFG”). Work on the riparian habitat has commenced.
33
MitigationRelating to Waters of the United States of America. The development within the District
required the construction of a culvert and the fill of approximately 2.89 acres of non-wetland waters of the
U.S. tributary to Santa Gertrudis Creek. The Corps of Engineers has jurisdiction over developments in or
affecting the navigable waters of the United States of America pursuant to the Rivers and Harbors Act and
the Clean Water Act. On June 30, 1999, the Corps of Engineers determined that the activity complied with
the terms and conditions of the nationwide permit issued under Section 404 of the Clean Water Act, provided
that the activity met the criteria in the permit terms and conditions. The culvert and fill was completed in
February, 2002 and facilities were certified in February, 2002.
Streambed Alteration Agreement. Lennar Homes filed a request for a Section 1603 Streambed
AlterationAgreement with the CDFG. The CDFG and Lennar Homes entered into an Agreement Regarding
Proposed Stream or Lake Alteration in April, 1999. The Agreement provides for the construction of a
master-planned community which resulted in the filling of approximately 6,000 feet of two channels and a
culvert crossing over a third channel. The construction of the culvert and the filling of the channels was
completed by September, 2002. Mitigation consists of establishing an over-story riparian area of
approximately eight acres along one channel. Installation of the required over-story riparian area has
commenced. Such area will be subject to a five year maintenance period.
National Pollution Discharge Elimination System Permit and Storm Water Pollution Prevention
Plan. Pursuant to the Federal Clean Water Act (Section 402(g)) and State General Construction Activity
Storm Water Permit, a National Pollution Discharge Elimination System (NPDES) permit and storm water
pollution prevention plan was required from the California Regional Water Quality Control Board for
grading andconstruction of areas greater than fiveacres. Lennar Homes had a revised Storm Water Pollution
Prevention Plan prepared which includes property within the District in conformance with the California
NPDES General Permit No. CAS000002 for StormWater Discharges Associated with Construction Activity
(ConstructionPermit.). The permit and storm water pollution prevention plan were approved by the Regional
Water Quality Control Board in October, 2001.
Toxic materials are not known to have been treated, stored, disposed, spilled or leaked in significant
quantities onto the property within the District and no contaminated soils were found on the site. Prior to
rough grading, the land was maintained as private vacant open space and free range grazing. The property
was vacant for some time before being acquired by Lennar Homes. No significant spills or disposals of
gasoline or diesel fuel are known to have occurred.
Development Agreement
Lennar Homes, Winchester Hills I, LLC and the City entered into a development agreement (the
“Development Agreement”), recorded January 16, 2002, as Instrument No. 2002-026470, encompassing
property within the District. Harveston, LLC is the successor to Lennar Homes as owner and developer of
such property. For purposes of the Development Agreement, the proposed development includes the
improvement of the sites within the District affecting the structure, improvements and facilities within the
District, including but not limited to grading, the construction of infrastructure and public facilities related
to the property within the District (whether located within or outside the Harveston Specific Plan area), the
construction of structures and buildings and the installation of landscaping. The widening of the Ynez Road
Bridge over Santa Gertrudes Creek is described in the “First Operating Memorandum to the Recorded
Development Agreement among Lennar Homes Inc. and Winchester Hills I, LLC and the City of Temecula,”
dated as of April 11, 2003, between Harveston, LLC and the City.
Pursuant to the terms of the Development Agreement, Harveston, LLC and Winchester Hills I, LLC
have the right to develop the property within the District in any manner consistent with the City’s approved
Harveston Specific Plan, and applicable rules, regulations and official policies. Final sales to homeowners
are expected to occur by the end of 2008. The City has agreed that Harveston, LLC and Winchester Hills
I, LLC shall have the right to develop the property in such order, at such rate and at such time as Harveston,
LLC and Winchester Hills I, LLC deem appropriate within the exercise of its subjective business judgment,
subject only to any timing or phasing requirements set forth in the development plan or the phasing plan as
set forth in the Development Agreement and as long as the property encompassed by the Development
Agreement is constructed in a manner consistent with the City’s existing land use ordinances.
34
By entering intothe DevelopmentAgreement, Harveston, LLC and Winchester Hills I, LLC obtained
a vested right to proceed with the development encompassed by the Development Agreement in accordance
with the Harveston Specific Plan. However, development remains subject to any remaining discretionary
approvals required in order to complete development as contemplated by the Harveston Specific Plan.
Termination of the Development Agreement by oneparty due to the default of another party will not
affect a right or duty emanating from City entitlements or approvals relating to the property within the
District.
The Development Agreement was approved and entered into pursuant to California Government
Code Section 65864, et seq. (the “Development Agreement Law”). The Development Agreement Law
provides that a developer can obtain a vested right to develop its real property pursuant to a validly executed
development agreement. One appellate case in California, Santa Margarita Residents v. San Luis Obispo
County Bd. of Supervisors, has held that development agreements are enforceable under the Development
Agreement Law. However, the development agreement in that case did not address vested right to build the
development as currently planned. Section 3.5.5 of the Development Agreement allows the parties to enter
into “operating memorandum” which do not amend the Development Agreement but which implement the
terms of the Development Agreement or provide for “changes, adjustments, or clarifications that are
appropriate to further the intended purposes” of the Development Agreement. The “First Operating
Memorandum to the Recorded Development Agreement Between Lennar Homes Inc., and Winchester
Hills I, LLC and the City of Temecula” was approved on April 11, 2003, and recorded as Document
No. 2003-293648 in the Official Records of Riverside County on April 25, 2003; the “Second Operating
Memorandumto the Recorded Development Agreement Between LennarHomes Inc. and Winchester Hills I,
LLC and the City of Temecula” was also approved on April 11, 2003, and recorded as Document
No. 2003-293649 in the Official Records of Riverside County on April 25, 2003; and the “Third Operating
Memorandumto the Recorded Development Agreement Between Lennar HomesInc. and Winchester Hills I,
LLC and the City of Temecula” was approved on May 10, 2004, and recorded as Document
No. 2004-0418836 in the Official Records of Riverside County on June 2, 2004. The widening of the Ynez
RoadBridge over Santa Gertrudes Creek is described in the First Operating Memorandum. The First, Second
and Third Operating Memorandum each describe and clarify the off-site public improvements required by
the Development Agreement and the conditions of approval of the land use entitlements and provide a
schedule for the issuance of up to 954 building permits prior to completion of the community park and up
to 1,535 building permits prior to the completion of the bridge widening improvements and certain off-site
public improvements and further provide for the withholding of building permits if the required off-site
public improvements are not progressing as scheduled. The community park and the bridge widening were
completed such that there was no interruption in receiving building permits as needed. See
“BONDOWNERS’ RISKS – Failure to Develop Properties” and “ – Ballot Initiatives and Legislative
Measures” herein.
Covenants, Conditions and Restrictions. All of the parcels in the District are subject to recorded
covenants, conditions and restrictions that provide for a levy of homeowners’ association assessments, on
a basis subordinate to the lien of the Special Taxes.
Acquisition of Improvements
The Authority and Harveston, LLC have entered into an Acquisition Agreement (the “Acquisition
Agreement”) dated as of August 1, 2002, as supplemented by Supplement No. 1 to Acquisition Agreement,
dated as of November 25, 2003. Under the terms of the Acquisition Agreement, the Authority has acquired
the Improvements from Harveston, LLC upon completion of various discrete components of infrastructure
and inspection thereof by the City. The Acquisition Agreement provides that the infrastructure would be
acquired for an amount based upon the documented Actual Cost (as defined in the Acquisition Agreement)
thereof or for such other amount as may be agreed upon by Harveston, LLC and the Authority.
Proceeds of the Prior Bonds in the amount of approximately $5,150,000, together with earnings
thereon, have been, or will be, applied to acquire or construct certain street and signal improvements, storm
drain improvement and park and recreation improvements to be constructed within or in the vicinity of the
District. The Improvements are substantially complete.
35
Property Ownership
The information about the development of the property within the District, Harveston, LLC, the
MerchantBuilders, and the other property owners contained in this OfficialStatement has been derived from
the Appraisal and information generally available to the Authority but has notbeen independently confirmed
or verified by the Underwriter, the District or the Authority. Such information is included because it may
be relevant to an informed evaluation of the security for the 2006 Bonds. However, because ownership of
the property may change at any time, no assurance can be given that the planned development will occur
at all, will occur in a timely manner or will occur as presently anticipated and described below or that the
Merchant Builders will acquire or own the Property at all. No representation is made herein as to the
accuracy or adequacy of such information, as to the experience, abilities or financial resources of the
Merchant Builders or any other landowner, or as to the absence of material adverse changes in such
information subsequent to the date hereof, or that the information given below or incorporated herein by
reference is correct as of any time subsequent to its date.
Harveston, LLC, the Merchant Builders and other property owners are not personally liable for
payment of the Special Taxes or the 2006 Bonds, and the following information should not be construed to
suggest that the Special Taxes or the 2006 Bonds are personal obligations or indebtedness of Harveston,
LLC, the Merchant Builders or other property owners or that Harveston, LLC, the Merchant Builders or
other property owners will continue to own their respective parcels of land.
Description of Project
Table 2 below sets forth information regarding the projects being developed in the District. In the
case of lots subject to option agreements, there can be no assurance that the applicable optionee will close
escrow on its remaining lots at the times provided in the applicable option agreement or at all.
36
Table 2
Temecula Public Financing Authority
Community Facilities District No. 01-2 (Harveston)
Property Ownership and Development Status
Name of
Landowner/
Merchant Builder(1)
Tract Name
Status of
Development
as of
May 8, 2006
Description of Status
Sherbourne
70
70
Built out
Built out
Built out
Wellsley Court
Easton Place
70
88
70
88
Built out
Built out
Built out
Built out
Built out
Built out
Owner Occupied
Lake Front
Cottages
139
139
Built out
Built out
Built out
Owner Occupied
Subtotal
Chathman
78
445
78
445
Built out
Built out
Built out
Tracts Under Construction – Phases 1, 2 and 2B
Greystone
Homes (70) – Lennar
Ashville
(3)
Homes
113
43
35
Final approved
William Lyon Homes, Inc. (162)
Savannah
162
5
78
Final approved
43 completed homes (including 3
mo d e ls), 3 5 h o me s u n d e r
construction, and 35 lots in a near
finished condition.
5 completed models, 78 production
homes under construction, 10 lots in
near finished condition; 69 lots in
graded blue-top condition.
Lennar Homes (10)
Auburn Lane
119
109
10
Final approved
109 homes (including 3 models) sold,
10 production homes under
construction.
Owner Occupied
Sausalito
109
109
0
Final approved
Substantially Owner Occupied
(1 completed home owned by PLC
Harveston LLC/ Christopher Homes)
Walden
93
93
0
Final approved
109 homes (including 3 models)
completed and sold.
92 homes sold; 1 production home
completed and unsold.
Acacia Credit Fund 9-A LLC (40) –
Meritage
Homes of California, Inc.
(4)
(66)
Charleston
106
4
25
Final approved
4 completed model homes; 25
production homes under construction,
and 77 vacant lots.
Acacia Credit Fund 9-A LLC (26) –
Meritage
Homes of California, Inc.
(4)
(66)
Aberdeen
85
6
13
Final approved
3 comple te d -sold h omes; 3
completed-unsold homes (model
homes); 13 production homes under
construction, 66 vacant lots.
787
369
161
Phase 3 –
Residential Land
382
0
3
The Morgan Group (22)
Cape May
Apartments
300
84
216
Final approved
for 318 lots;
Tentative for 64
lots
Final approved
Temecula Retirement Residence
Limited Partnership (115 Apts.,
3 Comm Spaces)
Retirement
Residence
(2.29 acres)
115
0
3 models under construction; 61 lots
for attached homes in mass graded
superpad condition and 318 lots in
graded blue-top condition.
8 buildings of 22 apartment buildings
complete with a total of 84 completed
units; all remaining units are under
construction.
Vacant and in rough graded
condition.
Harveston, LLC
Comm. Site/
Welcome Center
(2.45 acres)
Comm. Site
(111.75 acres)
N/A
Other Properties
MW Housing
Partners III, L.P.
(5)
(382) – Lennar Homes
Winchester Hills I, LLC
Subtotal
Total
(5)
Units
Under
Construction
as of
May 8, 2006
Owner Occupied
Owner Occupied
Subtotal
(4)
Units
Completed
as of
May 8,
2006
Built Out Tracts – Phases 1 and 2
Owner Occupied
(2)
(1)
(2)
(3)
Est.
Total
Number
of Units
Final Approved
N/A
N/A
Final approved
Tentative
approved
797
84
219
2,029
898
380
Welcome Center with second floor
andopen office space, includes paved
parking area and landscaped area.
Vacant land, rough graded.
Ownership of home sites indicated in parenthesis.
72 units are in Phase 1 and 67 units are in Phase 2.
3 models in Ashville acquired by GMAC in August, 2005 as land bank. The Summary Appraisal Report indicates LEN-Inland, LLC was an owner of a portion
of the property within the Ashville project as of January 15, 2006. As of June 30, 2006, Greystone Homes completed acquisition from LEN-Inland, LLC of the
lots which were subject to an option agreement between such parties and LEN-Inland, LLC no longer owns lots within the District. Lennar Homes is acting as
the Merchant Builder for Greystone Homes. 60 units are in Phase 1 and 53 units are in Phase 2.
As of June 27, 2006, 40 lots in the Charleston project were owned by Acacia Credit Fund 9-A LLC and 66 lots were owned by Meritage Homes of California,
Inc. As of June 27, 2006, 26 lots in the Aberdeen project were owned by Acacia Credit Fund 9-A, LLC and 66 lots were owned by Meritage Homes of California,
Inc. There are 92 lots within the Aberdeen project but only 85 are within the District and subject to the levy of Special Taxes.
Actual number of units may vary. MW Housing Partners III, L.P., a separate entity unaffiliated with Lennar Homes, has entered into a contractual arrangement
whereby MW Housing Partners III, L.P. acts as a land bank for Lennar Homes. As of July 1, 2006, Lennar Homes has acquired 52 lots from MW Housing
Partners III, L.P. Lennar Homes indicates that an aggregate of 20 units were under construction as of May 8, 2006. For a brief description of the agreements
betweenMW Housing PartnersIII,L.P. and Lennar Homes,see “THE COMMUNITY FACILITIES DISTRICT – Location and Description of the District” above.
37
Description of Projects.
The projects, together with the estimated lot sizes, unit sizes, base sales price ranges, sold, completed,
under construction or vacant, are set forth below.
Table 3
Temecula Public Financing Authority
Community Facilities District No. 01-2 (Harveston)
Description of Project
(As of May 8, 2006)
Minimum
Lot Size
(Sq. Ft.)
Estimated
Unit Size
(Sq. Ft.)
Estimated
Sales Price Range
Sherbourne
6,000
2,806-3,333
$510,000-$710,000
70
70
0
0
70
Easton Place
4,700
2,202-2,587
$450,000-$555,000
88
88
0
0
88
6,800
2,811-3,985
$549,500-$755,000
70
70
0
0
70
139
Project Name
Complete (1)
Sold
Under
Const.
Vacant
Total
Units
Built-Out Projects
Lennar Homes
US Home Corporation
Wellsley Court
Lake Front Cottages
3,000
1,991-2,259
$400,000-$625,000
139
139
0
0
Chathman
5,850
2,521-3,594
$560,000-$754,000
78
78
0
0
78
445
445
0
0
445
Total Built Out Projects:
Projects Under Construction
Greystone Homes – Lennar Homes
Ashville
Sausalito
1,684-2,141
1,873-2,537
$385,990-$418,990
$428,000-$539,000(2)
43
109
43
109
35
0
35
0
113
109
PLC Harveston LLC – Christopher Homes
Walden
4,950
2,770-3,393
$502,500-$690,000(2)
92
93
0
0
93
Lennar Homes
Auburn Lane
3,100
1,767-2,101
$432,000-$486,000(3)
109
109
10
0
119
William Lyon Homes, Inc.
Savannah
2,000
1,539-2,075
$344,900-$392,400
0
5
78
79
162
Acacia Credit Fund 9-A LLC – Meritage Homes of California, Inc.
Aberdeen
4,250
2,334-2,757
$501,990-$528,990
3
6
13
66
85
0
4
25
77
106
356
369
161
257
787
Residential Land (est. 382 units) (5)
Cape May Apartments (300 units)
Retirement Residence (115 apartments)
0
N/A
N/A
0
84
0
3
216
0
379
0
115
382
300
115
Commercial Site / Welcome Center(6)
Commercial Acreage (111.75 acres)
N/A
N/A
N/A
N/A
N/A
N/A
801
898
380
N/A
111.75
acres
751
N/A
111.75
acres
2,029
Charleston
2,500
4,250
3,100
1,780-2,181
(4)
$430,990-$470,990
Subtotal:
Other Projects
MW Housing Partners III, L.P.
The Morgan Group
Temecula Retirement
Residence Limited Partnership
Harveston, LLC
Winchester Hills I, LLC
Residential Totals, excluding commercial acreage
(1)
(2)
(3)
(4)
(5)
(6)
Includes model homes.
As of May 8, 2006, represents range of last builder sales.
Sales price information is as of January 25, 2006 because there was no new pricing available as of May 8, 2006.
As of May 8, 2006, the Merchant Builder had updated pricing on only two of the four floor plans.
As of July 1, 2006, Lennar Homes had acquired an aggregate of 52 lots from MW Housing Partners III, L.P. Two additional lots
were acquired by Lennar Homes on July 21, 2006. Lennar Homes indicates an aggregate of 20 units were under construction
as of May 8, 2006.
The Commercial Site/Welcome Center is expected to be converted to a commercial use in the future.
38
Special Tax Collections
The maximum Special Tax on Residential Developed Property authorized for the 2005-06 Fiscal
Year in the District ranged from $200 to $1,574 per unit of Residential Developed Property. For the 2005-06
Fiscal Year, Special Taxes in the amount of approximately $765,604 were levied against approximately 644
homes of Residential Developed Property in the District. Of those parcels, 42 were delinquent as of July 25,
2006. As of July 25, 2006, the total amount owing with respect to the delinquent parcels for the 2005-06
Fiscal Year totaled approximately $35,263, or approximately 4.61% of the total amount levied. For the 200506 Fiscal Year, no Special Taxes were levied on the Undeveloped Property.
Table 4 below sets forth the Special Tax collections for Fiscal Years 2002-03 through 2005-06.
Table 4
Temecula Public Financing Authority
Community Facilities District No. 01-2 (Harveston)
Special Tax Collections(1)
No. of
Parcels
Levied(2)
Fiscal
Year
Total
Special
Taxes
Levied(3)
Number of
Special Tax
Delinquencies (2)
Amount of
Special Tax
Delinquencies (2)
Percentage of
Special Tax
Delinquent(2)
Percentage of
Special Tax
Delinquent as of
July 25, 2006(4)
Number of
Special Tax
Delinquent as of
July 25, 2006(4)
2002-03
26
$893,468.90
0
$0.00
0.00%
0.00%
0
2003-04
332
589,182.80
6
721.64
0.12%
0.00%
0
2004-05
329
453,451.88
33
33,964.95
7.49%
0.13%
1
2005-06
644
765,604.14
67
55,455.50
7.24%
4.61%
42
(1)
(2)
(3)
(4)
Information provided by the City of Temecula.
Fiscal year Special Tax collections are received by the District from the County in several installments. The information presented
is based on information provided by the City of Temecula with respect to the payment received from the County in May of each
year following receipt of the April 10th collection of the applicable Fiscal Year.
Total Special Taxes levied varies from Fiscal Year to Fiscal Year because the Prior Bonds bore a variable interest rate and included
a levy on Undeveloped Property in the initial years. The Fiscal Year 2005-06 Special Tax levy was on Developed Property with
no Special Tax levy on Undeveloped Property.
July 25, 2006 delinquency information provided by NBS Government Finance Group.
____________________
Source: Psomas.
There have been no prepayments of Special Taxes in the District.
As of July 25, 2006, of the Authority’s sixcommunity facilities districts, the District had a delinquency
rate of 4.61% with respect to the Special Tax. The community facilities district relating to the Crowne Hill
project had a delinquency rate of 6.95%, and the other community facilities districts had rates below 3%. The
July 25, 2006 data does not include the final payments to be received from the County for Fiscal Year 2005-06.
The Authority has heard that the County and other jurisdictions are experiencing higher special tax
delinquenciesin some communityfacilities districts. The Authority is not aware of the causes for the increased
delinquencies in other jurisdictions or whether increases in delinquencies may occur in the future with respect
to the District. In late June, 2006, letters requesting payment of special taxes were sent on behalf of the
Authority to property owners who County records indicate were delinquent in payment of special taxes. See
“SECURITY FOR THE 2006 BONDS – Proceeds of Foreclosure Sales,” for a discussion of the provisions
which apply and procedures which the Authority is obligated to follow under the Fiscal Agent Agreement, in
the event of delinquencies in the payment of Special Taxes. See “BONDOWNERS’ RISKS – Bankruptcy and
Foreclosure Delay” and “Payments by FDIC and Other Federal Agencies” below, for a discussion regarding
bankruptcy, foreclosure, policies of the Federal Deposit Insurance Corporation and regarding payments by
other federal agencies that may affect the payment and collection of Special Taxes and limit the District’s
ability to foreclose on the lien of the Special Taxes. See also “BONDOWNERS’ RISKS – Adjustable Rate
39
and Unconventional Mortgage Structures” regarding adjustable and unconventional mortgage structures that
may affect the ability of homeowners to pay the Special Taxes.
Direct and Overlapping Debt
Table 5 below sets forth the existing authorized indebtedness payable from taxes and assessments
that may be levied within the District prepared by Psomas and dated as of June 1, 2006 (the “Debt Report”).
The Debt Report is included for general information purposes only. In certain cases, the percentages of debt
calculations are based on assessed values, which will change significantly as development occurs and
assessed values increase to reflect building values. The Authority believes the information is current as of
its date, but makes no representation as to its completeness or accuracy. Other public agencies, such as the
City, may issue additional indebtedness at any time, without the consent or approval of the District or the
Authority. See “ – Overlapping Community Facilities and Assessment Districts” below.
The Debt Report generally includes long term obligations sold in the public credit markets by public
agencies whose boundaries overlap the boundaries of the District in whole or in part. Such long term
obligations generally are not payable from property taxes, assessment or special taxes on land in the District.
In many cases long term obligations issued by a public agency are payable only from the general fund or
other revenues of such public agency. Additional indebtedness could be authorized by the District, the City
or other public agencies at any time.
The Authority has not undertaken to commission annual appraisals of the market value of property
in the District for purposes of the Annual Reports pursuant to the Continuing Disclosure Agreement, and
information regarding property values for purposes of a direct and overlapping debt analysis which may be
contained in such reports will be based on assessed values as determined by the County Assessor. See
APPENDIX E hereto for the form of the Continuing Disclosure Agreement.
40
Table 5
Temecula Public Finance Authority
Community Facilities District No. 01-2
Secured Property Tax Roll and Direct and Overlapping Debt
ASSESSED VALUE
Fiscal Year 2005-06 Secured Roll Assessed Valuation
SECURED PROPERTY TAX ROLL
$301,942,358
Parcels Levied
Total Parcels
Description of Tax Bill
Type
Levied
Total Levy
in CFD
General Purpose
1%
809,881
$1,708,046,335
996
Temecula Unified School District
GO
39,783
$4,321,348
996
Metropolitan Water Debt Service
GO
430,515
$5,247,282
996
EMWD U-8 Debt Service
GO
31,403
$1,173,671
996
RCWD R Div Debt Service
GO
33,466
$10,357,895
996
R&T Code 482 Penalty Asmnt
SPL
6,060
$1,734,923
2
NPDES - Santa Margarita
SPL
59,242
$401,183
380
Temecula Parks/Lighting Svs.
CSD
28,098
$3,014,973
992
Temecula Residential Street Lights
CSD
23,098
$593,157
958
Temecula Perimeter Landscaping
CSD
11,060
$1,268,186
958
Temecula Trash/Recycling
CSD
23,334
$4,454,927
309
Temecula Weed Abatement
SPL
59
$28,280
309
Rancho Ca Water Fire Service
SPL
1,354
$152,719
17
MWD Standby
WTR
209,944
$2,733,248
972
EMWD Standby-Combined Charge
WTR
212,481
$4,505,616
779
CFD 03-06 (Harveston II)
CFD
693
$355,573
686
CFD 01-2 (Harveston) Special Tax B
CFD
995
$199,352
995
CFD 01-2 (Harveston) Special Tax A
CFD
644
$765,604
644
Fiscal Year 2005-06 Total Property Tax Liability
TOTAL PROPERTY TAX AS A PERCENTAGE OF FISCAL YEAR 2005-06 ASSESSED VALUATION
%
Applicable
0.176%
2.297%
0.402%
2.822%
5.232%
0.055%
0.319%
2.751%
4.148%
7.554%
1.324%
2.122%
3.378%
0.305%
0.260%
99.600%
100.000%
100.000%
Levy Amount
$3,010,738
$99,264
$21,075
$33,118
$541,972
$961
$1,280
$82,936
$24,601
$95,800
$58,994
$600
$5,158
$8,343
$11,707
$354,152
$199,352
$765,604
$5,315,656
1.76%
LAND SECURED BOND INDEBTEDNESS
Outstanding Direct and Overlapping Bonded Debt
CFD 03-06 (Harveston II)
CFD 01-2 (Harveston) Special Tax A(1)
Total Land Secured Bonded Debt(2)
Type
CFD
CFD
Issued
$4,845,000
$17,310,000
Authorized Direct and Overlapping Bonded Debt
CFD 03-06 (Harveston II)
CFD 01-2 (Harveston) Special Tax A
Total Land Secured Bonded Debt(2)
Type
CFD
CFD
Authorized
$5,500,000 (3)
$19,810,000
Outstanding
$4,845,000
$17,310,000
Unissued
$655,000
$2,500,000
Parcels Levied
%
in CFD
Applicable
686
99.600%
644
100.000%
Parcels Levied
%
in CFD
Applicable
686
99.600%
644
100.000%
$25,288,018
TOTAL OUTSTANDING AND UNISSUED LAND SECURED BONDED INDEBTEDNESS
GENERAL OBLIGATION BOND INDEBTEDNESS
Outstanding Direct and Overlapping Bonded Debt
Temecula Unified School District
EMWD U-8 Debt Service
RCWD R Div Debt Service
Metropolitan Water Debt Service
Total General Obligation Bonded Debt(1)
Type
GO
GO
GO
GO
Issued (4)
$65,000,000
$16,000,000
$130,932,007
$850,000,000
Outstanding(4)
$46,485,000
$7,975,000
$111,476,729
$419,390,000
Authorized Direct and Overlapping Bonded Debt
Type
Authorized(4)
Unissued(4)
Temecula Unified School District
GO
$65,000,000
$0
EMWD U-8 Debt Service
GO
$16,000,000
$0
RCWD R Div Debt Service
GO
$130,932,007
$0
Metropolitan Water Debt Service
GO
$850,000,000
$0
Total General Obligation Bonded Debt(1)
TOTAL OUTSTANDING AND UNISSUED LAND SECURED BONDED INDEBTEDNESS
TOTAL OF ALL OUTSTANDING, DIRECT AND OVERLAPPING DEBT
TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING DEBT
(1)
(2)
Amount of
Debt
$4,825,636
$17,310,000
$22,135,636
Amount of
Debt
$652,382
$2,500,000
$3,152,382
Parcels Levied
%
in CFD
Applicable
996
2.297%
996
2.822%
996
5.232%
996
0.018%
Parcels Levied
in CFD
996
996
996
996
%
Applicable
2.297%
2.822%
5.232%
0.018%
Amount of
Debt
$1,067,789
$225,035
$5,832,963
$77,111
$7,202,898
Amount of
Debt
$0
$0
$0
$0
$0
$25,288,018
$29,338,533
$32,490,916
Includes outstanding bonds prior to issuance of the 2006 Bonds.
Additional bonded debt or available bond authorization may exist but is not shown because a tax was not levied for the referenced
(3) fiscal year.
Although the proceeding for the formation of the District authorized $25,000,000 of Bonds, the District covenanted in the Bond
Indenture relating to the issuance of the CFD No. 03-6 Bonds to limit the total authorized issuance to $19,810,000. However, the
principal amount of the refunding bonds may exceed $19,810,000. In the Indenture, the District has covenanted not to issue parity
senior
bonds except for refunding purposes.
(4)
Data provided by issuing agency as of September, 2005.
____________________
Source: Psomas.
41
Estimated Value-to-Lien Ratios and Estimated Special Tax Allocation by Property Ownership
The values, direct and overlapping debt and total tax burden on individual parcels varies among
parcels within the District. The value of individual parcels is significant because in the event of a
delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels. As
of May 8, 2006, the parcels in the District have an appraised value-to-lien ratio of approximately 24.51:1,
calculated with respect to the 2006 Bonds and including $4,825,636 of the $4,845,000 aggregate principal
amount of the special tax bonds issued by Community Facilities District No. 03-6, which overlaps only a
portion of the District.
Based on ownership information as of the May 8, 2006 date of the Supplemental Appraisal Report,
approximately 20.86% of the estimated Special Taxes in Fiscal Year 2006-07 were payable bythe Merchant
Builders and other major property owners.
Table 6 shows the amount of the Special Tax for which the Taxable Property within the District would
be responsible and the percentage of the estimated total amount of the Special Tax for Fiscal Year 2006-07.
Table 6 presents the amounts based on the current Developed and Undeveloped Property allocation.
There can be no assurance that Merchant Builders who have not closed escrow on their lots within the
District will do so at the times indicated or at all. Actual amounts levied in the District in Fiscal Year 2006-07
for the 2006 Bonds and thereafter will differ based on actual sales by Merchant Builders to home buyers. The
Special Tax in Fiscal Year 2006-07 will be calculated pursuant to the Rate and Method based on the parcel
configuration at such time as needed to levy the Special Tax Requirement for the 2006 Bonds and
administrative expenses of the District.
Development is expected to continue as the three Merchant Builders continue to build and sell houses
in their active projects.
Table 6 below sets forth the allocation of Special Taxes based on Developed Property and
Undeveloped Property categorization as of April 1, 2006, the date prior to which a building permit must be
issued to be categorized as Developed Property under the Rate and Method and the value-to-lien analysis for
the District based on the minimum market values as of January 15, 2006, as confirmed as minimum market
values as of the May 8, 2006 date of the Supplemental Appraisal Report:
42
Table 6
Temecula Public Financing Authority Community Facilities District No. 01-2 (Harveston)
Fiscal Year 2006-07 Allocation Based on Developed and Undeveloped Property
Special Tax Allocation As of April 1, 2006 and by Appraiser’s Categories and Record Owner As of May 8, 2006 (1)
Record Owner per Appraisal(2)
Neighborhood
Number
of
Units(2)
Acreage (3)
Estimated FY
2006-07
Developed
Assigned
Special Tax (3)
Estimated
FY 2006-07
Undeveloped
Special Tax
Estimated
Total
Special Tax
Percentage
of
Allocation
Total
Appraised
Value(2)
2006
Bonds
Overlapping
Land Secured
Debt(4)
Total Lien
Value-toLien
Ratio
(2)
Phase 1
Homeowners
Phase 2 and 2B
Greystone Homes – Lennar Homes(4)
William Lyon Homes, Inc.(6)
Lennar Homes(7)
Owner Occupied(8)
Substantially Owner Occupied (1
completed home owned by PLC Harveston
LLC/Christopher Homes)
Subtotal Phase 2
Phase 2B
Acacia Credit Fund 9-A LLC – Meritage
Homes of California, Inc.
Acacia Credit Fund 9-A LLC – Meritage
Homes of California, Inc.
43
Various
445
63.76
$535,980.00
$0.00
$535,980.00
47.94%
$205,010,000
$8,411,854
$0
$8,411,854
24.37:1
Ashville(5)
Savannah(6)
113
162
9.41
11.02
$46,010.00
$0.00
$1,760.67
$3,579.81
$47,770.67
$3,579.81
4.27%
0.32%
$24,880,000
$18,540,000
$749,729
$56,183
$466,464
$668,737
$1,216,194
$724,919
20.46:1
25.58:1
Auburn Lane(7)
119
11.23
$93,723.00
$0.00
$93,723.00
8.38%
$45,930,000
$1,470,921
$491,232
$1,962,153
23.41:1
Sausalito(8)
Walden(9)
109
93
13.22
13.2
$116,786.00
$139,512.00
$0.00
$0.00
$116,786.00
$139,512.00
10.45%
12.48%
$47,750,000
$46,270,000
$1,832,880
$2,189,549
$449,952
$383,904
$2,282,832
$2,573,453
20.92:1
17.98:1
596
58.08
$396,031.00
$5,340.48
$401,371.48
35.90%
$183,370,000
$6,299,262
$2,460,289
$8,759,551
106
9.87
$22,596.00
$2,306.41
$24,902.41
2.23%
$19,910,000
$390,827
$437,568
$828,395
24.03:1
85
10.38
$34,440.00
$2,212.21
$36,652.21
3.28%
$17,950,000
$575,232
$350,880
$926,113
19.38:1
191
20.25
$57,036.00
$4,518.62
$61,554.62
5.51%
$37,860,000
$966,059
$788,448
$1,754,508
382
300
115
68.92
15.26
2.29
$0.00
$60,000.00
$0.00
$22,388.45
$0.00
$743.90
$22,388.45
$60,000.00
$743.90
2.00%
5.37%
0.07%
$63,350,000
$29,700,000
$930,000
$351,372
$941,661
$11,675
$1,576,897
$0
$0
$1,928,269
$941,661
$11,675
32.85:1
31.54:1
79.66:1
2.45
$0.00
$795.87
$795.87
0.07%
$2,000,000
$12,491
$0
$12,491
160.12:1
110.16
5.14
$0.00
$0.00
$21,836.58
$1,669.71
$21,836.58
$1,669.71
1.95%
0.15%
$26,000,000
N/A
$342,711
$26,205
$0
$0
$342,711
$26,205
75.87:1
N/A
Charleston
Aberdeen
(10)
Subtotal Phase 2B
Phase 3 and Other Properties
MW Housing Partners III, L.P.(11)
The Morgan Group
Temecula Retirement Residence Limited
Partnership
Harveston LLC
Winchester Hills I, LLC
Subtotal Phase 3 and Other Properties
Totals
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Residential Land(11)
Cape May Apartments
Retirement Residence
Site
Commercial Site/
Welcome Center
Commercial Acreage Site
Other Undeveloped
Property(12)
Developed
Commercial(13)
1.89
$11,578.14
$0.00
$11,578.14
1.04%
N/A
$181,711
$0
$181,711
N/A
797
206.11
$71,578.14
$47,434.51
$119,012.65
10.65%
$121,980,000
$1,867,826
$1,576,897
$3,444,723
N/A
2,029
348.2
$1,060,625.14
$57,293.61
$1,117,918.75
100.00%
$548,220,000
$17,545,000
$4,825,636
$22,370,636
24.51:1
The minimum market values are as of January 15, 2006 and are confirmed as minimum market values as of May 8, 2006.
As provided by the Appraiser.
Based on building permits issued, Assessor's records, and development status as of April 1, 2006.
Estimate only. See Table 5 Direct and Overlapping Debt Report. Excludes General Obligation Bond Indebtedness. Additional bonded debt may exist but is not shown because a tax was not levied for the referenced fiscal year.
The Ashville project includes 43 units owned by homeowners as record owner with an estimated Fiscal Year 2006-07 Developed Assigned Special Tax of $32,630 representing approximately 2.83% of Special Tax Allocation.
77 building permits have been issued for the Savannah project, however, pursuant to the Rate and Method of Apportionment and Assessor's records as of April 1, 2006, this project is classified as Undeveloped.
The Auburn Lane project includes 109 units owned by homeowners as record owner with an estimated Fiscal Year 2006-07 Developed Assigned Special Tax of $84,402 representing approximately 7.33% of Special Tax Allocation.
The Sausalito project includes 109 units owned by homeowners as record owner with an estimated Fiscal Year 2006-07 Developed Assigned Special Tax of $116,786 representing approximately 10.14% of Special Tax Allocation.
The Walden project includes 92 units owned by homeowners as record owner with an estimated Fiscal Year 2006-07 Developed Assigned Special Tax of $137,938 representing approximately 11.98% of Special Tax Allocation.
The Aberdeen project includes 3 units owned by homeowners as record owner with an estimated Fiscal Year 2006-07 Developed Assigned Special Tax of $3,572 representing approximately 0.31% of Special Tax Allocation.
As of April 1, 2006, 18 building permits had been issued for the MW Housing Partners III, L.P./Lennar Homes project, however, pursuant to the Rate and Method of Apportionment and Assessor's records as of April 1, 2006, this project is classified
as Undeveloped Property. Lennar Homes has provided updated information with regard to the number of permits within this project as of July 1, 2006. See “THE COMMUNITY FACILITIES DISTRICT – Location and Description of the District.”
Pursuant to the Rate and Method of Apportionment, these properties are classified as Undeveloped Property. However, they are generally expected to be exempted from the special tax levy in the future assuming the property becomes Property Owner
Association Property. For purposes of the Appraisal, approximately 1.59 acres are included as part of the Commercial Acreage site and are expected to be subject to the Special Tax. (1.59 plus 110.16 equals the 111.75 acres for the commercial acreage
site referenced in the Appraisal).
The 1.89 acre developed commercial site is a child care facility. The parcel was not included among the parcels appraised by the Appraiser.
Overlapping Community Facilities and Assessment Districts
Community Facilities District No. 03-6. Community Facilities District No. 03-6, which includes
Phases 2, 2B and 3 of the District, levies a special tax which is pledged to Community Facilities District No.
03-6 for bonds the Authority issued in 2004. Such bonds were issued in the aggregate principal amount of
$4,845,000. The allocation of such bonds to the property within the District is approximately $4,825,636.
There are seven parcels included within Community Facilities District No. 03-6 which are not within the
boundaries of the District.
Additional Debt Payable from Taxes or Assessments. The Authority and the District have no control
over the amount of additional debt payable from taxes or assessments levied on all or a portion of the
property within a special district which may be incurred in the future by other governmental agencies,
including, but not limited to, the County, the City or any other governmental agency having jurisdiction over
all or a portion of the property within the District. Furthermore, nothing prevents the owners of property
within the District from consenting to the issuance of additional debt by other governmental agencies which
would be secured by taxes or assessments on a parity with the Special Taxes. To the extent such
indebtedness is payable from assessments, other special taxes levied pursuant to the Act or other taxes, such
assessments, special taxes and taxes will be secured by liens on the property within the District on a parity
with a lien of the Special Taxes.
Accordingly, the debt on the property within the District could increase, without any corresponding
increase in the value of the property therein, and thereby severely reduce the ratio that exists at the time the
2006 Bonds are issued between the value of the property and the debt secured bythe Special Taxes and other
taxes and assessments which may be levied on such property. The incurring of such additional indebtedness
could also affect the ability and willingness of the property owners within the District to pay the Special
Taxes when due.
Moreover, in the event of a delinquency in the payment of Special Taxes, no assurance can be given
that the proceeds of any foreclosure sale of the property with delinquent Special Taxes would be sufficient
to pay the delinquent Special Taxes. See “BONDOWNERS’ RISKS.”
Other Overlapping Direct Assessments
Metropolitan Water District Standby. Property within the District is subject to a Metropolitan Water
District Standby (“MWD Standby”) assessment. The MWD Standby assessment is fixed unless there is a
vote to increase the assessment. This pay-as-you-go assessment is used for water conservation programs,
emergency programs, water treatment and capital improvements such as transporting water from Colorado
and Northern California to Southern California. The assessment levied for Fiscal Year 2005-06 was $6.94
per equivalent dwelling unit. The assessment levied for Fiscal Year 2006-07 is not available.
Estimated Assessed Value-to-Lien Ratios
The assessed values, direct and overlapping debt and total tax burden on individual parcels varies
among parcels within the District. The value of individual parcels is significant because in the event of a
delinquency in the payment of Special Taxes, the District may foreclose only against delinquent parcels.
Based on the Fiscal Year 2005-06 assessed value of approximately $301,942,358, the parcels in the District
have an assessed value-to-lien ratio of approximately 13.5:1 taking into account outstanding direct and
overlapping bonded debt.
Appraised Property Value
An appraisal of the land and existing improvements within the District, dated February 3, 2006, as
supplemented by a Supplemental Appraisal Report, dated May 8, 2006 (the “Summary Appraisal Report,”
the “Supplemental Appraisal Report,” and collectively, the “Appraisal”), has been prepared by Stephen G.
White, MAI of Fullerton, California (the “Appraiser”) in connection with issuance of the 2006 Bonds. The
purpose of the Appraisal was to estimate the aggregate minimum market value of the “as is” condition of all
of the Taxable Property, as segregated by property type, separated tracts of homes and/or ownership. It is
noted that valuation of the completed-sold homes for the built-out tracts is based on the most recent sale price
for each home (original builder sale or more recent sale), or the assessed value where a sale price was not
44
available. The Appraisal also reflects the public bond financing, with the tax rates to the homeowners of up
to approximately 1.9%, including special taxes.
The Appraisalis based on certain assumptions and limiting conditions. Subject to these assumptions
and limiting conditions, the Appraiser estimated that the fee simple minimum market values of the Taxable
Property within the District (subject to the lien of the Special Taxes), as of January 15, 2006, and as
reconfirmed on May 8, 2006, were as follows:
Built-Out Tracts - Phases 1 and 2
Owner Occupied
Owner Occupied
Owner Occupied
Owner Occupied
Owner Occupied
Subtotal
No. of
Home
Sites/Units
Tract Name
Sherbourne
Wellsley
Easton Place
Lake Front Cottages
Chatham
No. of
Completed-Sold
Homes as of
May 8, 2006
Minimum
Market Value
70
70
88
139
78
445
70
70
88
139
78
445
$ 32,330,000
34,040,000
36,170,000
58,430,000
44,040,000
$205,010,000
Ashville
Savannah
Auburn Lane
Sausalito
Walden
113
162
119
109
93
43
0
109
109
92
$ 24,880,000
18,540,000
45,930,000
47,750,000
46,270,000
Charleston
106
0
19,910,000
Aberdeen
85
3
17,950,000
787
356
$221,230,000
Tracts under Construction -Phases 1, 2 and 2B
Greystone Homes – Lennar Homes(1)
William Lyon Homes, Inc.
Lennar Homes
Owner Occupied
Substantially Owner Occupied (1
completed home owned by PLC
Harveston LLC/Christopher Homes)
Acacia Credit Fund 9-A LLC – Meritage
Homes of California, Inc.
Acacia Credit Fund 9-A LLC – Meritage
Homes of California, Inc.(2)
Subtotal
No. of DU
or Acres
Other Properties - Phases 1 and 3
MW Housing Partners III, L.P.
Residential Land
382 DU
$ 63,350,000
The Morgan Group
Temecula Retirement Residence Limited
Partnership
Harveston LLC
Winchester Hills I, LLC
Subtotal:
Cape May Apartments
Retirement Residence Site
300 DU
2.29 ac.
29,700,000
930,000
2.45 ac.
111.75 ac.
2,000,000
26,000,000
$121,980,000
Commercial Site/Welcome Center
Phase 3 – Commercial Acreage Site
Total
(1)
(2)
$548,220,000
The Summary AppraisalReport indicates LEN-Inland, LLC was an owner of a portion ofthe propertywithin the Ashville project as ofJanuary 15, 2006. As of June 30, 2006,
Greystone Homes completed acquisition from LEN-Inland, LLC of the lots which were subject to an option agreement between such parties and LEN-Inland, LLC no longer
owns lots within the District. Lennar Homes is acting as the Merchant Builder for Greystone Homes.
The 85 home sites excludes 7 home sites which are not within the boundaries of the District.
The fee simple minimum market values include the value of completed-sold homes, completedunsold homes, homes under construction, vacant residential lots and acreage of the vacant retirement
residence site, the commercial site with the welcome center and the vacant commercial acreage. The
minimum market values reported in the Appraisal result in an estimated overall value-to-lien ratio of
approximately 24.51:1, calculated with respect to the 2006 Bonds and including $4,825,636 of the
45
$4,845,000 special tax bonds issued by Community Facilities District No. 03-6. The value-to-lien ratios of
individual parcels will differ from the foregoing aggregate value-to-lien ratio. See “ – Estimated Value-toLien Ratios and Estimated Special Tax Allocation by Property Ownership” and Table 6 which presents the
allocation based on Developed and Undeveloped Property and Special Tax Allocation by Appraiser’s
Categories. See “BONDOWNERS’ RISKS – Appraised Values” and “BONDOWNERS’ RISKS – Burden
of Parity Liens, Taxes and Other Special Assessments on the Taxable Property” herein and APPENDIX C
– “Supplemental Appraisal Report and Summary Appraisal Report” appended hereto forfurther information
on the Appraisal and for limiting conditions relating to the Appraisal.
For the built-out tracts, the minimum market values are based onthe most recent sales prices foreach
home or the current assessed value for the homes where the sale price information was not available. Most
of the sale prices are from the original builder sales which took place from late 2003 through late 2005, but
some of the prices reflect more recent resales of the homes where those have occurred.
For the tracts under construction and the other properties, a sales comparison approach is used to
estimate the value of the completed-sold homes (including models), considering the prior sale prices together
with the current home pricing for the tract. For the homes under construction, a simplified cost approach is
used, in which the value is based on a conservative estimate of costs expended plus the estimated value of
the vacant lot as if in finished condition. The sales comparison approach is used to estimate the value of the
vacant lots, as if in a finished lot condition, based upon recent sales of residential land or bulk lots from the
general area in comparison to the subject property. Lastly, a deduction is made for the estimated remaining
costs to the builder to get all of the lots from the “as is” condition to finished lots.
The Authority and the District make no representation as to the accuracy or completeness of the
Appraisal. See Appendix C hereto for more information relating to the Appraisal.
BONDOWNERS’ RISKS
In addition to the other information contained in this Official Statement, the following risk factors
should be carefully considered in evaluating the investment quality of the 2006 Bonds. The Authority
cautions prospective investors that this discussion does not purport to be comprehensive or definitive, the
risk factors are listed in no particular order of importance, and this discussion does not purport to be a
complete statement of all factors which may be considered as risks in evaluating the credit quality of the
2006 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. Any such failure to
pay Special Taxes could result in the inability of the Authority to make full and punctual payments of debt
service on the 2006 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.
Risks of Real Estate Secured Investments Generally
The Bondowners will be subject to the risks generally incident to an investment secured by real
estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the
market value of real property in the vicinity of the District, the supply of or demand for competitive
properties in such area, and the market value of residential property and/or sites in the event of sale or
foreclosure; (ii) changes in real estate tax rate and other operating expenses, governmental rules (including,
without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal
policies; and (iii) natural disasters (including, without limitation, earthquakes, wildfires and floods), which
may result in uninsured losses.
Concentration of Ownership
For Fiscal Year 2006-07, based on the property ownership as of the May 8, 2006 date of the
Supplemental Appraisal Report, Harveston, LLC, the Merchant Builders, MW Housing Partners III, L.P.,
The Morgan Group, Temecula Retirement Residence Limited Partnership, Winchester Hills I, LLC and the
commercial site developed with a childcare facility are responsible in the aggregate for approximately
20.86% of the Special Taxes. For Fiscal Year 2006-07, based on property ownership as of the May 8, 2006
date of the Supplemental Appraisal Report, Lennar Homes, Greystone Homes and MW Housing Partners
46
III, L.P. are responsible in the aggregate for approximately 5.63% of the Special Taxes and The Morgan
Group is responsible for approximately 5.21% of the Special Taxes. If any such entity fails in its obligations
under the applicable agreements or if any such entity is unwilling or unable to pay its portion of the Special
Tax when due, a potential shortfall in the Bond Fund could occur, which would result in the depletion of the
Senior Subaccount within the Reserve Fund or the Subordinate Subaccount within the Reserve Fund or a
draw on the reserve surety prior to reimbursement from the resale of foreclosed property or payment of the
delinquent Special Taxes and, consequently, a delay or failure in payments of the principal of or interest on
the 2006 Bonds. The principal of and interest on the Series A Bonds will be insured by the Financial
Guaranty Insurance Policy.
No property owner is obligated in any manner to continue to own and/or develop any of the land it
presently owns within the District. The Special Taxes are not a personal obligation of Harveston, LLC, any
Merchant Builder, The Morgan Group and MW Housing Partners III, L.P. or of any owner of the parcels,
and the District can offer no assurance that any current owner or any future owner will be financially able
to pay such installments or that it will choose to pay even if financially able to do so.
Adjustable Rate and Unconventional Mortgage Structures
Since the end of 2002, many persons have financed the purchase of new homes usingloans with little
or no down payment and with adjustable interest rates that start low and are subject to being reset at higher
rates on a specified date or upon the occurrence of specified conditions. Many of these loans allow the
borrower to pay interest only for an initial period, in some cases up to 10 years. Currently, in Southern
California, a substantial portion of outstanding home loans are adjustable rate loans at historically low
interest rates. In the opinion of some economists, the significant increase in home prices in this time period
has been driven, in part, by the ability of home purchasers to access adjustable rate and non-conventional
loans. These economists predict that as interest rates on new loans increase and as the interest rates on
existing adjustable rate loans are reset (and payments are increased), there will be a decrease in home sales
dueto the inability of purchasers to qualify for loans with higher interest rates. They further predict that such
a decrease in home sales will, eventually, result in a decrease in home prices. Some economists are
concerned that such a reduction in home prices will result in recent homebuyers having loan balances that
exceed the value of their homes, given their low down payments and small amount of equity in their homes.
Homeowners in the District who purchase their homes with adjustable rate and non-conventional
loans with no or low down payments may experience difficulty in making their loan payments due to
automatic mortgage rate increases and rising interest rates; and should homeowners in the District have loan
balances that exceed the value of their homes, those homeowners may choose not to make their loan
payments or pay their property taxes even if they are able to. This could result in an increase in the Special
Tax delinquency rate in the District and draws on the Reserve Fund or the Reserve Fund Policy. If there
were significant delinquencies in Special Tax collections in the District and the Senior Subaccount or
Subordinate Subaccount within the Reserve Fund was fullydepleted, there could be a default in the payment
of principal of and interest on the applicable 2006 Bonds.
Some economists have also predicted that, as mortgage loan defaults increase, bankruptcy filings by
such homeowners are also likely to increase. Bankruptcy filings by homeowners with delinquent Special
Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent
Special Taxes. As noted above in “THE COMMUNITY FACILITIES DISTRICT – Special Tax
Collections,” the Authority has in one community facilities district experienced higher special tax
delinquencies than had occurred in that community facilities district in the past; and the Authority has heard
that the County and other jurisdictions are experiencinghigher special tax delinquencies in some community
facilities districts. The Authority is not aware of the causes for increased delinquencies in its other
community facilities district or in other jurisdictions or whether increases in delinquencies may occur in the
future with respect to the District.
See “SECURITY FOR THE BONDS – Proceeds of Foreclosure Sales,” for a discussion of the
provisions which apply and procedures which the Authority is obligated to follow under the Fiscal Agent
Agreement in the event of delinquencies in the payment of Special Taxes. See “BONDOWNERS’ RISKS
– Bankruptcy and Foreclosure Delay” and “Payments by FDIC and Other Federal Agencies” below, for a
discussion regarding bankruptcy, foreclosure, policies of the Federal Deposit Insurance Corporation and
47
regarding payments by other federal agencies that may affect the payment and collection of Special Taxes
and limit the District’s ability to foreclose on the lien of the Special Taxes.
Failure to Develop Properties
Development of property within the District may be subject to economic considerations and
unexpected delays,disruptions andchanges whichmay affect the willingness and ability of Harveston, LLC,
the Merchant Builders, MW Housing Partners III, L.P., The Morgan Group, the Temecula Retirement
Residence Limited Partnership, Winchester Hills I, LLC or any property owner to pay the Special Taxes
when due.
Land development is also subject to comprehensive federal, State and local regulations. Land
development is complete in Phase 1 and substantially underway in Phases 2 and 2B. For portions of the
project not yet developed, approval may be required from various agencies in connection with the layout and
design of developments, the nature and extent of improvements, construction activity, land use, zoning,
school and health requirements, as well as numerous other matters. See “ – Government Approvals” and
“Local, State and Federal Land Use Regulations” below. While Lennar Homes has indicated it is not aware
of any impediments to necessary approvals, it is possible that the approvals necessary to complete
development of the property within the District will not be obtained on a timely basis. Failure to obtain any
such approval could adversely affect land development operations within the District. In addition, there is
a risk that future governmental restrictions on land development within the District will be enacted, either
directly by a governmental entity with jurisdiction or by the voters through the exercise of the initiative
power.
The failure to complete the development or the required infrastructure in the District or substantial
delays in the completion of the development or the required infrastructure for the development due to
litigation, the inabilityto obtain required funding, failureto obtain necessary governmental approval or other
causes may reduce the value of the property within the District and increase the length of time during which
Special Taxes will be payable from Undeveloped Property, and may affect the willingness and ability of the
owners of property within the District to pay the Special Taxes when due. See “SECURITY FOR THE 2006
BONDS.”
Bondowners should assume that any event that significantly impacts the ability to develop land in
the District would cause the property values within the District to decrease and could affect the willingness
and ability of the owners of land within the District to pay the Special Taxes when due.
Special Taxes Are Not Personal Obligations
The owners of land within the District are not personally liable forthe payment of the Special Taxes.
Rather, the Special Tax is an obligation only of the property within the District. If the value of the property
within the District is not sufficient to fully secure the Special Tax, then the District has no recourse against
the owners under the laws by which the Special Tax has been levied and the 2006 Bonds have been issued.
The 2006 Bonds Are Limited Obligations
The Authority has no obligation to pay principal of and interest on the 2006 Bonds in the event
Special Tax collections are delinquent, other than from amounts, if any, on deposit in certain funds and
accounts held under the Fiscal Agent Agreement, or funds derived from the tax sale or foreclosure and sale
of parcels on which levies of the Special Tax are delinquent, nor is the Authority obligated to advance funds
to pay such debt service on the 2006 Bonds.
Appraised Values
The Supplemental Appraisal Report and Summary Appraisal Report set forth in Appendix C hereto
estimate the fee simple interest minimum market values of the Taxable Property within the District as of
January 15, 2006 and confirmed as minimum market values as of May 8, 2006. The values are merely the
opinion of the Appraiser as of such dates, and are qualified by the Appraiser as stated in the Appraisal. The
Authority has not sought the present opinion of any other appraiser of the value of the Taxable Property. A
different opinion of such present value might be rendered by a different appraiser.
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The opinion of value relates to sale by a willing seller to a willing buyer, each having similar
information and neither being forced by other circumstances to sell nor to buy. Consequently, the opinion
is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced and the buyer
may not have the benefit of full information.
In addition, the opinion is an opinion based on a date specified in the Appraisal. It is based upon
factsand circumstances as of the dates set forth in the Appraisal. Differing facts and circumstances may lead
to differing opinions of value. The appraised minimum market value is not evidence of future value because
future facts and circumstances may differ significantly from the present.
No assurance can be given that if any of the Taxable Property in the District should become
delinquent in the payment of Special Taxes, and be foreclosed upon, that such property could be sold for the
amount of estimated market value thereof contained in the Appraisal.
Land Development
A major risk to the Bondowners is that development by the property owners in the District may be
subject to unexpected delays, disruptions and changes which may affect the willingness and ability of the
property owners to pay Special Taxes when due. For example, proposed development within a portion of
the District could be adversely affected by delays in or the inability to obtain final environmental clearances
required in connection with particular parcels of property, delays in or the inability to complete off-site
public improvements within the times required by the First, Second and Third Operating Memoranda,
unfavorable economic conditions, competing development projects, an inability of the current owners or
future owners of the parcels to obtain financing, fluctuations in the real estate market or interest rates,
unexpected increases in development costs, changes in federal, State or local governmental policies relating
to the ownership of real estate, faster than expected depletion of existing water allocations, the appearance
of previously unknown environmental impacts necessitating preparation of a supplemental environmental
impact report, and by other similar factors. While Lennar Homes has indicated it is not aware of any
impediments to necessary approvals, there can be no assurance that land development operations within the
District will not be adversely affected by the factors described above.
In addition, partially developed land is less valuable than developed land and provides less security
for the 2006 Bonds (and therefore to the Bondowners) should it be necessary for the District to foreclose on
partially developed property due to the nonpayment of Special Taxes. Moreover, failure to complete future
development on a timely basis could adversely affect the land values of those parcels which have been
completed. Lower land values result in less security for the payment of principal of and interest on the 2006
Bonds and lower proceeds from any foreclosure sale necessitated by delinquencies in the payment of the
Special Taxes.
Furthermore, an inability to develop the land within the District as planned will reduce the expected
diversity of ownership of land within the District, making the payment of debt service on the 2006 Bonds
more dependent upon timely payment of the Special Taxes levied on the undeveloped property. Because of
the concentration of undeveloped property ownership, the timely payment of the 2006 Bonds depends upon
the willingness and ability of the current owners of undeveloped land and any home builders to whom
finished lots are sold to pay the Special Taxes levied on the undeveloped land when due. Furthermore,
continued concentration of ownership increases the potential negative impact of a bankruptcy or other
financial difficulty experienced by the existing landowners. See “ – Concentration of Ownership” above.
Burden of Parity Liens, Taxes and Other Special Assessments on the Taxable Property
While the Special Taxes are secured by the Taxable Property, the security only extends to the value
of such Taxable Property that is not subject to prior and parity liens and similar claims.
The table in the section entitled “THE COMMUNITY FACILITIES DISTRICT – Direct and
Overlapping Debt” presents the presently outstanding amount of governmental obligations (with stated
exclusions), the tax or assessment which is or may become an obligation of one or more of the parcels of
Taxable Property, and furthermore states the additional amountof general obligation bonds the tax for which,
if and when issued, may become an obligation of one or more of the parcels of Taxable Property. The table
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does not specifically identify which of the governmental obligations are secured by liens on one or more of
the parcels of Taxable Property.
In addition,other governmental obligations may be authorized and undertaken or issued in the future,
the tax, assessment or charge for which may become an obligation of one or more of the parcels of Taxable
Property and may be secured by a lien on a parity with the lien of the Special Tax securing the 2006 Bonds.
In general, the Special Tax and all other taxes, assessments and charges collected on the County tax
roll are on a parity, that is, are of equal priority. Questions of priority become significant when collection
of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure
andsale. In the event of proceedings to foreclose for delinquency of Special Taxes securing the 2006 Bonds,
the Special Tax will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event
of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes,
assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro rata basis.
Although the Special Taxes will generally have priority over non-governmental liens on a parcel of Taxable
Property, regardless of whether the non-governmental liens were in existence at the time of the levy of the
Special Tax or not, this result may not apply in the case of bankruptcy.
While governmental taxes, assessments and charges are a common claim against the value of a
parcel of Taxable Property, other less common claims may be relevant. One of the most serious in terms of
the potential reduction in the value that may be realized to pay the Special Tax is a claim with regard to a
hazardous substance. See “ – Hazardous Substances” below.
Disclosure to Future Purchasers
The District recorded a Notice of the Special Tax lien in the Office of the Riverside County
Recorder on May 15, 2002, as Document No. 2002-254462. While title companies normally refer to such
notices in title reports, there can be no guarantee that such reference will be made or, if made, that a
prospective purchaser or lender will consider such Special Tax obligation in the purchase of a parcel of land
or a home in the District or the lending of money thereon. The Act requires the subdivider (or its agent or
representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot, parcel, or
unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a
statutorilyprescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other
than those covered by the above requirement, the seller must at least make a good faith effort to notify the
prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the
property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand
the nature and existence of the Special Tax, could adversely affect the willingness and ability of the
purchaser or lessor to pay the Special Tax when due.
Government Approvals
The current landowners or their predecessors have secured most discretionary approvals, permits
and government entitlements necessary to develop the land within the District. Nevertheless, development
within the District is contingent upon the construction of a number of major public improvements as well
as the necessary local in-tract improvements. The installation of the necessary improvements and
infrastructure is subject to the receipt of construction or building permits from the City and other public
agencies. The failure to obtain any such approval could adversely affect construction within the District.
A slow down or stoppage of the construction process could adversely affect land values. No assurance can
be given that permits will be obtained in a timely fashion, if at all. The failure to do so may result in the
prevention, or significant delays in the development of the property within the District or portions thereof.
See “ – Failure to Develop Properties” herein.
Local, State and Federal Land Use Regulations
There can be no assurance that land development operations within the District will not be adversely
affected by future government policies, including, but not limited to, governmental policies which directly
or indirectly restrict or control development. During the past several years, citizens of a number of local
communities in California have placed measures on the ballot designed to control the rate of future
development. During the past several years, state and federal regulatory agencies have significantly
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expanded their involvement in local land use matters through increased regulatory enforcement of various
environmental laws, including the Endangered Species Act, the Clean Water Act and the Clean Air Act,
among others. Such regulations can substantially impair the rate and amount of development without
requiring just compensation unless the effect of the regulation is to deny all economic use of the affected
property. Bondowners should assume that any event that significantly impacts the ability to construct homes
on land in the District could cause the land values within the District to decrease substantially and could
affect the willingness and ability of the owners of land to pay the Special Taxes when due or to proceed with
development of land in the District. See “ – Failure to Develop Properties” herein.
Endangered and Threatened Species
It is illegal to harm or disturb any plants or animals in their habitat that have been listed as
endangered species by the U.S. Fish & Wildlife Service (“FWS”) under the Federal Endangered Species Act
or by the California Department of Fish and Game (“CDFG”) under the California Endangered Species Act
without a permit. Thus, the presence of an endangered plant or animal could delay development of
undeveloped property in the District or reduce the value of undeveloped property. Failure to develop the
undeveloped property in the District as planned, or substantial delays in the completion of the planned
development of the property may increase the amount of Special Taxes to be paid by the owners of
undeveloped property and affect the willingness and ability of the owners of property within the District to
pay the Special Taxes when due. The Authority has not independently verified and is not aware of the
presence of an endangered plant or animal with respect to of Taxable Property. However, it is possible that
endangered plants or animals do currently exist and that the Authority is not aware of them. See “THE
COMMUNITY FACILITIES DISTRICT – Environmental Conditions.” In 1998, the FWS adopted the
“Permit RevocationRule” or more commonly, the “no surprises rule” which substantially restricted the FWS
authorityto revoke or modify required permits. The “no surprises rule” was held invalid by a Federal District
Court in Washington D.C. on the grounds that the FWS did not comply with federal procedures under the
Administrative Procedures Act for public notice in adopting new regulations, but did not rule on the
substantive validity of the rule, and enjoined enforcement of the regulation. (Spirit of the Sage Council v.
Norton 294 F. Supp. 2d 67 (2003).) On December 14, 2004, the FWS adopted a new “no surprises rule,”
effective January 10, 2005, with the same text as the former rule. (69 Fed. Reg. 71723.) The FWS states
that the new rule complies with procedures under the Administrative Procedures Act and the Court’s decision
in Spirit of the Sage Council. (69 Fed. Reg. 71723.)
Hazardous Substances
While governmental taxes, assessments, and charges are a common claim against the value of a
taxed parcel, other less common claims may be relevant. One of the most serious in terms of the potential
reduction in the value that may be realized to pay the Special Tax is a claim with regard to hazardous
substances. In general, the owners and operators of parcels within the District may be required by law to
remedy conditions of the parcels related to the releases or threatened releases of hazardous substances. The
federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, sometimes
referred to as “CERCLA” or the “Superfund Act,” is the most well-known and widely applicable of these
laws,but State laws with regard to hazardous substances are also stringent and similar. Under many of these
laws, the owner (or operator) is obligated to remedy a hazardous substances condition of a property whether
or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The
effect, therefore, should any parcel within the District be affected by a hazardous substance, would be to
reduce the marketability and value of the parcel by the costs of remedying the condition, because the owner
(or operator) is obligated to remedy the condition. Further, such liabilities may arise not simply from the
existence of a hazardous substance but from the method of handling or disposing of it. All of these
possibilities could significantly affect the financial and legal ability of a property owner to develop the
affected parcel or other parcels, as well as the value of the property that is realizable upon a delinquency and
foreclosure.
The appraised value of the property within the District does not take into account the possible
reduction in marketability and value of any of the parcels of Taxable Property by reason of the possible
liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The
Authority has not independently verified and is not aware that the owner (or operator) of any of the parcels
of Taxable Property has such a current liability with respect to any such parcels of Taxable Property, except
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as expressly noted. However, it is possible that such liabilities do currently exist and that the Authority is
not aware of them.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels of
Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as
hazardous but which has not been released or the release of which is not presently threatened, or may arise
in the future resulting from the existence, currently, on the parcel of a substance not presently classified as
hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from
the existence of a hazardous substance but from the method of handling or disposing of it. All of these
possibilities could significantly affect the value of a parcel of Taxable Property that is realizable upon a
delinquency. See “THE COMMUNITY FACILITIES DISTRICT – Environmental Conditions” herein for
a description of the prior use of the property.
Levy and Collection of the Special Tax; Insufficiency of the Special Tax
The principal source of payment of principal of and interest on the 2006 Bonds is the proceeds of
the annual levy and collection of the Special Tax against property within the District. The annual levy of
the Special Tax is subject to the maximum tax rates authorized. The levy cannot be made at a higher rate
even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax,
together with other available funds, will not be sufficient to paydebt service on the 2006 Bonds. Other funds
which might be available include funds derived from the payment of penalties on delinquent Special Taxes
and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are
delinquent.
The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value
of particular taxed parcels and the amount of the levy of the Special Tax against such parcels. Thus, there
will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share
of debt service on the 2006 Bonds, and certainly not a direct relationship.
The Special Tax levied in any particular tax year on a parcel of Taxable Property is based upon the
revenue needs and application of the Rate and Method. Application of the Rate and Method will, in turn,
be dependent upon certain development factors with respect to each parcel of Taxable Property by
comparison with similar development factors with respect to the other parcels of Taxable Property within
the District. Thus, in addition to annual variations of the revenue needs from the Special Tax, the following
are some of the factors which might cause the levy of the Special Tax on any particular parcel of Taxable
Property to vary from the Special Tax that might otherwise be expected:
(1)
Reduction in the number of parcels of Taxable Property, for such reasons as
acquisition of parcels of Taxable Property by agovernment and failure of the government to pay the
Special Tax based upon a claim of exemption or, in the case of the federal government or an agency
thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining
parcels of Taxable Property.
(2)
Failure of the owners of parcels of Taxable Property to pay the Special Tax and
delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure sale of
the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels.
In addition, if a substantial portion of land within the District becomes Property Owner’s
Association Property or Public Property, then whether sufficient Special Taxes will be collected to pay
principal and interest on the 2006 Bonds when due will depend on the ability and/or willingness of owners
of such property to pay the Special Tax levied on the non-exempt portion of their property.
Except as set forth above under “SECURITY FOR THE 2006 BONDS – Special Taxes” and
“ – Rate and Method” herein, the Fiscal Agent Agreement provides that the Special Tax is to be collected
in the same manneras ordinary ad valorem property taxes are collected and, except as provided in the special
covenant for foreclosure described in “SECURITY FOR THE 2006 BONDS – Proceeds of Foreclosure
Sales” and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case
of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are
unpaid, the property is then is subject to sale by the District.
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In addition, the Rate and Method limits the increase of Special Taxes levied on residential parcels
of Developed Property to cure delinquencies of other property owners in the District. See “THE 2006
BONDS – Coverage of Annual Debt Service” herein. Once sufficient development occurs such that the
Assigned Special Tax is levied at less than 91% of the Assigned Special Tax, the Special Tax on nondelinquent residential parcels may not be increased by more than 10% as a consequence of delinquency or
default by the owner of any other parcel or parcels. State law provides that in the case of any special tax to
pay for public facilities and to be levied against any parcel used for private residential purposes, the special
tax shall not be increased as a consequence of delinquency or default by the owner of any other parcel or
parcels with the District by more than 10%. Currently, the Special Tax on Developed Property is levied at
100% of the Assigned Special Tax.
In the event that sales or foreclosures of property are necessary, there could be a delay in payments
to owners of the 2006 Bonds pending such sales or the prosecution of foreclosure proceedings and receipt
by the Authority of the proceeds of sale if the Senior Subaccount or the Subordinate Subaccount within the
Reserve Fund is depleted. The Series B Bonds are subordinate to the Series A Bonds, and in the event of
delinquencies, the Series A Bonds would be paid andthe Senior Subaccount of the Reserve Fund replenished
before Series B Bonds are paid or the Subordinate Subaccount of the Reserve Fund is replenished. See
“SECURITY FOR THE 2006 BONDS – Proceeds of Foreclosure Sales.”
See “THE COMMUNITY FACILITIES DISTRICT – Special Tax Collections” for a discussion of
tax collections in the District, in other community facilities districts of the Authority, and in other
jurisdictions in the County.
Exempt Properties
Certain properties are exempt from the Special Tax in accordance with the Rate and Method (see
“SECURITY FOR THE 2006 BONDS – Rate and Method” herein). In addition, the Act provides that
properties or entities of the state, federal or local government are exempt from the Special Tax; provided,
however, that property within the District acquired by a public entity through a negotiated transaction or by
gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special
Tax. It is possible that property acquired by a public entity following a tax sale or foreclosure based upon
failure to pay taxes could become exempt from the Special Tax. In addition, although the Act provides that
if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings,
the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special
assessment, the constitutionality and operation of these provisions of the Act have not been tested, meaning
that such property could become exempt from the Special Tax. In the event that additional property is
dedicated to the City or other public entities, this additional property might become exempt from the Special
Tax.
The Act further provides that no other properties or entities are exempt from the Special Tax unless
the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax
or to alter the rate or method of apportionment of an existing special tax.
Depletion of Subaccounts within the Reserve Fund
The Subaccounts within the Reserve Fund are to be maintained at an amount equal to the Senior
Subaccount Reserve Requirement and the Subordinate Subaccount Reserve Requirement, respectively (see
“SECURITY FOR THE 2006 BONDS – Special Tax Fund” herein). Funds in the Senior Subaccount within
the Reserve Fund or the Reserve Surety credited to the Senior Subaccount in the Reserve Fund may be used
to pay principal of and interest on the Bonds, excluding the Series B Bonds, and funds in the Subordinate
Subaccount within the Reserve Fund may be used to pay principal of and interest on the Series B Bonds in
the event the proceeds of the levy and collection of the Special Tax against property within the District is
insufficient. If funds in the Reserve Fund and the Reserve Surety for the Series A Bonds are depleted, the
funds can be replenished from the proceeds of the levy and collection of the Special Tax that are in excess
of the amount required to pay all amounts to be paid to the Bondowners pursuant to the Fiscal Agent
Agreement. However, no replenishment from the proceeds of a Special Tax levy can occur as long as the
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proceeds that are collected from the levy of the Special Tax against property within the District at the
maximum tax rates, together with other available funds, remains insufficient to pay all such amounts,
including the limitation on increasing the Special Tax on non-delinquent residential parcels by more than
10% as a consequence of delinquency or default by the owner of any other parcel or parcels. Thus it is
possible that a Subaccount within the Reserve Fund, including the Reserve Surety with respect thereto, will
be depleted and not be replenished by the levy of the Special Tax.
Potential Delay and Limitations in Foreclosure Proceedings
The payment of property owners’ taxes and the ability of the District to foreclose the lien of a
delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings, may be
limited by bankruptcy, insolvency or other laws generally affecting creditors’ rights or by the laws of the
State relating to judicial foreclosure. See “SECURITY FOR THE 2006 BONDS – Proceeds of Foreclosure
Sales” and “BONDOWNERS’ RISKS – Bankruptcy and Foreclosure Delay” herein. In addition, the
prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars
or lengthy procedural delays.
The ability of the District to collect interest and penalties specified by State law and to foreclose
against properties havingdelinquent Special Tax installments may be limited in certain respects with regard
to properties in which certain federal agencies, such as the Federal Deposit Insurance Corporation (the
“FDIC”) has or obtains an interest. The FDIC would obtain such an interest by taking over a financial
institution which has made a loan which is secured by property within the District.
The FDIC has adopted a policy statement regarding the payment of state and local real property
taxes (the “Policy Statement”) which provides that the FDIC intends to payvalid real property taxes, interest
and penalties, in accordance with state law, on property which at the time of the tax levy is owned by a
financial institution in an FDIC receivership, unless abandonment of the FDIC interest is determined to be
appropriate. However, the Policy Statement is unclear as to whether the FDIC considers special taxes such
as the Special Taxes to be “real property taxes” which it intends to pay. Furthermore, the Policy Statement
provides that, with respect to parcels on which the FDIC holds a mortgage lien, it will not permit its lien to
be foreclosed by a taxing authority without its specific consent, and that it will not pay or recognize liens for
any penalties, fines, or similar claims imposed for the non-payment of taxes.
The Authority and the District are unable to predict what effect the application of the Policy
Statement would have in the event of a delinquency on a parcel within the District in which the FDIC has
or obtains an interest, although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale
would likely reduce or eliminate the persons willing to purchase a parcel at a foreclosure sale.
In addition, potential investors should be aware that judicial foreclosure proceedings are not
summary remedies and can be subject to significant procedural and other delays caused by crowded court
calendars and other factors beyond control of the Authority or the District. Potential investors should assume
that, under current conditions, it is estimated that a judicial foreclosure of the lien of Special Taxes will take
up to two or three years from initiation to the lien foreclosure sale. At a Special Tax lien foreclosure sale,
each parcel will be sold for not less than the “minimum bid amount” which is equal to the sum of all
delinquent Special Tax installments, penalties and interest thereon, costs of collection (including reasonable
attorneys’ fees), post-judgment interest and costs of sale. Each parcel is sold at foreclosure for the amounts
secured by the Special Tax lien on such parcel and multiple parcels may not be aggregated in a single “bulk”
foreclosure sale. If any parcel fails to obtain a “minimum bid,” the Authority may, but is not obligated to,
seek superior court approval to sell such parcel at an amount less than the minimum bid. Such superior court
approval requires the consent of the owners of 75% of the aggregate principal amount of the Outstanding
Bonds.
Bankruptcy and Foreclosure Delay
The payment of Special Taxes and the ability of the District to foreclose the lien of a delinquent
Special Taxes as discussed in the section herein entitled “SECURITY FOR THE 2006 BONDS” may be
limited by bankruptcy, insolvency, or other laws generally affecting creditors’ rights or by the laws of the
State relating to judicial foreclosure. In addition, the prosecution of a judicial foreclosure may be delayed
due to congested local court calendars or procedural delays.
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The various legal opinions to be delivered concurrently with the delivery of the 2006 Bonds
(including Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various
legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the
rights of creditors generally.
Although bankruptcy proceedings would not cause the obligation to pay the Special Tax to become
extinguished, bankruptcy of a property owner or of a partner or other equity owner of a property owner,
could result in a stay of enforcement of the lien for the Special Taxes, a delay in prosecuting Superior Court
foreclosure proceedings or adversely affect the ability or willingness of a property owner to pay the Special
Taxes and could result in the possibility of delinquent Special Taxes not being paid in full. In addition, the
amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the
value of the property were determined by the bankruptcy court to have become less than the amount of the
lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could then be treated as
an unsecured claim by the court. Any such stay of the enforcement of the lien for the Special Tax, or any
such delay or non-payment, would increase the likelihood of a delay or default in payment of the principal
of and interest on the 2006 Bonds and the possibility of delinquent Special Taxes not being paid in full.
Moreover, amounts received upon foreclosure sales may not be sufficient to fully discharge delinquent
installments. To the extent that a significant percentage of the property in the District is owned by any major
landowner, any Merchant Builders or any other property owner, and such owner is the subject of bankruptcy
proceedings, the payment of the Special Tax and the ability of the Authority to foreclose the lien of a
delinquent unpaid Special Tax could be extremely curtailed by bankruptcy, insolvency, or other laws
generally affecting creditors’ rights or by the laws of the State relating to judicial foreclosure.
Payments by FDIC and Other Federal Agencies
The ability of the Authority to collect interest and penalties specified by state law and to foreclose
the lien of delinquent Special Taxes may be limited in certain respects with regard to properties in which the
FDIC, the Drug Enforcement Agency, the Internal Revenue Service or other similar federal governmental
agencies has or obtains an interest.
Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy
Regarding the Payment of State and Local Property Taxes (the “1991 Policy Statement”). The 1991 Policy
Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the “Policy
Statement”). The Policy Statement provides that real property owned by the FDIC is subject to state and
local real property taxes only if those taxes are assessed according to the property’s value, and that the FDIC
is immune from real property taxes assessed on any basis other than property value. According to the Policy
Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay
claims for delinquent property taxes as promptly as is consistent with sound business practice andthe orderly
administration of the institution’s affairs, unless abandonment of the FDIC’s interest in the property is
appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided
under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not
pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts.
Ifany property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before
the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further
providesthat no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without
the FDIC’s consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be
eliminated by foreclosure without the FDIC’s consent.
The Policy Statement states that the FDIC generally will not pay non ad valorem taxes, including
special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time
that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the
extent it purports to secure the payment of any such amounts. Special taxes imposed under the Act and a
special tax formula which determines the special tax due each year, are specifically identified in the Policy
Statement as being imposed each year and therefore covered by the FDIC’s federal immunity. With respect
to property in California owned by the FDIC on January 9, 1997, and that was owned by the Resolution Trust
Corporation (the “RTC”) on December 31, 1995, or that became the property of the FDIC through
foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC’s prior
practice of paying special taxes imposed pursuant to the Act if the taxes were imposed prior to the RTC’s
acquisition of an interest in the property. All other special taxes may be challenged by the FDIC.
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The Authority is unable to predict what effect the application of the Policy Statement would have
in the event of a delinquency on a parcel within the District in which the FDIC has or obtains an interest,
although prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or
eliminate the persons willing to purchase a parcel at a foreclosure sale. Bondowners should assume that the
District will be unable to foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw
on the Senior Subaccount or Subordinate Subaccount within the Reserve Fund and perhaps, ultimately, a
default in payment on the 2006 Bonds. Based upon the secured tax roll as of January 1, 2006, the FDIC does
not presently own any of the property in the District. The Authority expresses no view concerning the
likelihood that the risks described above will materialize while the 2006 Bonds are outstanding.
Payment of Special Tax Not a Personal Obligation of the Property Owners
An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the
Special Tax is an obligation only against the parcels of Taxable Property. If the value of the parcels of
Taxable Property is not sufficient, taking into account other obligations also payable thereby to fully secure
the Special Tax, the District has no recourse against the owner.
Factors Affecting Parcel Values and Aggregate Value
Geologic, Topographic and Climatic Conditions. The value of the Taxable Property in the District
in the future can be adversely affected by a variety of additional factors, particularly those which may affect
infrastructure and other public improvements and private improvements on the parcels of Taxable Property
andthe continued habitability and enjoyment of such private improvements. Such additional factors include,
without limitation, geologic conditions such as earthquakes and volcanic eruptions, topographic conditions
such as earth movements, landslides, liquefaction, floods or fires, and climatic conditions such as tornadoes,
droughts, and the possible reduction in water allocation or availability. It can be expected that one or more
of such conditions may occur and may result in damage to improvements of varying seriousness, that the
damage may entail significant repair or replacement costs and that repair or replacement may never occur
either because of the cost or because repair or replacement will not facilitate habitability or other use, or
because other considerations preclude such repair or replacement. Under any of these circumstances, the
value of the parcels of Taxable Property may well depreciate or disappear.
Seismic Conditions. The District, like all California communities, may be subject to unpredictable
seismic activity. The occurrence of seismic activity in the District could result in substantial damage to
properties in the District which, in turn, could substantially reduce the value of such properties and could
affect the ability or willingness of the property owners to pay their Special Taxes. Any major damage to
structures as a result of seismic activity could result in greater reliance on undeveloped property in the
payment of Special Taxes.
Legal Requirements. Other events which may affect the value of a parcel of Taxable Property in
the District include changes in the law or application of the law. Such changes may include, without
limitation, local growth control initiatives, local utility connection moratoriums and local application of
statewide tax and governmental spending limitation measures. For example, in September, 2001, a
referendum petition opposing the ordinance approving the Development Agreement was submitted by a
resident to the City. In February, 2002, Lennar Homes entered into a Settlement Agreement relating to that
referendum petition. All of the obligations of Lennar Homes under the Settlement Agreement, including
payment of $150,000 to the City for park expansion were satisfied.
No Acceleration Provisions
The 2006 Bonds do not contain a provision allowing for the acceleration of the 2006 Bonds in the
event of a payment default or other default under the terms of the 2006 Bonds or the Fiscal Agent Agreement.
So long as the 2006 Bonds are in book-entry form, DTC will be the sole Bondowner and will be entitled to
exercise all rights and remedies of Bondowners.
Community Facilities District Formation
California voters, on June 6, 1978, approved an amendment (“Article XIIIA”) to the California
Constitution. Section 4 of Article XIIIA, requires a vote of two-thirds of the qualified electorate to impose
56
“special taxes,” or any additional ad valorem, sales or transaction taxes on real property. At an election held
pursuant to the Act, more than two-thirds of the qualified electors within the District, consisting of the
landowners within the boundaries of the District, authorized the District to incur bonded indebtedness to
finance the development of the property within the District and approved the Rate and Method of
Apportionment. The Supreme Court of the State has not yet decided whether landowner elections (as
opposed to resident elections) satisfyrequirements of Section 4 of Article XIIIA, nor has the Supreme Court
decided whether the special taxes of a District constitute a “special tax” for purposes of Article XIIIA.
Section 53341 of the Act requires that any action or proceeding to attack, review, set aside, void or
annul the levy of a special tax or an increase in a special tax pursuant to the Act shall be commenced within
30 days after the special tax is approved by the voters. No such action has been filed with respect to the
Special Tax.
Billing of Special Taxes
A special tax formula can result in a substantially heavier property tax burden being imposed upon
properties within a district than elsewhere in a city or county, and this in turn can lead to problems in the
collection of the special tax. In some districts the taxpayers have refused to pay the special tax and have
commenced litigation challenging the special tax, the district and the bonds issued by the district.
Under provisions of the Act, the Special Taxes are billed to the properties within the District which
were entered on the Assessment Roll of the County Assessor by January 1 of the previous fiscal year on the
regular property tax bills sent to owners of such properties. Such Special Tax installments are due and
payable, and bear the same penalties and interest for non-payment, as do regular property tax installments.
These Special Tax installment payments cannot be made separately from property tax payments, except in
certain limited circumstances. Therefore, the unwillingness or inability of a property owner to pay regular
property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability
to make regular property tax payments and installment payments of Special Taxes in the future. See
“SECURITY FOR THE 2006 BONDS – Proceeds of Foreclosure Sales,” for a discussion of the provisions
which apply, and procedures which the District is obligated to follow, in the event of delinquency in the
payment of installments of Special Taxes.
Collection of Special Tax
In order to pay debt service on the 2006 Bonds, it is necessary that the Special Tax levied against
land within the District be paid in a timely manner. The District has covenanted in the Fiscal Agent
Agreement under certain conditions to institute foreclosure proceedings against property with delinquent
Special Tax in order to obtain funds to pay debt service on the 2006 Bonds. If foreclosure proceedings were
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. In the event such superior court foreclosure is
necessary, there could be a delay in principal and interest payments to the Bondowners pending prosecution
of the foreclosure proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can
be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or,
if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment.
Although the Act authorizes the Authority as the Governing Board of the District to cause such an action to
be commenced and diligently pursued to completion, the Act does not specify the obligations of the
Governing Board with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the
foreclosure sale if there is no other purchaser at such sale. See “SECURITY FOR THE 2006
BONDS – Proceeds of Foreclosure Sales.”
Right to Vote on Taxes Act
An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the “Initiative”)
was approved by the voters of the State at the November 5, 1996 general election. The Initiative added
Article XIIIC (“Article XIIIC”) and Article XIIID to the CaliforniaConstitution. According to the “Title and
Summary” of the Initiative prepared by the California Attorney General, the Initiative limits “the authority
of local governments to impose taxes and property-related assessments, fees and charges.” The provisions
of the Initiative have not yet been interpreted by the courts, although a number of lawsuits have been filed
requesting the courts to interpret various aspects of the Initiative.
57
Among other things, Section 3 of Article XIII states that “ . . . the initiative power shall not be
prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.”
The Act provides fora procedure, which includes notice hearing, protest and voting requirements to alter the
rate and method of apportionment of an existing special tax. However, the Act prohibits a legislative body
from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax
pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the
reduction or termination of the special tax would not interfere with the timely retirement of that debt. On
July 1, 1997, a bill signed into law by the Governor of the State enacting Government Code Section 5854,
which states that:
Section 3 of Article XIIIC of the California Constitution, as adopted at the
November 5,1996, general election, shall not be construed to mean that any
owner or beneficial owner of a municipal security, purchased before or
after that date, assumes the risk of, or in any way consents to, anyaction by
initiative measure that constitutes an impairment of contractual rights
protected by Section 10 of Article I of the United States Constitution.
Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not
conferred onthe votersthe power to repeal or reduce the Special Taxes if such reduction would interfere with
the timely retirement of the 2006 Bonds.
It may be possible, however, for voters or the District to reduce the Special Taxes in a manner which
does not interfere with the timely repayment of the 2006 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 levy of Special Taxes forAdministrative Expenses. Furthermore, no assurance can
be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary
for the timely retirement of the 2006 Bonds.
Like its antecedents, the Initiative is likely to undergo both judicial and legislative scrutiny before
its impact on the District and its obligations can be determined. Certain provisions of the Initiative may be
examined by the courts for their constitutionality under both State and federal constitutional law. The
Authority is not able to predict the outcome of any such examination.
The foregoing discussion of the Initiative should not be considered an exhaustive or authoritative
treatment of the issues. The District does not expect to be in a position to control the consideration or
disposition of these issues and cannot predict the timing or outcome of any judicial or legislative activity in
this regard. Interim rulings, final decisions, legislative proposals and legislative enactments may all affect
the impact of the Initiative on the 2006 Bonds as well as the market for the 2006 Bonds. Legislative and
court calendar delays and other factors may prolong any uncertainty regarding the effects of the Initiative.
Ballot Initiatives and Legislative Measures
The Initiative was adopted pursuant to a measure qualified for the ballot pursuant to California’s
constitutional initiative process and the State Legislature has in the past enacted legislation which has altered
the spending limitations or established minimum funding provisions for particular activities. From time to
time, other initiative measures could be adopted by California voters or legislation enacted by the State
Legislature. The adoption of any such initiative or enactment of legislation might place limitations on the
ability of the State, the County, the City, the Authority, the District or local districts to increase revenues or
to increase appropriations or on the ability of a property owner to complete the development of the property.
Limited Secondary Market
There can be no guarantee that there will be a secondary market for the 2006 Bonds or, if a
secondary market exists, that such 2006 Bonds can be sold for any particular price. Although the Authority
and the District have committed to provide certain statutorily-required financial and operating information,
there can be no assurance that such information will be available to Bondowners on a timely basis. The
failure to provide the annual financial and operating information does not give rise to monetary damages but
merely an action for specific performance. Occasionally, because of general market conditions, lack of
current information or because of adverse history or economic prospects connected with a particular issue,
58
secondary marketing practices in connection with a particular issue are suspended or terminated.
Additionally, prices of issues for which a market is being made will depend upon then prevailing
circumstances. Such prices could be substantially different from the original purchase price.
Loss of Tax Exemption
As discussed under the caption “LEGAL MATTERS – Tax Exemption,” the interest on the 2006
Bonds could become includable in gross income for federal income tax purposes retroactive to the date of
issuance of the 2006 Bonds as a result of acts or omissions of the Authority in violation of certain provisions
of the Code and the covenants of the Fiscal Agent Agreement. In order to maintain the exclusion from gross
income for federal income tax purposes of the interest on the 2006 Bonds, the Authority has covenanted in
the Fiscal Agent Agreement not to take any action, or fail to take any action, if such action or failure to take
such action would adversely affect the exclusion from gross income of interest on the 2006 Bonds under the
Internal Revenue Code of 1986, as amended. Should such an event of taxability occur, the 2006 Bonds are
not subject to early redemption and will remain outstanding to maturity or until redeemed under the optional
redemption or mandatory redemption provisions of the Fiscal Agent Agreement.
Limitations on Remedies
Remedies available to the Bondowners may be limited by a variety of factors and may be inadequate
to assure the timely payment of principal of and interest on the 2006 Bonds or to preserve the tax-exempt
status of the 2006 Bonds. See “ – Payments by FDIC and other Federal Agencies,” “ – No Acceleration
Provisions” and “ – Billing of Special Taxes” herein.
SPECIAL RISK CONSIDERATIONS SPECIFIC TO THE SERIES B BONDS
In addition to the risks described under the heading “BONDOWNERS’ RISKS,” there are several
additional risks that are relevant to an investment in the Series B Bonds. The Series B Bonds are subordinate
in right of payment to the Series A Bonds. The Series B Bonds are not rated and are not insured by Ambac
Assurance. For this reason, investments in the Series B Bonds involve a high degree of risk and are not
appropriate for all investors.
Subordination of Series B Bonds
The Series B Bonds are subordinate to the Series A Bonds in right of payment. Special Taxes will
be available to pay obligations on the Series B Bonds only after all payments and deposits in respect of the
Series A Bonds have been made as set forth herein and in the Fiscal Agent Agreement. In the event of
delinquencies in the payment of Special Taxes which exceed the expected amount of debt service coverage
from the Special Taxes, there may not be sufficient Special Tax Revenues available to pay interest or
principal due on any or all of the Series B Bonds then outstanding.
Limited Secondary Market
As stated herein, investment in the Series B Bonds poses certain economic risks which may not be
appropriate for certain investors, and only persons with substantial financial resources who understand the
risk of investment in the Series B Bonds should consider such investment. There can be no guarantee that
there will be a secondary market for purchase or sale of the Series B Bonds or, if a secondary market exists,
that the Series B Bonds can or could be sold for any particular price. From time to time there may be no
market for the Series B Bonds, depending upon prevailing market conditions, the financial condition or
market position of firms who may make the secondary market, the financial condition and results of
operations of the owners of property located within the boundaries of the District, and the extent of the
development of property within the District.
No Ratings of Series B Bonds
The Series B Bonds are not rated by any rating agency, and the District does not presently intend
to seek any rating of the Series B Bonds nor does the District anticipate that the Series B Bonds would
qualify for an investment grade rating due to the structure and size of the Series A Bonds.
59
No Insurance; Remedies Controlled by Ambac Assurance
The Financial Guaranty Insurance Policy does not apply to the Series B Bonds.
The Fiscal Agent Agreement provides that, upon the occurrence of a default with respect to the
Series B Bonds, any Owner may pursue any available remedy at law or in equity to enforce the payment of
the Series B Bonds; provided, however, that Ambac Assurance shall have consented to such action. Given
this provision, so long as the Series A Bonds are outstanding, the exercise of remedies for any default under
the Fiscal Agent Agreement will be controlled by Ambac Assurance and not by the Owners of the Series B
Bonds.
LEGAL MATTERS
Legal Opinion
The legal opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, approving
the validity of the 2006 Bonds will be made available to purchasers at the time of original delivery and the
form of such opinion is attached hereto as Appendix F.
Tax Exemption
In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing
law, subject to the Authority’s compliance with certain covenants, interest on the 2006 Bonds is excludable
from gross income of the owners thereof for federal income tax purposes under Section 55 of the Code, is
not includable as an item of tax preference in computing the federal alternative minimum tax for individuals
and corporations under the Code but is taken into account in computing an adjustment used in determining
the federal alternative minimum tax for certain corporations. Failure by the Authority to comply with one
or more of such covenants could cause interest on the 2006 Bonds to not be excludable from gross income
under Section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the
2006 Bonds.
In the further opinion of Bond Counsel, interest on the 2006 Bonds is exempt from California
personal income taxes.
Bondowners should also be aware that the ownership or disposition of, or the accrual or receipt of
interest on, the 2006 Bonds may have federal or state tax consequences other than as described above. Bond
Counselexpresses no opinion regarding any federal or state tax consequences arising with respect to the 2006
Bonds other than as expressly described above.
The form of Bond Counsel’s opinion is set forth in Appendix F.
No Litigation
At the time of delivery of the 2006 Bonds, the Authority and the District will certify that there is no
action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court or regulatory
agency, public board orbody pending with respect to which they have been served with process or threatened
against the Authority or the District affecting their existence, or the titles of their respective officers, or
seeking to restrain or to enjoin the issuance, sale or delivery of the 2006 Bonds, the application of the
proceeds thereof in accordance with the Fiscal Agent Agreement, or the collection or application of the
Special Tax to pay the principal of and interest on the 2006 Bonds, or in any way contesting or affecting the
validity or enforceability of the 2006 Bonds, or the Fiscal Agent Agreement or any action of the Authority
or the District contemplated by either of said documents, or in any way contesting the completeness or
accuracy of this Official Statement or any amendment or supplement hereto, or contesting the powers of the
Authority or the District or their authority with respect to the 2006 Bonds or any action of the Authority or
the District contemplated by either of said documents, nor, to the knowledge of the Authority, is there any
basis therefor.
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No General Obligation of the Authority or the District
The 2006 Bonds are not general obligations of the Authority or the District, but are limited
obligations payable solely from proceeds of the Special Tax and proceeds of the 2006 Bonds, including
amounts in the Subaccounts within the Reserve Fund (including amounts available under the Reserve Surety
credit thereto), the Special Tax Fund and the Bond Fund. Any tax levied for the payment of the 2006 Bonds
shall be limited to the Special Taxes to be collected within the jurisdiction of the District.
RATINGS
Ratings on Insured Bonds
Standard & Poor’s Ratings Services has assigned a rating of AAA, to the Series A Bonds with the
understanding that, upon delivery of the Series A Bonds, the Policy will be issued with respect to such
maturities of the Series A Bonds by Ambac Assurance. Absent the Policy, the underlying rating for the
Series A Bonds is “BBB” by Standard & Poor’s. Such ratings reflect only the views of such organization
and any desired explanation of the significance of such ratings should be obtained from the rating agency
furnishing the same. Generally, a rating agency bases it rating on the information and materials furnished
to it and on investigations, studies and assumptions of its own. Some information provided to the rating
agency by the District may not appear in this Official Statement. There is no assurance such ratings will
continuefor any given period of time or that such ratings will not be revised downward or withdrawn entirely
by the rating agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such
downward revision or withdrawal of such ratings may have an adverse effect on the market price for the
Series A Bonds.
The District has not made, and does not contemplate making, application to any rating agency for
the assignment of a rating for the Series B Bonds.
UNDERWRITING
The Series A Bonds are being purchased by Stone & Youngberg LLC at a purchase price of
$14,064,604.82 (which represents the aggregate principal amount of the Series A Bonds ($14,470,000.00),
less net original issue discount of $244,602.45 and less an underwriter’s discount of $160,792.73) and the
Subordinate Series B Bonds are being purchased by Stone & Youngberg LLC at a purchase price of
$3,025,657.98 (which represents the aggregate principal amountof the Series B Bonds ($3,075,000.00), less
original issue discount of $2,447.25 and less an underwriter’s discount of $46,894.77).
The purchase agreement relating to the 2006 Bonds provides that the Underwriter will purchase all
of the 2006 Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms
and conditions set forth in such purchase agreement.
The Underwriter may offer and sell 2006 Bonds to certain dealers and others at prices lower than
the offering price stated on the inside cover page hereof. The offering prices may be changed from time to
time by the Underwriter.
PROFESSIONAL FEES
Fees payable to certain professionals in connection with the 2006 Bonds, including the Underwriter,
Quint & ThimmigLLP, as Bond Counsel, McFarlin & Anderson LLP, as Disclosure Counsel, and U.S. Bank
National Association, as the Fiscal Agent, are contingent upon the issuance of the 2006 Bonds. The fees of
Psomas, as Special Tax Consultant, and Fieldman, Rolapp & Associates, as Financial Advisor to the
Authority, are in part contingent upon the issuance of the 2006 Bonds.
61
MISCELLANEOUS
References are made herein to certain documents and reports which are brief summaries thereof
which summaries do not purport to be complete or definitive and reference is made to such documents and
reports for full and complete statement of the contents thereof.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so
stated, are intended as such and not as representatives of fact. This Official Statement is not to be construed
as a contract or agreement between the District or the Authority and the purchasers or owners of any of the
2006 Bonds.
The execution and delivery of the Official Statement by the Authority for the District has been duly
authorized by the Authority on behalf of the District.
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 01-2
(HARVESTON)
By:
62
/s/ Shawn Nelson
Shawn Nelson, Executive Director,
Temecula Public Financing Authority, on behalf
of the District
APPENDIX A
GENERAL INFORMATION ABOUT THE CITY OF TEMECULA
The following information is provided for background purposes only. The City of Temecula has
no liability whatsoever with respect to the 2006 Bonds or the Fiscal Agent Agreement.
General Information
Following avote by the residents onNovember 7, 1989, the City incorporated under the general laws
of the State of California on December 1, 1989. The City has a Council-Manager form of government, and
is represented by the five members of the City Council who are elected at-large to serve a four-year term.
The Mayor is selected annually by the members of the City Council.
The Temecula Community Services District (TCSD) was also established in 1989. The TCSD is
responsible for providing parks and recreation services to the citizens of Temecula, as well as street lighting
and slope maintenance in certain areas of the district.
Other governmental entities, such as the State of California, the County and various school, water
and other districts, also provide various levels of service within the City of Temecula. However, the
Temecula City Council does not have a continuing oversight responsibility over these other governmental
entities.
Located on Interstate 15, the City of Temecula is the 10th largest city in the Inland Empire and the
4th largest in Riverside County (as of January, 2006), encompassing 30.15 square miles. The City of
Temecula is 85 miles southeast of Los Angeles, 55 miles north of San Diego, 61 miles southeast of Orange
County,and 20 miles inland from the cities of San Juan Capistrano and Oceanside. The City’s approximately
93,923 residents are offered a broad range of housing options from apartments to luxury customhomes, with
the median housing price at $521,750.
Population
From 1995 - 2006, the City’s population grew from 39,284 to 93,923, a gain of 54,639 or 139.1%.
In this same period, Riverside County added 597,759, a gain of 44.1%.
CITY OF TEMECULA AND COUNTY OF RIVERSIDE POPULATION
FROM 1995 TO 2006
Temecula
Riverside County
Year
1995
1996
1997
1998
1999
2000
2001*
2002
2003
2004
2005**
2006
*
**
Population
39,284
41,850
43,760
46,564
48,828
53,791
61,803
73,164
75,996
78,841
81,921
93,923
% Change
9.8
6.5
4.6
6.4
4.9
10.2
14.9
18.4
5.3
3.7
3.9
14.7
Population
1,355,571
1,381,781
1,400,384
1,441,237
1,473,307
1,522,855
1,590,473
1,654,220
1,726,754
1,807,858
1,888,311
1,953,330
% Change
–
1.9%
1.3
2.9
2.2
3.4
4.4
4.0
4.4
4.7
4.5
3.4
Increase includes Vail Ranch annexation.
Increase includes Redhawk annexation which added approximately 9,475 individuals, effective June 30, 2005.
________________
Source: California Department of Finance.
A-1
Construction Activity
The following table shows a five year history of construction activity in the City.
CITY OF TEMECULA
BUILDING PERMITS AND VALUATIONS
2001 – 2005
2001
2002
2003
2004
2005
$127,823,375
$100,516,115
$194,699,509
$185,041,089
$261,657,164
39,602,913
43,487,229
36,087,001
56,658,233
73,749,612
$167,426,288
$144,003,344
$230,786,510
$241,699,322
$335,406,776
944
650
1,271
888
996
0
0
142
408
360
944
650
1,413
1,296
1,356
Valuation:
Residential
Non-residential
Total
Residential Units:
Single-family
Multiple-family
Total
____________________
Source: Construction Industry Research Board.
The following table shows historical commercial and residential construction and property values.
CITY OF TEMECULA
COMMERCIAL AND RESIDENTIAL CONSTRUCTION AND PROPERTY VALUES
1995 – 2005
Commercial Construction(1)
Fiscal Year
Number
of Units
Value
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
162
136
202
203
337
437
265
252
304
277
116
$29,221
23,572
32,863
66,226
159,286
52,497
39,511
51,686
41,402
61,823
79,578
Residential Construction(1)
Number
of Units
968
987
857
835
1,384
1,179
1,606
938
1,162
1,472
918
Values in thousands of dollars.
____________________
Source:
(1)
(2)
City of Temecula, Building and Safety Department.
County Land Use Statistical Recap Report.
A-2
Property Values(2)
Value
Commercial
Residential
$85,410
93,674
85,257
105,527
180,840
148,660
169,687
97,773
145,387
179,071
241,322
$1,466,641
1,478,230
1,347,000
1,321,044
1,378,364
1,524,091
1,935,537
2,183,862
2,633,661
2,711,397
2,835,143
$1,539,257
1,677,720
1,856,203
1,958,706
2,067,549
2,303,303
2,627,716
3,017,148
4,127,318
4,808,116
5,488,914
Economic Condition
Temecula’s economic base is anchored by a number of firms specializing in biomedical technology
and supplies, high technology controllers and semi-conductors, among others. The City’s retail base is also
experiencinggrowth and is home to several auto dealers including Honda, Toyota andNissan. The following
tables set forth major manufacturing and non-manufacturing employers:
CITY OF TEMECULA
MAJOR MANUFACTURING EMPLOYERS
(As of November, 2005)
Employer
Guidant Corporation
International Rectifier/Hexfet
Channell Commercial Corp.
Milgard Manufacturing
Bianchi International
Opto 22 Inc.
Chemicon International
Plant Equipment, Inc.
Magnecomp Corporation
Solid State Stamping
Tension Envelope
Molding International & Engineering
___________________
Approximate
No. of Employees
2,354
700
344
325
225
205
201
200
118
110
110
102
Type of Business
Medical equipment
Power semi-conductors
Cable enclosures
Custom windows
Leather goods
Electric/automation controls
Medical products
Telephone equipment
Manufacture computer disks
Manufacture electronic contacts
Envelope manufacturer
Manufacturer
Source: City Finance Department.
CITY OF TEMECULA
MAJOR NON-MANUFACTURING EMPLOYERS
(As of November, 2005)
Employer
Temecula Valley Unified School
District (TVUSD)
Manpower of Temecula
Professional Hospital Supply
Albertsons
Costco Wholesale
City of Temecula
JC Penney Corp.
The Scotts Company
Paradise Chevrolet/Cadillac
Temecula Creek Inn
Macy’s
Southwest Traders
FFF Enterprise, Inc.
____________________
Approximate
No. of Employees
2,608
1,871
850
604
400
315
209
190
184
180
172
170
142
Source: City Finance Department.
A-3
Type of Business
Public school system
Business services
Wholesaler distributor
Supermarket
Wholesale warehouse
City government
Retail
Distributor
Automobile dealer
Hospitality
Retail
Wholesale Distributor
Wholesale Distributor
Sales Tax Revenues
Industrial and business parks offering clean industries and convenient office space provide growing
employment opportunities. The retail community is expanding rapidly with excellent shopping venues
including the regional Promenade Mall, a unique Historic Old Town area, and neighborhood strip centers.
A wide selection of restaurants allows diners to choose between nationally recognized chains or intimate
dining bistros.
CITY OF TEMECULA
SALES TAX HISTORY
Year
*
Amount
1989-90
$632,153
1999-00
$14,009,322
2000-01
$16,321,929
2001-02
$19,237,317
2002-03
$21,572,199
2003-04
$25,392,314
2004-05
$27,802,830
2005-06
$29,200,000*
Budget estimate.
___________________
Source: City of Temecula Finance Department.
CITY OF TEMECULA
PRINCIPAL SECURED PROPERTY OWNERS
FOR THE YEAR ENDED JUNE 30, 2005
Taxpayer
Advanced Cardiovascular System Inc.
International Rectifier Corporation
Temecula Towne Center Associates
Lakha-Aldenwood Properties LLC
Kimco Palm Plaza Limited Partnership
Portofino Development
Starwood Wasserman Temecula
STCA
California Limited Partnership
Solana Ridge LLC
Type of Business
Manufacturing
Manufacturing
Real Estate Development
Real Estate Development
Real Estate Development
Real Estate Development
Property Management
Manufacturing
Real Estate Development
Real Estate Development
____________________
Source: Riverside County Assessor’s Office.
A-4
2005 Assessed
Valuation
(in thousands)
$152,155
128,471
98,285
47,500
41,738
30,428
29,692
29,233
27,264
25,544
$610,313
Percent of
Total Assessed
(Valuation)
2.05%
1.73%
1.33%
0.64%
0.56%
0.41%
0.40%
0.39%
0.37%
0.34%
8.24%
CITY OF TEMECULA
ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY
FOR THE FISCAL YEARS ENDED JUNE 30, 1997 THROUGH 2005
(Values in Thousands)
Fiscal Year
Taxes
Total
Secured and
Unsecured
Exemptions
Veteran
Church, etc.
Net
Assessed
Value
Exemptions
Homeowners
Net Total
Assessed
Value
1997
$3,203,187
$(22,479)
$3,180,911
$(53,023)
$3,127,888
1998
$3,280,066
$(24,432)
$3,255,633
$(56,665)
$3,198,969
1999
$3,446,093
$(24,441)
$3,421,652
$(60,119)
$3,361,533
2000
$3,826,889
$(25,822)
$3,801,068
$(61,464)
$3,739,603
2001
$4,563,217
$(29,676)
$4,533,542
$(64,372)
$4,469,169
2002
$5,201,622
$(33,370)
$5,168,252
$(68,938)
$5,099,314
2003
$6,201,896
$(30,010)
$6,171,886
$(82,926)
$6,088,960
2004
$6,931,291
$(43,142)
$6,888,149
$(92,362)
$6,795,787
2005
$7,794,688
$(53,240)
$7,741,448
$(94,237)
$7,647,211
_____________________
Source: Riverside County Assessor’s Office.
General Information
Industrial Real Estate. The City is part of the Inland Empire’s industrial real estate market. In 1999,
the inland region’s 313 million square feet of gross space absorption set a record. Lee & Associates found
that in June, 2004, the City had 12.5 million square feet of industrial space or 4.0% of the inland area’s
inventory. Temecula’s industrial vacancy rate was 5.0%, representing 633,250 square feet of space. Among
local cities, this ranked tenth,above Moreno Valley (25,890 square feet) andbelow San Bernardino (804,451
square feet).
Agriculture. The climate and soil in the City are particularly favorable for growing avocado, grape,
and citrus crops.
There are currently several agricultural management firms in the Temecula area which manage
agricultural production of thousands of acres of land owned by individual investors, partnerships and
corporations. The agricultural managers apply economies of scale, by combining many small and medium
sized parcels of land as if these parcels were one large ranch.
In addition, a substantial wine industry has been developed in the City and the surrounding area. As
of January, 2006, there were twenty-one (21) wineries which produce wine with locally grown grapes.
Climate. Temecula Valley enjoys a mild Mediterranean climate with year-round temperatures
averaging in the mid 70’s. The weather is comparable to the Napa Valley, as evidenced by a thriving wine
industry, with warm, dry days and cool evenings. Summer-time temperatures, which can average in the mid
80’s or the mid 90’s during the day, are often cooled by afternoon ocean breezes blowing into the valley
through gaps in the Santa Ana foothills to the west. Although separated from the Pacific by the Santa Rosa
range of mountains, the Rainbow Gap funnels the mild beach climate into the valley. Mild winter
temperatures average in the mid 60’s. Yearly average rainfall in Temecula is approximately 14 inches, as
compiled by the Rancho California Water District.
Thequality ofair in the Temecula Valley is consistentlybetter than that of surrounding communities.
Ocean breezes flow through the Rainbow Gap almost every day, sweeping away smog. In the summer,
Pacific winds yield temperatures up to 10 degrees lower than in towns just a few miles away.
A-5
Education. The City is served by Temecula Valley Unified School District, one of the fastest
growing school districts in the State,with 5 high schools (including a continuation school), 6 middle schools,
2 charter schools, 1 home-schooling program, and 17 elementary schools. In addition, there are 9 private
schools and several pre-schools.
The general boundaries extend north to Jean Nicholas Road in French Valley, south to the Riverside
County line, east to Vail Lake, and west to the Temecula city limit. The District covers approximately 150
square miles. Approximately 26,000 students (Grades K-12) are currently enrolled in the District.
The University of California, Riverside has opened an extension center in the City and Mt. San
Jacinto Community College operates a campus ten miles north of the City to serve the growing population.
Temecula began the 2000’s with a well-educated population, and its population trends and school
performance figures have allowed it to maintain that position.
Transportation. Interstate 15 and its connecting arterials provide convenient links to San Diego and
Riverside, Los Angeles (Interstate 10), Orange County (Highway 91) and San Bernardino (Interstate 215).
The French Valley Airport, 4 miles north of Interstate 15 on Winchester Road, accommodates business jets
and commuter airlines.
Housing. Temecula is unique in that its residents are about equidistant from both San Diego and
Orange County via the Interstate 15 freeway. As a result, it is receiving growth impulses from the south as
well as the north, as families spill into the Inland Empire from Southern California’s more congested coastal
counties. Temecula’s rapid population growth represents a relatively new phenomenon in Southern
California. A large number of the City’s new residents have migrated north from San Diego County along
the Interstate 5 freeway. Normally, a Southern California community undergoes rapid growth only when
population spills from Orange or Los Angeles counties. The latest population data shows Temecula with
93,923 residents, as of January 1, 2006, which includes the annexation of the Vail Ranch area in July, 2001
and the Redhawk annexation in June, 2005.
A-6
APPENDIX C
SUPPLEMENTAL APPRAISAL REPORT AND SUMMARY APPRAISAL REPORT
[THIS PAGE INTENTIONALLY LEFT BLANK]
May 11, 2006
Temecula Public Financing Authority
43200 Business Park Dr.
Temecula, CA 92590
Re: Community Facilities District No. 01-2
(Harveston Conversion)
Attn: Genie Roberts
Director of Finance
Dear Ms. Roberts:
This is a Supplemental Report to the Summary Appraisal Report dated February 3, 2006,
with a date of value of January 15, 2006, on the above-referenced Community Facilities
District (CFD). The purpose of this Supplemental Report is to complete a Limited Appraisal
of sufficient adequacy so as to determine if the current minimum market values of the
subject tracts and ownerships are at least as high as the concluded values in the February
2006 appraisal report. The date of value for this Supplemental Report is May 8, 2006. The
considerations of this updated appraisal as well as the conclusions are summarized in the
following paragraphs, and referencing the subject property tracts and ownerships as
discussed in the February 2006 report.
BUILT-OUT TRACTS
Sherbourne
The February 2006 report indicated that the total of the sale prices was $32,335,500
or an average of ±$462,000 for the 70 homes. In addition, 7 resales during 2005
indicated prices of $510,000 to $710,000 or an average of ±$599,000.
During 2006 there has been one closed sale at a price of $560,000, and as of current
date there are 3 pending sales with asking prices of $599,900, $610,000 and
$709,900 or an average of ±$620,000, and a current listing at $629,000. Thus, this
more recent data supports that the conclusion of $32,330,000 in the February 2006
report is still supportable as minimum market value at current date.
Wellsley Court
The February 2006 report indicated that the total of the sale prices for 69 homes plus
the assessed value for one home was $34,041,614 or an average of ±$486,000 for the
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 2
70 homes. In addition, 7 resales during 2005 indicated prices of $549,500 to
$755,000 or an average of ±$625,000.
During 2006 there have been no closed sales thus far. However, as of current date
there are four listings with asking prices of $669,900 to $869,000 or an average of
±$782,000. Thus, this data together with sales data discussed for other subject tracts
supports that the conclusion of $34,040,000 in the February 2006 report is still
supportable as minimum market value at current date.
Easton Place
The February 2006 report indicated that the total of the sale prices for 84 homes plus
the assessed values for 4 homes was $36,173,751 or an average of ±$411,000 for the
88 homes. In addition, 9 resales during 2005 indicated prices of $450,000 to
$555,000 or an average of ±$497,000.
During 2006 there have been two closed sales at prices of $470,000 and $550,000.
In addition there are three current listings with asking prices of $549,900, $559,600
and $620,000 or an average of ±$576,000. Thus, this data supports that the
conclusion of $36,170,000 in the February 2006 report is still supportable as
minimum market value at current date.
Lake Front Cottages
The February 2006 report indicated that the total of the sale prices for 123 homes
plus the assessed values for 16 homes was $58,434,307 or an average of ±$420,000
for the 139 homes. In addition, 5 resales during 2005 indicated prices of $400,000 to
$545,000 or an average of ±$449,000, and the three models sold at prices from
$620,000 to $725,000.
During 2006 there have been 5 closed sales at prices ranging from $460,000 to
$625,000 or an average of ±$541,000. In addition there is a pending sale with an
asking price of $570,000 and 7 current listings with asking prices ranging from
$488,500 to $595,000 or an average of ±$537,000. Thus, this data supports that the
conclusion of $58,430,000 in the February 2006 report is still supportable as
minimum market value at current date.
Chatham
The February 2006 report indicated that the total of the sale prices for 70 homes plus
the assessed values for 8 homes was $44,046,408 or an average of ±$565,000 for the
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 3
78 homes. In addition, 3 resales during 2005 indicated prices of $622,500, $675,000
and $754,000 or an average of ±$684,000.
During 2006 there has been one closed sale at a price of $560,000. In addition there
are three current listings with asking prices of $579,900, $659,000 and $679,900 or
an average of ±$640,000. Thus, this data supports that the conclusion of
$44,040,000 in the February 2006 report is still supportable as minimum market
value at current date.
TRACTS UNDER CONSTRUCTION
Ashville
The February 2006 report indicated that the northerly site had 3 completed-sold
homes, 55 homes under construction from ±30-90% completed, and 2 vacant lots.
The southerly site consisted of 53 vacant lots in a graded blue-top condition. In
addition, the base pricing for the homes ranged from $355,990 to $385,990.
As of current date, the northerly site consists of 43 completed-sold homes and 17
homes under construction that are ±90% completed and with pending sales that are
due to close by the end of May 2006. The southerly site consists of 18 homes under
construction that are ±10% completed and 35 vacant lots that are in a near finished
condition. In addition, the current base pricing ranges from $385,990 to $418,990,
or 8-9% higher than in the February 2006 report.
Based on the substantial amount of home construction and land development work
that has been completed and the many closed sales that have taken place over the
past ±4 months, the current aggregate value of this tract has increased significantly
since the prior January 15, 2006 date of value. Thus, the conclusion of $24,880,000
in the February 2006 report is still supportable as minimum market value at current
date.
Savannah
The February 2006 report indicated that the easterly site had 65 homes under
construction from ±10-40% completed, and vacant land with near finished building
pads for the remaining 28 homes. The westerly site for 69 units was in a graded
blue-top condition with utilities being installed. In addition, 50 homes had been
released for sale with 38 sold and 12 available, and the most recent base pricing for
the homes ranged from $325,900 to $377,900 or an average of ±$349,000.
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 4
As of current date, the easterly site consists of 5 completed-unsold homes (models),
78 homes under construction from ±20-90% completed and vacant land with near
finished building pads for the remaining 10 units. The westerly site consists of
vacant land with graded building pads and with the in-tract streets paved. In
addition, 60 homes have been released for sale with 58 in escrow and 2 still
available, and the first sale closings due to take place by the end of May 2006. The
current base pricing ranges from $344,900 to $392,400 or an average of ±$364,000,
which is 4% higher than in the February 2006 report.
Based on the substantial amount of home construction and land development work
that has been completed, plus the additional sales activity that has taken place over
the past ±4 months, the current aggregate value of this tract has increased
significantly since the prior January 15, 2006 date of value. Thus, the conclusion of
$18,540,000 in the February 2006 report is still supportable as minimum market
value at current date.
Auburn Lane
The February 2006 report indicated that there were 84 completed-sold homes, 9
completed-unsold homes and 26 homes under construction from ±20-90%
completed. In addition, all homes had been released for sale with 16 still available,
and the 9 completed-unsold homes were in escrow and due to close in February
2006.
As of current date, there are 109 completed-sold homes and 10 homes under
construction and due to be completed within several weeks. All 10 of these homes
are in escrow and due to close by the end of May 2006. It is also noted that there has
been one resale in this tract that closed in March 2006 at a price of $530,000, and the
original sale by the builder had closed in April 2005 at a price of $440,000. This
indicates a 20% increase.
Based on the substantial amount of home construction that has been completed and
the many closed sales that have taken place over the past ±4 months, and at least a
slight increase in the home pricing, the current aggregate value of this tract has
increased significantly since the prior January 15, 2006 date of value. Thus, the
conclusion of $45,930,000 in the February 2006 report is still supportable as
minimum market value at current date.
Sausalito
The February 2006 report indicated that there were 86 completed-sold homes, 3
completed-unsold homes and 20 homes under construction from ±60-70%
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 5
completed. In addition, all homes had been released for sale with 10 still available,
the 3 completed-unsold homes had sales that closed on January 20, 2006, and the
most recent base pricing for the homes was $457,990 to $501,990 or an average of
±$485,000.
As of current date, all 109 homes are completed-sold. The last builder sales closed at
prices ranging from $428,000 to $539,000 or an average of ±$493,000. It is also
noted that there are 5 current listings in the tract with asking prices that range from
$467,900 to $593,990 or an average of ±$530,000.
Based on the substantial amount of home construction that has been completed and
the many closed sales that have taken place over the past ±4 months, the current
aggregate value of this tract has increased significantly since the prior January 15,
2006 date of value. Thus, the conclusion of $47,750,000 in the February 2006 report
is still supportable as minimum market value at current date.
Walden
The February 2006 report indicated that there were 67 completed-sold homes, 4
completed-unsold homes and 22 homes under construction from ±70-80%
completed. In addition, all homes had been released for sale with 7 still available,
and the most recent base pricing for the homes was $498,000 to $555,000 or an
average of ±$528,000.
As of current date, there are 92 completed-sold homes and 1 completed-unsold home
which is Plan 3 home that is available at $585,000. The last builder sales of
production homes closed at prices ranging from $502,500 to $690,000 or an average
of ±$574,000. The 3 models closed in January and April 2006 at prices of $625,000,
$650,000 and $700,000. It is also noted that there are 2 current pending sales or
escrows (resales) and a current listing, with asking prices of $559,800, $565,000 and
$585,000.
Based on the substantial amount of home construction that has been completed and
the many closed sales that have taken place over the past ±4 months, as well as at
least a minor increase in the home prices, the current aggregate value of this tract has
increased significantly since the prior January 15, 2006 date of value. Thus, the
conclusion of $46,270,000 in the February 2006 report is still supportable as
minimum market value at current date.
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 6
Charleston
The February 2006 report indicated that there were 4 completed-unsold homes, 25
homes under construction of which 13 were ±30-40% completed and 12 were ±10%
completed, and 77 vacant lots in a near finished condition. In addition, 13 homes
had been released for sale with 6 sold and 7 available, and the most recent base
pricing for the homes ranged from $430,990 to $470,990 or an average of
±$450,000.
As of current date, there are 4 completed-unsold homes, and 25 homes under
construction of which 13 are now ±80-90% completed and 12 are still ±10%
completed, plus 77 vacant lots in a near finished condition. There have been 19
homes released for sale with 7 sold and 12 available. The pricing for the two floor
plans represented in Phase 2A is about $7,000 to $8,000 higher per plan.
Based on the home construction that has been completed over the past ±4 months,
the current aggregate value of this tract would have increased at least slightly. In
addition, as discussed later for Phase 3 – Residential Land, I have concluded that
land values have at least remained stable or increased slightly over the past ±4
months. Thus, the conclusion of $19,910,000 in the February 2006 report is still
supportable as minimum market value at current date.
Aberdeen
The February 2006 report indicated that of the 85 lots within CFD No. 01-2 there
were 3 completed-unsold homes, 16 homes under construction of which 9 were ±6070% completed and 7 were ±30-40% completed, and 66 vacant lots in a near finished
condition. For the overall tract there had been 13 homes released for sale but none
had been sold, and the most recent base pricing for the homes ranged from $492,990
to $522,990 or an average of ±$508,000.
As of current date, there are 3 completed-sold homes, 3 completed-unsold homes, 13
homes under construction of which 6 are ±90-95% completed and 7 are ±60-70%
completed, plus 66 vacant lots in a near finished condition. For the overall tract
there have been 23 homes released for sale with 13 sold (including 5 closed sales of
which 3 are in the CFD) and 10 still available. Three of the five closed sales were at
prices of $548,500 to $580,500 or an average of $566,500 which is significantly
above the base pricing. The most recent base pricing is $501,990 to $528,990 or an
average of ±$516,000 which is slightly above the base pricing as of the February
2006 report.
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 7
Based on the home construction that has been completed over the past ±4 months,
together with the sales activity of closed sales and current escrows, the current
aggregate value of this tract has increased significantly since the prior January 15,
2006 date of value. Thus, the conclusion of $17,950,000 in the February 2006 report
is still supportable as minimum market value at current date.
OTHER PROPERTIES
Phase 3 – Residential Land
The February 2006 report indicated that the site for the attached homes was in mass
graded superpad condition and the individual lots in the other tracts were in graded
blue-top condition with utilities being installed. The attached homes were to be an
average size of 1,713 s.f. with projected average base pricing of $344,000; the homes
on the 2,700 s.f. minimum lots were to be an average size of 1,950 s.f. with projected
average base pricing of $382,000; the homes on the 4,950 s.f. minimum lots were to
be an average size of 3,093 s.f. with projected average base pricing of $510,000; and
the homes on the 5,850 s.f. minimum lots were to be an average size of 3,129 s.f.
with projected average base pricing of $530,000.
As of current date, the site for the attached homes is still in mass graded superpad
condition with various construction trailers, but land development work has taken
place on the sites for the detached homes and three model homes are under
construction. Various of the in-tract streets in the southerly portion of the overall site
have now been paved with various of the 4,950 s.f. and 5,850 s.f. minimum lots now
in a near finished condition, and a sales trailer is open for two of the tracts of homes.
The homes on the 2,700 s.f. minimum lots will be called Emery Place and will range
in size from 1,966 s.f. to 2,316 s.f., or an average of 2,145 s.f. which is larger than
noted above from the February 2006 report. Construction has not yet started on
these homes. The homes on the 4,950 s.f. lots will be called Barrington and will
range in size from 2,434 s.f. to 3,063 s.f., or an average of ±2,847 s.f. which is
smaller than noted above from the February 2006 report. Construction has also not
yet started on these homes.
The homes on the 5,850 s.f. minimum lots will be called Prescott and will range in
size from 2,504 s.f. to 3,667 s.f., or an average of 3,162 s.f., and construction of the
three model homes is ±20-30% completed. Phase 1A consisting of 9 homes was
released for sale on March 18, 2006 with base pricing ranging from $504,900 to
$569,500 or an average of ±$542,000 which is slightly higher than noted above from
the February 2006 report. Phase 2A consisting of 8 homes was released for sale on
April 15, 2006 and the base pricing was increased slightly to $506,900 to $571,500.
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 8
It is also noted that in the February 2006 report the deduction for the remaining costs
to get to finished lots/homesites was a total of $8,851,600 and the current estimate of
remaining costs is ±$7,730,000 or just over $1,120,000 less.
Based on the significant amount of land development work that has been completed
over the past ±4 months, together with the model home construction that is underway
and the slightly higher home pricing as of current date than as projected in the
February 2006 report, the current aggregate value of Phase 3 – Residential Land has
increased since the prior January 15, 2006 date of value.
In terms of the land value, I am aware of only two additional and pertinent sales than
the residential land sales discussed in the February 2006 report. Both of these are
current escrows located in the master-planned community of Sycamore Creek in the
South Corona area, nearby to Data No. 10 that was discussed in the February 2006
report. These pending sales indicate prices of $175,000 per finished lot for a site for
attached homes at a density of 15 units per acre, and $340,000 per finished lot for
8,000 s.f. minimum lots. In general, these prices support a continuing upward value
trend on entitled residential land.
Thus, the conclusion of $63,350,000 in the February 2006 report is still supportable
as minimum market value at current date.
Cape May Apartments
The February 2006 report indicated that 6 buildings with a total of 54 units were
completed, with 41 units leased and occupied as of the January 15, 2005 date of
value. Six more buildings were due to be completed as of February 2006 with the
balance of the units to be completed in April or May 2006 and all construction to be
completed by the end of June 2006. It was estimated that the remaining costs to
complete the project were about $8,000,000.
As of current date, there are 8 buildings with a total of 84 units completed, and about
75 of the units are leased and occupied. Rental rates have been stable over the past
±4 months. It is currently projected that construction will be completed in late July
or early August 2006, and it is expected that stabilized occupancy will be achieved in
Spring 2007. The current estimate of costs remaining to complete the overall project
is about $4,500,000.
Thus, about $3,500,000 of construction costs have been expended over the past ±4
months resulting in 30 more completed units, and 34 more units have been leased
and occupied resulting in less deduction for rent loss until stabilized occupancy has
been achieved. However, the absorption period is now projected by the developer to
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 9
be about 4 to 5 months longer than had previously been projected. Overall, based on
these factors, the value of this property would be significantly higher than as of the
January 15, 2006 date of value. Thus, the conclusion of $29,700,000 in the February
2006 report is still supportable as minimum market value at current date.
Retirement Residence Site
The February 2006 report indicated that this is a vacant site in rough graded and
fairly flat condition that is planned to be developed with the Harveston Retirement
Residence project. As of current date, it is still targeted that construction will start in
June 2006.
Based on the previous discussion for Phase 3 – Residential Land, it is concluded that
residential land values have at least remained stable or increased slightly over the
past ±4 months. In addition, the value conclusion for this property in the February
2006 report was considered to be well on the conservative side. Thus, the conclusion
of $930,000 in the February 2006 report is still supportable as minimum market
value at current date.
Commercial Site/Welcome Center
The February 2006 report indicated that this 2.45-acre site was improved with the
3,493 s.f. Welcome Center building, and that the potential for the property was some
type of commercial re-use of the existing building and additional commercial
development on the excess land. Furthermore, the property had just been listed for
sale on January 23, 2006 at an asking price of $2,900,000.
As of current date, there is a pending sale of this property at a price of $2,600,000
that is due to close in November 2006. The buyer plans to use the existing building
and also build a small multi-tenant retail building on the excess land.
Based on this information, the conclusion of $2,000,000 in the February 2006 report
is still supportable as minimum market value at current date.
Commercial Acreage Site
The February 2006 report indicated that this ownership comprises 111.75 acres of
vacant land in rough graded superpad condition with the potential for commercial
development. As of current date, the land is mostly unchanged, but additional street
construction has taken place on Ynez Rd., southeasterly from Date St., which will
ultimately connect to Winchester Rd. and provide good access to the subject
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 10
property. However, construction of the Date St. interchange with the I-15 Freeway
and the bridge over the freeway is still well off into the future.
A cursory search was made for more recent sales of large commercial acreage sites
in the Temecula and Murrieta areas. Initially, it is noted that in the February 2006
report the first sale discussed was at the westerly corner of Los Alamos Rd. and
Jackson Ave. in Murrieta, and was a current escrow at a price of $9.30 per s.f. on
61.69 acres. This sale did close on March 23, 2006 but the price was $9.68 per s.f.
or slightly higher than had previously been confirmed.
An additional sale that closed on February 10, 2006 is located on the northwest side
of Winchester Rd. between Brumfield St. and Koon St. and extending west to
Pourroy Rd. in unincorporated County area, nearby to the northeast of Murrieta.
This is a 23.8-acre vacant site that sold for $7,750,000 or $7.47 per s.f. and the buyer
reportedly plans to develop a hotel. While this is a much smaller site than the subject
property, the location in an outlying area is far inferior to the subject. However, due
to the much smaller size, the indication at $7.47 per s.f. tends to support a close but
firm upper limit for the subject.
It is also noted that much residential development is continuing to take place in
Harveston and nearby areas of Temecula and Murrieta resulting in growing demand
for commercial development. Furthermore, the subject property has the desirable
factors of being well-located with prominent freeway exposure, and at the planned
freeway interchange.
It is concluded that commercial land values in general have at least remained stable
over the past ±4 months, and this would also particularly apply to the subject
property due to the desirable factors. In addition, the value conclusion for the
subject property in the February 2006 report was considered to be on the
conservative side. Thus, the conclusion of $26,000,000 in the February 2006 report
is still supportable as minimum market value at current date.
OVERALL CONCLUSION
Based on the foregoing, I have concluded that current minimum market values for
each of the 17 individual subject tracts or ownerships, as of May 8, 2006, are at least
as high as the minimum market value conclusions in the February 2006 report.
MS. GENIE ROBERTS
MAY 11, 2006
PAGE 11
As previously stated, this is a Supplemental Report to the Summary Appraisal Report dated
February 3, 2006. Reference is made to that report for the Certification, Assumptions and
Limiting Conditions, definitions, property data, exhibits, valuation and market data.
Sincerely,
Stephen G. White, MAI
(State Certified General Real Estate
Appraiser No. AG013311)
[THIS PAGE INTENTIONALLY LEFT BLANK]
SUMMARY APPRAISAL REPORT
COVERING
Temecula Public Financing Authority
Community Facilities District No. 01-2
(Harveston Conversion)
DATE OF VALUE:
January 15, 2006
SUBMITTED TO:
Temecula Public Financing Authority
43200 Business Park Dr.
Temecula, CA 92590
Attn: Genie Roberts
Director of Finance
DATE OF REPORT:
February 3, 2006
SUBMITTED BY:
Stephen G. White, MAI
1370 N. Brea Blvd., Suite 205
Fullerton, CA 92835
February 3, 2006
Temecula Public Financing Authority
43200 Business Park Dr.
Temecula, CA 92590
Re: Community Facilities District No. 01-2
(Harveston Conversion)
Attn: Genie Roberts
Director of Finance
Dear Ms. Roberts:
In accordance with your request and the City’s authorization, I have completed a Limited
Appraisal of the taxable properties within the above-referenced Community Facilities
District (CFD). The taxable properties include all completed-sold homes, completed-unsold
homes, homes under construction, vacant residential lots and acreage, the vacant retirement
residence site, the commercial site with the Welcome Center, and the vacant commercial
acreage.
The purpose of this appraisal is to estimate the aggregate minimum market value of the as is
condition of all of the taxable property, as segregated by property type, separate tracts of
homes and/or ownership. It is noted that valuation of the completed-sold homes for the
built-out tracts is based on the most recent sale price for each home (original builder sale or
more recent resale), or the assessed value where a sale price was not available. This
appraisal also reflects the proposed public bond financing, with the tax rates to the
homeowners of up to ±1.9%, including special taxes.
Based on the inspections of the properties and analysis of matters pertinent to value, the
following conclusions of minimum market value have been arrived at, subject to the
Assumptions and Limiting Conditions, and as of January 15, 2006:
BUILT-OUT TRACTS
Tract Name
Sherbourne
Wellsley Court
Easton Place
Lake Front Cottages
Chatham
No. Lots
Minimum
Market Value
70
70
88
139
78
$ 32,330,000
$ 34,040,000
$ 36,170,000
$ 58,430,000
$ 44,040,000
113
162
119
$ 24,880,000
$ 18,540,000
$ 45,930,000
TRACTS UNDER CONSTRUCTION
Tract Name
Ashville
Savannah
Auburn Lane
MS. GENIE ROBERTS
FEBRUARY 3, 2006
PAGE 2
Sausalito
Walden
Charleston
Aberdeen
OTHER PROPERTIES
Property Description
Phase 3 – Residential Land
Cape May Apartments
Retirement Residence Site
Commercial Site/Welcome Center
Commercial Acreage Site
109
93
106
92
$
$
$
$
47,750,000
46,270,000
19,910,000
17,950,000
No. DU
or Acs.
382 DU
300 DU
2.29 ac.
2.45 ac.
111.75 ac.
$ 63,350,000
$ 29,700,000
$
930,000
$ 2,000,000
$ 26,000,000
$548,220,000
(FIVE HUNDRED FORTY-EIGHT MILLION TWO HUNDRED TWENTY THOUSAND DOLLARS)
The following is the balance of this 89-page Summary Appraisal Report which includes the
Certification, Assumptions and Limiting Conditions, definitions, property data, exhibits,
valuation and market data from which the value conclusions were derived.
Sincerely,
Stephen G. White, MAI
(State Certified General Real Estate
Appraiser No. AG 013311)
SGW:sw
Ref: 05051
TABLE OF CONTENTS
PAGES
Certification………………………………………………………………. 5
Assumptions and Limiting Conditions…………………………………….. 6-7
Purpose and Use of the Appraisal, Scope of the Appraisal, Date of
Value, Property Rights Appraised, Definitions……………………. 8-9
GENERAL PROPERTY DATA
Location, General Area Description, Description of Harveston.………..… 10-15
BUILT OUT TRACTS……………….…………….………………………….
16-25
ASHVILLE TRACT…………………………….………………..……………
26-32
SAVANNAH TRACT………………………………………………………….
33-37
AUBURN LANE TRACT…………………..…………………….…………...
38-42
SAUSALITO TRACT…………………….……………………...….…………
43-47
WALDEN TRACT………………………….……..……..………….…………
48-52
CHARLESTON TRACT……………………………...….……………………
53-57
ABERDEEN TRACT………………………..………………………………..
58-61
PHASE 3-RESIDENTIAL LAND……………….…………………………..
62-67
CAPE MAY APARTMENTS…………………………………………………
68-72
RETIREMENT RESIDENCE SITE………………………………………….
73-75
COMMERCIAL SITE/WELCOME CENTER…………………………….
76-80
COMMERCIAL ACREAGE SITE…………………………………………..
81-85
ADDENDA
Tabulation of Residential Land Sales……………………………..……… 86
Qualifications of Appraiser………………………………………………. 87-89
4
CERTIFICATION
I certify that, to the best of my knowledge and belief:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, impartial, and unbiased
professional analyses, opinions and conclusions.
3. I have no present or prospective interest in the property that is the subject of this
report, and no personal interest with respect to the parties involved.
4. I have no bias with respect to the property that is the subject of this report or to the
parties involved with this assignment.
5. My engagement in this assignment was not contingent upon developing or reporting
predetermined results.
6. My compensation for completing this assignment is not contingent upon the
development or reporting of a predetermined value or direction in value that favors
the cause of the client, the amount of the value opinion, the attainment of a stipulated
result, or the occurrence of a subsequent event directly related to the intended use of
this appraisal.
7. The reported analyses, opinions and conclusions were developed, and this report has
been prepared, in conformity with the Code of Professional Ethics & Standards of
Professional Appraisal Practice of the Appraisal Institute, which include the Uniform
Standards of Professional Appraisal Practice.
8. I have made a personal inspection of the property that is the subject of this report.
9. No one provided significant professional assistance to the person signing this report,
other than data research and partial report writing by my associate, Kirsten Patterson.
10. The use of this report is subject to the requirements of the Appraisal Institute relating
to review by its duly authorized representatives.
As of the date of this report, I have completed the requirements of the continuing education
program of the Appraisal Institute.
Stephen G. White, MAI
(State Certified General Real Estate
Appraiser No. AG013311)
5
ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal has been based upon the following assumptions and limiting conditions:
1. No responsibility is assumed for the legal description provided or for matters
pertaining to legal or title considerations. Title to the property is assumed to be good
and marketable unless otherwise stated.
2. The property is appraised free and clear of any or all liens or encumbrances unless
otherwise stated.
3. Responsible ownership and competent property management are assumed.
4. The information furnished by others is believed to be reliable, but no warranty is
given for its accuracy.
5. All engineering studies, if applicable, are assumed to be correct. Any plot plans or
other illustrative material in this report are included only to help the reader visualize
the property.
6. It is assumed that there are no hidden or unapparent conditions of the property,
subsoil, or structures that render it more or less valuable. No responsibility is
assumed for such conditions or for obtaining the engineering studies that may be
required to discover them.
7. It is assumed that the property is in full compliance with all applicable federal, state
and local environmental regulations and laws unless the lack of compliance is stated,
described and considered in the appraisal report.
8. It is assumed that the property conforms to all applicable zoning and use regulations
and restrictions unless a nonconformity has been identified, described and considered
in the appraisal report.
9. It is assumed that all required licenses, certificates of occupancy, consents and other
legislative or administrative authority from any local, state or national government or
private entity or organization have been or can be obtained or renewed for any use on
which the value estimate contained in the report is based.
10. It is assumed that the use of the land and improvements is confined within the
boundaries or property lines of the property described and that there is no
encroachment or trespass unless noted in the report.
11. Unless otherwise stated in this report, the existence of hazardous materials, which
may or may not be present on the property, was not observed by the appraiser.
However, the appraiser is not qualified to detect such substances. The presence of
such substances may affect the value of the property, but the value estimated in this
6
ASSUMPTIONS AND LIMITING CONDITIONS, Continuing
appraisal is based on the assumption that there is no such material on or in the
property that would cause a loss in value. No responsibility is assumed for such
conditions or for any expertise or engineering knowledge required to discover them.
The client should retain an expert in this field, if desired.
12. Any allocation of the total value estimated in this report between the land and the
improvements applies only under the stated program of utilization. The separate
values allocated to the land and buildings must not be used in conjunction with any
other appraisal and are invalid if so used.
13. Possession of this report, or a copy thereof, does not carry with it the right of
publication, unless otherwise authorized. It is understood and agreed that this report
will be utilized in the Official Statement, as required for the bond issuance.
14. The appraiser, by reason of this appraisal, is not required to give further consultation
or testimony or to be in attendance in court with reference to the property in question
unless arrangements have previously been made.
SPECIAL ASSUMPTIONS AND LIMITING CONDITIONS
1. Estimates of the remaining costs and fees to get the subject land from its as is
condition to finished single-family residential lots or mass graded superpads
(including costs for all appropriate infrastructure, common area improvements, intract improvements, etc.) have been obtained from the various property ownersbuilders and from the master developer. These costs are integral to the analysis of
the value of the as is condition of the land, and have been relied upon in this
appraisal as being reasonably accurate.
2. This is a Limited Appraisal that has been based on adequate investigation and
analysis for the purpose of estimating the minimum market value of the subject
properties; it is further noted that the values for the completed-sold homes in the
Built-Out Tracts have been based on the most recent sale prices for the homes (some
of which are from several years ago) or the current assessed value where the sale
price was not available.
7
PURPOSE AND USE OF THE APPRAISAL
The purpose of this appraisal is to estimate the aggregate minimum market value of the as is
condition of all of the taxable property in Community Facilities District No. 01-2 (Harveston
Conversion) of the Temecula Public Financing Authority, as segregated by property type,
separate tracts of homes and/or ownership, and reflecting the proposed public bond
financing. This Summary Appraisal Report is to be used as required in the bond issuance.
SCOPE OF THE APPRAISAL
It is the intent of this Limited Appraisal that all appropriate and necessary data considered
pertinent in the valuation of the minimum market value of the subject properties be
collected, confirmed and reported in a Summary Appraisal Report, in conformance with the
Uniform Standards of Professional Appraisal Practice and the guidelines of the California
Debt and Investment Advisory Commission. This has included a general inspection of the
subject properties and the surroundings; review of various maps and documents relating to
the properties and the developments which are existing, under construction or planned;
obtaining of other pertinent property data on the subject properties; obtaining of comparable
land and improved sales from a variety of sources; and analysis of all of the data to the
minimum market value conclusions.
DATE OF VALUE
The date of value for this appraisal is January 15, 2006.
PROPERTY RIGHTS APPRAISED
This appraisal is of the fee simple interest in the subject properties, subject to the special tax
and assessment liens.
DEFINITION OF MARKET VALUE
The most probable price, as of a specified date, in cash or in terms equivalent to cash, or in
other precisely revealed terms for which the specified property rights should sell after
reasonable exposure in a competitive market under all conditions requisite to fair sale, with
the buyer and seller each acting prudently, knowledgeably and for self-interest, and
assuming that neither is under undue duress.
In this appraisal, the analysis is of the “minimum market value” which is intended to be a
conservative estimate of market value that is at least slightly to significantly below what a
probable estimate of market value would be.
DEFINITION OF FINISHED LOT
This term describes the condition of residential lots in a single-family subdivision for
detached homes or the building pads in a development of attached homes in which the lots
8
DEFINITION OF FINISHED LOT, Continuing
or building pads are fully improved and ready for homes to be built. This reflects that the
lots or building pads have all development entitlements, infrastructure improvements
completed, finish grading completed, all in-tract utilities extended to the property line of
each lot or building pad, street improvements completed, common area improvementslandscaping (associated with the tract) completed, resource agency permits (if necessary),
and all development fees paid, exclusive of building permit fees, in accordance with the
conditions of approval of the specific tract map.
DEFINITION OF BLUE-TOP LOT
This term describes residential lots in a single-family subdivision for detached homes in
which the lots and streets have been rough graded, and the offsite infrastructure of streets
and utilities are completed to the tract, but not within the tract.
DEFINITION OF MASS GRADED SUPERPAD
Also referred to as a sheet graded site or superpad, it is a parcel of land for residential or
commercial development which has been rough graded to a fairly flat condition, with the
infrastructure of streets and utilities completed to and along the site. This is similar to a
blue-top lot but it typically refers to a larger acreage parcel.
DEFINITION OF RAW LAND
In this case, the land is entitled for development, but it has not been graded from its raw
condition, and still lacks the necessary infrastructure of streets, utilities, etc.
9
LOCATION MAP
10
GENERAL PROPERTY DATA
LOCATION
The community of Harveston is located to the northeast of the I-15 Freeway, to the
west and southwest of Margarita Rd., and nearby to the northwest of Winchester Rd.
in the City of Temecula.
GENERAL AREA DESCRIPTION
The community of Harveston is located in the northwest part of Temecula, adjacent
to the southeast of the Murrieta city limits. This is a partially developed area, with
nearby surroundings including much residential and commercial development, a high
school, and much remaining undeveloped land.
In the area to the north of Harveston is residential development in the southeast part
of Murrieta, and in the area to the northeast is residential development in both
Murrieta and Temecula. In general, most of the neighborhoods in Murrieta consist
of homes that have been built over the past 9 years, and typically range in size from
about 1,600 s.f. to 3,400 s.f. The nearby neighborhoods in Temecula include homes
similar to the above, and also a large neighborhood with homes built in the late
1980’s, and ranging in size from about 900 s.f. to 1,500 s.f.
In the area to the west/northwest of Harveston, along the northeast side of the I-15
Freeway and located within Murrieta is much undeveloped acreage as well as a
mobilehome park. The undeveloped land is planned for future mixed-use
development. In the area to the south of Harveston is the Winchester Highlands
Business Park, consisting of various large office and industrial buildings. This area
extends southwest to the Freeway and southeast to Santa Gertrudis Creek.
Farther to the south and east of Harveston is a heavily developed commercial
corridor along Winchester Rd. (Hwy. 79 North). This includes a wide range of retail
and office uses, and including The Promenade at Temecula (mall) on the southeast
side of Winchester Rd., between Ynez Rd. and Margarita Rd. North of the
commercial uses and on the west side of Winchester Rd. at Nicolas Rd. is Chaparral
High School.
In summary, the community of Harveston is located in a fairly new and still
developing area on the border of Temecula and Murrieta. The area includes a
substantial amount of nearby retail/shopping facilities and many restaurants, and the
area is also in close proximity to the I-15 Freeway with an interchange at Winchester
Rd.
11
12
DESCRIPTION OF HARVESTON
Overview
Harveston is a master planned community that includes a large residential area
surrounding the 17-acre lake and park in the center of the community, and a ±112acre commercial area at the southwesterly end of the community. Harveston is
planned for a total of 2,036 dwelling units, including 1,395 detached homes, 226
attached homes, a 300-unit apartment complex, and a 115-unit retirement residence.
There is also a private Lake House/Village Club, a park surrounding the lake
connected by a paseo to the 20-acre community park, a child care center, a
community facility, and an elementary school. In addition there will be a 2.45-acre
retail-commercial development in the center of the community on which the
Welcome Center currently occupies a portion of the site.
Phase 1, comprising the northerly end of the community, is nearly complete and will
contain a total of 360 homes, plus the apartment complex and the future retirement
residence. There are four tracts or neighborhoods of homes that are completed and a
fifth neighborhood that is currently under construction. The apartment complex is
partially completed and occupied and the retirement residence will be under
construction in the near future. In addition, Phase 1 includes the completed lake and
Lake Park, the Welcome Center/commercial site, the completed Lake House/Village
Club, the child care center, and the Ysabel Barnett Elementary School.
Phase 2 will comprise 7 different tracts or neighborhoods of homes, containing a
total of 681 homes, and two of these tracts or product types are a carryover from
Phase 1. Two of the 7 tracts are completed and sold-out and 5 are under
construction.
Phase 2 also includes the 20-acre community park which is now
complete and includes a lighted soccer field and two lighted baseball fields.
Phase 2B will comprise two different tracts containing a total of 198 detached
homes, though only 191 of the lots are included within the boundary of CFD No. 012 and included in this appraisal. The models are now complete and construction of
production homes is underway.
Phase 3 will comprise four different tracts
containing a total of 382 homes, including 64 attached homes and 318 detached
homes. The lots are currently in near blue-top condition and construction of homes
will start near the middle of the year. There is also a ±112-acre commercial site at
the southerly end of the community and extending southerly to the I-15 Freeway.
Rough grading of this site is almost complete though the specific development and
timing of construction has not yet been determined.
Streets and Access
The primary access points to Harveston come from Harveston Way and Harveston
School Rd. off of Margarita Rd., and from Lakeview Rd. off of Date St. These three
streets are attractive entrances to the community, and are four-lane streets with
13
DESCRIPTION OF HARVESTON, Continuing
landscaped center median and landscaped parkways on both sides. These are short
streets that connect to Harveston Rd. which is the main circular loop street
throughout the community and is a wide two-lane street with center turn lane, plus
bike lanes on both sides. In addition, there will be access through the southerly part
of the community by Ynez Rd. that will extend northwesterly from Winchester Rd.
but is now only partially completed and does not yet connect with Winchester Rd.
Margarita Rd. is a four-lane street that comes toward Harveston from Winchester
Rd., and curves to the north and northwest around the north end of Harveston and
continues northerly into Murrieta. Date St. extends southwest from Margarita Rd. as
a 6-lane roadway, currently ending just to the south of Ynez Rd. Ultimately this
street is to be extended southerly with an interchange at and a bridge over the I-15
Freeway, but this will likely not occur for a number of years. This will provide
superior access to the commercial acreage at the southerly end of the community as
well as better accessibility for all of Harveston.
Utilities
All utilities are available to the community, and have been or will be installed in the
major streets and in-tract streets as part of the development of the community. The
utilities are provided as follows:
Water:
Sewer:
Electric:
Gas:
Telephone:
Rancho California Water District
Eastern Municipal Water District
Southern California Edison Company
Southern California Gas Company
Verizon
Zoning/General Plan/Approvals
The overall community of Harveston has specific plan approval by SP-13. The
zoning and general plan designations for the subject properties are LM (Low
Medium Density Residential), M (Medium Density Residential), H (High Density
Residential) and SC (Service Commercial). The LM designation generally permits
single family lots from 5,000 s.f. to 10,000 s.f., or a density of 3 to 6 dwelling units
per acre. The M designation permits attached and detached residential development,
with a density of 7 to 12 dwelling units per acre. The H designation permits attached
residential development, with a density of 13 to 20 dwelling units per acre. The SC
designation permits retail uses with a permitted FAR of .25 to 1.5.
Specific approvals for the residential development are by the recorded tract maps on
each of the tracts or neighborhoods. The apartment complex was approved and is
now under construction and nearing completion; the retirement residence has been
approved by the City and construction is anticipated to start in June 2006; the
commercial site with the Welcome Center has a mixed-use overlay over the Medium
14
DESCRIPTION OF HARVESTON, Continuing
Density Residential zoning to permit commercial development; and the commercial
acreage has the Service Commercial zoning and specific plan approvals.
Drainage/Flood Hazard
Drainage is and will be within master-planned facilities throughout the community,
and within each of the individual tracts. The overall community gradually slopes
and terraces down to the south/southeast, with drainage ultimately into the Santa
Gertrudis Creek channel which is nearby to the south and southeast of Harveston.
Per FEMA Flood Insurance Rate Map No. 060742 0005B dated 11/20/96, all of the
Harveston community is located in Zone X, which is outside of the floodplain.
Soil/Geologic Conditions
This appraisal has assumed that there are no abnormal soil or geologic conditions
that would affect the continuing development of the land as occurring and as
planned.
Environmental Conditions
The master developer obtained all necessary environmental permits and approvals
for development of the overall community as has occurred and as planned for the
balance of the land. Thus, this appraisal has assumed that there are no other
environmental conditions, including endangered species or significant habitat,
watercourses or wetlands that would have a negative effect on either the planned
development or the valuation.
Highest and Best Use
The term highest and best use is defined as that reasonable and probable use that will
support the highest present value as defined, as of the effective date of the appraisal.
Alternatively, it is that use from among reasonable, probable and legal alternative
uses, found to be physically possible, legally permissible, appropriately supported,
financially feasible, and which results in the highest land value.
The highest and best use of all of the improved properties is concluded to be for
continuation of the existing uses, indefinitely, and the highest and best use of the
vacant residential land is as planned for the continued development, including the
retirement residence site. The highest and best use of the commercial sites is
discussed later in the report.
15
16
BUILT-OUT TRACTS
INTRODUCTION
The Built-Out Tracts comprise the five tracts of homes in which all of the homes in
each tract were completed and sold (closed sale) as of the January 15, 2006 date of
value for this appraisal. These include three tracts from Phase 1 of Harveston
(Sherbourne, Wellsley Court and Easton Place), one tract with neighborhoods in both
Phases 1 and 2 (Lake Front Cottages) and one tract in Phase 2 (Chatham).
As previously indicated, the minimum market values for the homes in these five
tracts are based on the most recent sale prices for each home or the current assessed
value for the homes where the sale price information was not available. Most of the
sale prices are from the original builder sales which took place from late 2003
through late 2005, but some of the prices reflect more recent resales of the homes
where those have occurred. Thus, since the aggregate values for each of the five
tracts are based on sale prices in which the majority of the prices were negotiated 1
to 2 or more years ago, it is supportable that these aggregate values are well below
current market value, and thus reflect minimum market value.
Following is a brief description of each of the five tracts of homes, together with the
aggregate values indicated by the sale prices or assessed values. The tables for each
tract that provide the Assessor Parcel Numbers (APN) for each home, together with
the total assessed value, recording date of the most recent sale and the sale price (or
assessed value where the sale price was not available) are on following pages.
SHERBOURNE TRACT
This tract is located at the northerly end of Harveston, on the northerly side of
Harveston Dr. at Sherbourne Pl. and Evanston Pl. This tract consists of 70 homes
that were built in 2003 and 2004 by Lennar Homes. The homes range in size from
2,806 s.f. to 3,333 s.f. and are on ±6,000 s.f. minimum lots. The original builder
sales closed from November 2003 through November 2004.
As indicated by the table on a following page, sale prices were available on all of
these homes, and the total of the most recent sale prices is $32,335,500. It is noted
that some of the assessed values are higher than the sale prices, reflecting the annual
increase in the assessed value that would have occurred since the last sale date.
However, the assessed values do not reflect the more recent sales or resales. It is
also noted that the total of the sale prices indicates an average of ±$462,000 for the
70 homes. In contrast, there were 7 indicated resales during 2005 with sale prices of
$510,000 to $710,000 or an average of ±$599,000. Thus, it is evident that the
average of ±$462,000 is conservative and reflects a minimum market value.
The conclusion of value for this tract is rounded to an amount of $32,330,000.
17
WELLSLEY COURT TRACT
This tract is located in two separate areas at the northerly end of Harveston, with one
area on the northwest side of Harveston Dr. at Ann Arbor Pl. and the other area on
the northeast side of Harveston Dr. at Wellsley Ct. This tract consists of 70 homes
that were built in 2003 and 2004 by US Home. The homes range in size from 2,811
s.f. to 3,985 s.f. and are on ±6,800 s.f. minimum lots. The original builder sales
closed from October 2003 through August 2004.
As indicated by the table on a following page, sale prices were available on all but
one of these homes, and the total of the most recent sale prices plus one assessed
value is $34,041,614. It is noted that this total indicates an average of ±$486,000 for
the 70 homes. It is also noted that there were 7 indicated resales during 2005 with
sale prices of $549,500 to $755,000 or an average of ±$625,000. Thus, it is evident
that the average of ±$486,000 is conservative and reflects a minimum market value.
The conclusion of value for this tract is rounded to an amount of $34,040,000.
EASTON PLACE TRACT
This tract is located in two separate areas toward the northerly end of Harveston,
with one area on the southeast side of Harveston Dr. northeast from Newport Rd. and
the other area on the easterly side of Harveston Dr. at Easton Pl. This tract consists
of 88 homes that were built in 2003 and 2004 by Lennar Homes. The homes range
in size from 2,202 s.f. to 2,587 s.f. and are on ±4,700 s.f. minimum lots. Most of the
original builder sales closed from October 2003 through the end of 2004.
As indicated by the table on a following page, sale prices were available on all but
four of these homes, and the total of the most recent sale prices plus four assessed
values is $36,173,751. It is noted that this total indicates an average of ±$411,000
for the 88 homes. It is also noted that there were 9 indicated resales during 2005
with sale prices of $450,000 to $555,000 or an average of ±$497,000. Thus, it is
evident that the average of ±$411,000 is conservative and reflects a minimum market
value.
The conclusion of value for this tract is rounded to an amount of $36,170,000.
LAKE FRONT COTTAGES TRACT
This tract is located in two separate areas in the center part of Harveston, with the
northerly area being north of Lake Front Rd. at Stowe Rd. and the southerly area
being southeast from Harveston Dr. between Balboa Dr. and Pasadena Dr. This tract
consists of 139 homes that were built from 2003 through 2005 by US Home. The
homes range in size from 1,991 s.f. to 2,259 s.f. and are on ±3,000 s.f. minimum lots.
The original builder sales closed from November 2003 through November 2005.
18
LAKE FRONT COTTAGES TRACT, Continuing
As indicated by the table on a following page, sale prices were available on all but 16
of these homes, and the total of the most recent sale prices plus the 16 assessed
values is $58,434,307. It is noted that this total indicates an average of ±$420,000
for the 139 homes. It is also noted that there were 5 indicated resales during 2005
(not including the 3 model homes) with sale prices of $400,000 to $545,000 or an
average of ±$449,000. The 3 model homes resold in October and December 2005 at
prices of $620,000, $715,000 and $725,000. Thus, it is evident that the average of
±$420,000 is conservative and reflects a minimum market value.
The conclusion of value for this tract is rounded to an amount of $58,430,000.
CHATHAM TRACT
This tract is located in the southeasterly part of the residential area of Harveston,
with one area located on the southeasterly side of Harveston Dr. northeast from St.
Augustine Pl. and the other area located on the southerly side of Harveston Dr.
easterly from Chatham Ln. This tract consists of 78 homes that were built in 2004
and 2005 by US Home. The homes range in size from 2,521 s.f. to 3,594 s.f. and are
on ±5,850 s.f. minimum lots. The original builder sales closed from August 2004
through December 2005.
As indicated by the table on a following page, sale prices were available on all but 8
of the homes, and the total of the most recent sale prices or assessed values is
$44,046,408. It is noted that this total indicates an average of ±$565,000 for the 78
homes. It is also noted that there were 3 indicated resales during 2005 with sale
prices of $622,500, $675,000 and $754,000 or an average of ±$684,000. Thus, it is
evident that the average of ±$565,000 is conservative and reflects a minimum market
value.
The conclusion of value for this tract is rounded to an amount of $44,040,000.
19
SHERBOURNE
APN
916-340-013
916-340-014
916-340-015
916-340-016
916-340-017
916-340-018
916-340-019
916-340-020
916-340-021
916-340-022
916-340-023
916-340-024
916-340-025
916-340-026
916-340-027
916-340-028
916-340-029
916-340-030
916-340-031
916-340-032
916-340-033
916-340-034
916-340-035
916-340-036
916-340-037
916-340-038
916-340-039
916-340-040
916-340-041
916-341-011
916-341-012
916-341-013
916-341-014
916-342-001
916-342-002
916-342-003
916-342-004
916-342-005
916-342-006
916-350-001
916-350-002
916-350-003
916-350-004
916-350-005
916-351-001
916-351-002
916-351-003
916-351-004
916-351-005
916-351-006
916-351-007
916-351-008
916-351-009
916-351-010
916-351-011
TOTAL AV
430,440
467,670
442,680
405,960
419,220
465,120
465,650
436,050
468,058
441,660
452,530
453,707
472,260
435,540
435,540
567,500
494,500
465,000
565,000
436,000
468,000
432,000
438,000
466,500
466,000
507,000
447,000
518,000
496,000
417,000
454,638
498,780
448,290
578,000
490,416
565,000
542,334
531,008
495,629
415,140
407,082
408,000
530,000
390,252
408,510
430,919
375,360
410,448
414,770
365,160
407,898
396,780
423,300
405,960
386,580
REC
DATE
8/1/2005
5/12/2004
4/29/2004
4/22/2004
4/23/2004
5/5/2004
5/6/2004
5/28/2004
6/30/2004
6/3/2004
6/23/2004
6/11/2004
6/22/2004
5/7/2004
4/30/2004
10/20/2004
5/31/2005
10/22/2004
11/19/2004
8/20/2004
11/15/2005
8/19/2004
8/24/2004
8/20/2004
8/27/2004
8/31/2004
8/26/2004
8/31/2004
8/31/2004
7/2/2004
6/30/2004
6/22/2004
6/24/2004
11/12/2004
3/2/2005
12/22/2004
11/21/2003
11/18/2004
11/1/2004
11/13/2003
11/13/2003
11/26/2003
8/6/2004
11/14/2003
1/22/2004
1/22/2004
11/26/2003
11/21/2003
11/21/2003
11/25/2003
11/25/2003
6/24/2005
1/27/2004
1/29/2004
1/30/2004
916-351-012
916-351-013
916-351-014
916-351-015
916-351-016
916-351-017
916-352-003
916-352-004
916-352-005
916-352-006
916-352-007
916-352-008
916-352-009
916-352-011
916-352-012
SALE
PRICE/AV
615,000
458,500
434,000
398,000
411,000
456,000
457,000
427,500
459,000
433,000
444,000
445,000
463,000
427,000
427,000
567,500
565,000
465,000
565,000
436,000
710,000
432,000
438,000
466,500
466,000
507,000
447,000
518,000
496,000
417,000
446,000
489,000
439,500
578,000
575,000
565,000
532,000
531,500
496,000
407,000
399,500
400,000
530,000
383,000
400,500
422,500
368,000
402,500
396,000
358,000
400,000
575,500
415,000
398,000
379,000
TOTAL
20
433,500
412,505
452,743
434,520
440,640
417,180
443,877
393,720
423,810
469,278
405,774
460,530
423,896
345,025
530,000
2/20/2004
4/1/2005
2/27/2004
2/27/2004
2/27/2004
7/20/2005
3/11/2004
3/12/2004
3/18/2004
2/3/2004
1/30/2004
2/5/2004
2/10/2004
5/14/2004
9/21/2004
425,000
510,000
444,000
426,000
432,000
640,000
435,500
386,000
415,500
460,500
398,000
451,500
416,000
428,000
530,000
31,542,837
TOTAL
32,335,500
WELLSLEY COURT
APN
916-330-001
916-330-002
916-330-003
916-330-004
916-330-005
916-330-006
916-330-007
916-330-008
916-330-009
916-330-010
916-330-011
916-330-012
916-330-013
916-330-014
916-340-001
916-340-002
916-340-003
916-340-004
916-340-005
916-340-006
916-340-007
916-340-008
916-340-009
916-340-010
916-341-003
916-341-004
916-341-005
916-341-006
916-341-007
916-341-008
916-341-009
916-341-016
916-341-017
916-360-001
916-360-002
916-360-005
916-360-006
916-360-007
916-360-013
916-360-014
916-360-015
916-360-016
916-360-017
916-360-018
916-360-021
916-360-022
916-360-023
916-360-030
916-360-031
916-360-032
916-360-033
916-360-034
916-360-035
916-360-036
916-360-037
TOTAL AV
512,374
484,855
470,355
549,781
453,559
483,107
551,920
442,435
525,287
535,000
634,440
630,000
528,225
463,427
441,660
470,730
460,530
521,284
464,610
426,870
504,559
509,257
520,589
510,048
458,979
524,141
465,120
445,140
451,413
427,191
563,479
461,550
495,342
436,050
490,003
471,852
442,272
482,664
445,230
461,652
441,150
466,140
428,094
453,594
506,634
549,678
513,264
444,904
434,131
419,196
465,305
415,121
456,450
417,227
477,930
REC
DATE
5/25/2004
5/27/2004
5/28/2004
6/3/2004
6/3/2004
6/16/2004
6/17/2004
6/10/2004
6/30/2004
8/20/2004
12/31/2003
7/16/2004
4/16/2004
12/12/2005
4/22/2004
4/23/2004
4/27/2004
4/28/2004
4/30/2004
4/29/2004
5/5/2004
5/5/2004
6/7/2004
5/26/2004
5/11/2004
5/12/2004
5/13/2004
5/14/2004
5/18/2004
5/19/2004
6/2/2005
5/7/2004
4/2/2004
4/2/2004
8/5/2005
10/23/2003
10/29/2003
11/4/2003
2/10/2005
11/14/2003
11/12/2003
11/12/2003
11/17/2003
11/26/2003
12/16/2003
12/17/2003
4/9/2004
4/1/2005
11/26/2003
11/25/2003
11/4/2003
2/2/2004
10/24/2003
10/31/2003
916-360-038
916-361-001
916-361-002
916-361-003
916-361-004
916-361-005
916-361-006
916-361-007
916-361-008
916-361-009
916-361-010
916-361-011
916-361-012
916-361-013
916-361-014
SALE
PRICE/AV
502,500
475,500
461,500
539,500
445,000
474,000
541,500
434,000
515,000
535,500
686,000
630,000
665,000
549,500
433,000
461,500
451,500
511,500
455,500
418,500
495,000
499,500
510,500
500,500
450,000
514,000
456,000
436,500
443,000
419,000
695,000
452,500
495,342
427,500
480,500
755,000
434,000
473,500
436,500
580,000
432,500
457,000
420,000
445,000
497,000
539,000
503,500
436,500
645,000
411,000
456,500
407,000
447,500
409,500
469,000
TOTAL
21
429,439
427,686
521,322
450,330
446,931
390,660
406,191
470,220
468,690
446,007
490,620
475,320
476,340
176,019
433,500
10/29/2003
12/19/2003
12/23/2003
12/30/2003
1/16/2004
1/23/2004
1/14/2004
4/7/2004
4/9/2004
3/24/2005
4/14/2004
4/15/2004
4/23/2004
12/13/2005
4/30/2004
421,500
419,500
511,500
441,500
438,500
383,000
398,500
461,000
459,500
575,000
481,000
466,000
467,000
577,272
425,000
33,015,073
TOTAL
34,041,614
EASTON PLACE
APN
916-331-003
916-331-004
916-331-005
916-331-006
916-331-007
916-331-008
916-331-009
916-331-010
916-331-011
916-331-012
916-331-013
916-331-014
916-331-015
916-331-016
916-331-017
916-331-018
916-331-019
916-331-020
916-331-021
916-331-022
916-331-023
916-331-024
916-331-025
916-331-033
916-331-034
916-332-001
916-332-002
916-332-003
916-332-004
916-332-005
916-332-006
916-332-007
916-332-011
916-332-012
916-332-013
916-332-014
916-332-015
916-332-016
916-332-018
916-332-019
916-332-020
916-353-001
916-353-002
916-353-003
916-353-004
916-353-005
916-353-006
916-353-007
916-353-008
916-353-009
916-353-010
916-353-011
916-353-012
916-353-013
916-353-014
TOTAL AV
331,092
348,840
346,188
354,654
312,732
352,104
376,380
437,000
480,000
434,000
432,000
486,000
504,308
469,975
481,500
463,000
426,000
442,000
483,500
461,000
419,000
435,000
444,500
326,910
355,980
477,362
465,705
362,202
335,784
346,290
337,926
351,900
352,002
358,538
483,000
448,290
421,260
464,202
364,854
354,960
346,494
363,630
385,634
376,023
385,560
429,098
353,940
369,240
384,030
394,000
377,000
397,000
393,704
442,500
419,000
REC
DATE
10/29/2003
11/26/2003
11/26/2003
12/12/2003
12/16/2003
12/19/2003
12/19/2003
6/21/2005
11/8/2004
8/31/2004
11/5/2004
11/5/2004
11/29/2004
11/23/2004
11/30/2004
11/5/2004
12/30/2004
11/17/2004
11/12/2004
11/16/2004
11/19/2004
11/17/2004
11/23/2004
10/17/2003
10/17/2003
11/24/2004
7/7/2005
10/31/2003
10/31/2003
10/31/2005
10/24/2003
10/31/2003
12/31/2003
1/8/2004
9/24/2004
12/4/2003
11/21/2003
11/25/2003
10/17/2003
10/24/2003
1/31/2005
7/8/2005
1/30/2004
2/4/2004
2/6/2004
3/12/2004
3/17/2004
3/18/2004
3/31/2004
7/7/2004
4/1/2005
7/14/2004
7/14/2004
7/16/2004
3/28/2005
916-353-015
916-353-016
916-353-017
916-353-018
916-353-019
916-353-020
916-353-021
916-353-022
916-353-023
916-353-024
916-353-025
916-353-026
916-353-027
916-354-003
916-354-004
916-354-005
916-354-006
916-354-010
916-354-011
916-354-012
916-354-013
916-354-014
916-370-001
916-370-002
916-370-003
916-370-004
916-370-005
916-370-006
916-370-007
916-370-011
916-370-012
916-370-013
916-370-014
SALE
PRICE/AV
325,000
342,000
339,500
348,000
307,000
345,500
369,000
498,000
480,000
434,000
432,000
486,000
504,500
470,000
481,500
463,000
426,000
442,000
483,500
461,000
419,000
435,000
444,500
320,500
349,000
477,500
500,000
355,500
329,500
555,000
331,500
345,000
345,500
352,000
483,000
439,500
414,500
455,500
358,000
348,000
488,000
470,000
378,500
369,100
378,000
421,000
347,000
362,000
376,500
394,000
582,000
397,000
393,909
442,500
582,000
TOTAL
22
430,000
398,000
464,899
447,500
465,000
424,000
404,852
440,000
424,384
416,000
409,708
366,180
390,660
347,820
350,880
349,860
339,257
358,047
224,149
300,846
321,212
138,163
378,930
307,669
407,881
398,820
402,900
392,700
379,950
403,635
420,071
408,591
391,680
7/28/2004
7/23/2004
9/21/2004
6/29/2005
9/17/2004
9/22/2004
9/24/2004
9/30/2004
9/30/2004
7/28/2004
7/30/2004
3/25/2004
3/30/2004
2/27/2004
2/20/2004
2/27/2004
2/13/2004
2/25/2004
2/26/2004
4/2/2004
4/13/2004
6/30/2005
4/2/2004
5/7/2004
5/11/2004
5/24/2004
34,649,035
TOTAL
6/30/2005
5/21/2004
5/20/2005
430,000
398,000
465,000
525,000
465,000
424,000
405,000
440,000
424,500
416,000
410,000
359,000
383,000
341,000
344,000
343,000
333,000
351,500
336,500
353,500
367,500
450,000
371,500
391,000
400,000
391,000
402,900
514,000
372,500
469,000
420,071
408,591
391,680
36,173,751
LAKE FRONT COTTAGES
APN
916-371-005
916-371-006
916-371-007
916-371-008
916-371-009
916-371-010
916-371-011
916-371-012
916-371-013
916-371-014
916-371-015
916-371-016
916-371-017
916-372-001
916-372-002
916-372-003
916-372-004
916-372-005
916-372-006
916-372-007
916-372-008
916-372-009
916-372-010
916-372-011
916-372-012
916-372-013
916-372-014
916-372-015
916-372-016
916-372-017
916-372-018
916-372-019
916-372-020
916-372-021
916-372-022
916-372-023
916-372-024
916-372-025
916-372-026
916-372-027
916-372-028
916-372-029
916-372-030
916-372-031
916-373-001
916-373-002
916-373-003
916-373-004
916-373-005
916-373-006
916-373-007
916-373-008
916-373-009
916-373-010
916-373-011
TOTAL AV
390,364
332,591
338,410
329,036
353,141
360,060
410,000
367,710
362,191
569,874
537,030
518,466
85,928
320,382
324,564
313,446
303,348
325,890
286,926
305,796
306,612
310,882
294,608
313,626
296,820
329,460
334,050
345,270
297,840
312,324
319,260
291,822
313,752
423,300
292,842
337,722
342,189
341,290
380,460
349,350
375,360
314,670
292,740
339,150
452,124
448,290
437,580
429,930
452,370
454,410
406,034
428,498
377,018
387,498
371,382
REC
DATE
6/10/2004
5/28/2004
5/28/2004
5/28/2004
5/28/2004
5/24/2004
12/30/2004
5/19/2004
5/19/2004
10/27/2005
10/17/2005
12/30/2005
11/30/2005
11/21/2003
11/26/2003
11/19/2003
5/14/2004
11/21/2003
5/21/2004
5/21/2004
5/28/2004
3/17/2005
2/27/2004
3/3/2004
3/4/2004
3/5/2004
3/9/2004
4/15/2004
12/3/2003
6/8/2005
9/28/2005
12/10/2003
5/7/2004
12/10/2003
12/31/2003
3/12/2004
3/12/2004
3/16/2004
3/17/2004
3/26/2004
3/19/2004
3/24/2004
3/26/2004
4/9/2004
4/9/2004
4/7/2004
4/9/2004
2/11/2004
2/10/2004
2/6/2004
2/6/2004
2/6/2004
4/21/2005
6/14/2004
916-373-012
916-373-013
916-373-014
916-373-015
916-373-016
916-373-017
916-373-018
916-373-019
916-373-020
916-373-021
916-373-022
916-373-023
916-373-024
916-373-025
916-373-026
916-373-027
916-373-028
916-510-001
916-510-002
916-510-003
916-510-004
916-510-005
916-510-006
916-510-007
916-510-008
916-510-009
916-510-010
916-510-011
916-510-012
916-510-013
916-510-014
916-510-015
916-510-016
916-510-017
916-510-018
916-510-019
916-510-020
916-510-021
916-510-022
916-510-023
916-510-024
916-510-025
916-510-026
916-510-027
916-510-028
916-510-029
916-510-030
916-510-031
916-510-032
916-510-033
916-510-034
916-510-035
916-510-036
916-510-037
916-510-038
916-510-039
916-510-040
SALE
PRICE/AV
383,000
326,500
332,000
323,000
289,227
353,000
410,000
360,500
355,500
725,000
715,000
620,000
566,900
314,500
318,500
307,500
395,000
319,500
286,926
412,000
401,000
384,000
405,000
307,500
291,000
323,000
327,500
338,500
292,000
306,500
440,000
400,000
308,000
415,000
287,500
331,500
335,500
335,000
373,000
342,500
368,000
308,500
287,000
332,500
443,500
439,500
429,000
421,500
443,500
445,500
398,500
420,500
370,000
545,000
512,000
23
419,730
355,980
322,014
294,270
294,066
296,820
335,070
314,820
327,676
307,897
351,390
231,380
345,270
145,802
442,170
385,050
346,800
246,400
240,200
241,200
240,185
241,185
246,385
240,185
241,185
246,400
240,200
246,400
241,200
246,400
240,200
601,142
600,022
336,148
559,500
487,000
544,486
337,148
547,500
345,648
547,313
533,313
524,359
375,648
541,000
486,854
537,642
409,258
392,026
427,135
402,104
415,438
375,648
374,257
402,836
381,843
431,250
4/20/2004
11/7/2003
11/14/2003
10/5/2005
11/13/2003
11/12/2003
2/20/2004
2/26/2004
2/18/2004
2/20/2004
4/30/2004
4/21/2004
4/23/2004
4/15/2004
4/20/2004
4/15/2004
4/29/2004
4/25/2005
5/31/2005
6/17/2005
5/25/2005
6/14/2005
4/29/2005
5/31/2005
6/28/2005
2/15/2005
2/17/2005
2/16/2005
2/15/2005
2/22/2005
3/24/2005
12/30/2004
1/7/2005
12/30/2004
12/29/2004
6/16/2005
5/26/2005
11/30/2004
5/2/2005
12/1/2004
11/19/2004
11/23/2004
11/19/2004
4/29/2005
530,000
349,500
316,000
453,000
288,500
291,500
328,500
309,000
321,500
302,000
344,500
322,500
338,500
514,000
433,500
377,500
340,000
443,000
418,000
423,000
435,500
438,000
447,500
473,500
441,000
473,000
443,000
487,000
461,500
537,000
496,500
601,500
600,022
588,500
559,500
487,000
544,500
516,000
547,500
520,000
547,313
533,500
524,359
560,000
541,000
486,854
538,000
409,258
392,500
427,500
402,500
415,438
448,500
374,257
402,836
381,843
431,250
LAKE FRONT COTTAGES, Continuing
APN
916-510-041
916-510-042
916-510-043
916-510-044
916-510-045
916-510-046
916-510-047
916-510-048
916-510-049
916-510-050
916-510-051
916-510-052
916-510-053
916-510-054
916-510-055
916-510-056
916-510-057
916-510-058
916-510-059
916-510-060
916-510-061
916-511-001
916-511-002
916-511-003
916-511-004
916-511-005
916-511-006
TOTAL
TOTAL AV
388,362
415,462
240,200
241,200
246,400
240,200
246,400
240,200
241,200
246,400
240,200
241,200
240,200
246,385
241,185
240,185
246,385
241,185
246,385
240,185
241,185
337,052
347,552
336,052
337,052
337,052
337,052
REC
DATE
5/6/2005
3/10/2005
3/25/2005
3/4/2005
3/3/2005
3/3/2005
7/15/2005
3/29/2005
3/31/2005
3/31/2005
4/29/2005
5/13/2005
5/24/2005
5/27/2005
5/17/2005
5/10/2005
5/5/2005
5/6/2005
6/2/2005
1/31/2005
1/26/2005
1/21/2005
5/31/2005
3/23/2005
1/21/2005
SALE
PRICE/AV
388,362
415,462
438,500
420,500
468,000
433,000
514,500
472,500
460,000
426,500
388,500
401,000
409,500
432,500
423,500
409,500
442,500
432,000
422,500
412,500
434,000
499,000
517,500
507,000
429,000
424,500
431,000
47,908,650
TOTAL
58,434,307
24
CHATHAM
APN
916-430-001
916-430-002
916-430-003
916-430-004
916-430-005
916-430-006
916-430-007
916-430-008
916-430-009
916-430-010
916-430-011
916-430-012
916-430-013
916-430-014
916-430-015
916-430-016
916-430-017
916-430-018
916-430-019
916-430-020
916-430-021
916-430-022
916-430-023
916-430-024
916-430-025
916-430-026
916-430-027
916-431-001
916-431-002
916-431-003
916-431-004
916-431-005
916-431-006
916-431-007
916-431-008
916-450-001
916-450-002
916-450-003
916-450-004
916-450-005
916-450-006
916-450-007
916-450-008
916-450-009
916-450-010
916-450-011
916-450-012
916-450-013
916-450-014
916-450-015
916-450-016
916-450-017
916-450-018
916-450-019
916-451-001
TOTAL AV
256,251
291,251
282,551
291,251
256,251
291,251
282,551
291,251
290,475
299,475
264,375
290,475
299,475
264,375
290,475
159,175
159,175
159,175
159,175
159,175
159,175
159,175
159,185
151,251
151,251
151,251
151,251
151,251
151,251
256,251
291,251
282,551
256,251
282,551
291,251
151,251
495,000
645,000
705,000
151,251
151,251
151,251
151,251
151,251
151,251
151,251
151,251
391,251
471,251
451,251
471,251
451,251
391,251
471,251
451,251
REC
DATE
3/31/2005
4/29/2005
3/31/2005
4/8/2005
4/13/2005
4/8/2005
4/22/2005
4/13/2005
6/16/2005
4/22/2005
4/29/2005
4/29/2005
6/30/2005
4/29/2005
7/29/2005
8/5/2005
8/5/2005
8/3/2005
8/31/2005
8/11/2005
8/26/2005
8/11/2005
8/19/2005
9/21/2005
8/24/2005
8/18/2005
8/31/2005
6/28/2005
4/1/2005
6/30/2005
3/28/2005
5/6/2005
10/28/2005
8/31/2005
9/27/2005
10/7/2005
10/5/2005
9/30/2005
10/7/2005
10/14/2005
10/17/2005
5/27/2005
2/4/2005
2/18/2005
2/24/2005
6/22/2005
2/28/2005
2/15/2005
916-451-002
916-451-003
916-451-004
916-451-005
916-451-006
916-451-007
916-451-008
916-451-009
916-451-010
916-451-011
916-451-012
916-451-013
916-451-014
916-452-001
916-452-002
916-452-003
916-452-004
916-452-005
916-452-006
916-452-007
916-452-008
916-452-009
916-452-010
SALE
PRICE/AV
505,500
565,000
555,720
592,500
522,000
575,500
530,000
625,500
621,000
640,000
513,500
591,000
599,500
499,000
560,000
600,500
508,465
587,500
529,000
602,000
647,500
595,000
641,000
552,000
602,500
521,000
571,500
600,000
516,000
509,000
575,000
563,040
500,000
536,000
593,000
519,185
622,449
675,000
754,000
506,000
611,000
630,500
559,000
663,000
614,500
608,015
566,000
528,500
576,500
571,000
610,500
557,500
503,000
608,000
535,500
TOTAL
25
471,251
391,251
451,251
471,251
391,251
595,195
582,250
467,915
542,752
563,204
467,100
504,720
547,295
519,000
536,153
544,000
562,945
574,880
512,000
524,500
567,495
467,000
151,251
2/10/2005
3/31/2005
2/24/2005
4/29/2005
1/20/2005
571,500
475,000
520,500
584,500
514,460
585,195
582,750
465,300
542,752
563,204
467,100
504,720
547,295
622,500
536,153
543,795
562,945
574,880
512,000
524,500
567,495
469,990
543,000
26,244,932
TOTAL
44,046,408
11/4/2005
ASHVILLE TRACT
26
ASHVILLE TRACT
PROPERTY DATA
Location
The Ashville tract consists of two separate areas, with the northerly site being
located at the southerly corner of Harveston Dr. and Newport Rd. and extending
southerly to Lake Park, and the southerly site being located at the westerly end of
Lake House Rd., ±350’ west of Harveston Dr., and along the southerly side of Lake
Park.
Record Owner/Ownership History
The current owner of all lots in the northerly site is Greystone Homes, Inc., except
for the three model homes that were sold in August 2005 to GMAC, and the current
owner of all lots in the southerly site is LEN-Inland, LLC.
Legal Description
The northerly site is described as Lots 1 through 60 of Tract No. 31276 and the
southerly site is currently described as Lot 19 of Tract No. 59639-2, and also
described as Lots 1 through 53 of Tentative Tract No. 32105.
Assessor Data
The northerly site comprises Assessor Parcel Nos. 916-570-001 through 060 for
which assessed values are not yet available, and the southerly site comprises
Assessor Parcel No. 916-410-042 with an assessed value of $6,000,876 for land and
$0 for improvements. The tax rate areas are 13-001 and 13-018, with base tax rates
of ±1.05%, but the projected total tax rate to new homeowners is ±1.9% including
the special taxes for the CFD.
No. of Lots/Lot Sizes
The northerly site contains 60 lots and the southerly site will contain a total of 53 lots
upon completion of the grading and site improvements, or a total of 113 lots. The
lots are a minimum size of ±2,500 s.f.
Existing and Planned Development
Both sites are planned to be developed with a tract of detached homes called
Ashville. As of the January 15, 2006 date of value, the northerly site had 3
completed models that had been sold to GMAC, plus there were 55 homes under
construction and 2 vacant lots. Of the 55 homes under construction, 12 were ±90%
completed, 27 were an average of ±60-70% completed and 16 were an average of
27
PROPERTY DATA, Continuing
±30-40% completed. The 53 lots in the southerly site were vacant and in a graded
blue-top condition.
Both tracts are fairly flat with no significant territorial view potential. However, 12
lots in the northerly site and about 10 to 15 lots in the southerly site front along Lake
Park with views of the lake.
There are three floor plans of homes that are described as follows:
Residence One: 1,684 s.f., two-story, with 3 bedrooms, 2½ baths, family room, dining
room, courtyard and a 2-car garage.
Residence Two: 1,915 s.f., three-story, with 3 bedrooms, 2½ baths, bonus room, library,
family room, dining room, courtyard and a 2-car garage.
Residence Three: 2,141 s.f., three-story, with 4 bedrooms, 2½ baths, bonus room, parlor,
family room, dining room, and a 2-car garage.
Base pricing for the homes in Phase 1 ranged from $355,990 to $385,990 and the
most recent base pricing for the homes in Phase 4 ranged from $378,990 to
$413,990. Lot premiums have ranged from $15,000 up to $185,000, with the high
end being for homes fronting on Lake Park with views of the lake.
VALUATION
Method of Analysis
The Sales Comparison Approach is used to estimate the value of the completed-sold
homes (models), considering the prior sale prices together with the current home
pricing for this tract. For the homes under construction, a simplified Cost Approach
is used, in which the value is based on a conservative estimate of costs expended
plus the estimated value of the vacant lot as if in finished condition. The Sales
Comparison Approach is used to estimate the value of the vacant lots, as if in a
finished lot condition, based upon recent sales of residential land or bulk lots from
the general area in comparison to the subject property. Lastly, a deduction is made
for the estimated remaining costs to the builder to get all of the lots from the as is
condition to finished lots.
Analysis of Completed-Sold Homes
These are the 3 completed model homes which sold in August 2005 from the builder
to GMAC at prices of $560,500, $574,750 and $603,250, or a total of $1,738,500.
The current base pricing for these three plans ranges from $378,990 to $413,990 or a
total of ±$1,189,000, plus lot premiums of $185,000 each or a total of $555,000 for
being on Lake Park, resulting in an overall total of $1,744,000. However, this total
would not reflect the significant upgrades and options in the model homes.
28
VALUATION, Continuing
Thus, the conclusion for these 3 completed-sold homes is a conservative total of
$1,740,000.
Analysis of Homes Under Construction
For the 12 homes that were ±90% completed, I have considered an average cost
amount of 90% of ±$60.00 per s.f. as an estimated total for direct costs or $54.00 per
s.f. on the average home size of ±1,910 s.f., or an amount of ±$103,000. This is
added to the estimated finished lot value of $190,000, as discussed next for the
vacant lots, resulting in a total of $293,000 as an average for these 12 homes.
For the 27 homes that were ±60-70% completed, an average cost amount of 65% of
±$60.00 per s.f. total costs or $39.00 per s.f. on the average home size of ±1,910 s.f.
indicates an amount of ±$74,000. This is added to the estimated finished lot value of
$190,000, resulting in a total of $264,000 as an average for these 27 homes.
For the 16 homes that were ±30-40% completed, an average cost amount of 35% of
±$60.00 per s.f. total costs or $21.00 per s.f. on the average home size of ±1,910 s.f.
indicates an amount of ±$40,000. This is added to the estimated finished lot value of
$190,000, resulting in a total of $230,000 as an average for these 16 homes.
Analysis of Finished Lot Value
A search was made in the general Temecula area for recent sales of residential land,
including sales of single-family lots for detached housing as well as sales of land for
relatively low density attached housing. A detailed tabulation of the pertinent
residential land sales data is in the Addenda section of this report. The pertinent
units of comparison to the subject property are on the basis of price per finished lot
and on the basis of a finished lot ratio (ratio of finished lot cost to average projected
base home price). The following discussion and analysis references the 10 sales in
that tabulation.
Sale No. 1 consists of the sale in November 2004 of the lots comprising both the
subject Charleston and Aberdeen tracts as discussed later. The purchase included
106 lots at 3,100 s.f. minimum and 92 lots at 4,250 s.f. minimum, and the price
reflected an amount of $201,000 per finished lot. In comparison to the subject, these
lots are much larger resulting in the potential for the larger and higher-priced homes
that are being built. However, this sale lacks the Lake Park frontage and lake view
premiums to about 21% of the lots in the subject tract. Upward adjustments for time
and potential lot premiums are offset by a downward adjustment for the much larger
lot sizes of this sale, resulting in a close indication for the subject at $201,000 per
finished lot.
29
VALUATION, Continuing
Sale Nos. 2 through 5 consist of the vacant lots and vacant site for the attached
product that comprise Phase 3 as discussed later. These sales closed in November
2005 from Harveston, LLC to MW Housing Partners III, L.P. They are a land bank
entity for Lennar Homes and will ultimately transfer the land to Lennar for
construction of the homes. Though there is a relationship between these parties, the
price for the land was considered by all parties to be at market value.
Sale No. 3 consists of 2,700 s.f. minimum lots that sold at the price reflecting
$174,000 per finished lot. These are fairly similar size lots to the subject, and the
planned homes are similar in size but lower in the projected pricing. In addition, the
location outside of the Harveston Dr. loop is considered to be slightly inferior, and
this sale lacks the Lake Park frontage and lake view premiums. Thus, the indication
at $174,000 per finished lot supports a firm lower limit.
Sale Nos. 4 and 5 consist of much larger lots at 4,950 s.f. and 5,850 s.f. minimum,
and the prices reflected indications of $203,000 and $221,000 per finished lot,
respectively. In addition to the lots being much larger than the subject, the planned
homes are also much larger and higher-priced. However, this is partially offset by
the inferior location and lack of lake views of these two sales, resulting in a close
upper limit for the subject at $203,000 per finished lot but a far upper limit at
$221,000 per finished lot.
Sale No. 6 is located in the master-planned community of Wolf Creek, which is
toward the southerly end of Temecula. This was a sale of 6,000 s.f. minimum lots
that closed in December 2005 from the master developer to Lennar Homes at a price
reflecting $270,000 per finished lot. Lennar plans to build homes ranging in size
from 3,000 s.f. to 3,600 s.f., with projected pricing in the high $500,000’s to the low
$600,000’s. In comparison to the subject, these are much larger lots than the subject,
which results in the potential for the much larger and higher-priced homes. This is
far more than offsetting to the location of the subject with the lake view premiums to
some of the lots. Overall, the indication at $270,000 per finished lot supports a far
upper limit for the subject.
Sale No. 7 is located in the master-planned community of Morgan Hill which is just
south of the southerly City Limits of Temecula along Butterfield Stage Rd. This was
a sale of 6,000 s.f. minimum lots that closed in December 2004 at a price reflecting
$220,500 per finished lot. The buyer planned to build homes ranging from 2,494 to
3,239 s.f. and with projected pricing of $465,990 to $528,990. Current pricing is
from $511,000 to $575,000 which indicates an increase of about 10%. In
comparison to the subject, these are much larger lots that are being developed with
much larger and higher-priced homes. The tax rate is similar though the view
potential is inferior. Overall the larger lot size is more than offsetting to the inferior
view premiums plus an upward time adjustment, and the result is a firm upper limit
for the subject at $220,500 per finished lot.
30
VALUATION, Continuing
Sale No. 8 is located in the master-planned community of Roripaugh Ranch which is
in the north part of Temecula, along Murrieta Hot Springs Rd. and several miles east
of Winchester Rd. (Hwy. 79 North). This was a sale of 113 lots, 5,000 s.f. minimum
size, that closed in January 2006 at a price reflecting $203,700 per finished lot. This
tract will be within a gated area with good recreation amenities, and the buyer plans
homes of 2,385-2,974 s.f. with projected pricing of $429,000 to $489,000. In
comparison to the subject, the lots are much larger in size at 5,000 s.f., resulting in
the larger and higher-priced homes that are planned. The tax rate of ±1.9-2.0% is
similar to the subject, the location in a gated community is superior, but the view
potential is inferior to the subject. Overall, the indication at $203,700 per finished
lot supports a firm upper limit for the subject.
Sale No. 9 is located in the master-planned community of Canyon Hills which is at
the east side of Lake Elsinore, several miles east of the I-15 Freeway. This was a
sale of 131 lots, 4,900 s.f. minimum, which closed in July 2005 at a price reflecting
$192,500 per finished lot. The buyer planned homes of 1,947-2,303 s.f. with
projected pricing of $416,000 to $440,000. In comparison to the subject, the lots are
much larger though the planned homes are only slightly larger and higher-priced.
The tax rate of ±1.9% is similar to the subject, but the location is considered to be
inferior, including the lack of significant view premiums. Overall, considering also a
minor upward time adjustment, the indication at $192,500 per finished lot is a fairly
close indication for the subject.
Sale No. 10 is located in the master-planned community of Sycamore Creek which is
along the westerly side of the I-15 Freeway and in the South Corona area. This was
a sale of 101 lots, 4,000 s.f. minimum, some with good territorial view potential.
The sale closed in October 2004 at the price reflecting $212,428 per finished lot.
The homes were projected to range in size from 2,050 to 2,550 s.f., with projected
base pricing of $415,000 to $445,000, but the current pricing is from $509,000 to
$546,000 indicating an increase of 23%. In comparison to the subject, the lots are
larger at 4,000 s.f. minimum, the overall tax rate of ±1.7-1.9% is similar, but the
location in the South Corona area is considered to be slightly superior and the view
potential is fairly similar to the subject. These superior factors are more than
offsetting to an upward time adjustment, resulting in a firm upper limit for the
subject at ±$212,000 per finished lot.
In summary, on the basis of price per finished lot, the sales data supports a firm
lower limit at $174,000, close indications at $192,500 and $201,000, a close upper
limit at $203,000, firm upper limits from $203,700 to $220,500, and far upper limits
from $221,000 to $270,000.
On the basis of a finished lot ratio, the data indicates the overall range from 36% to
49%. The low end of the range is from Sale No. 3 which is the attached product in
Phase 3 of Harveston, and the high end of the range is from Sale No. 11 which has
31
VALUATION, Continuing
the view potential that results in a higher ratio due to reflecting potential premiums
over and above the base pricing. Since the subject property also has significant
premium potential due to ±21% of the lots with Lake Park frontage and lake views, I
have concluded that the upper end of the range is most supportable for the subject, or
a ratio of 48-49%. This is applied to the average base pricing of ±$396,500 which
results in the following:
$396,500 x .48-.49 = $190,320 to $194,285/finished lot
Based on the foregoing, I have concluded on a conservative value of $190,000 per
finished lot for the subject tract.
Deduction for Costs to get to Finished Lots
Information was not provided by the builder as to an estimate of remaining costs to
get the lots from as is condition to finished condition. The 60 lots in the north part of
the tract have minimal remaining costs since they are in near finished condition and
all building permits but 2 have been pulled thus most fees have been paid. Based on
cost data from other tracts, I have estimated the remaining costs for these 60 lots at
$5,000 per lot, or $300,000. For the 53 lots in the south part of the tract that are in
blue-top condition, data from other tracts would indicate typical costs of about
$19,000 to $22,000 per lot. I have used a cost factor of $25,000 per lot, or
$1,325,000. Thus, the total cost for both portions of the tract is estimated at
$1,625,000.
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
3 completed-sold homes =
12 homes under construction @ $293,000 =
27 homes under construction @ $264,000 =
16 homes under construction @ $230,000 =
55 vacant lots, if in finished condition, @ $190,000 =
Less remaining costs to get to finished lots:
$ 1,740,000
$ 3,516,000
$ 7,128,000
$ 3,680,000
$10,450,000
$26,514,000
- 1,625,000
Value Indication, As Is Condition:
$24,889,000
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Ashville tract, subject to the Assumptions and
Limiting Conditions, and as of January 15, 2006:
$24,880,000
(TWENTY-FOUR MILLION EIGHT HUNDRED EIGHTY THOUSAND DOLLARS)
32
SAVANNAH TRACT
33
SAVANNAH TRACT
PROPERTY DATA
Location
This tract consists of two separate sites, with one located at the southerly corner of
Harveston Dr. and Harveston Way, and the other located at the westerly corner of
Harveston Dr. and Lakeview Rd.
Record Owner/Ownership History
William Lyon Homes, Inc. acquired both sites from Lennar Homes of California,
Inc. in January 2004 at a price of $12,900,000 or $79,630 per unit for 162 dwelling
units, reflecting both parcels being delivered in a mass graded superpad condition.
William Lyon Homes still owns all homes under construction and the remaining
vacant land.
Legal Description
The two parcels comprising the two sites of the overall tract are described as Lots 7
and 17 of Tract No. 29639-2.
Assessor Data
This tract comprises Assessor Parcel Nos. 916-410-008 & 040. The current assessed
values are a total of $13,229,399 for land and $0 for improvements. The tax rate
areas are 13-001 and 13-018, with base tax rates of ±1.05%, but the projected total
tax rate to new homeowners is ±1.9% including the special taxes for the CFD.
No. of Lots/Lot Sizes/Density
The westerly site of the tract consists of a 4.66-acre parcel that is planned for 69
lots/homesites (attached homes) or a density of 14.8 units per acre, and the easterly
site of the tract consists of a 6.43-acre parcel that is planned for 93 lots/homesites
(attached homes) or a density of 14.5 units per acre. This results in a total of 162
lots/homesites on 11.09 acres or an overall density of 14.6 units per acre. The
minimum homesite sizes are indicated to be ±2,000 s.f.
Existing and Planned Development
The land is being developed with a tract of attached homes called Savannah. As of
the January 15, 2006 date of value, there were 65 homes under construction on the
easterly site (including 5 models) and vacant land with near finished building pads
for the remaining 28 homes. The westerly site for 69 units was in a graded blue-top
condition with utilities being installed. Of the 65 homes under construction, 26 were
34
PROPERTY DATA, Continuing
±30-40% completed and 39 were 10-20% completed. Both sites are fairly flat,
providing no significant view potential. However, some of the units in each site will
have limited views across Harveston Dr. toward the lake.
These attached units will be in 4 to 6-unit buildings. There will be four floor plans
which are described as follows:
Davenport (Plan 1): 1,539 s.f., three-story with 2 bedrooms, 2½ baths, loft, living room,
dining area and a 2-car garage.
Jackson (Plan 2): 1,567 s.f., two-story with 2 bedrooms, 2½ baths, den or optional bedroom
3, living room, dining room and a 2-car garage.
Lafayette (Plan 3): 1,671 s.f., two-story with 3 bedrooms, 2½ baths, loft or optional
bedroom 4, living room, dining room, covered front porch and a 2-car garage; optional den in
lieu of bedroom 3.
Thomas (Plan 4): 2,075 s.f., three-story with 3 bedrooms, 3½ baths, bonus room, loft,
living room, dining room, covered front porch and a 2-car garage; optional bedroom 4 in lieu
of loft, optional bedroom 5 in lieu of bonus room.
The base pricing for the first phase was $319,900 for Plan 1, $334,900 for Plan 2,
$349,900 for Plan 3 and $374,900 for Plan 4, or an average of ±$345,000. The most
recent base pricing for Phase 3A is $325,900 for Plan 1, $338,900 for Plan 2,
$353,900 for Plan 3 and $377,900 for Plan 4, or an average of ±$349,000. Lot
premiums typically range from $3,000 to $11,000.
There have been 50 homes released for sale, with 38 sold and 12 still available. The
first sale closings are anticipated to take place in May 2006.
VALUATION
Method of Analysis
This is the same as for the Ashville tract except that there are no completed-sold
homes.
Analysis of Homes Under Construction
For the 26 homes that were ±30-40% completed, I have considered an average cost
amount of 35% of ±$60.00 per s.f. as an estimated total for direct costs or $21.00 per
s.f. on the average home size of ±1,710 s.f., or an amount of ±$36,000. This is added
to the estimated finished lot/homesite value of $138,000, as discussed next for the
vacant lots/homesites, resulting in a total of $174,000 as an average for these 26
homes.
35
VALUATION, Continuing
For the 39 homes that were ±10-20% completed, an average cost amount of 15% of
±$60.00 per s.f. total costs or $9.00 per s.f. on the average home size of ±1,710 s.f.
indicates an amount of ±$15,000. This is added to the estimated finished
lot/homesite value of $138,000, resulting in a total of $153,000 as an average for
these 39 homes.
Analysis of Finished Lot/Homesite Value
This is similar to the analysis of the Ashville tract, except that this subject Savannah
tract consists of smaller lots/homesites (effectively at ±2,000 s.f.), and is an attached
product which also tends to result in a much lower price per lot/homesite paid for the
land. This is evident by Sale No. 3 which consists of the land for an attached product
that will be similar in size and pricing to the subject, but the location is considered to
be slightly inferior and lacks any partial lake view premiums. Thus, the indication at
$128,000 per finished lot/homesite supports a close but firm lower limit for the
subject. The other sales data supports far upper limits for the subject from $174,000
per finished lot and above.
In terms of a finished lot ratio, Sale No. 3 indicates the low end of the range at 36%,
and this is due to being an attached product which tends to result in a relatively lower
price per finished lot/homesite and thus a lower finished lot ratio. However, as
previously discussed, the location is considered to be inferior to the subject and
lacking the potential for partial/limited lake view premiums. Thus, the indication at
36% is a lower limit for the subject. The other data indicate the range of 39% to
49%, but mostly 44-45%. I have concluded on a range of 39-40% for the subject,
and applied to the average base pricing of ±$349,000 the following indication
results:
$349,000 x .39-.40 = $136,110 to $139,600/finished lot (homesite)
Based on the foregoing, I have concluded on a value of $138,000 per finished
lot/homesite for the subject tract.
Deduction for Costs to get to Finished Lots/Homesites
Information provided by the builder is that the remaining total costs to get both sites
from as is condition to finished lot/homesite condition is approximately $5,330,000.
This cost amount includes the remaining land development work of grading, instreets and utilities, common area improvements including tot lots and much
landscaping, walls/fencing, fees and consultants.
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
36
VALUATION, Continuing
26 homes under construction @ $174,000 =
39 homes under construction @ $153,000 =
97 vacant lots/homesites, if in finished condition, @ $138,000 =
Less remaining costs to get to finished lots/homesites:
$ 4,524,000
$ 5,967,000
$13,386,000
$23,877,000
- 5,330,000
Value Indication, As Is Condition:
$18,547,000
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Savannah tract, subject to the Assumptions
and Limiting Conditions, and as of January 15, 2006:
$18,540,000
(EIGHTEEN MILLION FIVE HUNDRED FORTY THOUSAND DOLLARS)
37
AUBURN LANE TRACT
38
AUBURN LANE TRACT
PROPERTY DATA
Location
The westerly portion of this tract is located along the easterly side of Harveston Dr.
from Mendocino Ln. northerly to Pasadena Dr. and the easterly portion of this tract
is located at the northeasterly corner of Harveston Dr. and Auburn Ln., extending
northerly to Sarasota Ln.
Record Owner/Ownership History
The 84 completed-sold homes are owned by various homeowners who purchased the
homes from Lennar Homes of California, Inc. The sales closed from September
2004 through December 2005 at prices of $382,000 to $487,000. The remaining
completed-unsold homes and homes under construction are owned by Lennar Homes
of California Inc. They had acquired the vacant lots for this tract from LEN-Inland,
LLC (a financial holding company for Lennar) who had acquired the lots from
Harveston, LLC in November 2003 as part of a larger bulk transfer of land in Phase
2 of Harveston. The sale price from Harveston, LLC was $12,700,000 or $106,723
per lot, reflecting the lots being delivered in a semi-finished condition.
Legal Description
The 119 lots are described as Lots 1 through 77 of Tract No. 30669-2 and Lots 1 to
42 of Tract No. 30668-2.
Assessor Data
This tract comprises Assessor Parcel Nos. 916-470-001 through 026, 916-471-001
through 016, 916-500-001 through 061 and 916-501-001 through 016. The current
assessed values range from $106,550 to $484,000 for the individual parcels, or an
overall total of $24,436,687. The tax rate areas are 13-001 and 13-018, with base tax
rates of ±1.05%, but the projected total tax rate to new homeowners is ±1.9%
including the special taxes for the CFD.
No. of Lots/Lot Sizes
This tract comprises a total of 119 lots, with 77 lots in the westerly portion and 42
lots in the easterly portion. The lots are a minimum size of 42.5’ x 73’ or ±3,100 s.f.
Existing and Planned Development
The lots are being developed with a tract of detached homes called Auburn Lane. As
of the January 15, 2006 date of value, there were 84 completed-sold homes
39
PROPERTY DATA, Continuing
(including the 3 models), 9 completed-unsold homes and 26 homes under
construction. The 9 completed-unsold homes were in escrow and due to close by
mid-February 2006. Of the 26 homes under construction, 8 were ±80-90%
completed and 18 were an average of ±20-30% completed.
There are three floor plans of homes that are described as follows:
Residence One: 1,767 s.f., two-story, with 3 bedrooms, 2½ baths, living room,
dining room, nook, and a 2-car garage.
Residence Two: 1,913 s.f., two-story, with 3 bedrooms, 2½ baths, living room, family
room, nook, and a 2-car garage.
Residence Three: 2,101 s.f., two-story, with 4 bedrooms, 2½ baths, living room, dining
room, family room, nook, and a 2-car garage.
The final sales release took place in September 2005 and to date all 119 homes have
been released for sale with 16 still available. As of December 18, 2005, the pricing
for the remaining homes ranged from $432,000 to $445,000 for Plan 1, $442,000 to
$475,000 for Plan 2 and $459,000 to $486,000 for Plan 3. The average of the base
pricing was ±$444,000 and the overall average was ±$461,000. Lot premiums in the
final phase ranged from $4,000 to $20,000 and the average amount spent on
options/upgrades was ±$15,000 (flooring and window coverings were the only
options).
VALUATION
Method of Analysis
This is similar to the Ashville tract.
Analysis of Completed-Sold Homes
There were 84 completed-sold homes as of January 15, 2006, and these sales closed
from September 2004 through December 2005 at prices ranging from $382,000 to
$487,000. The most recent 19 sales that closed from October through December
ranged in price from $419,000 to $468,000 or an average of $444,000, and these
prices would have been set about 3 to 6 months ago. As previously indicated, the
most recent pricing for the available homes ranged from $432,000 to $486,000, with
an average base pricing of $444,000 or an overall average price of $461,000. It is
noted that subsequent to the purchase from the builder, many of these homes have
now been further upgraded with interior and yard improvements.
In summary, I have concluded on a conservative average for the 84 completed-sold
homes at $440,000.
40
VALUATION, Continuing
Analysis of Completed-Unsold Homes
There were 9 completed-unsold homes as of January 15, 2006 which were in escrow
and due to close by mid-February 2006. The valuation is similar to the completedsold homes except that a discount of 15% is made to reflect holding and closing costs
plus the bulk ownership by the builder. Thus, the $440,000 average value is
discounted to an average of $374,000 for these 9 completed-unsold homes.
Analysis of Homes Under Construction
For the 8 homes that were ±80-90% completed, I have considered an average cost
amount of 85% of ±$60.00 per s.f. as an estimated total for direct costs or $51.00 per
s.f. on the average home size of ±1,930 s.f., or an amount of ±$98,000. This is added
to the estimated finished lot value of $190,000, as discussed next for the vacant lots,
resulting in a total of $288,000 as an average for these 8 homes.
For the 18 homes that were ±20-30% completed, an average cost amount of 25% of
±$60.00 per s.f. total costs or $15.00 per s.f. on the average home size of ±1,930 s.f.
indicates an amount of ±$29,000. This is added to the estimated finished lot value of
$190,000, resulting in a total of $219,000 as an average for these 18 homes.
Analysis of Finished Lot Value
This is similar to the analysis of the Ashville tract, with the exceptions that these lots
are slightly larger at 3,100 s.f. minimum, but no lots have Lake Park frontage or lake
views. The homes on this subject Auburn Lane tract are only slightly larger than the
Ashville homes, but the average base pricing is about 10% higher. Overall, the sales
data would support a firm lower limit for the subject at $174,000 per finished lot but
a firm upper limit at $203,000 per finished lot.
In terms of a finished lot ratio, within the overall range of 36% to 49%, the
supportable range for the subject property is concluded to be the mid-portion of the
range, or 43-44%. Applied to the average base pricing of $444,000, the following
indication results:
$444,000 x .43-.44 = $190,920 to $195,360/finished lot
Based on the foregoing, I have concluded on a conservative value of $190,000 per
finished lot for the subject tract.
Deduction for Costs to get to Finished Lots
Information provided by the builder is that the remaining total costs to get both sites
from as is condition to finished lot condition is approximately $642,000, with the
majority of the cost ($340,000) being for landscaping.
41
VALUATION, Continuing
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
84 completed-sold homes @ $440,000 =
9 completed-unsold homes @ $374,000 =
8 homes under construction @ $288,000 =
18 homes under construction @ $219,000 =
Less remaining costs to get to finished lots:
$36,960,000
$ 3,366,000
$ 2,304,000
$ 3,942,000
$46,572,000
- 642,000
Value Indication, As Is Condition:
$45,930,000
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Auburn Lane tract, subject to the Assumptions
and Limiting Conditions, and as of January 15, 2006:
$45,930,000
(FORTY-FIVE MILLION NINE HUNDRED THIRTY THOUSAND DOLLARS)
42
SAUSALITO TRACT
43
SAUSALITO TRACT
PROPERTY DATA
Location
The westerly part of this tract is located along the northeasterly side of Harveston
Dr., southerly from Mendocino Ln.; the center part of this tract is located on the
northerly side of Harveston Dr., westerly of Auburn Ln.; and the easterly part of this
tract is located on the northwest side of Harveston Dr., southwesterly from Lake
House Rd.
Record Owner/Ownership History
The 86 completed-sold homes are owned by various homeowners who purchased the
homes from Greystone Homes, Inc. The sales closed from February 2005 through
January 13, 2006 at prices of $416,000 to $526,000. The remaining completedunsold homes and homes under construction are owned by Greystone Homes, Inc.
They had acquired the vacant lots for this tract from LEN-Inland, LLC (a financial
holding company) who had acquired the lots from Harveston, LLC in November
2003 as part of a larger bulk transfer of land in Phase 2 of Harveston. The sale price
from Harveston, LLC was $13,500,000 or $123,853 per lot, reflecting the lots being
delivered in a semi-finished condition.
Legal Description
These 109 lots are described as Lots 1 to 27 of Tract No. 30668, Lots 1 to 31 of Tract
No. 30668-1, and Lots 1 to 51 of Tract No. 30669-1.
Assessor Data
This tract comprises Assessor Parcel Nos. 916-460-001 to 021, 916-461-001 to 010,
916-480-001 to 018, 916-481-001 to 004, 916-482-001 to 005, 916-490-001 to 039
and 916-491-001 to 012. The current assessed values range from $123,387 to
$580,000 for the individual parcels, or a total of $19,780,474 for the overall tract.
The tax rate areas are 13-001 and 13-018, with base tax rates of ±1.05%, but the
projected total tax rate to new homeowners is ±1.9% including the special taxes for
the CFD.
No. of Lots/Lot Sizes
This tract comprises a total of 109 lots, with 51 lots in the westerly portion, 27 lots in
the center portion, and 31 lots in the easterly portion. The lots are a minimum size of
50’ x 85’ or 4,250 s.f.
44
PROPERTY DATA, Continuing
Existing and Planned Development
The lots are planned to be developed with a tract of detached homes called Sausalito.
As of the January 15, 2006 date of value, 86 homes were completed-sold (including
the 3 models), 3 homes were completed-unsold, and 20 homes were under
construction and an average of ±60-70% completed. The three portions of the tract
have a gradual terracing down to the south, and some of the perimeter lots along
Harveston Dr. will have minor territorial views to the south.
There are three floor plans of homes that are described as follows:
Residence One: 1,873 s.f., one-story, with 3 bedrooms, 2 baths, family room, dining room
and a 2-car garage.
Residence Two: 2,452 s.f., two-story, with 4 bedrooms, 2½ baths, tech center, bonus room,
living room, family room, dining room and a 2-car garage with storage space.
Residence Three: 2,537 s.f., two-story, with 4 bedrooms, 2½ baths, tech center, library,
formal dining room, family room, nook and a 2-car garage with storage space.
The most recent base pricing was $457,990 for Plan 1, $494,990 for Plan 2 and
$501,990 for Plan 3, or an average of ±$485,000. The typical lot premiums range
from $3,000 to $30,000 for lot size and location. The typical options and upgrades
average ±$15,000, which was primarily for flooring. All homes had been released
for sale and as of January 15, 2006 there were 10 homes available.
VALUATION
Method of Analysis
This is similar to previous analyses.
Analysis of Completed-Sold Homes
There were 86 completed-sold homes as of January 15, 2006, and these sales closed
from February 2005 through January 13, 2006 at prices ranging from $416,000 to
$526,000. The most recent 22 sales that closed since November 1, 2005 ranged in
price from $430,000 to $526,500 or an average of ±$482,000, and most of these
prices were set in May through July 2005. As previously indicated, the most recent
base pricing ranged from $457,990 to $501,990 or an average of ±$485,000, and
these prices would not include lot premiums as well as options and upgrades. It is
noted that subsequent to the purchase from the builder, many of these homes have
now been further upgraded with interior and yard improvements.
In summary, I have concluded on a conservative average for the 86 completed-sold
homes at $480,000.
45
VALUATION, Continuing
Analysis of Completed-Unsold Homes
There were 3 completed-unsold homes as of January 15, 2006 which were in escrow
and closed on January 20, 2006. However, similar to the analysis of the previous
Auburn Lane tract, a discount of 15% has been applied to the conclusion of $480,000
for the completed-sold homes, resulting in an average value of $408,000 for the 3
completed-unsold homes.
Analysis of Homes Under Construction
For the 20 homes that were an average of ±60-70% completed, I have considered an
average cost amount of 65% of ±$55.00 per s.f. as an estimated total for direct costs
or $35.75 per s.f. on the average home size of ±2,290 s.f., or an amount of ±$82,000.
This is added to the estimated finished lot value of $208,000, as discussed next for
the vacant lots, resulting in a total of $290,000 as an average for these 20 homes.
Analysis of Finished Lot Value
This is similar to the analysis of the previous Auburn Lane tract, with the exceptions
that these lots are larger at 4,250 s.f. minimum, and there are slightly superior lot
premiums with limited views and backing to open space. The larger lots result in the
larger and higher-priced homes on the subject tract than on the Auburn Lane tract.
Overall, the sales data would support a far lower limit for the subject at $174,000 per
finished lot, closer but firm lower limits at $192,500 to $203,000 per finished lot,
and a firm upper limit at $221,000 per finished lot.
In terms of a finished lot ratio, the conclusion is similar to the Auburn Lane tract or a
range of 43-44%. Applied to the average base pricing of $485,000, the following
indication results:
$485,000 x .43-.44 = $208,550 to $213,400/finished lot
Based on the foregoing, I have concluded on a conservative value of $208,000 per
finished lot for the subject tract.
Deduction for Costs to get to Finished Lots
Information was not provided by the builder as to an estimate of remaining costs to
get the lots from as is condition to finished condition. However, similar to the
previous discussion for the subject Ashville tract, all of these lots are in a near
finished condition, and building permits have been pulled on all lots thus all fees
have been paid. I have estimated the remaining costs at $5,000 per lot which
indicates a total of $545,000 for the 109 lots.
46
VALUATION, Continuing
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
86 completed-sold homes @ $480,000 =
3 completed-unsold homes @ $408,000 =
20 homes under construction @ $290,000 =
Less remaining costs to get to finished lots:
$41,280,000
$ 1,224,000
$ 5,800,000
$48,304,000
- 545,000
Value Indication, As Is Condition:
$47,759,000
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Sausalito tract, subject to the Assumptions
and Limiting Conditions, and as of January 15, 2006:
$47,750,000
(FORTY-SEVEN MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS)
47
WALDEN TRACT
48
WALDEN TRACT
PROPERTY DATA
Location
The northerly portion of this tract is located at the southeasterly corner of Harveston
Dr. and Savannah Dr., and the southerly portion of the tract is located at the
southeasterly corner of Harveston Dr. and Augustine Pl.
Record Owner/Ownership History
The 67 completed-sold homes are owned by various homeowners who purchased the
homes from PLC Harveston, LLC (known by the builder name of Christopher
Homes). The sales closed from March through December 2005 at prices of $455,000
to $660,000. The remaining completed-unsold homes and homes under construction
are owned by PLC Harveston, LLC. They had purchased the vacant lots for this tract
in November 2003 from Harveston, LLC. The sale price was $13,500,000 or
$145,161 per lot, reflecting the lots being delivered in a semi-finished condition.
Legal Description
These 93 lots are described as Lots 1 to 36 of Tract No. 30667-1, and Lots 1 to 57 of
Tract No. 30667-3.
Assessor Data
This tract comprises Assessor Parcel Nos. 916-420-001 to 015, 916-421-001 to 021,
916-440-001 to 007, 916-441-002 to 035 and 916-442-001 to 016. The current
assessed values range from $148,479 to $498,479 for the individual parcels, or an
overall total of $21,941,447. The tax rate area is 13-018, with a base tax rate of
±1.05%, but the projected total tax rate to new homeowners is ±1.9% including the
special taxes for the CFD.
No. of Lots/Lot Sizes
This tract comprises a total of 93 lots, with 36 lots in the northerly portion and 57
lots in the southerly portion. The lots are a minimum size of 55’ x 90’ or 4,950 s.f.
Existing and Planned Development
These lots are being developed with a tract of detached homes called Walden. As of
the January 15, 2006 date of value, there were 67 completed-sold homes, 4
completed-unsold homes, and 22 homes under construction which were an average
of ±70-80% completed. Both of the areas of the tract have a gradual terracing down
49
PROPERTY DATA, Continuing
to the south/southeast, and a few of the southeast perimeter lots in both portions of
the tract have minor territorial views.
There are three floor plans of homes that are described as follows:
Residence One: 2,770 s.f., two-story with 4 bedrooms, 2½ baths, den/office, living room,
formal dining room, family room, nook, covered front porch and upstairs deck, and a 2-car
garage with storage, with options of a master retreat and loft.
Residence Two: 3,052 s.f., two-story with 5 bedrooms, 3 baths, living room, family room,
dining room, and a 2-car garage with storage; with options of loft and den/office.
Residence Three: 3,150-3,393 s.f., two-story with 5 bedrooms, 3½ baths, study alcove,
living room, dining room, family room, nook and a 3-car tandem garage with options of
media room, super family room, loft, den/office, and bedroom 6 with bath 4.
The most recent base pricing was $498,000 for Plan 1, $530,000 for Plan 2 and
$555,000 for Plan 3, or an average of ±$528,000. Lot premiums typically range up
to ±$40,000 and options/upgrades typically add ±$50,000. As of January 15, 2006
there were 7 available homes, with pricing (including premiums but not options or
upgrades) of $513,000 for a Plan 1, $700,000 for the Plan 2 model, $580,000 to
$598,000 for the Plan 3 production homes and $750,000 for the Plan 3 model.
VALUATION
Method of Analysis
This is similar to previous analyses.
Analysis of Completed-Sold Homes
There were 67 completed-sold homes as of January 15, 2006, and these sales closed
from March through December 2005 at prices ranging from $455,000 to $660,000.
The most recent 22 sales that closed in November and December 2005 ranged in
price from $502,000 to $660,000 or an average of $568,500. These prices include
premiums as well as options and upgrades, but it is also noted that most of these
prices were set from about 4 to 9 months ago. As previously indicated, the most
recent base pricing ranged from $498,000 to $555,000 or an average of ±$528,000,
not including lot premiums as well as options and upgrades. It is noted that
subsequent to the purchase from the builder, many of these homes have now been
further upgraded with interior and yard improvements.
In summary, I have concluded on a conservative average for the 67 completed-sold
homes at $550,000.
50
VALUATION, Continuing
Analysis of Completed-Unsold Homes
There were the 3 models and another Plan 3 production home that were completed
but not sold as of January 15, 2006. It is noted that the sale of the Plan 1 model
home closed on January 23, 2006 at a price of $625,000, but the price was set in
August or September. As previously indicated, the other two models are available at
prices of $700,000 and $750,000 and the Plan 3 production home was priced at
$580,650, not including options. I have concluded on a conservative average of
$625,000, and then similar to previous analyses have discounted this by 15% to
reflect the bulk ownership by the builder. This results in an average of $530,000 for
these 4 completed-unsold homes.
Analysis of Homes Under Construction
For the 22 homes that were an average of ±70-80% completed, I have considered an
average cost amount of 75% of ±$55.00 per s.f. as an estimated total for direct costs
or $41.25 per s.f. on the average home size of ±2,990 s.f., or an amount of
±$123,000. This is added to the estimated finished lot value of $225,000, as
discussed next for the vacant lots, resulting in a total of $348,000 as an average for
these 22 homes.
Analysis of Finished Lot Value
This is similar to the previous analyses of the Auburn Lane and Sausalito tracts,
except that these lots are larger at 4,950 s.f. minimum resulting in the larger and
higher-priced homes on these lots. Overall, the sales data would support a far lower
limit for the subject at $192,500 to $203,000 per finished lot, a closer indication at
$221,000 per finished lot and a far upper limit at $270,000 per finished lot.
In terms of a finished lot ratio, the conclusion is similar to the Auburn Lane and
Sausalito tracts or a range of 43-44%. Applied to the average base pricing of
$528,000, the following indication results:
$528,000 x .43-.44 = $227,040 to $232,320/finished lot
Based on the foregoing, I have concluded on a conservative value of $225,000 per
finished lot for the subject tract.
Deduction for Costs to get to Finished Lots
Information provided by the builder is that the remaining total costs to get both sites
from as is condition to finished lot condition is approximately $350,000, allocated as
$50,000 for street improvements and $300,000 in landscaping and fencing.
51
VALUATION, Continuing
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
67 completed-sold homes @ $550,000 =
4 completed-unsold homes @ $530,000 =
22 homes under construction @ $348,000 =
Less remaining costs to get to finished lots:
$36,850,000
$ 2,120,000
$ 7,656,000
$46,626,000
- 350,000
Value Indication, As Is Condition:
$46,276,000
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Walden tract, subject to the Assumptions and
Limiting Conditions, and as of January 15, 2006:
$46,270,000
(FORTY-SIX MILLION TWO HUNDRED SEVENTY THOUSAND DOLLARS)
52
CHARLESTON TRACT
53
CHARLESTON TRACT
PROPERTY DATA
Location
The northerly portion of this tract is located on the northwesterly side of Harveston
Dr., southwest from Charleston Ln. and the southerly portion of the tract is located at
the northwest corner of Harveston Dr. and Fairmont Pl. and extending westerly.
Record Owner/Ownership History
Acacia Credit Fund 9-A L.L.C. (Acacia) purchased all of the lots in this tract,
together with the 92 lots of the subject Aberdeen tract, from Harveston, LLC in
November 2004 for a total price of $36,171,685 or $182,685 per lot for the 198 lots.
Acacia is a financing entity for Meritage Homes of California, Inc. (Meritage) and
has subsequently deeded 26 of the lots in this tract to Meritage from August 24, 2005
through January 15, 2006.
Legal Description
The 106 lots in this tract are described as Lots 1 through 37 of Tract Map No. 310532 and Lots 1 through 69 of Tract Map No. 31053.
Assessor Data
This tract comprises Assessor Parcel Nos. 916-530-001 to 008, 916-531-001 to 029,
916-550-001 to 042 and 916-551-001 to 027. The current assessed values range
from $21,220 to $21,332 per lot for land and $0 for improvements, or a total of
$2,252,956 for land and $0 for improvements. The tax rate area is 13-001, with a
base tax rate of ±1.05%, but the projected total tax rate to future homeowners is
±1.9% including the special taxes for the CFD.
No. of Lots/Lot Sizes
This tract comprises a total of 106 lots, with 69 lots in the northerly portion and 37
lots in the southerly portion. The lots are a minimum size of 42.5’ x 73’, or 3,100
s.f.
Existing and Planned Development
The lots are being developed with a tract of detached homes called Charleston. As
of the January 15, 2006 date of value, there were 4 completed-unsold homes
(models), 25 homes under construction and 77 vacant lots. Of the 25 homes under
construction, 13 were ±30-40% completed and 12 were ±10% completed.
54
PROPERTY DATA, Continuing
There are four floor plans that are described as follows:
Residence 1780: 1,780 s.f., two-story, with 3 bedrooms, 2½ baths, living room, family
room, dining room, covered front porch and a 2-car garage, with optional loft in lieu of
bedroom 3.
Residence 1929: 1,929 s.f., two-story, with 3 bedrooms, 2½ baths, living room, dining
room, family room, covered front porch and a 2-car garage, with optional loft in lieu of
bedroom 3.
Residence 2057: 2,057 s.f., two-story, with 3 bedrooms, 2½ baths, loft, living room, dining
room, family room, nook, covered front porch and a 2-car garage, with optional bedroom 4
in lieu of loft.
Residence 2181: 2,181 s.f., two-story, with 3 bedrooms, 2½ baths, loft, living room, formal
dining room, family room, nook, covered front porch and a 2-car garage, with options of den
and bedrooms 4 & 5.
The most recent base pricing which was for the homes in Phase 1 was $430,990 for
Plan 1, $442,990 for Plan 2, $455,990 for Plan 3 and $470,990 for Plan 4, or an
average of ±$450,000. In addition, lot premiums ranged up to ±$11,000. Of the 13
homes released for sale, 6 had been sold and 7 were available, and the first sale
closings are projected for May 2006.
VALUATION
Method of Analysis
This is similar to previous analyses.
Analysis of Completed-Unsold Homes
These are the 4 completed model homes. As previously indicated, the current base
pricing is an average of $450,000, with lot premiums over and above this. In
addition, these homes have significant model upgrades and options. However, I have
concluded on a conservative average of $450,000, less a 15% discount as previously
discussed to reflect the bulk ownership by the builder plus holding costs and profit.
Thus, the indication is an average of $382,000 for these 4 completed-unsold homes.
Analysis of Homes Under Construction
For the 13 homes that were ±30-40% completed, I have considered an average cost
amount of 35% of ±$60.00 per s.f. as an estimated total for direct costs or $21.00 per
s.f. on the average home size of ±1,990 s.f., or an amount of ±$42,000. This is added
to the estimated finished lot value of $194,000, as discussed next for the vacant lots,
resulting in a total of $236,000 as an average for these 13 homes.
55
VALUATION, Continuing
For the 12 homes that were ±10% completed, an average cost amount of 10% of
±$60.00 per s.f. total costs or $6.00 per s.f. on the average home size of ±1,990 s.f.
indicates an amount of ±$18,000. This is added to the estimated finished lot value of
$194,000, resulting in a total of $212,000 as an average for these 12 homes.
Analysis of Finished Lot Value
The analysis is similar to the Auburn Lane tract, as these are similar size lots at 3,100
s.f. minimum and the homes being built are fairly similar in size and pricing. The
conclusion for the Auburn Lane tract was $190,000 per finished lot. It is also noted
that the subject lots sold in November 2004 (Sale No. 1), at an indicated price of
$201,000 per finished lot which included the 92 lots at 4,250 s.f. minimum of the
Aberdeen tract. Thus, an upward time adjustment is offset by a downward
adjustment for the larger lots, resulting in a close indication at $201,000 per finished
lot.
In terms of a finished lot ratio, using the range of 43-44% and average base pricing
of $450,000, the following indication results:
$450,000 x .43-.44 = $193,500 to $198,000/finished lot
Based on the foregoing, I have concluded on a conservative value of $194,000 per
finished lot for the subject tract.
Deduction for Costs to get to Finished Lots
Information provided by the builder is that the remaining total costs to get all lots
comprising this tract from as is condition to finished lot condition is approximately
$2,164,000, including costs for street improvements, utilities, landscaping, fencing,
fees, consulting, etc.
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
4 completed-unsold homes @ $382,000 =
13 homes under construction @ $236,000 =
12 homes under construction @ $212,000 =
77 vacant lots, if in finished condition, @ $194,000 =
Less remaining costs to get to finished lots:
$ 1,528,000
$ 3,068,000
$ 2,544,000
$14,938,000
$22,078,000
- 2,164,000
Value Indication, As Is Condition:
$19,914,000
56
VALUATION, Continuing
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Charleston tract, subject to the Assumptions
and Limiting Conditions, and as of January 15, 2006:
$19,910,000
(NINETEEN MILLION NINE HUNDRED TEN THOUSAND DOLLARS)
57
ABERDEEN TRACT
58
ABERDEEN TRACT
PROPERTY DATA
Location
The northerly portion of this tract is located on the westerly side of Harveston Dr. at
Aberdeen Ln. and the southerly portion of the tract is located on the southwesterly
side of Harveston Dr. between Fairmont Pl. and Dalton Rd.
Record Owner/Ownership History
This is the same as the Charleston tract, and Acacia Credit Fund 9-A L.L.C. has also
deeded 26 lots of this tract (19 lots within this CFD) to Meritage Homes of
California, Inc. from August 24, 2005 through January 15, 2006.
Legal Description
There are 92 lots in this tract but only 85 are within CFD No. 01-2, and these 85 lots
are described as Lots 6 through 11 and 14 through 38 of Tract Map No. 31053-1 and
Lots 1 to 54 of Tract Map No. 31053-3.
Assessor Data
The 85 lots comprise Assessor Parcel Nos. 916-520-006 through 011 & 014 through
023, 916-521-001 through 015, 916-540-001 through 008, 916-541-001 through 030
and 916-542-001 through 016. The current assessed values for each lot range from
$27,337 to $33,630 for land and $0 for improvements, or an overall total for the tract
of $2,684,758 for land and $0 for improvements. The tax rate areas are 13-001 and
13-018, with base tax rates of ±1.05%, but the projected total tax rate to future
homeowners is ±1.9% including the special taxes for the CFD.
No. of Lots/Lot Sizes
This tract comprises a total of 92 lots, of which 85 lots are within CFD No. 01-2 and
are included in this appraisal. The lots are a minimum size of 50’ x 85’, or 4,250 s.f.
Existing and Planned Development
The lots are being developed with a tract of detached homes called Aberdeen. As of
the January 15, 2006 date of value, there were 3 completed-unsold homes (models),
16 homes under construction and 66 vacant lots (comprising the 85 total lots). Of
the 16 homes under construction, 9 were ±60-70% completed and 7 were an average
of ±30-40% completed.
There are three floor plans that are described as follows:
59
PROPERTY DATA, Continuing
Residence 2334: 2,334 s.f., two-story, with 3 bedrooms, 2½ baths, loft, living room, formal
dining room, family room, nook, covered front porch and a 2-car garage, with options of a
master retreat and bedroom 4.
Residence 2569: 2,569 s.f., two-story, with 3 bedrooms, 3 baths, loft, living room, formal
dining room, family room, nook, covered front porch and a 3-car tandem garage, with
options of a master retreat and bedrooms 4 & 5.
Residence 2757: 2,757 s.f., two-story, with 4 bedrooms, 2½ baths, living room, formal
dining room, family room, nook, covered front porch and a 2-car garage with storage, with
options of bonus room, bedroom 5 and bath 3.
The base pricing for the homes in Phase 1 was $492,990 for Plan 1, $507,990 for
Plan 2 and $522,990 for Plan 3, or an average of ±$508,000. In addition, lot
premiums ranged up to ±$20,000. The 13 homes in Phase 1 had been released for
sale but no sales had taken place as of January 15, 2006.
VALUATION
Method of Analysis
This is similar to previous analyses.
Analysis of Completed-Unsold Homes
These are the 3 completed model homes. As previously indicated, the current base
pricing is an average of $508,000, with lot premiums over and above this. In
addition, these homes have significant model upgrades and options. However, I have
concluded on a conservative average of $508,000, less a 15% discount as previously
discussed to reflect the bulk ownership by the builder plus holding costs and profit.
Thus, the indication is an average of $432,000 for these 3 completed-unsold homes.
Analysis of Homes Under Construction
For the 9 homes that were ±60-70% completed, I have considered an average cost
amount of 65% of ±$55.00 per s.f. as an estimated total for direct costs or $35.75 per
s.f. on the average home size of ±2,550 s.f., or an amount of ±$91,000. This is added
to the estimated finished lot value of $215,000, as discussed next for the vacant lots,
resulting in a total of $306,000 as an average for these 9 homes.
For the 7 homes that were an average of ±30-40% completed, an average cost
amount of 35% of ±$55.00 per s.f. total costs or $19.25 per s.f. on the average home
size of ±2,550 s.f. indicates an amount of ±$49,000. This is added to the estimated
finished lot value of $215,000, resulting in a total of $264,000 as an average for
these 7 homes.
60
VALUATION, Continuing
Analysis of Finished Lot Value
This is similar to previous analyses, and considering the subject lots at 4,250 s.f.
minimum, the supportable value range would be well over $200,000 per finished lot
and closer to $220,000 per finished lot. It is also noted that the November 2004 sale
of the subject lots (Sale No. 1) supports a far lower limit at $201,000 per finished lot
due to the date of sale and the inclusion of the 3,100 s.f. lots for the Charleston tract.
In terms of a finished lot ratio, using the range of 43-44% and average base pricing
of $508,000, the following indication results:
$508,000 x .43-.44 = $218,440 to $223,520/finished lot
Based on the foregoing, I have concluded on a conservative value of $215,000 per
finished lot for the subject tract.
Deduction for Costs to get to Finished Lots
Information provided by the builder is that the remaining total costs to all lots
comprising this tract from as is condition to finished lot condition is approximately
$2,138,000, including costs for street improvements, utilities, landscaping, fencing,
fees, consulting, etc.
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
3 completed-unsold homes @ $432,000 =
9 homes under construction @ $306,000 =
7 homes under construction @ $264,000 =
66 vacant lots, if in finished condition, @ $215,000 =
Less remaining costs to get to finished lots:
$ 1,296,000
$ 2,754,000
$ 1,848,000
$14,190,000
$20,088,000
- 2,138,000
Value Indication, As Is Condition:
$17,950,000
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Aberdeen tract, subject to the Assumptions
and Limiting Conditions, and as of January 15, 2006:
$17,950,000
(SEVENTEEN MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS)
61
PHASE 3 – RESIDENTIAL LAND
62
PHASE 3 – RESIDENTIAL LAND
PROPERTY DATA
Location
This property is located at the northerly corner of Date St. and Ynez Rd., extending
northerly along Date St. to just beyond Lakeview Rd. (on the easterly side) and
extending northwesterly along Ynez Rd. to the Temecula City Limits.
Record Owner/Ownership History
The current owner is MW Housing Partners III, L.P. They acquired this property
from Harveston, LLC in November 2005 at a total price of $63,772,536. MW
Housing Partners is a land bank entity for Lennar Homes, and it is planned that there
will be multiple takedowns of lots by Lennar Homes from MW Housing Partners
starting late in the second quarter or early in the third quarter of 2006.
Legal Description
The site for the attached product is described as Lot 1 of Tract No. 29639-2; the tract
of the ±2,700 s.f. minimum lots is described as Lots 1 through 29 of Tract No. 32436
and Lots 1 through 47 of Tract No. 32436-1; the tract of the 4,950 s.f. minimum lots
is described as Lots 1 through 60 of Tract No. 32437-1 and Lots 1 through 70 of
Tract No. 32437-2; and the tract of the 5,850 s.f. minimum lots is described as Lots 1
through 63 of Tract No. 32437 and Lots 1 through 49 of Tract No. 32437-3.
Assessor Data
The overall site comprises Assessor Parcel Nos. 916-410-001 & 003 through 007.
The current assessed values total $11,122,713 for land and $0 for improvements.
The tax rate area is 13-001, with a base tax rate of ±1.05%, but the projected total tax
rate to future homeowners is ±1.9% including the special taxes for the CFD.
No. of Lots/Lot Sizes/Density
The property comprising Phase 3 consists of the following:
Planning
Area
No.
Lots/Units
5
1&2
3A & 3B
4A & 4B
64
76
130
112
382
Minimum Lot
Size or Density
7.6/acre (attached)
2,700 s.f. (cluster)
4,950 s.f. (55 x 90)
5,850 s.f. (65 x 90)
63
PROPERTY DATA, Continuing
Planned Development/Status of Land
Planning Area 5 is an 8.37-acre site that is planned to be developed with 64 attached
units, indicating a density of 7.6 units per acre. It is a triangular-shaped site which
results in a relatively low density for an attached product. The attached homes are
planned to average 1,713 s.f. in size, with projected average base pricing of
$344,000.
Planning Areas 1 and 2 have been subdivided into 76 lots, 2,700 s.f. minimum size.
These lots are planned to be developed with detached cluster-style homes that are to
be an average size of 1,950 s.f., with projected average base pricing of $382,000.
Planning Areas 3A and 3B have been subdivided into 130 lots, 4,950 s.f. minimum
size. These lots are planned to be developed with detached homes that are to be an
average size of 3,092 s.f., with projected average base pricing of $510,000.
Planning Areas 4A and 4B have been subdivided into 112 lots, 5,850 s.f. minimum
size. These lots are planned to be developed with detached homes that are to be an
average size of 3,129 s.f., with projected average base pricing of $530,000.
As of the January 15, 2006 date of value, the site for the attached homes was in mass
graded superpad condition, and the individual lots in the other tracts were in graded
blue-top condition with utilities being installed.
VALUATION
Method of Analysis
This is similar to previous analyses.
Analysis of Finished Lot/Homesite Value
Planning Area 5: Sale No. 2 was the November 2005 sale of this site at a price
reflecting $128,000 per finished lot/homesite, and this is the best current indication
for this property.
The sites for the subject Savannah tract sold in January 2004 at a price reflecting
$113,000 per finished lot/homesite. The attached homes in the Savannah tract are
fairly similar in size to the attached homes planned on this subject property, and the
pricing is also fairly similar, but the location of the Savannah tract is superior,
including minor or partial lake views to some of the homes. Thus, an upward time
adjustment of at least 30% results in a firm upper limit for the subject at ±$147,000
per finished lot/homesite.
64
VALUATION, Continuing
A site at the northwest corner of McElwain Rd. and Sierra Ln. in Murrieta sold in
August 2004 at a price reflecting ±$95,000 per finished lot/homesite. This is a 15.6acre site that was planned for 198 attached homes, indicating a density of 12.7 units
per acre, and the attached homes were to range in size from 1,031 s.f. to 1,896 s.f.
This is a higher density than the subject project and the units are much smaller in
size. Thus, an upward time adjustment of at least 25% supports a firm lower limit
for the subject at ±$119,000 per finished lot/homesite.
In summary, the concluded value for this site is $128,000 per finished lot/homesite.
Planning Areas 1 and 2: Sale No. 3 was the November 2005 sale of these lots at a
price reflecting $174,000 per finished lot. This sale also indicated a finished lot ratio
of 44% which is considered to be supportable and has been used in previous
analyses.
Sale No. 2 supports a far lower limit at $128,000 per finished lot due to being an
attached product and at a higher density resulting in smaller homes. Sale No. 4
supports a far upper limit at $203,000 per finished lot due to being much larger lots.
Sale No. 1 supports a far upper limit at $201,000 per finished lot, with the much
larger lot sizes and slightly superior location being more than offsetting to an upward
time adjustment. Sale No. 9 supports a closer but firm upper limit at $192,500 per
finished lot, due to the larger lot sizes at 4,900 s.f. minimum being more than
offsetting to the inferior Lake Elsinore location.
In summary, the concluded value for these lots is $174,000 per finished lot.
Planning Areas 3A and 3B: Sale No. 4 was the November 2005 sale of these lots at
a price reflecting $203,000 per finished lot. This sale also indicated a finished lot
ratio of 39% which is considered to be on the low side, based on the other data and
previous analyses that have concluded on a ratio of 43-44%. This would tend to
support that the indication at $203,000 per finished lot is on the conservative side.
Sale No. 3 supports a far lower limit at $174,000 per finished lot due to the much
smaller lots and Sale No. 5 supports a firm upper limit at $221,000 per finished lot
due to the larger lots. Sale No. 1 consists of smaller lots at 3,100 s.f. and 4,250 s.f.
minimum but the location is slightly superior. Thus, adjusting the indication of
$201,000 per finished lot up by at least 10-15% for time would result in a close
indication for the subject at $226,000 per finished lot. Sale No. 8 consists of similar
size lots at 5,000 s.f. minimum, but they are planned for smaller and lower-priced
homes, thus the price of $203,700 per finished lot would tend to support a lower
limit for the subject. Sale No. 9 consists of similar lot sizes at 4,900 s.f. minimum,
but the location is inferior as evidenced by the smaller and lower-priced homes that
are planned. Thus, the indication at $192,500 per finished lot is a firm lower limit
for the subject.
65
VALUATION, Continuing
In summary, I have concluded on a conservative value for these lots at $203,000 per
finished lot.
Planning Areas 4A and 4B: Sale No. 5 was the November 2005 sale of these lots at
a price reflecting $221,000 per finished lot. This sale also indicated a finished lot
ratio of 41% which is concluded to be on the low side.
Sale Nos. 4 and 8 support firm lower limits at $203,000 and $203,700 per finished
lot due to the smaller lots. Sale No. 1 supports a lower limit at the adjusted
indication of $226,000 per finished lot due to the superior location being partially
offsetting to the much smaller lots. Sale No. 7 can be adjusted up by at least 10-15%
for time to an indication at ±$248,000 per finished lot, and this would support a close
upper limit for the subject due to the similar size lots but superior view premiums.
Sale No. 6 supports a far upper limit at $270,000 per finished lot due to the slightly
larger lots that are planned for much larger and higher-priced homes.
In summary, I have concluded on a conservative value for these lots at $221,000 per
finished lot.
Deduction for Costs to get to Finished Lots/Homesites
Information provided by Lennar Communities is that the approximate costs to get to
finished lot/homesite condition were an average of ±$22,200 per lot for the singlefamily detached lots and $28,000 per lot/homesite for the attached site. This results
in the following:
318 single-family lots @ $22,200/lot =
64 attached homesites @ $28,000/homesite =
$7,059,600
$1,792,000
$8,851,600
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
As If Finished Lots/Homesites:
P.A. 5: 64 lots/homesites @ $128,000 =
P.A. 1 & 2: 76 lots @ $174,000 =
P.A. 3A & 3B: 130 lots @ $203,000 =
P.A. 4A & 4B: 112 lots @ $221,000 =
Less remaining costs to get to finished lots:
$ 8,192,000
$12,876,000
$26,390,000
$24,752,000
$72,210,000
- 8,851,600
Value Indication, As Is Condition:
$63,358,400
66
VALUATION, Continuing
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Phase 3 – Residential Land, subject to the
Assumptions and Limiting Conditions, and as of January 15, 2006:
$63,350,000
(SIXTY-THREE MILLION THREE HUNDRED FIFTY THOUSAND DOLLARS)
67
CAPE MAY APARTMENTS
68
CAPE MAY APARTMENTS
PROPERTY DATA
Location
This property is located at the northeasterly corner of Harveston Way and Village
Rd., extending easterly to Margarita Rd.
Record Owner/Ownership History
Per assessor data, the current owner of the property is Cape May Apartments.
Reportedly, Harveston, LLC sold the site in 2003 to LNR Properties at a price of
$7,125,000, and they sold the property to the The Morgan Group in June 2004 at the
same price. LNR Properties is developer of the apartment complex and The Morgan
Group will continue to own and manage the apartments.
Legal Description
The property is described as a portion of Lot 6 of Tract No. 29639-1.
Assessor Data
The property comprises Assessor Parcel No. 916-560-001. The current assessed
value is $7,403,183 for land and $3,900,000 for improvements, or a total of
$11,303,183. The tax rate area is 13-018, with a base tax rate of ±1.05%, and in
addition there are special taxes for the CFD.
Land Size
The site contains 15.26 acres per the assessor map.
Existing and Planned Development
The site is being developed with a 300-unit apartment complex called the Cape May
Apartments. There are 1, 2 and 3-bedroom units, including both flats and
townhome-style units. The unit mix is as follows:
No.
Units
Bedrooms/
Baths
98
126
28
42
2
4
300
1/1
2/2
2/2½
3/2
3/3
2/2½
Size
720 s.f.
920-955 s.f.
1,182 s.f.
1,125 s.f.
1,321 s.f.
1,633 s.f. (live/work unit with studio and add’l ½ bath)
69
PROPERTY DATA, Continuing
Each unit will include a garage and/or carport. The live/work units have a
commercial space plus half bath on the first floor with the living space above.
Amenities of the complex include a pool and spa plus a fitness center. The monthly
rental rates range from $1,155 to $1,265 for the one-bedroom units, $1,460 to $1,850
for the two-bedroom units, $1,665 to $2,025 for the three-bedroom units, and $2,270
to $2,330 for the live/work units.
There will be a total of 22 apartment buildings. As of the January 15, 2006 date of
value, 6 buildings were completed with a total of 54 units. The first occupancies
took place in October 2005 and there were 41 units occupied as of January 15, 2006.
Six more buildings were to be completed in February 2006 with the balance of the
apartment units to be completed in April or May 2006. All remaining construction
items are due to be completed by the end of June 2006. It is anticipated that
absorption (occupancy) of the apartment units will occur through the end of the year
and possibly into early 2007.
VALUATION
Method of Analysis
Only the Sales Comparison Approach is used in this analysis of minimum market
value. Thus, recent sales of similar but completed and occupied apartment
complexes have been considered in comparison to the subject property, in order to
estimate a minimum market value if the subject property was completed and at
stabilized occupancy. Then, deductions are made for the estimated remaining
construction costs and for rent loss during absorption to stabilized occupancy.
Analysis as if Completed/Occupied
The pertinent sales data is discussed in the following paragraphs:
Morning Ridge Apartments, 30660 Milky Way, Temecula: 200-unit, 17-year old complex
sold in March 2005 for $28,586,000 or $142,930 per unit; 48 one-bedroom one-bath units of
691 s.f. and 152 two-bedroom two-bath units of 979 s.f.; rents were $950 for one-bedroom
units and $1,110 for two-bedroom units; 95% occupancy and good condition at time of sale.
In comparison to the subject, this is an older complex, with an inferior unit mix and smaller
units, though it was not subject to a CFD.
California Oaks Apartments, 24375 Jackson Ave., Murrieta: 460-unit, 15 to 20-year old
complex sold in August 2005 for $52,750,000 or $114,674 per unit; 260 one-bedroom onebath units of 600-670 s.f. and 200 two-bedroom two-bath units of 930-998 s.f.; rents were
$820 to $980 for one-bedroom units and $1,160 to $1,215 for two-bedroom units; above
average condition, though purchaser planned to rehab; CFD of $500 per unit per year. In
comparison to the subject, this is an older complex of inferior quality and condition, with an
inferior unit mix and smaller units, and similar with the CFD.
70
VALUATION, Continuing
Woodcreek Apartments, 42200 Moraga Rd., Temecula: 344-unit, 16-year old complex
sold in September 2004 for $32,250,000 or $93,750 per unit; 282 two-bedroom two-bath
units of 843-894 s.f. and 62 three-bedroom two-bath units of 960 s.f.; rents were $847 to
$918 for the two-bedroom units and $1,006 to $1,126 for the three-bedroom units; deferred
maintenance at time of sale ($3,500,000 or $10,174 per unit cost to cure) and no CFD. In
comparison to the subject, this is an older complex of inferior quality and condition, and
while the unit mix is superior the unit sizes are smaller, but there is no CFD.
Waterstone at Murrieta, 24850 Hancock Ave., Murrieta: 420-unit, 16-year old complex
sold in November 2004 for $45,500,000 or $108,333 per unit; 100 one-bedroom one-bath
units of 610 s.f., 160 two-bedroom one-bath units of 810 s.f. and 160 two-bedroom two-bath
units of 850 s.f.; rents were $899 to $949 for the one-bedroom units and $1,029 to $1,149 for
the two-bedroom units; 93% occupied and in good condition at time of sale. In comparison
to the subject, this is an older complex with an inferior unit mix and smaller unit sizes, but
superior with no CFD.
In summary, the sales indicate the range of ±$104,000 (including cost to cure
deferred maintenance) to $142,930 per unit. The low end of the range are from sales
that closed in September and November 2004, and upward time adjustments would
result in prices closer to the range of $130,000 to $135,000 per unit. The indication
at $114,674 per unit is from a sale in August 2005, but the complex is far inferior to
the subject property in terms of age, quality, unit mix and unit sizes.
Additional information indicates that a large and good quality complex in Murrieta is
currently in escrow at a price of near $170,000 per unit. In addition, there is a
current listing on a complex in Temecula at a price of $175,000 per unit and a
current listing on a complex in Murrieta at a price of $160,000 per unit.
In summary, I have concluded on a conservative value of $140,000 per unit if the
subject complex was completed and at stabilized occupancy.
Deductions for Remaining Costs and Rent Loss During Absorption
A first deduction is for the remaining construction costs to complete the subject
complex. Information provided by LNR Property Corporation is that the estimated
remaining costs to complete the project are $8,000,000.
A second deduction is made to reflect the rent loss during the absorption or lease-up
to stabilized occupancy of the subject units. As previously indicated, there were 41
occupied units as of the January 15, 2006 date of value. Stabilized occupancy is
estimated to be 95% occupancy (5% vacancy) which would be 285 units. Thus, 244
units remain to be leased to get to stabilized occupancy. Then, the average rental
rate for the subject units is approximately $1,500 per month. Lastly, as to an
absorption of the units, it is estimated by the developer that the complex will be to
stabilized occupancy by the end of 2006 or into early 2007, or in about 12 months
from the date of value. I have estimated a conservative absorption of 13 to 14
months, or about 18 units per month.
71
VALUATION, Continuing
Thus, the calculations of the rent loss are shown as follows, starting with 244 units
the first month at the average rent of $1,500, and reducing by 18 units each month:
Month
1
2
3
4
5
6
7
8
9
10
11
12
13
14
No.
Units
244
226
208
190
172
154
136
118
100
82
64
46
28
10
x
Avg. Mo’ly
Rent
$1,500
“
“
“
“
“
“
“
“
“
“
“
“
“
x
Rent Loss
$366,000
$339,000
$312,000
$285,000
$258,000
$231,000
$204,000
$177,000
$150,000
$123,000
$ 96,000
$ 69,000
$ 42,000
$ 15,000
$2,667,000
In summary, the total deductions are indicated to be $10,667,000 for remaining
construction costs plus rent loss during absorption/lease-up. To this total I have
added a factor of 15% for contingency/risk, or an additional $1,600,000. This results
in a total deduction of $12,267,000.
Conclusion of Value
Based on the foregoing, the value indication of the as is condition is calculated as
follows:
If completed and at stabilized occupancy:
300 units @ $140,000/unit =
Less deductions for construction costs/rent loss/
contingency/risk:
$42,000,000
- 12,267,000
$29,733,000
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Cape May Apartments, subject to the
Assumptions and Limiting Conditions, and as of January 15, 2006:
$29,700,000
(TWENTY-NINE MILLION SEVEN HUNDRED THOUSAND DOLLARS)
72
RETIREMENT RESIDENCE SITE
73
RETIREMENT RESIDENCE SITE
PROPERTY DATA
Location
This property is located at the southeasterly corner of Village Rd. and Township Rd.
Record Owner/Ownership History
Per assessor data, the current owner of the property is Temecula Retirement
Residence. They acquired this site in August 2004 at a price of $885,000 plus an
option fee of $50,000, or a total of $935,000.
Legal Description
The property is described as Lot 7 of Tract No. 29639-1.
Assessor Data
The property comprises Assessor Parcel No. 916-560-010. The current assessed
value is $885,000 for land and $0 for improvements. The tax rate area is 13-018,
with a base tax rate of ±1.05%, and in addition there are special taxes for the CFD.
Land Size
The site contains 2.29 acres per the assessor map.
Planned Development/Current Status
The site is currently vacant and in rough graded, fairly flat condition. It is planned to
be developed with the Harveston Retirement Residence which will consist of 115
apartments and three commercial spaces. The apartments will include 29 studio
units of 365 s.f. to 506 s.f., 73 one-bedroom units of 520 s.f. to 790 s.f., and 13 twobedroom units of 861 s.f. to 1,150 s.f. The three commercial spaces will be 586 s.f.,
764 s.f. and 304 s.f., and are planned for barber shop, beauty shop and health care
uses. This will be a three-story building with a total of 121,761 s.f., plus basement
area of 15,855 s.f. for parking and mechanical uses. There will be a total of 81
parking spaces, including 41 spaces in the subterranean garage and 40 open surface
spaces.
The project has been approved through the City, and construction is anticipated to
start in June 2006 with completion in May 2007.
74
VALUATION
Method of Analysis
Only the Sales Comparison Approach has been used in this analysis.
Analysis of Land Value
As previously indicated, the subject property sold in August 2004 at a total price of
$935,000 which indicates $9.37 per s.f. for the 2.29 acres or $8,130 per unit for the
115 residential units (density of 50.2 units per acre). No other recent sales of sites
for similar retirement residences or senior/age-restricted apartments were found. As
indicated for the subject Cape May Apartment complex, that site was purchased at a
price of $7,125,000 in 2003 which indicates $10.72 per s.f. for 15.26 acres or
$23,750 per unit for 300 units (density of 19.7 units per acre). However, a
significant upward time adjustment would be required to that sale.
It is also noted that the multi-family residential site in Phase 3 sold in November
2005 at a price reflecting $17.52 per s.f. for the 8.37 acres, or $99,814 per unit for 64
units. While this is an attached product, it is a relatively low density at only 7.7 units
per acre.
A 14.01-acre site at 28801 Pujol St. in Temecula is available for sale, with potential
to tear down the 96 existing apartments (±30 years old) for redevelopment to at least
280 apartments (20 units per acre). There have been 20 offers on the property, at and
above the $16,900,000 asking price. At $16,900,000 the indications are $27.69 per
s.f. of land or $60,357 per unit based on 280 units. Lastly, a vacant site near the
southwest corner of Kalmia St. and Washington Ave. in Murrieta has received offers
near $5,500,000 for ±6 usable acres of multi-family land, if a zone change can be
accomplished. This price indicates close to $21.00 per s.f. of usable land area.
In summary, no other sales data was found on land that is to be developed with a
project similar to the subject. However, other sales data on multi-family residential
land supports prices from near $11.00 per s.f. to well over $20.00 per s.f. Thus, the
conclusion of minimum market value for the subject property is based on its
purchase price of $935,000 from the sale that was negotiated in October 2003 and
closed in August 2004.
Conclusion of Value
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Retirement Residence Site, subject to the
Assumptions and Limiting Conditions, and as of January 15, 2006:
$930,000
(NINE HUNDRED THIRTY THOUSAND DOLLARS)
75
COMMERCIAL SITE/WELCOME CENTER
76
COMMERCIAL SITE/WELCOME CENTER
PROPERTY DATA
Location
This property is located at the southwesterly corner of Village Rd. and Landings Rd.
Record Owner/Ownership History
Per assessor data, the current owner of the property is Harveston, LLC. They
acquired this site as part of the large acreage acquisition some years ago for the
development of the community of Harveston.
Legal Description
The property is described as Lot 9 of Tract No. 29639-1.
Assessor Data
The property comprises Assessor Parcel No. 916-560-006. The current assessed
value is $351,327 for land and $0 for improvements. The tax rate area is 13-018,
with a base tax rate of ±1.05%, and in addition there are special taxes for the CFD.
Land Size
The site contains 2.45 acres per the assessor map.
Existing Use/Planned Development
On the southeasterly corner of the site is the Welcome Center which was built
several years ago and contains 3,493 s.f. including a small second floor area. It is an
attractive building, mostly office space including large open areas, and the southerly
side of the building faces the lake. The balance of the site, which comprises the bulk
of the site, includes paved parking area and landscaped area, with a large grass area
surrounded by planters with shrubs and various trees.
Per the City Planning Department, the site is zoned Medium Density Residential but
with a Mixed-Use Overlay which allows for restaurants and commercial uses. The
probable uses would include local retail and service commercial, as well as
restaurant. Contact with the property owner indicates that the site will be marketed
for retail development, with probable conversion of the Welcome Center building to
alternative commercial use, including potential restaurant use. (Note: The property
was listed through a commercial broker on January 23, 2006.)
77
PROPERTY DATA, Continuing
Highest and Best Use
The highest and best use of this property is concluded to be for conversion of the
existing building to some type of commercial use (office, retail or restaurant) and
commercial development on the balance of the site.
VALUATION
Method of Analysis
The Sales Comparison Approach is used to estimate the minimum market value of
the 2.45-acre site as commercial land, and then a conservative cost allocation is made
to the existing Welcome Center building.
Analysis of Land Value
A search was made in the general Temecula and Murrieta areas for recent sales of
reasonably similar commercial sites. The pertinent data is discussed as follows:
NWC Hwy. 79 South & La Paz Rd., Temecula: 3/05 sale of 3.71 acres at a price of $11.70
per s.f.; the site was vacant and fairly level, and the buyer planned to resolve access issues
and develop medical condos; this site is inferior to the subject in terms of the access issues,
the location and development potential, and supports a far lower limit at $11.70 per s.f.
E/S Jefferson Ave., 4th parcel N/O Rancho California Rd., Temecula: 8/04 sale of 4.73
acres at a price of $14.35 per s.f.; the site was vacant, fairly level, and backs to the I-15
Freeway; the buyer planned an office/retail center; this site is considered to be fairly similar
to the subject, but an upward time adjustment would be supportable, resulting in a firm lower
limit for the subject at $14.35 per s.f.
W’ly corner Jefferson Ave. & Elm St., Murrieta: 5/05 sale of 4.2 net acres at a price of
$12.50 per s.f.; the site was vacant and fairly level, and the buyer planned retail development
along the front and industrial development on the rear of the site; the location and
development potential are considered to be inferior to the subject, and considering also the
date of sale, the price of $12.50 per s.f. supports a far lower limit for the subject.
NW/S Jackson Ave., ±.4 mile S/O Murrieta Hot Springs Rd., Murrieta: 9/05 sale of 6.19
acres at a price of $17.06 per s.f.; the site was mostly vacant and level and is at the southerly
end of a large retail center anchored by Sam’s Club; the buyer planned to build two retail
buildings of 40,000 s.f. and 25,000 s.f.; this is a much larger site than the subject, but has the
benefit of being part of a larger center with good traffic draw; overall, the indication at
$17.06 per s.f. supports a close indication to close upper limit for the subject.
Both Sides Calex Ct. @ Juniper St., Murrieta: 3/05 sale of 4.2 acres at a price of ±$17.76
per s.f.; the site was vacant and mostly flat, and consisted of four subdivided lots; the
location is near the Target store and theaters and has some freeway visibility; the buyer’s
plans were unknown; the location is considered to be slightly superior to the subject, but a
downward adjustment for this factor is approximately offset by an upward time adjustment
since the date of sale, resulting in a close indication to close upper limit for the subject at
±$17.76 per s.f.
78
VALUATION, Continuing
E’ly corner Madison Ave. & Juniper St., Murrieta: 4/05 sale of 3.55 acres at a price of
$13.48 per s.f.; the site was vacant, mostly flat, and near the I-15 Freeway; the buyer planned
retail/restaurant uses; this is considered to be fairly similar to the subject, and considering the
date of sale the price of $13.48 per s.f. supports a firm lower limit for the subject.
N’ly corner Jefferson Ave. & Juniper St., Murrieta: 12/05 sale of 2.02 acres at a price of
$15.34 per s.f.; the site is vacant and fairly flat, and the buyer plans retail development on the
front of the site and office development on the rear; the site is fairly similar to the subject in
terms of the size, location and development potential, resulting in a close indication for the
subject at $15.34 per s.f.
In summary, the data supports far lower limits for the subject at $11.70 and $12.50
per s.f., a closer but firm lower limits at $13.48 and $14.35 per s.f., a close indication
at $15.34 per s.f., and close indications to close upper limits at $17.06 and $17.76 per
s.f. While the subject property is not located on a major street as are some of the
sales data, the subject site does have the benefit of being the only commercial site
directly in the Harveston community, with the potential for much pedestrian traffic
as well. Overall, I have concluded on a conservative land value for the subject at
$15.00 per s.f.
Allocation to Existing Building
The existing building is fairly new, of good quality and well situated on the site to
have a good view of the lake and also to provide for good developability of the
balance of the site. Thus, I have concluded that this building could be converted to
an alternative commercial use as part of the larger center, and contributes over and
above the commercial land value.
Based on Marshall Valuation Service, considering the subject as a good Class D
office building, the cost new would be approximately $130.00 per s.f. While the
building is only several years old, I have considered a depreciation factor of 10%.
This results in a conservative allocation to the existing building of $117.00 per s.f.
Conclusion of Value
Based on the foregoing, the value of the as is condition of the subject property is
calculated as follows:
Land: 2.45 acres or 106,722 s.f. @ $15.00/s.f. =
Building: 3,493 s.f. @ $117.00/s.f. =
Value Indication:
$1,600,830
$ 408,681
$2,009,511
Lastly, it is noted that the listing of the property that occurred on January 23, 2006 is
at an asking price of $2,900,000. While this is of interest, there has not yet been time
to assess the level of market interest at this price. This is considered of general
interest and a far upper limit for minimum market value.
79
VALUATION, Continuing
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Commercial Site/Welcome Center, subject to
the Assumptions and Limiting Conditions, and as of January 15, 2006:
$2,000,000
(TWO MILLION DOLLARS)
80
COMMERCIAL ACREAGE SITE
81
COMMERCIAL ACREAGE SITE
PROPERTY DATA
Location
This property is mostly located along the southwesterly side of Ynez Rd., on both
sides of Date St., and extending southerly to the I-15 Freeway; plus a small portion
of the property lies on the easterly side of Ynez Rd., southeasterly from Date St.
Record Owner/Ownership History
Assessor records indicate that the owner of the bulk of the property is Winchester
Hills I and the owner of two small parcels is Harveston.
Legal Description
The property is described as Lots 50, 52, 53 and 54 of Tract No. 29639-2 and portion
of Lots 109, 110, 120 and 121 of Subdivision of Temecula Land & Water Company.
Assessor Data
This property comprises Assessor Parcel Nos. 916-400-001, 002, 004, 006, 008, 014,
015, 016, 017, 019, 020, 021 & 022. The current assessed values total $3,500,012
for land and $0 for improvements. The tax rate area is 13-001, with a base tax rate
of ±1.05% and in addition there are special taxes for the CFD.
Land Size
Per the assessor map this property contains a total of 111.75 acres. The City
Planning Department and the property owner reference this property as the “118acre” commercial site, however, that appears to relate to an older map which does
not reflect the more recent dedication of land for the Date St. freeway interchange. It
is also noted that the property owner references a net buildable area of ±112 acres.
Thus, this appraisal has used the size of 111.75 acres, per the assessor map.
Existing Use/Planned Development
The property currently consists of vacant land that has been rough graded or mass
graded to a fairly flat superpad condition. The overall site is approximately at grade
of Ynez Rd. and Date St., but is above grade of the freeway and above grade of the
land adjacent to the northwest.
As previously discussed, Ynez Rd. extends northwesterly from Date St. to a point
near the northwesterly corner of this property, and extends southeasterly from Date
St. part of the way along the frontage of this property, and does not yet connect all
82
PROPERTY DATA, Continuing
the way to Winchester Rd. Date St. currently extends about mid-way into this
property. It was also previously indicated that Date St. is planned to bridge over the
freeway and connect with Cherry St. to the southwest of the freeway. There is also
to be a freeway interchange at Date St., and the land for this has already been
dedicated from the subject property, but it will likely not be constructed for a number
of years.
Per the City Planning Department, this property is zoned Service Commercial. The
development code indicates intensive commercial and allows for selected light
manufacturing. However, the City would likely not approve industrial use on the site
but rather intends for commercial development, including office and retail
development with a “downtown” feel or similar to an open air mall.
Per the property owner, they have an approved Environmental Impact Report and an
approved Specific Plan, but an overall Site Plan has not yet been developed for
submission to the City. They are waiting for the Date St. bridge and freeway
interchange situation to become more firm in terms of the timing. The description of
their potential development is in the Development Agreement and allows for
1,200,000 s.f. of building including hotel, office and retail. There is to be no
significant industrial, except for possibly some higher end light industrial such as a
technology park type of development.
Highest and Best Use
The highest and best use of this property is concluded to be for commercial
development that could include a mix of uses as permitted by the Specific Plan and
Development Agreement, but mostly retail and office types of uses. This is a prime
site for future commercial development due to the prominence along the freeway, the
location at a future interchange, and the substantial amount of nearby residential
development in the Harveston community. However, the timing of potential
development is uncertain, and somewhat dependent on the timing of construction of
the Date St. interchange and bridge.
VALUATION
Method of Analysis
This is similar to the two previous analyses.
Analysis of Land Value
Initially, it is noted that the sales data previously discussed for the Commercial
Site/Welcome Center would support close indications at the ±$15.00 per s.f. range
for ±2 to 6-acre portions of this property. However, considering the large bulk size
83
VALUATION, Continuing
of the subject property that would result in a lengthy time for build-out of the site or
sell-off of individual parcels, the indication at ±$15.00 per s.f. is a far upper limit.
A search was made in the general Temecula and Murrieta areas for recent sales of
large commercial acreage sites. The pertinent data is discussed as follows:
W’ly corner Los Alamos Rd. & Jackson Ave., Murrieta: Current escrow on 61.69 acres at
a price of ±$25,000,000 or $9.30 per s.f.; the site is vacant and undulating, and zoned
Regional Commercial; there had been multiple offers by commercial developers, but the site
is being sold to the School District for a high school; however, the price is based on
commercial land value and reportedly is near the asking price of $25,000,000; in comparison
to the subject, this is similar as relatively large acreage though still smaller, the location is
considered to be fairly similar and while it lacks freeway frontage it likely has sooner
development potential, the undulating topography is inferior but there are no special taxes;
overall, the indication at $9.30 per s.f. supports a firm upper limit for the subject.
E’ly corner Murrieta Hot Springs Rd. & Jefferson Ave., Murrieta: 7/04 sale of ±16.0
usable acres at a price of $8.45 per s.f. of usable area; this was a vacant site, mostly flat but
below street grade and impacted by a watercourse through the site; the buyer planned a retail
center; in comparison to the subject, the size is substantially smaller and there are no special
taxes, but the location, topography and impact by the watercourse are inferior factors;
upward adjustments for time and the inferior factors are more than offset to a downward
adjustment for size, resulting in a close but firm upper limit at $8.45 per s.f.
N’ly corner of Jefferson Ave. & Guava St., Murrieta: 7/05 sale of 38.2 acres at a price of
$12,100,000 or $7.27 per s.f.; this is vacant land and slightly undulating; the buyer plans to
develop a 500,000 s.f. retail center, including hotel and entertainment facilities; the price had
been negotiated in January 2005; a CFD is being formed on this and other properties for
street improvements and sewer; in comparison to the subject, this is a relatively large site
with similar development potential, though the size is still much smaller than the subject; the
location and topography are inferior, and the CFD is similar; considering also an upward
time adjustment since the date of negotiation, the indication at $7.27 per s.f. supports a close
upper limit for the subject primarily due to the size.
SEC Winchester Rd. & Auld Rd. and W/S Leon Rd. ±1,250’ S/O Auld Rd., Unincorp.
County Area: 2/05 sale of 127.09 acres (gross) at a price of $20,000,000 or $3.61 per s.f.;
44.35 acres fronts on Winchester Rd. along the west side of the French Valley Airport with
commercial-retail potential and 82.74 acres wraps around the southwest corner of Leon Rd.
and Auld Rd. (small frontage portion on Auld Rd.) along the east side of the airport and with
office-industrial-business park potential; both sites were vacant and gently undulating, and
both have been resold as discussed in following paragraphs; in addition, both sites will
require some street dedication but the net area for both sites was not available; in comparison
to the subject, the overall size is fairly similar, but the undulating topography is inferior, and
the location, shape and development potential of the east site is inferior, though the lack of
special taxes is superior; considering also an upward time adjustment and that the sale price
reflects the gross area, the indication at $3.61 per s.f. supports a firm lower limit for the
subject.
SEC Winchester Rd. & Auld Rd., Unincorp. County Area: 6/05 resale of the west site
noted above, being 44.35 acres that sold for $15,900,000 or $8.23 per s.f.; the sale was to
Wal-Mart Stores, Inc. who plan to build a Wal-Mart store on the site; the negotiation was
based on 43 acres at a price of $8.50 per s.f.; in comparison to the subject, the size is much
84
VALUATION, Continuing
smaller, the location is fairly similar, the lack of special taxes is superior but the topography
is inferior; overall, the indication at ±$8.50 per s.f. supports a firm upper limit for the subject.
W/S Leon Rd., ±1,250’ S/O Auld Rd., Unincorp. County Area: 2/05 resale of the east site
previously discussed, being 82.74 acres that sold for $13,200,000 or $3.66 per s.f.; it is noted
that this is the gross area and significant street dedication will be required; the buyer planned
an industrial and office complex; in comparison to the subject, the size is slightly smaller but
the location and development potential are far inferior, the topography is inferior, but the
lack of special taxes is superior; considering also an upward time adjustment, the indication
at $3.66 per s.f. supports a far lower limit for the subject.
In summary, the data supports firm to far lower limits for the subject at $3.61 and
$3.66 per s.f., a close upper limit at $7.27 per s.f., and firm upper limits from $8.45
to $9.30 per s.f. I have concluded on a supportable range of minimum market value
at $5.00 to $6.00 per s.f. which results in the following:
111.75 acres or 4,867,830 s.f. @ $5.00-$6.00/s.f. = $24,339,150 to $29,206,980
Conclusion of Value
Thus, as the result of this analysis, I have arrived at the following conclusion of
minimum market value for the subject Commercial Acreage Site, subject to the
Assumptions and Limiting Conditions, and as of January 15, 2006:
$26,000,000
(TWENTY-SIX MILLION DOLLARS)
85
ADDENDA
TABULATION OF RESIDENTIAL LAND SALES
Rec.
Date
No.
Lots
Min.
Lot Size
Product
Price/Lot
Finished Lot
Harveston, LLC
Acacia Credit Fund 9-A, LLC
11/04
106
92
198
3,100
4,250
1,780-2,757 s.f.
±$430,000-$523,000
$182,685
±$201,000
43%
Phase 2B of Harveston; delivered as
semi-finished lots with rec. tract map;
±1.9% tax rate
NW/S Date St. opposite Lakeview Rd.,
Temecula
(n/a)
Harveston, LLC
MW Housing Partners III, L.P.
11/05
64
Att.
(7.7/ac.)
1,713 s.f. avg.
$350,880 avg.
$99,814
$128,000
36%
Phase 3 of Harveston; delivered as mass
graded superpad with rec. “A” map;
±1.8-1.9% tax rate
3
NE/S Ynez Rd. at Waverly Ln.,
Temecula
(n/a)
Harveston, LLC
MW Housing Partners III, L.P.
11/05
76
2,700
1,950 s.f. avg.
$391,550 avg.
$150,026
$174,000
44%
Phase 3 of Harveston; delivered as semifinished lots with rec. tract map; ±1.81.9% tax rate
4
N’ly corner Date St. & Ynez Rd.,
Temecula
(n/a)
Harveston, LLC
MW Housing Partners III, L.P.
11/05
130
4,950
3,092 s.f. avg.
$519,675 avg.
$180,824
$203,000
39%
Phase 3 of Harveston; delivered as semifinished lots with rec. tract map; ±1.81.9% tax rate
5
±175’ NW/O Date St. and ±560’ NE/O
Ynez Rd., Temecula
(n/a)
Harveston, LLC
MW Housing Partners III, L.P.
11/05
112
5,850
3,129 s.f. avg.
$538,125 avg.
$200,672
$221,000
41%
Phase 3 of Harveston; delivered as semifinished lots with rec. tract map; ±1.81.9% tax rate
6
NE/S Wolf Creek Dr. South, .4 mile
SE/O Wolf Valley Rd., Temecula
(n/a)
Wolf Creek Dev., LLC
Lennar Homes
12/05
112
6,000
3,000-3,600 s.f.
High $500,000’s to
Low $600,000’s
$238,000
$270,000
45%
Southerly portion of Wolf Creek;
delivered as blue-top lots with approved
tract map; ±1.9% tax rate
7
N’ly corner Butterfield Stage Rd. &
Morgan Hill Dr., Temecula area
(Montevina)
McMillin Morgan Hill
McMillin Montevina, LLC
12/04
146
6,000
2,494-3,239 s.f.
$465,990-$528,990
$199,000
$220,500
44%
Phase 2, PA 11 of Morgan Hill; delivered
as blue-top lots with approved final tract
map; some views; ±1.8% tax rate
8
S/S Murrieta Hot Springs Rd., ±1,200’
E/O Roripaugh Meadows Rd., Temecula
(Hamptons)
Roripaugh Ranch I, L.P.
Traditions at Roripaugh, LLC
1/06
113
5,000
2,385-2,974 s.f.
$429,000-$489,000
$167,049
$203,700
44%
Phase 1 of Roripaugh Ranch; delivered
as blue-top lots with some utilities in;
±1.9-2.0% tax rate
9
NE/O Canyon Hills Rd., ±½ mile SE/O
Railroad Canyon Rd., Lake Elsinore
(Weatherly)
Pardee Home Construction
Pulte Home Corp.
7/05
131
4,900
1,947-2,303 s.f.
$416,000-$440,000
$135,916
$192,500
45%
Canyon Hills community; delivered as
blue-top lots with approved tent. tract
map; ±1.9% tax rate
10
N/S & W/S Coral Canyon Rd., W’ly
from Mayhew Canyon Rd., Corona
(Amethyst Hills)
Starfield Sycamore Creek Inv.
SCC-Canyon II
10/04
101
4,000
2,050-2,550 s.f.
$415,000-$445,000
$165,520
$212,500
49%
PA 1 of Sycamore Creek; Phase 2A;
delivered as blue-top lots; territorial
views; ±1.8% tax rate
No.
Location/Project Name
Seller/Buyer
1
W’ly side Harveston Dr. from Charleston
Ln. to Dalton Rd., Temecula
(Charleston & Aberdeen)
2
Note: Home pricing is original
proforma or earliest available
Fin. Lot
Ratio
Remarks
QUALIFICATIONS
OF
STEPHEN G. WHITE, MAI
PROFESSIONAL EXPERIENCE
Real Estate Appraiser since 1976.
1983 through current date: Self-employed; office located at 1370 N. Brea Blvd., Suite 205, Fullerton,
CA 92835 (Phone: 714-738-1595)
1976-1982: Employed by Cedric A. White, Jr., MAI, independent appraiser located in Anaheim.
Real estate appraisals have been completed on most types of properties for purposes of fair market
value, leased fee value, leasehold value, easement value, partial acquisitions and severance damages.
PROFESSIONAL ORGANIZATIONS
Member, Appraisal Institute; MAI designation obtained 1985
Affiliate Member, Pacific West Association of Realtors
LICENSES
Licensed by the State of California as a Certified General Real Estate Appraiser; OREA ID No.
AG013311; valid through September 22, 2006.
EDUCATION
B.A. Economics & Business, Westmont College, Santa Barbara (1976)
Appraisal Institute Courses:
Basic Appraisal Principles, Methods and Techniques
Capitalization Theory and Techniques
Urban Properties
Litigation Valuation
Standards of Professional Appraisal Practice
Numerous seminars and continuing education on various appraisal subjects, including
valuation of easements and leased fee interests, litigation, the money market and its impact
on real estate, and standards of professional appraisal practice.
COURT/TESTIMONY EXPERIENCE
Qualified as an expert witness in the Superior Courts of Orange, Los Angeles, Riverside and San
Bernardino Counties; also before the Assessment Appeals Board of Orange and Los Angeles
Counties.
TYPES OF PROPERTY APPRAISED
Residential: vacant lots, acreage and subdivisions; single family residences, condominiums,
townhomes and apartment complexes.
Commercial: vacant lots/acreage; office buildings, retail stores, shopping centers, restaurants, hotels
and motels.
87
QUALIFICATIONS, Page 2
Industrial: vacant lots and acreage; warehouses, manufacturing buildings, R&D buildings, industrial
parks, mini-warehouses.
Special Purpose: mobilehome parks, churches, automobile agencies, medical buildings, convalescent
hospitals, easements, leased fee and leasehold interests.
CLIENT LIST
Corporations:
Aera Energy
British Pacific Properties
BSI Consultants
Crown Central Petroleum
Eastman Kodak Company
Firestone Building Materials
Foodmaker Realty Corp.
Greyhound Lines
Holiday Rambler Corp.
International Baking Co.
Johnson Controls
Kampgrounds of America
La Habra Products, Inc.
MCP Foods
Merrill Lynch Relocation
Orangeland RV Park
Pacific Scientific
Penhall International
Pic 'N Save Stores
Sargent-Fletcher Co.
Shell-Western E&P
Southern Distributors Corp.
Southern California Edison
The Home Depot
Tooley and Company
Wastewater Disposal Co.
Developers:
Brighton Homes
Citation Builders
Davison-Ferguson Investment Devel.
D.T. Smith Homes
Irvine Company
Kathryn Thompson Developers
Mark Taylor, Inc.
Mission Viejo Co.
Premier Homes
Presley Homes
Rockefeller & Associates
Taylor Woodrow Homes
Unocal Land & Development
Law Firms:
Baldikoski, Klotz & Dragonette
Best, Best & Krieger
Bowie, Arneson, Kadi, Wiles & Giannone
Bradshaw, John
Bye, Hatcher & Piggott
Callahan, McCune & Willis
Cooksey, Coleman & Howard
Hamilton & Samuels
Horgan, Rosen, Beckham & Coren
Kent, John
Kirkland & Ellis
Lathan & Watkins
McKee, Charles C.
Mosich, Nicholas J.
Long, David M.
88
Nossaman, Guthner, Knox & Elliott
Oliver, Barr & Vose
Ollestad, Freedman & Taylor
Palmieri, Tyler, Wiener, Wilhelm &
Waldron
Paul, Hastings, Jonofsky & Walker
Piggott, George B.
Pothier, Rose
Rosenthal & Zimmerman
Rutan & Tucker
Sikora & Price, Inc.
Smith & Politiski
Williams, Gerold G.
Woodruff, Spradlin & Smart
Yates, Sealy M.
QUALIFICATIONS, Page 3
Financial Institutions:
Barclays Bank
Chino Valley Bank
Continental Bank
First Interstate Mortgage
Security Pacific Bank
Washington Square Capital
San Clemente Savings & Loan
United Calif. Savings Bank
National Credit Union Admin.
First Wisconsin Bank
Ahmanson Trust Company
Sunwest Bank
City of Anaheim
City of Baldwin Park
City of Buena Park
City of Cypress
City of Duarte
City of La Habra
City of Laguna Beach
City of Mission Viejo
City of Orange
City of Placentia
City of Riverside
City of Santa Ana
City of Santa Fe Springs
City of Stanton
City of Tustin
City of Yorba Linda
Cities:
Counties:
County of Orange
County of Riverside
Other Governmental:
Agua Mansa Industrial Growth Association
El Toro Water District
Federal Deposit Insurance Corporation (FDIC)
Kern County Employees Retirement Association
Metropolitan Water District
Orange County Water District
Trabuco Canyon Water District
U.S. Postal Service
School Districts:
Anaheim Union High School Dist.
Banning Unified School Dist.
Capistrano Unified School Dist.
Castaic Union School Dist.
Cypress School Dist.
Etiwanda School Dist.
Fullerton School Dist.
Garden Grove Unified School Dist.
Irvine Unified School Dist.
Lake Elsinore Unified School Dist.
Moreno Valley Unified School Dist.
Newhall School Dist.
Newport-Mesa Unified School Dist.
Placentia-Yorba Linda Unified Dist.
Poway Unified School Dist.
Rialto Unified School Dist.
Saddleback Unified School Dist.
Santa Ana Unified School Dist.
So. Org. Cnty Comm. College Dist.
Temple City School Dist.
Churches/Church Organizations:
Calvary Church, Santa Ana
Central Baptist Church, Pomona
Christian & Missionary Alliance Church, Santa Ana
Christian Church Foundation
Congregational Church, Fullerton
First Church of the Nazarene
Lutheran Church, Missouri Synod
Presbytery of Los Rancho
St. Mark’s Lutheran Church, Hac. Hts.
Vineyard Christian Fellowship
Biola University
Cedars-Sinai Medical Center
Garden Grove Boys' Club
The Sheepfold
Other:
89
APPENDIX D
SUMMARY OF CERTAIN PROVISIONS OF THE
FISCAL AGENT AGREEMENT
The following is a brief summary of certain provisions of the Fiscal Agent
Agreement not otherwise described in the text of this Official Statement. Such summary is
not intended to be definitive, and reference is made to the text of the Fiscal Agent
Agreement for the complete terms thereof.
Definitions
Except as otherwise defined in this summary, the terms previously defined in this
Official Statement have the respective meanings previously given. In addition, the
following terms have the following meanings when used in this summary:
“ Acquisition Agreement ” means the Acquisition Agreement, dated as of August 1,
2002, between the Authority and Harveston, LLC, as originally executed and as it may be
amended from time to time.
“ Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being
Sections 53311 et seq. of the California Government Code.
“ Administrative Expenses ” means costs directly related to the administration of the
District consisting of the costs of computing the Special Taxes and preparing the annual
Special Tax collection schedules (whether by the Treasurer or designee thereof or both) and
the costs of collecting the Special Taxes (whether by the County or otherwise); the costs of
remitting the Special Taxes to the Fiscal Agent; fees and costs of the Fiscal Agent (including
its legal counsel) in the discharge of the duties required of it under the Fiscal Agent
Agreement; the costs of the Authority, the City or any designee of either the Authority or
the City of complying with the disclosure provisions of the Act, the Continuing Disclosure
Agreement and the Fiscal Agent Agreement, including those related to public inquiries
regarding the Special Tax and disclosures to Bondowners and the Original Purchaser; the
costs of the Authority, the City or any designee of either the Authority or the City related to
an appeal of the Special Tax; any amounts required to be rebated to the federal government
in order for the Authority to comply with the Fiscal Agent Agreement; costs of the City, the
Authority, the Fiscal Agent or the Prior Trustee related to the refunding and discharge of
the Prior Bonds; an allocable share of the salaries of the City staff directly related to the
foregoing and a proportionate amount of City general administrative overhead related
thereto. Administrative Expenses shall also include amounts advanced by the Authority or
the City for any administrative purpose of the District, including costs related to
prepayments of Special Taxes, recordings related to such prepayments and satisfaction of
Special Taxes, amounts advanced to ensure compliance with the Fiscal Agent Agreement,
administrative costs related to the administration of any joint community facilities
agreement regarding the District, and the costs of commencing and pursuing foreclosure of
delinquent Special Taxes.
“ Administrative Expense Fund ” means the fund by that name established by the
Fiscal Agent Agreement.
D-1
“ Agreement ” means the Fiscal Agent Agreement, as it may be amended or
supplemented from time to time by any Supplemental Agreement adopted pursuant to the
provisions thereof.
“ Annual Debt Service ” means, for each Bond Year, the sum of (i) the interest due on
the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired
as scheduled (including by reason of the provisions of the Fiscal Agent Agreement
providing for mandatory sinking payments and any similar provisions with respect to
mandatory sinking payments under any Supplemental Agreement providing for the
issuance of Parity Bonds), and (ii) the principal amount of the Outstanding Bonds due in
such Bond Year (including any mandatory sinking payment due in such Bond Year
pursuant to the Fiscal Agent Agreement and any similar provisions with respect to
mandatory sinking payments under any Supplemental Agreement providing for the
issuance of Parity Bonds).
“ Auditor” means the auditor/controller of the County.
“ Authority Attorney ” means any attorney or firm of attorneys employed by the
Authority or the City in the capacity of general counsel to the Authority.
“ Authorized Officer ” means the Chairperson, Executive Director, Treasurer,
Secretary or any other officer or employee authorized by the Board of Directors of the
Authority or by an Authorized Officer to undertake the actions referenced in the Fiscal
Agent Agreement as required to be undertaken by an Authorized Officer.
“ Bond Counsel” means (i) Quint & Thimmig LLP, or (ii) any other attorney or firm
of attorneys acceptable to the Authority and nationally recognized for expertise in
rendering opinions as to the legality and tax-exempt status of securities issued by public
entities.
“ Bond Fund ” means the fund by that name established under the Fiscal Agent
Agreement.
“ Bond Insurance Policy” means the financial guaranty insurance policy with respect
to the Series 2006A Bonds issued by the Bond Insurer and insuring the payment when due
of the principal of and interest on the Series 2006A Bonds as provided in the Fiscal Agent
Agreement.
“ Bond Insurer ” means Ambac Assurance Corporation, a Wisconsin-domiciled stock
insurance company, or any successor thereto or assignee thereof.
“ Bond Register” means the books for the registration and transfer of Bonds
maintained by the Fiscal Agent under the Fiscal Agent Agreement.
“ Bond Year ” means the one-year period beginning on September 2nd in each year
and ending on September 1st in the following year, except that the first Bond Year shall
begin on the Closing Date and end on September 1, 2007.
“ Bonds” means the Series 2006 Bonds, and, if the context requires, any Parity Bonds,
at any time Outstanding under the Fiscal Agent Agreement or any Supplemental
Agreement.
D-2
“ Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day on
which banking institutions in the state in which the Fiscal Agent has its principal corporate
trust office are authorized or obligated by law or executive order to be closed.
“ CDIAC ” means the California Debt and Investment Advisory Commission of the
office of the State Treasurer of the State of California or any successor agency or bureau
thereto.
“ Closing Date ” means the date upon which there is a physical delivery of the Series
2006 Bonds in exchange for the amount representing the purchase price of the Series 2006
Bonds by the Original Purchaser.
“ Code ” means the Internal Revenue Code of 1986 as in effect on the date of issuance
of the Bonds or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the date of issuance of the Bonds, together with applicable proposed,
temporary and final regulations promulgated, and applicable official public guidance
published, under the Code.
“ Continuing Disclosure Agreement ” shall mean that certain Continuing Disclosure
Agreement executed by the Authority and the Fiscal Agent on the Closing Date, as
originally executed and as it may be amended from time to time in accordance with the
terms thereof.
“ Costs of Issuance” means items of expense payable or reimbursable directly or
indirectly by the Authority or the City and related to the authorization, sale and issuance of
the Bonds and the refunding of the Prior Bonds, which items of expense shall include, but
not be limited to, printing costs, costs of reproducing and binding documents, closing
costs, filing and recording fees, initial fees and charges of the Fiscal Agent including its first
annual administration fee, expenses incurred by the City or the Authority in connection
with the issuance of the Bonds and the refunding of the Prior Bonds, appraiser fees and
expenses, special tax consultant fees and expenses, preliminary engineering fees and
expenses, Bond (underwriter’s) discount, legal fees and charges, including bond counsel
and disclosure counsel, financial consultants’ fees, charges for execution, transportation and
safekeeping of the Bonds, premiums for the Bond Insurance Policy and the Reserve Fund
Policy, rating agency fees and other costs, charges and fees in connection with any of the
foregoing.
“ Costs of Issuance Fund ” means the fund by that name established by the Fiscal
Agent Agreement.
“ DTC ” means the Depository Trust Company, New York, New York, and its
successors and assigns.
“ Debt Service ” means the scheduled amount of interest and amortization of
principal (including principal payable by reason the Fiscal Agent Agreement on the 2006
Bonds and the scheduled amount of interest and amortization of principal payable on any
Parity Bonds during the period of computation, excluding amounts scheduled during such
period which relate to principal which has been retired before the beginning of such
period.
“ Depository ” means (a) initially, DTC, and (b) any other Securities Depository
acting as Depository pursuant to the Fiscal Agent Agreement.
D-3
“ District Value” means the market value, as of the date of the appraisal described
below and/or the date of the most recent County real property tax roll, as applicable, of all
parcels of real property in the District subject to the levy of the Special Taxes and not
delinquent in the payment of any Special Taxes then due and owing, as determined with
respect to any parcel or group of parcels by reference to (i) an appraisal performed within
six (6) months of the date of issuance of any proposed Parity Bonds by an MAI appraiser
(the “Appraiser”) selected by the Authority, or (ii), in the alternative, the assessed value of
all such nondelinquent parcels and improvements thereon as shown on the then current
County real property tax roll available to the Treasurer. It is expressly acknowledged that,
in determining the District Value, the Authority may rely on an appraisal to determine the
value of some or all of the parcels in the District and/or the most recent County real
property tax roll as to the value of some or all of the parcels in the District. Neither the
Authority nor the Treasurer shall be liable to the Owners, the Original Purchaser or any
other person or entity in respect of any appraisal provided for purposes of this definition or
by reason of any exercise of discretion made by any Appraiser pursuant to this definition.
“ Fair Market Value” means the price at which a willing buyer would purchase the
investment from a willing seller in a bona fide, arm’s length transaction (determined as of
the date the contract to purchase or sell the investment becomes binding) if the investment
is traded on an established securities market (within the meaning of section 1273 of the
Code) and, otherwise, the term “Fair Market Value” means the acquisition price in a bona
fide arm’s length transaction (as referenced above) if (i) the investment is a certificate of
deposit that is acquired in accordance with applicable regulations under the Code, (ii) the
investment is an agreement with specifically negotiated withdrawal or reinvestment
provisions and a specifically negotiated interest rate (for example, a guaranteed investment
contract, a forward supply contract or other investment agreement) that is acquired in
accordance with applicable regulations under the Code, (iii) the investment is a United
States Treasury Security--State and Local Government Series that is acquired in accordance
with applicable regulations of the United States Bureau of Public Debt, or (iv) the
investment is the Local Agency Investment Fund of the State of California but only if at all
times during which the investment is held its yield is reasonably expected to be equal to or
greater than the yield on a reasonably comparable direct obligation of the United States.
“ Federal Secu rities ” means any of the following which are non-callable and which at
the time of investment are legal investments under the laws of the State of California for
funds held by the Fiscal Agent: (i) direct general obligations of the United States of America
(including obligations issued or held in book entry form on the books of the United States
Department of the Treasury and CATS and TGRS), and (ii) obligations, the payment of
principal of and interest on which are fully guaranteed by the United States of America.
“ Fiscal Agent” means the Fiscal Agent appointed by the Authority and acting as an
independent fiscal agent with the duties and powers provided in the Fiscal Agent
Agreement, its successors and assigns, and any other corporation or association which may
at any time be substituted in its place, as provided in the Fiscal Agent Agreement.
“ Fiscal Year ” means the twelve-month period extending from July 1 in a calendar
year to June 30 of the succeeding year, both dates inclusive.
“ Improvement Fund ” means the fund by that name created by and held by the Fiscal
Agent Agreement.
“ Independent Financial Consultant ” means any consultant or firm of such
consultants appointed by the Authority, the City or the Treasurer, and who, or each of
whom: (i) has experience in matters relating to the issuance and/or administration of bonds
D-4
under the Act; (ii) is in fact independent and not under the domination of the Authority;
(iii) does not have any substantial interest, direct or indirect, with or in the Authority, or
any owner of real property in the District, or any real property in the District; and (iv) is not
connected with the City or the Authority as an officer or employee of the City or the
Authority, but who may be regularly retained to make reports to the City or the Authority.
“ Information Services” means Financial Information, Inc.’s “Daily Called Bond
Service”, 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor;
Kenny Information Services’ “Called Bond Service”, 65 Broadway, 16th Floor, New York,
New York 10006; Moody’s Investors Service “Municipal and Government”, 99 Church
Street, New York, New York 10007, Attention: Municipal News Reports; Standard & Poor’s
Corporation “Called Bond Record”, 25 Broadway, 3rd Floor, New York, New York 10004;
and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other addresses and/or such services providing information with
respect to called bonds as the Authority may designate in an Officer’s Certificate delivered
to the Fiscal Agent.
“ Interest Payment Dates” means March 1 and September 1 of each year, commencing
March 1, 2007.
“ Maximum Annual Debt Service ” means the largest Annual Debt Service for any
Bond Year after the calculation is made through the final maturity date of any Outstanding
Bonds.
“ Maximum Reserve Fund Amount” means an amount equal to the lesser of (i) 10% of
the then Outstanding principal amount of the Bonds, (ii) Maximum Annual Debt Service on
the Outstanding Bonds, or (iii) 125% of average Annual Debt Service on the Outstanding
Bonds.
“ Moody’s ” means Moody’s Investors Service, and any successor thereto.
“ Officer’s Certificate” means a written certificate of the Authority signed by an
Authorized Officer of the Authority.
“ Ordinance” means any ordinance of the Authority levying the Special Taxes.
“ Original Purchaser” means Stone & Youngberg LLC, the first purchaser of the 2006
Bonds from the Authority.
“ Outstanding,” when used as of any particular time with reference to Bonds, means
(subject to the provisions of the Fiscal Agent Agreement) all Bonds except: (i) Bonds
theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation;
(ii) Bonds paid or deemed to have been paid within the meaning of the Fiscal Agent
Agreement; and (iii) Bonds in lieu of or in substitution for which other Bonds shall have
been authorized, executed, issued and delivered by the Authority pursuant to the Fiscal
Agent Agreement or any Supplemental Agreement.
“ Owner ” or “ Bondowner ” means any person who shall be the registered owner of
any Outstanding Bond.
“ Parity Bonds” means bonds of the Authority for the District, secured under the
Fiscal Agent Agreement on a parity with any then Outstanding Series 2006A Bonds (and
any other Parity Bonds previously issued in accordance with the Fiscal Agent Agreement)
issued in compliance with the requirements of the Fiscal Agent Agreement.
D-5
“ Participating Underwriter” shall have the meaning ascribed thereto in the
Continuing Disclosure Agreement.
“ Permitted Investments ” means any of the following, but only to the extent that the
same are acquired at Fair Market Value:
(a) direct obligations of (including obligations issued or held in book entry
form on the books of) the Department of the Treasury of the United States of
America, and senior debt obligations of other government-sponsored agencies
approved by the Bond Insurer;
(b) obligations of any of the following federal agencies which obligations
represent full faith and credit of the United States of America, including: (i) ExportImport Bank; (ii) Rural Economic Community Development Administration; (iii)
U.S. Maritime Administration; (iv) Small Business Administration; (v) U.S.
Department of Housing & Urban Development (PHA’s); (vi) Federal Housing
Administration; and (vii) Federal Financing Bank;
(c) 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: (i) senior debt obligations issued by the Federal National Mortgage
Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC); (ii)
obligations of the Resolution Funding Corporation (REFCORP); (iii) senior debt
obligations of the Federal Home Loan Bank System; and (iv) senior debt obligations
of other governmental sponsored agencies approved by the Bond Insurer;
(d) U.S. dollar denominated deposit accounts, federal funds and banker’s
acceptances with domestic commercial banks, including the Trustee and its
affiliates, which have a rating on their short term certificates of deposit on the date of
purchase of “P-1” by Moody’s and “A-1” or “A-1+” by S&P and maturing no more
than 360 days after the date of purchase, provided that ratings on holding companies
are not considered as the rating of the bank;
(e) commercial paper which is rated at the time of purchase in the single
highest classification, “P-1” by Moody’s and “A-1+” by S&P, and which matures not
more than 270 days after the date of purchase;
(f) investments in a money market fund rated “AAAm” or “AAAm-G” or
better by S&P, including any money market fund for which the Fiscal Agent or an
affiliate receives fees for investment advisory or other services to the fund;
(g) pre-refunded municipal obligations defined as follows: any bonds or
other obligations of any state of the United States of America or of 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 irrevocable instructions
have been given by the obligor to call on the date specified in the notice; and (i)
which are rated, based upon an irrevocable escrow account or fund (the “escrow”),
in the highest rating category of Moody’s and S&P or any successors thereto; or
(ii)(A) 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 (a) 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
D-6
dates pursuant to such irrevocable instructions, as appropriate, and (B) 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 thereof or on the redemption date or dates specified in the irrevocable
instructions referred to above, as appropriate;
(h) municipal obligations rated “Aaa/AAA” or general obligations of the
States with a rating of “A-2/A” or higher by both Moody’s and S&P;
(i) investment agreements approved in writing by the Bond Insurer,
supported by appropriate opinions of counsel, with notice to S&P;
(j) the Local Agency Investment Fund of the State, created pursuant to
Section 16429.1 of the California Government Code, to the extent the Fiscal Agent is
authorized to register such investment in its name; and
(k) other forms of investments (including repurchase agreements) approved
in writing by the Bond Insurer.
“ Principal Office” means the principal corporate trust office of the Fiscal Agent set
forth in the Fiscal Agent Agreement, except for the purpose of maintenance of the
registration books and presentation of Bonds for payment, transfer or exchange, such term
shall mean the office at which the Fiscal Agent conducts its corporate agency business, or
such other or additional offices as may be designated by the Fiscal Agent.
“ Prior Bonds” means the Temecula Public Financing Authority Community
Facilities District No. 01-2 (Harveston) Special Tax Bonds outstanding as of the Closing Date
under the Prior Indenture.
“ Prior Indenture” means the Indenture of Trust, dated as of August 1, 2002, between
the Prior Trustee and the Authority, as amended by the First Supplemental Indenture of
Trust, dated as of June 1, 2004, between the Prior Trustee and the Authority, by the Second
Supplemental Indenture of Trust, dated as of November 22, 2005, between the Prior Trustee
and the Authority, and by the Third Supplemental Indenture of Trust, dated as of May 24,
2006, between the Prior Trustee and the Authority.
“ Prior Trustee ” means U.S. Bank National Association, successor to U.S. Bank, N.A.,
in its capacity as the trustee under the Prior Indenture.
“ Project ” means the facilities eligible to be funded by the District more particularly
described in the Resolution of Formation.
“ Rate and Method of Apportionment of Special Taxes” means the rate and method of
apportionment of special taxes for the District, as approved pursuant to the Resolution of
Formation, and as it may be modified in accordance with the Act.
“ Record Date ” means the fifteenth day of the month next preceding the month of the
applicable Interest Payment Date, whether or not such day is a Business Day.
“ Refunding Bonds” means bonds issued by the Authority for the District the net
proceeds of which are used to refund all or a portion of the then Outstanding Bonds;
provided that the debt service on the Refunding Bonds in each Bond Year is not in excess of
the debt service on the Bonds being refunded in each corresponding Bond Year, and the
D-7
final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being
refunded.
“ Refunding Fund ” means the fund by that name established pursuant to the Fiscal
Agent Agreement.
“ Reserve Fund ” means the fund by that name established pursuant to the Fiscal
Agent Agreement.
“ Reserve Fund Policy” means the surety bond issued by the Bond Insurer in the
initial face amount specified in the Fiscal Agent Agreement guaranteeing certain payments
into the Senior Subaccount of the Reserve Fund with respect to the Series 2006A Bonds as
provided in the Fiscal Agent Agreement and subject to the limitations set forth in the Fiscal
Agent Agreement.
“ Resolution” means Resolution No. TPFA 06-03, adopted by the Board of Directors
of the Authority on July 11, 2006.
“ Resolution of Formation” means Resolution No. TPFA 02-03, adopted by the Board
of Directors of the Authority on August 13, 2002.
“ Resolution of Intention ” means Resolution No. TPFA 01-07, adopted by the Board
of Directors of the Authority on December 11, 2001.
“ S&P ” means Standard & Poor’s Ratings Services, a division of McGraw-Hill, and
any successor thereto.
“ Securities Depositories” means The Depository Trust Company, 55 Water Street,
50th Floor, New York, New York 10041-0099, Attention: Call Notification Department, Fax
(212) 855-7232; and, in accordance with then current guidelines of the Securities and
Exchange Commission, such other addresses and/or such other securities depositories as
the Authority may designate in an Officer’s Certificate delivered to the Fiscal Agent.
“ Senior Subaccount ” means the subaccount by that name within the Reserve Fund,
established under the Indenture.
“ Senior Subaccount Reserve Requirement” means, as of any date of calculation, an
amount not to exceed the lesser of (i) maximum annual debt service on the Outstanding
Bonds (other than the Series 2006B Bonds), (ii) one hundred twenty-five percent (125%) of
average annual debt service on the Outstanding Bonds (other than the Series 2006B Bonds),
or (iii) ten percent (10%) of the then principal amount of the Outstanding Bonds (other than
the Series 2006B Bonds).
“ Series 2006 Bonds” means, collectively, the Series 2006A Bonds and the Series 2006B
Bonds.
“ Series 2006A Bonds” means the Temecula Public Financing Authority Community
Facilities District No. 01-2 (Harveston) 2006 Special Tax Refunding Bonds, Series A,
authorized by and at any time Outstanding pursuant to the Act and the Fiscal Agent
Agreement.
“ Series 2006B Bonds” means the Temecula Public Financing Authority Community
Facilities District No. 01-2 (Harveston) 2006 Special Tax Refunding Bonds, Subordinate
D-8
Series B, authorized by and at any time Outstanding pursuant to the Act and the Fiscal
Agent Agreement.
“ Special Tax Fund ” means the fund by that name established by the Fiscal Agent
Agreement.
“ Special Tax Prepayments” means the proceeds of any Special Tax prepayments
received by the Authority, as calculated pursuant to the Rate and Method of
Apportionment of Special Taxes, less any administrative fees or penalties collected as part
of any such prepayment.
“ Special Tax Prepayments Account” means the account by that name established
within the Bond Fund under the Fiscal Agent Agreement.
“ Special Tax Revenues ” means the proceeds of the Special Taxes received by the
Authority, including any scheduled payments and any prepayments thereof, interest
thereon and proceeds of the redemption or sale of property sold as a result of foreclosure of
the lien of the Special Taxes to the amount of said lien and interest thereon. “Special Tax
Revenues” does not include any penalties collected in connection with delinquent Special
Taxes.
“ Special Taxes” means the special taxes levied within the District pursuant to the
Act, the Ordinance and the Fiscal Agent Agreement.
“ Subordinate Subaccount ” means the subaccount by that name within the Reserve
Fund, established under the Fiscal Agent Agreement.
“ Subordinate Subaccount Reserve Requirement” means an amount equal to the then
Maximum Reserve Fund Amount, less the amount of the then Senior Subaccount Reserve
Requirement.
“ Supplemental Agreement ” means an agreement the execution of which is
authorized by a resolution which has been duly adopted by the Authority under the Act
and which agreement is amendatory of or supplemental to the Fiscal Agent Agreement, but
only if and to the extent that such agreement is specifically authorized under the Fiscal
Agent Agreement.
“ Tax Consultant ” means Psomas, or another independent financial or tax consultant
retained by the Authority or the City for the purpose of computing the Special Taxes.
“ Treasurer ” means the Treasurer of the Authority or such other officer or employee
of the Authority performing the functions of the chief financial officer of the Authority.
Funds and Accounts
The Fiscal Agent Agreement provides for the following funds:
Improvement Fund . There is established under the Fiscal Agent Agreement as a
separate fund to be held by the Fiscal Agent the Improvement Fund. A deposit shall be
made to the Improvement Fund as required by the Fiscal Agent Agreement. Moneys in the
Improvement Fund shall be held in trust by the Fiscal Agent for the benefit of the
Authority, and shall be disbursed for the payment or reimbursement of costs of the Project.
Moneys in this fund are not pledged as security for the repayment of the Bonds.
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Disbursements from the Improvement Fund shall be made by the Fiscal Agent upon
receipt of an Officer’s Certificate, which shall: (a) set forth the amount required to be
disbursed, the purpose for which the disbursement is to be made (which shall be for
payment of a cost of the Project as required under the Acquisition Agreement, or otherwise,
or to reimburse expenditures of the Authority, the City or any other party for any of such
Project costs previously paid), that the disbursement is a proper expenditure from the
Improvement Fund, and the person to which the disbursement is to be paid; and (b) certify
that no portion of the amount then being requested to be disbursed was set forth in any
Officer’s Certificate previously filed requesting a disbursement.
Each such Officer’s Certificate or other certificate submitted to the Fiscal Agent as
described in the Fiscal Agent Agreement shall be sufficient evidence to the Fiscal Agent of
the facts stated therein, and the Fiscal Agent shall have no duty to confirm the accuracy of
such facts.
Moneys in the Improvement Fund will be invested and deposited in accordance
with the Fiscal Agent Agreement. Interest earnings and profits from the investment and
deposit of amounts in the Improvement Fund shall be retained in the Improvement Fund to
be used for the purposes thereof.
Upon receipt by the Fiscal Agent of an Officer’s Certificate stating that the Project
has been completed and that all costs of the Project have been paid, or that any such costs
are no longer required to be paid from the Improvement Fund, the Fiscal Agent shall
transfer the amount, if any, remaining in the Improvement Fund to the Bond Fund to be
used to pay Debt Service on the Bonds (in accordance with the priority set forth in the
Fiscal Agent Agreement) on the next Interest Payment Date, and when no amounts remain
on deposit in the Improvement Fund the Improvement Fund shall be closed.
Costs of Issuance Fund . There is established under the Fiscal Agent Agreement as a
separate fund to be held by the Fiscal Agent the Costs of Issuance Fund, to the credit of
which a deposit shall be made as required by the Fiscal Agent Agreement. Moneys in the
Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as
provided below for the payment or reimbursement of Costs of Issuance, and are not
pledged as security for the Bonds.
Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay
Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to
the designated payees, signed by the Treasurer and delivered to the Fiscal Agent
concurrently with the delivery of the Bonds, or otherwise in an Officer’s Certificate
delivered to the Fiscal Agent after the Closing Date. The Fiscal Agent shall pay all Costs of
Issuance after receipt of an invoice from any such payee which requests payment in an
amount which is less than or equal to the amount set forth with respect to such payee
pursuant to an Officer’s Certificate requesting payment of Costs of Issuance.
The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of 90 days
from the date of delivery of the Bonds and then shall transfer any moneys remaining therein,
including any investment earnings thereon, to the Treasurer for deposit by the Treasurer in
the Administrative Expense Fund.
Moneys in the Costs of Issuance Fund will be invested and deposited in accordance
with the Fiscal Agent Agreement. Interest earnings and profits resulting from said
investment shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for
the purposes of such fund.
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Reserve Fund . There is established under the Fiscal Agent Agreement as a separate
fund to be held by the Fiscal Agent the Reserve Fund, and within such fund two
subaccounts designated as the Senior Subaccount and the Subordinate Subaccount, to the
credit of which subaccounts deposits shall be made as required by the Fiscal Agent
Agreement, and to the credit of which Senior Subaccount the Fiscal Agent shall hold the
Reserve Fund Policy. The amount available to be drawn under the Reserve Fund Policy as
of the Closing Date, and, together with the amount to be deposited to the Senior
Subaccount pursuant to the Fiscal Agent Agreement, is equal to the Senior Subaccount
Reserve Requirement as of the Closing Date. The amount to be deposited to the
Subordinate Subaccount pursuant to the Fiscal Agent Agreement is equal to the
Subordinate Subaccount Reserve Requirement as of the Closing Date. Deposits also shall
be made to the Senior Subaccount and the Subordinate Subaccount as provided in the
Fiscal Agent Agreement. Moneys in the Senior Subaccount shall be held in trust by the
Fiscal Agent for the benefit of the Owners of the Bonds (other than the Series 2006B Bonds)
as a reserve for the payment of principal of, and interest and any premium on, the Bonds
(other than the Series 2006B Bonds) and shall be subject to a lien in favor of the Owners of
the Bonds (other than the Series 2006B Bonds). The Reserve Fund Policy shall be held by the
Fiscal Agent for the credit of the Senior Subaccount and the benefit of the Series 2006A
Bonds, to be drawn upon as provided in the Fiscal Agent Agreement. Moneys in the
Subordinate Subaccount shall be held in trust by the Fiscal Agent for the benefit of the
Owners of the Series 2006B Bonds as a reserve for payment of principal of, and interest and
any premium on, the Series 2006B Bonds and shall be subject to a lien in favor of the Owners
of the Series 2006B Bonds.
Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited
in the Senior Subaccount shall be used and withdrawn by the Fiscal Agent solely for the
purpose of making transfers to the Bond Fund in the event of any deficiency at any time in
the Bond Fund of the amount then required for payment of the principal of, and interest
and any premium on, the Bonds (other than the Series 2006B Bonds) or, in accordance with
the provisions of the Fiscal Agent Agreement, for the purpose of redeeming Bonds (other
than the Series 2006B Bonds) from the Bond Fund. Notwithstanding any other provision
hereof, proceeds of draws on the Reserve Fund Policy shall be used solely to pay debt
service on the Series 2006A Bonds.
In any case where the Senior Subaccount of the Reserve Fund is funded with a
combination of cash and the Reserve Fund Policy, the Fiscal Agent shall (i) deplete all cash
balances and Permitted Investments in the Senior Subaccount of the Reserve Fund before
drawing on the Reserve Fund Policy, and (ii) once all cash balances and Permitted
Investments have been exhausted, the Fiscal Agent shall draw on the Reserve Fund Policy.
Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited
in the Subordinate Subaccount shall be used and withdrawn by the Fiscal Agent solely for
the purpose of making transfers to the Bond Fund in the event of any deficiency at any time,
in the Bond Fund of the amount then required for payment of the principal of, and interest
and any premium on, the Series 2006B Bonds, or, in accordance with the provisions of the
Fiscal Agent Agreement, for the purpose of redeeming Series 2006B Bonds from the Bond
Fund.
Whenever, on the Business Day prior to any Interest Payment Date, or on any other
date at the request of the Treasurer, the amount in the Senior Subaccount (taking into
account any amounts available to be drawn under the Reserve Fund Policy for the purposes
of the Senior Subaccount of the Reserve Fund) or the Subordinate Subaccount of the
Reserve Fund exceeds the Senior Subaccount Reserve Requirement or the Subordinate
Subaccount Reserve Requirement, respectively, the Fiscal Agent shall provide written
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notice to the Treasurer of the amount of the excess and shall transfer an amount equal to the
excess from the applicable subaccount of the Reserve Fund: (i) to the Bond Insurer, to the
extent any amounts are then owing by the Authority to the Bond Insurer in respect of
amounts drawn under the Reserve Fund Policy (including, but no limited to, repayment of
any withdrawals under the Reserve Fund Policy which have not theretofore been repaid),
and then (ii) to the Bond Fund to be used for the payment of interest on the Bonds on the
next Interest Payment Date in accordance with the priorities set forth in the Fiscal Agent
Agreement.
Whenever (i) the balance in the Senior Subacccount of the Reserve Fund (without
regard to amounts available to be drawn under the Reserve Fund Policy) exceeds the
amount required to redeem or pay the Outstanding Bonds (other than the Series 2006B
Bonds), including interest accrued to the date of payment or redemption and premium, if
any, due upon redemption, and (ii) no amounts are owing by the Authority to the Bond
Insurer in respect of draws under the Reserve Fund Policy (including, but not limited to,
repayment of any withdrawals under the Reserve Fund Policy which have not theretofore
been repaid), the Fiscal Agent shall transfer the amount in the Senior Subacccount of the
Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment
Date to the payment and redemption, in accordance with the Fiscal Agent Agreement, of all
of the Outstanding Bonds (other than the Series 2006B Bonds). In the event that the amount
so transferred from the Senior Subacccount of the Reserve Fund to the Bond Fund exceeds
the amount required to pay and redeem the Outstanding Bonds (other than the Series 2006B
Bonds), the balance in the Senior Subaccount of the Reserve Fund shall be transferred to the
Authority to be used for any lawful purpose of the Authority.
Whenever the balance in the Subordinate Subaccount of the Reserve Fund exceeds
the amount required to redeem or pay the Outstanding Series 2006B Bonds, including
interest accrued to the date of payment or redemption and premium, if any, due upon
redemption, the Fiscal Agent shall transfer the amount in the Subordinate Subaccount of
the Reserve Fund to the Bond Fund to be applied, on the next succeeding Interest Payment
Date to the payment and redemption, in accordance with the Fiscal Agent Agreement, of all
of the Outstanding Series 2006B Bonds. In the event that the amount so transferred from the
Subordinate Subaccount of the Reserve Fund to the Bond Fund exceeds the amount
required to pay and redeem the Outstanding Series 2006B Bonds, the balance in the
Subordinate Subaccount of the Reserve Fund shall be transferred to the Authority to be
used for any lawful purpose of the Authority.
Notwithstanding the foregoing, no amounts shall be transferred from either of the
subaccounts of the Reserve Fund pursuant to the provisions of the Fiscal Agent Agreement
described in the preceding two paragraphs until after (i) the payment to the Bond Insurer of
any amounts owed to it by the Authority in respect of draws under the Reserve Fund
Policy, (ii) the calculation of any amounts due to the federal government pursuant to the
Fiscal Agent Agreement following payment of the applicable series of the Bonds and
withdrawal of any such amount from the applicable subaccount of the Reserve Fund for
purposes of making such payment to the federal government, and (iii) payment of any fees
and expenses due to the Fiscal Agent.
Whenever Special Taxes are prepaid and Bonds are to be redeemed with the
proceeds of such prepayment pursuant to the Fiscal Agent Agreement, a proportionate
amount in the subaccounts of the Reserve Fund (determined on the basis of the principal of
Bonds to be redeemed and the then outstanding principal of the Bonds, the series of Bonds
to be redeemed (i.e. Series 2006A Bonds and Parity Bonds, and Series 2006B Bonds), and in
any event without taking into account any amounts available to be withdrawn under the
Reserve Fund Policy) shall be transferred on the Business Day prior to the redemption date
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by the Fiscal Agent to the Bond Fund to be applied to the redemption of the Bonds
pursuant to the Fiscal Agent Agreement. Notwithstanding the foregoing, in no event shall
any transfer be made pursuant to the Fiscal Agent Agreement which results in the (i)
amount on deposit in the Senior Subaccount being an amount less than the amount of the
Senior Subaccount Reserve Requirement to be in effect following the redemption of such
Bonds; or (ii) amount on deposit in the Subordinate Subaccount being an amount less than
the amount of the Subordinate Subaccount Reserve Requirement to be in effect following
the redemption of such Bonds. Also, in no event shall there be a draw on the Reserve Fund
Policy to make any transfer provided for in the Fiscal Agent Agreement.
Amounts in the subaccounts of the Reserve Fund may at any time be used, at the
written direction of an Authorized Officer, for the purpose of paying any rebate liability as
may be determined in accordance with the Fiscal Agent Agreement; provided that amounts
in the Subordinate Subaccount shall be used for such purpose until no amounts remain in
such subaccount, prior to using amounts in the Senior Subaccount for such purpose. Also,
in no event shall there be a draw on the Reserve Fund Policy to make any transfer provided
for in the Fiscal Agent Agreement.
Moneys in the Senior Subaccount and in the Subordinate Subaccount of the Reserve
Fund shall be invested in accordance with the Fiscal Agent Agreement, and earnings on
amounts in a subaccount shall remain in the corresponding subaccount subject to transfer
as provided in the Fiscal Agent Agreement.
As long as the Reserve Fund Policy shall be in full force and effect, the Authority
and the Fiscal Agent agree to comply with the following provisions: (i) in the event and to
the extent that moneys on deposit in the Senior Subaccount of the Reserve Fund, plus all
amounts on deposit in and credited to the Bond Fund in excess of the amount of the Reserve
Fund Policy, are insufficient to pay the amount of principal and interest coming due on the
Series 2006A Bonds, then upon the later of: (a) one (1) day after receipt by the General
Counsel of the Bond Insurer of a demand for payment in the form attached to the Reserve
Fund Policy as Attachment 1 (the “Demand for Payment”), duly executed by the Fiscal
Agent certifying that payment due under the Fiscal Agent Agreement has not been made to
the Fiscal Agent; or (b) the payment date of the Series 2006A Bonds as specified in the
Demand for Payment presented by the Fiscal Agent to the General Counsel of the Bond
Insurer, the Bond Insurer will make a deposit of funds in an account with the Fiscal Agent
or its successor, in New York, New York, sufficient for the payment to the Fiscal Agent, of
amounts which are then due to the Fiscal Agent under the Fiscal Agent Agreement (as
specified in the Demand for Payment) up to but not in excess of the Surety Bond Coverage,
as defined in the Reserve Fund Policy; provided, however, that in the event that the amount
on deposit in, or credited to, the Senior Subaccount of the Reserve Fund, in addition to the
amount available under the Reserve Fund Policy, includes amounts available under a letter
of credit, insurance policy, surety bond or other such funding instrument (the “Additional
Funding Instrument”), draws on the Reserve Fund Policy and the Additional Funding
Instrument shall be made on a pro rata basis to fund the insufficiency; (ii) the Fiscal Agent
shall, after submitting to the Bond Insurer the Demand for Payment as provided in (i)
above, make available to the Bond Insurer all records relating to the funds and accounts
maintained by it under the Fiscal Agent Agreement; (iii) the Fiscal Agent shall, upon
receipt of moneys received from the draw on the Reserve Fund Policy, as specified in the
Demand for Payment, credit the Senior Subaccount of the Reserve Fund to the extent of
moneys received pursuant to such Demand; (iv) the Senior Subaccount of the Reserve Fund
shall be replenished in the following priority: (a) principal and interest due under the terms
of the Reserve Fund Policy shall be paid from first available Special Tax Revenues
otherwise required to be deposited to the Senior Subaccount of the Reserve Fund; (b) after
all such amounts are paid in full, amounts necessary to fund the Senior Subaccount of the
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Reserve Fund to the required level, after taking into account the amounts available under
the Reserve Fund Policy shall be deposited from next available Special Tax Revenues
otherwise required to be deposited to the Senior Subaccount of the Reserve Fund; and (v) it
is expected that the amount available to be drawn on the Reserve Fund Policy will be
reduced, in the event that the Senior Subaccount Reserve Requirement is reduced, to an
amount not less than the amount of the then Senior Subaccount Reserve Requirement less an
amount equal to any funds then held in the Senior Subaccount of the Reserve Fund.
Bond Fund . There is established under the Fiscal Agent Agreement as a separate
fund to be held by the Fiscal Agent the Bond Fund, to the credit of which deposits shall be
made as required by the Fiscal Agent Agreement, and any other amounts required to be
deposited therein by the Act. There is also created in the Bond Fund a separate account to
be held by the Fiscal Agent consisting of the Special Tax Prepayments Account, to the
credit of which deposits shall be made as provided in the Fiscal Agent Agreement.
Moneys in the Bond Fund and the accounts therein shall be held in trust by the Fiscal
Agent for the benefit of the Owners of the Bonds, shall be disbursed for the payment of the
principal of, and interest and any premium on, the Bonds as provided below, and, pending
such disbursement, shall be subject to a lien in favor of the Owners of the Bonds (subject in
any event to the priorities for the disposition of amounts in the Bond Fund specified in the
Fiscal Agent Agreement).
On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund
and pay to the Owners of the Bonds the principal, and interest and any premium, then due
and payable on the Bonds, including any amounts due on the Bonds by reason of the
sinking payments set forth in the Fiscal Agent Agreement, or a redemption of the Bonds
required by the Fiscal Agent Agreement, such payments to be made in the priority listed in
the succeeding paragraph. Notwithstanding the foregoing, amounts in the Bond Fund as a
result of a transfer from the Improvement Fund will be used to pay the principal of and
interest on the Bonds prior to the use of any other amounts in the Bond Fund for such
purpose.
On each Interest Payment Date amounts on deposit in the Bond Fund will be used to
make the following payments in the order of priority listed, with each requirement to be
satisfied in full prior to any use of amounts for the next succeeding requirement: (i)
payment of all interest due and owing (including any past due interest not yet paid) on the
Bonds, other than the Series 2006B Bonds, (ii) payment of all principal due and owing
(including any past due principal and any principal due by reason of sinking payments for
the Bonds (other than the Series 2006B Bonds) referred to in the Fiscal Agent Agreement) on
the Bonds, other than the Series 2006B Bonds, (iii) payment of all interest due and owing
(including any past due interest not yet paid) on the Series 2006B Bonds, and (iv) payment
of all principal due and owing (including any past due principal and any principal due by
reason of sinking payments for the Series 2006B Bonds referred to in the Fiscal Agent
Agreement) on the Series 2006B Bonds. If the requirements of any of the preceding clauses
(i) through (iv) can be met in part, but not in full, available amounts shall be applied pro
rata to payment of the applicable Bonds referenced in such clause.
In the event that amounts in the Bond Fund are insufficient for the purposes set forth
in clauses (i) and (ii) of the preceding paragraph, the Fiscal Agent shall withdraw from the
Senior Subaccount of the Reserve Fund, in accordance with the provisions of the Fiscal
Agent Agreement, to the extent of any funds or Permitted Investments therein, and then
draw on the Reserve Fund Policy, to the extent amounts are available under the Reserve
Fund Policy, amounts to cover the amount of such Bond Fund insufficiency, all in the
priority provided in the Fiscal Agent Agreement. Amounts so withdrawn from the Senior
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Subaccount of the Reserve Fund or drawn under the Reserve Fund Policy will be deposited
in the Bond Fund; and, notwithstanding any other provision of the Fiscal Agent Agreement,
amounts drawn on the Reserve Fund Policy shall be used solely to make payments on the
Series 2006A Bonds.
In the event that amounts in the Bond Fund are insufficient for the purpose set forth
in clauses (iii) and (iv) of the second preceding paragraph, the Fiscal Agent shall withdraw
from the Subordinate Subaccount of the Reserve Fund to the extent of any funds therein
amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn
from the Subordinate Subaccount shall be deposited in the Bond Fund and used solely to
make payments on the Series 2006B Bonds.
Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal
Agent to the Bond Fund on the next date for which notice of redemption of Bonds can
timely be given under the Fiscal Agent Agreement, and notice to the Fiscal Agent can
timely be given under the Fiscal Agent Agreement, and shall be used (together with any
amounts transferred pursuant to the Fiscal Agent Agreement) to redeem Bonds on the
redemption date selected in accordance with the Fiscal Agent Agreement.
Moneys in the Bond Fund and the Special Tax Prepayments Account shall be
invested and deposited in accordance with the Fiscal Agent Agreement. Interest earnings
and profits resulting from the investment and deposit of amounts in the Bond Fund and the
Special Tax Prepayments Account shall be retained in the Bond Fund and the Special Tax
Prepayments Account, respectively, to be used for purposes of such fund and account.
Special Tax Fund . There is established under the Fiscal Agent Agreement as a
separate fund to be held by the Fiscal Agent the Special Tax Fund, to the credit of which the
Fiscal Agent shall deposit amounts received from or on behalf of the Authority consisting
of Special Tax Revenues, and any amounts required by the Fiscal Agent Agreement to be
deposited therein. The Authority shall promptly remit any such amounts received by it to
the Fiscal Agent for deposit by the Fiscal Agent to the Special Tax Fund. Notwithstanding
the foregoing, (i) any Special Tax Revenues constituting payment of the portion of the
Special Tax levy for Administrative Expenses, up to an amount not to exceed $75,000.00 in
any Fiscal Year, shall be deposited by the Treasurer in the Administrative Expense Fund,
and (ii) any proceeds of Special Tax Prepayments shall be transferred by the Treasurer to
the Fiscal Agent for deposit by the Fiscal Agent (as specified in writing by the Treasurer to
the Fiscal Agent) directly in the Special Tax Prepayments Account established pursuant to
the Fiscal Agent Agreement.
Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the
benefit of the Authority and the Owners of the Bonds, shall be disbursed as provided below
and, pending disbursement, shall be subject to a lien in favor of the Owners of the Bonds
and the Authority.
From time to time as needed to pay the obligations of the District, but no later than
three (3) Business Days prior to each Interest Payment Date, the Fiscal Agent shall withdraw
from the Special Tax Fund and transfer the following amounts in the following order of
priority: (i) to the Bond Fund an amount, taking into account any amounts then on deposit
in the Bond Fund and any expected transfers from the Improvement Fund, the Reserve
Fund and the Special Tax Prepayments Account to the Bond Fund pursuant to the Fiscal
Agent Agreement, such that the amount in the Bond Fund equals the principal (including
any sinking payment), premium, if any, and interest due on the Bonds (other than the Series
2006B Bonds) on such Interest Payment Date; (ii) to the Bond Insurer, any amounts owed by
the Authority to the Bond Insurer in respect of amounts drawn on the Reserve Fund Policy
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(including, but not limited to, repayment of any withdrawals under the Reserve Fund
Policy which have not theretofore been repaid); (iii) to the Senior Subaccount of the Reserve
Fund an amount, taking into account amounts then on deposit in the Senior Subaccount
and amounts available to be drawn under the Reserve Fund Policy for purposes of the
Senior Subaccount of the Reserve Fund (after any amounts paid to the Bond Insurer under
the preceding clause (ii)), such that the amount in the Senior Subaccount is equal to the
Senior Subaccount Reserve Requirement; (iv) prior to any transfers referred to in the
succeeding clauses (v), (vi) and (vii) in connection with any March 1 Interest Payment Date
for the Series 2006B Bonds, there shall be withheld in the Special Tax Fund, for use in
connection with the principal due on the Bonds (other than the Series 2006B Bonds) on the
succeeding September 1 payment date, an amount equal to one-half of the principal
(including one-half of any scheduled mandatory sinking payment due on the Bonds (other
than the Series 2006B Bonds) under the Fiscal Agent Agreement) due on the Bonds (other
than the Series 2006B Bonds) on the next succeeding September 1, (v) to the Bond Fund an
amount, taking into account any expected transfers referred to in clause (i) and from the
Subordinate Subaccount of the Reserve Fund, as well as the requirements of the preceding
clauses (i), (ii) and (iii), such that the amount in the Bond Fund equals the principal
(including any sinking payment), premium, if any, and interest due on the Bonds
(including the Series 2006B Bonds) on the next Interest Payment Date, (vi) to the
Subordinate Subaccount of the Reserve Fund an amount, taking into account amounts then
on deposit in the Subordinate Subaccount, such that the amount in the Subordinate
Subaccount is equal to the Subordinate Subaccount Reserve Requirement, and (vii) in
connection with transfers with respect to any September 1 Interest Payment Date, following
the satisfaction of the requirements of the preceding clauses (i) through (vi) above for such
September 1, the Fiscal Agent shall transfer to the Administrative Expense Fund an amount,
not to exceed the then remaining amount on deposit in the Special Tax Fund, as may be
specified in an Officer’s Certificate delivered to the Fiscal Agent as necessary to pay
Administrative Expenses not able to be paid due to the $75,000.00 limitation referenced in
clause (i) of the third sentence of the second preceding paragraph.
Moneys in the Special Tax Fund shall be invested and deposited in accordance with
the Fiscal Agent Agreement. Interest earnings and profits resulting from such investment
and deposit shall be retained in the Special Tax Fund to be used for the purposes thereof.
Administrative Expense Fund . There is established under the Fiscal Agent
Agreement, as a separate fund to be held by the Treasurer the Administrative Expense Fund
to the credit of which deposits shall be made as required by the Fiscal Agent Agreement.
Moneys in the Administrative Expense Fund shall be held in trust by the Treasurer for the
benefit of the Authority, shall be disbursed as provided below, and are not pledged as
security for the Bonds.
Amounts in the Administrative Expense Fund will be withdrawn by the Treasurer
and paid to the Authority or its order upon receipt by the Treasurer of an Officer’s
Certificate stating the amount to be withdrawn, that such amount is to be used to pay an
Administrative Expense or a Costs of Issuance, and the nature of such Administrative
Expense or Costs of Issuance. Amounts transferred from the Costs of Issuance Fund to the
Administrative Expense Fund pursuant to the Fiscal Agent Agreement shall be separately
identified at all times, and shall be expended for purposes of the Administrative Expense
Fund prior to the use of amounts transferred to the Administrative Expense Fund from the
Special Tax Fund pursuant to the Fiscal Agent Agreement.
Annually, on the last day of each Fiscal Year commencing with the last day of Fiscal
Year 2006-2007, the Treasurer shall withdraw any amounts then remaining in the
Administrative Expense Fund in excess of $40,000 that have not otherwise been allocated to
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pay Administrative Expenses incurred but not yet paid, and which are not otherwise
encumbered, and transfer such amounts to the Fiscal Agent for deposit by the Fiscal Agent
in the Special Tax Fund.
Moneys in the Administrative Expense Fund will be invested and deposited in
accordance with the Fiscal Agent Agreement. Interest earnings and profits resulting from
said investment shall be retained by the Treasurer in the Administrative Expense Fund to be
used for the purposes of such fund.
Refunding Fund . There is hereby established under the Fiscal Agent Agreement as a
separate fund to be held by the Fiscal Agent the Refunding Fund, to the credit of which a
deposit shall be made as required by the Fiscal Agent Agreement. Moneys in the
Refunding Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority,
shall be disbursed as provided in the Fiscal Agent Agreement, and are not pledged as
security for the Bonds.
On the Closing Date, all amounts on deposit in the Refunding Fund shall be
transferred by the Fiscal Agent to the Prior Trustee, to be used to pay in full and discharge
the Prior Bonds. After disbursement of all amounts on deposit in the Refunding Fund, the
Refunding Fund shall be closed.
Parity Bonds
The Authority may issue one or more series of Bonds, in addition to the Series 2006
Bonds authorized under the Fiscal Agent Agreement, by means of a Supplemental
Agreement and without the consent of any Bondowners, upon compliance with the
provisions described below. Any such Bonds that comply with the requirements described
below shall be Parity Bonds, and such Parity Bonds shall constitute Bonds under the Fiscal
Agent Agreement and shall be secured by a lien on the Special Tax Revenues and funds
pledged for the payment of the Bonds under the Fiscal Agent Agreement on a parity with
all Series 2006A Bonds and any previously issued Parity Bonds Outstanding under the
Fiscal Agent Agreement. The Authority may issue the Parity Bonds subject to the following
specific conditions precedent:
(A) The Authority shall be in compliance on the date of issuance of the Parity
Bonds with all covenants set forth in the Fiscal Agent Agreement and all
Supplemental Agreements.
(B) The Supplemental Agreement providing for the issuance of such Parity
Bonds shall provide that interest thereon shall be payable on March 1 and September
1, and principal thereof shall be payable on September 1 in any year in which
principal is payable (provided that there shall be no requirement that any Parity
Bonds pay interest on a current basis).
(C) The Supplemental Agreement providing for the issuance of such Parity
Bonds may provide for the establishment of separate funds and accounts, and shall
provide for a deposit to the Senior Subaccount of the Reserve Fund in an amount
necessary so that following the issuance of such Parity Bonds, the amount on deposit
therein, together with the amount available to be drawn on the Reserve Fund Policy,
is equal to the Senior Subaccount Reserve Requirement.
(D) The Parity Bonds shall constitute “Refunding Bonds,” as such term is
defined in the Fiscal Agent Agreement.
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(E) The Authority shall obtain a certificate of a Tax Consultant to the effect
that (i) the amount of the maximum Special Taxes that may be levied in each Fiscal
Year on Developed Property (as such term is defined in the Rate and Method of
Apportionment of Special Taxes), less an amount sufficient to pay annual
Administrative Expenses (as determined by the Treasurer), shall be at least one
hundred ten percent (110%) of the total Annual Debt Service for each such Fiscal
Year on (a) the Bonds (other than the Series 2006B Bonds) to remain outstanding
following the issuance of the Parity Bonds, and (b) on the proposed Parity Bonds;
and (ii) the amount of the maximum Special Taxes that may be levied in each Fiscal
Year on Residential Property (including Single Family Property) and Apartment
Property (as such terms are defined in the Rate and Method of Apportionment of
Special Taxes) for which the City has issued certificates of occupancy, shall be at
least one hundred percent (100%) of (a) the total Annual Debt Service for each Fiscal
Year on (x) the Bonds (other than the Series 2006B Bonds) to remain outstanding
following the issuance of the Parity Bonds, and (y) on the proposed Parity Bonds,
plus (b) an amount sufficient to pay annual Administrative Expenses (as determined
by the Treasurer).
(F) The District Value shall be at least twenty-five (25) times the sum of: (i) the
aggregate principal amount of all Bonds then Outstanding (other than the Series
2006B Bonds), plus (ii) the aggregate principal amount of the series of Parity Bonds
proposed to be issued, plus (iii) the aggregate principal amount of any fixed
assessment liens on the parcels in the District subject to the levy of Special Taxes,
plus (iv) a portion of the aggregate principal amount of any and all other
community facilities district bonds then outstanding (other than the Series 2006B
Bonds) and payable at least partially from special taxes to be levied on parcels of
land within the District (the “Other District Bonds”) equal to the aggregate principal
amount of the Other District Bonds multiplied by a fraction, the numerator of which
is the amount of special taxes levied for the Other District Bonds on parcels of land
within the District, and the denominator of which is the total amount of special taxes
levied for the Other District Bonds on all parcels of land against which the special
taxes are levied to pay the Other District Bonds (such fraction to be determined
based upon the maximum special taxes which could be levied in the year in which
maximum annual debt service on the Other District Bonds occurs), based upon
information from the most recent available Fiscal Year.
(G) The Authority shall deliver to the Fiscal Agent an Officer’s Certificate
certifying that the conditions precedent to the issuance of such Parity Bonds set forth
in subsections (A), (B), (C), (D), (E) and (F) of the Fiscal Agent Agreement have been
satisfied. In delivering such Officer’s Certificate, the Authorized Officer that
executes the same may conclusively rely upon such certificates of the Fiscal Agent,
the Tax Consultant and others selected with due care, without the need for
independent inquiry or certification.
Nothing in the Fiscal Agent Agreement shall prohibit the Authority from issuing
bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues
subordinate to the pledge thereof for the benefit of the Series 2006B Bonds under the Fiscal
Agent Agreement.
Covenants of the Authority
The Authority will punctually pay or cause to be paid the principal of, and interest
and any premium on, the Bonds when and as due in strict conformity with the terms of the
Fiscal Agent Agreement and any Supplemental Agreement, and it will faithfully observe
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and perform all of the conditions, covenants and requirements of the Fiscal Agent
Agreement and all Supplemental Agreements and of the Bonds.
The Bonds are limited obligations of the Authority on behalf of the District and are
payable solely from and secured solely by the Special Tax Revenues and the amounts in the
Bond Fund (including the Special Tax Prepayments Account therein), the Reserve Fund
(provided that amounts in the Senior Subaccount may only be used to pay amounts due on
the Bonds, other than the Series 2006B Bonds, and otherwise as provided in the Fiscal Agent
Agreement, and amounts in the Subordinate Subaccount may only be used to pay amounts
due on the Series 2006B Bonds, and as otherwise provided in the Fiscal Agent Agreement)
and, until disbursed as provided in the Fiscal Agent Agreement, the Special Tax Fund.
In order to prevent any accumulation of claims for interest after maturity, the
Authority may not, directly or indirectly, extend or consent to the extension of the time for
the payment of any claim for interest on any of the Bonds and may not, directly or
indirectly, be a party to the approval of any such arrangement by purchasing or funding
said claims for interest or in any other manner. In case any such claim for interest shall be
extended or funded, whether or not with the consent of the Authority, such claim for
interest so extended or funded shall not be entitled, in case of default under the Fiscal
Agent Agreement, to the benefits of the Fiscal Agent Agreement, except subject to the prior
payment in full of the principal of all of the Bonds then Outstanding and of all claims for
interest which shall not have been so extended or funded.
The Authority will not encumber, pledge or place any charge or lien upon any of the
Special Tax Revenues or other amounts pledged to the Bonds superior to or on a parity
with the pledge and lien herein created for the benefit of the Bonds, except as permitted by
the Fiscal Agent Agreement.
The Authority will keep, or cause to be kept, proper books of record and accounts,
separate from all other records and accounts of the Authority, in which complete and
correct entries are made of all transactions relating to the expenditure of amounts disbursed
from the Administrative Expense Fund and to the Special Tax Revenues. Such books of
record and accounts will at all times during business hours be subject to the inspection of
the Fiscal Agent and the Owners of not less than ten percent (10%) of the principal amount
of the Bonds then Outstanding, or their representatives duly authorized in writing.
The Authority will preserve and protect the security of the Bonds and the rights of
the Owners, and will warrant and defend their rights against all claims and demands of all
persons. From and after the delivery of any of the Bonds by the Authority, the Bonds shall
be incontestable by the Authority.
The Authority will comply with all applicable provisions of the Act and law in
administering the District and completing the acquisition of the Project; provided that the
Authority shall have no obligation to advance any of its own funds for any purpose
whatsoever under the Fiscal Agent Agreement.
The Authority shall comply with all requirements of the Act so as to assure the
timely collection of Special Tax Revenues, including without limitation, the enforcement of
delinquent Special Taxes. On or within five (5) Business Days of each June 1, the Fiscal
Agent shall provide the Treasurer with a notice stating the amount then on deposit in the
Bond Fund and in the subaccounts within the Reserve Fund, and informing the Authority
that the Special Taxes may need to be levied pursuant to the Ordinance as necessary to
provide for the debt service to become due on the Bonds in the calendar year that
commences in the Fiscal Year for which the levy is to be made, and Administrative
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Expenses and replenishment (if necessary) of the Senior Subaccount and of the Subordinate
Subaccount of the Reserve Fund so that the balances therein (taking into account, with
respect to the Senior Subaccount, the amount available to be drawn under the Reserve Fund
Policy) equals the Senior Subaccount Reserve Requirement and the Subordinate
Subaccount Reserve Requirement, respectively. The receipt of or failure to receive such
notice by the Treasurer shall in no way affect the obligations of the Treasurer under the
following two paragraphs. Upon receipt of such notice, the Treasurer shall communicate
with the Auditor to ascertain the relevant parcels on which the Special Taxes are to be
levied, taking into account any parcel splits during the preceding and then current year.
The Treasurer shall effect the levy of the Special Taxes each Fiscal Year in accordance
with the Ordinance by each July 15 that the Bonds are outstanding, or otherwise such that
the computation of the levy is complete before the final date on which Auditor will accept
the transmission of the Special Tax amounts for the parcels within the District for inclusion
on the next real property tax roll. Upon the completion of the computation of the amounts
of the levy, the Treasurer shall prepare or cause to be prepared, and shall transmit to the
Auditor, such data as the Auditor requires to include the levy of the Special Taxes on the
next real property tax roll.
The Treasurer shall fix and levy the amount of Special Taxes within the District
required for the payment of principal of and interest on any outstanding Bonds of the
District becoming due and payable during the ensuing year, including any necessary
replenishment or expenditure of the Senior Subaccount and of the Subordinate Subaccount
of the Reserve Fund and an amount estimated to be sufficient to pay the Administrative
Expenses (including amounts necessary to discharge any obligation under the Fiscal Agent
Agreement) during such year, taking into account the balances in such funds and in the
Special Tax Fund. The Special Taxes so levied shall not exceed the authorized amounts as
provided in the proceedings pursuant to the Resolution of Formation.
The Special Taxes shall be payable and be collected in the same manner and at the
same time and in the same installment as the general taxes on real property are payable, and
have the same priority, become delinquent at the same time and in the same proportionate
amounts and bear the same proportionate penalties and interest after delinquency as do the
ad valorem taxes on real property; provided that, pursuant to and in accordance with the
Ordinance, the Special Taxes may be collected by means of direct billing of the property
owners within the District, in which event the Special Taxes shall become delinquent if not
paid when due pursuant to said billing.
Pursuant to Section 53356.1 of the Act, the Authority covenants with and for the
benefit of the Owners of the Bonds that it will order, and cause to be commenced as
described below, and thereafter diligently prosecute to judgment (unless such delinquency
is theretofore brought current), an action in the superior court to foreclose the lien of any
Special Tax or installment thereof not paid when due as provided in the following
paragraph. The Treasurer shall notify the Authority Attorney of any such delinquency of
which it is aware, and the Authority Attorney shall commence, or cause to be commenced,
such proceedings.
On or about February 15 and June 15 of each Fiscal Year, the Treasurer shall compare
the amount of Special Taxes theretofore levied in the District to the amount of Special Tax
Revenues theretofore received by the Authority, and: (A) if the Treasurer determines that
any single parcel subject to the Special Tax in the District is delinquent in the payment of
Special Taxes in the aggregate amount of $5,000 or more, then the Treasurer shall send or
cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to
the property owner within 45 days of such determination, and (if the delinquency remains
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uncured) foreclosure proceedings shall be commenced by the Authority within 90 days of
such determination. Notwithstanding the foregoing, the Treasurer may defer such action if
the amounts in the subaccounts of the Reserve Fund (taking into account amounts available
to be drawn under the Reserve Fund Policy) aggregate at least an amount equal to the
Maximum Reserve Fund Amount; and (B) if the Treasurer determines that the total amount
of delinquent Special Tax for the prior Fiscal Year for the entire District (including the total
of delinquencies under subsection (A) above), exceeds 5% of the total Special Tax due and
payable for the prior Fiscal Year, the Treasurer shall notify or cause to be notified property
owners who are then delinquent in the payment of Special Taxes (and demand immediate
payment of the delinquency) within 45 days of such determination, and the Authority shall
commence foreclosure proceedings within 90 days of such determination against each
parcel of land in the District with a Special Tax delinquency.
The Treasurer and the Authority Attorney, as applicable, are hereby authorized to
employ counsel to conduct any such foreclosure proceedings. The fees and expenses of any
such counsel (including a charge for Authority staff time) in conducting foreclosure
proceedings shall be an Administrative Expense under the Fiscal Agent Agreement.
The Authority will adopt, make, execute and deliver any and all such further
resolutions, instruments and assurances as may be reasonably necessary or proper to carry
out the intention or to facilitate the performance of the Fiscal Agent Agreement, and for the
better assuring and confirming unto the Owners of the rights and benefits provided in the
Fiscal Agent Agreement.
The Authority shall assure that the proceeds of the Series 2006 Bonds and any
amounts held in the Improvement Fund are not so used as to cause the Series 2006 Bonds to
satisfy the private business tests of section 141(b) of the Code or the private loan financing
test of section 141(c) of the Code.
The Authority shall not take any action or permit or suffer any action to be taken if
the result of the same would be to cause the Series 2006 Bonds to be “federally guaranteed”
within the meaning of Section 149(b) of the Code.
The Authority shall take any and all actions necessary to assure compliance with
section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the
federal government, to the extent that such section is applicable to the Series 2006 Bonds.
If necessary, the Authority may use amounts in the subaccounts within the Reserve
Fund (in accordance with the priorities in the Fiscal Agent Agreement), amounts on deposit
in the Administrative Expense Fund, and any other funds available to the District,
including amounts advanced by the Authority or the City, in its respective sole discretion,
to be repaid by the District as soon as practicable from amounts described in the preceding
clauses, to satisfy its obligations under the Fiscal Agent Agreement. The Treasurer shall
take note of any investment of monies hereunder in excess of the yield on the Series 2006
Bonds, and shall take such actions as are necessary to ensure compliance with the Fiscal
Agent Agreement, such as increasing the portion of the Special Tax levy for Administration
Expenses as appropriate to have funds available in the Administrative Expense Fund to
satisfy any rebate liability under the Fiscal Agent Agreement.
The Authority shall not take, or permit or suffer to be taken by the Fiscal Agent or
otherwise, any action with respect to the proceeds of the Series 2006 Bonds which, if such
action had been reasonably expected to have been taken, or had been deliberately and
intentionally taken, on the date of issuance of the Series 2006 Bonds would have caused the
Series 2006 Bonds to be “arbitrage bonds” within the meaning of section 148 of the Code.
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In determining the yield of the Series 2006 Bonds to comply with the Fiscal Agent
Agreement, the Authority will take into account redemption (including premium, if any) in
advance of maturity based on the reasonable expectations of the Authority, as of the Closing
Date, regarding prepayments of Special Taxes and use of prepayments for redemption of
the Bonds, without regard to whether or not prepayments are received or Series 2006 Bonds
redeemed.
The Authority shall take all actions necessary to assure the exclusion of interest on
the Series 2006 Bonds from the gross income of the Owners of the Series 2006 Bonds to the
same extent as such interest is permitted to be excluded from gross income under the Code
as in effect on the date of issuance of the Series 2006 Bonds.
In addition to its obligations under the Fiscal Agent Agreement, the Authority
hereby covenants and agrees that it will comply with and carry out all of the provisions of
the Continuing Disclosure Agreement. Notwithstanding any other provision of the Fiscal
Agent Agreement, failure of the Authority to comply with the Continuing Disclosure
Agreement shall not be considered a default thereunder; however, any Participating
Underwriter or any holder or Beneficial Owner (as defined in the Fiscal Agent Agreement)
of the Bonds may take such actions as may be necessary and appropriate to compel
performance by the Authority of its obligations thereunder, including seeking mandate or
specific performance by court order.
The Authority covenants and agrees to not consent or conduct proceedings with
respect to a reduction in the maximum Special Taxes that may be levied in the District
below an amount, for any Fiscal Year, equal to 110% of the aggregate of the Debt Service
due on the Bonds in such Fiscal Year, plus a reasonable estimate of Administrative
Expenses for such Fiscal Year. It is hereby acknowledged that Bondowners are purchasing
the Bonds in reliance on the foregoing covenant, and that said covenant is necessary to
assure the full and timely payment of the Bonds.
The Authority covenants not to exercise its rights under the Act to waive
delinquency and redemption penalties related to the Special Taxes or to declare Special
Tax penalties amnesty program if to do so would materially and adversely affect the
interests of the owners of the Bonds and further covenants not to permit the tender of Bonds
in payment of any Special Taxes except upon receipt of a certificate of an Independent
Financial Consultant that to accept such tender will not result in the Authority having
insufficient Special Tax revenues to pay the principal of and interest on the Bonds
remaining Outstanding following such tender.
Investments
Moneys in any fund or account created or established by the Fiscal Agent
Agreement and held by the Fiscal Agent is required to be invested by the Fiscal Agent in
Permitted Investments, as directed pursuant to an Officer’s Certificate filed with the Fiscal
Agent at least two (2) Business Days in advance of the making of such investments. In the
absence of any such Officer’s Certificate, the Fiscal Agent shall invest to the extent
reasonably practicable, any such moneys in the Permitted Investments described in clause
(g) of the definition thereof in the Fiscal Agent Agreement, which by their terms mature
prior to the date on which such moneys are required to be paid out thereunder. The
Treasurer shall make note of any investment of funds thereunder in excess of the yield on
the Bonds, so that appropriate actions can be taken to assure compliance with the federal tax
rebate provisions of the Fiscal Agent Agreement.
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Moneys in any fund or account created or established by Fiscal Agent Agreement
and held by the Treasurer will be invested by the Treasurer in any Permitted Investment,
which in any event by their terms mature prior to the date on which such moneys are
required to be paid out under the Fiscal Agent Agreement. Obligations purchased as an
investment of moneys in any fund shall be deemed to be part of such fund or account,
subject, however, to the requirements of the Fiscal Agent Agreement for transfer of interest
earnings and profits resulting from investment of amounts in funds and accounts.
Whenever in the Fiscal Agent Agreement any moneys are required to be transferred by the
Authority to the Fiscal Agent, such transfer may be accomplished by transferring a like
amount of Permitted Investments.
The Fiscal Agent and its affiliates or the Treasurer may act as sponsor, advisor,
depository, principal or agent in the acquisition or disposition of any investment. Neither
the Fiscal Agent nor the Treasurer shall incur any liability for losses arising from any
investments made pursuant to the Fiscal Agent Agreement. The Fiscal Agent will not be
required to determine the legality of any investments.
The value of investments in the Senior Subaccount of the Reserve Fund or the Bond
Fund (including any accounts therein) shall be determined as follows: (a) for the purpose of
determining the amount in any such fund, all Permitted Investments credited to any such
fund shall be valued at fair market value, and the Fiscal Agent shall determine the fair
market value based on accepted industry standards and from accepted industry providers
(accepted industry providers shall include but are not limited to pricing services provided
by Financial Times Interactive Data Corporation, Merrill Lynch, Citigroup Global Markets
Inc., Bear Stearns, or Lehman Brothers); (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 among the
Authority, the Fiscal Agent, and Bond Insurer.
Except as otherwise provided in the preceding paragraph or the next sentence, all
investments of amounts deposited in any fund or account created by or pursuant to the
Fiscal Agent Agreement, or otherwise containing gross proceeds of the Bonds (within the
meaning of Section 148 of the Code) shall be acquired, disposed of, and valued (as of the
date that valuation is required by the Fiscal Agent Agreement or the Code) at Fair Market
Value. The Fiscal Agent shall have no duty in connection with the determination of Fair
Market Value other than to follow the investment direction of an Authorized Officer in any
written direction of any Authorized Officer. Investments in funds or accounts (or portions
thereof) that are subject to a yield restriction under the applicable provisions of the Code
and (unless valuation is undertaken at least annually) investments in the subaccounts within
the Reserve Fund shall be valued at their present value (within the meaning of section 148 of
the Code). The Fiscal Agent shall not be liable for verification of the application of such
sections of the Code.
Investments in any and all funds and accounts may be commingled in a separate
fund or funds for purposes of making, holding and disposing of investments,
notwithstanding provisions herein for transfer to or holding in or to the credit of particular
funds or accounts of amounts received or held by the Fiscal Agent or the Treasurer
thereunder, provided that the Fiscal Agent or the Treasurer, as applicable, shall at all times
account for such investments strictly in accordance with the funds and accounts to which
they are credited and otherwise as provided in the Fiscal Agent Agreement.
The Fiscal Agent or the Treasurer, as applicable, shall sell at Fair Market Value, or
present for redemption, any investment security whenever it shall be necessary to provide
moneys to meet any required payment, transfer, withdrawal or disbursement from the fund
D-23
or account to which such investment security is credited and neither the Fiscal Agent nor
the Treasurer shall be liable or responsible for any loss resulting from the acquisition or
disposition of such investment security in accordance with the Fiscal Agent Agreement.
Limited Obligations; Limited Liability of the Authority
The Authority’s obligations under the Fiscal Agent Agreement and with respect to
the Bonds are limited obligations of the Authority on behalf of the District and are payable
solely from and secured solely by the Special Tax Revenues and the amounts in the Special
Tax Fund, the Bond Fund (including the Special Tax Prepayments Account therein) and the
Reserve Fund (including the subaccounts therein, subject to the limitations in the Fiscal
Agent Agreement) created under the Fiscal Agent Agreement.
The Authority shall not incur any responsibility in respect of the Bonds or the Fiscal
Agent Agreement other than in connection with the duties or obligations explicitly herein
or in the Bonds assigned to or imposed upon it. The Authority shall not be liable in
connection with the performance of its duties thereunder, except for its own negligence or
willful default. The Authority shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions covenants or agreements of the
Fiscal Agent in the Fiscal Agent Agreement or in any of the documents executed by the
Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of
default thereunder.
In the absence of bad faith, the Authority, including the Treasurer, may conclusively
rely, as to the truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Authority and conforming to the
requirements of the Fiscal Agent Agreement. The Authority, including the Treasurer, shall
not be liable for any error of judgment made in good faith unless it shall be proved that it
was negligent in ascertaining the pertinent facts.
No provision of the Fiscal Agent Agreement shall require the Authority to expend or
risk its own general funds or otherwise incur any financial liability (other than with respect
to the Special Tax Revenues) in the performance of any of its obligations thereunder, or in
the exercise of any of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
The Authority and the Treasurer may rely and shall be protected in acting or
refraining from acting upon any notice, resolution, request, consent, order, certificate,
report, warrant, bond or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or proper parties. The Authority may consult
with counsel, who may be the Authority Attorney, with regard to legal questions, and the
opinion of such counsel shall be full and complete authorization and protection in respect
of any action taken or suffered by it thereunder in good faith and in accordance therewith.
The Authority shall not be bound to recognize any person as the Owner of a Bond
unless and until such Bond is submitted for inspection, if required, and his title thereto
satisfactory established, if disputed.
Whenever in the administration of its duties under the Fiscal Agent Agreement the
Authority or the Treasurer shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action hereunder, such matter (unless other
evidence in respect thereof be herein specifically prescribed) may, in the absence of willful
misconduct on the part of the Authority, be deemed to be conclusively proved and
D-24
established by a certificate of the Fiscal Agent, an appraiser, an Independent Financial
Consultant or a Tax Consultant, and such certificate shall be full warrant to the Authority
and the Treasurer for any action taken or suffered under the provisions of the Fiscal Agent
Agreement or any Supplemental Agreement upon the faith thereof, but in its discretion the
Authority or the Treasurer may, in lieu thereof, accept other evidence of such matter or
may require such additional evidence as to it may seem reasonable.
In order to perform its duties and obligations under the Fiscal Agent Agreement, the
Authority and/or the Treasurer may employ such persons or entities as it deems necessary
or advisable. The Authority shall not be liable for any of the acts or omissions of such
persons or entities employed by it in good faith, and shall be entitled to rely, and shall be
fully protected in doing so, upon the opinions, calculations, determinations and directions
of such persons or entities.
Defaults; Rights of the Bond Insurer
If the Authority shall: (A) fail to pay principal or interest on the Series 2006A Bonds
when due and payable as provided herein; or (B) fail to observe any of the other covenants,
agreements or conditions on its part contained herein or in the Series 2006A Bonds and such
failure shall continue for the period of 30 days after written notice thereof has been
provided to the Authority by the Bond Insurer or the Fiscal Agent, such failure shall
constitute a default under the Fiscal Agent Agreement and, in such event, the Bond Insurer
shall be entitled to pursue any remedy available to the Owners of the Series 2006A Bonds
under the Fiscal Agent Agreement, at law or in equity to enforce the Authority’s obligation
to make such payments and honor such covenants and agreements and shall be deemed the
sole owner of the Series 2006A Bonds for such purposes.
The Fiscal Agent
U.S. Bank National Association is appointed Fiscal Agent and paying agent for the
Bonds. The Fiscal Agent undertakes to perform such duties, and only such duties, as are
specifically set forth in the Fiscal Agent Agreement, and no implied covenants or
obligations shall be read into the Fiscal Agent Agreement against the Fiscal Agent.
Any company into which the Fiscal Agent may be merged or converted or with
which it may be consolidated or any c ompany resulting from any merger, conversion or
consolidation to which it shall be a party or any company to which the Fiscal Agent may
sell or transfer all or substantially all of its corporate trust business, provided such
company shall be eligible under the following paragraph, shall be the successor to such
Fiscal Agent without the execution or filing of any paper or any further act, anything
therein to the contrary notwithstanding.
The Authority may at any time remove the Fiscal Agent initially appointed, and any
successor thereto, and may appoint a successor or successors thereto, but any such
successor shall be a bank, corporation or trust company having a combined capital
(exclusive of borrowed capital) and surplus of at least Seventy-Five Million Dollars
($75,000,000), and be subject to supervision or examination by federal or state authority. If
such bank, corporation or trust company publishes a report of condition at least annually,
pursuant to law or to the requirements of any supervising or examining authority above
referred to, then for the purposes of the Fiscal Agent Agreement, 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.
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The Fiscal Agent may at any time resign by giving written notice to the Authority
and by giving to the Owners notice by mail of such resignation. Upon receiving notice of
such resignation, the Authority shall promptly appoint a successor Fiscal Agent by an
instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective
upon acceptance of appointment by the successor Fiscal Agent.
If no appointment of a successor Fiscal Agent shall be made pursuant to the
foregoing provisions of Fiscal Agent Agreement within forty-five (45) days after the Fiscal
Agent shall have given to the Authority written notice or after a vacancy in the office of the
Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent or any
Owner may apply to any court of competent jurisdiction to appoint a successor Fiscal
Agent. Said court may thereupon, after such notice, if any, as such court may deem proper,
appoint a successor Fiscal Agent.
If, by reason of the judgment of any court, or reasonable agency, the Fiscal Agent is
rendered unable to perform its duties under the Fiscal Agent Agreement, all such duties
and all of the rights and powers of the Fiscal Agent thereunder shall be assumed by and vest
in the Treasurer of the Authority in trust for the benefit of the Owners. The Authority
covenants for the direct benefit of the Owners that its Treasurer in such case shall be vested
with all of the rights and powers of the Fiscal Agent under the Fiscal Agent Agreement, and
shall assume all of the responsibilities and perform all of the duties of the Fiscal Agent
thereunder, in trust for the benefit of the Owners of the Bonds. In such event, the Treasurer
may designate a successor Fiscal Agent qualified to act as Fiscal Agent thereunder.
The recitals of facts, covenants and agreements in the Fiscal Agent Agreement and in
the Bonds contained shall be taken as statements, covenants and agreements of the
Authority, and the Fiscal Agent assumes no responsibility for the correctness of the same, or
makes any representations as to the validity or sufficiency of the Fiscal Agent Agreement or
of the Bonds, or shall incur any responsibility in respect thereof, other than in connection
with the duties or obligations in the Fiscal Agent Agreement or in the Bonds assigned to or
imposed upon it. The Fiscal Agent shall not be liable in connection with the performance of
its duties under the Fiscal Agent Agreement, except for its own negligence or willful
default. The Fiscal Agent assumes no responsibility or liability for any information,
statement or recital in any offering memorandum or other disclosure material prepared or
distributed with respect to the issuance of the Bonds.
In the absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Fiscal Agent and conforming to the requirements of the Fiscal
Agent Agreement; but in the case of any such certificates or opinions by which any
provision of the Fiscal Agent Agreement are specifically required to be furnished to the
Fiscal Agent, the Fiscal Agent shall be under a duty to examine the same to determine
whether or not they conform to the requirements of the Fiscal Agent Agreement. Except as
provided above in this paragraph, Fiscal Agent shall be protected and shall incur no
liability in acting or proceeding, or in not acting or not proceeding, in good faith,
reasonably and in accordance with the terms of the Fiscal Agent Agreement, upon any
resolution, order, notice, request, consent or waiver, certificate, statement, affidavit, or other
paper or document which it shall in good faith reasonably believe to be genuine and to
have been adopted or signed by the proper person or to have been prepared and furnished
pursuant to any provision of the Fiscal Agent Agreement, and the Fiscal Agent shall not be
under any duty to make any investigation or inquiry as to any statements contained or
matters referred to in any such instrument.
D-26
The Fiscal Agent shall not be liable for any error of judgment made in good faith
unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent
facts.
No provision of the Fiscal Agent Agreement shall require the Fiscal Agent to expend
or risk its own funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers.
The Fiscal Agent shall be under no obligation to exercise any of the rights or powers
vested in it by the Fiscal Agent Agreement at the request or direction of any of the Owners
pursuant to the Fiscal Agent Agreement unless such Owners shall have offered to the Fiscal
Agent reasonable security or indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction.
The Fiscal Agent may become the owner of the Bonds with the same rights it would
have if it were not the Fiscal Agent.
The Fiscal Agent shall have no duty or obligation whatsoever to enforce the
collection of Special Taxes or other funds to be deposited with it under the Fiscal Agent
Agreement, or as to the correctness of any amounts received, and its liability shall be
limited to the proper accounting for such funds as it shall actually receive.
In order to perform its duties and obligations under the Fiscal Agent Agreement, the
Fiscal Agent may employ such persons or entities as it deems necessary or advisable. The
Fiscal Agent shall not be liable for any of the acts or omissions of such persons or entities
employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully
protected in doing so, upon the opinions, calculations, determinations and directions of
such persons or entities.
The Fiscal Agent will keep, or cause to be kept, proper books of record and
accounts, separate from all other records and accounts of the Fiscal Agent, in which
complete and correct entries shall be made of all transactions relating to the expenditure of
amounts disbursed from the Bond Fund (including the Special Tax Prepayments Account
therein), the Reserve Fund (including the Senior Subaccount and the Subordinate
Subaccount therein), the Special Tax Fund, the Refunding Fund, the Improvement Fund
and the Costs of Issuance Fund. Such books of record and accounts shall at all times during
business hours be subject to the inspection of the Authority and the Owners of not less than
ten percent (10%) of the principal amount of the Bonds then Outstanding, or their
representatives duly authorized in writing upon reasonable prior notice.
The Fiscal Agent shall provide to the Authority such information relating to the
Bonds and the funds and accounts maintained by the Fiscal Agent hereunder as the
Authority shall reasonably request, including but not limited to quarterly statements
reporting funds held and transactions by the Fiscal Agent.
The Fiscal Agent may rely and shall be protected in acting or refraining from acting
upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or
other paper or document believed in good faith by it to be genuine and to have been signed
or presented by the proper party or proper parties. The Fiscal Agent may consult with
counsel, who may be counsel to the Authority, with regard to legal questions, and the
opinion of such counsel shall be full and complete authorization and protection in respect
of any action taken or suffered by it under the Fiscal Agent Agreement in good faith and in
accordance therewith.
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The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond
unless and until such Bond is submitted for inspection, if required, and his title thereto
satisfactorily established, if disputed.
Whenever in the administration of its duties under the Fiscal Agent Agreement the
Fiscal Agent shall deem it necessary or desirable that a matter be proved or established
prior to taking or suffering any action under the Fiscal Agent Agreement, such matter
(unless other evidence in respect thereof be in the Fiscal Agent Agreement specifically
prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be
deemed to be conclusively proved and established by an Officer’s Certificate, and such
certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the
provisions of the Fiscal Agent Agreement or any Supplemental Agreement upon the faith
thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of
such matter or may require such additional evidence as to it may seem reasonable.
The Authority shall pay to the Fiscal Agent from time to time reasonable
compensation for all services rendered as Fiscal Agent under the Fiscal Agent Agreement,
and also all reasonable expenses, charges, counsel fees and other disbursements, including
those of their attorneys, agents and employees, incurred in and about the performance of
their powers and duties under the Fiscal Agent Agreement, but the Fiscal Agent shall not
have a lien therefor on any funds at any time held by it under the Fiscal Agent Agreement.
The Authority further agrees, to the extent permitted by applicable law, to indemnify and
save the Fiscal Agent, its officers, employees, directors and agents harmless against any
costs, expenses, claims or liabilities whatsoever, including without limitation fees and
expenses of its attorneys, which it may incur in the exercise and performance of its powers
and duties under the Fiscal Agent Agreement which are not due to its negligence or willful
misconduct. The obligation of the Authority under the Fiscal Agent Agreement shall
survive resignation or removal of the Fiscal Agent under the Fiscal Agent Agreement and
payment of the Bonds and discharge of the Fiscal Agent Agreement, but any monetary
obligation of the Authority arising under the Fiscal Agent Agreement shall be limited
solely to amounts on deposit in the Administrative Expense Fund.
The Fiscal Agent may be removed at any time, at the request of the Bond Insurer, for
any breach of the trust set forth in the Fiscal Agent Agreement. The Bond Insurer shall
receive prior written notice of any Fiscal Agent resignation. Every successor Fiscal Agent
appointed pursuant to the Fiscal Agent Agreement shall be a trust company or bank in
good standing located in or incorporated under the laws of the State, duly authorized to
exercise trust powers and subject to examination by federal or state authority, having a
reported capital and surplus of not less than $75,000,000 and acceptable to the Bond Insurer.
Any successor Fiscal Agent shall not be appointed unless the Bond Insurer approves such
successor in writing. Notwithstanding any other provision of the Fiscal Agent Agreement,
no removal, resignation or termination of the Fiscal Agent shall take effect until a successor,
acceptable to the Bond Insurer, shall be appointed by the Authority.
Notwithstanding any other provision of the Fiscal Agent Agreement, in determining
whether the rights of the Owners of the Series 2006A Bonds will be adversely affected by
any action taken pursuant to the terms and provisions of the Fiscal Agent Agreement, the
Fiscal Agent shall consider the effect on the Owners of the Series 2006A Bonds as if there
were no Bond Insurance Policy.
Amendment of the Fiscal Agent Agreement
The Fiscal Agent Agreement and the rights and obligations of the Authority and of
the Owners of the Bonds may be modified or amended at any time by a Supplemental
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Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written
consent without a meeting, of the Owners of (i) at least sixty percent (60%) in aggregate
principal amount of the Series 2006A Bonds then Outstanding and (ii) at least sixty percent
(60%) in aggregate principal amount of then Series 2006B Bonds then Outstanding, in each
case Bonds then Outstanding, in each case exclusive of Bonds disqualified as provided in
the Fiscal Agent Agreement. No such modification or amendment shall (i) extend the
maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the
obligation of the Authority to pay the principal of, and the interest and any premium on,
any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation
by the Authority of any pledge or lien upon the Special Taxes superior to or on a parity
with the pledge and lien created for the benefit of the Owners of the Bonds (except as
otherwise permitted by the Act, the laws of the State of California or the Fiscal Agent
Agreement), or (iii) reduce the percentage of Bonds of each series required for the
amendment of the Fiscal Agent Agreement. Any such amendment may not modify any of
the rights or obligations of the Fiscal Agent without its written consent.
The Fiscal Agent Agreement and the rights and obligations of the Authority and of
the Owners may also be modified or amended at any time by a Supplemental Agreement,
without the consent of any Owners, only to the extent permitted by law and only for any one
or more of the following purposes:
(A) to add to the covenants and agreements of the Authority in the Fiscal
Agent Agreement contained, other covenants and agreements thereafter to be
observed, or to limit or surrender any right or power in the Fiscal Agent Agreement
reserved to or conferred upon the Authority;
(B) to make modifications not adversely affecting any outstanding series of
Bonds of the Authority in any material respect;
(C) to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision contained in the Fiscal
Agent Agreement, or in regard to questions arising under the Fiscal Agent
Agreement, as the Authority or the Fiscal Agent may deem necessary or desirable
and not inconsistent with the Fiscal Agent Agreement, and which shall not adversely
affect the rights of the Owners of the Bonds;
(D) to make such additions, deletions or modifications as may be necessary or
desirable to assure exemption from gross federal income taxation of interest on the
Bonds; and
(E) in connection with the issuance of Parity Bonds under and pursuant to the
Fiscal Agent Agreement.
From and after the time any Supplemental Agreement becomes effective pursuant to
the Fiscal Agent Agreement, the Fiscal Agent Agreement shall be deemed to be modified
and amended in accordance therewith, the respective rights, duties and obligations under
the Fiscal Agent Agreement of the Authority and all Owners of Bonds Outstanding shall
thereafter be determined, exercised and enforced thereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such Supplemental
Agreement shall be deemed to be part of the terms and conditions of the Fiscal Agent
Agreement for any and all purposes.
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The provisions of the Fiscal Agent Agreement shall not prevent any Owner from
accepting any amendment as to the particular Bonds held by him, provided that due
notation thereof is made on such Bonds.
Discharge of the Fiscal Agent Agreement
The Authority shall have the option to pay and discharge the entire indebtedness on
all or any portion of the Bonds Outstanding in any one or more of the following ways:
(A) by well and truly paying or causing to be paid the principal of, and
interest and any premium on, such Bonds Outstanding, as and when the same
become due and payable;
(B) by depositing with the Fiscal Agent, in trust, at or before maturity, money
which, together with the amounts then on deposit in the funds and accounts therein
as provided in the Fiscal Agent Agreement is fully sufficient to pay such Bonds
Outstanding, including all principal, interest and redemption premiums; or
(C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal
Securities in such amount as the Authority shall determine as confirmed by Bond
Counsel or an independent certified public accountant will, together with the
interest to accrue thereon and moneys (not including the Reserve Fund Policy) then
on deposit in the funds and accounts therein as provided in the Fiscal Agent
Agreement, be fully sufficient to pay and discharge the indebtedness on such Bonds
(including all principal, interest and redemption premiums) at or before their
respective maturity dates, and paying all amounts due and owing or to become due
and owing by the Authority under the Reserve Fund Policy (including, but not
limited to, repayment of any withdrawals under the Reserve Fund Policy which
have not theretofore been repaid).
If the Authority shall have taken any of the actions specified in (A), (B) or (C) above,
and if such Bonds are to be redeemed prior to the maturity thereof notice of such
redemption shall have been given as in the Fiscal Agent Agreement provided or provision
satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at
the election of the Authority, and notwithstanding that any Bonds shall not have been
surrendered for payment, the pledge of the Special Taxes and other funds provided for in
the Fiscal Agent Agreement and all other obligations of the Authority under the Fiscal
Agent Agreement with respect to such Bonds Outstanding shall cease and terminate.
Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing,
the obligation of the Authority to pay or cause to be paid to the Owners of the Bonds not so
surrendered and paid all sums due thereon, all amounts owing to the Fiscal Agent
pursuant to the Fiscal Agent Agreement, and otherwise to assure that no action is taken or
failed to be taken if such action or failure adversely affects the exclusion of interest on the
Bonds from gross income for federal income tax purposes, shall continue in any event.
Upon compliance by the Authority with the foregoing with respect to all Bonds
Outstanding, any funds held by the Fiscal Agent after payment of all fees and expenses of
the Fiscal Agent, which are not required for the purposes of the preceding paragraph, shall
be paid over to the Authority and any Special Taxes thereafter received by the Authority
shall not be remitted to the Fiscal Agent but shall be retained by the Authority to be used
for any purpose permitted under the Act.
Notwithstanding anything in the Fiscal Agent Agreement to the contrary, in the
event that the principal and/or interest due on the Series 2006A Bonds shall be paid by the
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Bond Insurer pursuant to the Bond Insurance Policy, the Series 2006A Bonds shall remain
Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered
paid by the Authority, and the assignment and pledge of the Special Taxes under the Fiscal
Agent Agreement and all covenants, agreements and other obligations of the Authority to
the Owners of the Series 2006A Bonds shall continue to exist and shall run to the benefit of
the Bond Insurer, and the Bond Insurer shall be subrogated to the rights of such Owners.
Bond Insurance Provisions
Payment Procedure Pursuant to the Bond Insurance Policy. As long as the Bond
Insurance Policy shall be in full force and effect, the City and the Fiscal Agent agree to
comply with the following provisions:
(a) At least one (1) Business Day prior to each Interest Payment Date, the
Fiscal Agent will determine whether there will be sufficient moneys in the funds and
accounts maintained by the Fiscal Agent under the Fiscal Agent Agreement to pay
the principal or interest due on the Series 2006A Bonds on such Interest Payment
Date. If the Fiscal Agent determines that there will be insufficient moneys in such
funds or accounts, the Fiscal Agent shall so notify the Bond Insurer. Such notice
shall specify the amount of the anticipated deficiency, the Series 2006A Bonds to
which such deficiency is applicable and whether such Series 2006A Bonds will be
deficient as to principal or interest, or both. If the Fiscal Agent has not so notified the
Bond Insurer at least one (1) Business Day prior to an Interest Payment Date, the
Bond Insurer will make payments of principal or interest due on the Series 2006A
Bonds on or before the first (1st) Business Day next following the date on which the
Bond Insurer shall have received notice of nonpayment from the Fiscal Agent.
(b) The Fiscal Agent shall, after giving notice to the Bond Insurer as provided
in (a) above, make available to the Bond Insurer and, at the Bond Insurer’s direction,
to The Bank of New York, in New York, New York, as insurance trustee for the Bond
Insurer or any successor insurance trustee (the “Insurance Trustee”), the Registration
Books for the Series 2006A Bonds and all records relating to the funds and accounts
maintained by the Fiscal Agent under the Fiscal Agent Agreement.
(c) The Fiscal Agent shall provide the Bond Insurer and the Insurance Trustee
with a list of Owners of Series 2006A Bonds entitled to receive principal or interest
payments from the Bond Insurer under the terms of the Bond Insurance Policy, and
shall make arrangements with the Insurance Fiscal Agent (i) to mail checks or drafts
to the Owners entitled to receive full or partial interest payments from the Bond
Insurer and (ii) to pay principal on the Series 2006A Bonds surrendered to the
Insurance Trustee by the Owners entitled to receive full or partial principal
payments from the Bond Insurer.
(d) The Fiscal Agent shall, at the time it provides notice to the Bond Insurer
pursuant to (a) above, notify Owners entitled to receive the payment of principal or
interest from the Bond Insurer (i) as to the fact of such entitlement, (ii) that the Bond
Insurer will remit to them all or a part of the interest payments next coming due
upon proof of Owner entitlement to interest payments and delivery to the Insurance
Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment
of the Owner’s right to payment, (iii) that should they be entitled to receive full
payment of principal from the Bond Insurer, they must surrender their Bonds (along
with an appropriate instrument of assignment in form satisfactory to the Insurance
Trustee to permit ownership of such Bonds to be registered in the name of the Bond
Insurer) for payment to the Insurance Trustee, and not the Fiscal Agent, and (iv) that
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should they be entitled to receive partial payment of principal from the Bond
Insurer, they must surrender their Bonds for payment first to the Fiscal Agent who
shall note on such Bonds the portion of the principal paid by the Fiscal Agent and
then, along with an appropriate instrument of assignment in form satisfactory to the
Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion
of principal.
(e) In the event that the Fiscal Agent has notice that any payment of principal
or interest with respect to a Series 2006A Bond which has become Due for Payment
(as such term is defined in the Bond Insurance Policy) and which is made to a Owner
by or on behalf of the City has been deemed a preferential transfer and theretofore
recovered from its registered owner pursuant to the United States Bankruptcy Code
by a trustee in bankruptcy in accordance with the final, nonappealable order of a
court having competent jurisdiction, the Fiscal Agent shall, at the time the Bond
Insurer is notified, notify all Owners of Series 2006A Bonds that in the event that any
Owner’s payment is so recovered, such Owner will be entitled to payment from the
Bond Insurer to the extent of such recovery if sufficient funds are not otherwise
available, and the Fiscal Agent shall furnish to the Bond Insurer its records
evidencing the payments of principal and interest on the Series 2006A Bonds which
have been made by the Fiscal Agent and subsequently recovered from Owners and
the dates on which such payments were made.
(f) In addition to those rights granted the Bond Insurer under the Fiscal Agent
Agreement, the Bond Insurer shall, to the extent it makes payment of principal or
interest on the Series 2006A Bonds, become subrogated to the rights of the recipients
of such payments in accordance with the terms of the Bond Insurance Policy, and to
evidence such subrogation (i) in the case of subrogation as to claims for past due
interest, the Fiscal Agent shall note the Bond Insurer’s rights as subrogee on the
Registration Books upon receipt from the Bond Insurer of proof of the payment of
interest with respect thereto to the Owners, and (ii) in the case of subrogation as to
claims for past due principal, the Fiscal Agent shall note the Bond Insurer’s rights as
subrogee on the Registration Books upon surrender of the Series 2006A Bonds by the
Owners thereof together with proof of the payment of principal thereof.
The Authority covenants and agrees in the Fiscal Agent Agreement that it shall
reimburse the Bond Insurer for any amounts paid under the Bond Insurance Policy and all
costs of collection thereof and enforcement of the Fiscal Agent Agreement and any other
documents executed in connection with the Fiscal Agent Agreement, together with interest
thereon, from the date paid or incurred by the Bond Insurer until payment thereof in full by
the Authority, payable at the Insurer Payment Rate (as defined in the Fiscal Agent
Agreement), including without limitation (to the extent permitted by applicable law)
interest on claims paid by the Bond Insurer in respect of interest on the Series 2006A Bonds.
Such payment obligation shall be payable on demand and on a parity with, and from the
same sources and secured by the same security as, regularly scheduled principal and
interest payments in respect of the Series 2006A Bonds.
Rights of Bond Insurer .
(a)
Events of Default. Immediately upon obtaining actual knowledge of the
occurrence of default by the Authority or the District in the performance of their
obligations under the Fiscal Agent Agreement, the Fiscal Agent shall give notice of such
default to the Bond Insurer and the Authority by telephone confirmed in writing.
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(b)
Consents of Bond Insurer. Any provision of the Fiscal Agent Agreement
expressly recognizing or granting rights in or to the Bond Insurer may not be amended in
any manner which affects the rights of the Bond Insurer thereunder without the prior
written consent of the Bond Insurer. The Bond Insurer reserves the right to charge the
Authority a fee for any consent or amendment to the Fiscal Agent Agreement while the
Bond Insurance Policy is outstanding.
Unless otherwise provided in the Fiscal Agent Agreement, the Bond Insurer’s
consent shall be required in addition to the Owners’ consent, when required, for the
following purposes: (i) execution and delivery of any Supplemental Agreement, (ii)
removal of the Fiscal Agent and selection and appointment of any successor Fiscal Agent,
and (iii) initiation or approval of any action not described in (i) or (ii) above which requires
the Owners’ consent.
Any reorganization or liquidation plan with respect to the Authority or the District
must be acceptable to the Bond Insurer. In the event of any reorganization or liquidation,
the Bond Insurer shall have the right to vote on behalf of all Owners who hold Series 2006A
Bonds absent a default by the Bond Insurer under the Bond Insurance Policy.
(c)
Rights of Bond Insurer Upon Event of Default. Anything in the Fiscal Agent
Agreement to the contrary notwithstanding, upon the occurrence and continuation of a
default by the Authority or the District in the performance of their obligations under the
Fiscal Agent Agreement, the Bond Insurer shall be entitled to control and direct the
enforcement of all rights and remedies granted under the Fiscal Agent Agreement to the
Owners of the Series 2006A Bonds, or to the Fiscal Agent for the benefit of the Owners of the
Series 2006A Bonds. The rights granted to the Bond Insurer under the Fiscal Agent
Agreement shall be deemed terminated and shall not be exercisable by the Bond Insurer
during any period during which the Bond Insurer shall be in default under the Bond
Insurance Policy.
Notwithstanding any other provision of the Fiscal Agent Agreement, in determining
whether the rights of the Owners of the Series 2006A Bonds will be adversely affected by
any action taken pursuant to the terms and provisions of the Fiscal Agent Agreement, the
Fiscal Agent shall consider the effect on the Owners of the Series 2006A Bonds as if there
were no Bond Insurance Policy.
To the extent that the Fiscal Agent Agreement confers upon or gives or grants to the
Bond Insurer any right, remedy or claim under or by reason of the Fiscal Agent Agreement,
the Bond Insurer is hereby explicitly recognized as being a third-party beneficiary
thereunder and may enforce any such right remedy or claim conferred, given or granted
thereunder.
(d)
Bond Insurer Rights Regarding the Fiscal Agent. The Fiscal Agent may be
removed at any time, at the request of the Bond Insurer, for any breach of the trust set forth
in the Fiscal Agent Agreement. The Bond Insurer shall receive prior written notice of any
Fiscal Agent resignation. Every successor Fiscal Agent appointed pursuant to the Fiscal
Agent Agreement shall be a trust company or bank in good standing located in or
incorporated under the laws of the State, duly authorized to exercise trust powers and
subject to examination by federal or state authority, having a reported capital and surplus
of not less than $75,000,000 and acceptable to the Bond Insurer. Any successor Fiscal Agent
shall not be appointed unless the Bond Insurer approves such successor in writing.
Notwithstanding any other provision of the Fiscal Agent Agreement, no removal,
resignation or termination of the Fiscal Agent shall take effect until a successor, acceptable
to the Bond Insurer, shall be appointed by the Authority.
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APPENDIX E
FORM OF CONTINUING DISCLOSURE AGREEMENT
This CONTINUING DISCLOSURE AGREEMENT (the “Disclosure Agreement”) is executed and
entered into as of September 1, 2006, by and between U.S. Bank National Association, a national banking
association organized and existing under and by virtue of the laws of the United States of America (the
“Bank”), in its capacity as Dissemination Agent (the “Dissemination Agent”) and in its capacity as Fiscal
Agent (the “Fiscal Agent”), and the Temecula Public Financing Authority, a joint exercise of powers
authority organized and existing under and by virtue of the Constitution and of the laws of the State of
California (the “Authority”), for and on behalf of the Temecula Public Financing Authority Community
Facilities District No. 01-2 (Harveston) (the “District”);
WITNESSETH:
WHEREAS, pursuant to the Fiscal Agent Agreement, dated September 1, 2006 (the “Fiscal Agent
Agreement”), by and between the Authority and the Fiscal Agent, for and on behalf of the District, and the
Fiscal Agent, the Authority has issued its 2006 Special Tax Refunding Bonds, Series A, in the aggregate
principal amount of $14,470,000 (the “Series A Bonds”) and its 2006 Special Tax Refunding Bonds,
Subordinate Series B, in the aggregate principal amount of $3,075,000 (the “Series B Bonds,” collectively,
the “2006 Bonds”); and
WHEREAS, this Disclosure Agreement is being executed and delivered by the Authority and the
Fiscal Agent for the benefit of the owners and beneficial owners of the 2006 Bonds and in order to assist the
underwriter of the 2006 Bonds in complyingwith Securities and Exchange Commission Rule 15c2-12(b)(5);
NOW, THEREFORE, for and in consideration of the mutual premises and covenants herein
contained, the parties hereto agree as follows:
Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed
thereto in the Fiscal Agent Agreement. In addition, the following capitalized terms shall have the following
meanings:
“Annual Report” shall mean any Annual Report provided by the Authority pursuant to, and
described in, Sections 2 and 3 of this Disclosure Agreement.
“Annual Report Date” shall mean the date in each year that is eight months after the end of the
Authority’s fiscal year, which date, as of the date of this Disclosure Agreement, is March 1.
“Disclosure Representative” shall mean the Finance Director of the City of Temecula, as Treasurer
of the Authority, or his or her designee, or such other office or employee as the Authority shall designate in
writing to the Fiscal Agent from time to time.
“Dissemination Agent” shall mean U.S. Bank National Association, acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the
Authority and which has filed with the Fiscal Agent a written acceptance of such designation.
“Listed Events” shall mean any of the events listed in Section 4(a) of this Disclosure Agreement.
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“National Repository” shall mean any Nationally Recognized Municipal Securities Information
Repository for purposes of the Rule. Information on the National Repositories as of a particular date is
available on the Internet at www.sec.gov/info/municipal/nrmsir.htm.
“Official Statement” shall mean the Official Statement, dated August 9, 2006, relating to the 2006
Bonds.
“Participating Underwriter” shall mean Stone & Youngberg LLC.
“Repository” shall mean each National Repository and each State Repository.
“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.
“State Repository” shall mean any public or private repository or entity designated by the State of
California as a state repository for the purpose of the Rule and recognized as such by the Securities and
Exchange Commission. As of the date of this Disclosure Agreement, there is no State Repository.
Section 2. Provision of Annual Reports.
(a)
The Authority shall, or, upon furnishing the Annual Report to the Dissemination
Agent, shall cause the Dissemination Agent to, provide to each Repository, to the Fiscal Agent and
to the Participating Underwriter an Annual Report which is consistent with the requirements of
Section 3 of the Disclosure Agreement, not later than the Annual Report Date, commencing with the
report for the 2005-06 fiscal year. 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 3 of this Disclosure Agreement; provided, however, that the audited financial
statements of the Authority, if any, may be submitted separately from the balance of the Annual
Report, and later than the date required above for the filing of the Annual Report if not available by
that date. If the Authority’s fiscal year changes, it shall give notice of such change in the same
manner as for a Listed Event under Section 4(f).
(b)
Not later than fifteen (15) Business Days prior to the date specified in subsection
(a) for providing the Annual Report to Repositories, the Authority shall provide the Annual Report
(in a form suitable for reporting to the Repositories) to the Dissemination Agent, the Fiscal Agent
(if the Fiscal Agent is not the Dissemination Agent) and the Participating Underwriter. If by such
date, the Fiscal Agent has not received a copy of the Annual Report, the Fiscal Agent shall contact
the Disclosure Representative and the Dissemination Agent to inquire if the Authority is in
compliance with the first sentence of this subsection (b). The Authority shall provide a written
certification with each Annual Report furnished to the Dissemination Agent to the effect that such
Annual Report constitutes the Annual Report required to be furnished by it hereunder. The
Dissemination Agent may conclusively rely upon such certification of the Authority and shall have
no duty or obligation to review such Annual Report.
(c)
If the Fiscal Agent is unable to verify that an Annual Report has been provided to
Repositories by the date required in subsection (a), the Fiscal Agent shall send a notice to the
Repositories and the appropriate State Repository, if any, in substantially the form attached as
Exhibit A. The Annual Report may be provided in electronic format to each Repository and the
Participating Underwriter and may be provided through the services of a “central post office”
approved by the Securities and Exchange Commission. For example, any filing under this
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Continuing Disclosure Agreement may be made solely by transmitting such filing to the Texas
Municipal Advisory Council (the “MAC”) as provided at http://www.disclosureusa.org unless the
United States Securities and Exchange Commission has withdrawn the interpretive advice in its
letter to the MAC dated September 7, 2004.
(d)
The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the name
and address of each National Repository and each State Repository, if any; and
(ii) file a report with the Authority, the Participating Underwriter and (if the
Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual
Report has been provided pursuant to this Disclosure Agreement, stating the date it was
provided and listing all the Repositories to which it was provided.
Section 3. Content of Annual Reports. The Authority’s Annual Report shall contain or incorporate
by reference the following; provided, however, that for the first Annual Report due with respect to Fiscal
Year 2005-06, provision of the items referenced in clause (b) may be satisfied by providing a copy of the
Official Statement relating to the 2006 Bonds:
(a)
The Authority’s audited financial statements, if any, prepared in accordance with
generally accepted accounting principles as promulgated to apply to government entities from time
to time by the Governmental Accounting Standards Board. If the Authority’s audited financial
statements, if any, are not available by the time the Annual Report is required to be filed pursuant
to Section 2(a), the Annual Report shall contain unaudited financial statements in a format similar
to that used for the Authority’s audited financial statements, and the audited financial statements,
if any, shall be filed in the same manner as the Annual Report when they become available. If the
Authority’s audited financial statements, if any, or unaudited financial statements are already filed,
the Annual Report may reference that such financial statements are on file with the Repositories.
For purposes of this Section 3(a), if audited financial statements of the Authority are not prepared,
the Authority shall include or incorporate by reference the audited financial statements of the City
of Temecula and such inclusion or incorporation shall be deemed to satisfy the requirement to
provide audited financial statements of the Authority.
(b)
The following information:
(i) The principal amount of 2006 Bonds and parity bonds, if any, outstanding as
of September 30 next preceding the date of the Annual Report Date.
(ii) The balances in the Accounts within the Reserve Fund, if any, and a statement
of the Senior Subaccount Reserve Requirement and the Subordinate Subaccount Reserve
Requirementas of the September 30 nextpreceding the Annual Report Date and the balance
in the other funds and accounts held under the Fiscal Agent Agreement.
(iii) Information regarding the amount of the annual special taxes levied in the
District by the Rate and Method of Apportionment of Special Tax land use categories, the
names of the owners of property responsible for more than 5% of the Special Tax levy and
the amount of Special Tax owed, as shown on such assessment roll of the Riverside County
Assessor last equalized prior to the September 30 next preceding the Annual Report Date.
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(iv) The total assessed value of all parcels within the District on which the Special
Taxes are levied, as shown on the assessment roll of the Riverside County Assessor last
equalized prior to the September 30 next preceding the Annual Report Date, anda statement
of assessed value for the property in the District by Rate and Method of Apportionment of
Special Tax land use categories.
(v) The Special Tax delinquency rate for all parcels within the District on which
the Special Taxes are levied, as shown on the assessment roll of the Riverside County
Assessor last equalized prior to the September 30 next preceding the Annual Report Date,
the number of parcels within the District on which the Special Taxes are levied and which
are delinquent in payment of Special Taxes based on parcels, as shown on the assessment
roll on the Riverside County Assessor last equalized prior to the September 30 next
preceding the Annual Report Date, the amount of each delinquency, the length of time
delinquent and the date on which foreclosure was commenced, or similar information
pertaining to delinquencies deemed appropriate by the District; provided, however, that
parcels with aggregate delinquencies of$5,000 or less (excluding penalties and interest) may
be grouped together and such information may be provided by category.
(vi) The status of foreclosure proceedings for any parcels within the District on
which the Special Taxes are levied and a summary of the results of any foreclosure sales as
of the September 30 next preceding the Annual Report Date.
(vii) The identity of any property owner representing more than five percent (5%)
of the annual Special Tax levy who is delinquent in payment of such Special Taxes, as
shown on such assessment roll of the Riverside County Assessor last equalized prior to the
September 30 next preceding the Annual Report Date.
(viii) A summary of (a) zoning changes, if any, approved by the City of Temecula
(the “City”) for property subject to the Special Tax in the District and (b) building permits
issued by the City for property subject to the Special Tax in the District.
(c)
In addition to any of the information expressly required to be provided under
paragraphs (a) and (b) of this Section, the Authority shall provide such further information, if any,
as may be necessary to make the required statements, in the light of the circumstances under which
they are made, not misleading.
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the Authority or related public entities,
which have been submitted to each of the Repositories or the Securities and Exchange Commission.
If the document included by reference is a final official statement, it must be available from the
Municipal Securities Rulemaking Board. The District shall clearly identify each such other
document so included by reference. A form of information cover sheet for municipal secondary
market disclosure recommended by the Municipal Securities Rulemaking Board is attached as
Exhibit B.
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Section 4. Reporting of Significant Events.
(a)
Pursuant to the provisions of this Section 4, the Authority shall give, or cause to be
given, notice of the occurrence of any of the following events with respect to the 2006 Bonds, if
material:
(i)
Principal and interest payment delinquencies;
(ii)
Non-payment related defaults;
(iii) Unscheduled draws on debt service reserves reflecting financial difficulties;
(iv)
Unscheduled draws on credit enhancements reflecting financial difficulties;
(v)
Substitution of credit or liquidity providers, or their failure to perform;
(vi)
Adverse tax opinions or events affecting the tax-exempt status of the security;
(vii) Modifications to rights of security holders;
(viii) Contingent or unscheduled bond calls;
(ix) Defeasances;
(x)
Release,substitution, or sale of property securing repayment of the securities;
(xi) Rating changes; and
(xii) Receipt by the Authority of notice that a credit on liquidity facility will not
be renewed, replaced or extended.
(b)
The Fiscal Agent shall, within five (5) business days of obtaining actual knowledge
of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such
person of the event, and request that the Authority promptly notify the Dissemination Agent in
writing whether or not to report the event pursuant to subsection (f), provided, however, that the
Dissemination Agent shall have no liability to Bond Owners for any failure to provide such notice.
For purposes of this Disclosure Agreement, “actual knowledge” of the occurrence of the Listed
Events described under clauses (ii), (iii), (vi), (x) and (xi) above shall mean actual knowledge by an
officer at the corporate trust office of the Fiscal Agent. The Fiscal Agent shall have no responsibility
for determining the materiality of any of the Listed Events.
(c)
Whenever the Authority obtains knowledge of the occurrence of a Listed Event,
whether because of a notice from the Fiscal Agent pursuant to subsection (b) or otherwise, the
Authority shall as soon as possible determine if such event would be material under applicable
federal securities law.
(d)
If the Authority determines that knowledge of the occurrence of a Listed Event
would be material under applicable federal securities law, the Authority shall promptly notify the
Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the
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occurrence pursuant to subsection (f). The Authority shall provide the Dissemination Agent with
a form of notice of such event in a format suitable for reporting to the Municipal Securities
Rulemaking Board and each State Repository, if any.
(e)
If in response to a request under subsection (b), the Authority determines that the
Listed Event would not be material under applicable Federal securities law, the Authority shall so
notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the
occurrence pursuant to subsection (f).
(f)
If the Dissemination Agent has been instructed by the Authority to report the
occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with
the Municipal Securities Rulemaking Board and each State Repository and shall provide a copy of
such notice to each Participating Underwriter, as listed in Section 12. Notwithstanding the
foregoing, notice of Listed Events described in subsections(a)(viii) and (ix) need not be given under
this subsection any earlier than the notice (if any) of the underlying event is given to owners of
affected 2006 Bonds pursuant to the Fiscal Agent Agreement.
Section 5. Termination of Reporting Obligation. All of the Authority’s obligations under this
Disclosure Agreement shall terminate upon the earliest to occur of (i) the legal defeasance ofthe 2006 Bonds,
(ii) prior redemption of the 2006 Bonds or (iii) payment in full of all the 2006 Bonds. If such determination
occurs prior to the final maturity of the 2006 Bonds, the Authority shall give notice of such termination in
the same manner as for a Listed Event under Section 4(f).
Section 6.
Dissemination Agent. The Authority may, from time to time, appoint or engage a
Dissemination Agent to assist in carrying out its obligations under this Disclosure Agreement, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
initial Dissemination Agent shall be U.S. Bank National Association. The Dissemination Agent may resign
by providing forty-five (45) days’ written notice to the Authority and the Fiscal Agent (if the Fiscal Agent
is not the Dissemination Agent). The Dissemination Agent shall have no duty to prepare the Annual Report
nor shall the Dissemination Agent be responsible for filing any Annual Report not provided to it by the
Authority in a timely manner and in a form suitable for filing. If at any time there is not any other designated
Dissemination Agent, the Fiscal Agent shall be the Dissemination Agent.
Section 7.
Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the Authority, the Fiscal Agent and the Dissemination Agent may amend this Disclosure
Agreement (and the Fiscal Agent and the Dissemination Agent shall agree to any amendment so requested
by the Authority, so long as such amendment does not adversely affect the rights or obligations of the Fiscal
Agent or the Dissemination Agent), and any provision of this Disclosure Agreement may be waived,
provided that the following conditions are satisfied:
(a)
if the amendment or waiver relates to the provisions of Sections 2(a), 3 or 4(a), it
may only be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature, or status of an obligated person with
respect to the 2006 Bonds, or type of business conducted;
(b)
the undertakingsherein, as proposed to be amended orwaived, would, in the opinion
of nationally recognized bond counsel, have complied with the requirements of the Rule at the time
of the primary offering of the 2006 Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
E-6
(c)
the proposed amendment or waiver either (i) is approved by a majority of the
owners of the 2006 Bonds affected thereby in the manner provided in the Fiscal Agent Agreement
for amendments to the Fiscal Agent Agreement with the consent of owners, or (ii) does not, in the
opinion of nationally recognized bond counsel, materially impair the interests of the owners or
beneficial owners of the 2006 Bonds.
If the annual financial information or operating data to be provided in the Annual Report is amended
pursuant to the provisions hereof, the first annual financial information containing the amended operating
data or financial information shall explain, in narrative form, the reasons for the amendment and the impact
of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed in
preparing financial statements, the annual financial information for the year in which the change is made
shall present a comparison between the financial statements or information prepared on the basis of the new
accounting principles and those prepared on the basis of the former accounting principles. The comparison
shall include a qualitative discussion of the differences in the accounting principles and the impact of the
change in the accounting principles on the presentation of the financial information in order to provide
information to investors to enable them to evaluate the ability of the Authority to meet its obligations,
including its obligation to pay debt service on the 2006 Bonds. To the extent reasonably feasible, the
comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the
Repositories in the same manner as for a Listed Event under Section 4(f).
Section 8. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the Authority from disseminating any other information, using the means of dissemination set forth
in this Disclosure Agreement or any other means of communication, or including any other information in
any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Agreement. If the Authority chooses to include any information in any Annual Report or notice
of occurrence of a Listed Event, in addition to that which is specifically required by this Disclosure
Agreement, the Authority shall have no obligation under this Disclosure Agreement to update such
information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 9. Default. In the event of a failure of the Authority, the Dissemination Agent or the Fiscal
Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent may (and, at the written
direction of any Participating Underwriter or the owners of at least 25% aggregate principal amount of
Outstanding2006 Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Fiscal Agent),
or any owner or beneficial owner of the 2006 Bonds may, take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the Authority, the
Dissemination Agent or the Fiscal Agent, as the case may be, to comply with its obligations under this
Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default
under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any
failure of the Authority, the Dissemination Agent or the Fiscal Agent to comply with this Disclosure
Agreement shall be an action to compel performance.
Section 10. Duties, Immunities and Liabilities of Fiscal Agent and Dissemination Agent.
Section 7.01 and Section 7.02 of the Fiscal Agent Agreement are hereby made applicable to this Disclosure
Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent
Agreement, and the Fiscal Agent and the Dissemination Agent shall be entitled to the protections, limitations
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from liability and indemnities afforded to the Fiscal Agent thereunder. The Dissemination Agent and the
Fiscal Agent shall have only such duties hereunder as are specifically set forth in this Disclosure Agreement.
This Disclosure Agreement does not apply to any other securities issued or to be issued by the Authority.
The Dissemination Agent shall have no obligation to make any disclosure concerning the 2006 Bonds, the
Authorityor any other matter except as expressly set out herein, provided that no provision of this Disclosure
Agreement shall limit the duties or obligations of the Fiscal Agent under the Fiscal Agent Agreement. The
Dissemination Agent shall have no responsibility for the preparation, review, form or content of any Annual
Report or anynotice of a Listed Event. The fact that the Fiscal Agent has or may have any banking, fiduciary
or other relationship with the District or any other party, apart from the relationship created by the Fiscal
Agent Agreement and this Disclosure Agreement, shall not be construed to mean that the Fiscal Agent has
knowledge or notice of any event or condition relating to the 2006 Bonds or the District except in its
respective capacities under such agreements. No provision of this Disclosure Agreement shall require or be
construed to require the Dissemination Agent to interpret or provide an opinion concerning any information
disclosed hereunder. Information disclosed hereunder by the Dissemination Agent may contain such
disclaimer language concerning the Dissemination Agent’s responsibilities hereunder with respect thereto
as the Dissemination Agent may deem appropriate. The Dissemination Agent may conclusively rely on the
determination of the District as to the materiality of any event for purposes of Section 4 hereof. Neither the
Fiscal Agent nor the Dissemination Agent make any representation as to the sufficiency of this Disclosure
Agreement for purposes of the Rule. The Dissemination Agent shall be paid compensation by the District
for its services provided hereunder in accordance with its schedule of fees, as amended from time to time,
and all expenses, legal fees and advances made or incurred by the Dissemination in the performance of its
duties hereunder. The District’s obligations under this Section 10 shall survive the termination of this
Disclosure Agreement.
Section 11. Beneficiaries. The Participating Underwriter and the owners and beneficial owners
from time to time of the 2006Bonds shall be third party beneficiaries under this Disclosure Agreement. This
Disclosure Agreement shall inure solely to the benefit of the District, the Fiscal Agent, the Dissemination
Agent, the Participating Underwriter and owners and beneficial owners from time to time of the 2006 Bonds,
and shall create no rights in any other person or entity.
Section 12. Notices. Any notice or communications herein required or permitted to be given to the
Authority, the Fiscal Agent or the Dissemination Agent shall be in writing and shall be deemed to have been
sufficiently given or served for all purposes by being delivered or sent by telecopy or by being deposited,
postage prepaid, in a post office letter box, to the addresses set forth below, or to such other address as may
be provided to the other parties hereinafter listed in writing from time to time, namely:
If to the Authority:
Temecula Public Financing Authority
43200 Business Park Drive
Temecula, California 92590
Attention: Director of Finance
Telephone: 951/694-6430
Telecopier: 951/694-6479
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If to the Community
Facilities District:
Community Facilities District No. 01-2 (Harveston)
43200 Business Park Drive
Temecula, California 92590
Attention: Director of Finance
Telephone: 951/694-6430
Telecopier: 951/694-6479
If to the
Dissemination
Agent:
U.S. Bank National Association
633 West Fifth Street, 24th Floor
LM-CA-T24T
Los Angeles, California 90071
Telephone: 213/615-6005
Telecopier: 213/615-6196
If to the
Fiscal Agent:
U.S. Bank National Association
633 West Fifth Street, 24th Floor
LM-CA-T24T
Los Angeles, California 90071
Telephone: 213/615-6005
Telecopier: 213/615-6196
If to the
Participating
Underwriter:
Stone & Youngberg LLC
One Ferry Building
San Francisco, California 94111
Telephone: 415/445-2300
Telecopier: 415/445-2395
Attention: Municipal Research Department
Section 13. Future Determination of Obligated Persons. In the event the Securities Exchange
Commission amends, clarifies or supplements the Rule in such a manner that requires any landowner within
the Authority to be an obligated person as defined in the Rule, nothing contained herein shall be construed
to require the Authority to meet the continuing disclosure requirements of the Rule with respect to such
obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the Authority to
disclose information concerning any owner of land within the Authority except as required as part of the
information required to be disclosed by the Authority pursuant to Section 4 and Section 5 hereof.
Section 14. Severability. In case any one or more of the provisions contained herein shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof.
Section 15. State of California Law Governs. The validity, interpretation and performance of this
Disclosure Agreement shall be governed by the laws of the State of California.
Section 16. Counterparts. This Disclosure Agreement may be executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and the same instrument.
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Section17. 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.
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the
date first above written.
TEMECULA PUBLIC FINANCING AUTHORITY,
FOR AND ON BEHALF OF TEMECULA PUBLIC
FINANCING AUTHORITY COMMUNITY
FACILITIES DISTRICT NO. 01-2 (HARVESTON)
By: __________________________________________
Authorized Officer
U.S. BANK NATIONAL ASSOCIATION,
as Fiscal Agent
By: ____________________________________ _____
Authorized Officer
U.S. BANK NATIONAL ASSOCIATION,
as Dissemination Agent
By:__________________________________________
Authorized Officer
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EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer:
Temecula Public Financing Authority, for and on behalf of Temecula Public
Financing Authority Community Facilities District No. 01-2 (Harveston)
Name of Bond Issue:
Temecula Public Financing Authority Community Facilities District No. 01-2
(Harveston) 2006 Special Tax Refunding Bonds, Series A and 2006 Special Tax
Refunding Bonds, Subordinate Series B
Date of Issuance:
September 1, 2006
NOTICE IS HEREBY GIVEN that the Temecula Public Financing Authority (the “Authority”) has
not provided an Annual Report with respect to the above-named 2006 Bonds as required by the Continuing
Disclosure Agreement, dated as of September 1, 2006, by and between U.S. Bank National Association, in
its capacity as Fiscal Agent, and in its capacity as Dissemination Agent, and the Authority. [The Authority
anticipates that the Annual Report will be filed by ________________.]
Dated: ______________, 2006
U.S. BANK NATIONAL ASSOCIATION, as Fiscal
Agent, on behalf of the Temecula Public Financing
Authority
_____________________________________________
Authorized Officer
cc: Temecula Public Financing Authority
Stone & Youngberg LLC
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EXHIBIT B
Municipal Secondary Market Disclosure
Information Cover Sheet
This cover sheet should be sent with all submissions made to the Municipal Securities Rulemaking Board, Nationally
Recognized Municipal Securities Information Repositories, and any applicable State Information Depository, whether the
filing is voluntary or made pursuant to Securities and Exchange Commission Rule 15c2-12 or any analogous state statute.
See www.sec.gov/info/municipal/nrmsir.htm for list of current NRMSIRs and SIDs
IF THIS FILING RELATES TO A SINGLE BOND ISSUE:
Provide name of bond issue exactly as it appears on the cover of the Official Statement
(please include name of state where Issuer is located):
$14,470,000
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 01-2 (HARVESTON)
2006 SPECIAL TAX REFUNDING BONDS, SERIES A
(California)
Provide nine-digit CUSIP® numbers* if available, to which the information relates:
Maturity
CUSIP®
Maturity
CUSIP ®
2007
2008
2009
2010
2011
87972RAB7
87972RAC5
87972RAD3
87972RAE1
87972RAF8
2018
2019
2020
2021
2022
87972RAN1
87972RAP6
87972RAQ4
87972RAR2
87972RAS0
87972RAT8
87972RAU5
87972RAV3
87972RAX9
87972RAY7
2012
87972RAG6
2023
2013
2014
2015
2016
2017
87972RAH4
87972RAJ0
87972RAK7
87972RAL5
87972RAM3
2024
2025
2031
2036
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$3,075,000
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 01-2 (HARVESTON)
2006 SPECIAL TAX REFUNDING BONDS, SUBORDINATE SERIES B
(California)
Provide nine-digit CUSIP® numbers* if available, to which the information relates:
Maturity
CUSIP®
Maturity
CUSIP ®
2007
2008
2009
2010
2011
2012
2013
2014
87972RAZ4
87972RBA8
87972RBB6
87972RBC4
87972RBD2
87972RBE0
87972RBF7
87972RBG5
2015
2016
2017
2018
2021
2026
2036
87972RBH3
87972RBJ9
87972RBK6
87972RBL4
87972RBP5
87972RBQ3
87972RBR1
IF THIS FILING RELATES TO ALL SECURITIES ISSUED BY THE ISSUER OR ALL
SECURITIES OF A SPECIFIC CREDIT OR ISSUED UNDER A SINGLE INDENTURE:
ISSUER’S N AME (PLEASE INCLUDE NAME OF STATE WHERE ISSUER IS LOCATED): _____________________________________
OTHER O BLIGATED PERSON’S NAME (IF ANY): _______________________________________________________________
(EXACTLY AS IT APPEARS ON THE OFFICIAL STATEMENT C OVER)
PROVIDE SIX- DIGIT CUSIP® NUMBER( S) *, IF AVAILABLE, OF ISSUER: _______________________________________________
* (C ONTACT CUSIP’ S® MUNICIPAL DISCLOSURE ASSISTANCE LINE
®
PROPER CUSIP NUMBERS .)
AT
212.438.6518 FOR
ASSISTANCE WITH OBTAINING THE
TYPE OF FILING:
a ELECTRONIC ( NUMBER OF PAGES ATTACHED)______________ a P APER (NUMBER OF PAGES ATTACHED ) ______________
IF INFORMATION IS ALSO AVAILABLE ON THE INTERNET, GIVE URL: _______________________________________________
WHAT TYPE OF INFORMATION ARE YOU PROVIDING? (CHECK ALL THAT APPLY)
A. a ANNUAL FINANCIAL INFORMATION AND OPERATING D ATA PURSUANT TO R ULE 15C2-12
(FINANCIAL INFORMATION AND OPERATING DATA SHOULD NOT BE FILED WITH THE MSRB.)
FISCAL PERIOD COVERED: _____________________________________________________________________________
B. a AUDITED FINANCIAL S TATEMENTS OR CAFR PURSUANT TO R ULE 15C2-12
FISCAL PERIOD COVERED: _____________________________________________________________________________
C. a NOTICE OF A MATERIAL EVENT PURSUANT TO RULE 15C2-12 (CHECK AS APPROPRIATE )
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1.
a P RINCIPAL AND INTEREST PAYMENT
6.
2.
a ADVERSE TAX OPINIONS OR EVENTS AFFECTING
THE TAX-EXEMPT STATUS OF THE SECURITY
DELINQUENCIES
a NON -PAYMENT RELATED DEFAULTS
7.
a MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS
3.
4.
a U NSCHEDULED DRAWS ON DEBT SERVICE
RESERVES REFLECTING FINANCIAL DIFFICULTIES
8.
a B OND CALLS
a UNSCHEDULED DRAWS ON CREDIT ENHANCEMENTS
9.
a DEFEASANCES
10.
a R ELEASE, SUBSTITUTION , OR SALE OF PROPERTY
REFLECTING FINANCIAL DIFFICULTIES
5.
a S UBSTITUTION OF CREDIT OR LIQUIDITY
PROVIDERS, OR THEIR FAILURE TO PERFORM
SECURING
REPAYMENT OF THE SECURITIES
11.
a R ATING CHANGES
D. a NOTICE OF FAILURE TO PROVIDE A NNUAL FINANCIAL INFORMATION AS REQUIRED
E. a OTHER SECONDARY M ARKET INFORMATION (SPECIFY): _________________________________________________
I
HEREBY REPRESENT THAT
I
AM AUTHORIZED BY THE ISSUER OR OBLIGOR OR ITS AGENT TO DISTRIBUTE THIS
INFORMATION PUBLICLY:
ISSUER CONTACT:
NAME ______________________________________________ TITLE ___________________________________________
EMPLOYER __________________________________________________________________________________________
ADDRESS ___________________________________________ CITY _____________ S TATE _____ ZIP CODE ____________
TELEPHONE_________________________________________ F AX ____________________________________________
EMAIL ADDRESS ____________________________________ I SSUER WEB S ITE ADDRESS ___________________________
DISSEMINATION AGENT CONTACT, IF ANY:
NAME _____________________________________________ TITLE ____________________________________________
EMPLOYER __________________________________________________________________________________________
ADDRESS _________________________________________ CITY _____________ STATE _____ ZIP CODE ______________
TELEPHONE_________________________________________ F AX _____________________________________________
EMAIL ADDRESS ___________________________________ R ELATIONSHIP TO I SSUER______________________________
OBLIGOR CONTACT, IF ANY:
NAME _____________________________________________ TITLE ___________________________________________
EMPLOYER __________________________________________________________________________________________
ADDRESS ___________________________________________ CITY _____________ S TATE _____ ZIP CODE ____________
TELEPHONE_________________________________________ F AX ____________________________________________
EMAIL ADDRESS _____________________________________ O BLIGOR WEB S ITE ADDRESS _________________________
INVESTOR RELATIONS CONTACT, IF ANY:
NAME _____________________________________________ TITLE ___________________________________________
TELEPHONE________________________________________ EMAIL ADDRESS ____________________________________
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APPENDIX F
FORM OF OPINION OF BOND COUNSEL
September 1, 2006
Board of Directors
Temecula Public Financing Authority
43200 Business Park Drive
Temecula, California 92590
OPINION:
$14,470,000 Temecula Public Financing Authority
Community Facilities District 01-2 (Harveston) 2006 Special Tax
Refunding Bonds, Series A and $3,075,000 Temecula Public
Financing Authority Community Facilities District 01-2 (Harveston)
2006 Special Tax Refunding Bonds, Subordinate Series B
Members of the Board of Directors:
We have acted as bond counsel to the Temecula Public Financing Authority (the “Authority”) in
connection with the issuance by the Authority of its $14,470,000 Temecula Public Financing Authority
Community Facilities District 01-2 (Harveston) 2006 Special Tax Refunding Bonds, Series A (the “Senior
Bonds”) and its $3,075,000 Temecula Public Financing Authority Community Facilities District 01-2
(Harveston) 2006 Special Tax Refunding Bonds, Subordinate Series B (the “Subordinate Bonds” and,
together with the Senior Bonds, the “Bonds”), pursuant to the provisions of the Mello-Roos Community
Facilities Act of 1982, as amended, constituting Sections 53311 et seq. of the California Government Code
(the “Act”), a Fiscal Agent Agreement, dated as of July 1, 2006 (the “Fiscal Agent Agreement”), by and
between the Authority for and on behalf of the Temecula Public Financing Authority Community Facilities
District 01-2 (Harveston) (the “District”), and U.S. Bank National Association, as fiscal agent, and
Resolution No. TPFA 06-03 adopted by the Authority on July 11, 2006 (the “Resolution”). We have
examined the law and such certified proceedings and other documents as we deem necessary to render this
opinion.
As to questions of fact material to our opinion, we have relied upon representations of the Authority
contained in the Resolution and in the certified proceedings and certifications of public officials and others
furnished to us, without undertaking to verify the same by independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The Authority is duly created and validly existing as a joint exercise of powers authority, with
the power to adopt the Resolution, enter into the Fiscal Agent Agreement and perform the agreements on its
part contained therein and issue the Bonds.
2. The Fiscal Agent Agreement has been duly entered into by the Authority, for and on behalf of
the District, and constitutes a valid and binding obligation of the Authority enforceable upon the Authority.
3. Pursuant to the Act, the Fiscal Agent Agreement creates a valid lien on the funds pledged by the
Fiscal Agent Agreement for the security of the Bonds, with the lien thereon under the Fiscal Agent
Agreement for the security of the Senior Bonds being senior to the lien thereon under the Fiscal Agent
Agreement for the security of the Subordinate Bonds.
4. The Bonds have been duly authorized, executed and delivered bythe Authority andare valid and
binding limited obligations of the Authority on behalf of the District, payable solely from the sources
provided therefor in the Fiscal Agent Agreement, in the manner and in the priority set forth in the Fiscal
Agent Agreement. The Fiscal Agent Agreement requires that certain funds held thereunder be applied to the
payment of the Senior Bonds prior to the use of such funds to pay the Subordinate Bonds.
F-1
Temecula Public Financing Authority
September 1, 2006
Page 2
5. Subject to the Authority’s compliance with certain covenants, interest on the Bonds is excludable
from gross income of the owners thereof for federal income tax purposes under Section 103 of the Internal
Revenue Code of 1986, as amended (the “Code”) and, under Section 55 of the Code, is not included as an
item of tax preference in computing the federal alternative minimum tax for individuals and corporations
under the Code but is taken into account in computing an adjustment used in determining the federal
alternative minimum tax for certain corporations. Failure by the Authority to comply with one or more of
such covenants could cause interest on the Bonds to not be excludable from gross income under Section 103
of the Code for the federal income tax purposes retroactively to the date of issuance of the Bonds.
6. The interest on the Bonds is exempt from personal income taxation imposed by the State of
California.
Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express
no opinion regarding any such collateral consequences arising with respect to the Bonds.
The rights of the owners of the Bonds and the enforceability of the Bonds, the Resolution and the
Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors’ rightsheretofore or hereafter enacted and also may be subject to the exercise
of judicial discretion in accordance with general principles of equity.
Inrendering this opinion, we have relied upon certifications of the Authorityand others with respect
to certain material facts. Our opinion represents our legal judgment based upon such review of the law and
facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given
as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts
or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
Respectfully submitted,
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APPENDIX G
BOOK-ENTRY SYSTEM
The following description of the procedures and record keeping withrespect to beneficial ownership
interests in the 2006 Bonds, payment of principal of and interest on the 2006 Bonds to Direct Participants,
Indirect Participants or Beneficial Owners (as such terms are defined below) of the 2006 Bonds,
confirmation and transfer of beneficial ownership interests in the 2006 Bonds and other Bond-related
transactions by and between DTC, Direct Participants, Indirect Participants and Beneficial Owners of the
2006 Bonds is based solely on information furnished by DTC to the District which the District believes to
be reliable, but the Authority, the District and the Underwriter do not and cannot make any independent
representations concerning these matters and do not take responsibility for the accuracy or completeness
thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely
on the foregoing information with respect to such matters, but should instead confirm the same with DTC
or the DTC Participants, as the case may be.
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository
for the 2006 Bonds. The 2006 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 2006 Bond will be issued for each maturity of the 2006 Bonds,
each in the aggregate principal amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under
the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York
Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues
of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from
over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates
the post-trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct Participants’
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers anddealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing
Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members
ofthe National Securities Clearing Corporation, Fixed Income ClearingCorporation, andEmerging Markets
Clearing Corporation, (NSCC, FICC, and EMCC, also subsidiaries of DTCC), as well as by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities
brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC
has Standard & Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with
the Securities andExchange Commission. More information about DTC can be found at www.dtcc.com and
www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which
will receive a credit for the 2006 Bonds on DTC’s records. The ownership interest of each actual purchaser
of each 2006 Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’
records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial
Owners are, however, expected to receive written confirmations providing details of the transaction, as well
as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the 2006 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 2006
Bonds, except in the event that use of the book-entry system for the 2006 Bonds is discontinued.
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Tofacilitate 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 requested by an authorized
representative of DTC. The deposit of the 2006 Bonds with DTC and their registration in the name of Cede
& Co. or such other DTC nominee donot effect any change in beneficial ownership. DTC has no knowledge
of the actual Beneficial Owners of the 2006 Bonds; DTC’s records reflect only the identity of the Direct
Participants to whose accounts such 2006 Bonds are credited, which may or may not be the Beneficial
Owners. The Direct or Indirect Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants,and byDirect Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory or regulatory requirements as may
be in effect from time to time. Beneficial Owners of 2006 Bonds may wish to take certain steps to augment
the transmissions to them of notices of significant events with respect to the 2006 Bonds, such as
redemptions, tenders, defaults, and proposed amendments to the 2006 Bonds documents. For example,
Beneficial Owners of the 2006 Bonds may wish to ascertain that the nominee holding the 2006 Bonds for
their benefit has agreed to obtain and transmit notices to Beneficial Owners.
Redemption notices shall be sent to DTC. If less than all of the 2006 Bonds 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 such other DTC nominee) will consent or vote with respect to the
2006Bonds unless authorized bya Direct Participant in accordance with DTC’s 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 the 2006 Bonds are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Principal, redemption price and interest payments on the 2006 Bonds will be made to Cede & Co.,
or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to
credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from
the District, the Authority or the Fiscal Agent, on payable date in accordance with their respective holdings
shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for the accounts of customers in
bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC,
the Fiscal Agent, the Authority or the District, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal, redemption price and interest 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 Fiscal Agent, disbursement of such payments to Direct Participants will be the
responsibilityof DTC, anddisbursement ofsuch payments to the Beneficial Owners will be the responsibility
of Direct and Indirect Participants.
DTC may discontinue providing its service as depository with respect to the 2006 Bonds at any time
by giving reasonable notice to the District or Fiscal Agent. Under such circumstances, in the event that a
successor depository is not obtained, the 2006 Bond certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or
a successor securities depository). In that event, 2006 Bond certificates will be printed and delivered to
DTC.
The information in this section concerning DTC and DTC’s book-entry system has been obtained
from sources that the Authority and the District believe to be reliable, but the Authority and the District take
no responsibility for the accuracy thereof.
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Discontinuance of DTC Services
In the event that (a) DTC determines not to continue to act as securities depository for the 2006
Bonds, or (b) the Authority determines that DTC shall no longer act and delivers a written certificate to the
Fiscal Agent to that effect, then the Authoritywill discontinue the Book-Entry System with DTC for the 2006
Bonds. If the Authority determines to replace DTC with another qualified securities depository, the
Authority will prepare or direct the preparation of a new single separate, fully registered Bond for each
maturity of the 2006 Bonds registered in the name of such successor or substitute securities depository as
are not inconsistent with the terms of the Fiscal Agent Agreement. If the Authority fails to identify another
qualified securities depository to replace the incumbent securities depository for the 2006 Bonds, then the
2006 Bonds shall no longer be restricted to being registered in the 2006 Bond registration books in the name
of the incumbent securities depository or its nominee, but shall be registered in whatever name or names the
incumbent securities depository or its nominee transferring or exchanging the 2006 Bonds shall designate.
In the event that the Book-Entry System is discontinued, the following provisions would also apply:
(i) the 2006 Bonds will be made available in physical form, (ii) principal of, and redemption premiums if any,
on the 2006 Bonds will be payable upon surrender thereof at the trust office of the Fiscal Agent identified
in the Fiscal Agent Agreement, and (iii) the 2006 Bonds will be transferable and exchangeable as provided
in the Fiscal Agent Agreement.
The Authority, the District and the Fiscal Agent do not have any responsibility or obligation to DTC
Participants, to the persons for whom they act as nominees, to Beneficial Owners, or to any other person
who is not shown on the registration books as being an owner of the 2006 Bonds, with respect to (i) the
accuracy of any records maintained by DTC or any DTC Participants; (ii) the payment by DTC or any DTC
Participant of any amount in respect of the principal of, redemption price of or interest on the 2006 Bonds;
(iii) the delivery of any notice which is permitted or required to be given to registered owners under the
Fiscal Agent Agreement; (iv) the selection by DTC or anyDTC Participant of any person to receive payment
in the event of a partial redemption of the 2006 Bonds; (v) any consent given or other action taken by DTC
as registered owner; or (vi) any other matter arising with respect to the 2006 Bonds or the Fiscal Agent
Agreement. The Authority, the District and the Fiscal Agent cannot and do not give any assurances that
DTC, DTC Participants or others will distribute payments of principal of or interest on the 2006 Bonds paid
to DTC or its nominee, as the registered owner, or any notices to the Beneficial Owners or that they will do
so on a timely basis or will serve and act in a manner described in this Official Statement. The Authority,
the District and the Fiscal Agent are not responsible or liable for the failure of DTC or any DTC Participant
to make any payment or give any notice to a Beneficial Owner in respect to the 2006 Bonds or any error or
delay relating thereto.
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APPENDIX H
SPECIMEN FINANCIAL GUARANTY INSURANCE POLICY
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Financial Guaranty Insurance Policy
Ambac Assurance Corporation
One State Street Plaza, 15th Floor
New York, New York 10004
Telephone: (212) 668-0340
Obligor:
Policy Number:
Obligations:
Premium:
Ambac Assurance Corporation (Ambac), a Wisconsin stock insurance corporation, in consideration of the payment of the
premium and subject to the terms of this Policy, hereby agrees to pay to The Bank of New York, as trustee, or its successor (the
“Insurance Trustee”), for the benefit of the Holders, that portion of the principal of and interest on the above-described obligations
(the “Obligations”) which shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Obligor.
N
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Ambac will make such payments to the Insurance Trustee within one (1) business day following written notification to Ambac of
Nonpayment. Upon a Holder’s presentation and surrender to the Insurance Trustee of such unpaid Obligations or related coupons,
uncanceled and in bearer form and free of any adverse claim, the Insurance Trustee will disburse to the Holder the amount of
principal and interest which is then Due for Payment but is unpaid. Upon such disbursement, Ambac shall become the owner of
the surrendered Obligations and/or coupons and shall be fully subrogated to all of the Holder’s rights to payment thereon.
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In cases where the Obligations are issued in registered form, the Insurance Trustee shall disburse principal to a Holder only upon
presentation and surrender to the Insurance Trustee of the unpaid Obligation, uncanceled and free of any adverse claim, together
with an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee duly executed by the Holder or such
Holder’s duly authorized representative, so as to permit ownership of such Obligation to be registered in the name of Ambac or its
nominee. The Insurance Trustee shall disburse interest to a Holder of a registered Obligation only upon presentation to the
Insurance Trustee of proof that the claimant is the person entitled to the payment of interest on the Obligation and delivery to the
Insurance Trustee of an instrument of assignment, in form satisfactory to Ambac and the Insurance Trustee, duly executed by the
Holder or such Holder’s duly authorized representative, transferring to Ambac all rights under such Obligation to receive the
interest in respect of which the insurance disbursement was made. Ambac shall be subrogated to all of the Holders’ rights to
payment on registered Obligations to the extent of any insurance disbursements so made.
C
E
In the event that a trustee or paying agent for the Obligations has notice that any payment of principal of or interest on an
Obligation which has become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed a
preferential transfer and theretofore recovered from the Holder pursuant to the United States Bankruptcy Code in accordance with
a final, nonappealable order of a court of competent jurisdiction, such Holder will be entitled to payment from Ambac to the extent
of such recovery if sufficient funds are not otherwise available.
P
S
As used herein, the term “Holder” means any person other than (i) the Obligor or (ii) any person whose obligations constitute the
underlying security or source of payment for the Obligations who, at the time of Nonpayment, is the owner of an Obligation or of
a coupon relating to an Obligation. As used herein, “Due for Payment”, when referring to the principal of Obligations, is when
the scheduled maturity date or mandatory redemption date for the application of a required sinking fund installment has been
reached and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by application
of required sinking fund installments), acceleration or other advancement of maturity; and, when referring to interest on the
Obligations, is when the scheduled date for payment of interest has been reached. As used herein, “Nonpayment” means the failure
of the Obligor to have provided sufficient funds to the trustee or paying agent for payment in full of all principal of and interest
on the Obligations which are Due for Payment.
This Policy is noncancelable. The premium on this Policy is not refundable for any reason, including payment of the Obligations
prior to maturity. This Policy does not insure against loss of any prepayment or other acceleration payment which at any time
may become due in respect of any Obligation, other than at the sole option of Ambac, nor against any risk other than Nonpayment.
In witness whereof, Ambac has caused this Policy to be affixed with a facsimile of its corporate seal and to be signed by its duly
authorized officers in facsimile to become effective as its original seal and signatures and binding upon Ambac by virtue of the
countersignature of its duly authorized representative.
President
Secretary
Effective Date:
Authorized Representative
THE BANK OF NEW YORK acknowledges that it has agreed
to perform the duties of Insurance Trustee under this Policy.
Form No.: 2B-0012 (1/01)
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Authorized Officer of Insurance Trustee
Ambac Assurance Corporation
One State Street Plaza,
New York, New York 10004
Telephone: (212) 668-0340
Endorsement
Policy for:
Attached to and forming part of Policy No.:
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Effective Date of Endorsement:
M
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In the event that Ambac Assurance Corporation were to become insolvent, any claims arising
under the Policy would be excluded from coverage by the California Insurance Guaranty
Association, established pursuant to the laws of the State of California.
P
S
C
E
Nothing herein contained shall be held to vary, alter, waive or extend any of the terms, conditions, provisions, agreements
or limitations of the above mentioned Policy other than as above stated.
In Witness Whereof, Ambac has caused this Endorsement to be affixed with a facsimile of its corporate seal and to
be signed by its duly authorized officers in facsimile to become effective as its original seal and signatures and binding
upon Ambac by virtue of the countersignature of its duly authorized representative.
Ambac Assurance Corporation
President
Secretary
Authorized Representative
Form No.: 2B-0004 (7/97)
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APPENDIX I
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Temecula Public Financing Authority Community Facilities District No. 01-2 (Harveston) • 2006 Special Tax Refunding Bonds, Series A and Subordinate Series B
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