Roripaugh CFD 03-2 Official Statement[Icon]

Transcription

NEW ISSUE
NOT RATED
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.
$51,250,000
TEMECULA PUBLIC FINANCING AUTHORITY
COMMUNITY FACILITIES DISTRICT NO. 03-02
(RORIPAUGH RANCH)
2006 SPECIAL TAX BONDS
Dated: Date of Delivery
Due: September 1, as on the inside cover
The Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax 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 March 1, 2006, 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. 03-02 (Roripaugh Ranch) (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 2006 Bonds are being issued (i) to finance, either directly or indirectly, the acquisition and construction of certain road,
sewer, storm drain, fire facilities and park and recreation improvements (collectively, the “Improvements”) within or in the vicinity
of the District, (ii) to eliminate an existing special assessment lien (the “Prior Lien”) on parcels in the District imposed by the County
of Riverside Assessment District No. 161, (iii) to fund interest on the 2006 Bonds through September 1, 2006, (iv) to pay certain
administrative expenses related to the District, (v) to pay the costs of issuing the 2006 Bonds and (vi) to establish a Reserve Fund for
the 2006 Bonds. See “PLAN OF FINANCE; IMPROVEMENTS TO BE FINANCED WITH PROCEEDS OF THE 2006 BONDS” and
“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 2006 Bonds are subject to optional redemption, mandatory redemption from prepayments of Special Taxes and mandatory
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 (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 (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) OR 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 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 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, acting as general counsel to the Authority and for Ashby USA, LLC by its
counsel, Pillsbury Winthrop Shaw Pittman LLP, Los Angeles, California. It is anticipated that the 2006 Bonds, in book-entry form,
will be available through the facilities of DTC on or about April 27, 2006.
Dated: April 13, 2006
MATURITY SCHEDULE
$51,250,000
(RORIPAUGH RANCH)
$9,370,000 Serial Bonds
Base CUSIP® No. 87972Y†
Maturity
(September 1)
Principal
Amount
2007
2008
2009
2010
2011
$765,000
795,000
830,000
865,000
905,000
Interest
Rate
Price
4.00%
4.20
4.35
4.50
4.65
100%
100
100
100
100
CUSIP®
No.†
Maturity
(September 1)
Principal
Amount
Interest
Rate
Price
BV7
BW5
BX3
BY1
BZ8
2012
2013
2014
2015
2016
$ 945,000
990,000
1,040,000
1,090,000
1,145,000
4.75%
4.90
5.00
5.05
5.10
100%
100
100
100
100
CUSIP®
No.†
CA2
CB0
CC8
CD6
CE4
$15,490,000 5.45% Term 2006 Bonds due September 1, 2026, Price 100% CUSIP® No.† 87972YCM6
$26,390,000 5.50% Term 2006 Bonds due September 1, 2036, Price 100% CUSIP® No. 87972YCN4†
† 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.
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 of the City of Temecula
Genie Roberts, Authority Treasurer and Finance Director of the City of Temecula
Susan Jones, Authority Secretary and City Clerk of the City of Temecula
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
David Taussig & Associates, Inc.
Newport Beach, California
Financial Advisor to the Authority
Fieldman, Rolapp & Associates
Irvine, California
Fiscal Agent
U.S. Bank National Association
Los Angeles, California
Appraiser
Stephen G. White, MAI
Fullerton, California
Market Absorption Consultant
Empire Economics, Inc.
Capistrano Beach, California
NO DEALER, BROKER, SALESPERSON OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION WITH RESPECT
TO THE 2006 BONDS, OTHER THAN AS CONTAINED IN THIS OFFICIAL STATEMENT, AND, IF
GIVEN OR MADE, ANY SUCH 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 OF ANY
SECURITIES OTHER THAN THOSE DESCRIBED ON THE COVER PAGE OR AN OFFER TO SELL
ORA SOLICITATIONOF AN OFFER TO BUYNOR SHALL THERE BE ANY OFFER, SOLICITATION
OR SALE OF THE 2006 BONDS BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OR SALE. THIS OFFICIAL STATEMENT
IS NOT TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE 2006 BONDS.
Statements contained in this Official Statement which involve time estimates, forecasts or matters
of opinion, whether or not expressly so described herein, are intended solely as such and are not to be
construed as representations of fact. The information set forth herein has been furnished by the Authority
or other sources which are believed to be reliable, but it is not guaranteed as to accuracy or completeness.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The
Underwriter has reviewed the information in this Official Statement in accordance with, and as part of, its
responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this
transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. The
information and expressions of opinion herein are subject to change without notice and neither the delivery
ofthis Official Statement nor anysale made hereundershall, under anycircumstances, create anyimplication
that there has been no change in the affairs of the District or any other entity described herein since the date
hereof.
This Official Statement is submitted in connection with the sale of securities referred to herein and
may not be reproduced or be used, as a whole or in part, for any other purpose.
IN CONNECTION WITH THE OFFERING OF THE 2006 BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE 2006 BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE 2006 BONDS TO CERTAIN
DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES
LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND
SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE
UNDERWRITER.
THE 2006BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE 2006
BONDSHAVE NOT BEEN REGISTERED ORQUALIFIED 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
4
4
5
6
6
6
7
7
CONTINUING DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PLAN OF FINANCE; IMPROVEMENTS TO BE FINANCED
WITH PROCEEDS OF THE 2006 BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ESTIMATED SOURCES AND USES OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
THE 2006 BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the 2006 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt Service Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Terms of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer and Exchange of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book-Entry and DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
10
11
12
14
14
SECURITY FOR THE 2006 BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate and Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Taxes and the Teeter Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds of Foreclosure Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Tax Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment of Moneys in Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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THE AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Authority for Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
THE COMMUNITY FACILITIES DISTRICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of the District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conditions to the Release of Building Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Specific Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Development Agreement; Deferral Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
23
24
26
27
28
30
31
32
PROPERTY OWNERSHIP AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Description of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ashby USA, LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Development Costs; Plan of Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ohio Savings Bank Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sale of Phase II to KB Home Coastal Inc.; Take Down Options . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Absorption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
History of Property Tax Payment; Loan Defaults; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . .
Continental Residential, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
32
33
33
36
39
44
48
48
49
-i-
Davidson Roripaugh Ranch 122 LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Tanamera/Roripaugh Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
KB Home Coastal Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Special Tax Allocation by Property Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct and Overlapping Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Value-to-Lien Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overlapping Assessment and Community Facilities Districts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Assessed Value-to-Lien Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation Uniform Mitigation Fee; Multiple Species Habitat Conservation Plan . . . . . . . . . .
Market Absorption Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appraised Property Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
53
57
59
61
63
65
65
66
67
69
BONDOWNERS’ RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risks of Real Estate Secured Investments Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concentration of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Failure to Develop Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special Taxes Are Not Personal Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The 2006 Bonds Are Limited Obligations of the District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Potential Delay and Limitations in Foreclosure Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustable Rate and Unconventional Mortgage Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
IRS Audit of Tax-Exempt Bond Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limitations on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
70
71
71
71
72
72
72
73
73
74
74
75
75
76
77
77
78
78
79
80
81
81
82
82
82
82
83
84
84
84
84
84
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
No General Obligation of the Authority or the District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85
85
85
85
85
NO RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
UNDERWRITING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
PROFESSIONAL FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
-ii-
APPENDIX A –
APPENDIX B –
APPENDIX C
APPENDIX D
APPENDIX E
APPENDIX F
APPENDIX G
–
–
–
–
–
APPENDIX H
APPENDIX I
APPENDIX J
APPENDIX K
–
–
–
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General Information About the City of Temecula . . . . . . . . . . . . . . . . . . . . . . . . A-1
Rate and Method of Apportionment of Special Tax Temecula Public
Financing Authority Community Facilities District No. 03-02
(Roripaugh Ranch) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Summary Appraisal Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
Market Absorption Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
Summary of Certain Provisions of the Fiscal Agent Agreement . . . . . . . . . . . . . E-1
Form of Authority Continuing Disclosure Agreement . . . . . . . . . . . . . . . . . . . . . . F-1
Form of Ashby USA, LLC and the Tanamera/Roripaugh Entities Continuing
Disclosure Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
Form of Opinion of Bond Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
Book-Entry System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
Boundary Map of the Community Facilities District . . . . . . . . . . . . . . . . . . . . . . . J-1
Building Permit Thresholds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K-1
-iii-
[THIS PAGE INTENTIONALLY LEFT BLANK]
OFFICIAL STATEMENT
$51,250,000
(RORIPAUGH RANCH)
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. 03-02 (Roripaugh
Ranch) (the “District” or the “Community Facilities District”) of $51,250,000 aggregate principal amount
of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch)
2006 Special Tax Bonds (the “2006 Bonds”).
The 2006 Bonds are issued pursuant to the Act (as defined below) and a Fiscal Agent Agreement,
dated as of March 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”). See “THE
AUTHORITY – Authority for Issuance” herein. The Authority may issue additional bonds secured on a
parity with the 2006 Bonds for the remaining $3,750,000 of authorization of the District or for refunding
purposes. The 2006 Bonds and any parity bonds are referred to herein as the “Bonds.”
Capitalizedterms used in this Official Statement andnot otherwise defined herein have the meanings
given such terms in the Fiscal Agent Agreement, some of which are set forth in Appendix E 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. See “THE AUTHORITY” and “THE
COMMUNITY FACILITIES DISTRICT.”
The Community Facilities District
The District was formed and established by the Board of Directors of the Authority on January 11,
2005 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 unanimously authorized the District
to incur bonded indebtedness in the aggregate not-to-exceed amount of $55,000,000 and approved the levy
of a Special Tax (the “Special Tax”) on certain real property located in the District for the payment of debt
service and administrative expenses of the District.
Once duly established, a community 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 acommunity facilities district and compliance
with the provisions of the Act, a community facilities district may issue bonds and may levy and collect
special taxes to repay such bonded indebtedness and interest thereon.
The District is comprised of approximately 800 gross acres of land located in the far north end of
the City, in the south-westerly portion of the County of Riverside (the “County”). The District is located
along the south side of Murrieta Hot Springs Road, and along the future northerly extension of Butterfield
Stage Road, about 1.5 miles east of Winchester Road (Highway 79). Nicolas Road and North Loop Road
1
will provide internal circulation to a portion of the District. The land in the District is expected to be
developed with a master-planned community that is approved for up to 2,105 dwelling units, but is currently
planned for approximately 1,745 units. In addition, there is expected to be approximately 10 net acres of
commercial development proposed for a neighborhood retail center, approximately 12 acres for an
elementary school site, approximately 20 acres for a middle school site, an approximately 19.7-acre sports
park (Planning Area 27), an approximately 5.1-acre neighborhood park (Planning Area 6), two private
recreation facilities, private and public trails and paseos, an approximately 2-acre fire station site, and
approximately 202.7 acres of natural open space to be preserved as permanent habitat and related flood
control improvements to Long Valley Wash and Santa Gertrudis Creek. The property within the District is
governed by the Roripaugh Ranch Specific Plan approved by the City Council.
The property within the District is planned to be developed in 2 phases, which are referred to herein
as Phase I, located in the northwest portion of the property and Phase II, located in the east portion of the
property. Phase I is estimated to include approximately 515 homes and encompasses approximately 75.81
net acres. Phase II encompasses approximately 1,230 proposed residential lots which have been approved.
Phases I and II are expected to contain gated neighborhoods. As of January 15, 2006, rough grading is
complete for Phase I, and is approximately 90% complete for the “village core” area of Phase II (Planning
Areas 10, 11, 12, 33A and 33B). Rough grading is approximately 80% complete for the balance of the
property within Phase II. Builders in Phase I, except for Continental Residential, Inc. (as defined below),
have acquired their respective tracts within Phase I. Continental Residential, Inc. is not yet a landowner
within the District, and there can be no assurance that it will close escrow on its lots within the District at
the times indicated or at all. The school sites may be sold by Ashby USA, LLC (as defined below) to
Temecula Valley Unified School District if the School District chooses to purchase the sites.
•
Ashby USA, LLC (“Ashby USA, LLC”),the master developer ofthe property in the District,
is a California limited liability company based in Corona, California, formed by its members with
respect to the Roripaugh Ranch project. Ashby USA, LLC is managed by Ashby Development
Company, Inc., aCalifornia corporation. The other member of Ashby USA, LLC is USA Investment
Partners, LLC, a Nevada limited liability company, and an affiliate of USA Commercial Mortgage
Company, a Nevada corporation (dba “USA Capital”). Ashby USA, LLC had acquired all of the
property within the District andhas sold or entered into agreements for the sale of property proposed
for development of 515 homes within Phase I and has entered into option agreements for the sale of
property proposed for development of approximately 1,230 homes in Phase II. (112 homes proposed
in PA 12 and approximately 1,118 homes proposed in other Planning Areas of Phase II.)
•
An agreement has been entered into between Ashby USA, LLC and Continental Residential,
Inc., a California corporation (“Continental Residential, Inc.”) related to 104 lots in Planning Area
1A, which sale is pending and is anticipated by Ashby USA, LLC and Continental Residential, Inc.
to close in September 2006 after conditions to the issuance of building permits in Phase I are
satisfied.
•
Ashby USA, LLC has closed escrow with Davidson Roripaugh Ranch 122 LLC whose
manager is Davidson Project Service, Inc., a California corporation (99 lots in Planning Area 2).
•
Ashby USA, LLC had sold 99 lots in Planning Area 3, 100 lots in Planning Area 4A and 113
lots in Planning Area 4B to three purchasers. Litigation against Ashby USA, LLC, among others,
was filed by the purchaser of lots within Planning Area 4A in February 2005 and by the purchaser
of lots within Planning Area 4B in August 2005. Negotiations resulted in the sale of the lots in
Planning Area 4A on June 30, 2005 to Tanamera/Roripaugh, LLC, a California limited liability
company (“Tanamera/Roripaugh, LLC”) and the sale of the lots in Planning Area 4B on January 6,
2006 to Traditions at Roripaugh, LLC, a California limited liability company (“Traditions at
Roripaugh, LLC”). Upon each closing the respective lawsuits were dismissed with prejudice. In
addition, on November 2, 2005, the lots in Planning Area 3 were sold by the prior owner to
Tanamera/Roripaugh II, LLC, a California limited liability company (“Tanamera/Roripaugh II,
LLC,” and together with Tanamera/Roripaugh, LLC and Traditions at Roripaugh, LLC, the
“Tanamera/Roripaugh Entities”). The Tanamera/Roripaugh Entities operate under the name of
Tanamera Residential Group. The Tanamera/Roripaugh Entities are owned by Tanamera Homes,
LLC, a California limited liability company (“Tanamera Homes, LLC”). Tanamera Homes, LLC
is owned by Monaco Diversified Corporation, a California corporation and Housing Partners, LLC,
a Nevada limited liability company (“Housing Partners”). Housing Partners is owned by USA
Investment Partners, LLC, a Nevada limited liability company (“USA Investment Partners, LLC”),
which is a member of Ashby USA, LLC.
In addition, on August 1, 2003, Ashby USA, LLC entered into an option contract for the sale of 112
of the approximately 1,230 proposed single family lots proposed for development in Phase II with KB Home
Coastal Inc., a California corporation (“KB Home Coastal Inc.”). Closing of the sale of all 112 units is
2
conditioned upon Ashby USA, LLC’s satisfaction of the conditions specified in the agreement, including
satisfaction of conditions necessary for issuance of building permits and satisfaction of conditions relating
to issuance of certificates of occupancy which is expected by Ashby USA, LLC to occur prior to June 1,
2007.
Subsequently in 2005, Ashby USA, LLC entered into an Option Agreement and Agreement for
Purchase and Sale of Real Property and Escrow Instructions (the “Option Agreement”), dated as of July 11,
2005, with KB Home Coastal Inc., as optionee, for the balance of approximately 1,118 of the approximately
1,230 proposed single family lots within Phase II. KB Home Coastal Inc. is not yet a landowner within the
District, and there can be no assurance that it will exercise its option to purchase lots within the District at
the times indicated or at all. Approximately 10 net acres in Planning Area 11 of Phase II were not part of
the contract with KB Home Coastal Inc. and are planned for sale by Ashby USA, LLC to a future purchaser
for commercial development as a neighborhood retail center. In addition, it is currently estimated by Ashby
USA, LLC that the grading of the lots in Phase II to a blue-top condition and other development conditions
will be completed from approximately September 2006 through May 2007. When this occurs, and Ashby
USA, LLC’s work is completed, which includes satisfaction of the conditions to release of building permits
and satisfaction of conditions relating to issuance of certificates of occupancy, the option with KB Home
Coastal Inc. provides for KB Home Coastal Inc. to begin taking down or closing on portions
of the lots.
Pursuant to the Option Agreement, KB Home Coastal Inc. may acquire approximately 4121 1 of the lots in
Phase II in Planning Areas 16, 23, 24 and 31, or may acquire all of the approximately 1,118 remaining lots
in Phase II (not including the 112 lots in Planning Area 12 that are subject to a separate transaction). Based
solely on Ashby USA, LLC’s estimated completion date, acquisition is expected to commence in the third
quarter after Ashby USA, LLC satisfies the conditions of the Option Agreement. If the option for
approximately 412 lots is selected, the sale of the approximately 412 lots would close within 45 days of the
ability to obtain building permits and satisfaction of conditions relating to issuance of certificates of
occupancy and the date of acceptance of the Blue Top Condition specified in the Option Agreement (as
described below in “PROPERTY OWNERSHIP AND DEVELOPMENT – Description of Project – Ashby
USA, LLC – Sale of Phase II to KB Home Coastal Inc.; Take Down Options,” unless KB Home Coastal Inc.
elects to delay the close for eight months after said election. If the option for approximately 412 lots is
selected, Ashby USA, LLC would market the remaining approximately 706 lots to other merchant builders.
If the approximately 1,118 lot option is exercised then the lots will be purchased over a period of
approximately 5 years. There is no assurance that any agreements for lot sales not yet consummated will be
performed as expected or with regard to the timing of completion of improvements.
With regard to the timing of completion of improvements, the City has reviewed a construction
schedule prepared by Ashby USA, LLC in January 2006 and has indicated that schedule was feasible but
was aggressive. The January 2006 schedule assumed2 only minimal construction delays such as may occur
due to delay in receipt of necessary Resource Agency or other approvals, delays in award of construction
contracts, delays in delivery of construction materials, or delays due to inclement weather. The City has
indicated that a time frame between March 2007 and September 2007 is a more realistic estimate of the time
frame for completion of the necessary infrastructure to allow building permits to be issued for homes within
Phase II. Ashby USA, LLC has subsequently modified its schedule with respect to certain items to take into
account subsequent events. The Authority, the City and the Merchant Builders make no representation
whatsoever that the schedule as provided by Ashby USA, LLC and modified from time to time, will be
achieved. KB Home Coastal Inc. makes no representation as to Ashby USA, LLC’s ability to timely complete
the work to allow issuance of building permits in Phase II by June 1, 2007 as required under the Option
Agreement (as defined below). The Market Absorption Study and the Appraisal were prepared utilizing an
estimated September 2006 date of completion of necessary infrastructure to allow issuance of remaining
buildingpermits forhomes within Phase I and an estimated September 2007 date of completion of necessary
1
424 lots represents the aggregate estimated number of lots in Planning Areas 16, 23, 24, and 31 at the time Ashby
USA, LLC and KB Home Coastal Inc. entered into the Option Agreement. 1,129 represents the aggregate estimated
number of lots in the other Planning Areas subject to the Option Agreement at the time Ashby USA, LLC and KB
Home Coastal Inc. entered into the Option Agreement. Current estimates for Planning Areas 16, 23, 24 and 31
aggregate to 412 lots and for the other Planning Areas the lots aggregate to approximately 706 lots. For convenience
of reference when describing the terms of the Option Agreement, the current number of estimated lots will be used
rather than the estimated number of lots referenced in the Option Agreement. The actual number of lots in any
Planning Area may change as development plans are refined over time. KB Home Coastal Inc. is not at this time able
to represent what the unit counts in each Planning Area are. KB Home Coastal Inc. is not yet a current landowner
within the District, and there can be no assurance that it will exercise its option to purchase lots within the District at
the times indicated or at all.
2
Resource Agencies include the California Department of Fish and Game, the Army Corp of Engineers and the
California Regional Water Quality Control Board.
3
infrastructure to allow issuance of building permits for homes within Phase II. The September 2007 date
of completion takes into account the possibility that the schedule prepared by Ashby USA, LLC, as modified
from time to time, with respect to Phase II is not achieved. It is also possible that the schedule prepared
by Ashby USA, LLC with respect to Phase I may not be achieved.
The development of the property in the District is subject to a number of constraints, with various
requirements that must be met for the issuance by the City of building permits for property in the District.
Upon issuance of the 2006 Bonds, development requirements will have been met which allow up to 107
building permits to be issued. Ashby USA, LLC estimates it will satisfy the development requirements
which allow up to 515 building permits to be issued by approximately the end of September 2006. Initially,
development with respect to 54 building permits in Planning Area 2 by Davidson Roripaugh Ranch 122 LLC
and 53 building permits in Planning Areas 3 and 4A by the Tanamera/Roripaugh Entities is expected to
commence during the second quarter of 2006. Development beyond 107 building permits requires
satisfaction of specified development conditions. Ashby USA, LLC expects those conditions to be satisfied
a few months before the time at which Ashby USA, LLC expects to satisfy the conditions which allow
development of the residential and commercial lots in Phase II. See “THE COMMUNITY FACILITIES
DISTRICT” and “PROPERTY OWNERSHIP AND DEVELOPMENT” for a description of the District,
Ashby USA, LLC, the merchant builders and the development. The Authority, the City and the Merchant
Builders make no representation as to the ability of Ashby USA, LLC to satisfy requirements in a timely
fashion.
The various merchant builders currently anticipated by Ashby USA, LLC to be involved in
development within Phases I and II include (i) Continental Residential, Inc., (ii) Davidson Roripaugh Ranch
122 LLC, for whom Davidson Builders, Inc. is expected to be under contract to develop the property,
(iii) Tanamera Residential Group for the Tanamera/Roripaugh Entities, and (iv) KB Home Coastal Inc.
These merchant builders, together with any other merchant builder which becomes involved in the
development, are each individually referred to as a “Merchant Builder” and collectively referred to as the
“Merchant Builders.” Detailed information about the location of and property ownership and land uses in
the District is set forth in “THE COMMUNITY FACILITIES DISTRICT” and “PROPERTY OWNERSHIP
AND DEVELOPMENT “herein.
Purpose of the 2006 Bonds
The 2006 Bonds are being issued (i) to finance, either directly or indirectly, the acquisition and
construction of certain road, sewer, storm drain, fire facilities, and park and recreation improvements
(collectively, the “Improvements”) to be located within or in the vicinity of the District, (ii) to eliminate an
existingspecial assessment lien (the “Prior Lien”), on parcels in the District imposed by Assessment District
No.161 (Winchester Properties) of the County (“CountyAssessment District No. 161”), (iii) to fund interest
on the 2006 Bonds through September 1, 2006, (iv) to pay certain administrative expenses related to the
District, (v) to pay the costs of issuing the 2006 Bonds and (vi) to establish a Reserve Fund for the 2006
Bonds. See “PLAN OF FINANCE; IMPROVEMENTS TO BE FINANCED WITH PROCEEDS OF THE
2006 BONDS” herein.
Sources of Payment for the 2006 Bonds
The Bonds are secured by and payable from a first pledge of “Special Tax Revenues,” defined in the
Fiscal Agent Agreement as the proceeds of the Special Taxes received by the Authority, including any
scheduled payments thereof 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 amounts 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. The Special Taxes will be 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.
Pursuant to the Act, the Rate and Method, the Resolution of Formation (as defined herein) and the
Fiscal Agent Agreement, so long as any Bonds are outstanding, the Authority will 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
Bonds and the Rate and Method, to make provision for the collection of the Special Tax in amounts which
will be sufficient to (a)(i) pay debt service due on all Bonds, for the calendar year that commences in such
Fiscal Year; (ii) pay Administrative Expenses; and (iii) pay any amounts required to establish or replenish
any bond or interest reserve funds for any Outstanding Bonds; less (b) a credit for funds available to reduce
4
the annual Special Tax levyunder the Fiscal Agent Agreement. See “SECURITY FOR THE 2006 BONDS –
Special Taxes and the Teeter Plan” herein.
The Rate and Method exempts from the Special Tax up to 511.11 acres of Property Owner’s
Association Property and Public Property. Such property includes parcels for a private mini-park, for a
private recreation center, for open space, for flood control facilities, for equestrian trails, for public parks,
for school sites, and for a fire station site. 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 AUTHORITY,
THE DISTRICT (EXCEPT TO THE LIMITED EXTENT DESCRIBED HEREIN) OR THE STATE
OR ANY POLITICAL SUBDIVISIONTHEREOF IS PLEDGEDTO THE PAYMENT OF THE2006
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 OR THE DISTRICT, BUT ARE LIMITED OBLIGATIONS
OF THE AUTHORITY FOR THE DISTRICT PAYABLE SOLELY FROM THE SOURCES
PROVIDED IN THE FISCAL AGENT AGREEMENT.
Appraisal
An appraisal prepared by an MAI appraiser of the residential and commercial land that comprises
the District dated February 10, 2006 (the “Appraisal”), has been prepared by Stephen G. White, MAI of
Fullerton, California (the “Appraiser”) in connection with the issuance of the 2006 Bonds. The purpose of
the appraisal was to estimate the aggregate market value of the “as-is” condition of the property in each of
the 5 separate tracts in Phase I, the “panhandle” area, plus the remaining ownership of Ashby USA, LLC
comprising Phase II, the “pan” area. The Appraisal also reflects the proposed District financing, as well as
the tax rates of approximately 1.6% to 1.7% of the estimated sales prices of the homes to be built in the
District, including the Special Taxes, to the future homeowners. The Appraisal is based on certain
assumptions. Subject to these assumptions, the Appraiser estimated that the fee simple market value of the
Taxable Property within the District (subject to the lien of the Special Taxes) as of January 15, 2006, was
as follows:
Ownership
Market Value
Phase I – “Panhandle” Area: Builder (Tract Name)
DR Horton – Continental Homes (Castillo)
Davidson Roripaugh Ranch 122 LLC (n/a)
Tanamera/Roripaugh II, LLC (Madison)
Tanamera/Roripaugh, LLC (Shutters)
Traditions at Roripaugh, LLC (Hamptons)
Subtotal
Phase II “Pan” Area: Owner
Ashby USA, LLC
Total
$17,280,000
18,070,000
17,700,000
18,260,000
18,340,000
$89,650,000
$74,480,000
$164,130,000
The values are based on the assumption that the master developer will complete the infrastructure
in a timely manner such that building permits will be available for development to occur as projected in the
absorption conclusions by the Market Absorption Consultant. The Market Absorption Study contains
projected absorption of production homes that differ from those of Ashby USA, LLC. The Market
AbsorptionStudy and the Appraisal were prepared utilizing an estimated September 2006 date of completion
of necessary infrastructure to allow issuance of remaining building permits for homes in Phase I and an
estimated September 2007 date of completion of necessary infrastructure to allow issuance of building
permits forhomes in Phase II. The September 2007 date of completion takes into account the possibility that
the schedule prepared by Ashby USA, LLC with respect to Phase II is not achieved. It is also possible that
5
the schedule prepared by Ashby USA, LLC with respect to Phase I may not be achieved. The Authority, the
City and the Merchant Builders make no representations as to the ability of Ashby USA, LLC to perform in
the manner assumed by Ashby USA, LLC or assumed in the Appraisal, or as to the accuracy or completeness
of the Appraisal or the Market Absorption Study.
Thefee simple market value includesthe value of extensive grading and infrastructure improvements
completed as of the date of value and the improvements to be financed by the 2006 Bonds. The market
values reported in the Appraisal result in an estimated overall value-to-lien ratio of 3.20:1, with a value of
approximately 6.90:1 with respect to Phase I and approximately 1.95:1 with respect to Phase II, calculated
with respect to the 2006 Bonds based on allocation of Special Taxes levied as Undeveloped Property and
excluding the overlapping assessment debt relating to the Prior Lien and general obligation bond debt. The
value-to-lien ratios of individual parcels will differ from the foregoing aggregate value-to-lien ratio. See
Table 4 – “Estimated Value-to-Lien Analysis” in “PROPERTY OWNERSHIP AND DEVELOPMENT –
Value-to-Lien Ratios” section. See “BONDOWNERS’ RISKS – Burden of Parity Liens, Taxes and Other
Special Assessments on the Taxable Property” and “BONDOWNERS’ RISKS – Appraised Values” herein
andAPPENDIX C – “Summary AppraisalReport” appended hereto for further information on the Appraisal
and for limiting conditions relating to the Appraisal. Ashby USA, LLC has provided a letter of credit to the
Trustee which may be drawn in the event Special Taxes due with respect to property owned by Ashby USA,
LLC and the Tanamera/Roripaugh Entities are not paid. See “SECURITY FOR THE BONDS – Letter of
Credit.”
Tax Exemption
In the opinion of Bond Counsel, subject, however, to certain qualifications described herein, under
existing law, interest on the 2006 Bonds is excludable from gross income of the Bondowners 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
Californiapersonal income taxes. Bond Counsel expresses no opinion regarding any other tax consequences
related to the ownership or disposition of, or the accrual or receipt of interest on, the 2006 Bonds. See
“LEGAL MATTERS – Tax Exemption” herein.
Risk Factors Associated with Purchasing the 2006 Bonds
Investment in the 2006 Bonds involves risks that may not be appropriate for some investors. 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 “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 “PROPERTY OWNERSHIP AND DEVELOPMENT” therein.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED
IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. NEITHER THE AUTHORITY NOR THE DISTRICT PLANS
TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET
FORTH IN THIS OFFICIAL STATEMENT.
6
Professionals Involved in the Offering
U.S. Bank NationalAssociation, Los Angeles, California, will serve asthe fiscalagent, paying agent,
registrar and authentication and transfer agent for the 2006 Bonds, and will perform the other functions
required of it under the Fiscal Agent Agreement. Quint & Thimmig LLP, San Francisco, California is
serving as Bond Counsel to the Authority. McFarlin & Anderson LLP, Lake Forest, California, is acting as
Disclosure Counsel to the Authority.
Pillsbury Winthrop Shaw Pittman LLP, Los Angeles, California, is counsel for Ashby USA, LLC
and the Tanamera/Roripaugh Entities. Bond Counsel, Disclosure Counsel and Pillsbury Winthrop Shaw
Pittman LLP have served and continue to serve as counsel to the Underwriter in other transactions.
David Taussig & Associates, Inc., Newport Beach, California, acted as special tax consultant for the
District. Fieldman, Rolapp and Associates, Irvine, California, acts as Financial Advisor to the Authority.
The appraisal work was done by Stephen G. White, MAI of Fullerton, California. Empire Economics, Inc.,
Capistrano Beach, California, acted as Market Absorption Consultant.
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, Ashby USA, LLC, the Merchant
Builders, information regarding the development plan for the property owned by Ashby USA, LLC and the
Merchant Builders 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 Attention: Treasurer. The Authority may charge for copying and mailing any
documents requested.
CONTINUING DISCLOSURE
The Authority. The Authority 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,
ownershipand 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 “Authority Annual Report”), and to provide notice of the occurrence of
certain enumerated events, if material. The Authority Annual Report 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 March 1, 2007. The Authority, the City and related entities have never
failed to comply in all material respects with any previous undertakings with regard to Securities and
Exchange Commission Rule 15c2-12(b)(5) (the “Rule”) to provide annual reports or notices of material
events.
Ashby USA, LLC. Ashby USA, LLC has covenanted for the benefit of the owners of the 2006 Bonds
to provide semi-annually certain financial information and information regarding the development of the
property owned by it or its Affiliates (as defined below), in the District (the “Ashby USA, LLC Semi-Annual
Report”), and to provide noticeof the occurrence of certain enumerated events, if material. The Ashby USA,
LLC Semi-Annual Report is to be provided not later than April 1 and October 1, commencing with the report
due not later than October 1, 2006. Ashby USA, LLC has informed the Authority that it and its Affiliates
have never failed to comply in all material respects with any previous undertakings with regard to the Rule
to provide reports or notices of material events. For purposes of the Ashby USA, LLC Continuing Disclosure
Agreement entered into by Ashby USA, LLC the term “Affiliate” is defined to provide that an Affiliate of
another Person means (a) a Person directly or indirectly owning, controlling, or holding with power to vote,
15% or more of the outstanding voting securities of such other Person, (b) any Person 15% or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such
other Person, and (c) any Person directly or indirectly controlling, controlled by, or under common control
with, such other Person; for purposes hereof, “control” means the power to exercise a controlling influence
7
over the management or policies of a Person, unless such power is solely the result of an official position
with such Person. Notwithstanding the foregoing, none of the following entities shall be considered to be
an “Affiliate” of Ashby USA, LLC: Continental Residential, Inc., Davidson Roripaugh Ranch 122, LLC,
Tanamera/Roripaugh, LLC, Tanamera/Roripaugh II, LLC, Traditions at Roripaugh, LLC and KB Home
Coastal Inc.
Tanamera/Roripaugh, LLC; Tanamera/Roripaugh II, LLC and Traditions at Roripaugh, LLC.
Tanamera/Roripaugh, LLC, Tanamera/Roripaugh II, LLC and Traditions at Roripaugh, LLC have covenanted
for the benefit of the owners of the 2006 Bonds to provide semi-annually certain financial information and
information regarding the development of the properties owned by each of themor their Affiliates, other than
property owned by Ashby USA, LLC in the District (the “Tanamera/Roripaugh Entities Semi-Annual
Report”), and to provide notice of the occurrence of certain enumerated events, if material. The
Tanamera/Roripaugh Entities Semi-Annual Report is to be provided not later than April 1 and October 1,
commencing with the report due not later than October 1, 2006. The Tanamera/Roripaugh Entities have
indicated that in connection with the Willowbrook project in the City of Perris CFD No. 2002-1
(Willowbrook), an affiliate of Tanamera Homes, LLC was late in providing the continuing disclosure report
that was due on December 31, 2003. The report was filed in September 2004. Other than such continuing
disclosure report, Tanamera/Roripaugh Entities have informed the Authority that they and their Affiliates
have never failed to comply in all material respects with any previous undertakings with regard to the Rule
to provide reports or notices of material events. The definition of “Affiliate’ in the Tanamera/Roripaugh
Entities Continuing Disclosure Agreement is substantially the same as the definition of “Affiliate” set forth
above, except that none of the following entities shall be considered to be an “Affiliate” of the
Tanamera/Roripaugh Entities: Ashby USA, LLC, Continental Residential, Inc., Davidson Roripaugh Ranch
122, LLC, and KB Home Coastal Inc
Filing of Annual Reports; Ashby USA, LLC Semi-Annual Reports; Tanamera/Roripaugh Entities;
Forms of Reports. Each Authority Annual Report will be filed by the Fiscal Agent, as dissemination agent
for the Authority with each Nationally Recognized Municipal Securities Information Repository and with
each State Repository, if any. Each Ashby USA, LLC Semi-Annual Report and Tanamera/Roripaugh
Entities Semi-Annual Report will be filed by the Fiscal Agent, as dissemination agent for Ashby USA, LLC
andas dissemination agent for the Tanamera/Roripaugh Entities, 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 the Rule; provided, however, a default under the
AuthorityContinuing Disclosure Agreement, the Ashby USA, LLC Continuing Disclosure Agreement or the
Tanamera/Roripaugh Entities Continuing Disclosure Agreement will not, in itself, constitute a default under
the Fiscal Agent Agreement, and the sole remedy under the Authority Continuing Disclosure Agreement, the
Ashby USA, LLC Continuing Disclosure Agreement orthe Tanamera/Roripaugh Entities, in the event of any
failureof the Authority, Ashby USA, LLC, the Tanamera/Roripaugh Entities or the applicable Dissemination
Agent, to comply with the Authority Continuing Disclosure Agreement, the Ashby USA, LLC Continuing
Disclosure Agreement or the Tanamera/Roripaugh Entities Continuing Disclosure Agreement will be an
actionto compel performance. The Authority has no obligation to enforce Continuing Disclosure Agreement
obligationsof Ashby, USA, LLC orTanamera/Roripaugh Entities. Ashby USA, LLC’s continuing disclosure
obligations will terminate upon the occurrence of certain events, including when it or its Affiliates’ property
is subject to less than 15% of the Special Tax levy of the District for the then current Fiscal Year. The
Tanamera/Roripaugh Entitiescontinuing disclosure obligations will terminate upon the occurrence of certain
events, including when they and their Affiliates’ property is subject to less than 15% of the Special Tax levy
of the District for the then current Fiscal Year. For a complete listing of items of information which will be
provided in the Authority Annual Reports, the Ashby USA, LLC’s Semi-Annual Reports and the
Tanamera/Roripaugh Entities Semi-Annual Reports, see APPENDIX F – “Form of Authority Continuing
Disclosure Agreement” andAPPENDIX G– “Form of Ashby USA, LLC Continuing Disclosure Agreement
and Form of Tanamera/Roripaugh Entities Continuing Disclosure Agreement.”
PLAN OF FINANCE; IMPROVEMENTS TO BE FINANCED
WITH PROCEEDS OF THE 2006 BONDS
Acquisition or Construction of Improvements; Payment of Prior Lien. Proceeds of the 2006 Bonds
are not sufficient to finance acquisition and construction of all of the Improvements, but will be used, to the
extent of available funds to acquire or construct the Improvements, all of which are to be constructed within
or in the vicinity of the District. Ashby USA, LLC will finance Improvements not financed with proceeds
of the 2006 Bonds. The Improvements which proceeds of the 2006 Bonds may be expended for, include
construction of portions of Murrieta Hot Springs Road, Butterfield Stage Road, and Nicolas Road, bridges
over Long Valley Wash and Santa Gertrudis Creek for Butterfield Stage Road and over Santa Gertrudis
Creek for Nicolas Road, grading, detention basins and storm drainage improvements to Santa Gertrudis
Creek and Long Valley Wash Channel, habitat mitigation for the Santa Gertrudis Creek and Long Valley
Wash Channel improvements, and fire station site acquisition and construction, and equipping of the fire
8
station. Eligible Improvement costs also include the acquisition of right-of-way, the cost of design,
engineering and planning, the cost of any environmental or traffic studies, surveys or other reports, the cost
of any required environmental mitigation and any required noise mitigation measures, landscaping and
irrigation, soils testing, permits, plan check and inspection fees, insurance, legal and related overhead costs,
coordinationand supervision and any other related costs or appurtenances. In addition, 2006 Bond proceeds
andavailable moneys provided by Ashby USA, LLC in the aggregate amount of approximately $583,610.63
will be applied to discharge the Prior Lien, including the lien relating to authorized but unissued bonds
relating to the Prior Lien or to reimburse Ashby USA, LLC for its provision of funds used to prepay the lien.
See “THE COMMUNITY FACILITIES DISTRICT – Acquisition of Improvements” regarding the
Acquisition Agreement between the Authorityand Ashby USA, LLC regarding certain of the Improvements
which are to be acquired by the Authority from Ashby USA, LLC.
The balance of the proceeds of the 2006 Bonds will be used (i) to fund interest on the 2006 Bonds
through September 1, 2006, (ii) to pay certain administrative expenses related to the District, (iii) to pay the
costs of issuing the 2006 Bonds, and (iv) to establish a Reserve Fund for the 2006 Bonds.
The Authority has entered into a Joint Community Facilities Agreement with the City whereby the
Cityagrees to accept dedication of certain Improvements. The Authority has entered into a Joint Community
Facilities Agreement (Street Improvements) with the County and Ashby USA, LLC, pursuant to which the
County will accept certain road improvements financed by the District. The Authority has entered into a
Joint Community Facilities Agreement (Flood Control Improvements) with the Riverside County Flood
Control and Water Conservation District, the County, the City, and Ashby USA, LLC, pursuant to which the
Riverside County Flood Control and Water Conservation District will accept certain completed storm drain
improvements financed by the District. The Authority has entered into a Joint Community Facilities
Agreement with the Eastern Municipal Water District pursuant to which the Eastern Municipal Water
District will acceptcertain completed sewer and water improvements financed by the District. The Authority
has entered into an Acquisition Agreement with Ashby USA, LLC providing for the acquisition by the
Authority from Ashby USA, LLC of certain Improvements. Any of the foregoing agreements may be
amended without any requirement for notice to or the consent of the owners of the 2006 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:
Principal Amount of 2006 Bonds
Less: Underwriter’s Discount
$51,250,000.00
(955,625.00)
Total Sources
$50,294,375.00
Uses:
Deposit into Improvement Fund (1)
Deposit to Refunding Fund for payment of Prior Lien(2)
Deposit into Reserve Fund
Deposit into Capitalized Interest Account of the Bond Fund(3)
Deposit into Administrative Expense Fund
Deposit into Cost of Issuance Fund (4)
Total Uses
(1)
(2)
(3)
(4)
$44,307,106.40
491,158.10
3,503,850.00
942,260.50
60,000.00
990,000.00
$50,294,375.00
See “PLAN OF FINANCE; IMPROVEMENTS TO BE FINANCED WITHPROCEEDS OF THE2006 BONDS” above.
Within the Improvement Fund $4,162,710.00 will be deposited into the City Account, $1,381,015.00 will be deposited
into the EMWD Account, $38,083,381.40 will be deposited into the Acquisition Account, and $680,000.00 will be
deposited into the Public Works Administration Account.
Used to prepay Prior Lien on parcels in the District imposed by County Assessment District No. 161. Ashby USA, LLC
will provide additional funds to effect a full prepayment.
Represents gross funded capitalized interest through September 1, 2006.
Includes, among other things, the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the
Special Tax Consultant and the Fiscal Agent, the cost of printing the Preliminary and final Official Statements and
reimbursement to the District and Ashby USA, LLC for costs advanced towards the issuance of the 2006 Bonds and the
formation of the District.
9
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 cover page hereof, payable semiannually on each March 1 and September 1, commencing on
September 1, 2006 (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. So long as the 2006 Bonds are held in book-entry form, principal of, premium, if any, and
interest on the 2006 Bonds will be paid directly to DTC for distribution to the beneficial owners of the 2006
Bonds in accordance with the procedures adopted by DTC. See “THE 2006 BONDS – Book-Entry and
DTC.” In the event that the 2006 Bonds are not registered in the name of Cede & Co., as nominee of DTC
or another eligible depository, both the principal and redemption price, including any premium, of the 2006
Bonds shall be payable by check in lawful money of the United States of America upon presentation 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) is
payable by check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the
registered owner thereof at such registered owner’s address as it appears on the registration books maintained
by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date, or by
wire transfer to an account within the United States made on such Interest Payment Date upon written
instructions of any Bondowner 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 (initially being DTC with respect to all of the 2006 Bonds).
The “Record Date” with respect to any 2006 Bonds, 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.
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 mean DTC and not the Beneficial Owners.
The 2006 Bonds will bear interest at the rates set forth on the cover hereof payable on the Interest
Payment Dates in each year. Interest will be calculated on the basis of a 360-day year comprised 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 Closing
Date; provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such
Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made
available for payment thereon.
The principal of, and interest and premium, if any, payable on the 2006 Bonds will be payable when
due, by wire transfer of the Fiscal Agent, to The Depository Trust Company, New York, New York (“DTC”),
which will in turn remit such principal, interest and premium, if any, to its Participants (as described in
APPENDIX I – “Book-Entry System”), which Participants will in turn remit such principal, interest and
premium, if any, to the Beneficial Owners (as defined in APPENDIX I – “Book-Entry System”) of the 2006
Bonds as described in APPENDIX I – “Book-Entry System.”
10
Debt Service Schedule
The following table presents the annual debt service on the 2006 Bonds (including sinking fund
redemptions), assuming that there are no optional redemptions or mandatory redemptions from prepayments
of Special Taxes.
Year Ending
September 1
2006
2007
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)
Principal
Total
Debt Service
Interest
(1)
–
$ 765,000
795,000
830,000
865,000
905,000
945,000
990,000
1,040,000
1,090,000
1,145,000
1,205,000
1,270,000
1,340,000
1,415,000
1,490,000
1,570,000
1,660,000
1,750,000
1,845,000
1,945,000
2,050,000
2,165,000
2,280,000
2,405,000
2,540,000
2,680,000
2,825,000
2,980,000
3,145,000
3,320,000
$51,250,000
$ 942,260.50
2,735,595.00
2,704,995.00
2,671,605.00
2,635,500.00
2,596,575.00
2,554,492.50
2,509,605.00
2,461,095.00
2,409,095.00
2,354,050.00
2,295,655.00
2,229,982.50
2,160,767.50
2,087,737.50
2,010,620.00
1,929,415.00
1,843,850.00
1,753,380.00
1,658,005.00
1,557,452.50
1,451,450.00
1,338,700.00
1,219,625.00
1,094,225.00
961,950.00
822,250.00
674,850.00
519,475.00
355,575.00
182,600.00
$54,722,433.00
$ 942,260.50
3,500,595.00
3,499,995.00
3,501,605.00
3,500,500.00
3,501,575.00
3,499,492.50
3,499,605.00
3,501,095.00
3,499,095.00
3,499,050.00
3,500,655.00
3,499,982.50
3,500,767.50
3,502,737.50
3,500,620.00
3,499,415.00
3,503,850.00
3,503,380.00
3,503,005.00
3,502,452.50
3,501,450.00
3,503,700.00
3,499,625.00
3,499,225.00
3,501,950.00
3,502,250.00
3,499,850.00
3,499,475.00
3,500,575.00
3,502,600.00
$105,972,433.00
Will be paid from funds deposited into the Capitalized Interest Account of the Bond Fund.
11
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. The 2006 Bonds maturing on or after September 1, 2015 are subject to
optional redemption prior to their stated maturity on any Interest Payment Date on or after September 1,
2014, as a whole, or in part among maturities 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
2006 Bonds to be redeemed), as set forth below, together with accrued interest thereon to the date fixed for
redemption:
Redemption Date
Redemption Price
September 1, 2014 and March 1, 2015
September 1, 2016 and any Interest Payment
Date thereafter
102%
101
100
Mandatory Sinking Payment Redemption. The 2006 Bonds maturing on September 1, 2026, are
subject to mandatory sinking payment redemption in part on September 1, 2017, 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
Sinking Payments
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026 (maturity)
$1,205,000
1,270,000
1,340,000
1,415,000
1,490,000
1,570,000
1,660,000
1,750,000
1,845,000
1,945,000
The 2006 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:
12
Sinking Fund
Redemption Date
Sinking Payments
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036 (maturity)
$2,050,000
2,165,000
2,280,000
2,405,000
2,540,000
2,680,000
2,825,000
2,980,000
3,145,000
3,320,000
The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level
debt service on the 2006 Bonds as a result of any prior partial redemption of the 2006 Bonds pursuant to an
optional redemption or mandatory redemption from prepaid Special Taxes, as specified in writing by the
Treasurer to the Fiscal Agent.
Redemption from Special Tax Prepayments. Special Tax Prepayments and any corresponding
transfers from 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 among maturities
of the 2006 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price
(expressed as a percentage of 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 September 1,
2006 through March 1, 2014
September 1, 2016 and any Interest Payment
Date thereafter
103%
102
101
100
Mandatory Redemption From Improvement Fund Transfer. The 2006 Bonds are subject to
mandatoryredemption on the next Interest Payment Date for which notice of redemption can timely be given
under the Fiscal Agent Agreement, in part, 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 amounts
transferred from the Improvement Fund to the Bond Fund pursuant to the Fiscal Agent Agreement.
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
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 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 the 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 de signate the CUSIP® numbers and Bond
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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 surrendered at the principal office of the Fiscal Agent for redemption
atthe said redemption price, andshall state that further interest on the 2006 Bonds called for redemption 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 Bonds or any given portion thereof, the Fiscal Agent shall select the Bonds to be
redeemed, from all Bonds or such given portion thereof not previously called for redemption, among
maturities as directed in writing by the Treasurer (who shall specify Bonds to be redeemed so as to maintain,
as much as practicable, substantially level debt service on the Bonds), 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 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 for such 2006 Bonds.
Transfer and Exchange of 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. 2006 Bonds may be exchanged at the principal office of the Fiscal Agent for a like
aggregate principal amountof 2006 Bonds of authorized denominations and of the same series andmaturity.
The Fiscal Agent shall collect from the Bondowner requesting such 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 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.
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 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 I – “Book-Entry System.”
SECURITY FOR THE 2006 BONDS
General
The Bonds are secured by a pledge of all of the Special Tax Revenues and all moneys deposited in
the Bond Fund, the Reserve Fund and, until disbursed as provided in the Fiscal Agent Agreement, in the
Special Tax Fund. Pursuant to the Act and the Fiscal Agent Agreement, and subject to the Maximum Special
Taxes that may be levied in any Fiscal Year, the Authority will annually levy in each Fiscal Year the Special
Taxes in an amountrequired for the payment of principal of and interest on any outstanding Bonds becoming
due and payable during the calendar year commencing in each Fiscal Year, including any necessary
replenishment of Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the
Administrative Expenses duringsuch year. The Special Tax Revenues and all deposits into said funds (until
disbursed as provided in the Fiscal Agent Agreement) are pledged to the payment of the principal of, and
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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 (as defined in the Fiscal Agent
Agreement) have been set aside irrevocably for that purpose.
Amounts in the Administrative Expense Fund, the Cost of Issuance Fund, the Refunding Fund and
the Improvement Fund are not pledged to the repayment of the 2006 Bonds. The Improvements constructed
or acquired with the proceeds of the 2006 Bonds are not in any way pledged to pay the debt service on the
2006Bonds. Any proceeds of condemnation or destruction of any Improvements financed with the proceeds
of the 2006 Bonds are not pledged to pay the debt service on the 2006 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 complywith 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 from property
owners 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 ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF
THE 2006 BONDS. OTHER THAN THE SPECIAL TAXES OF THE DISTRICT, NO TAXES ARE
PLEDGEDTO THE PAYMENT OF THE 2006BONDS. THE 2006 BONDS ARE NOT A GENERAL
OBLIGATION OF THE AUTHORITY, BUT ARE LIMITED OBLIGATIONS OF THE
AUTHORITY FOR THE DISTRICT 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 of Special Tax Temecula Public Financing Authority
CommunityFacilities District No.03-02 (RoripaughRanch).” The qualified electors of the District approved
the Rate and Method on January 11, 2005. Capitalized terms used in the following paragraphs but not
defined herein have the meanings given to 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 be levied for a period not to exceed 50 Fiscal Years, commencing
with Fiscal Year 2005-06. No amounts were levied in Fiscal Year 2005-06.
Special Tax Requirement. Annually, at the time of levying the Special Tax, the Authority will
determine the amount of money to be collected from Taxable Property in the District (the “Special Tax
Requirement”), which will be the amount required in any Fiscal Year to pay the following:
(i)
annual debt service on all outstanding Bonds due in the calendar year which commences in
such Fiscal Year;
(ii)
periodic cost on the Bonds, including, but not limited to, the costs of remarketing, credit
enhancement andliquidity facility fees (including such fees forinstruments that serve as the
basis of a reserve fund in lieu of cash related to any such Bonds) and rebate payments;
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(iii)
the Administrative Expenses;
(iv)
any reasonably anticipated delinquent Special Taxes based on the delinquency rate for
Special Taxes levied in the previous Fiscal Year or otherwise reasonably expected; and
(v)
any amount required to establish or replenish any reserve funds for the Bonds; and less
(vi)
available funds as directed under the Fiscal Agent Agreement.
Developed and Undeveloped Property; Exempt Property. The Rate and Method declares that for
each Fiscal Year, all Parcels of Taxable Property within the District shall be classified as either Taxable
Property or Exempt Property. Taxable Property shall be further classified as Residential Property, NonResidential Property, Taxable Property Owner’s Association Property, or Taxable Public Property.
Residential Property and Non-Residential Property shall be further classified as Developed Property and
Undeveloped Property.
(i)
“Developed Property” means all Parcels of Taxable Property, for which a Final Map was
recorded as of the January 1 and a building permit for new construction was issued as of the
April 1 preceding the Fiscal Year in which the Special tax is being levied, exclusive of
Property Owner’s Association Property and Public Property.
(ii)
“Exemptions” is defined to include up to 511.11 acres of Property Owner’s Association and
Public Property. The Rate and Method specifies the classification of certain Property
Owner’s Association Property or Public Property, as applicable at the time the District was
established, which property counts toward the limitation of 511.11 acres of Property
Owner’s Association Property and Public Property.
(iii)
“Non-Residential Property” means all Parcels of Taxable Property which are not classified
as Residential Property, Property Owner’s Association Property, or Public Property.
(iv)
“Property Owner’s Association Property” means (i) any Parcel for which the owner of
record, as determined from the County Assessor’s secured tax roll for the Fiscal Year in
which the Special Tax is being levied, is a property owner’s association, including any
master or sub-association, (ii) any Lot located in a Final Map that was recorded as of the
January 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as
determined from such Final Map, is or will be open space, a common area recreation facility
or a private street owned by a property owner’s association, (iii) any Lot within a Final Map
that is located within the boundaries of the District and was recorded as of the January 1
preceding the Fiscal Year in which the Special Tax is being levied and for which the Land
Use is private mini park or private recreation center, or (iv) any Lot or Parcel which, as of
the April 1 preceding the Fiscal Year for which the Special Tax is being levied, has been
conveyed, irrevocably dedicated or irrevocably offered to a property owner’s association,
including any master or sub-association, provided such conveyance, dedication or offer is
submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for which
the Special Tax is being levied.
(v)
“Public Property” means (i) any Parcel for which the owner of record, as determined from
the County Assessor’s secured tax roll for the Fiscal Year in which the Special Tax is being
levied, is the federal government, the State of California, the County, the City, or any local
government or other governmental agency, (ii) any property within a Final Map that is
locatedwithin the boundaries of the District and was recorded as of the January 1 preceding
the Fiscal Year in which the Special Tax is being levied and which, as determined from such
Final Map, is or will be a public street, (iii) any Lot within aFinal Map that is located within
the boundaries of the District and was recorded as of the January 1 preceding the Fiscal
Year in which the Special Tax is being levied and for which the Land Use is neighborhood
park,sports park, educational, public institutional, habitat,flood control,or landscape slope,
unless such Lot has an underlying residential land use and the applicable public entity has
provided notice to the City that it will not acquire or otherwise take ownership of the Lot,
or (iv) any Lot or Parcel which, as of the April 1 preceding the Fiscal Year for which the
Special Tax is being levied, has been conveyed, irrevocably dedicated to, or irrevocably
offered to the federal government, the State of California, the County, the City, or any local
government or other governmental agency, provided such conveyance, dedication, or offer
is submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for
which the Special Tax is being levied.
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(vi)
“Residential Property” means all Parcels of Taxable Property, exclusive of Property
Owner’s Association Property and Public Property, designated with a residential Land Use.
(vii)
“Taxable Property” means all Parcels which are not exempt from the Special Tax pursuant
to law or the Rate and Method as Exempt Property.
(viii)
“Taxable Property Owner’s Association Property” means all Parcels of Property Owner’s
Association Property which are not exempt from the Special Tax pursuant to law or the
provisions of the Rate and Method relating to Exempt Property.
(ix)
“Taxable Public Property” means all Parcels of Public Property which are not exempt from
the Special Tax pursuant to law or the provisions of the Rate and Method relating to Exempt
Property.
(x)
“Undeveloped Property” means all Taxable Property not classified as Developed Property,
exclusive of Property Owner’s Association Property and Public Property.
Maximum Special Tax. The Maximum Special Tax for each Parcel of Developed Residential
Property shall be the greater of the applicable Dwelling Unit Special Tax or Acreage Special Tax. If there
are two or more residential dwelling units located on a Parcel, the applicable Dwelling Unit Special Tax for
such Parcel shall be the sum of the Dwelling Unit Special Tax for each such residential dwelling unit. The
Maximum Special Tax for each Parcel of Undeveloped Residential Property, Non-Residential Property,
Taxable Property Owner’s Association Property, and Taxable Public Property shall be the applicable Acreage
Special Tax. The Dwelling Unit Special Tax for Developed Residential Property ranges from $1,586 to
$4,230 per residential dwelling unit based on the residential floor area of the residential unit. The Acreage
Special Tax rates range from $5,620 per acre to $17,665 per acre depending on the property classification
or land use as low density, low medium density, medium density standard, medium density cluster, nonresidential property, Taxable Property Owner’s Association Property or Taxable Public Property.
The Maximum Special Tax is not subject to escalation.
SeeAPPENDIX B – “Rate andMethod of Apportionment of Special Tax Temecula Public Financing
Authority Community Facilities District No. 03-02 (Roripaugh Ranch) – Table 1” herein for a listing of the
tax classifications and tax rates in the District.
Method of Apportionment. The Rate and Method provides that commencing with Fiscal Year 200506 and for each following Fiscal Year, the District Administrator shall levy the Special Tax on all Taxable
Property to fund the Special Tax Requirement as follows:
First: The Special Tax shall be leviedProportionately oneach Parcel of Developed Property,
up to 100% of the applicable Dwelling Unit Special Tax in the case of Developed Residential
Property and up to 100% of the applicable Acreage Special Tax in the case of Developed NonResidential Property;
Second: If additional Special Taxes are needed after the first step, the Special Tax shall be
levied Proportionately on each Parcel of Undeveloped Property, up to 100% of the applicable
Acreage Special Tax;
Third: If additional Special Taxes are needed after the second step, the Special Tax for
parcels of Developed Property for which the Maximum Special Tax is derived from the applicable
Acreage Special Tax shall be increased equally, measured on a percentage basis, from the amounts
levied under the preceding Step 1 up to 100% of the applicable Acreage Special Tax (i.e., the
percentage increase shall be equal for all applicable Parcels, until the Maximum Special Tax is
reached); and
Fourth: If additional Special Taxes are needed after the third step, the Special tax shall be
levied Proportionately on each Parcel of Taxable Property Owner’s Association Property and
Taxable Public Property up to the applicable Maximum Special Tax.
Notwithstanding the above, under no circumstances will the Special Taxes levied against any Parcel
used as aprivate residence be increased as aconsequence of delinquency or default bythe owner of any other
Parcel or Parcels within the District by more than ten percent (10%) per Fiscal Year. In addition, under no
circumstances will the Acreage Special Tax be levied against Parcels of Developed Residential Property if
the Special Taxes which may be levied pursuant to the first and second steps above are equal to or greater
than the sum of estimated Administrative Expenses and one hundred ten percent (110%) of the then
maximum annual debt service for outstanding Bonds.
17
Prepaymentin Full. The Maximum Special Tax obligation may be prepaid and permanently satisfied
for a Parcel of Developed Property, Non-Residential Property and Taxable Property Owner’s Association
Property. The Maximum Special Tax obligation applicable to such Parcel may be fully prepaid and the
obligation of the Parcel to pay the Special Tax permanently satisfied as described in the Rate and Method,
provided that a prepayment may be made only if there are no delinquent Special Taxes with respect to the
Parcel and all other parcels which are under the same ownership and located within the District. The Full
Prepayment Amount for an applicable 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 of Special Tax Temecula Public Financing Authority Community Facilities District No. 0302 (Roripaugh Ranch) – Section H” herein. Any such prepayment will result in a redemption of Bonds prior
to maturity. See “THE 2006 BONDS – Terms of Redemption.” In addition, the Act authorizes a public
agency whichacquires property subject to the Special Tax to prepaythe Special Tax so long as the Authority
determines the prepayment arrangement will fully protect the interests of the owners of the Bonds.
Prepayment in Part. The Maximum Special Tax on a Parcel of Developed Residential Property,
Non-Residential Property, or Taxable Property Owner’s Association Property may be partially prepaid to
allow redemption of Bonds in increments of $5,000. The amount of the prepayment shall be calculated
pursuant to the Rate and Method.
Special Taxes and the Teeter Plan
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 anydelinquency in the payment of the Special
Tax, the District may order the institution of a Superior Court action to foreclose the lien therefor within
specified time 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
Taxes theretofore levied in the District to the amount of Special Tax Revenue 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 amount in the Reserve Fund is at least equal to the Reserve Requirement.
AggregateDelinquencies. If the Treasurer determines that (i) 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 or
(ii) there are ten (10) or fewer owners of real property in the District, determined by reference to the
latest available secured property tax roll of the County, 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, andthe Authoritywill
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
18
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 no assurance 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 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 not require the Authority or the District to purchase or otherwise acquire any lot or parcel
of property offered for sale or subject to foreclosure if there is no other purchaser at such sale. 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 paydebt service on the 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 Bonds by the Fiscal Agent Agreement.
Special Tax Fund
Pursuant to the Fiscal Agent Agreement, except as described below, all Special Tax Revenues
received by the District will be deposited in the Special Tax Fund, which will be held by the Fiscal Agent
on behalf of the District. Moneys in the Special Tax Fund shall be held in trust by the Fiscal Agent for the
benefit of the District and the Bondowners. Pending disbursement, moneys in the Special Tax Fund will be
subject to a lien in favor of the Bondowners andthe Authorityestablished 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 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.
On 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, the Capitalized Interest Account 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 on such Interest Payment Date and (ii) to the Reserve Fund
an amount, taking into account amounts then on deposit in the Reserve Fund, such that the amount in the
Reserve Fund is equal to the Reserve Requirement.
Investment. Moneys in the Special Tax Fund will be invested and deposited as described in
“ – Investment of Moneys in Funds” below and APPENDIX E – “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 in trust for the benefit of the Bondowners. There are
created in the Bond Fund, as separate accounts to be held by the Fiscal Agent, the Capitalized Interest
Account and the Special Tax Prepayments Account. Moneys in the Bond Fund and the accounts therein shall
be disbursed for the payment of the principal of, and interest and any premium on, the 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 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 shall be used (together with any applicable
amounts transferred from the Reserve Fund) to redeem Bonds on the applicable redemption date.
19
Capitalized Interest Account. Moneys in the Capitalized Interest Account shall be transferred to the
Bond Fund on the Business Day prior to each Interest Payment Date, in the amount equal to and to be used
for the payment of interest on the Bonds due on the next succeeding Interest Payment Date; provided that
no such transfer shall exceed the amount then on deposit in the Capitalized Interest Account.
Bond Fund. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund
and payto 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. In the event that amounts in the Bond Fund are insufficient for the purposes set
forth in the preceding sentence, the Fiscal Agent shall withdraw from the Reserve Fund to the extent of any
funds therein amounts to cover the amount of such Bond Fund insufficiency. If, after the foregoing transfers,
there are insufficient funds in the Bond Fund to make the payments described above, the Fiscal Agent shall
apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due
on the Bonds other than by reason of sinking payments, and then to the payment of principal due on the
Bonds by reason of sinking payments. Any sinking payment not made as scheduled shall be added to the
sinking payment to be made on the next sinking payment date.
Investment. Moneys in the Bond Fund, the Capitalized Interest Account and the Special Tax
Prepayments Account shall be invested and deposited in accordance with the provisions of the Fiscal Agent
Agreement relating to Investment of Moneys. See APPENDIX E – “Summary of Certain Provisions of the
Fiscal Agent Agreement.”
Reserve Fund
In order to further secure the payment of principal of and interest on the 2006 Bonds, certain
proceeds of the 2006 Bonds will be deposited into the Reserve Fund in an amount equal to the initial Reserve
Requirement (see “ESTIMATED SOURCES AND USES OF FUNDS” herein). Reserve Requirement is
defined in the Fiscal Agent Agreement to mean with respect to the 2006 Bonds an amount, as of any date of
calculation, equal to the least of (i) the then largest Annual Debt Service for any Bond Year after the
calculation is made through the final maturity date of any Outstanding Bonds, (ii) 125% of the then average
annual debt service on the Bonds, or (iii)10% of the outstanding principal amount of the 2006 Bonds. The
moneys in the Reserve Fund will only be used for payment of principal of, interest and any redemption
premium on, the 2006 Bonds and at the direction of the District, for payment of rebate obligations related
to the 2006 Bonds.
If Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment,
a proportionate amount in the Reserve Fund (determined on the basis of the principal amount of Bonds to
be redeemed and the original principal amount of the Bonds and only to the extent that the amount remaining
on deposit in the Reserve Fund is at least equal to the Reserve Requirement) will be applied to the
redemption of the Bonds.
Moneys in the Reserve Fund will be invested and deposited as described in “Investment of Moneys
in Funds” below. See APPENDIX E – “Summary of Certain Provisions of the Fiscal Agent Agreement” for
a description of the timing, purpose and manner of disbursements from the Reserve Fund.
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 E – “Summary of Certain Provisions of
the Fiscal Agent Agreement” for a definition of “Permitted Investments.”
Additional Bonds
Bonds secured on a parity with the 2006 Bonds (each a series of “Additional Bonds”) may be issued
with respect to the remaining $3,750,000 of authorization or for refunding purposes where the issuance of
such Additional Bonds results in a reduction of Annual Debt Service on all Outstanding Bonds than that
which exists on the Bonds adjusted for prepayments (if any).
The Authority may issue Additional Bonds subject to satisfaction of certain conditions, including
the following:
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(A) Value-to-Lien Ratio. The District Value (as defined in the Fiscal Agent Agreement) shall be
at least three times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the
aggregate principal amount of the series of Additional 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 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.
(B) The Special Tax Coverage. 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, 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 the Bonds
and the proposed Additional Bonds, and (ii) the Assigned Special Tax that may be levied on Developed
Property(as such term is defined in the Rate and Method of Apportionment of Special Taxes for the District)
in the next Fiscal Year, based upon the status of the land in the District as of the date of issuance of the
Additional Bonds, shall not be less than the aggregate maximum Annual Debt Service on the Bonds (to
remain Outstanding following the issuance of the Additional Bonds) and the proposed Additional Bonds.
(C) Increase in Letters of Credit. Unless all of the conditions to the release of any Letter of Credit
set forth in the Fiscal Agent Agreement have theretofore been satisfied, or the Letters of Credit have all been
reduced to $0.00 pursuant to the provisions of the Fiscal Agent Agreement, there shall be delivered to the
Fiscal Agent an amendment to each Letter of Credit then held by the Fiscal Agent to increase the amount
available to be drawn under each such Letter of Credit to reflect the expected increase in the Special Taxes
that will need to be levied on the parcels to which each Letter of Credit pertains to pay the debt service on
the Additional Bonds, as determined by the Treasurer upon consultation with the Tax Consultant. In the
event that anyLetter of Credit has theretofore been drawn upon pursuant to the provisionsof the Fiscal Agent
Agreement relating to expiration of a Letter of Credit and failure to provide a replacement Letter of Credit
or as a result of a ratings downgrade, there shall be deposited with the Fiscal Agent monies in an amount
equal to the amount that the corresponding Letter of Credit would need to be increased pursuant to the
preceding sentence, and the funds so deposited shall be disposed of in the same manner as the proceeds of
the draw on the Letter of Credit under the Fiscal Agent Agreement.
See APPENDIX E – “Summary of Certain Provisions of the Fiscal Agent Agreement.” The District
may issue bonds or other obligations payable from Net Taxes which are subordinate to the 2006 Bonds.
Nothing in the Fiscal Agent Agreement shall prohibit the Authorityfrom issuing bonds or otherwise
incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof.
Letter of Credit
Prior to the issuance of the 2006 Bonds, Ashby USA, LLC will provide a letter or letters of credit
from Ohio Savings Bank, with a confirmation by Citibank, N.A.,1 to the Fiscal Agent in a stated amount
equalto two years estimated expected annual Special Taxes (assuming Build-Out) to be levied on the County
Assessor’sparcels for the property owned by Ashby USA, LLC andthe Tanamera/Roripaugh Entities. Ashby
USA, LLC anticipates that the portion of the Letter of Credit relating to the property owned by the
Tanamera/Roripaugh Entities will be released in the third quarter of 2006 once the conditions precedent to
the issuance of building permits for all lots within Planning Areas 3, 4A and 4B are satisfied. Ashby USA,
LLC anticipates that the Parcel Value of the land in Phase II will increase to an amount in excess of three
times the Parcel Liens and that the conditions precedent to the issuance of building permits for all lots to
be developed in Phase II will be satisfied by June 1, 2007 so that the portion of the Letter of Credit or Letters
of Credit relating to the property owned by Ashby USA, LLC will be released by the end of the second
quarter of 2007.
A letter of credit shall be subject to draw by the Fiscal Agent in the amount of any Special Taxes
levied by the District on any of the parcels to which such letter of credit pertains which are delinquent; or
*
Citibank, N.A. is acting as confirming bank to an Ohio Savings Bank Letter of Credit and draws under the Letter of
Credit will be made on Citibank, N.A.
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(i) in whole if the letter of credit (or any related confirmation) expires prior to the date on which it is eligible
for release in whole as described in the Fiscal Agent Agreement and a replacement letter of credit satisfying
the criteria of a letter of credit is not delivered to the Fiscal Agent at least 5 days prior to such expiration
date; or (ii) in whole, if the rating of the unsecured debt obligations of the provider of the letter of credit (or,
if applicable, the provider of any related confirmation) have been reduced to BBB or its equivalent or lower
by Moody’s Investors Service or Standard & Poor’s Ratings Group. Amounts drawn on the letter of credit
as a result of a Special Tax delinquency on parcels to which it pertains will be deposited to the Special Tax
Fund and used for the purpose of such Fund, and amounts drawn on any letter of credit as a result of the
expirationof the letter of credit prior to the date on which it is eligible for release in whole and a replacement
letter of credit was not delivered to the Fiscal Agent will be held in the Reserve Fund for the Bonds and
drawn upon, with the proceeds of the draw deposited to the Special Tax Fund, for the Bonds, in the amount
of any delinquent Special Taxes levied in the District with respect to the parcels to which the letter of credit
pertains, or released or reduced to the same extent the corresponding letter of credit would have been
released or reduced.
No assurance can be given that a draw on a Letter of Credit will be timely honored by the provider
of the Letter of Credit or any confirmation related thereto.
The Letter of Credit amount may be reduced as property sales occur and the expected annual Special
Taxes that may be levied on parcels owned by the applicable landowner and its affiliates decline, or if certain
value to lien and accessability to building permit tests are met. Notwithstanding the foregoing, a Letter of
Credit shall not be reduced if the reason for the reduction is the sale of property to an owner (a) that will
own, together with its affiliates, property responsible for 10% or more of the expected annual Special Taxes
that may be levied on such parcels in the District (assuming Build-Out) and (b) that will own land in a
planning area and either (x) the then Parcel Value of such land is less than three times the Parcel Liens for
such land, or (y) there are conditions precedent to the issuance of building permits for all lotsto be developed
in such planning area, as such conditions are set forth in the Development Agreement and unless the property
owner provides evidence that the new owner has posted its own Letter of Credit securing the payment of
special taxes to be levied by the District on such property. For a description of the terms of the Fiscal Agent
Agreement pertaining to the Letter of Credit, see, Appendix E hereto “Summary of Certain Provisions of the
Fiscal Agent Agreement – Letters of Credit Provisions.”
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 Treasurer 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 August 24, 2004, the Board of Directors of the Authority adopted
ResolutionNo. TPFA 04-08 stating its intention to establish the District and to authorize the levy of a special
tax therein, and on the same day the Authority adopted Resolution No. TPFA 04-09 stating its intention to
incur bonded indebtedness in an amount not to exceed $55,000,000 within the District for the purpose of
financing the cost of certain public improvements (the “Improvements”) and to eliminate an existing special
assessment lien (the “Prior Lien”), imposed by County Assessment District No. 161. See “PLAN OF
FINANCE; IMPROVEMENTS TO BE FINANCED WITH PROCEEDS OF THE 2006 BONDS” herein.
Resolution Amending Resolutions of Intention: On September 28, 2004, the Authority adopted
Resolution No. TPFA 04-10 (the “Amending Resolution”), which added facilities eligible to be funded by
the District and changed the date of the public hearing from September 28, 2004 to November 9, 2004.
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Resolution of Complexity: On December 7, 2004, the Authority adopted ResolutionNo. TPFA 04-11
(the Resolution of Complexity”), which continued the public hearing to January 11, 2005.
Resolution of Formation: On January 11, 2005 subsequent to the conclusion of a noticed public
hearing, the Authority adopted Resolution No. TPFA 05-01 (the “Resolution of Formation”), which
established the District and authorized the levy of a special tax within the District.
Resolution of Necessity: On January 11, 2005, the Authority adopted Resolution No. TPFA 05-02
declaring the necessity to incur bonded indebtedness in an amount not to exceed $55,000,000 within the
District and submitting that proposition to the qualified electors of the District.
Resolution Calling Election: On January 11, 2005, the Authority adopted Resolution No. TPFA 0503 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.
Landowner Election and Declaration of Results: On January 11, 2005, an election was held within
the District in which the landowners eligible to vote, being the 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 $55,000,000 in bonds to finance the costs of the Improvements
and the costs of eliminating the Prior Lien, the levy of a special tax and the establishment of an
appropriations limit for the District. On January 11, 2005, the Authority adopted Resolution No. TPFA 0504, pursuant to which the Authority 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 the County on January 14, 2005 as Document No. 2005-0039138; and a First Amendment to Notice of
Special Lien was recorded on March 10, 2006 as Document No. 2006-0174544.
Ordinance Levying Special Taxes: On January 11, 2005, the Authority introduced Ordinance No.
TPFA 05-01 levying the Special Tax within the District and said Ordinance was adopted on January 25,
2005.
Resolution Authorizing Issuance of the 2006 Bonds: On February 28, 2006, the Authority adopted
Resolution No. TPFA 06-01 approving issuance of the 2006 Bonds.
THE COMMUNITY FACILITIES DISTRICT
The information about Ashby USA, LLC and the Merchant Builders contained in this Official
Statement has been provided by representatives of Ashby USA, LLC and the Merchant Builders and has not
been 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 Ashby USA, LLC and the Merchant Builders will acquire or own the property
within the District 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 Ashby USA, LLC and 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.
Ashby USA, LLC and the Merchant Builders 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 Ashby USA, LLC and the Merchant
Builders or that Ashby USA, LLC and the Merchant Builders will continue to own their respective parcels
of land.
General
The District is comprised of approximately 800 gross acres of land located in the far northeast
section of the City, in the south-westerly portion of the County. The District is located along the south side
of Murietta Hot Springs Road, and along Butterfield Stage Road, about 1.5 miles east of Winchester Road
(Highway 79). Nicolas Road and North Loop Road will provide internal circulation to a portion of the
District. The District is a master-planned community that is approved for up to 2,105 dwelling units, but is
currently planned for approximately 1,745 units. In addition, there is expected to be approximately 10 net
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acres of commercial development proposed for a neighborhood retail center, approximately 12 gross acres
for an elementary school site, approximately 20 gross acres for a middle school site, an approximately 19.7acre sports park (Planning Area 27), an approximately 5.1 acre neighborhood park (Planning Area 6), two
private recreation facilities, private and public trails and paseos, an approximately 2-acre fire station site, and
approximately 202.7 acres of natural open space to be preserved as permanent habitat, and related flood
control improvements to Long Valley Wash and Santa Gertrudis Creek. 39.1 acres of flood control mostly
consist of the Long Valley Wash that runs east-west through the southerly part of Phase II, plus a small
portion of the Santa Gertrudis Creek runs northeasterly into the center of Phase II at the west side, and then
into the habitat area. Views consist of the open space and the valley in Phase II. The property within the
District is governed by the Roripaugh Ranch Specific Plan.
The District is surrounded by unincorporated County to the north, northwest and east, and is nearby
to the east of the City of Murrieta. The Roripaugh Ranch proposed development is east of existing or
approved development. It is located immediately adjacent to the developed areas of Rancho Bella Vista on
the northwest. Commercial uses exist to the west of the proposed development.
The French Valley Airport is located approximately one mile to the northwest, and Lake Skinner
Recreation Area is located approximately 2 miles to the northeast. Ashby USA, LLC has provided the
County’s Airport Land Use Commission with avigation easements necessary for all the parcels in the
District. The proposed structures within the District comply with the current height restrictions of the French
Valley Airport and the Airport Land Use Commission. The avigation easement was accepted by the County
on April 10, 2003.
The property within the District is planned to be developed in 2 phases, which are referred to herein
as Phase I located in the northwest portion of the property and Phase II located in the east portion of the
property. Phase I is estimated to include approximately 515 homes, including 6 homes which result from
a specific plan amendment in January 2005 which allowed homes on a site previously proposed for a
detention basin. Phase I encompasses approximately 75.81 net acres. Phase II encompasses approximately
1,230 proposed residential lots which have been approved. The number of residential lots may increase or
decreaseas tentative maps are processed byAshby USA, LLC through the City. All neighborhoods in Phases
I and II will be gate guarded, with some tracts also being gated with remote or card access. The community
is expected to provide a wide range of housing. The lot sizes are expected to span from approximately 1 acre
custom lots to 3,150 square foot courtyard lots.
Description of the District
As of January 15, 2006, rough grading is complete for Phase I, is approximately 90% complete for
the “village core” area of Phase II (Planning Areas 10, 11, 12, 33A and 33B) and is approximately 80%
complete for the balance of the property within Phase II. As of January 15, 2006, the Merchant Builders in
Phase I, except for Continental Residential, Inc., have taken title to the property. The property was, or will
be, deliveredto Merchant Builders in Phase I in blue top or superpad condition. Continental Residential, Inc.
is scheduled to take title to the property subsequent to the date at which conditions precedent to the issuance
of building permits have been satisfied, which conditions are estimated by Ashby USA, LLC to be satisfied
by the end of September 2006 such that the acquisition can occur in October 2006. See Appendix K for a
description of some of the thresholds for installation of improvements under the Development Agreement
and Conditions of Approval. Final maps encompassing the 298 home sites purchased by Davidson
Roripaugh Ranch 122 LLC, Tanamera/Roripaugh, LLC and Tanamera/Roripaugh II, LLC were recorded on
April 28, 2004. Final maps encompassing 98 of the 104 proposed home sites to be purchased by Continental
Residential, Inc. and the 113 home sites purchased by Traditions at Roripaugh, LLC have been approved by
City staff, but recordation is pending submittal to the City Council and satisfaction of conditions enabling
issuance of building permits. Applicable taxes will need to be paid in connection with recordation. Pursuant
to the agreement with Ashby USA, LLC, final payment byContinental Residential, Inc. to Ashby USA, LLC
of the purchase price of the lots in Planning Area 1A is due within five (5) business days of Ashby USA,
LLC’s notification to Continental Residential, Inc. that the final maps are in recordable condition and all
blue-top improvements have been completed. Ashby USA, LLC estimates such maps will be ready for
recordation during the third quarter of 2006.
The Temecula Valley Unified School District is expected to construct an elementary school and a
middle school within the District. The proposed school sites are located in Planning Areas 28 and 29 on the
south side of North Loop Road. Ashby USA, LLC and the Temecula Valley Unified School District have
not yet begun negotiations regarding the price or timing of the purchase of the school sites. The School
District has indicated that it has the capacity to serve the initial students generated from the development,
including students generated from Phase I (i.e., the 515 units), and that the timing of the purchase of the
school sites and the construction of the schools will depend on the timing of absorption of the units within
Phases I and II. Construction of the schools is not a condition to development of the property within the
Community Facilities District.
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A portion of the Roripaugh Ranch proposed development is located within County Assessment
District No. 161 and is participating in a portion of the shared funding of community infrastructure needs.
The Prior Lien will be paid with aggregate of approximately $583,610.63 of proceeds of the 2006 Bonds and
funds of Ashby USA, LLC.
Ashby USA, LLC currently owns the property in Planning Area 1A subject to the sales contract with
Continental Residential, Inc. in Phase I and all of the property in Phase II which, with the exception of the
commercial acreage, is subject to agreements with KB Home Coastal Inc. The property in Phase II is
expected to be developed with a total of approximately 1,230 units, proposed to be a combination of singlefamily residential units and no more than 3 Planning Areas with cluster lots, single family residential units.
In addition, Ashby USA, LLC intends to develop or sell approximately 10 acres to a commercial builder to
develop a neighborhood retail center. An approximately 10 net acre commercial development is located in
Planning Area 11 in Phase II. Ashby USA, LLC estimates development of the commercial site will occur
in 2008. See “PROPERTY OWNERSHIP AND DEVELOPMENT” herein.
On August 1, 2003, Ashby USA, LLC entered into an option contract for the sale of 112 of the
approximately 1,230 single family lots proposed for development in Phase II with KB Home Coastal Inc.
Closing of the sale of all 112 units is conditioned upon Ashby USA, LLC’s satisfaction of the conditions
specified in the agreement, including satisfaction of conditions necessary for issuance of building permits
and satisfaction of conditions relating to issuance of certificates of occupancy which is expected to occur
prior to June 1 2007.
On July 11, 2005, Ashby USA, LLC entered into an option contract with KB Home Coastal Inc. for
the balance of approximately 1,118 of the approximately 1,230 proposed single family lots within Phase II.
It is currently estimated by Ashby USA, LLC that the grading of the lots in Phase II to a blue-top condition
andother development conditions willbe completed from approximately September 2006 through May 2007.
When this occurs, and Ashby USA, LLC’s work is completed, which includes satisfaction of the conditions
to release of building permits and satisfaction of conditions relating to issuance of certificates of occupancy,
the option with KB Home Coastal Inc. provides for KB Home Coastal Inc. to begin taking down or closing
on portions of the lots. KB Home Coastal Inc. may either acquire approximately 412 of the lots in Phase II
in Planning Areas 16, 23, 24, and 31, or may acquire all of the approximately 1,118 remaining lots in Phase
II (not including the 112 lots in Planning Area 12 that are subject to a separate transaction). Based solely
on Ashby USA, LLC’s estimated completion date, acquisition is expected to commence in the third quarter
after Ashby USA, LLC satisfies the conditions of the Option Agreement. If the option for approximately 412
lots is selected, the sale of the approximately 412 lots would close within 45 days of the ability to obtain
building permits, satisfaction of conditions relating to issuance of certificates of occupancy and the date of
acceptance of Blue Top Condition specified in the Option Agreement and Agreement for Purchase and Sale
ofReal Propertyand Escrow Instructions, dated as of July 11, 2005, with KB Home Coastal Inc., as optionee,
and Ashby USA, LLC, as optionor (the “Option Agreement”), unless KB Home Coastal Inc. elects to delay
the close for eight months after said election. If the option for approximately 412 lots is selected, Ashby
USA, LLC would market the remaining approximately 706 lots to other merchant builders. If the
approximately 1,118 lot option is exercised then the lots will be purchased over a period of approximately
5 years. KB Home Coastal Inc. is not yet a landowner within the District, and there can be no assurance
that it will exercise its option to purchase lots within the District at the times indicated or at all.
The City has imposed conditions of approval on the development in the District through the Specific
Plan, the Development Agreement and Tentative Tract Maps. The various Planning Areas have been or are
being mapped first by an “A” tract map into one large lot, and then the residential Planning Areas are being
subdivided into individual single-family lots by a “B” tract map. Tract Map No. 29353-2 recorded in
September 2003 and is the “A” map for the west portion of Phase II and Tract Map No. 29353 is the “A” map
for the balance of the Phase II area. Tract Map No. 29353 is still a tentative tract map that is being
processed. The separate tentative tract maps for each Planning Area (the “B” maps) in Phase II are being
prepared. The Tentative Tract Maps for Planning Areas 10, 16, 17, 18, 19, 23, 24 and 33A have been
submitted to the City for review. Ashby USA, LLC anticipates submitting the Tentative Tract Maps for
Planning Areas 12, 20, 21, and 22, in the second quarter of 2006. Ashby USA, LLC expects processing of
tentative tract maps to take 3 to 4 months and that such maps will be finalized and recorded over a period
from July through November 2006. The Preannexation and Development Agreement allows the tentative
tract maps to have a term equal to the greater of (i) the term of the Preannexation and Development
Agreement (currently approximately November 26, 2012) or (ii) expiration of the tentative map pursuant to
the applicable provisions of the Government Code. In September 2003, the City and Ashby USA, LLC
entered into a Deferral Agreement (as defined below) whereby the City agreed to allow Ashby USA, LLC
to record the final map for Tract 29353-2 (Phase I) prior to the fulfillment of certain development conditions.
See “ – Development Agreement,” below.
Utility services for parcels in the District will be provided by Southern California Edison
(electricity), Southern California Gas Company (natural gas), CR&R Disposal (refuse collection), EMWD
25
(sewer and water (portion)), Rancho California Water District (water (portion)), Riverside County Flood
Control and Water Conservation District (storm water), Adelphia (cable) and Verizon (telephone). Public
schools are located in the Temecula Valley Unified School District. The property is located within 30 miles
of Mount Palomar Observatory.
See “ – ASHBY USA, LLC – Merchant Builder Litigation Against Ashby USA, LLC; Sales of
Merchant Builder Tracts,” below for a description of the sale of property by Ashby USA, LLC to merchant
builders, the filing of litigation regarding satisfaction of terms of the purchase agreement and the subsequent
sale of property to the Tanamera/Roripaugh Entities.
Conditions to the Release of Building Permits
Development within the District is subject to development conditions that relate to phasing of the
development. In certain cases, Ashby USA, LLC has determined to proceed with all of the required
improvements concurrently rather than in the phases allowed by the development approvals. Construction
has been delayed beyond Ashby USA, LLC’s original anticipated schedule. Construction is progressing, and
agreements for the major work have been/are soon to be awarded.
Butterfield Stage Road Improvements and Easements. Among the remaining development conditions
are requirements relating to the construction of Butterfield Stage Road including the alignmentof Butterfield
Stage Road south of the development as well as the construction of Butterfield Stage Road through the
development from the southern District boundary to Murietta Hot Springs Road.
With respect to improvements to Butterfield Stage Road south of the District, Ashby USA, LLC has
been unsuccessful in its attempts to negotiate with two property owners for the purchase of rights of way over
portions of their property required for the construction of a segment of the Butterfield Stage Road
improvements south of the District. Section 3.1.3.5 of the Development Agreement allows the Developer
to ask the City to attempt to acquire the rights of way in the event Ashby USA, LLC is unable to do so. On
August 23, 2005, the City and Ashby USA, LLC entered into an agreement entitled “Agreement Between
the City of Temecula andAshby USA, LLC for the Acquisition of Certain Property for Public Rights of Way
in Connection with the Roripaugh Ranch Project” pursuant to the authority of Section 3.1.3.5 of the
Development Agreement and Government Code Section 66462.5. The City is currently appraising the
property and will be prepared to make an offer of fair market value to the owners when the appraisals are
approvedby the CityCouncil. Negotiations will commence at that time. The City anticipates that it will take
approximately eight (8) months for it to complete the acquisition of the rights of way on these two parcels.
If the City is unable to negotiate the purchase of the rights of way, there is a process whereby the City can
obtain a right of access to the property while the negotiations proceed if the City Council makes certain
findings required by law. As of March 27, 2006, the City does not anticipate the process to preclude
completion of improvements during the first quarter of 2007 but cannot guarantee that the access can be
obtained to complete the improvements by that time.
With respect to improvements to Butterfield Stage Road within the District, grading of Butterfield
Stage Road is approximately 65% complete. Construction includes construction of two full-width bridges
within and over Santa Gertrudis Creek and Long Valley Wash. The bid package for Butterfield Stage Road,
including the two bridges is ready and Resource Agency approvals have been obtained. Prefabricated
components of the bridge structures have been completed and delivered to the project site. Completion is
estimated by Ashby USA, LLC to occur in the third quarter of 2006.
Nicolas Road and Bridge Structure; Resource Agency Approvals for Nicolas Road - Ashby USA,
LLC is required to construct a 40 foot wide improvement of Nicolas Road from 450 feet east of the existing
Nicolas Road/Calle Girasol intersection to Liefer Road, including the full width bridge structure over Santa
Gertrudis Creek. Ashby USA, LLC is working to obtain offers of dedication which are anticipated at such
time as Ashby USA, LLC pays the acquisition costs for the offers of dedication. Portions of the road plans
are approved and other plan revisions are in process. An Environmental Impact Report amendment is in
process. Ashby USA, LLC is preparing plans and information requested by the Resource Agencies in order
for Resource Agencies and the Flood Control District to review the proposed design. Ashby USA, LLC is
assuming that Ashby USA, LLC will be able to obtain the necessary Resource Agency and Flood Control
District approvals in approximately 120 days from March 15, 2006, so as to enable completion of these
improvements prior to June 1, 2007.
Fire Station Conditions to the Release of Building Permits. A fire station is planned in Planning
Area 32 located in the southwest portion of the District, at the intersection of Butterfield Stage Road and
South Loop Road. The fire station will enhance fire protection and emergency response for the surrounding
community. Under the original Development Agreement, the Fire Chief, in his sole discretion, could allow
a maximum of 250 building permits to be issued for Phase I so long as the permanent fire station and the
secondary access (as defined in Attachment 5 to the Development Agreement) are substantially under
26
construction at the time such building permits are requested. On October 21, 2004, the City and Ashby USA,
LLC entered into a “First Operating Memorandum to the Recorded Development Agreement between the
City of Temecula and Ashby USA, LLC. The First Operating Memorandum provides additional funding for
the construction of the permanent fire station necessary to provide fire protection within the District and for
the surrounding area. The First Operating Memorandum requires that the City process an Amendment to the
Development Agreement to revise the Development Agreement to change the thresholds required for
issuance of building permits under the Fire Chief’s discretion based on the status of the fire station. On
February 28, 2006, the City Council adopted the ordinance approving the First Amendment to the
Development Agreement. The First Amendment provides for the issuance of up to five hundred fifteen (515)
residential building permits for Planning Areas 1A, 2, 3, 4A and 4B upon a findingby the City Manager that:
(1) the permanent fire station is substantially under construction; (2) permanent access to the fire station via
Butterfield Stage Road and Murrieta Hot Springs Road is substantially under construction so as to be
completed concurrent with the opening of the fire station; (3) access to the fire station via Calle Chapos
between the fire station’s eastern most driveway and Walcott Lane will be completed concurrent with the
opening of the fire station; and (4) all other requirements of the Development Agreement and Conditions of
Approval of the Land Use Entitlements for Phases I and II for the issuance of the building permits have been
fulfilled. As of March 21, 2006, the City and Ashby USA LLC entered into a Second Operating
Memorandum pursuant to Section 3.5.5 of the Development Agreement. The Second Operating
Memorandum provides that: (1) in calculating the allowable number of dwelling units per residential
Planning Area in the Phase II (“Pan”) area of the Specific Plan, the applicable densities shall be applied to
the “gross” acreage of the Planning Area and not the “net” acreage as discussed in Table 5-2; (2) all other
requirements of the Specific Plan, including lot size and the maximum 1,500 units in Phase II, would remain
in effect; and (3) Ashby USA LLC warrants and represents to the City and the Authority that with this
change,Ashby or its successors in Phase II have the ability to construct at least 1,230 dwelling units in Phase
II. The fire station is currently under construction and completion of the fire station is expected in the second
quarter of 2006. Ashby USA, LLC estimates the fire station will open during the fourth quarter of 2006.
(For additional information about the Development Agreement, see “The Community Facilities District –
Development Agreement” herein.)
The foregoing only describe some of the development conditions that must be satisfied in order to
fullydevelop property in the District. See Appendix K for a further description of thresholds for installation
of improvements under the Development Agreement and Conditions of Approval. Ashby USA, LLC does
not anticipate the items described above or any of the thresholds set forth in Appendix K or otherwise
applicable to its development to unduly delay the expected development of the property and estimates the
completion of the development thresholds to allow 515 buildingpermits to be issued by the endof September
2006 and completion of the balance of the building permit thresholds to be satisfied prior to June 1, 2007.
Construction is subject to weather and other delays. With regard to the timing of completion of
improvements, the City has reviewed a construction schedule prepared by Ashby USA, LLC in January 2006
and has indicated that schedule was feasible but was aggressive. The January 2006 schedule assumed only
minimal construction delays such as may occur due to delay in receipt of necessary Resource Agency or
other approvals, delays in award of construction contracts, delays in delivery of construction materials, or
delays due to inclement weather. The City has indicated a time frame between March 2007 and September
2007 is a more realistic estimate of the time frame for completion of the necessary infrastructure to allow
buildingpermits to be issued for homes in Phase II. Ashby USA, LLC has subsequently modified its schedule
with respect to certain items to take into account subsequent events. The Authority, the City and the
Merchant Builders make no representation whatsoever that the schedule, as provided by Ashby USA, LLC
and modified from time to time, will be achieved. KB Home Coastal Inc. makes no representation as to
Ashby USA, LLC’s ability to timely complete the work to allow issuance of building permits in Phase II by
June 1, 2007 as required under the Option Agreement. The Market Absorption Study and the Appraisal were
prepared utilizing an estimated September 2006 date of completion of necessary infrastructure to allow
issuance of remaining building permits for homes in Phase I and an estimated September 2007 date of
completion of necessary infrastructure to allow issuance of building permits for homes in Phase II. The
September 2007 date of completion takes into account the possibility that the schedule prepared by Ashby
USA, LLC, as modified from time to time, with respect to Phase II is not achieved. It is also possible that
the schedule prepared by Ashby USA, LLC with respect to Phase I may not be achieved.
Specific Plan
The Roripaugh Ranch Specific Plan was adopted in November 2002 by the City. The Roripaugh
Ranch Specific Plan development concept provides for a mixed-use development of residential, commercial
and public facilities (e.g. parks, schools) within the framework of a comprehensive master planned
community. The Specific Plan concept includes both single family, commercial, landscape paseos, public
park facilities, as well as other privately owned recreational facilities within the community. Specific Plan
Amendment No. 1 was approved on January 11, 2005. Specific Plan Amendment No. 1 allows 6 homes to
be built on property previously planned for use as a detention basin. Specific Plan No. 2 was approved by
27
the City Council on February 14, 2006 and allows for the development of Planning Area 33B as a park and
ride and trail head in accordance with the First Amendment to the Deferral Agreement.
Environmental Conditions
Environmental Impact Report. In connection with the Roripaugh Ranch Specific Plan approval, the
Cityprocessed an Environmental Impact Report (the “EIR”) for the property encompassed bythe Roripaugh
Ranch Specific Plan. The EIR was certified by the City in November 2002 (State Clearing House No.
97121030). The draft Environmental Impact Report (DEIR) was issued on June 1, 1999, and over the
interveningyears a Revised Draft Environmental Impact Reportwas issued andthe project was revisedbased
on input from the City and local residents.
Endangered Species Act. The project site is within the boundary of the Assessment District 161
Subarea Habitat Conservation Plan approved by the U.S. Fish and Wildlife Service (“FWS”). (The
Assessment District 161 Subarea Habitat Conservation Plan is separate from the County’s Assessment
District 161.) Required mitigation is provided through the transfer of approximately 201 acres to the City
andrecording of a conservation easement overlying the open space recorded for the Center forNatural Lands
Management. In addition, Ashby USA, LLC paid approximately $436,098 to the Center for Natural Lands
Management. Rough grading is substantially complete in Phase I and in the Village Core area of Phase II
of the District and approximately 80% complete in the balance of Phase II in compliance with the applicable
requirements. Grading has occurred in all areas of the District which are to be graded and grading continues
to bring the property to the correct grade for development. The site contains two major drainages (Santa
Gertrudis Creek and Long Valley Wash) plus several other minor tributary drainages. The site supports a
number of listed or otherwise protected species, such as the California gnatcatcher, Quino checkerspot
butterfly, Stephen’s kangaroo rat, and possibly burrowing owls. In 1998, the FWS adopted the “Permit
Revocation Rule” or more commonly, the “no surprises rule” which substantially restricted the FWS
authority to revoke or modify these types of 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).
The 262 acres of Roripaugh Ranch open space include 201 acres of preserved habitat as required in
the Assessment District 161 Subarea Habitat Conservation Plan (“AD 161 SHCP”) as required forthe federal
Endangered Species Act Section 10(a) permit number TE-030505-0 issued by the FWS on December 4,
2001. In March 2003 Ashby USA, LLC graded approximately 8.96 acres of the land designated as the
Preserved Habitat Area pursuant to the AD 161 SHCP with FWS permits in violation of federal law. The
impacted area included an estimated 4.33 acres of Riversidean Sage Scrub, 2.42 acres of
transitional/degraded Riversidean Sage Scrub, and approximately 2.2 acres of ruderal, weed or agricultural
areas. In response to the violation of federal law, the FWS approved a “Conceptual Mitigation Plan for
Impacts to Areas Within the Jurisdiction of the United States Department of Interior Fish and Wildlife
Service Under Section 10(a)(1) (B) of the Endangered Species Act on June 2, 2004 (“Restoration Plan”).
Pursuant to the Restoration Plan, Ashby USA, LLC is required to restore an additional 21.65 acres of
Riversidean Sage Scrub (4.33 acres at 5:1 ratio) to offset the impacts to mature Riversidean Sage Scrub
caused byAshby USA, LLC grading in violation of federal law. The City and Ashby USA, LLC entered into
that certain “Open Space Grading and Restoration Agreement” (the “Restoration Agreement”) dated as of
May 11, 2004 in order to implement the requirements of the Fish and Wildlife Service to cure the violations.
Under the Restoration Plan, Ashby USA, LLC is obligated to guarantee the plant growth for a period of five
years from installation. Open space grading and restoration began in October 2005, and included irrigation
and planting and was anticipated to be completed by January 31, 2005. Weather conditions and other
conditions delayed completion of the 33.49 acres of restoration. Heavy rains and freezing temperatures in
the winter of 2005 prohibited the completion of grading and caused plant material not to germinate, which
required plants to be regrown. As of March 21, 2006, the easterly 18.21 acres have been graded and the
westerly 15.28 acres have been irrigated and planted. Both areas will be hydro-seeded as soon as the plant
pallette has been approved by the applicable Resource Agency and weather permits. Ashby USA, LLC
expects the five year monitoring period to commence on April 15, 2006. In addition to the Restoration Plan,
Ashby USA, LLC has obtained all required Resource Agencies amendments with respect to improvements
within the boundaries of the project and is preparing a revised Wetland Mitigation Plan relating to
improvements located outside the boundaries of the District. Ashby USA, LLC expects construction
described in the revised Wetland Mitigation Plan to begin soon after approval.
As noted above, there has been a delay in installation of plant material which constitutes a portion
of the restoration work. Ashby USA, LLC has recently contacted the Fish and Wildlife Service and
28
presented its plan for restoration as outlined above so as to resolve any issues relating to the delay in
installation of the plant material beyond January 31, 2005 and to avoid being in violation of federal law. The
Fish and Wildlife Service will review the information presented by Ashby USA, LLC regarding the
completion of restoration and determine if it is satisfied with Ashby USA, LLC’s proposed remediation
schedule or whether it will require additional mitigation measures. Fish and Wildlife Service requirements
are not anticipated to adversely affect the development of the property within the Community Facilities
District.
Mitigation Relating to Waters of the United States. The EIR indicates the project site includes a
jurisdictional wetland subject to the jurisdiction of the U.S. Army Corp of Engineers which has jurisdiction
over developments in or affecting the navigable waters of the United States pursuant to the Rivers and
Harbors Act and the Clean Water Act. The development within the District is expected to impact
approximately 3.38 acres of waters of the United States, including 0.5 acres of wetlands. Among other
things, Ashby USA, LLC is to create 6.7 acres of southern willow scrub and 1.5 acres of freshwater marsh
wetlands, and maintain the mitigation for five years or until it reaches success criteria and is approved by the
Army Corp of Engineers. In March 2003, a permit was issued by the U.S. Army Corp of Engineers which
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 meets the criteria in the permit’s terms and
conditions(the “Section 404 Permit”). Under the Section 404 Permit, Ashby USA, LLC is allowed to modify
Santa Gertrudis Creek and Long Valley Wash and is required to provide approximately 6 acres of southern
willow scrub and fresh water marsh habitat within the 8.2-acre mitigation site within Santa Gertrudis Creek.
The Santa Gertrudis Creek and the Long Valley Wash flood control channels will be maintained as open
space in perpetuity. The Section 404 Permit provides the time limit for completing the authorized activity,
but such period is subject to extension. The work is estimated to be completed by the third quarter of 2006.
The Section 401 Water Quality Certification was issued by the California Regional Water Quality Control
Board(San Diego Division) on December 11, 2002. Under the Section 401 permit, the period for completion
of the work ends not later than nine months following the close of the calendar year in which impacts first
occur (estimated end date September 2006), but such period is subject to extension.
Streambed Alteration Agreement. Ashby USA, LLC met with the California Department of Fish and
Game (“CDFG”) to review the development. The CDFG issued a Section 1603 Permit in March 2003. The
permit expires on March 1, 2008 and requires that Ashby USA, LLC complete the approximately 6 acres of
southern willow scrub and fresh water marsh habitat within the 8.2-acre mitigation site within Santa
Gertrudis Creek. The permit is subject to extension in certain circumstances.
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 (San
Diego Region) for grading and construction of areas greater than five acres. Ashby USA, LLC had a Storm
Water Pollution Prevention Plan prepared for the project and was notified on January 10, 2003, that the
California Regional Water Quality Control Board (San Diego Division) had processed the notice to comply
with the general permit to discharge storm waters associated with construction activity. The proposed
discharge from the Roripaugh Ranch project will comply with the applicable provisions of the Clean Water
Act.
Other Requirements. As indicated above most required development approvals were obtained over
the last several years. The project was required to sign a pre-excavation agreement with the Pechanga Band
of Luiseño Mission Indians (“Pechanga”). Pechanga monitors as well as Ashby USA, LLC monitors were
on site during grading to recover any artifacts. Pechanga has approved the work plan for the grading of the
remaining area to be graded within the District. To date, items found have been relocated or handled in
accordance with the applicable work plans. Ashby USA, LLC is not aware of any additional permits required
to proceed with development of the property other than the usual permits required from the City and
applicable local agencies. See “BONDOWNERS’ RISKS – Local, State and Federal Land Use Regulations.”
The project site has been used for dry farming agriculture for many years. Crops grown in the site
in the past primarily include grains and grasses. Soil samples were taken in 1999 in accordance with federal
and state testing protocols in connection with the Phase I Environmental Site Assessment report dated
June 30, 1999. The 1999 Phase 1 Environmental Site Assessment report identified waste oil containers,
solvent containers, stained soil, above ground storage tanks and stockpiles of trash, including, but not limited
to wood, metals, tires and rusted 55-gallon drums. The remediation work was reviewed in February 2002
and in May 2003 by SID Geotechnical, Inc. to confirm the areas of environmental concern were remediated
satisfactorily.
The EIR indicated several Planning Areas were within a 100-year flood plain for the existing Santa
Gertrudis Creek and Long Valley Wash. On review by FEMA, FEMA was unable to locate any previous
29
hydraulic analyses for Santa Gertrudis Creek or Long Valley Wash and determined that no Flood Insurance
Study data had previously been performed for the area. The current Flood Insurance Rate Maps for the area
show the entire development to be within Zone C, which is defined as “areas of minimal flooding.” Ashby
USA, LLC’s engineer is preparing a FEMA map so that a Conditional Letter of Map Revision (“CLOMR”)
or Letter of Map Revision (“LOMR”) can be processed for flood plain modifications within Zone C. The
City has allowed grading of the entire District. Flooding will be mitigated through the construction of the
Santa Gertrudis Creek and Long Valley Wash channel improvements and construction of various detention
basins.
Development Agreement; Deferral Agreement
Ashby USA, LLC and the City have entered into a Preannexation and Development Agreement (the
“Development Agreement”), as of December 17, 2002, regarding the proposed development. The
Development Agreement was recorded on January 9, 2003 as Document No. 2003-018567. For purposes
of the Development Agreement, the proposed development includes the improvement of the proposed
development sites for the purposes consistent with the proposed development’s land use authorization as set
forth in the Development Plan (as defined in the Development Agreement), including, without limitation,
grading, construction of infrastructure and public facilities related to the off-site Improvements and the onsite Improvements, the construction of structures and buildings and the installation of landscaping.
Pursuant to the terms of the Development Agreement, Ashby USA, LLC has the right to develop the
proposed development in a manner consistent with the approved Specific Plan, and applicable rules,
regulations and official policies. Ashby USA, LLC has sold, or entered into contracts for sale of, the
residential portion of the proposed development to Merchant Builders, with home construction and sales of
production units during 2006 to 2012, depending on absorption. The Development Agreement provides that
as long as the project is constructed in a manner consistent with the Development Plan and Existing
Regulations (as defined in the Development Agreement), the project may be constructed at the rate and in
the sequence that Ashby USA, LLC deems appropriate. The Market Absorption Study estimates build-out
within the District will occur in 2012. See APPENDIX D – “Market Absorption Study.”
By entering into the Development Agreement, Ashby USA, LLC obtained a vested right to proceed
with the project in accordance with the development approvals identified in the Development Agreement.
However, development remains subject to any remaining discretionary approvals required in order to
complete the project as contemplated by the foregoing entitlements and subject to changes in City laws,
regulations, plans or policies specifically mandated and required by changes in state or federal laws or
regulations.
The Development Agreement and Conditions of Approval contain thresholds for installation of
improvements. See Appendix K.
Termination of the Development Agreement by one party due to the default of the other party will
not affect a right or duty emanating from City entitlements or approvals on the project.
The Development Agreement was approved in November 2002 and entered into as of December 17,
2002 pursuant to California Government Code Section 65864, et seq. (the “Development Agreement Law”).
The applicable statute of limitations relatingto a challenge to the Development Agreement has expired. The
Development Agreement Law provides that adeveloper 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 Bd. of Supervisors, has heldthat development agreements are enforceable under
the Development Agreement Law. However, the development agreement in that case did not address the type
of vested rights obtained in the Development Agreement. Consequently, although the Development
Agreement purports to provide Ashby USA, LLC with a vested right to build the development as currently
planned and as described herein, if the Development Agreement were to be challenged in a California court,
there can be no assurances that such court would enforce the Development Agreement if the City fails to
fulfill its obligations under the Development Agreement or if more restrictive local land use regulations are
adopted in the future. Additionally, public entities not bound by the terms of the Development Agreement
may impose additional conditions on the development. See “BONDOWNERS’ RISKS – Failure to Develop
Properties” and “ – Ballot Initiatives and Legislative Measures” herein.
On October 21, 2004, the City and Ashby USA, LLC entered into the First Operating Memorandum
pursuant to Section 3.5.5 of the Development Agreement. This First Operating Memorandum provides for
the additional contribution by Ashby USA, LLC of $1.1 million to the fire station construction which may
be reimbursed to Ashby USA, LLC out of the proceeds of the 2006 Bonds. Additionally, the First Operating
Memorandum provides that the City will process an amendment to Section 4.1.6 of the Development
Agreement in order to change the thresholds for issuance of building permits based on the completion of the
fire station. On February 28, 2006, the City Council adopted the ordinance approving the First Amendment
30
to the Development Agreement. The First Amendment provides for the issuance of up to a maximum of five
hundred fifteen (515) residential buildings permits for Planning Areas 1A, 2, 3, 4A and 4B upon a finding
by the City Manager that: (1) the permanent fire station is substantially under construction; (2) permanent
access to the fire station via Butterfield Stage Road and Murrieta Hot Springs Road is substantially under
construction so as to be completed concurrent with the opening of the fire station; (3) access to the Fire
Station via Calle Chapos between the Fire Station’s eastern most driveway and Walcott Lane will be
completedconcurrent with the opening of the fire station; and (4) all other requirements of the Development
Agreement and Conditions of Approval of the Land Use Entitlements for Phases I and II for the issuance of
the building permits have been fulfilled. As of March 21, 2006 the City and Ashby USA LLC entered into
a Second Operating Memorandum pursuant to Section 3.5.5 of the Development Agreement. The Second
Operating Memorandum provides that: (1) in calculating the allowable number of dwelling units per
residential Planning Area in the Phase II (“Pan”) area of the Specific Plan, the applicable densities shall be
applied to the “gross” acreage of the Planning Area and not the “net” acreage as discussed in Table 5-2; (2)
all other requirements of the Specific Plan, including lot size and the maximum 1,500 units in Phase II,
would remain in effect; and (3) Ashby USA LLC warrants and represents to the City and the Authority that
with this change, Ashby or its successors in Phase II have the ability to construct at least 1,230 dwelling units
in Phase II.
In September 2003, the City and Ashby USA, LLC entered into a Deferral Agreement whereby the
City agreed to allow Ashby USA, LLC to record the final map for Tract 29353-2 (Phase I) prior to the
fulfillment of conditions requiring construction drawings for all parks, landscaped medians and proposed
Temecula Community Services District slope/landscape maintenance areas to be reviewed and approved by
the Director of Community Services and requiring that Ashby USA, LLC post security and enter into an
agreement to improve the public parks, landscaped medians and proposed Temecula Community Services
District slope/landscaped maintenance areas. The Deferral Agreement provided that additional final maps
and land use approvals would not be processed until either (i) the conditions specified in the Deferral
Agreement are satisfied or (ii) the Deferral Agreement is amended by City Council action. The Deferral
Agreement provides that no maps or land use entitlements will be approved until certain conditions are met.
The conditions include a requirement that Ashby USA, LLC obtain approval of the landscaping for streets,
the sports park and the 5.1 acre neighborhood park. The Deferral Agreement also requires resolution of fuel
modification issues for fire protection (eithermodified landscaping or hardscape). The fuel modification has
been resolved by providing for a single loaded street in the northerly boundary of Phase II and through
construction of a recessed wall, fire setback area and fuel modification in the north easterly area of the
District. These modifications were included within a Specific Plan amendment approved January 11, 2005.
The City and Ashby USA LLC entered into a First Amendment to the Deferral Agreement on January 28,
2005. This First Amendment provides that: (1) Ashby USA, LLC will complete the improvements required
by the original Deferral Agreement, except for the Sports Park, prior to the issuance of the first building
permit within the District, even if the Improvements do not pertain to that portion of the District for which
a residential building permit is sought; (2) Ashby USA, LLC shall design and construct, at its own expense,
a second Community Building at the Sports Park; (3) Ashby USA, LLC shall convey an additional 1.4 acres
to the City for the Sports Park; (4) Ashby USA, LLC shall contribute 2.3 acres of land in Planning Area 33B
fora park and ride and trail head; and (4) Ashby USA, LLC would be allowed to submit applications forland
use entitlements for Phases I and II, but the City retains the authority to withhold building permits if the
requirements of the First Amendment to the Deferral Agreement or the Deferral Agreement are not timely
completed. Ashby USA, LLC has completed the improvements referenced in clause (1) above and is
proceeding with the items referenced in items (2) through (4). The modifications described in the First
Amendmentconcerning Planning Area 33B are contained in the Second Amendment to the Roripaugh Ranch
Specific Plan adopted by the City Council on February 28, 2006.
Other Matters
Additional Approvals. Additional discretionary approval, such as design review for architecture
(Merchant Builders) and tentative tract approvals is needed for development in the District as contemplated
bythe EIR that may require additional environmental review by the Cityunder the California Environmental
Quality Act. Ashby USA, LLC does not anticipate that obtaining any of the approvals will constrain
development of the property.
Long Valley Wash Recreational Trails Agreement. On January 11, 2005, the City, Roripaugh Ranch
Community Association, and Ashby USA, LLC entered into an agreement in which the Roripaugh Ranch
Community Association and Ashby USA, LLC agreed to maintain in perpetuity the public trails in the Long
Valley Wash. In addition, the Roripaugh Ranch Community Association and Ashby USA, LLC agreed to
maintain insurance naming the City, the County, the Riverside County Water Conservation and Flood
Control District and the Temecula Community Services District as additional insured and to defend,
indemnify and hold harmless such parties against any claims or lawsuits relating to the public use and
maintenance of the Long Valley Wash recreational trails and public access to the channel right of way.
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Covenants, Conditions and Restrictions. Covenants, conditions and restrictions will be recorded
against the property prior to sale of individual units. In addition, the future residential units will be assessed
monthly assessments to cover maintenance of common areas not being maintained by the City. All of the
parcels in the District are or will be subject to recorded covenants, conditions and restrictions that provide
for a levy of the Roripaugh Ranch Community Association’s assessments, on a basis subordinate to the lien
of the Special Taxes.
Acquisition of Improvements
The Authority and Ashby USA, LLC have entered into an Acquisition Agreement (the “Acquisition
Agreement”) dated as of March 1, 2006. Under the terms of the Acquisition Agreement, the Authority will
use proceeds of the 2006 Bonds in the Acquisition Account of the Improvement Fund to acquire some of the
Improvements from Ashby USA, LLC upon completion of various discrete components of infrastructure and
inspection thereof by the City. The Acquisition Agreement provides that the infrastructure will 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 Ashby USA, LLC and the Authority. The Acquisition
Agreement may be amended at any time without any requirement for notice to or the consent of the
Bondowners.
PROPERTY OWNERSHIP AND DEVELOPMENT
The information about Ashby USA, LLC and the Merchant Builders contained in this Official
Statement has been provided by representatives of Ashby USA, LLC and the Merchant Builders and has not
been 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 Ashby USA, LLC and the Merchant Builders will acquire or own the property
within the District 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 Ashby USA, LLC and 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.
Ashby USA, LLC and the Merchant Builders 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 Ashby USA, LLC and the Merchant
Builders or that Ashby USA, LLC and the Merchant Builders will continue to own their respective parcels
of land.
Description of Project.
Ashby USA, LLC owned all of the property within the District and has sold a portion of the District
to the Merchant Builders. Table 1 below sets forth information regarding the projects being developed in
the District. Only certain of the Merchant Builders referenced below are currently landowners within the
District, and there can be no assurance that those who are not yet owners will close escrow on their lots
within the District at the times indicated or at all. See “BONDOWNERS’ RISKS – Concentration of
Ownership,” “ – Failure to Develop Properties” and “ – Land Development.”
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Table 1
Temecula Public Financing Authority
Community Facilities District No. 03-02 (Roripaugh Ranch)
Property Ownership and Development Status
Name of
Landowner/
Merchant Builder(1)
Development
Phase/
Specific Plan
Planning
Area
Phase I - Residential
Ashby USA, LLC/Continental
Residential, Inc.(1)
1A
Davidson Roripaugh Ranch 122 LLC
Est.
Total
Number
of
Units
Units
Completed
or Under
Construction
as of
January 15, 2006 (4)
No. of Lots
for Which
There is a
recorded
Final Map
Status
of
Maps
104(1)
0
0
2
99
0
99
Final map
recorded.
Tanamera/Roripaugh II, LLC
3
99
0
99
Final map
recorded.
Tanamera/Roripaugh, LLC
4A
100
0
100
Final map
recorded.
Traditions at Roripaugh, LLC
4B
113
0
0
515
0
298
Subtotal – Phase I - Residential
Phase II - Residential and
Commercial
Ashby USA, LLC/
KB Home Coastal Inc. (Option)(2)(3)
Total Phase I and Phase II
(1)
(2)
(3)
(4)
Final map
approved but
not yet
recorded.
Final map
approved but
not yet
recorded.
Status of
Development
as of
January 15, 2006
Graded; blue-top, except
6 lots in Tentative Tract
Map anticipated to be
approved by May 2006;
in-tract sewer and water
stubbed; 65% of sewer
and water installed to
lots.
Near finished condition
with wet in-tract utilities
installed and the in-tract
street paved.
Graded; near finished
condition with wet intract utilitiesinstalled and
the in-tract street paved.
Graded; near finished
condition with wet intract utilitiesinstalled and
the in-tract street paved.
Graded, blue-top
condition; some in-tract
sewer and water
installed; no curb no
paving; a few lots have
laterals.
0
1,230
0
0
1,745
0
298
Rough grading in
process.
Continental Residential, Inc. is anticipated to close lots for 104 units at the end of the third quarter of 2006, assuming
improvements are constructed as anticipated byAshby USA, LLC. The final map which has been reviewed and approved
by City staff does not include 6 lots which were approved pursuant to a Specific Plan Amendment on January11, 2005.
Ashby USA, LLC anticipates the Tentative Tract Map No. 32004 for the additional 6 units will be approved by May
2006 and the final map will be ready for recordation by August 2006. Continental Residential Inc. anticipates
acquisition of the 104 lots once Ashby USA, LLC has satisfied its obligations pursuant to the terms of Continental
Residential, Inc.’s purchase agreement. Closing is conditioned on Ashby USA, LLC’s satisfaction of development
conditions such that Continental Residential, Inc. can obtain building permits and certificates of occupancy.
See “ – Sale of Phase II to KB Home Coastal Inc.; Take Down Options” regarding KB Home Coastal Inc.’s option to
purchase some or all of the Phase II residential property.
Commercial property is located in Planning Area 11.
Issuance of building permits is contingent on the 2006 Bonds being issued. Upon issuance of the 2006 Bonds, up to 107
building permits may be pulled within Planning Areas 2, 3 and 4A.
___________________
Source: Ashby USA, LLC.
Ashby USA, LLC
General
Ashby USA, LLC and its Members. Ashby USA, LLC (“Ashby USA, LLC”) is a California limited
liability company based in Corona, California, formed by its members with respect to the Roripaugh Ranch
project. Ashby USA, LLC is managed by Ashby Development Company, Inc., a California corporation. The
other member of Ashby USA, LLC is USA Investment Partners, LLC, a Nevada limited liability company,
and an affiliate of USA Commercial Mortgage Company, a Nevada corporation (dba “USA Capital”).
33
Members and Affiliates.
The primary principal of Ashby Development Company, Inc. is Richard Ashby.
Mr. Ashby received his Master’s degree from the University of California at Long Beach. After
graduation he taught industrial education at Newport Harbor High from 1962 until 1965. Upon leaving his
teaching position, Mr. Ashby entered the contracting, building and development profession. Mr. Ashby’s
building and development expertise now encompasses over 40 years of experience.
In addition to the Roripaugh Ranch Project, the following is a partial list of some of Mr. Ashby’s
accomplishments:
Mr. Ashby is one of three partners in Creative Communities, which was founded in 1972 and has
developed a number of quality commercial sites, two major land development projects and several
residential subdivisions to include:
•
More than 200 single family homes and town homes in Huntington Harbor, La Habra and
Yorba Linda. All of the homes were built and sold.
•
Two large land development projects:
•
Rolling Hills Estates – A 1,500 acre planned community as a joint venture between
Creative Communities and Bramalea of California with 4,500 homes, a regional
mall, church site and two commercial sites. Developed between 1976 and 1981
with the lots sold to builders, its success earned Creative Communities recognition
as “Builder of the Year” in 1979 for the California Builders Industry Association.
The joint venture built on part of the development and sold the remainder to other
builders.
•
Southridge Village – a 2,800 acre, master-planned residential development project
located in the City of Fontana along the Jurupa Hills. The master developer is Ten
Ninety, Ltd., aCalifornia Limited Partnership owned byCreative Communities and
the three principals of Creative Communities as individuals. The project consists
of 8,350 residential units and includes a 12.5 acre commercial shopping center
(Southridge Plaza), a three acre strip shopping center, more than 300 acres of parks,
seven new schools, a fire and police station, a day care center, and a community
building and recreation center. Ten Ninety, Ltd. sold lots to merchant builders,
including other Richard Ashby entities as shown below and marked with two
asterisks.
In addition to his involvement with Creative Communities, Mr. Ashby maintains (50%) ownership
in Fiesta Development, Inc., a partnership that was established in 1996. Fiesta Development,Inc. wascreated
to develop large parcels of land to sell to the merchant builder community and to build single-family
residential properties.
A partial list of projects owned by or in which Fiesta Development or its principals are in some
manner involved include:
•
Country Village Homes – a 186 unit single family project in Southridge Village, Fontana,
California. Fiesta Development constructed and sold all homes in the project.
•
Park Series – a 125 unit project, and AppleBrook – a 130 unit project, both also in
Southridge Village, Fontana, California. Fiesta Development constructed and sold all
homes in the project.
•
Country Club Estates – a 365 lot development located in Fontana, California. Fiesta
Development participated as a builder and developer, selling homes and lots in the project.
•
Grizzly Ridge, Murrieta, California – a 212 lot land subdivision. All lots were sold by
Fiesta Development to merchant builders.
•
Mission Grove, Riverside, California – 183 lots, all sold to merchant builders.
34
•
Summerbreeze – 92 lot subdivision in Southridge Village, Fontana, California. All homes
built and sold out.
•
Sun Ridge – a 74 unit development of finished lots also within Southridge Village. All
homes built and sold out.
•
Sunset Ranch – 202 lots in Moreno Valley, California. All homes built and sold out.
•
Las Flores – a 127 unit development in Southridge Village, Fontana, California. All homes
built and sold out.
•
Stone Gate – a 226 unit subdivision, and Stone Gate II – a 74 lot subdivision, both in
Menifee Valley, California. All homes built and sold out.
•
Country View Estates – a 325 unit project in Harvest Valley on Hwy 74 in the Homeland
/ Romoland area of Riverside County, California. Of the 325 units, 106 homes have been
built and sold, 22 are under construction but in escrow, and 24 are under construction.
Construction on the remaining units has not yet begun.
•
Mesa Verde Estates – 3,450 unit development in the City of Calimesa. A tentative map for
this project is in process. The owners may sell a majority of the lots on an as is basis and
to start home production on the balance of the lots or may add a development partner.
Development is expected to occur over the next 3 to 4 years.
•
Lomas del Sol – 8,271 unit development with two golf courses located in the City of
Coachella. A tentative map for this project is in process. The owners may sell a majority
of the lots on an as is basis and start home production on the balance of the lots or may add
a development partner. Development is expected to occur over a 10 year period beginning
in 2007.
•
Stone Ridge – a 1,900 unit development project in Riverside County. A tentative map for
this project is in process. The owners may sell a majority of the lots on an as is basis and
start home production on the balance of the lots or may add a development partner.
Development is expected to occur over the next 3 to 5 years.
•
Bundy Canyon – a 228 unit development project in Riverside County. A grading permit for
this project is expected to be issued in the second quarter of 2006.
In addition to his involvement with the entities described above, Mr. Ashby is the manager of R&D Land
Investors, LLC (“R & D Land Investors, LLC”), a California limited liability company. R&D Land
Investors,LLC wasformed in 2003 andcommenced conducting business shortly thereafter with the purchase
ofapproximately 23 parcels of unentitled land in Riverside County. R&D Land Investors, LLC is a real estate
holding company and it anticipates selling its interest in the properties listed below prior to commencement
of any development and/or construction. R&D Land Investors, LLC cannot, at this time, estimate when it
intends to sell the properties.
A partial list of projects owned by or in which R&D Land Investors, LLC is involved include the
following:
•
Friedman I and Friedman II – an approximate 318 lot development and an approximately
210 lot development in the Homeland / Romoland area of Riverside County, California.
•
Chess – an approximate 120 lot development in the Homeland / Romoland area of Riverside
County, California.
•
Underwood – an approximately 499 lot development in the Homeland / Romoland area of
Riverside County, California.
•
Walston – an approximately 58 lot development in the Homeland / Romoland area of
Riverside County, California.
35
The primary principals of USA Investment Partners, LLC are Tom Hantges and Joe Milanowski.
Thomas Hantges. Mr. Hantges is a 32-year resident of Las Vegas, Nevada, and had been active in
the real estate business since 1974. Mr. Hantges founded USA Commercial Mortgage Company (dba “USA
Capital”) in 1989. Mr. Hantges has actively developed multifamily housing throughout Las Vegas and Reno,
Nevada. From 1989 through 1996, he managed the USA Capital Land Fund, a partnership formed to develop
residential and multifamily projects throughout southern Nevada. Mr. Hantges is currently managing
Tanamera Resort Partners, a $50 million real estate equity fund developing several projects primarily in
Reno, Nevada. Mr. Hantges obtained both his B.A. and M.B.A. from the University of Nevada Las Vegas
and is a Chartered Financial Analyst (CFA).
Joseph D. Milanowski. Mr. Milanowski joined USA Capital in 1993 after five years with Southwest
Gas, a leading utility in the Southwest, in the Finance Department. Since joining USA Capital, Mr.
Milanowski has been involved with analyzing and financing nearly $500 million in real estate transactions
including master-planned communities, apartments, land development and residential construction. His
primary responsibilities for USA Capital include project analysis and financing of various commercial
development projects for the company. Mr. Milanowski is also involved with the management of Tanamera
Resort Partners, a $50 million real estate equity fund developing several projects primarily in Reno, Nevada.
Mr. Milanowski has lived in Las Vegas since 1988. Mr. Milanowski obtained his BA in Economics from
the University of Michigan and his MBA in finance from the University of Arizona.
Agreements for provision of Public Facilities. Ashby USA, LLC has entered into separate
improvement agreements with EMWD for sewer and water service to be provided to the property within the
District. These agreements cover the backbone improvements only. Each Merchant Builder will need to
enter into separate improvement agreements for in-tract sewer and water facilities with respect to their
respective portion of the development. Ashby USA, LLC has entered into improvement agreements and
posted surety bonds with the City for completion of portions of backbone streets and storm drain facilities.
Ashby USA, LLC or a Merchant Builder will be required to post surety bonds with the City prior to
recordation of the individual tract maps within the individual planning areas for completion of in-tract
improvements.
Estimated Development Costs; Plan of Finance
Ashby USA, LLC estimates that the total cost to improve each Phase of the project from raw land
to blue-top lots with backbone improvements, including financing costs, is approximately $76,320,583 for
Phase I, $323,495,731 for Phase II, and $70,609,920 forpublic improvements, a portion of which are District
eligible costs for which approximately $39,464,396.40 of District bond proceeds will be available. District
eligible costs not funded with proceeds of the 2006 Bonds will be financed through the loan from Ohio
Savings Bank discussed below in the Section captioned “ – Plan of Finance,”proceeds of sales to Merchant
Builders or through other funds available to Ashby USA, LLC or with a second series of bonds. These
foregoing costs include the installation of all backbone improvements not being funded by the District,
including backbone dry utilities, street lights andcommon landscaping and perimeter walls. These costs also
include repayment of loans. As of December 31, 2005, Ashby USA, LLC had spent approximately
$19,055,143 for land improvement costs and construction costs in connection with Phase I, approximately
$24,144,566 for land improvement costs and construction costs in connection with Phase II and
approximately $17,965,385 in connection with public improvement costs. The foregoing amounts exclude
soft costs such as planning, engineering, environmental, endowment, and consultant costs as well as
excluding interest on loans, financing cost and taxes. The foregoing merely reflect Ashby USA, LLC’s
presentplan for the development of the property and include repayment of loans with proceeds of subsequent
loans. There can be no assurance that Ashby USA, LLC will have the resources, willingness or ability to
successfully implement the development plan as described above.
In addition to the foregoing costs of Ashby USA, LLC, each Merchant Builder will incur costs to
develop its Planning Area from the blue-top lot condition, for which Ashby USA, LLC is responsible, to
finished lots (ready for house construction). These costs include for the Merchant Builders all in-tract
improvements including fees paid at building permit issuance. Additional costs have been included for those
items that are traditionally considered a house cost, but are often used to determine a finished lot value.
Estimated costs utilized in the Appraisal for estimating finished lot value range from $28,846 per lot to
$110,899 per lot, depending on the specifics of each Planning Area. APPENDIX C – “Summary Appraisal
Report” appended hereto for further information on the Appraisal and for limiting conditions relating to the
Appraisal.
36
Table 2 summarizes the sources and uses of funds to complete, as a whole, Ashby USA, LLC’s
development in the District and the expected cash flow from Ashby USA, LLC’s operations within the
District. Ashby USA, LLC projects land sales to merchant and commercial builders and to the School
District to occur over an approximate period from 2004 through anticipated close of purchases under the
Option Agreement, which may occur through 2012. Table 2 below summarizes the sources and uses of funds
to complete, as a whole, Ashby USA, LLC’s development in the District and the expected cash flow from
Ashby USA, LLC’s operations within the District.
37
Table 2
Community Facilities District No. 03-02
Ashby USA, LLC’s Estimated Sources and Uses of Funds
As of Dec 31
2005
Sources
Lot Sales - Residential(1)
Lot Sales - Commercial
Lot Sales - School Sites2)
Option Maintenance Payments
Constr. Loan - Bank Midwest
Constr. Loan - Bank of the West
Constr. Loan - Ohio Saving Bank
Related Party Contributions
Related Party Loans
CFD Funding
CFD Funding 2nd Series of Bonds
SUBTOTAL
38
Uses: PHASE I - Improvements
Land costs
Soft Costs3)
Land Improvement Costs
Construction Costs
Constr. Loan - Bank of the West pay-off
Other Contrib. & Related Party pay-off
GRC Exit Fee (3.6%)4)
SUBTOTAL
Uses: PHASE II - Improvements
Land cost
Soft Costs32)
Land Improvement Costs
Construction Costs
Offsite Improvements
Constr. Loan - Bank Midwest pay-off
Constr. Loan - Ohio Saving Bank pay-off
Other Contrib. & Related Party pay-off
GRC Exit Fee (3.6%)4)
SUBTOTAL
$26,652,942
Jan-March
2006
Apr-June
2006
$5,212,169
July-Sept
2006
$6,610,695
Oct- Dec
2006
$7,115,000
Jan-June
2007
$52,000,000
35,171,903
26,135,000
63,835,529
34,510,573
634,194
$186,940,141
$2,165,277
10,400,532
13,740,367
5,314,776
13,299,647
9,010,000
683,682
54,614,281
8,661,108
23,005,243
23,279,883
347,042
517,641
35,171,903
6,165,000
30,000,000
1,500,000
25,000,000
16,500,000
10,000,000
12,000,000
17,000,000
$11,377,169
$48,034,000
$43,610,695
$40,615,000
200,000
5,000,000
2,200,000
$64,299,471
$290,000
$343,000
$90,000
$34,600
$25,000
5,053,517
6,305,310
1,476,526
182,426
5,525,943
228,690
6,877,000
237,985
1,804,511
$116,210,000
35,986,000
5,520,000
$8,400,000
$135,041,000
$124,610,000
$1,487,530
800,000
1,540,000
801,050
$4,495,562
2,000,000
6,400,000
400,000
34,600
4,636,851
4,148,997
1,468,375
5,590,000
81,309
$4,016,346
200,000
2,600,000
$1,874,000
$400,000
2,353,672
6,651,720
6,651,720
$8,661,108
$39,427,678
27,748,258
16,577,042
1,800,000
$35,171,903
$146,400,000
34,723,266
13,186,476
323,695,731
10,000,000
16,821,184
15,000,000
57,000,000
1,872,000
60,846,000
100,000
21,239,549
21,816,346
$13,561,414
279,804
$1,538,972
441,232
$8,692,514
2,565,852
$7,759,744
1,836,644
1,024,167
3,100,000
200,000
640,000
$9,197,508
5,500,000
730,706
2,800,000
2,200,000
919,136
2,500,000
SUBTOTAL
$17,965,385
$2,820,204
$18,228,214
$13,458,366
$13,015,524
$4,822,227
CASH OUTFLOWS (Improvements)
CASH OUTFLOWS (Finance Activity)
CUMULATIVE NET CASH FLOW
$92,551,802
$92,250,234
$2,138,105
$6,895,872
$6,078,855
$540,548
$28,862,904
$19,537,872
$173,772
$20,886,035
$22,486,707
$411,725
$16,843,124
$18,023,346
$6,160,255
$8,662,255
$61,642,823
$154,648
47,578,816
13,483,717
$4,662,756
66,125,289
$4,822,227
$5,336,481
$61,262,533
$68,596,633
$307,335,805
6,534,000
35,986,000
13,920,000
35,171,903
26,135,000
146,400,000
36,010,573
834,194
44,000,000
2,200,000
$654,527,476
$ 2,165,277
11,183,132
13,740,367
5,314,776
26,135,000
15,975,523
1,806,508
76,320,583
2,353,672
473,725
473,725
28,109,865
(4)
$93,535,000
4,611,851
23,295,562
(2)
(3)
Totals
4,899,471
4,628,580
(1)
Thereafter
$6,534,000
112,222,369
Uses: Public Improvements
Street Improvements
Storm Drain Improvements
Environmental Mitigation
Parks
Other Contributions
July-Dec
2007
300,000
$45,572,379
10,623,532
1,030,706
7,143,303
6,240,000
$300,000
$70,609,920
$6,951,720
$2,353,672
$183,901,241
$186,990,193
$283,636,041
$183,901,241
Ashby USA, LLC anticipates arranging for refinancing in the July to December 2007 and thereafter time periods assuming KB Home Coastal Inc. exercises the options to acquire
the parcels in Phase II. If KB Home Coastal Inc. does not elect to acquire the parcels in Phase II, Ashby USA, LLC anticipates marketing the parcels not acquired by KB Home
Coastal Inc. to other merchant builders.
Ashby USA, LLC and the Temecula Valley Unified School District have not yet begun negotiations regarding the price or timing of the purchase of the school sites.
Soft costs which are not included in the foregoing values include a combination of planning, engineering, environmental, endowment and consultant costs as well as interest on
loans, financing costs and taxes.
GRC exit fee relates to payoff of amounts due relating to original acquisition of the property.
The discussion and budgets set forth above merely reflect Ashby USA, LLC's present plan for the
development of the property Ashby USA, LLC owns or previously owned within the District. There can be
noassurance that Ashby USA, LLC will have the resources, willingness or ability to successfully implement
the development plan as described above.
Plan of Finance. Ashby USA, LLC is financing development of the property from sources provided
by its members and a variety of loans. On September 2, 2005, Ashby USA, LLC obtained a $146,400,000
loan from Ohio Savings Bank (the “Loan,” as further described below), with a maximum of $103,500,000
outstanding at one time for refinancing the acquisition of the land and for financing of the blue top
improvements. The loan terms are described below. A loan from Bank Midwest with an outstanding balance
of $34,988,188 on September 2, 2005 was paid on September 2, 2005 with proceeds of the Ohio Savings
Bank Loan.
A loan in the amount of $26,135,000 from Bank of the West for which approximately
$12,795,667.62 was outstanding as of December 31, 2005 was paid in part with proceeds of sales of lots in
Planning Area 3 (closed on November 2, 2005), and was further paid down in January 2006 to approximately
$7,742,151.02 with proceeds of sales of lots in Planning Area 4B (closed January 6, 2006). The loan is
expected to be further paid down with proceeds of sales of lots in Planning Area 1A expected to close in the
thirdquarter of 2006. Financing costs accrue on the outstanding amount until the loan is paid. The note held
by Bank of the West is due September 2, 2006, as the result of a recent extension granted by Bank of the
West and Ashby USA, LLC anticipates that it will have funds to pay the note on or before such date.
In addition, there is a loan in the amount of $34,831,680 from USA Capital of which approximately
$9,436,227.01 was outstanding as of December 31, 2005 secured by a deed of trust with respect to Phase I
and Phase II.
As of December 31, 2005, approximately $61,165,094 had been expended in connection with the
improvements to the land in the project. Such amount excludes land acquisition costs, soft costs, debt service
and general and administrative costs.
Ohio Savings Bank Loan Agreement
Ashby USA, LLC and Ohio Savings Bank, a federal savings bank (“Ohio Savings Bank”), as lender,
entered into the Loan Agreement, dated as of August 29, 2005, as modified by a Modification Agreement
dated February 14, 2006 entered into by Ashby USA, LLC and Ohio Savings Bank (collectively, the “Loan
Agreement”). Ashby USA, LLC and Ohio Savings Bank have subsequently entered into forebearance
agreements relating to the issuance of the 2006 Bonds and receipt by Ohio Savings Bank of $4,000,000 in
reimbursement foreligible construction cost on or before April 30, 2006 and a letter agreement to extend the
date for completion of improvements to June 1, 2007.
Ohio Savings Bank is making a revolving loan (the “Loan”) to Ashby USA, LLC in the amount that
cannot be outstanding at any one time in an amount greater than $106,500,000, of which $103,500,000 may
be used by Ashby USA, LLC to refinance the acquisition of the Land A (as defined below) and to finance
Blue Top Improvements (as defined below). $3,000,000 of the $106,500,000 is set aside to support a letter
of credit in a maximum amount of $8,005,000 described below. The maximum amount that may be loaned
to Ashby USA, LLC under the Loan is $146,400,000. The Loan will also finance the construction of the
Blue Top Improvements necessary to complete approximately 1,102 detached residential building sites for
single family homes on the Land A. The Loan is evidenced by a note from Ashby USA, LLC to Ohio
Savings Bank, secured by a first Deed of Trust recorded against the Land A and that portion of the Land B
(as defined below) owned by Ashby USA, LLC. The Loan is guaranteed by Richard K. Ashby and Justin
Ashby pursuant to a guaranty (the “Guaranty”). There is also a letter of credit to be issued by Ohio Savings
Bank and confirmed by Citibank, N.A. in the maximum amount of $8,005,000, which is secured in part by
$3,000,000 available under the Loan and equity provided by Ashby USA, LLC. As of March 21, 2006, the
principal amount outstanding under the Loan was approximately $61,244,457.00.
39
Under the Loan Agreement, “Land A” is defined as Planning Areas 13 through 32, inclusive. Of
these parcels, Planning Areas 14-24 andPlanning Area 31 are part of the land that is the subject of the Option
Agreement. The remaining portion of Land A represents open space (PA13), flood control channels (PA’s
25 and 26), parkland (PA 27), school sites (PA’s 28 and 29), the proposed Recreation Center (PA 30), and
the land for the fire station (PA 32).
“Land B” is defined in the Loan Agreement as Planning Areas 1A, 1B, 2, 3, 4A, 4B, 5, 6, 7A, 7B,
7C, 8, 9A, 9B, 10, 12, 33A and 33B, which have the following land uses:
Planning Area
1A
1B
2
3
4A
4B
5
6
7A
7B
7C
8
9A
9B
10
12
33A
33B
Proposed Land Use
Residential (Continental Property)
Park site
Residential (Davidson Roripaugh Ranch 122 LLC
Property)
Residential (Tanamera Residential Group)
Recreation Center
Park site
Open Space
Detention Basin
Detention Basin
Open Space
Open Space
Open Space
Residential (KB Home Coastal Inc. (Option))
The term Blue Top Improvements1 means all earthwork, infrastructure and other improvements
necessary to develop 1,102 single family lots on the Land A in accordance with the Option Agreement
(including bringing the Land A to Blue Top Condition). Under the Loan Agreement, if no Event of Default
has occurred and is continuing, (i) Ohio Savings Bank will release Planning Areas 25, 26, 27 and 32 of Land
A from the lien of the Deed of Trust for no consideration (unless Ashby USA, LLC receives consideration),
except for a processing fee, (ii) Ohio Savings Bank will release Planning Area 30 of Land A for no
consideration (unless Ashby USA, LLC receives consideration) if Ohio Savings Bank has already released
Planning Areas 25, 26, 27 and 32, and (iii) Ohio Savings Bank will release Planning Areas 28 or 29 (the
potential school sites) of Land A upon payment of the greater of 100% of the net proceeds of the sale of such
Planning Area or an amount equal to 90% of the appraised value (as determined by an appraisal acceptable
to Ohio Savings Bank) of such Planning Areas. With respect to the Land B, the property will be released
upon the payment of the greater of (i) the Minimum Release Price (as defined in the Loan Agreement) for
such Planning Area, or (ii) 100% of the Net Proceeds received from the sale of the lot.
Advances are made under the Loan in the form of a continual revolving credit. The interest rate on
the loan is 7.75% to the end of the first month, then the greater of 7.25% or the “prime rate” plus 1.25%.
Accrued interest is due on the first day of each calendar month in consecutive monthly installments
commencing on October 1, 2005. Unless Ohio Savings Bank extends the term of the Loan an additional six
months, the Loan becomes due and payable on August 29, 2007. If Ashby USA, LLC fails to pay any
1
For purposes of this Official Statement,the term “Improvements” means certainroad, sewer, storm drain, fire facilities,
and park and recreation improvements which proceeds of the 2006 Bonds may finance. The Loan Agreement used
the term “Improvements” to mean all earthwork infrastructure and other improvements necessary to develop
approximately 1,102 single family lots on the Land A in accordance with the Option Agreement, as such term is more
particularly defined in the Loan Agreement. For convenience of reference, such Loan Agreement “Improvements”
are referred to in the Official Statement as “Blue Top Improvements.” Blue Top Improvements is not a defined term
in the Loan Agreement.
40
installment of interest within 10 calendar days after it becomes due or fails to pay the entire indebtedness
when it becomes due, all unpaid principal and accumulated interest could be accelerated at the direction of
Ohio Savings Bank and become immediately due and payable and then bear interest at a default rate equal
to the Loan rate plus 5%.
Unless otherwise authorized by Ohio Savings Bank, the amount of Loan proceeds that may be used
for each category, item or purpose of Blue Top Improvement costs cannot exceed the amounts set forth in
an exhibit to the Loan Agreement, including those Blue Top Improvements which may be acquired under
the Acquisition Agreement with proceeds of the 2006 Bonds. The budget for the Blue Top Improvements
to be financed by the 2006 Bonds and other moneys available to Ashby USA, LLC under the Loan, or
otherwise, include the following:
Blue Top Improvements
Murrieta Hot Springs Road
Butterfield Stage Road
Nicolas Road
Calle Chapos
Long Valley Channel
Santa Gertrudes Creek
Environmental Mitigation
Sports Park
Fire Station Grading
North Loop Road
South Loop Road
Roripaugh Valley Road
Fiesta Ranch Road
Neighborhood Park
Fire Station Contribution
Payoff of AD 161
Capital Contribution to the City
Budget
$4,600,000
$21,400,000
$9,800,000
$200,000
$7,600,000
$3,000,000
$1,000,000
$5,600,000
$100,000
$2,100,000
$600,000
$1,700,000
$1,100,000
$1,500,000
$3,100,000
$600,000
$2,500,000
Ohio Savings Bank will reserve $16,330,000 of Loan proceeds in a reserve fund to pay $1,894,612
in interest due under the Bank of the West Loan, and $14,435,388.00 for the regular monthly installments
of interest due on the Loan (i.e., capitalized interest for purposes of payment of the Loan).
TheLoan Agreement originally providedthat until the 2006Bonds have been issued, advances under
the Loan were limited to: (i) $35,714,000 to release the Land A from an existing deed of trust with Bank
Midwest; (ii) $1,830,000 to pay the loan fee; (iii) $32,000 to pay certain expenses; (iv) up to $20,000,000
for payment of “Development Costs” (as identified in the Loan Agreement, and (v) up to $560,000 for the
payment of interest due for loans encumbering the Land B. To date, the items listed in (i) – (iii), inclusive,
have been financed with the Loan. The Loan Agreement was modified to, among other things, allow an
additional $10,000,000 of permitted funding for items (iv) and (v) prior to issuance of the 2006 Bonds.
If less than $52,000,000 aggregate principal amount of 2006 Bonds are issued, Ashby USA, LLC
can provide additional collateral to qualify for the additional Loan proceeds. Ashby USA, LLC can request
advances of Loan proceeds not more than two times in any calendar month, using draw request forms. When
the Blue Top Improvements have been fully installed and Ashby USA, LLC has fulfilled all its obligations
under the Loan Agreement, Ohio Savings Bank will disburse the final advance or release a retainage to
Ashby USA, LLC.
The amount outstanding at any one time under the Loan Agreement cannot exceed 51% of the “as
is” value of the Land A, as determined by an appraisal acceptable to Ohio Savings Bank.
All merchant builder contracts affecting the Land A have been assigned to Ohio Savings Bank. In
addition, any proceeds of the 2006 Bonds that are to be reimbursed to Ashby USA, LLC have been assigned
to Ohio Savings Bank.
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Security for the Loan
The Loan is evidenced by the Note, which is secured by among other security:
x
the Deed of Trust;
x
the assignment to Ohio Savings Bank of all payments under the merchant builder contracts.
x
Any property that is part of the Land B that is released from the Bank of the West Deed of Trust
will become encumbered by the Deed of Trust.
x
The Guaranty.
x
Richard Ashby’s 1/3 interest in tax increment payable to an entity called Ten Ninety (as evidenced
by an assignment of 1/3 of any tax increment received by Ten Ninety from the City of Fontana).
Selected Covenants and Conditions
Under the Loan Agreement, there are several covenants made by Ashby USA, LLC and conditions
for the making of advances by Ohio Savings Bank, including:
1.
Ashby USA, LLC will begin construction and installation of Blue Top Improvements on or
before the 30th day after the closing of the loan. (Ashby USA, LLC began construction and installation on
or before the required date.)
2.
Ashby USA, LLC must request in writing any change in the Blue Top Improvement plans
that involves an expenditure in excess of $50,000, or the deletion of any facility, improvement or
expenditure.
3.
The Blue Top Improvements must be substantially complete by the earliest of: (i) the 120 th
day prior to the August 29, 2007 maturity date of the loan (i.e., May 1, 2007); (ii) June 1, 2007 (as such date
may be extended pursuant to KB Home Coastal Inc.’s Option Agreement); or (iii) any earlier date required
by the Option Agreement of KB Home Coastal Inc.. As of March 24, 2006, KB Home Coastal Inc. has
agreed to extend the date for completion of the Blue Top lots to June 1, 2007.
4.
Ashby USA, LLC and Ohio Savings Bank agree that at all times the loan will be “in
balance,” meaning that the unadvanced portion of the loan and amounts which may be re-advanced together
with any required Ashby USA, LLC equity funds, equals or exceeds the estimated remaining cost, in the
aggregate, to complete the Blue Top Improvements and to pay for all other items. If Ohio Savings Bank
determines that the loan is not “in balance,” Ohio Savings Bank has no further obligation to make an advance
unless Ashby USA, LLC deposits sufficient cash amounts within 30 days or Ohio Savings Bank elects to
allow Ashby USA, LLC to prove its ability to pay all amounts required to place the loan “in balance” again.
5.
Under the Loan Agreement, Ashby USA, LLC is obligated to complete improvements so that
Ashby USA, LLC can obtain reimbursement for authorized Blue Top Improvement costs in an amount not
less than the following cumulative total amounts by the following dates (unless an extension is provided due
to a force majeure event): (i) $4,000,000 by April 30, 2006; (ii) $10,000,000 by June 30, 2006; (iii)
$25,000,000 by December 31, 2006; and (iv) $40,000,000 by June 30, 2007. Ashby USA, LLC must satisfy
conditions of the Acquisition Agreement in order to be paid for improvements completed under the
Acquisition Agreement. The Authority has made no commitment that any of such amounts will be available
at the times specified by Ohio Savings Bank and Ashby USA, LLC in the Loan Agreement.
6.
The final map subdividing the Land A must be recorded by April 27, 2006 (240 days after
the date of the Loan Agreement).
42
Events of Default
There are numerous events of default under the Loan Agreement, including:
1.
Ashby USA, LLC fails to pay any amounts due and owing under the Loan Agreement.
2.
Ashby USA, LLC or Guarantor fails to observe or perform any term, covenant or agreement
under the Loan Agreement or the Guaranty.
3.
Ashby USA, LLC or Guarantor becomes insolvent.
4.
A material adverse change occurs in the financial condition of Ashby USA, LLC, either of
the guarantors, and certain affiliates of Ashby USA, LLC. For purposes of the Loan Agreement, the death
or incapacity of any guarantor is considered a change in financial condition.
5.
Stock, membership or interest of Ashby USA, LLC, orcertain affiliates of Ashby USA, LLC
is transferred.
6.
Ashby USA, LLC or either guarantor makes false, incorrect or incomplete statements to Ohio
Savings Bank.
7.
A default or an event of default occurs under any loan document, any other loan made by
Ohio Savings Bank to Ashby USA, LLC, or any surety bond or letter of credit issued to or for the benefit of
Ohio Savings Bank in connection with the loan and/or the credit facility.
8.
The failure of any of the conditions described in “Selected Covenants and Conditions,”
including failure to make certain benchmark principal payments.
9.
The failure of Ashby USA, LLC to perform under the Option Agreement, including any
default thereunder or the occurrence of an event that with notice or the passage of time, or both, would
constitute such a default, including the failure to complete the Blue Top Improvements by June 1, 2007.
10.
The failure of KB Home Coastal Inc. to replace the KB Home Coastal Inc. Letter of Credit
with cash and an additional letter of credit if KB Home Coastal Inc. elects the First Option Alternative.
11.
If Richard Ashby is no longer employed by or associated with Ashby USA, LLC, or if he
becomes deceased.
The foregoing are only some of the potential events of default. In such an event, Ohio Savings Bank
may, at its option, exercise any of the remedies available to it under the Loan Agreement, including (i)
terminatingthe Loan Agreement, (ii) seeking specific performance, and (iii) accelerating the payment of the
Loan and foreclosing on the Deed of Trust.
Deeds of Trust
The Loan is secured by a Deed of Trust recorded against the Land A and that portion of the Land
B that is owned by Ashby USA, LLC. The Deed of Trust may be released against any lots sold if certain
release payments and costs are paid. By virtue of subordination agreements, the Ohio Savings Bank received
a title policy that shows that the Deed of Trust is in first position in relation to other deeds of trust. There
are several other deeds of trust on the property, which the Loan Agreement allows to be in the following
priority:
x
Ashby Development Company, Inc. (“ADC”) and GRC Development Company, L.P., a California
limited partnership (“GRC”), a junior creditor, entered into an option agreement under which ADC
is obligated to make certain payments to GRC with respect to all of the property that remains subject
to the Deed of Trust. The junior debt is secured by a junior deed of trust by ADC (the “ADC Deed
of Trust”) for the benefit of GRC. ADC’s rights and obligations under this option agreement have
been assigned to and assumed by Ashby USA, LLC.
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x
Ashby USA, LLC and KB Home Coastal Inc. entered into the Option Agreement relating to portions
of the land secured by the Deed of Trust, which is secured by a deed of trust (the “KB Home Coastal
Inc. Deed of Trust”) for the benefit of KB Home Coastal Inc. Pursuant to an agreement between KB
Home Coastal Inc., Ashby USA, LLC and Ohio Savings Bank KB Home Coastal Inc. has agreed that
the lien of the Deed of Trust is senior and prior to the lien of the KB Home Coastal Inc. Deed of
Trust.
x
USA Investment Partners, LLC made a loan to Ashby USA, LLC in the principal amount of
$4,250,000. The loan is secured by a junior deed of trust by Ashby USA, LLC for the benefit of
USA Investment Partners, LLC, and is in position behind the Deed of Trust, the ADC Deed of Trust
and the KB Home Coastal Inc. Deed of Trust.
x
The Land B is currently encumbered by a deed of trust in favor of Bank of the West. The deed
secures the repayment of the outstanding amounts owed to Bank of the West, which as of December
31, 2005 was approximately $8,311,037. The note held by Bank of the West is due September 2,
2006, as the result of a recent extension granted by Bank of the West. Ashby USA, LLC intends to
repay the loan to Bank of the West from the proceeds of the sale of property to the
Tanamera/Roripaugh Entities, Continental Residential, Inc. and KB Home Coastal Inc. Once Bank
of the West is paid, the portion of the Land B owned by Ashby USA, LLC that was previously
encumbered by the deed of trust in favor of Bank of the West will be encumbered by Ohio Savings
Bank’s Deed of Trust.
The plans described herein and Ashby USA, LLC’s projections are subject to change. There can be
noassurance that Ashby USA, LLC has the willingness or ability to successfullyimplement the development
plans described above. In the event that cost overruns occur which exceed the funds described in the section
captioned “Plan of Finance” above, Ashby USA, LLC will need to raise additional funds. No assurance can
be given that such funds could be raised or would be raised on a timely basis. Continued development in the
District may also be adversely affected by changes in general economic conditions, fluctuations in the real
estate market and other similar factors. See “BONDOWNERS’ RISKS” herein for a discussion of risk
factors.
If and to the extent that internal financing and land sales revenues or alternative sources are
inadequate to pay the costs to complete the planned development of the lots within the District, portions of
the project may not be developable.
Sale of Phase II to KB Home Coastal Inc.; Take Down Options
KB Home Coastal Inc. as optionee, and Ashby USA, LLC, as optionor, entered into the Option
Agreement in July 2005. The Option Agreement grants KB Home Coastal Inc. an option to purchase a
portion of the residential lots in Phase II (herein, the “Phase II Residential Property”). Specifically, KB
Home Coastal Inc. can elect: (i) to exercise the option on the approximately 1,118 of the approximately 1,230
lots of the Phase II Residential Property (the “Overall Option Alternative”); (ii) to exercise the option for
approximately 412 lots of the Phase II Residential Property (the “First Option Alternative”); or (iii) not to
exercise the option to purchase any of the Phase II Residential Property (the “Termination Option
Alternative”). Each election is described in more detail below. In each case, the term of the option
commenced on the date that KB Home Coastal Inc. delivered a feasibility notice and title approval notice,
which occurred on July 27, 2005 and expires on the “Outside Closing Date” which is defined as 20 calendar
quarters after the delivery or deemed delivery of Acceptance of the Blue Top Condition on the Overall
Property (as defined below). KB Home Coastal Inc. is not yet a current landowner within the District, and
there can be no assurance that it will exercise its option to purchase lots within the District at the times
indicated or at all.
In connection with the Option Agreement KB Home Coastal Inc. has deposited with Ohio Savings
Bank oneor more irrevocable letters of credit in an aggregate amount of $39 million (the “KB Home Coastal
Inc. Letter of Credit”), based on the satisfaction of certain conditions under the Option Agreement (including
Ashby USA, LLC receiving its construction financing and the title company issuing a title policy to KB
Home Coastal Inc.). Ashby USA, LLC’s approved lender (Ohio Savings Bank) is named as the beneficiary
of the KB Home Coastal Inc. Letter of Credit, and Ashby USA, LLC has assigned its rights under the KB
Home Coastal Inc. Letter of Credit to Ohio Savings Bank. The deposit represented by the KB Home Coastal
44
Inc. Letter of Credit is deemed to be earned by Ashby USA, LLC and becomes nonrefundable to KB Home
Coastal Inc. upon (i) the delivery of a notice evidencing acceptance by KB Home Coastal Inc. of the portion
of the Phase II Residential Property for which the option is exercised in Blue Top Condition (the
“Acceptance Notice”),or (ii) KB Home Coastal Inc.’s election or deemedelection of the Termination Option
Alternative, except in the event KB Home Coastal Inc.’s election to terminate the Option Agreement is due
to a material default by Ashby USA, LLC. The beneficiary of the KB Home Coastal Inc. Letter of Credit
has the right to draw upon the KB Home Coastal Inc. Letter of Credit when Ashby USA, LLC has received
a notification of non-renewal and if KB Home Coastal Inc. has failed to renew or provide a replacement letter
of credit within 30 days after receipt of notice from Ashby USA, LLC of such non-renewal. The KB Home
Coastal Inc. Letter of Credit may also be drawn upon if (i) KB Home Coastal Inc. fails to annually renew the
KB Home Coastal Inc. Letter of Credit; (ii) KB Home Coastal Inc. fails to replace the KB Home Coastal Inc.
Letter of Credit with cash after all Ashby USA LLC’s work is complete, no title objections have been made,
and there is no default by Ashby USA, LLC under the Development Agreement; or (iii) the option is
terminated and the KB Home Coastal Inc. Letter of Credit is not replaced with cash. The KB Home Coastal
Inc. Letter of Credit may also be drawn upon if an amount is awarded to Ashby USA, LLC by an arbitrator.
Otherwise the KB Home Coastal Inc. Letter of Credit is replaced by cash, which is turned over to Ashby
USA, LLC. The escrow holder has recorded a performance deed of trust against the Phase II Residential
Property which secures Ashby USA, LLC’s obligation to refund the deposit to KB Home Coastal Inc. in the
event of a material default by Ashby USA, LLC and KB Home Coastal Inc.’s subsequent election to
terminate the Option Agreement.
It is currently estimated by Ashby USA, LLC that the grading of the lots in Phase II to a blue-top
condition will be completed from approximately September 2006 through May 2007. When this occurs, and
Ashby USA, LLC’s work is completed, which includes satisfaction of the conditions to release of building
permits and satisfaction of conditions relating to issuance of certificates of occupancy, the option with KB
Home Coastal Inc. provides for KB Home Coastal Inc. to begin taking down or closing on portions of the
lots. KB Home Coastal Inc. may either acquire approximately 412 of the lots in Phase II in Planning Areas
16, 23, 24, and 31, or may acquire all of the approximately 1,118 remaining lots in Phase II (not including
the 112 lots in Planning Area 12 that are subject to a separate transaction). The sale of the approximately
412 lots would close within 45 days of the ability to obtain building permits, satisfaction of conditions
relating to issuance of certificates of occupancy and the date of acceptance of the Blue Top Condition
specified in the Option Agreement, provided however, that KB Home Coastal Inc. has the right to extend the
closing date for eight months. If KB Home Coastal Inc. terminates the Option, then the KB Home Coastal
Inc. Letter of Credit must be replaced by $39 million in cash, which cash is released to Ohio Savings Bank
and applied to reduce amounts due from Ashby USA, LLC. If KB Home Coastal Inc. exercises the Overall
Option Alternative (approximately 1,118 lots), then the KB Home Coastal Inc. Letter of Credit must be
replaced with approximately $51 million in cash, which cash is released to Ohio Savings Bank and applied
to reduce amounts due from Ashby USA, LLC. If KB Home Coastal Inc. exercises the First Option
Alternative (approximately 412 lots), the KB Home Coastal Inc. Letter of Credit is replaced with
approximately $15.4 million in cash, which is released to Ashby USA, LLC and an additional KB Home
Coastal Inc. Letter of credit for approximately $23.6 million must be provided by KB Home Coastal Inc.
The deposit and KB Home Coastal Inc. Letter of Credit should always be equal to 19.76% of the purchase
price.
Under the Option Agreement, Ashby USA, LLC is obligated to deliver the lots in Blue Top
Condition on or before June 1, 2007 (subject to force majeure). The failure to deliver the lots in Blue Top
Condition provides KB Home Coastal Inc. with an option to terminate the Option Agreement, or extend the
date for completing such work with Ashby USA, LLC paying for any costs, fees or expenses incurred in
connection with the KB Home Coastal Inc. Letter of Credit. The Option Agreement defines Blue Top
Condition as follows:
(i)
all civil and soils engineering work pertaining to rough grading and the construction and
installation of improvements outside the boundaries of the Phase II Residential Property has been performed
and paid for, all improvements outside the boundaries of the Phase II Residential Property has been
completed, and all other obligations have been completed that will allow the issuance of building permits
andcertificates of occupancy(subject to completion of improvements to be constructed by KB Home Coastal
Inc. as the merchant builder);
(ii)
each lot is graded in accordance with the grading plans;
45
(iii)
all wet and dry utilities have been completed up to the property line;
(iv)
permanent access over public streets has been provided to the property line;
(v)
all storm water requirements and best management practices are in place and have been
complied with;
(vi)
allcontractor and consultant requirements have been provided to KB Home Coastal Inc.; and
(vii)
except for the work that KB Home Coastal Inc. must complete as described in the Option
Agreement, all work necessary for the City to issue building permits and occupancy permits for
approximately 1,118 units has been completed.
As noted above, KB Home Coastal Inc. has the following three options, which may be exercised on
or before a date that is 60 days following KB Home Coastal Inc.’s receipt of the “Estimated Completion Date
Notice.” The Estimated Completion Date Notice will be provided to KB Home Coastal Inc. when Ashby
USA, LLC’s engineerestimates that the improvements to bring the Phase II Residential Property to Blue Top
Condition are four months away. KB Home Coastal Inc.’s failure to exercise the option in that time frame
could result in a deemed election of the Termination Option Alternative. The three options available to KB
Home Coastal Inc. under the Option Agreement are as follows:
Option #1: The Overall Option Alternative: If KB Home Coastal Inc. elects the Overall Option
Alternative, a minimum of 63 lots within the Phase II Residential Property must be purchased and escrow
closed during each calendar quarter of every year commencing in the third quarter following the date of
delivery of the Acceptance Notice (said date being referred to herein as the “Blue Top Date”) and continuing
for 20 quarters until all of the approximately 1,118 lots in the Phase II Residential Property have been
purchased. However, KB Home Coastal Inc. may elect to purchase the first lots prior to the third quarter
followingthe Blue Top Date. KB Home Coastal Inc. can purchase any or all of the lots in increments as long
as KB Home Coastal Inc. gives Ashby USA, LLC at least 45 days advance notice of which lots it intends to
purchase. Within 10 days of the Blue Top Date, the KB Home Coastal Inc. Letter of Credit will be replaced
with cash in an amount equal to 19.76% of the purchase price of all approved lots in the Phase II Residential
Property, which shall be immediately paid to Ohio Savings Bank to credit to amounts due from Ashby USA,
LLC and credited against the purchase price of the Phase II Residential Property. The failure to replace the
KB Home Coastal Inc. Letter of Credit with cash will allow the beneficiary of the KB Home Coastal Inc.
Letter of Credit to draw upon the KB Home Coastal Inc. Letter of Credit; provided; however, that all Ashby
USA, LLC’s work required under the Option Agreement is completed, the title company has not received
notice of any disapproved exceptions and Ashby USA, LLC is not in default under the Development
Agreement contingent on arbitration award in case of dispute.
Option #2: The First Option Alternative: If KB Home Coastal Inc. elects the First Option
Alternative, the approximately 412 lots to be acquired must be purchased and escrow closed within 45 days
from the Blue Top Date; provided, however, that KB Home Coastal Inc. has the right to extend the closing
date for eight months. The KB Home Coastal Inc. Letter of Credit will be replaced within 10 days after the
Blue Top Date with (i) cash in the amount of approximately 19.76% of the purchase price of the
approximately 412 lots to be acquired (the “Purchase Deposit”), which will be immediately paid to Ashby
USA, LLC and credited against the purchase price of the approximately 412 lots, and (ii) a letter of credit
for the difference between the Purchase Deposit and $39 million, as adjusted proportionately if more or less
than the approximately 412 lots are approved, which will secure the payment of the purchase price for the
approximately 412 lots. The failure to replace the KB Home Coastal Inc. Letter of Credit with cash/letter
of credit will allow the beneficiary of the KB Home Coastal Inc. Letter of Credit to draw upon the KB Home
Coastal Inc. Letter of Credit provided; however, that all Ashby USA, LLC’s work under the Option
Agreement is completed, the title company has not received notice of any disapproved exceptions and Ashby
USA, LLC is not in default under the Development Agreement contingent on arbitration award in case of
dispute. Ashby USA, LLC would then market and sell the balance of the lots to other merchant builders.
Option #3: The Termination Option Alternative: If KB Home Coastal Inc. elects the Termination
Option Alternative, the KB Home Coastal Inc. Letter of Credit will be replaced within 10 days of such
election with a like amount of cash to be immediately paid to Ohio Savings Bank to credit to amounts due
from Ashby USA, LLC, and KB Home Coastal Inc. shall have no further obligation to purchase any of the
lots in the Phase II Residential Property unless termination is due to a material default by Ashby USA, LLC,
46
in which case the KB Home Coastal Inc. Letter of Credit is released to KB Home Coastal Inc. and KB Home
Coastal Inc. owes no amounts to Ashby USA, LLC.
As soon as KB Home Coastal Inc. gives notice of either the Overall Option Alternative or the First
Option Alternative, KB Home Coastal Inc. assumes all obligations and liabilities of the applicable property,
to the same extent as if fee simple ownership and possession had been conveyed and delivered, including the
(i) payment of all real property taxes and assessments, (ii) the payment of certain interest on the purchase
price of the lots, (iii) the payment of loan costs associated with the Loan, and (iv) all obligations associated
with the District.
When KB Home Coastal Inc. delivers a notice indicating its intention to close on lots (the “Closing
Notice”),the Option Agreement becomes a purchase and sale agreement with respect to the incremental lots
indicated on the Closing Notice and the Option Agreement remains an option with respect to the balance of
the lots.
The Option Agreement acknowledges that, either prior to or subsequent to the close of escrow,
Ashby USA, LLC intends to establish one or more community facilities districts (“CFDs”) on the Phase II
Residential Property which will (i) encumber the Phase II Residential Property with the annual levy of
special taxes or other charges (“Impositions”), and (ii) pledge the Phase II Residential Property as security
for a borrowing, the issuance of bonds, or the payment of Impositions. KB Home Coastal Inc. agrees to take
title to the Phase II Residential Property (or portion thereof) upon the close of escrow subject to any CFDs
and Impositions in existence, and subsequent to the close of escrow to have any of the CFDs or Impositions
formed or imposed upon the Phase II Residential Property, so long as the aggregate of all Impositions on a
lot does not exceed 2% of the estimated sales price of a home on such lot at the time the special tax rates are
set or modified.
In closing on the lots, the Option Agreement provides that, except with Ashby USA, LLC’s written
consent, (i) no more than two escrow closings may occur in any month (which may include multiple lot
closings) and (ii) no lots may close during the fourth quarter of a year and no more than 400 lots during any
2nd or 3 rd quarter.
Inthe event of a material breach of the Option Agreement byAshby USA, LLC prior to the Blue Top
Date, but subject to certain cure rights of lenders:
(i)
KB Home Coastal Inc. can deliver a written notice of termination, in which event the KB
Home Coastal Inc. Letter of Credit is returned to KB Home Coastal Inc. and the Phase II Residential Property
is released from the deed of trust; or
(ii)
KB Home Coastal Inc. can elect to extend the Blue Top Date and exercise its Takeover
Rights (as defined below).
In the event of a material breach of the Option Agreement by Ashby USA, LLC following the Blue
Top Date:
(i)
KB Home Coastal Inc. can deliver a written notice of termination, in which event the escrow
holder returns the portion of the KB Home Coastal Inc. Letter of Credit which has not been applied to
purchase increments and no other sums, and the Phase II Residential Property is released from the deed of
trust;
(ii)
KB Home Coastal Inc. can exercise its Takeover Rights (defined below); or
(iii)
KB Home Coastal Inc. can commence an action of specific performance and incidental
damages of $500,000 or less, in which event KB Home Coastal Inc. must still perform its obligations.
Subject to certain cure rights of lenders, KB Home Coastal Inc. has a right to take over certain work
should Ashby USA, LLC fail to perform such work (“Takeover Rights”), as follows:
a)
Prior to the Blue Top Date, KB Home Coastal Inc. can take over and fund the obligations
of Ashby USA, LLC to bring the property to Blue Top Condition, and Ashby USA, LLC is required to
47
reimburse KB Home Coastal Inc. for such costs (plus a 10% administrative charge) in cash or as a credit
against the purchase price of the lots to be acquired by KB Home Coastal Inc.
b)
Following the Blue Top Date, if the City will notissue a buildingpermit or occupancy permit
because of the failure of Ashby USA, LLC to complete the work required of it in the Option Agreement, KB
Home Coastal Inc. may perform such work, and Ashby USA, LLC is required to reimburse KB Home Coastal
Inc. for such costs (plus a 10% administrative charge) in cash or as a credit against the purchase price of the
lots to be acquired by KB Home Coastal Inc.
Estimated Absorption
As of January 15, 2006, Ashby USA, LLC has closed the sale of 411 of the proposed residential lots
in Phase I, has an agreement for sale of an additional 104 lots in Phase I to Continental Residential, Inc. and
has options for the sale of the approximately 1,230 residential lots within Phase II to KB Home Coastal Inc.,
with closings for the final lots in Phase I estimated to occur at the end of the third quarter of 2006 and initial
closings for lots in Phase II estimated to occur as described above with respect to the Option Agreement and
the option agreement for the 112 lots. Ashby USA, LLC estimates sales of completed homes in Phase I will
occur from the fourth quarter of 2006 through 2008.
The foregoing absorption estimates were provided by Ashby USA, LLC. The Market Absorption
Study contains projected absorption of production homes that differ from those of Ashby USA, LLC. The
Market Absorption Study and the Appraisal were prepared utilizing an estimated September 2006 date of
completion of necessary infrastructure to allow issuance of remaining building permits for homes in Phase
I and an estimated September 2007 date of completion of necessary infrastructure to allow issuance of
building permits for homes in Phase II. The September 2007 date of completion takes into account the
possibility that the schedule prepared by Ashby USA, LLC with respect to Phase II is not achieved. It is also
possible that the schedule prepared by Ashby USA, LLC with respect to Phase I may not be achieved. See
“PROPERTY OWNERSHIP AND DEVELOPMENT – Market Absorption Study” and APPENDIX D –
“Market Absorption Study.”
History of Property Tax Payment; Loan Defaults; Bankruptcy
The authorized signatories executing a certificate on behalf of Ashby USA, LLC certifythat, to their
actual knowledge:
•
Under the definition of Affiliate in the Ashby USA, LLC Continuing Disclosure Agreement,
Ashby USA, LLC has numerous Affiliates consisting of various entities that are developing or have been
involved in the development of numerous projects over an extended period of time. It is likely that some of
such Affiliates have been delinquent at one time or another in the payment of ad valorem property taxes,
special assessments or special taxes. Ashby USA, LLC does not have actual knowledge that Ashby USA,
LLC or any such Affiliate is currently delinquent in any material amount in the payment of ad valorem
property taxes, special assessments or special taxes.
•
Neither Ashby USA, LLC nor any of its Affiliates is currently in default on any loans, lines
of credit or other obligation related to its development in the District or any of its other projects which
default would in any way materially and adversely affect its ability to develop its property in the District as
described in the Official Statement or to pay the Special Taxes for which it is responsible. Except as
described under “ – Deeds of Trust,” no Affiliate has any loans, lines of credit, or other obligations related
to the development in the District.
•
Ashby USA, LLC, the Members of Ashby USA, LLC and the parent entities of such
Members of Ashby USA, LLC are solvent and no proceedings are pending, or threatened in which Ashby
USA, LLC, the Members of Ashby USA, LLC and the parent entities of such Members of Ashby USA, LLC
may be adjudicated as bankrupt or discharged from any or all of their respective debts or obligations, or
granted an extension of time to pay their respective debts or obligations, or be allowed to reorganize or
readjust their respective debts or obligations.
•
No action, suit, proceedings, inquiry or investigations at law or in equity, before or by any
court, regulatory agency, public board or body, is pending (with service of process to Ashby USA, LLC or
an Affiliate having been accomplished) against Ashby USA, LLC or any Affiliate or, to Ashby USA, LLC’s
48
actual knowledge, threatened, which if successful, would materially adversely affect the ability of Ashby
USA, LLC to complete the development and sale of the property proposed for development by such entity
within the District or to pay special taxes or ad valorem tax obligations when due on such property within
the District.
Merchant Builder Litigation against Ashby USA, LLC; Sales of Merchant Builder Tracts. In 2003,
Ashby USA, LLC sold land in Planning Areas 4A to Roripaugh Ranch 100 L.P. A complaint was filed on
May 28, 2004 by Roripaugh Ranch 100, L.P. for which Griffin Communities acts as merchant builder (100
lots in Planning Area 4A) against Ashby USA, LLC alleging breach of contract and fraud, and seeking
damages, declaratory relieve and a temporary restraining order. Ashby USA, LLC was never served with
that lawsuit and the lawsuit was dismissed one week after it was filed on June 4, 2004. A second complaint
was filed on February 10, 2005 by Roripaugh Ranch 100, L.P. against Ashby USA, LLC relating to breach
of contract and breach of covenant of good faith and seeking damages and declaratory relief. Ashby USA,
LLC was served with that complaint on March 1, 2005. Ashby USA, LLC and Roripaugh Ranch 100, L.P.
have resolved the issues raised in the complaint and a series of agreements have been entered into whereby
Tanamera/Roripaugh, LLC became the owner of the property in Planning Area 4A on June 30, 2005 and the
lawsuit was dismissed with prejudice as of that date.
During the time period of negotiations to resolve the Griffin Communities litigation, an agreement
wasentered into by Tanamera/Roripaugh II, LLC with Shea HomesLimited Partnership, a Californialimited
partnership (“Shea Homes Limited Partnership”) with respect to lots in Planning Area 3, which sale closed
on November 2, 2005.
A third complaint was filed in August 2005, by Roripaugh Ranch 1, LP, a California limited
partnership for which Meeker Companies, Inc., a California corporation (“Meeker Companies, Inc.”) acts
as merchant builder (113 lots in Planning Area 4B). Roripaugh Ranch 1, LP’s lawsuit against Ashby USA,
LLC, and others, alleged, among other things, breach of contract and breach of the covenant of good faith
and seeking damages and declaratory relief. Ashby USA, LLC was served with that complaint in August
2005. Ashby USA, LLC and Roripaugh Ranch 1, LP resolved the issues raised in the complaint and a series
of agreements were executed whereby Traditions at Roripaugh, LLC became the owner of the property in
Planning Area 4B on January 6, 2006, and the lawsuit was dismissed with prejudice as of that date.
Continental Residential, Inc.
Continental Residential, Inc., a California corporation (“Continental Residential, Inc.”) has entered
into an agreement with Ashby USA, LLC for the acquisition of lots for development of 104 residential units
on approximately 14.53 net acres in Planning Area 1A, including 6 lots which were approved pursuant to
a Specific Plan amendment approved on January 11, 2005. Ashby USA, LLC has indicated lots for all 104
units are expected to close in September 2006 upon Ashby USA, LLC’s satisfaction of development
conditions such that Continental Residential, Inc. can obtain building permits and certificates of occupancy.
Continental Residential, Inc. is not yet a landowner within the District, and there can be no assurance that
it will close escrow on its lots within the District at the times indicated or at all.
Continental Residential, Inc. is a subsidiary of DR Horton, Inc, a Delaware corporation (“DR
Horton”). DR Horton is a New York Stock Exchange listed corporation traded under the ticker symbol
“DHI.” DR Horton was founded as a family business in 1978. DR Horton now has over 50 divisions
operating in over 700 communities, located in 23 states across the United States. Additionally DR Horton
provides mortgage and title insurance services in many of its markets.
Description of the Project. The development which constitutes Continental Residential, Inc.’s
project, together with the estimated lot sizes, unit sizes and base sales price range, is set forth below.
Project Name
Minimum
Lot Size
(Square Feet)
Estimated Unit
Size
(Square Feet)
Estimated
Base Sales
Price Range
Castillo
5,000 sq. ft.
1,949 - 2,949
$410,000 - $480,000
49
Total Units
104
Statusof Permits and Approvals. The lots for 98 of the units are encompassed within a tentative tract
map. The final map for 98 of the units has been processed by Ashby USA, LLC and has been approved by
City staff, but is not expected to be recorded until Ashby USA, LLC satisfies development conditions such
that Continental Residential, Inc. can obtain building permits and certificates of occupancy, which is
estimated to occur by the end of the third quarter of 2006 for all 104 units. The lots for 6 of the units are
encompassed within a tentative tract map which Ashby USA, LLC anticipates will be approved by May
2006. Continental Residential is obligated to complete submission of construction landscaping plans. Ashby
USA, LLC is obligated to complete the following tasks as required by the Planning Department: (1) deposit
of landscape maintenance bonds; (2) completion of landscape plans for perimeter slopes; and (3) submission
of the final report from the archaeologist and paleontologist monitor. Pursuant to the purchase agreement
between Ashby USA, LLC and Continental Residential, Inc., Ashby USA, LLC is obligated to deliver bluetop lots to Continental Residential, Inc. As described above, under “ – Status of Permits and Approvals,”
Ashby USA, LLC will be constructing all backbone public improvements and has rough graded the lots.
Continental Residential, Inc. will be responsible for final grading and for constructing in-tract street, water,
sewer and dry utility improvements for the detached single family housing lots. Continental Residential, Inc.
will construct model and production homes. Continental Residential, Inc. estimates it will begin model
construction in the fourth quarter of 2006. Closings of home sales are expected to commence in the third
quarter of 2007.
Final grading for the lots is estimated to commence in the third quarter of 2006. The majority of the
in-tract sewer has been installed and a portion of the in-tract water has been installed by Ashby USA, LLC.
In-tract water is anticipated to be completed in the fourth quarter of 2006 and streets, curbs and gutters are
estimated to commence construction in the fourthquarter of 2006. Because Continental Residential, Inc. will
acquire rough graded sites, Continental Residential, Inc. is responsible for work to bring the lots to a
“finished” condition. As of March 1, 2006, Continental Residential, Inc.’s estimated costs for in-tract
improvement costs and fees to achieve finished lots aggregate $3,200,000 of which approximately $50,000
had been expended as of January 15, 2006, and approximately $3,150,000 remained to be expended. In
addition, Continental Residential, Inc. will incur model and production home construction costs.
Plan of Finance. Continental Residential, Inc. is financing development of the property from internal
sources provided by its parent entity. As of January 15, 2006, Continental Residential, Inc. estimates that
approximately $3,050,000 had been expended in connection with the development of the project, excluding
anon-refundable deposit paidin connection with its purchase agreement with Ashby USA, LLC. Continental
Residential, Inc. is not yet a landowner within the District, and there can be no assurance that it will close
escrow on its lots within the District at the times indicated or at all.
There is no assurance that amounts necessary to finance the remaining site development and
construction costs within Planning Area 1A will be available fromContinental Residential, Inc. or any other
source, when needed. Continental Residential, Inc. is under no legal obligation of any kind to borrow or
expend funds for the development of the property within Planning Area 1A. Any contribution of capital by
Continental Residential, Inc. or any other Continental Residential, Inc. entity, or any borrowings by
Continental Residential, Inc., whether to fund costs of development within Planning Area 1A or to pay
special taxes, is entirely voluntary.
Development Experience. DR Horton and its subsidiaries, including Continental Residential, Inc.,
designs, constructs, markets and sells single-family residences, town homes and condominiums primarily to
entry-level and “move-up” buyers and is a geographically diverse homebuilder in the United States of
America. DR Horton, delivered approximately 43,567 homes and had approximately $10.66 billion in
revenues for the DR Horton’s fiscal year ended September 30, 2005.
Absorption. According to DR Horton, DR Horton’s development has a projected absorption rate of
35units per quarter, with home closings commencing in the third quarter of 2007. The foregoing absorption
estimates were provided by DR Horton and rely in part on Ashby USA, LLC’s projected completion of
infrastructure improvements. The Market Absorption Study contains projected absorption of production
homes that differ from those of Ashby USA, LLC. The Market Absorption Study and the Appraisal were
prepared utilizing an estimated September 2006 date of completion of necessary infrastructure to allow
issuance of remaining building permits for homes in Phase I and an estimated September 2007 date of
completion of necessary infrastructure to allow issuance of building permits for homes in Phase II. The
September 2007 date of completion takes into account the possibility that the schedule prepared by Ashby
USA, LLC with respect to Phase II is not achieved. It is also possible that the schedule prepared by Ashby
50
USA, LLC with respect to Phase I may not be achieved. See “PROPERTY OWNERSHIP AND
DEVELOPMENT – Market Absorption Study” and APPENDIX D – “Market Absorption Study.”
History of Property Tax Payment; Loan Defaults; Bankruptcy. DR Horton has made the following
representations:
•
Under the definition ofAffiliate in Ashby USA, LLC Continuing Disclosure Agreement, DR
Horton has numerous Affiliates consisting of various entities that are developing or have been involved in
the development of numerous projects over an extended period of time. It is likely that DR Horton, and any
of such Affiliates have been delinquent at one time or another in the payment of ad valorem property taxes,
special assessments or special taxes. DR Horton does not have actual knowledge that it or any such Affiliate
is currently delinquent in any material amount in the payment of ad valorem property taxes, special
assessments or special taxes.
•
Neither DR Horton nor any of its Affiliates is currently in default on any loans, lines of
credit or other obligation related to its development in the District or any of its other projects which default
would in any way materially and adversely affect its ability to develop its development in the District as
described in the Official Statement or to pay the Special Taxes for which it is responsible. No Affiliate has
any loans, lines of credit, or other obligation related to the development in the District.
•
DR Horton and its Affiliates are solvent and neither DR Horton nor any of its current
Affiliates has ever filed bankruptcy or been declared bankrupt, or has any proceeding pending or to DR
Horton’s actual knowledge threatened in which it may be adjudicated as bankrupt, or discharged from any
or all of its debts or obligations.
•
court, regulatory agency, public board or body, is pending (with service of process to DR Horton or an
Affiliate having been accomplished) against DR Horton or anyAffiliate or, to DR Horton’ actual knowledge,
threatened, which if successful, would materially adversely affect the ability of DR Horton to complete the
acquisition and development of the property expected to be owned within the District to pay Special Taxes,
assessments or ad valorem tax obligations when due on its property within the District.
Davidson Roripaugh Ranch 122 LLC, a California limited liability company, acquired the lots
proposed for development of 99 residential units on approximately 14.67 net acres in Planning Area 2 on
May 30, 2003. Davidson Roripaugh Ranch 122 LLC. The manager of Davidson Roripaugh Ranch 122 LLC
is Davidson Project Service Inc., a California corporation. Davidson Roripaugh Ranch 122 LLC is under
commonownership with Davidson Builders, Inc., aCalifornia corporation, which has specialized in building
single-family attached and detached homes in San Diego County since 1979.
Description of the Project. The development which constitutes Davidson Roripaugh Ranch 122
LLC’s project, together with the estimated lot sizes, unit sizes and base sales price range, is set forth below.
Project Name
Minimum
Lot Size
(Square Feet)
Estimated Unit
Size
(Square Feet)
Estimated
Base Sales
Price Range
Total
Units
Not yet named
5,000
2,960 - 3,357
$538,000 - $558,000
99
Status of Permits and Approvals. The lots for the 99 units are encompassed within a final map
recorded on April 28, 2004. Davidson Roripaugh Ranch 122 LLC is obligated to complete submission of
construction landscaping plans. Ashby USA, LLC is obligated to complete the following tasks as required
bythe Planning Department: (1) deposit of landscape maintenance bonds; (2) completion of landscape plans
forperimeter slopes; and (3)submission ofthe final report from the archaeologist and paleontologist monitor.
Pursuant to the purchase agreement between Ashby USA, LLC and Davidson Roripaugh Ranch 122 LLC,
Ashby USA, LLC was obligated to deliver blue top lots to Davidson Roripaugh Ranch 122 LLC. As
described above, under “ – Status of Permits and Approvals,” Ashby USA, LLC will be constructing all
backbone public improvements and rough grading the lots. Davidson Roripaugh Ranch 122 LLC will be
51
responsible for final grading and for constructing model and production homes. By agreement among the
merchant builders and based on development conditions, Davidson Roripaugh Ranch 122 LLC will utilize
54 of the 107 building permits for which development thresholds have been satisfied following issuance of
the 2006 Bonds. Davidson Roripaugh Ranch 122 LLC estimates it will begin model construction in the
second quarter of 2006. Closings of home sales are expected to commence in the fourth quarter of 2006.
As of January 15, 2006, Davidson Roripaugh Ranch 122 LLC has installed the in-tract water and
sewer, and the in-tract streets have been paved and curbs and gutters have been installed. Because Davidson
Roripaugh Ranch 122 LLC acquired blue top sites, Davidson Roripaugh Ranch 122 LLC is responsible for
work to bring the lots to a “finished” condition. Davidson Roripaugh Ranch 122 LLC’s estimated costs for
in-tract improvement, excluding fees such as the Transportation Uniform Mitigation Fee, to achieve finished
lots aggregate approximately $5,518,908. Approximately $2,006,850 had been expended as of January 15,
2006, and approximately $3,512,058 remained to be incurred. In addition, Davidson Roripaugh Ranch 122
LLC will incur model and production home construction costs.
Plan of Finance. Davidson Roripaugh Ranch 122 LLC has a loan with Wachovia Bank National
Association, a national banking association, as agent for First Union Commercial Corporation, a North
Carolina corporation, with an available facility of $8,651,000 of which approximately $7,566,878 was
outstanding as of March 9, 2006 and a loan in the amount of $5,500,000 from Lowe Enterprises Residential
Investors, LLC, a Delaware limited liability company, of which approximately $5,221,017 was outstanding
as of February 28, 2006. Davidson Roripaugh Ranch 122 LLC also has a revolving line of credit facility of
$18,651,000 for construction of the homes upon meeting certain terms and conditions. As of January 15,
2006, Davidson Roripaugh Ranch 122 LLC estimates that approximately $2,006,850 had been expended in
connection with the development of the project, excluding land acquisition costs and excluding consultant
costs.
construction costs within Planning Area 2 will be available from the lenders referenced above, or any other
source, when needed. Davidson Roripaugh Ranch 122 LLC is under no legal obligation of any kind to
borrow or expend funds for the development of the property within Planning Area 2. Any contribution of
capital to Davidson Roripaugh Ranch 122 LLC or any borrowings by Davidson Roripaugh Ranch 122 LLC
whether to fund costs of development within Planning Area 2 or to pay special taxes, is entirely voluntary.
Development Experience. Davidson Builders, Inc. and its subsidiaries and Affiliates, including
Davidson Roripaugh Ranch 122 LLC designs, constructs, markets and sells single-family residences
primarily to entry-level and “move-up” buyers and is a geographically diverse homebuilder in the United
States of America. Davidson Builders, Inc., and its subsidiaries and Affiliates delivered approximately 174
homes and had approximately $184 million in revenues for the Davidson Builders, Inc.’s fiscal year ended
December 31, 2005.
Absorption. According to Davidson Roripaugh Ranch 122 LLC, Davidson Roripaugh Ranch 122
LLC’s development has a projected absorption rate of 32 units per quarter, with home closings commencing
in the fourth quarter of 2006. The foregoing absorption estimates were provided by Davidson Roripaugh
Ranch122 LLC andrely in part on Ashby USA, LLC’s projected completion ofinfrastructure improvements.
The Market Absorption Study contains projected absorption of production homes that differ from those of
Ashby USA, LLC. The Market Absorption Study and the Appraisal were prepared utilizing an estimated
September 2006 date of completion of necessary infrastructure to allow issuance of remaining building
permits for homes in Phase I and an estimated September 2007 date of completion of necessary
infrastructure to allow issuance of building permits for homes in Phase II. The September 2007 date of
completion takes into account the possibility that the schedule prepared by Ashby USA, LLC with respect
to Phase II is not achieved. It is also possible that the schedule prepared by Ashby USA, LLC with respect
to Phase I may not be achieved. See “PROPERTY OWNERSHIP AND DEVELOPMENT – Market
Absorption Study” and APPENDIX D – “Market Absorption Study.”
Historyof Property Tax Payment; Loan Defaults; Bankruptcy. Davidson Roripaugh Ranch 122 LLC
has made the following representations:
•
Under the definition of Affiliate in Ashby USA, LLC Continuing Disclosure Agreement,
Davidson Roripaugh Ranch 122 LLC has numerous Affiliates consisting of various entities that are
developing or have been involved in the development of numerous projects over an extended period of time.
52
It is likely that Davidson Roripaugh Ranch 122 LLC and any of such Affiliates have been delinquent at one
time or another in the payment of ad valorem property taxes, special assessments or special taxes.
Davidson Roripaugh Ranch 122 LLC does not have actual knowledge that it or any such Affiliate is currently
delinquent in any material amount in the payment of ad valorem property taxes, special assessments or
special taxes.
•
Neither Davidson Roripaugh Ranch 122 LLC nor anyof its Affiliates is currently in default
on any loans, lines of credit or other obligation related to its development in the District or any of its other
projectswhich default would in any way materially and adverselyaffect its ability to developits development
in the District as described in the Official Statement or to pay the Special Taxes for which it is responsible.
No Affiliate has any loans, lines of credit, or other obligation related to the development in the District.
•
Davidson Roripaugh Ranch 122 LLC and its Affiliates are solvent and neither Davidson
Roripaugh Ranch 122 LLC nor any of its current Affiliates has ever filed bankruptcy or been declared
bankrupt, or has any proceeding pending or to Davidson Roripaugh Ranch 122 LLC’s actual knowledge
threatened in which it may be adjudicated as bankrupt, or discharged from any or all of its debts or
obligations.
•
court, regulatory agency, public board or body, is pending (with service of process to Davidson Roripaugh
Ranch 122 LLC or an Affiliate having been accomplished) against Davidson Roripaugh Ranch 122 LLC or
anyAffiliate or, to Davidson Roripaugh Ranch 122 LLC’ actual knowledge, threatened,which if successful,
would materially adversely affect the ability of Davidson Roripaugh Ranch 122 LLC to complete the
acquisition and development of the property expected to be owned within the District to pay Special Taxes,
assessments or ad valorem tax obligations when due on its property within the District.
The Tanamera/Roripaugh Entities
The Tanamera/Roripaugh Entities operate under the name of Tanamera Residential Group. The
Tanamera/Roripaugh, Entities are owned by Tanamera Homes, LLC, a California limited liability company
(“Tanamera Homes, LLC”). Tanamera Homes, LLC is owned by Monaco Diversified Corp., a California
corporation, and Housing Partners, LLC, a Nevada limited liability company (“Housing Partners”). Housing
Partners is owned by USA Investment Partners, LLC, a Nevada limited liability company (“USA Investment
Partners, LLC”), which is a member in Ashby USA, LLC. The principals of Tanamera Residential Group
include Tom Hantges and Joe Milanowski, who are also principals of USA Commercial Real Estate Group
and who are described above, as well as Anthony and Sue Monaco who have specialized in building singlefamily detached homes in Southern California since 1985.
Description of Projects. The developments which constitute the Tanamera/Roripaugh Entities’
projects, together with the estimated lot sizes, unit sizes, and base sales price ranges are set forth below.
Planning Area/
Project Name
3 – Madison
4A – Shutters
4B – Hamptons
Minimum
Lot Size
(square feet)
Estimated Unit
Size
(square feet)
5,000
5,000
5,000
1,974 - 2,699
2,007 - 3,246
2,346 - 2,951
Estimated Base
Sales Price Range
$459,990 - $519,990
$459,990 - $539,990
$489,000 - $529,990
Total
Units
99
100
113
Status of Permits and Approvals. The lots for the 99 units in Planning Area 3 and the 100 units in
Planning Area 4A are encompassed within a final map recorded on April 28, 2004. The lots for the 113 units
in Planning Area 4B are encompassed within a final map which has been approved by City staff but which
has not yet been presented to the City Council which is required before it can be recorded.
Tanamera/Roripaugh, LLC acquired the lots in Planning Area 4A on June 30, 2005 from Griffin
Communities. The lots in Planning Area 4A are proposed for development of 100 residential units on 15.12
net acres. As of January 15, 2006, the lots are in a near-finished condition with some improvements such
as sidewalks and street lights remaining and remaining fees to be paid.
53
Tanamera/Roripaugh II, LLC acquired the lots in Planning Area 3 on November 2, 2005 from Shea
Homes Limited Partnership. The lots in Planning Area 3 are proposed for development of 99 residential
units on approximately 13.9 net acres. As of January 15, 2006, the lots are in a near-finished condition with
some improvements such as sidewalks and street lights remaining and remaining fees to be paid.
Traditions at Roripaugh, LLC acquired the lots in Planning Area 4B from Roripaugh Ranch 1, LP,
a California limited partnership for which Meeker Companies, Inc., a California corporation was to act as
merchant builder on January 6, 2006. The lots in Planning Area 4B are proposed for development of 113
residential units on approximately 22.3 net acres. As of January 15, 2006, the lots were graded to a blue-top
condition, and some of the in-tract utilities had been installed.
The Tanamera/Roripaugh Entities are obligated to complete the following tasks as required by the
Planning Department: (1) re-approval of building plans which have expired; and (2) submission of
construction landscaping plans. Ashby USA, LLC is obligated to complete the following tasks as required
bythe Planning Department: (1) deposit of landscape maintenance bonds; (2) completion of landscape plans
forperimeter slopes; and (3)submission ofthe final report from the archaeologist and paleontologist monitor.
Pursuant to a prior purchase agreement between Ashby USA, LLC and Shea Homes Limited Partnership,
predecessor to Tanamera/Roripaugh II, LLC, Ashby USA, LLC was obligated to deliver blue-top lots with
respect to Planning Area 3. As described above, under “ – Status of Permits and Approvals,” Ashby USA,
LLC will be constructing all backbone public improvements and rough grading the lots. The
Tanamera/Roripaugh Entities will be responsible for final grading and for constructing in-tract street, water,
sewer and dry utility improvements for the detached single housing lots. Tanamera Residential Group will
construct model and production homes. By agreement among the Merchant Builders and based on
development conditions, the Tanamera/Roripaugh Entities will utilize 53 of the 107 building permits for
which development thresholds have been satisfied following issuance of the 2006 Bonds and anticipate
allocating 27 of such permits to Planning Area 3, 21 of such permits to Planning Area 4A and 5 of such
permits to Planning Area 4B. Tanamera Residential Group estimates it will begin model construction for
the lots in Planning Areas 3 and 4A in the second quarter of 2006. Closings of home sales are expected to
commence in the fourth quarter of 2006.
As of January 15, 2006, most of the in-tract water, streets, curbs and gutters in Planning Areas 3 and
4A had been installed by the applicable prior merchant builders. Because the Tanamera/Roripaugh Entities
each acquired the sites with in-tract improvements installed with respect to Planning Areas 3 and 4A, and
in a graded condition with respect to Planning Area 4B, each Tanamera/Roripaugh Entity is responsible for
the respective remaining work and/or fees to bring the lots to a “finished” condition. The
Tanamera/Roripaugh Entities’ estimated costs for in-tract improvement and fees to achieve finished lots
aggregate $11,054,441. In addition, each Tanamera/Roripaugh Entity will incur model and production home
construction costs.
Plan of Finance. Tanamera/Roripaugh, LLC financed the acquisition of the property in Planning
Area 4A with aloan from Vineyard Bank in the amount of $11,700,000. The outstanding balance of this loan
as of February28, 2006 is $11,474,275. Tanamera/Roripaugh, LLC is currently in the process of negotiating
a development and construction loan with Vineyard Bank for completion of the development work and
construction of 4 models and 17 production units. Tanamera/Roripaugh, LLC expects to close this loan in
April 2006. Tanamera/Roripaugh, LLC expects to finance the construction of the remaining 79 lots with a
loan from Vineyard Bank. All construction loans will be paid down through sales to buyers beginning in the
4th quarter of 2006. Minimal costs have been expended in connection with the construction and development
of the project as of February 27, 2006.
Tanamera/Roripaugh II, LLC financed the acquisition of the property in Planning Area 3 with a loan
from KeyBank and Weyerhaeuser Realty Investors in the amount of $11,920,000 and $7,190,000,
respectively. The outstanding balances of both loans as of February 28, 2006 are $11,255,018 and
$5,995,254, respectively. Tanamera/Roripaugh II, LLC is currently in the process of negotiating a
development and construction loan with KeyBank for completion of the development work and construction
of 4 models and 23 production units. Tanamera/Roripaugh II, LLC expects to close this loan in April 2006.
Tanamera/Roripaugh II, LLC expects to finance the construction of the remaining 72 lots with a loan from
KeyBank. All construction loans will be paid down through sales to buyers beginning in the 4th quarter of
2006. Minimal costs have been expended in connection with the construction anddevelopment of the project
as of February 27, 2006.
54
Traditions at Roripaugh, LLC financed the acquisition and development of the property in Planning
Area 4B with loans from Downey Savings and Weyerhaeuser Realty Investors in the amount of $14,612,000
and $9,860,000, respectively. The outstanding balances of both loans as of February 28, 2006 are
$10,667,394 and $8,212,278, respectively. Traditions at Roripaugh, LLC will be submitting for a
construction loan with Downey Savings for construction of 4 models in the 2nd quarter of 2006. Traditions
at Roripaugh, LLC expects to finance the construction of the remaining 109 units with a loan from Downey
Savings. All construction loans will be paid down through sales to buyers. Minimal costs have been
expended in connection with the construction and development of the project as of February 27, 2006.
construction costs within Planning Areas 3, 4A and 4B will be available from the Tanamera/Roripaugh
Entitiesor any other source, when needed. The Tanamera/Roripaugh Entities are under no legal obligation
of any kind to borrow or expend funds for the development of their respective property within the Planning
Areas. Any contribution of capital by any member entity, or any borrowings by a Tanamera/Roripaugh
Entity, whether to fund costs of development within the applicable Planning Area or to pay special taxes,
is entirely voluntary.
Development Experience. Recent projects developed by Tanamera Residential Group include the
following:
Project
Name
August Moon
Ravenswood
No.
City/
of
Location Lots
Victorville
128
Apple Valley 173
Type of
Development
SFR
SFR
Willowbrook
Savannah
Perris
Victorville
181
166
SFR
SFR
Bella Rosa
Hesperia
104
SFR
Santa Fe
Crossing
Winchester
Perris
150
SFR
Victorville
218
SFR
Shenandoah
Victorville
242
SFR
Magdalena
Victorville
179
SFR
Role of
Project
Manager
Builder
Developer/
Builder
Builder
Developer/
Builder
Developer/
Builder
Builder
Developer/
Builder
Developer/
Builder
Developer/
Builder
Price
Square
Range
Feet
$208,000 – 347,000 1,354 – 2,286
$520,000 – 720,000 3,400 – 5,000
Time
Period of
Development
10/04 – 1/06
9/04 – Present
$236,000 – 375,000 2,200 – 3,400
$366,000 – 470,000 2,194 – 3,490
6/03 – 12/05
1/04 – Present
$520,000 – 720,000 3,400 – 5,000
6/04 – Present
$179,000 – 329,000 1,300 – 1,850
6/02 – 1/04
$129,000 – 189,000 1,800 – 2,220
2/01 – 12/02
$159,000 – 359,000 1,800 – 2,600
1/02 – 12/03
$199,000 – 379,000 2,400 – 3,400
6/02 – 12/03
TanameraHomes, LLC built approximately 326 homes in calendar year 2004and approximately 235
homes in calendar year 2005.
Absorption. For Tanamera/Roripaugh, LLC, Tanamera Residential Group has allocated 21 available
building permits (4 models and 17 production units) to this project. Production of these units is scheduled
to commence in the 2 nd quarter of 2006 with the models being completed in the 3rd quarter of 2006 and the
17 production units being completed and sold in the 4th quarter of 2006. Based on Ashby USA, LLC’s
projected completion of the infrastructure improvements, the remaining permitswill become available in the
3rd quarter of 2006. As such, Tanamera/Roripaugh, LLC projects that it will begin closing the remaining
homes at a rate of approximately 13 homes per quarter thereafter beginning in the 2nd quarter of 2007. The
Market Absorption Study and the Appraisal were prepared utilizing an estimated September 2006 date of
completion of necessary infrastructure to allow issuance of remaining building permits for homes in Phase
I and an estimated September 2007 date of completion of necessary infrastructure to allow issuance of
building permits for homes in Phase II. The September 2007 date of completion takes into account the
55
For Tanamera/Roripaugh II, LLC, Tanamera Residential Group has allocated 27 available building
permits (4 models and 23 production units) to this project. Production of these units is scheduled to
commence in the 2 nd quarter of 2006 with the models being completed in the 3 rd quarter of 2006 and the 23
productionunits being completed and sold in the 4th quarter of 2006. Based on Ashby USA, LLC’s projected
completion of the infrastructure improvements, the remaining permits will become availablein the 3 rd quarter
of 2006. As such, Tanamera/Roripaugh II, LLC, projects that it will begin closing the remaining homes at
a rate of approximately 13 homes per quarter thereafter beginning in the 2 nd quarter of 2007. The Market
AbsorptionStudy and the Appraisal were prepared utilizing anestimated September 2006date of completion
permits for homes in Phase II. The September 2007 date of completion takes into account the possibility that
the schedule prepared by Ashby USA, LLC with respect to Phase II is not achieved. It is also possible that
the schedule prepared by Ashby USA, LLC with respect to Phase I may not be achieved. See “PROPERTY
OWNERSHIP AND DEVELOPMENT – Market Absorption Study” and APPENDIX D – “Market
Absorption Study.”
For Traditions at Roripaugh, LLC, Tanamera Residential Group has allocated 5 available building
permits of which only 4 will be used for the construction of model homes on this project. Traditions at
Roripaugh, LLC estimates the models will be completed in the 3rd quarter of 2006. Production units for this
project will commence after additional building permits become available. Additional permits become
available at such time as Ashby USA, LLC completes the project infrastructure improvements which is
scheduled for completion in the 3 rd quarter of 2006. As such, Traditions at Roripaugh, LLC projects that it
will begin closing the homes at a rate of approximately 13 homes per quarter beginning in the 2nd quarter of
2007. The Market Absorption Study and the Appraisal were prepared utilizing an estimated September 2006
date of completion of necessary infrastructure to allow issuance of remaining building permits for homes
in Phase I and an estimated September 2007 date of completion of necessary infrastructure to allow issuance
of building permits for homes in Phase II. The September 2007 date of completion takes into account the
History of Property Tax Payment; Loan Defaults; Bankruptcy. An authorized representative
executing a certificate on behalf of each of the Tanamera/Roripaugh Entities certifies that, to its actual
knowledge:
•
Under the definition of Affiliate in the Tanamera/Roripaugh Entities Continuing Disclosure
Agreement, the Tanamera/Roripaugh Entitieshave numerous Affiliatesconsisting of various entities that are
developing or have been involved in the development of numerous projects over an extended period of time.
It is likely that some of such Affiliates have been delinquent at one time or another in the payment of ad
valorem property taxes, special assessments or special taxes. The Tanamera/Roripaugh Entities do not have
actual knowledge that any of them or anysuch Affiliate is currently delinquent in any material amount in the
payment of ad valorem property taxes, special assessments or special taxes.
•
Neither the Tanamera/Roripaugh Entities nor any of their Affiliates are currently in default
on any loans, lines of credit or other obligation related to its development in the District or any of its other
projects which default would in any way materially and adversely affect their ability to develop their
developments in the District as described in the Official Statement or to pay the Special Taxes forwhich each
is responsible. Except as described in the Official Statement, no Affiliate has any loans, lines of credit, or
other obligations related to the development in the District.
•
The Tanamera/Roripaugh Entities, the Members of the Tanamera/Roripaugh Entities, and
the parent entities of such Members of the Tanamera/Roripaugh Entities are solvent and no proceedings are
pending, or threatened in which the Members of the Tanamera/Roripaugh Entities and the parent entities of
such Members of the Tanamera/Roripaugh Entities may be adjudicated as bankrupt or discharged from any
or all of their respective debts or obligations, or granted an extension of time to pay their respective debts
or obligations, or be allowed to reorganize or readjust their respective debts or obligations.
•
court, regulatory agency, public board or body, is pending (with service of process to the
56
Tanamera/Roripaugh Entities or an Affiliate having been accomplished) against the Tanamera/Roripaugh
Entities or any Affiliate or, to the Tanamera/Roripaugh Entities’ actual knowledge, threatened, which if
successful, would materially adversely affect the ability of the Tanamera/Roripaugh Entities to complete
the acquisition and development of their respective property expected to be owned within the District to pay
Special Taxes, assessments or ad valorem tax obligations when due on its property within the District.
KB Home Coastal Inc.
KB Home Coastal Inc. (“KB Home Coastal Inc.”), a California corporation, entered into an option
agreement dated August 1, 2003, with Ashby USA, LLC for Phase II, for the acquisition of lots for
development of approximately 112 residential units on approximately 10.6 net acres in Planning Area 12.
Closing of the sale of all 112 units is conditioned upon Ashby USA, LLC’s satisfaction of the conditions
specified in the agreement, including satisfaction of conditions necessary for issuance of building permits
and satisfaction of conditions relating to issuance of certificates of occupancy which is expected to occur
prior to June 1, 2007. On July 11, 2005, KB Home Coastal Inc. entered into the Option Agreement that
providesfor the acquisition of the balance of the 1,230 residential lots in Phase II, or smaller portions thereof
as specified in the Option Agreement. The purchases are anticipated to commence once Ashby USA, LLC
completes infrastructure required to enable issuance of building permits and satisfaction of conditions
relating to issuance of certificates of occupancy.
KBHome Coastal Inc. is a wholly-owned subsidiary of KB Home, a Delaware Corporation (“KBH”).
KBH has domestic operations divisions in California, Arizona, Nevada, New Mexico, Florida, Colorado,
Georgia, North Carolina, South Carolina, Illinois, Indiana, Louisiana, Maryland, Virginia and Texas.
Countrywide KB Home Loans, a joint venture between Countrywide Financial Corporation and KBH also
operates a full-service mortgage company for the convenience of KBH buyers. Founded in 1957, KBH is
a Fortune 500 company listed on the NYSE under the ticker symbol “KBH.” KBH 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 SEC. Such reports,
proxy statements and other information, including its 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 prescribed rates at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC’s regional
offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. In
addition, the aforementioned material may also be inspected at the offices of the NYSE at 20 Broad Street,
New York, New York 10005. All documents subsequently filed by KBH pursuant to the requirements of
the Exchange Act after the date of this Official Statement will be available forinspection in the same manner
as described above.
Copies of KBH’s Annual Report and related financial statements, prepared in accordance with
generally accepted accounting standards, are available from KBH’s website at kbhomes.com. This Internet
address is included for reference only and the information on the Internet site is not a part of this Official
Statement or incorporated by reference into this Official Statement. No representation is made in this
Official Statement as to the accuracy or adequacy of the information contained on the Internet site.
Description of the Project. The development which constitutes KB Home Coastal Inc.’s project is
preliminary,and subject to various approvals, including approvalswhich will affect the product type andmix
among the units.
Status of Permits and Approvals. Ashby USA, LLC and KB Home Coastal Inc., are obligated to
complete the followingtasks as requiredby the Planning Department:(1) re-approval of buildingplans which
have expired; (2) submission of construction landscaping plans; (3) depositof landscape maintenance bonds;
(4) completion of landscape plans for perimeter slopes; and (5) submission of the final report from the
archaeologist and paleontologist monitor. Under the agreements with Ashby USA, LLC, Ashby USA, LLC
is responsible for satisfying a number of conditions prior to acquisition of the property by KB Home Coastal
Inc. Ashby USA, LLC is constructing regional infrastructure improvements, including roads, sewer, and
drainage. See Appendix K for a description of some of the thresholds for installation of improvements under
the Development Agreement and Conditions of Approval which must be completed by Ashby USA, LLC
before building permits can be issued in Phase II. Upon completion of such improvements by Ashby USA,
LLC and acceptance of the Blue Top Condition, KB Home Coastal Inc. will be responsible for processing
various architecture approvals with the City. KB Home Coastal Inc. will construct in-tract improvements
after obtaining necessary City approvals.
57
Sale of Phase II to KB Home Coastal Inc.; Take Down Options. In connection with the purchase of
approximately 112 lots in Planning Area 12, KB Home Coastal deposited approximately $3 million into
escrow. The date specified in the purchase agreement for Ashby USA, LLC to complete certain
improvements has passed, and the contract automatically extends day by day until Ashby USA, LLC
completes the improvements, or KB Home Coastal Inc. provides the notice specified in the agreement to
terminate the agreement and request return of the $3 million deposit. Subsequent to entering into an option
agreement with respect to Planning Area 12, Ashby USA, LLC and KB Home Coastal Inc. entered into the
Option Agreement with respect to approximately 1,118 lots in Phase II. For a description of the Option
Agreement, see PROPERTY OWNERSHIP AND DEVELOPMENT – Ashby USA, LLC – Sale of Phase
II to KB Home Coastal Inc.; Take Down Options” above.
Plan of Finance. If the lots are purchased, KB Home Coastal Inc. currently expects to finance the
acquisition of its lots through its internal resources and expects to finance construction of in-tract
improvements and housing units through internal resources and home sales. At this time, KB Home Coastal
Inc. has not determined the estimated total costs to get from blue top condition to completed residential units.
Once Ashby USA, LLC notifies KB Home Coastal Inc. that it has completed the improvements required
under the Option Agreement, KB Home Coastal Inc. will evaluate the estimated total remaining costs in
determining whether to acquire lots under the Option Agreement or the option agreement relating to the 112
lots.
construction costs within Phase II will be available from KB Home Coastal Inc., or any other source, when
needed. KB Home Coastal Inc., and KBH are under no legal obligation of any kind to acquire the property
within Phase II or to borrow or expend funds for the development of the property within Phase II. Any
contribution of capital by KB Home Coastal Inc. or any other KBH entity, or any borrowings by KB Home
Coastal Inc., whether to fund costs of development within Phase II or to pay special taxes, is entirely
voluntary.
Development Experience. In fiscal year ending November 30, 2005, KBH delivered homes to
approximately 37,140 families in the United States and France.
Absorption. KB Home Coastal Inc.’s development plans are preliminary and KB Home Coastal Inc.
has not yet established a projected absorption rate for the project. Depending on satisfaction of the
conditions to acquisition under the agreements with Ashby USA, LLC, the closings of home sales may
commence at the end of 2007 to early 2008. The foregoing absorption estimates were provided by KB Home
Coastal Inc. and rely on Ashby USA, LLC’s projected completion of infrastructure improvements. The
Market Absorption Study containsprojected absorption of production homes that differ from those of Ashby
USA, LLC. The Market Absorption Study and the Appraisal were prepared utilizing an estimated September
2006 date of completion of necessary infrastructure to allow issuance of remaining building permits for
homes in Phase I and an estimated September 2007 date of completion of necessary infrastructure to allow
issuance of building permits for homes within Phase II. The September 2007 date of completion takes into
account the possibility that the schedule prepared by Ashby USA, LLC with respect to Phase II is not
achieved. See “PROPERTY OWNERSHIP AND DEVELOPMENT – Market Absorption Study” and
APPENDIX D – “Market Absorption Study.”
History of Property Tax Payment; Loan Defaults; Bankruptcy. KB Home Coastal Inc. to the actual
knowledge of KB Home Coastal Inc.’s current management has made the following representations:
•
Under the definition of Affiliate in the KB Home Coastal Inc. Continuing Disclosure
Agreement, KB Home Coastal Inc. has numerous Affiliates consisting of various entities that are developing
or have been involved in the development of numerous projects over an extended period of time. It is likely
that some of such Affiliates have been delinquent at one time or another in the payment of ad valorem
property taxes, special assessments or special taxes. KB Home Coastal Inc. does not have actual knowledge
that any of them or any such Affiliate is currently delinquent in any material amount in the payment of ad
valorem property taxes, special assessments or special taxes.
•
Except as described below, neither KB Home Coastal Inc. nor, to KB Home Coastal Inc.’s
actual knowledge, any of its current Affiliates in California (as defined in the Ashby USA, LLC Continuing
Disclosure Agreement) has ever been delinquent in the payment of any ad valorem property taxes, special
assessments or special taxes in any material amount within the past 5 years,
58
•
Neither KB Home Coastal Inc. nor any of its Affiliates is currently in material default on any
loans, lines of credit or other obligation related to its development in the District or any of its other projects
which default would in any way materially and adversely affect its ability to develop its property in the
District as described in the Official Statement or to pay the Special Taxes for which it is responsible,
•
KB Home Coastal Inc. and its Affiliates are solvent and neither KB Home Coastal Inc. nor
any of its current Affiliates has ever filed bankruptcy or been declared bankrupt, or has any proceeding
pending or to KB Home Coastal Inc.’s actual knowledge threatened in which KB Home Coastal Inc. or its
Affiliates may be adjudicated as bankrupt, or discharged from any or all of its debts or obligations, and
•
court, regulatory agency, public board or body, is pending (with service of process to KB Home Coastal Inc.
or an Affiliate having been accomplished) against KB Home Coastal Inc. or any Affiliate or, to KB Home
Coastal Inc.’s actual knowledge, threatened, which if successful, would materially adversely affect the ability
of KB Home Coastal Inc. to complete the development and sale of the property currently owned within the
District or to pay special taxes or ad valorem tax obligations when due on its property within the District.
KB Home Greater Los Angeles Inc., a California corporation, one of KBH’s divisions, and its
affiliate, KB Home Holdings, Inc. owned approximately 500 acres ofundeveloped land in the Rosamond area
of southern Kern County, California. The property is within two assessment districts formed by the
RosamondCommunity Services District, AD 1990-2 and AD 1991-3, both of which issued assessment bonds.
In approximately 1995, KB Home Greater Los Angles, Inc. and KB Home Holdings, Inc. determined that
based upon changed market conditions, the value of the property did not support the tax burden on the
property and KB Home Greater Los Angeles Inc. and KB Home Holdings, Inc. discontinued paying the ad
valorem property taxes and the special assessments on the property. The Rosamond Community Services
District obtained a foreclosure judgment against the property and a sheriff’s sale was held on July 30, 2002.
There were no bidders at the sheriff’s sale. Kern County held a tax sale on March 3, 2003. Four parcels,
totaling approximately 480 acres, were sold at the tax sale to two buyers. The affiliate has been informed,
however, that for reasons unknown to the affiliate, the tax sales were rescinded and title to these four parcels
reverted back to KB Home and KB Home Holdings, Inc., as the case may be. Kern County held a tax sale
in late 2005 that resulted in the sale of four parcels; and as of December 1, 2005, KB Home and HB Home
Holdings, Inc. continued to own approximately 122 acres in three tax parcels which are still in default. In
1996, KB Home implemented a new business model to transition from a more speculative business into a
more disciplined organization to reduce the exposure to the risk inherent in building large numbers of homes
that sit unoccupied until a buyer turns up to a business model of building homes after it has lined up a buyer
with mortgage approval. There are exceptions to this business model. The foregoing information is made
to the actual knowledge of KB Home Coastal Inc.’s management.
Estimated Special Tax Allocation by Property Ownership
Based on the Appraisal, as of January 15, 2006, the taxable property consists of undeveloped land
in five separate ownerships – Ashby USA, LLC for Planning Area 1A in Phase I and for all of Phase II, and
Davidson Roripaugh Ranch 122 LLC, Tanamera/Roripaugh II, LLC, Tanamera/Roripaugh, LLC and
Traditions at Roripaugh, LLC for the portion of Phase I not owned by Ashby USA, LLC. Rough grading is
currently underway in the entire District and some in-tract improvements have been completed in Phase I.
Based on current and expected ownership, Ashby USA, LLC, the five Merchant Builders in Phase I and KB
Home Coastal Inc., would be responsible for their respective portions of the estimated Fiscal Year 2006-07
Special Tax levy.
Prior to the acceptance by KB Home Coastal Inc. of any parcels in Phase II, the property taxes for
Phase II are the responsibility of Ashby USA LLC. In addition, during the term of the Option Agreement
prior to KB Home Coastal Inc.’s acceptance of the Blue Top Condition, the property taxes and assessments
are the responsibility of Ashby USA, LLC. Under the Option Agreement, upon KB Home Coastal Inc.’s
acceptance of the Blue Top Condition, the property taxes and assessments would become the responsibility
of KB Home Coastal Inc., i.e., KB Home Coastal Inc. will paythe property taxes and assessments on the lots
it has not yet taken down once it has accepted the Blue Top Condition. Until acquisition of lots by KB Home
Coastal Inc., Ashby USA, LLC would be liable for property taxes and assessments if KB Home Coastal Inc.
defaulted in its obligation under the Option Agreement to pay such property taxes and assessments.
59
Table 3
Owners of Taxable Property as of January 15, 2006
and Estimated Allocation of Special Tax Liability
Fiscal Year 2006–07
Property Owner
Ashby USA, LLC
Subtotal – Phase I Residential
Phase II - Residential and Commercial
Ashby USA, LLC
Ashby USA, LLC
Ashby USA, LLC
Ashby USA, LLC
Ashby USA, LLC
Ashby USA, LLC
Ashby USA, LLC
Subtotal – Phase II Residential and
Commercial
Merchant Builder (1)
Davidson Roripaugh Ranch 122
LLC
Tanamera Residential Group
KB Home Coastal Inc. (Option)
Commercial land - to be determined
Planning
Area
(2)
(3)
(4)
(5)
Gross
Acreage(2)
Est. Allocation of
FY 2006-07
Undeveloped
Special Tax (3),(4)
Percent of
Allocation (5)
1A
2
104
99
19.11
13.42
$205,446
144,204
5.77%
4.05%
3
4A
4B
99
100
113
515
13.79
15.27
22.3
83.89
148,477
164,143
239,984
$902,255
4.17%
4.61%
6.74%
25.34%
14
112
92
104
14
894
1,230
8.12
15.19
16.01
13.59
14.09
10.32
295.03
372.35
$27,773
76,197
172,333
145,984
151,681
35,250
2,049,122
$2,658,340
0.78%
2.14%
4.84%
4.10%
4.26%
0.99%
57.55%
74.66%
1,745
456.24
$3,560,595
100.00 %
10
11
12
14
15
33A
16-26, 30, 31, Loop Road
(1)
Number
of
Units
Continental Residential, Inc. is not currently a landowner within the District, and there can be no assurance that it will close escrow on the lots within the District at the time indicated or at all. KB Home Coastal
Inc. is not currently a landowner within the District, and there can be no assurance that it will exercise its option to purchase lots within the District at the times indicated or at all. KB Home Coastal Inc. will not
become an owner until building permits and certificates of occupancy can be issued in Phase II, acceptance by KB Home Coastal Inc. of Ashby USA, LLC’s work and election of either the Overall Option Alternative
or the First Option Alternative. Until such time, KB Home Coastal Inc. is not responsible for any property taxes or assessments.
Gross acres differ slightly from gross acres on the Roripaugh Ranch Land Use Plan prepared by The Keith Companies. Gross acreage per County of Riverside Assessor’s Maps. Net acreage shown for Planning
Areas 2, 3, and 4A as final subdivision maps are recorded.
The actual Special Tax Allocation for 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.
Debt Service plus administrative fees.
Total may not add due to rounding.
____________________
Source: David Taussig & Associates, Inc.
60
Assuming no parcels are categorized as Developed Property in Fiscal Year 2006-07, the projected
Fiscal Year 2006-07 Maximum Special Tax allocation for Undeveloped Property is $5,849,094 and the
projected Special Tax levy for Undeveloped Property is approximately $3,558,558.76. These amounts are
estimates based on the estimated debt service plus estimated administrative fees of $60,000.
Direct and Overlapping Debt
Table 4 below sets forth the existing authorized indebtedness payable from taxes and assessments
that may be levied within the District prepared by Canty Engineering Group, Inc. and based on what was
levied for Fiscal Year 2005-06 (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 sales occur and assessed values increase to reflect housing values. The District
believes the information is current as of its date, but makes no representation as to its completeness or
accuracy. The District may issue up to $3,750,000 of Additional Bonds. 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 its Annual Reports pursuant to the Authority 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 F hereto for the form of the Authority Continuing Disclosure Agreement.
61
Table 4
CFD 03-02 (Roripaugh Ranch)
Secured Property Tax Roll and Direct and Overlapping Debt
ASSESSED VALUE
Fiscal Year 2005-06 Secured Roll Assessed Valuation
$36,529,505
SECURED PROPERTY TAX ROLL
Description of Tax Bill
Type
General Purpose
Temecula Valley Unified School District
Metropolitan Water Debt Service
RCWD R Div Debt Service
AD 161 Series A
AD 161 Series B
AD 161 Series C
NPDES - Santa Margarita
Temecula Parks/Lighting Svs.
MWD Standby
EMWD Standby-Combined Charge
Fiscal Year 2005-06 Total Property Tax Liability
Total Parcels
Levied
1%
GO
GO
GO
AD
AD
AD
SPL
CSD
WTR
WTR
809,881
39,783
430,515
33,466
3,609
3,498
3,379
59,242
28,098
209,944
212,481
Total Levy
$1,708,046,335
$4,321,348
$5,247,282
$10,357,895
$290,628
$1,376,737
$319,780
$401,183
$3,014,973
$2,733,248
$4,505,616
Parcels
Levied in
CFD
308
308
308
1
301
301
301
36
308
308
308
% Applicable
0.021%
0.279%
0.036%
0.007%
3.123%
5.108%
1.799%
0.027%
2.159%
0.181%
0.341%
TOTAL PROPERTY TAX AS A PERCENTAGE OF FISCAL YEAR 2005-06 ASSESSED VALUATION
Type
AD
AD
AD
Issued
$3,971,000
$19,596,000
$4,638,000
Outstanding
$1,808,691
$8,668,065
$2,532,737
Parcels
Levied in
CFD
301
301
301
% Applicable
3.123%
5.108%
1.799%
Amount of Debt
$56,481
$442,796
$45,569
$544,847
Type
AD
Issued
$3,380,213
Outstanding
$1,197,929
Parcels
Levied in
CFD
301
% Applicable
10.886%
Amount of Debt
$130,411
$130,411
Unissued Direct and Overlapping Bonded Debt
AD 161 (2)
Total Unissued Land Secured Bonded Debt(1)
$675,258
TOTAL OUTSTANDING AND UNISSUED LAND SECURED BONDED INDEBTEDNESS
GENERAL OBLIGATION BOND INDEBTEDNESS
Outstanding Direct and Overlapping Bonded Debt
Total General Obligation Bonded Debt(1)
Type
GO
GO
GO
Issued
$65,000,000
$130,932,007
$850,000,000
Outstanding
$46,485,000
$111,476,729
$419,390,000
Parcels
Levied in
CFD
308
1
308
% Applicable
0.279%
0.007%
0.002%
Amount of Debt
$129,543
$7,993
$9,329
$146,865
Unissued
$0
$0
$0
Parcels
Levied in
CFD
308
1
308
% Applicable
0.279%
0.007%
0.002%
Amount of Debt
$0
$0
$0
$0
Authorized Direct and Overlapping Bonded Debt
Total General Obligation Bonded Debt(1)
$365,295
$12,043
$1,899
$743
$9,076
$70,329
$5,754
$109
$65,097
$4,940
$15,364
$550,647
1.51%
LAND SECURED BOND INDEBTEDNESS
Outstanding Direct and Overlapping Bonded Debt
AD 161 Series A(2)
AD 161 Series B(2)
AD 161 Series C(2)
Total Land Secured Bonded Debt(1)
Levy Amount
Type
GO
GO
GO
Authorized
$65,000,000
$130,932,007
$850,000,000
TOTAL OUTSTANDING AND UNISSUED LAND SECURED BONDED INDEBTEDNESS
$675,258
TOTAL OF ALL OUTSTANDING, DIRECT AND OVERLAPPING DEBT
TOTAL OF ALL OUTSTANDING AND UNISSUED DIRECT AND OVERLAPPING DEBT
$691,712
$822,123
(1)
Additional bonded debt or available bond authorization may exist but is not shown because a tax was not levied for the referenced fiscal year.
Will be eliminated as part of the sale of the 2006 Bonds.
____________________
(2)
Source: Canty Engineering Group, Inc.
62
Estimated Value-to-Lien Ratios
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 January 15, 2006, the parcels in the District have an appraised value-to-lien ratio of approximately 3.20:1,
6.90:1 with respect to Phase I and 1.95:1 with respect to Phase II, calculated with respect to the 2006 Bonds
based on allocation of Special taxes levied as Undeveloped Property and excluding the overlapping
assessment debtrelating to the Prior Lien and general obligation bond debt. Ashby USA, LLC has provided
a letter of credit to the Trustee which may be drawn in the event Special Taxes due with respect to property
owned by Ashby USA, LLC are not paid. See “SECURITY FOR THE BONDS – Letter of Credit.”
Table 5 below sets forth the value-to-lien analysis for the District as of the January 15, 2006
appraisal date of value and on an allocation of value presented in the Appraisal to the allocation of the Bonds
based on the Undeveloped Special Taxes applicable to the parcels in the District. Table 6 on the following
page sets forth the value-to-lien analysis for the District at build out based on assumed Developed Property
Special Taxes assuming the units in Phase II are developed as 1,230 residential units.
63
Table 5
Estimated Value-to-Lien Analysis (Assuming Current Status of Development)
(As of January 15, 2006 Date of Value)
Property Owner
Ashby USA, LLC
LLC
Tanamera/Roripaugh II., LLC
Subtotal – Phase I Residential
Commercial
Ashby USA, LLC6)
Total
Appraised
Value(3)
2006
Bonds(4)
19.11
13.42
$17,280,000
18,070,000
$2,957,125
2,075,625
5.84
8.71
99
100
113
515
13.79
15.27
22.3
83.89
17,700,000
18,260,000
18,340,000
$89,650,000
2,137,125
2,362,625
3,454,250
$12,986,750
8.28
7.73
5.31
6.90
1,230
372.35
$74,480,000
$38,263,250
1.95
1,745
456.24
$164,130,000
$51,250,000
3.20
Potential Merchant
Builder(1)(7)
Planning
Area
Number
of
Units
Acreage(2)
LLC
1A
2
104
99
3
4A
4B
Residential – KB Home Coastal
Inc. (Option)
Commercial – To be determined
10-12, 14, 26,
30, 31, Loop
Road, 33A
(1)
Value-toLien
Ratio(5)
Continental Residential, Inc. and KB Home Coastal Inc. are not currently landowners within the District, and there can be no
assurance that either of them will close escrow on their lots within the District at the times indicated or at all. Classification of
.
(2) property into these planning areas provided by Ashby USA, LLC
(3) Provided by Ashby USA, LLC and may not reflect the parcel configuration as of January 15, 2006.
As
of
January
15,
2006,
based
on
the
Appraisal.
(4)
The actual Special Tax Allocation for the initial year of the levy of the Special Tax, 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,
which may not reflect what is shown. Includes 2006 Bonds to be issued by the District; debt has been allocated based on
undeveloped tax rates, actual allocation of debt will vary depending on size of unit and categorization as Developed Property or
(5) Undeveloped Property.
(6) Average value-to-lien per lot; actual value-to-lien may vary by lot.
The Appraisal utilizes a discounted cash flow analysis of Phase II and does not allocate value among the various planning areas.
(7)
The Merchant Builders have not independently verified the information in the appraised value or the allocation of 2006 Bonds
and overlapping land secured debt to their respective projects.
___________________
Sources: Development Plans from Ashby USA, LLC; Canty Engineering Group, Inc.; Appraisal.
64
Table 6
Estimated Value-to-Lien Analysis at Build-Out
(Utilizing Appraisal Values)
Property Owner
Ashby USA, LLC
Davidson Roripaugh Ranch
122 LLC
Subtotal – Phase I
Residential
Commercial
Ashby USA, LLC7)
Potential Merchant
Builder(1)(7)
Planning
Area
Number
of
Units
(2)
(3)
(4)
(5)
(6)
(7)
Total
Appraised
Value(3)
2006
Bonds(4)
Value-toLien
Ratio(5)
1A
104
19.11
$17,280,000
$2,844,277
6.08
Davidson Roripaugh Ranch
122 LLC
2
99
14.67
18,070,000
3,209,490
5.63
3
4A
4B
99
100
113
515
13.9
15.12
22.3
85.3
17,700,000
18,260,000
18,340,000
$89,650,000
3,028,138
2,479,229
3,182,759
$14,743,893
5.85
7.37
5.76
6.08
1,230
372.35
$74,480,000
$36,506,107
2.04
1,745
456.24
$164,130,000
$51,250,000
3.20
Residential – KB Home
Coastal Inc. (Option)
Commercial - To be
determined
10-26, 30,
31, Loop
Road, 33A
(1)
Acreage
(2)
Continental Residential, Inc. and KB Home Coastal Inc. are not currently landowners within the District, and there can be no
assurance that either of them will close escrow on their lots within the District at the times indicated or at all. Classification of
property into these planning areas provided by Ashby USA, LLC.
Provided by Ashby USA, LLC and may not reflect the parcel configuration as of January 15, 2006.
As of January 15, 2006, based on the Appraisal.
The actual Special Tax Allocation for the initial year of the levy of the Special Tax, 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, which may
not reflect what is shown. Includes 2006 Bonds to be issued by the District; debt has been allocated based on undeveloped tax rates,
actual allocation of debt will vary depending on size of unit and categorization as Developed Property or Undeveloped Property.
Average value-to-lien per lot; actual value-to-lien may vary by lot.
The Appraisal utilizes a discounted cash flow analysis of Phase II and does not allocate value among the various planning areas.
The Merchant Builders have not independently verified the information in the appraised value or the allocation of 2006 Bonds and
overlapping land secured debt to their respective projects.
___________________
Sources: Development Plans from Ashby USA, LLC; Canty Engineering Group, Inc.; Appraisal.
Overlapping Assessment and Community Facilities Districts
Prior Lien; County of Riverside Assessment District No. 161. A portion of the property within the
District is subject to the County Assessment District No. 161 lien. A portion of the proceeds of the 2006
Bonds together with moneys provided by Ashby USA, LLC, will be used to prepay the outstanding lien of
County Assessment District No. 161 (i.e., the Prior Lien). The aggregate amount of the lien is $583,610.40.
The County has agreed to release the Prior Lien when the 2006 Bonds are issued and the prepayment of the
outstanding lien is paid.
Additional Debt Payable from Taxes or Assessments. The District has no control over the amount
of additional debt payable from taxes or assessments levied onall 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 Actor taxes, such assessments, special taxes and taxes
will be secured by liens on the property within a 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 by the 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.”
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
delinquencyin the payment of Special Taxes, the District may foreclose only against delinquent parcels. As
65
of September 1, 2005, based on the Fiscal Year 2005-06 assessed value of approximately $36,529,505 the
parcels in the District have an assessed value-to-lien ratio of less than 1:1 taking into account outstanding
direct and overlapping bonded debt. See Table 4 above.
Transportation Uniform Mitigation Fee; Multiple Species Habitat Conservation Plan
Transportation Uniform Mitigation Fee. The County and the 14 cities in western Riverside County,
including the City, adopted a new transportation fee for development, which when enacted added
approximately $7,248 to every new single-family house and approximately $5,021 to each future apartment
or condominium unit in the County, subject to credit for a portion, if any, of transportation facility fees
imposed by the County or applicable city which relates to facilities encompassed within the new
transportation fee. New retail, service and industrial development will also be charged the transportation fee
based on the square footage of new development ($8.90 per square foot for retail, $5.08 per square foot for
service and $1.65 per square foot for industrial). The fee was approved by the County in February 2003.
The fee was approved by the City on January 28, 2003, effective 61 days thereafter. The fee was
implemented by the other cities in the County between February 1, and June 1, 2003. Cities may opt out of
the fee, but then they will not be able to receive any money from Measure A, the County’s half-cent sales
tax initiative. Extension of the term of Measure A was approved by the voters at the November 5, 2002
election. Measure A is estimated to cover more than 50% of the cost of maintaining cities’ roads and streets.
The half-cent sales tax program is now extended an additional 30 years and will expire in 2039. The
Transportation Uniform Mitigation Fee is subject to increase based on an inflation index and also after the
firsttwo years and every five years thereafter may be increased upon reviewof facilities encompassed within
the transportation fee. The two year increase is expected to be effective commencing with Fiscal Year 200607and establish a rate of approximately $9,693 for every new single-family house and approximately $6,806
for eachmulti-family residential unit as provided in the applicable ordinance. On February 28, 2006 the City,
Ashby USA, LLC and the Merchant Builders1 entered into an agreement entitled “Roripaugh Ranch Project
TransportationUniform Mitigation Fee Program Improvement Credit Agreement.” This Agreement provides:
(1) the means by which the payment of the costs of construction of Transportation Uniform Mitigation Fee
improvements through the 2006 Bonds is offset against Ashby USA, LLC’s and the Merchant Builders’
obligationto paythe applicable Transportation Uniform MitigationFee and(2) ameans, subject to the separate
approvalof the Western Riverside County Council of Governments, for deposits to be made to the SpecialTax
Fund established under the Fiscal Agent Agreement to the extent the actual and authorized payment costs for
construction of Transportation Uniform Mitigation Fee improvements exceeds Ashby USA, LLC’s and the
Merchant Builders’* Transportation Uniform Mitigation Fee obligation.
Multiple Species Habitat Conservation Plan. The project site is within the boundary of the
AssessmentDistrict 161 Sub-Regional Habitat Conservation Plan approved by the Fish and WildlifeService
(“FWS”). Mitigation is provided through the transfer of approximately 201 acres to the City and recording
of aconservation easementoverlying the open space recorded forthe Center forNatural Lands Management.
Because of the participation in the Assessment District 161 Sub-Regional Habitat Conservation Plan, the
property within the District is not subject to the fee adopted by the City relating to the costs of a Multiple
Species Habitat Conservation Plan. In 1998, the FWS adopted the “Permit Revocation Rule” or more
commonly, the “no surprises rule” which substantially restricted the FWS’s authority to revoke or modify
these types of 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).
The 262 acres of Roripaugh Ranch open space include 201 acres of preserved habit as required in the
AD161 SHCP asrequired for the federal Endangered Species Act Section 10(a) permit number TE-030505-0
issued by the Fish and Wildlife Service on December 4, 2001. In March 2003 Ashby USA, LLC graded
approximately8.96 acres of the land designated as the Preserved Habitat Area pursuant to the AD 161 SHCP
with Fish and Wildlife Service permits in violation of federal law. The impacted area included estimated 4.33
acres of Riversidean Sage Scrub, 2.42 acres of transitional/degraded Riversidean Sage Scrub, and
approximately2.2 acres of ruderal, weed or agricultural areas. In response to the violation of federal law, the
FishandWildlife Service approved a“Conceptual Mitigation Plan for Impacts to Areas Within the Jurisdiction
*
KB Home is not a party to the Transportation Uniform Mitigation Fee Agreement.
66
of the United States Department of Interior Fish and Wildlife Service Under Section 10(a)(1) (B) of the
Endangered Species Action on June 2, 2004 (“Restoration Plan”). Pursuant to the Restoration Plan, Ashby
USA, LLC is required to restore additional 21.65 acres of Riversidean Sage Scrub (4.33 acres at 5:1 ratio) to
offset the impacts to mature Riversidean Sage Scrub caused by Ashby USA, LLC grading in violation of
federal law. The City and Ashby USA, LLC entered into that certain “Open Space Grading and Restoration
Agreement” dated as of May 11, 2004 in order to implement the requirements of the FWS to cure the
violations. Weather conditions in the winter of 2005 and other matters delayed completion of the 33.49 acres
ofrestoration. See “THE COMMUNITY FACILITIES DISTRICT – Environmental Conditions – Endangered
Species Act” for a description of the status of the restoration work. Ashby USA, LLC has recently contacted
the Fish and Wildlife Service and presented its plan for restoration so as to resolve any issues relating to the
delay in installation of the plant material beyond January 31, 2005 and to avoid being in violation of federal
law.
Market Absorption Study
EmpireEconomics, Inc., the market absorptionconsultant (the “Market Absorption Consultant”), has
prepared a market analysis of the property in the District in its Market Absorption Study, dated February 1,
2006 (Original Study July 13, 2004) (the “Market Absorption Study”).
Based upon its analysis of the expected demographic-economic trends, the Market Absorption
Consultant estimated the District is expected to accommodate the approximately 1,745 residential units with
build-out by the end of 2010. The Market Absorption Study is subject to a number of assumptions and
limiting conditions. The Market Absorption Study contains projected absorption of production homes that
differ from those of Ashby USA, LLC. The Market Absorption Study and the Appraisal were prepared
utilizing an estimated September 2006 date of completion of necessary infrastructure to allow issuance of
remaining building permits for homes in Phase I and an estimated September 2007 date of completion of
necessary infrastructure to allow issuance of building permits for homes in Phase II. The September 2007
date of completion takes into account the possibility that the schedule prepared by Ashby USA, LLC with
respect to Phase II is not achieved. It is also possible that the schedule prepared by Ashby USA, LLC with
respect to Phase I may not be achieved. The Market Absorption Consultant’s estimated absorption rates of
the different categories of residential units are as follows:
67
Table 7
Projected Absorption
February 2, 2006
Planning Area
Units
Builder
Lot Size
Average
Estimated Housing Prices
Lower
Average
Upper
Expected Living Areas
Lower Average Upper
Sales Rates 2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
Annually Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec Jan-Jun Jul-Dec
Phase I
PA-2
PA -1A
99
Davidson
6,265
$538,000
$548,141
$558,000
2,960
3,181
3,357
50
0
25
25
25
24
0
0
0
0
0
0
0
0
0
104
D.R. Horton
6,285
$410,000
$450,918
$480,000
1,949
2,642
2,949
55
0
0
27
27
27
23
0
0
0
0
0
0
0
0
99
Tanamera
6,000
$459,990
$498,490
$519,990
1,974
2,434
2,699
55
0
20
27
27
25
0
0
0
0
0
0
0
0
0
PA-4A
100
Tanamera
6,310
$459,990
$522,364
$539,990
2,007
2,943
3,246
55
0
20
27
27
26
0
0
0
0
0
0
0
0
0
PA-4B
113
Tanamera
6,580
$489,990
$516,597
$529,990
2,346
2,714
2,951
55
0
0
27
27
27
32
0
0
0
0
0
0
0
0
0
PA-3
Phase II+
Segment #1: Below $420,000-Avg.
PA-31
169
KB Home
3,150
$370,000
$395,495
$415,990
1,809
2,080
2,300
70
0
0
0
0
35
35
35
35
29
0
0
0
0
PA-22
130
KB Home
3,150
$370,000
$395,495
$415,990
1,809
2,080
2,300
Sequence
0
0
0
0
0
0
0
0
6
35
35
35
19
0
PA-12
112
KB Home
6,120
$405,990
$417,657
$430,990
2,050
2,167
2,300
65
0
0
0
0
32
32
32
16
0
0
0
0
0
0
68
PA-14
92
KB Home
3,880
$405,990
$417,657
$430,990
2,050
2,167
2,300
Sequence
0
0
0
0
0
0
0
16
32
32
12
0
0
0
PA-15
104
KB Home
3,880
$405,990
$417,657
$430,990
2,050
2,167
2,300
Sequence
0
0
0
0
0
0
0
0
0
0
20
32
32
20
0
Segment #2: $420,000 - $530,000-Avg.
PA-23
47
KB Home
5,313
$415,990
$429,323
$445,990
2,029
2,408
2,707
60
0
0
0
0
30
17
0
0
0
0
0
0
0
PA-24
75
KB Home
5,313
$415,990
$429,323
$445,990
2,029
2,408
2,707
Sequence
0
0
0
0
0
13
30
30
2
0
0
0
0
0
PA-16
121
KB Home
6,696
$450,990
$480,990
$510,990
2,500
3,138
3,787
55
0
0
0
0
27
27
27
27
13
0
0
0
0
0
PA-17
147
KB Home
8,703
$510,990
$526,740
$545,990
2,969
3,350
3,711
50
0
0
0
0
25
25
25
25
25
22
0
0
0
0
PA-18
121
KB Home
8,703
$510,990
$526,740
$545,990
2,969
3,350
3,711
Sequence
0
0
0
0
0
0
0
0
0
3
25
30
30
33
Segment #3: Above $600,000-Avg.
PA: 10, 19-21, 33
76
KB Home
20,000
$779,990
$845,990
$909,990
4,001
4,681
5,187
30
0
0
0
0
15
15
15
15
16
0
0
0
0
0
PA: 10, 19-21 ,33
36
KB Home
42,298
$787,990
$844,990
$909,990
3,676
4,378
5,318
Sequence
0
0
0
0
0
0
0
0
0
15
15
6
0
0
515
29.5%
$471,594
$507,302
$525,594
2,247
2,783
3,040
0
65
133
133
129
55
0
0
0
0
0
0
0
0
1,230
70.5%
$485,908
$510,671
$536,657
2,495
2,864
3,219
0
0
0
0
164
164
164
164
123
107
107
103
81
53
Statistical Summary:
Phase I
Phase II+
Segment #1 Below $420,000-Avg.
607
$391,594
$408,792
$424,990
1,954
2,132
2,300
0
0
0
0
67
67
67
67
67
67
67
67
51
20
Segment #2 $420,000 - $530,000-Avg.
511
$460,990
$478,623
$498,990
2,499
2,931
3,325
0
0
0
0
82
82
82
82
40
25
25
30
30
33
Segment #3 Above $600,000-Avg.
112
$783,990
$845,490
$909,990
3,839
4,530
5,253
0
0
0
0
15
15
15
15
16
15
15
6
0
0
1,745
$481,698
$509,680
$533,403
2,422
2,840
3,166
0
65
133
133
293
219
164
164
123
107
107
103
81
53
Overall
See APPENDIX D – “Market Absorption Study” for a discussion of the assumptions and limiting conditions of the Market Absorption Study.
Appraised Property Value
An appraisal prepared by an MAI appraiser of the residential and commercial land that comprises
the District dated February 10, 2006 (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 market value of the “as-is” condition of the property in each of the
5 separate tracts in Phase I, the “panhandle” area, plus the remaining ownership of Ashby USA, LLC
comprising Phase II, the “pan” area. The Appraisal also reflects the proposed District financing, as well as
the tax rates of approximately 1.6% to 1.7%, of the estimated sales prices of the homes to be built in the
District, including the Special Taxes, to the future homeowners. The Appraisal is based on certain
assumptions. Subject to these assumptions, the Appraiser estimated that the fee simple market value of the
Taxable Property within the District (subject to the lien of the Special Taxes) as of January 15, 2006, was
as follows:
Market
Ownership
Value
Phase I – “Panhandle” Area: Builder (Tract Name)
DR Horton – Continental Homes (Castillo)
Davidson Roripaugh Ranch 122 LLC (n/a)
Tanamera/Roripaugh II, LLC (Madison)
Tanamera/Roripaugh, LLC (Shutters)
Traditions at Roripaugh, LLC (Hamptons)
Subtotal
Phase II “Pan” Area: Owner
Ashby USA, LLC
Total
$17,280,000
18,070,000
17,700,000
18,260,000
18,340,000
$89,650,000
$74,480,000
$164,130,000
The values are based on the assumption that the master developer will complete the infrastructure
in a timely manner such that building permits will be available for development to occur as projected in the
absorption conclusions by the Market Absorption Consultant. The Market Absorption Study contains
projected absorption of production homes that differ from those of Ashby USA, LLC. The Market
AbsorptionStudy and the Appraisal were prepared utilizing an estimated September 2006 date of completion
permits for homes in Phase II. The September 2007 date of completion takes into account the possibility that
the schedule prepared by Ashby USA, LLC with respect to Phase II is not achieved. The Authority, the City
and the Merchant Builders make no representations as to the ability of Ashby USA, LLC to perform in the
manner assumed by Ashby USA, LLC or assumed in the Appraisal, or as to the accuracy or completeness
of the Appraisal or the Market Absorption Study.
See “PROPERTY OWNERSHIP AND
DEVELOPMENT – Market Absorption Study” and APPENDIX D – “Market Absorption Study.”
The Appraisal uses a sales comparison approach to estimate the value of the property in Phase I.
This approach considers recent sales of residential land or bulk lots from the general area in comparison to
the property in Phase I. Then a deduction is made for the estimated remaining cost and fees to get the lots
from “as is” condition to finished lots. “Finished lots” are lots that are fully improved and ready for homes
to be built. This reflects that the lots have all development entitlements, infrastructure improvements
completed, finish grading completed, all in-tract utilities extended to the property line of each lot, street
improvements completed, common area improvements/landscaping (associated with the tract) completed,
and all development fees paid, exclusive of building permit fees, in accordance with the conditions of
approval of the specific tract map (which, as described in “Property Ownership” above, is not yet the
condition of the property within Phase I), less the estimated cost to achieve finished lots (based on the status
of the development process as of January 15, 2006. The estimate of value was based on fee simple
69
ownership, subject only to easements of record and the lien of the Special Taxes and other special tax and
assessment liens.
The Appraisal uses a subdivision or developmental approach to estimate the value of the property
in Phase II. This method uses a discounted cash flow analysis which involves the discounting of the
projected net proceeds from assumed sales of the land over the appropriate period of time. The sales of land
represent the gross proceeds, less deduction for the remaining land development costs, cost of overhead and
marketing, holding cost, and profit to Ashby USA, LLC. The estimated net proceeds over time are then
discounted to a present value indication.
Neither the Authority nor the District makes any representation as to the accuracy or completeness
of the Appraisal. See Appendix C hereto for more information relating to the Appraisal.
The fee simple market value includes the value of extensive grading as of the date of value and the
improvements to be financed by the 2006 Bonds. The market values reported in the Appraisal result in an
estimated aggregate value-to-lien ratio of 3.20:1, with a value of approximately 6.90:1 with respect to tracts
within Phase I and 1.95:1 with respect to Phase II, calculated with respect to the 2006 Bonds based on
allocation of Special Taxes levied as Undeveloped Property and excluding the overlapping assessment debt
relating to the Prior Lien and general obligation bond debt. The value-to-lien ratios of individual parcels
will differ from the foregoingaggregate value. See Table 5 – “Estimated Value-to-Lien Analysis (Assuming
Current Status of Development) (As of January 15, 2006 Date of Value)” and Table 6 “Estimated Value-toLien Analysis at Build-Out (Utilizing Appraisal Values)” in “PROPERTY OWNERSHIP AND
DEVELOPMENT – Value-to-Lien Ratios” section. See “BONDOWNERS’ RISKS – Burden of Parity
Liens, Taxes and Other Special Assessments on the Taxable Property” and “BONDOWNERS’ RISKS –
Appraised Values” herein and APPENDIX C – “Summary Appraisal Report” appended hereto for further
information on the Appraisal and for limiting conditions relating to the Appraisal. Ashby USA, LLC has
provided a letter of credit to the Trustee which may be drawn in the event Special Taxes due with respect
to property owned by Ashby USA, LLC or the Tanamera/Roripaugh Entities are not paid. See “SECURITY
FOR THE BONDS – Letter of Credit.”
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 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 theirSpecial 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.
70
Concentration of Ownership
As of the date hereof, Ashby USA, LLC and the Merchant Builders are responsible for all 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 Reserve Fund 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.
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 Ashby USA, LLC,
anyMerchant Builder 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.
Failure to Develop Properties
Development of property within the District may be subject to economic considerations and
unexpecteddelays, disruptions andchanges which may affect the willingness and ability of Ashby USA, LLC
or Merchant Builders or any property owner to paythe Special Taxes when due. Development is conditioned
upon Ashby USA, LLC‘s completion of the infrastructure in a timely manner such that building permits will
be available for development to occur as projected. Delays in completion of infrastructure will delay
satisfaction of conditions relating to issuance of building permits.
Land development is also subject to comprehensive federal, State and local regulations. Approval
is 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. Grading is currently substantially completed for all of the development. See
“Government Approvals” and “Local, State and Federal Land Use Regulations” below. 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, failure to obtain necessarygovernmental 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. The issuance of building permits
for the property within the District is dependent upon Ashby USA, LLC’s completion of certain public
improvements as described in Appendix K. See also, “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 land within the District. If the value of the land 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.
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The 2006 Bonds Are Limited Obligations of the District
The District has no obligation to pay principal of and interest on the 2006Bonds in the event Special
Tax collections are delinquent, other than from amounts, if any, on depositin certain funds and accounts held
under the Fiscal Agent Agreement, or funds derived from the tax sale or foreclosure and sale of parcels on
whichlevies of the Special Tax are delinquent, nor is the District obligated to advance funds to paysuch debt
service on the Bonds.
Appraised Values
The Appraisal summarized in Appendix C hereto estimates the fee simple interest market value of
the Taxable Property within the District. This value is merely the present opinion of the Appraiser, and is
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 present opinion of such value might
be rendered by a different appraiser.
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 a present opinion. It is based upon present facts and circumstances.
Differing facts andcircumstances may lead to differing opinions of value. The appraised market value is not
evidence of future value because future facts and circumstances may differ significantly from the present.
No assurance can be given that 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
requiredin connection with particular parcels of property or the public improvements, 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, the presence
of previously unknown Indian artifacts or burial grounds and by other similar factors. 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
undeveloped 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. See BONDOWNERS’ RISKS – Failure to Develop Properties.”
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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 priority and parity liens and similar claims.
The table in the section entitled “PROPERTY OWNERSHIP AND DEVELOPMENT – 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
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 has recorded a notice of the Special Tax lien in the Office of the County Recorder on
January 14, 2005, as Document No. 2005-0039138, as amended by a recording following February 28, 2006
approval of an amended notice. 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 statutorily prescribed 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
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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
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.
Ashby USA, LLC must also comply with all applicable laws,ordinances, regulations andconditions
of approval with respect to the construction of the development. Failure to do so could result in a party
bringing a legal action seeking various remedies, including, but not limited to, an injunction to stop
construction of the project. Of particular concern is the payment of prevailing wages on construction of the
public improvements and compliance with the requirements for preservation of cultural artifacts and human
remains of Native Americans, specifically the Pechanga Band of Luiseno Indians.
Ashby USA, LLC must pay prevailing wages pursuant to Labor Code Section 1720 et seq. for the
public improvements as required bySection 8.01 of the Acquisition Agreement by andbetween the Authority
and Ashby USA, LLC dated March 1, 2006. If Ashby USA, LLC does not maintain certified payrolls
documenting the payment of prevailing wages and otherwise comply with the requirements of the Prevailing
Wage Law, it cannot be reimbursed for such work with Bond proceeds for construction of the public
improvements and will still be obligated to construct the public improvements with its own funds. Such an
event would likely adversely impact construction of the housing units.
As described in “THE COMMUNITY FACILITIES DISTRICT – Environmental Conditions – Other
Requirements,” Ashby USA, LLC signed a pre-excavation agreement with the Pechanga Band providing for
the monitoring of grading on the property in order to fulfill its responsibilities under the conditions of
approval and State law to identify and preserve cultural artifacts and human remains relating to Native
Americans and specifically the Pechanga Band. The Pechanga Band and Ashby USA, LLC have also
approved a work plan to complete grading of the property after some disagreements as to the scope of the
required monitoring. Despite the fact that grading is almost complete, Ashby USA, LLC will still need to
comply with the applicable laws, regulations and conditions of approval as well as the pre-excavation
agreement and required work plan in the event any cultural artifacts or human remains are found. Failure
to do so will likely result in a legal action by the Pechanga Band to enforce these obligations. The Pechanga
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Band has filed such actions on other projects in the City of Temecula and threatened to do so on this project
until the work plan was approved.
Endangered and Threatened Species
It is illegal to harm or disturb any plants or animals in their habitat that have been listed as
endangered species by the United States Fish & Wildlife Service (“FWS”) under the Federal Endangered
Species Act or by the California Department of Fish & 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. See “THE COMMUNITY FACILITIES DISTRICT – Environmental
Conditions.” In 1998, the FWS adopted the “Permit Revocation Rule” or more commonly, the “no surprises
rule” which substantially restricted the FWS authority to revoke or modify these types of 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 formerrule.
(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).
The 262 acres of Roripaugh Ranch open space include 201 acres of preserved habit as required in
the AD 161 SHCP as required for the federal Endangered Species Act Section 10(a) permit number TE030505-0issued by the FWS on December 4, 2001. In March 2003, Ashby USA, LLC graded approximately
8.96 acres of the land designated as the Preserved Habitat Area pursuant to the AD 161 SHCP with Fish and
Wildlife Service permits in violation of federal law. The impacted area included estimated 4.33 acres of
Riversidean Sage Scrub, 2.42 acres of transitional/degraded Riversidean Sage Scrub, and approximately 2.2
acres of ruderal, weed or agricultural areas. In response to the violation of federal law, the Fish and Wildlife
Service approved a “Conceptual Mitigation Plan for Impacts to Areas Within the Jurisdiction of the United
States Department of Interior Fish and Wildlife Service Under Section 10(a)(1) (B) of the Endangered
Species Acton on June 2, 2004 (“Restoration Plan”). Pursuant to the Restoration Plan, Ashby USA, LLC
is required to restore additional 21.65 acres of Riversidean Sage Scrub (4.33 acres at 5:1 ratio) to offset the
impacts to mature Riversidean Sage Scrub caused by Ashby USA, LLC grading in violation of federal law.
The City and Ashby USA, LLC entered into that certain “Open Space Grading and Restoration Agreement”
dated as of May 11, 2004 in order to implement the requirements of the Fish and Wildlife Service to cure
the violations. The installation of the new plant material pursuant to the Restoration Plan was to be
completed before January 31, 2005, provided, however, that Ashby USA, LLC is obligated to guarantee the
plant growth for a period of five years from installation. Weather conditions in the winter of 2005 and other
matters delayed completion of the 33.49 acres of restoration. See “THE COMMUNITY FACILITIES
DISTRICT – Environmental Conditions – Endangered Species Act” for a description of the status of the
restoration work. Ashby USA, LLC has recently contacted the Fish and Wildlife Service and presented its
plan for restoration as outlined above so as to resolve any issues relating to the delay in installation of the
plant material beyond January 31, 2005 and to avoid being in violation of federal law.
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 California laws with regard to hazardous substances are also stringent and similar. Under many
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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
District 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
as expressly noted. However, it is possible that such liabilities do currently exist and that the District is not
aware of them. See “THE COMMUNITY FACILITIES DISTRICT – Environmental Conditions” for a
description of the prior agricultural use of the property and the remediation of certain conditions identified
in the 1999 Phase 1 Environmental Site Assessment report.
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 availablefunds, 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 a government 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
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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 Pubic 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 manner as 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.
Inaddition, the Rate andMethod limits the increase of Special Taxes levied onparcels of Developed
Property or Undeveloped Property to cure delinquencies of other property owners in the District. See
“SECURITY FOR THE 2006 BONDS – Rate and Method” herein.
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 Reserve Fund is depleted. See “SECURITY FOR THE 2006
BONDS – Proceeds of Foreclosure Sales.”
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 Reserve Fund
The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement (see
“SECURITY FOR THE 2006 BONDS – Special Tax Fund – Disbursements” herein). Funds in the Reserve
Fund may be used to pay principal of and interest on the 2006 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 for the 2006 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
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Bondowners pursuant to the Fiscal Agent Agreement. However, no replenishment from the proceeds of a
Special Tax levy can occur as long as the proceeds that are collected from the levyof 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. Thus it is possible that the Reserve Fund 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 having delinquent Special Tax installments may be limited in certain respects with regard
to properties in which the Federal Deposit Insurance Corporation (the “FDIC”) has or obtains an interest.
The FDIC would obtain such an interest by taking over a financial institution 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 Authorityor 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.
Adjustable Rate and Unconventional Mortgage Structures
Since the end of 2002, many persons have financedthe purchase of new homes using loans 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
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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 forloans 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 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. If there were significant delinquencies in Special Tax collections
in the District and the Reserve Fund was fully depleted, there could be a default in the payment of principal
of and interest on the 2006 Bonds.
Some economists have also predicted that, as mortgage loan defaults increase bankruptcy filing 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. See “SPECIAL RISK FACTORS —Bankruptcy and Foreclosure Delay” below.
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.
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.
On July 30, 1992, the United States Court of Appeals for the Ninth circuit issued its opinion in a
bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem
79
property taxes levied bySnohomish County in the State of Washington after the date that the property owner
filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the
property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition
as “administrative expenses” of the bankruptcy estate, payable after all secured creditors. As a result, the
secured creditor was to foreclose on the property and retain all of the proceeds of the sale except the amount
of the pre-petition taxes.
According to the court’s ruling, as administrative expenses, post-petition taxes would have to be
paid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such
administrative expenses may be allowed to be deferred. Once the property is transferred out of the
bankruptcy estate (through foreclosure or otherwise) it would at that time become subject to current ad
valorem taxes.
The Act provides that the Special Taxes are secured by a continuing lien, which is subject to the
same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how
a bankruptcy court would treat the lien for the Special Taxes levied after the filing of a petition in
bankruptcy. Glasply is controlling precedent forbankruptcy courts in the State. If the Glasply precedent was
applied to the levy of the Special Tax, the amount of Special Tax received from parcels whose owners
declare bankruptcy could be reduced.
It should also be noted that on October 22, 1994, Congress enacted 11 U.S. C. Section 362(b)(18),
which added a new exception to the automatic stay for ad valorem property taxes imposed by a political
subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of
a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal
years will attach even if the property is part of the bankruptcy estate. Bondowners should be aware that the
potential effect of 11 U.S. C. Section 362(b)(18) on the Special Taxes depends upon whether a court were
to determine that the Special Taxes should be treated like ad valorem taxes for this purpose.
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.
If anyproperty taxes (including interest) onFDIC owned property are secured by a validlien (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
80
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.
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 Reserve Fund and perhaps, ultimately, a default in payment on the 2006 Bonds. Based upon the
secured tax roll as of January 1, 2004, 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. Prior to the issuance of grading permits, engineering reports addressing geologic,
seismic or soil limitations and foundation design were prepared for applicable Planning Areas. None of the
school sites lies within the Alquist-Priolo Earthquake Fault Zone.
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.
81
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
“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 andapproved the Rate and Method. The Supreme
Court of the State has not yet decided whether landowner elections (as opposed to resident elections) satisfy
requirements 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
82
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.
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 for aprocedure, 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, any action 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, forvoters 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 for Administrative 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
District 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.
83
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 as to the
ability of the State, the County, the City, the District or local districts to increase revenues or to increase
appropriations or as to 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,
the District and Ashby USA, LLC has 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, 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.
IRS Audit of Tax-Exempt Bond Issues
The Internal Revenue Servicehas initiated an expanded program forthe auditing of tax-exempt bond
issues, including both random and targeted audits. It is possible that the 2006 Bonds will be selected for
audit by the Internal Revenue Service. It is also possible that the market value of the 2006 Bonds might be
affected as a result of such an audit of the 2006 Bonds (or by an audit of similar bonds).
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
Provision” and “Billing of Special Taxes” herein.
84
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 H.
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 H.
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 or body pending with respect to which they have been served with process or to their
knowledge threatened against the Authority or the District affecting their existence, or the titles of their
respective officers which would materially adversely affect the ability of the Authority to perform its
obligations under the 2006 Bonds or certain documents related thereto 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.
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 of the Authority for the District payable solely from proceeds of the Special Tax and proceeds
of the 2006 Bonds, including amounts in the Reserve Fund, 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.
85
NO RATINGS
The 2006 Bonds have not been rated by any securities rating agency.
UNDERWRITING
The 2006Bonds are being purchased by Stone & Youngberg LLC at apurchase priceof $50,294,375
(which represents the aggregate principal amount of the 2006 Bonds ($51,250,000, less an underwriter’s
discount of $955,625).
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 cover page hereof. The offering prices may be changed from time to time by
the Underwriter.
PROFESSIONAL FEES
Feespayable to certainprofessionals, in connection with the 2006 Bonds,including the Underwriter,
Quint & Thimmig LLP, 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
David Taussig & Associates, Inc., 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.
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 District has been duly authorized by the
Authority on behalf of the District.
(RORIPAUGH RANCH)
By: /s/ Shawn Nelson
Shawn Nelson, Executive Director,
Temecula Public Financing Authority, on behalf of the
District
86
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 or responsibility whatsoever with respect to the 2006 Bonds or the Fiscal Agent Agreement.
General Information
Following a vote by the residents on November 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 andother
districts, also provide various levels of service within the City of Temecula. However, the Temecula City Council
does not have continuing oversight responsibility over these other governmental entities.
Located on Interstate 15, the City of Temecula is the 9th largest city in the Inland Empire and the 4th largest
in Riverside County (as of July 1, 2005), encompassing approximately 30 square miles. The City of Temecula is
85 miles southeast of Los Angeles, approximately 55 miles north of San Diego, approximately 60 miles southeast
of Orange County and approximately 20 miles inland from the cities of San Juan Capistrano and Oceanside. The
City’s approximately 90,872 residents are offered a broad range of housing options from apartments to luxury
custom homes.
Population
From 1990 – 2005, the City’s population grew from 27,099 to 90,872, a gain of 63,773 or 235.3%. In this
same period, Riverside County added 706,587, a gain of 60.4%.
CITY OF TEMECULA AND COUNTY OF RIVERSIDE POPULATION
FROM 1990 TO 2005
Temecula
Year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001*
2002
2003
2004
2005**
Population
27,099
27,264
31,005
33,226
35,771
39,284
41,850
43,760
46,564
48,828
53,791
61,803
73,164
75,996
78,841
90,872
Riverside County
% Change
—
0.6%
13.7
7.2
7.7
9.8
6.5
4.6
6.4
4.9
10.2
14.9
18.4
5.3
3.7
15.3
*
Population
1,170,413
1,223,227
1,268,844
1,304,447
1,331,988
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
1,877,000
% Change
—
4.5%
3.7
2.8
2.1
1.8
1.9
1.3
2.9
2.2
3.4
4.4
4
4.4
4.7
3.8
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
2000 – 2004
2000
2001
2002
2003
2004
$156,787,850
$127,823,375
$100,516,115
$194,699,509
$185,041,089
58,320,736
39,602,913
43,487,229
36,087,001
56,658,233
$215,108,586
$167,426,288
$144,003,344
$230,786,510
$241,699,322
1,142
944
650
1,271
888
244
0
0
142
408
1,386
944
650
1,413
1,296
Valuation:
Residential
Non-residential
Total
Residential Units:
Single family
Multiple family
Total
____________________
Source: Construction Industry Research Board.
A-2
The following table shows historical commercial and residential construction and property values.
CITY OF TEMECULA
COMMERCIAL AND RESIDENTIAL CONSTRUCTION AND PROPERTY VALUES
Fiscal Years ending June 30, 1992 – 2005
Commercial Construction(1)
Fiscal Year
(ending June 30)
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Number
of Units
158
150
130
162
136
202
203
337
437
265
252
304
277
116
Residential Construction(1)
Value
Number
of Units
902
6,316
10,639
29,221
23,572
32,863
66,226
159,286
52,497
39,511
51,686
41,402
61,823
79,578
337
802
1,186
968
987
857
835
1,384
1,179
1,606
938
1,162
1,472
918
$
Property Values(2)
Value
Commercial
Residential
$ 10,605
50,347
113,002
85,410
93,674
85,257
105,527
180,840
148,660
169,687
97,773
145,387
179,071
241,322
$1,078,926
1,473,713
1,526,353
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
$1,542,280
1,454,943
1,489,077
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
Values in thousands of dollars.
____________________
Source:
(1) City of Temecula, Building and Safety Department.
(2) County Land Use Statistical Recap Report.
Economic Condition
Temecula’s economic base is anchored by a number of firms specializing in biomedical technology and
supplies, hightechnology controllers and semi-conductors, among others. The City’s retail base is also experiencing
growth and is home to several auto dealersincluding Honda, Toyota and Nissan. The following tables set forth major
manufacturing and non-manufacturing employers:
A-3
CITY OF TEMECULA
MAJOR MANUFACTURING EMPLOYERS
(As of November, 2005)
Approximate
No. of Employees
Employer
Guidant Corporation
International Rectifier/Hexfet
Channell Commercial Corp.
Milgard Manufacturing
2,354
700
344
325
Type of Business
Medical equipment
Power semi-conductors
Cable enclosures
Custom windows
Bianchi International
Opto 22 Inc.
Chemicon International
Plant Equipment, Inc.
225
205
201
200
Leather goods
Electric/automation controls
Medical products
Telephone equipment
Magnecomp Corporation
Solid State Stamping
Tension Envelope
Molding International & Engineering
118
110
110
102
Manufacture computer disks
Manufacture electronic contacts
Envelope manufacturer
Manufacturer
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
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
Source: City of Temecula Finance Department.
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
A-4
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
1997-98
$9,186,547
1998-99
$10,652,400
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
Type of Business
2005 Assessed
Valuation
(in thousands)
Percent of
Total Assessed
(Valuation)
Advanced Cardiovascular System Inc.
Manufacturing
$152,155
2.05%
International Rectifier Corporation
Manufacturing
128,471
1.73%
Temecula Towne Center Associates
Real Estate Development
98,285
1.33%
Lakha-Aldenwood Properties LLC
47,500
0.64%
Kimco Palm Plaza Limited Partnership
41,738
0.56%
Portofino Development
30,428
0.41%
Starwood Wasserman Temecula
Property Management
29,692
0.40%
STCA
Manufacturing
29,233
0.39%
California Acacia Limited Partnership
27,264
0.37%
Solana Ridge LLC
25,544
0.34%
$610,313
8.24%
____________________
Source: Riverside County Assessor’s Office and City of Temecula Finance Department.
A-5
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
$(22,276)
$3,180,911
$(53,023)
$3,127,888
$3,127,888
1998
$3,279,750
$(24,100)
$3,255,651
$(56,665)
$3,198,986
$3,198,986
1999
$3,445,913
$(24,216)
$3,421,696
$(60,119)
$3,361,578
$3,361,578
2000
$3,827,394
$(25,597)
$3,801,797
$(61,464)
$3,740,333
$3,740,333
2001
$4,563,253
$(29,666)
$4,533,587
$(64,372)
$4,469,215
$4,469,215
2002
$5,201,010
$(33,360)
$5,167,650
$(68,938)
$5,098,712
$5,098,712
2003
$6,201,896
$(30,010)
$6,171,886
$(82,926)
$6,088,960
$6,088,960
2004
$6,931,291
$(43,142)
$6,888,149
$(92,362)
$6,795,787
$6,795,787
2005
$7,794,688
$(53,240)
$7,741,448
$(94,237)
$7,647,211
$7,647,211
Estimated
Actual
Value
____________________
Source: Riverside County Assessor’s Office.
General Information
Industrial Real Estate. In June 2004, the City had 12.5 million square feet of manufacturing space
in existence or under construction. This was an increase from 9.0 million square feet in 2002. The City’s
supply represents 4.0% of the Inland Empire’s total of 313 million square feet. In June 2004, the City’s
industrial vacancy rate was approximately 5.0%. The City industrial vacancy rate was well below the 8.6%
average for the inland regions’ 12 major submarkets.
Office Real Estate. In 2003, the region’s net space absorption was 1.23 million square feet. For the
four quarters ended June 2004, a net of 731,551 square feet was taken off the market. The vacancy rate has
dropped from 25% in 1997 to 9.2% in the third quarter of 2004.
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 May, 2005, there were twenty (20) 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.
A-6
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.
Education. The City is served by Temecula Valley Unified School District, one of the fastest
growing school districts in the State,with 4 high schools (including a continuation school), 5 middle schools,
2 charter schools, 1 home-schooling program, and 15 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. As of May, 2005, approximately 25,653 students (Grades K-12) are 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 1990s 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 15 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
81,397 residents as of January 1, 2005, which includes the annexation of the Vail Ranch area in July, 2001
and the March, 2004 annexation of the community of Redhawk, which became official June 30, 2005.
A-7
APPENDIX B
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
(RORIPAUGH RANCH)
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
(RORIPAUGH RANCH)
A Special Tax shall be levied and collected on all Taxable Property located within the boundaries of
CFD No. 03-02 Temecula Public Financing Authority Community Facilities District No. 03-02
(Roripaugh Ranch) ("CFD No. 03-02"). The amount of Special Tax to be levied in each Fiscal Year
on a Parcel in CFD No. 03-02, commencing with Fiscal Year 2005-2006, shall be determined by the
CFD Administrator through the application of the procedures described below. All of the real
property in CFD No. 03-02, unless exempted by law or the provisions herein, shall be taxed for the
purposes, to the extent and in the manner herein provided.
A.
DEFINITIONS
In addition to the capitalized terms set forth in the preceding paragraph, capitalized terms
used in this Section A shall have the following meanings:
"Acre" means 43,560 square feet of land. The Acres for a Parcel means the land area of the
Parcel as shown on or determined from the applicable Assessor's Parcel Map.
Notwithstanding the foregoing, the Acres attributable to each Parcel of Residential Property
that is (i) located in a Final Map and (ii) an individual single-family home lot or
Condominium shall be computed by the CFD Administrator by dividing the sum of the land
area for all such Parcels of Residential Property in the Final Map by the number of such
Parcels. The Acres for any leasehold or possessory interest shall be the Acres for the Parcel
which corresponds to such leasehold or possessory interest.
"Acreage Special Tax" means the special tax set forth in Section C.2 below.
"Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter
2.5, Part 1, Division 2 of Title 5 of the Government Code of the State of California.
"Administrative Expenses" means the actual or reasonably estimated costs directly related
to the administration of CFD No. 03-02, including but not limited to the following: (i) the
costs of computing the Special Taxes and of preparing the annual Special Tax collection
schedules (whether by the CFD Administrator or designee thereof, or both); (ii) the costs of
collecting the Special Taxes (whether by the Authority, County, City, or otherwise); (iii) the
costs of remitting the Special Taxes to the fiscal agent or trustee for any Bonds; (iv) the costs
of commencing and pursuing to completion any foreclosure action arising from delinquent
Special Taxes; (v) the costs of the fiscal agent or trustee (including its legal counsel) in the
discharge of the duties required of it under any Indenture; (vi) the costs of the Authority,
City, or designee of complying with arbitrage rebate and disclosure requirements of
applicable federal and State of California securities laws, the Act, and the California
Government Code, including property owner or Bond owner inquiries regarding the Special
CFD No. 03-02
Page 1 of 12
January 5, 2005
Taxes; (vii) the costs associated with the release of funds from any escrow account; (viii) the
costs of the Authority, City, or designee related to any appeal of a Special Tax; and (ix) an
allocable share of the salaries of the City staff and City overhead expense directly relating to
the foregoing. Administrative Expenses shall also include amounts advanced by the City or
the Authority for any administrative purposes of CFD No. 03-02.
"Assessor" means the County Assessor of the County of Riverside.
"Assessor's Parcel Map" means an official map of the Assessor designating parcels of land
or Condominium units by number.
"Authority" means the Temecula Public Financing Authority.
"Board of Directors" means Board of Directors of the Authority, acting as the legislative
body of CFD No. 03-02.
"Bonds" means any bonds or other indebtedness (as defined in the Act), whether in one or
more series, the repayment of which is secured by the levy of Special Taxes on Parcels
within CFD No. 03-02.
"CFD Administrator" means the Finance Director of the City, or designee thereof,
responsible for determining the Special Tax Requirement and providing for the levy and
collection of Special Taxes.
"City" means the City of Temecula, California.
"Condominium" means a residential dwelling unit meeting the statutory definition of a
condominium contained in the California Civil Code, Section 1351, and for which a
condominium plan has been recorded pursuant to California Civil Code, Section 1352.
"County" means the County of Riverside, California.
"Developed Property" means all Parcels of Taxable Property, for which a Final Map was
recorded as of the January 1 and a building permit for new construction was issued as of the
April 1 preceding the Fiscal Year in which the Special Tax is being levied, exclusive of
Property Owner's Association Property and Public Property.
"Dwelling Unit Special Tax" means the special tax set forth in Section C.1 below.
"Exempt Property" means any Parcel located within the boundaries of CFD No. 03-02
which is exempt from the Special Tax pursuant to law or Section E below.
"Final Map" means a subdivision of property by recordation of a (i) final map or parcel map
approved by the City pursuant to the Subdivision Map Act (California Government Code
CFD No. 03-02
Page 2 of 12
January 5, 2005
Section 66410 et seq.), (ii) lot line adjustment approved by the City, or (iii) condominium
plan pursuant to California Civil Code 1352.
"Fiscal Year" means the period starting on each July 1 and ending on the following June 30.
"Indenture" means the indenture, fiscal agent agreement, trust agreement, resolution or
other instrument pursuant to which Bonds are issued, as modified, amended and/or
supplemented from time to time, and any instrument replacing or supplementing the same.
"Land Use " means the land use set forth in the Land Use Plan.
"Land Use Plan" means the approved land use plan for the Specific Plan.
"Lot" means (i) any lot within a Final Map that is located at least partially within the
boundaries of CFD No. 03-02 or (ii) any land within the boundaries of CFD No. 03-02 that is
conveyed, dedicated, or otherwise acquired by or irrevocably offered to the federal
government, the State of California, the County, the City, or any local government or other
governmental agency.
"Maximum Special Tax" means the maximum special tax, determined in accordance with
Section C, that can be levied in any Fiscal Year on any Parcel.
"Non-Residential Property" means all Parcels of Taxable Property which are not classified
as Residential Property, Property Owner's Association Property, or Public Property.
"Parcel" means a parcel (i) which is located at least partially within the boundaries of CFD
No. 03-02 and (ii) to which an Assessor's parcel number is assigned as shown on an
Assessor's Parcel Map.
"Planning Area" means those planning areas designated by number on the Land Use Plan.
"Property Owner's Association Property" means (i) any Parcel for which the owner of
record, as determined from the County Assessor's secured tax roll for the Fiscal Year in
which the Special Tax is being levied, is a property owner's association, including any master
or sub-association, (ii) any Lot located in a Final Map that was recorded as of the January 1
preceding the Fiscal Year in which the Special Tax is being levied and which, as determined
from such Final Map, is or will be open space, a private park or recreation facility, or a
private street owned by a property owner's association, (iii) any Lot within a Final Map that
is located within the boundaries of CFD No. 03-02 and was recorded as of the January 1
Use is private mini park or private recreation center, or (iv) any Lot or Parcel which, as of the
April 1 preceding the Fiscal Year for which the Special Tax is being levied, has been
conveyed, irrevocably dedicated, or irrevocably offered to a property owner's association,
including any master or sub-association, provided such conveyance, dedication, or offer is
CFD No. 03-02
Page 3 of 12
January 5, 2005
submitted to the CFD Administrator prior to the May 1 preceding the Fiscal Year for which
the Special Tax is being levied.
"Proportionately" means that with respect to a given classification of property the ratio of
the Special Tax to the Dwelling Unit Special Tax or Acreage Special Tax, as applicable, is
the same for all Parcels assigned to such classification. For example, levying the Special Tax
Proportionately on Parcels of Developed Residential Property means that for all such Parcels
the ratio of the Special Tax to the Dwelling Unit Special Tax is the same.
"Public Property" means (i) any Parcel for which the owner of record, as determined from
the County Assessor's secured tax roll for the Fiscal Year in which the Special Tax is being
levied, is the federal government, the State of California, the County, the City, or any local
government or other governmental agency, (ii) any property within a Final Map that is
located within the boundaries of CFD No. 03-02 and was recorded as of the January 1
preceding the Fiscal Year in which the Special Tax is being levied and which, as determined
from such Final Map, is or will be a public street, (iii) any Lot within a Final Map that is
located within the boundaries of CFD No. 03-02 and was recorded as of the January 1
Use is neighborhood park, sports park, educational, public institutional, habitat, flood
control, or landscape slope, unless such Lot has an underlying residential land use and the
applicable public entity has provided notice to the City that it will not acquire or otherwise
take ownership of the Lot, or (iv) any Lot or Parcel which, as of the April 1 preceding the
Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably
dedicated to, or irrevocably offered to the federal government, the State of California, the
County, the City, or any local government or other governmental agency, provided such
conveyance, dedication, or offer is submitted to the CFD Administrator prior to the May 1
preceding the Fiscal Year for which the Special Tax is being levied.
"Residential Floor Area" means all of the square footage within the perimeter of a
residential structure, not including any carport, walkway, garage, overhang, patio, enclosed
patio, or similar area as determined from the applicable building permit(s) issued for such
structure as of the April 1 preceding the Fiscal Year in which the Special Tax is being levied.
Such determination shall be final following the final inspection or certification of occupancy
for the dwelling unit(s).
"Residential Property" means all Parcels of Taxable Property, exclusive of Property
Owner's Association Property and Public Property, designated with a residential Land Use.
"Special Tax" means the Special Tax levied in each Fiscal Year on each Parcel.
"Special Tax Requirement" means (a) that amount with respect to CFD No. 03-02 required
in any Fiscal Year to pay (i) for annual debt service on all outstanding Bonds due in the
calendar year which commences in such Fiscal Year; (ii) periodic costs on the Bonds,
including, but not limited to, the costs of remarketing, credit enhancement, and liquidity
facility fees (including such fees for instruments that serve as the basis of a reserve fund in
CFD No. 03-02
Page 4 of 12
January 5, 2005
lieu of cash related to any such Bonds) and rebate payments; (iii) the Administrative
Expenses; (iv) any reasonably anticipated delinquent Special Taxes based on the delinquency
rate for Special Taxes levied in the previous Fiscal Year or otherwise reasonably expected;
(v) any amounts required to establish or replenish any reserve funds established for the
Bonds, and less (b) available funds as directed under the Indenture.
"Specific Plan" means the Roripaugh Ranch Specific Plan (City of Temecula Resolution
02-112, Ordinance 02-13), as amended.
"Taxable Property" means all Parcels which are not exempt from the Special Tax pursuant
to law or Section E below.
"Taxable Property Owner's Association Property" means all Parcels of Property Owner's
Association Property which are not exempt from the Special Tax pursuant to law or Section
E below.
"Taxable Public Property" means all Parcels of Public Property which are not exempt from
the Special Tax pursuant to law or Section E below.
"Undeveloped Property" means all Parcels of Taxable Property which are not classified as
Developed Property, exclusive of Property Owner's Association Property and Public
Property.
B.
ASSIGNMENT TO LAND USE CATEGORY
Each Fiscal Year, commencing with Fiscal Year 2005-2006, all Parcels shall be classified as
either Taxable Property or Exempt Property. Taxable Property shall be further classified as
Residential Property, Non-Residential Property, Taxable Property Owner's Association
Property, or Taxable Public Property. Residential Property and Non-Residential Property
shall be further classified as Developed Property and Undeveloped Property (hereinafter
referred to as "Developed Residential Property," "Developed Non-Residential Property,"
"Undeveloped Residential Property," or "Undeveloped Non-Residential Property").
For purposes of determining the applicable Dwelling Unit Special Tax, Developed
Residential Property shall be assigned to classifications one through fifteen in Table 1 below
based on Residential Floor Area. If a Parcel consists of two or more Lots located in a Final
Map that was recorded as of the January 1 preceding the Fiscal Year for which the Special
Tax is being levied, each such Lot shall be treated as a Parcel and classified independently of
the other; however, the aggregate Special Tax for the Lots will be levied on the Parcel.
C.
MAXIMUM SPECIAL TAX RATE
The Maximum Special Tax for each Parcel of Developed Residential Property shall be the
greater of the applicable Dwelling Unit Special Tax or Acreage Special Tax. If there are two
or more residential dwelling units located on a Parcel, the applicable Dwelling Unit Special
CFD No. 03-02
Page 5 of 12
January 5, 2005
Tax for such Parcel shall be the sum of the Dwelling Unit Special Tax for each such
residential dwelling unit. The Maximum Special Tax for each Parcel of Undeveloped
Residential Property, Non-Residential Property, Taxable Property Owner's Association
Property, and Taxable Public Property shall be the applicable Acreage Special Tax.
1.
Dwelling Unit Special Tax
The Dwelling Unit Special Tax rates are shown in Table 1 below.
TABLE 1
D WELLING U NIT SPECIAL TAX RATES FOR
DEVELOPED R ESIDENTIAL PROPERTY
SPECIAL TAX CLASSIFICATION
R ESIDENTIAL
F LOOR
A REA
D WELLING
U NIT
SPECIAL
TAX
1
1
Residential
>5,000
$4,230
2
Residential
>4,400 and <=5,000
$3,9951
3
Residential
>4,200 and <=4,400
$3,5201
4
Residential
>4,000 and <=4,200
$3,3561
5
Residential
>3,800 and <=4,000
$3,192
1
6
Residential
>3,600 and <=3,800
$3,028
1
7
Residential
>3,400 and <=3,600
$2,8651
8
Residential
>3,200 and <=3,400
$2,7011
9
Residential
>3,000 and <=3,200
$2,537
10
Residential
>2,800 and <=3,000
$2,374
11
Residential
>2,600 and <=2,800
$2,2101
12
Residential
>2,400 and <=2,600
$2,046
1
13
Residential
>2,200 and <=2,400
$1,883
1
14
Residential
>2,000 and <=2,200
$1,7191
<=2,000
$1,5861
15 Residential
Per residential dwelling unit
1
1
1
CFD No. 03-02
Page 6 of 12
January 5, 2005
2.
Acreage Special Tax
The Acreage Special Tax rates are shown in Table 2 below.
TABLE 2
ACREAGE S PECIAL TAX R ATES
A CREAGE
SPECIAL TAX
PROPERTY C LASSIFICATION/LAND U SE
Developed and Undeveloped Residential Property
Low Density (L) or Low-Estate Density (L-E)
$5,620 Per Acre
Low Medium Density (LM)
$17,665 Per Acre
Medium Density Standard (M1)
$17,665 Per Acre
Medium Density Clustered (M2)
$17,665 Per Acre
Developed and Undeveloped Non-Residential Property (NC)
$8,247 Per Acre
Taxable Property Owner's Association Property
$17,665 Per Acre
Taxable Public Property
$17,665 Per Acre
Notwithstanding the above, if the Land Use Plan is amended or the zoning of the
Planning Areas is otherwise amended resulting in a Land Use which is not shown in
Table 2 above, then the Acreage Special Tax rate applicable to each Parcel to which
the new Land Use applies shall be $17,665. In addition, if at any time subsequent to
the issuance of Bonds the Land Use Plan is amended or the zoning or configuration
of the Planning Areas is otherwise amended, the CFD Administrator shall determine
if the Acreage Special Taxes that may thereafter be levied are less than the sum of
estimated Administrative Expenses and one hundred ten percent (110%) of the
maximum annual debt service for outstanding Bonds. If the amended Land Use Plan,
zoning, and/or Planning Area configuration has resulted in such a reduction, then the
Acreage Special Tax for each Parcel to which such amendments apply shall be
computed using the Acreage Special Tax rate(s) previously applicable to such Parcel.
If the previous Land Use for any portion of a Parcel to which the amended Land Use
Plan, zoning, and/or Planning Area configuration applies was not low density (L),
low-estate density (L-E), low medium density (LM), medium density standard (M1),
medium density clustered (M2), or neighborhood commercial (NC) then the
applicable Acreage Special Tax rate shall be $17,665.
D.
METHOD OF APPORTIONMENT OF THE SPECIAL TAX
Commencing with Fiscal Year 2005-2006 and for each following Fiscal Year, the CFD
Administrator shall levy the Special Tax on all Taxable Property to fund the Special Tax
Requirement as follows:
CFD No. 03-02
Page 7 of 12
January 5, 2005
First: The Special Tax shall be levied Proportionately on each Parcel of Developed
Property, up to 100% of the applicable Dwelling Unit Special Tax in the case of Developed
Residential Property and up to 100% of the applicable Acreage Special Tax in the case of
Developed Non-Residential Property;
Second: If additional Special Taxes are needed after the first step, the Special Tax shall be
levied Proportionately on each Parcel of Undeveloped Property, up to 100% of the applicable
Acreage Special Tax;
Third: If additional Special Taxes are needed after the second step, the Special Tax for
Parcels of Developed Property for which the Maximum Special Tax is derived from the
applicable Acreage Special Tax shall be increased equally, measured on a percentage basis,
from the amounts levied under the preceding Step 1 up to 100% of the applicable Acreage
Special Tax (i.e., the percentage increase shall be equal for all applicable Parcels, until the
Maximum Special Tax is reached); and
Fourth: If additional Special Taxes are needed after the third step, the Special Tax shall be
levied Proportionately on each Parcel of Taxable Property Owner's Association Property and
Taxable Public Property up to the applicable Maximum Special Tax.
Notwithstanding the above, under no circumstances will the Special Taxes levied against any
Parcel used as a private residence be increased as a consequence of delinquency or default by
the owner of any other Parcel or Parcels within CFD No. 03-02 by more than ten percent
(10%) per Fiscal Year. In addition, under no circumstances will the Acreage Special Tax be
levied against Parcels of Developed Residential Property if the Special Taxes which may be
levied pursuant to the first and second steps above are equal to or greater than sum of
estimated Administrative Expenses and one hundred ten percent (110%) of the then
maximum annual debt service for outstanding Bonds.
E.
EXEMPTIONS
The Board of Directors shall not levy a Special Tax on up to 511.11 Acres of Property
Owner's Association Property and Public Property. If the total number of Acres of Property
Owner's Association Property and Public Property exceeds 511.11, the chronological order in
which such property is classified will determine which Parcels are classified as Exempt
Property and which are classified as Taxable Property. If a Lot or Parcel is no longer
classified as Property Owner's Association Property or Public Property, its status as Exempt
Property will be revoked.
The following property shall be classified as Property Owner's Association Property or
Public Property, as applicable, at the time CFD No. 03-02 is established and shall count
toward the limitation of 511.11 Acres of Property Owner's Association Property and Public
Property set forth in the preceding paragraph:
CFD No. 03-02
Page 8 of 12
January 5, 2005
x
Property Owner's Association Property and Public Property: Lots A and B (portion of
Murrieta Hot Springs Road), Lot 2 (private mini park), Lot 5 (private recreation
center), and Lot 8 (open space) of Tract 29353-1; Lots H and 5 (open space), Lots A
through G and M through O (streets), Lots I, J, and K (flood control), Lot L
(equestrian trail), Lots 2 and 9 (parks), Lots 10 and 11 (school sites), and Lot 12 (fire
station) of Tract 29353-2; and the property described in and conveyed to the City
pursuant to a grant deed dated May 21, 2003 and recorded with the County as
Document Number 2003-371374.
Subject to Section 53317.5 of the Act, if a Lot or Parcel classified as Developed Residential
Property is acquired by a public entity by any means, including by negotiated transaction,
gift, devise, or foreclosure, such Lot or Parcel will notwithstanding anything else herein be
subject to the Special Tax in accordance with the terms for Developed Residential Property.
In addition, if a Parcel of Public Property is leased to a non-governmental entity, then the
leasehold or possessory interest, in accordance with Section 53340.1 of the Act, shall be
subject to the applicable Acreage Special Tax.
F.
MANNER OF COLLECTION
The Special Tax shall be collected in the same manner and at the same time as ordinary ad
valorem property taxes and shall be subject to the same penalties, the same procedure, sale
and lien priority in the case of delinquency; provided, however, that the Special Tax may be
billed directly and/or may be collected at a different time or in a different manner if necessary
or convenient to meet the financial obligations of CFD No. 03-02, or as otherwise
determined by the CFD Administrator. The foreclosure remedies provided for in the
Indenture shall apply upon the nonpayment of the Special Tax.
G.
REVIEW AND APPEALS
Any taxpayer may file a written appeal of the Special Tax levied on his/her property with the
CFD Administrator, provided that the appellant is current in his/her payments of Special
Taxes. During the pendency of an appeal, all Special Taxes previously levied must be paid
on or before the payment date established when the levy was made. The appeal must specify
the reasons why the appellant claims the Special Tax is in error. The CFD Administrator
shall review the appeal, meet with the appellant if the CFD Administrator deems necessary,
and advise the appellant of its determination. If the CFD Administrator agrees with the
appellant, the CFD Administrator shall grant a credit to eliminate or reduce future Special
Taxes on the appellant's property. No refunds of previously paid Special Taxes shall be
made.
H.
PREPAYMENT OF SPECIAL TAX
1.
Full Prepayment– Developed Residential Property, Non-Residential Property, and
Taxable Property Owner's Association Property
CFD No. 03-02
Page 9 of 12
January 5, 2005
The Maximum Special Tax for any Parcel of Developed Residential Property, NonResidential Property, or Taxable Property Owner's Association Property may be
prepaid and permanently satisfied as described herein, provided that a prepayment
may be made only if at the time of the prepayment there are no delinquent Special
Taxes with respect to such Parcel and all other Parcels which are under the same
ownership and located within CFD No. 03-02. An owner of a Parcel intending to
prepay the Maximum Special Tax shall provide the CFD Administrator with written
notice of intent to prepay, and within 10 business days of receipt of such written
notice, the CFD Administrator shall notify such owner of the non-refundable deposit
determined to cover the cost to be incurred by the CFD No. 03-02 in calculating the
prepayment amount. Within 10 business days of receipt of such non-refundable
deposit, the CFD Administrator shall notify such owner of the prepayment amount.
Prepayment must be made not less than 60 days prior to any redemption date, unless
otherwise authorized by the CFD Administrator, for any Bonds to be redeemed with
the prepayment proceeds.
The "Full Prepayment Amount" means an amount equal to the sum of (1) Bond
Redemption Amount, (2) Redemption Premium, (3) Defeasance Amount, and (4)
Fees, less the Reserve Fund Credit, where the terms "Bond Redemption Amount,"
"Redemption Premium," "Defeasance Amount," "Fees," and "Reserve Fund Credit"
have the following meanings:
"Bond Redemption Amount" means the principal amount of Bonds to be
redeemed and equals the greater of (a) the quotient derived by dividing (i) the
applicable Dwelling Unit Special Tax, in the case of Residential Property, or
Acreage Special Tax, in the case of Non-Residential Property or Taxable
Property Owner's Association Property by (ii) the sum of the aggregate
Dwelling Unit Special Taxes (for Residential Property) and Acreage Special
Taxes (for Non-Residential Property) for CFD No. 03-02 (and excluding
from (ii) any Special Taxes which have been prepaid) or (b) the quotient
derived by dividing (iii) the applicable Acreage Special Tax by (iv) the sum
of the aggregate Acreage Special Taxes (for Residential Property and NonResidential Property) for CFD No. 03-02 (and excluding from (iv) any
Special Taxes which have been prepaid) in each case multiplied by the
principal amount of outstanding Bonds rounded up to the nearest $5,000.
The aggregate special taxes under (a) and (b) above means the aggregate
special taxes upon completion of the development of CFD No. 03-02. Prior
to the completion of the development of CFD No. 03-02, the aggregate
special taxes under (a) and (b) above shall be as projected by the CFD
Administrator.
"Redemption Premium" means the Bond Redemption Amount multiplied
by the applicable redemption premium, if any, for the Bonds to be redeemed.
"Defeasance Amount" means the amount needed to pay interest on the
CFD No. 03-02
Page 10 of 12
January 5, 2005
Bond Redemption Amount until the earliest redemption date for the
outstanding Bonds. Credit shall be given for any portion of the Special Tax
heretofore paid by the Parcel for which the Full Prepayment Amount is being
calculated and which will be, but has not yet been, utilized to pay interest and
principal on the Bonds.
"Fees" equal the fees and expenses of CFD No. 03-02 related to the Full
Prepayment Amount, including, but not limited to, the costs of computing the
Full Prepayment Amount, the costs of redeeming Bonds, and the costs of
recording any notices to evidence that the Maximum Special Tax has been
prepaid.
"Reserve Fund Credit" shall equal the lesser of (i) the reduction in the
applicable "Reserve Requirement," as such term is defined in the Indenture, if
any, following the redemption of Bonds from proceeds of the Prepayment
Amount or (ii) the amount derived by subtracting the new Reserve
Requirement in effect after the redemption of Bonds from proceeds of the
Full Prepayment Amount from the balance in the "Reserve Fund," as such
term is defined in the Indenture, on the prepayment date, but in no event shall
such amount be less than zero.
The CFD Administrator shall remove any portion of the Special Tax which has been
enrolled but not paid. With respect to any Parcel that has prepaid the Maximum
Special Tax, the Board of Directors shall cause a suitable notice to be recorded in
compliance with the Act, to indicate the prepayment of the Maximum Special Tax
and the release of the Special Tax lien on such Parcel, and the obligation of such
Parcel to pay the Special Tax shall cease.
2.
Partial Prepayment – Developed Property, Non-Residential Property, and Taxable
Property Owner's Association Property
The Maximum Special Tax for any Parcel of Developed Residential Property, NonResidential Property, or Taxable Property Owner's Association Property may be
prepaid in part as described herein, provided that (i) the Bond Redemption Amount
must be an integral multiple of $5,000 and (ii) at the time of the prepayment there are
no delinquent Special Taxes with respect to such Parcel and all other Parcels which
are under the same ownership and located within CFD No. 03-02. The "Partial
Prepayment Amount" shall be computed using the methodology in Section H.1 and
substituting the portion of the Maximum Special Tax to be prepaid by the Parcel for
its Dwelling Unit Special Tax and Acreage Special Tax when determining the Bond
Redemption Amount.
The owner intending to prepay a portion of the Maximum Special Tax shall notify
the CFD Administrator in writing of (i) such owner's intent to partially prepay the
Maximum Special Tax, (ii) the percentage by which the Maximum Special Tax shall
CFD No. 03-02
Page 11 of 12
January 5, 2005
be prepaid, and (iii) the company or agency that will be acting as the escrow agent, if
applicable, and within 10 business days of receipt of such written notice, the CFD
Administrator shall notify such owner of the non-refundable deposit determined to
cover the cost to be incurred by CFD No. 03-02 in calculating the amount of the
partial prepayment. Within 10 business days of receipt of such non-refundable
deposit, the CFD Administrator shall notify such owner of the Partial Prepayment
Amount. Prepayment must be made not less than 60 days prior to any redemption
date, unless authorized by the CFD Administrator, for any Bonds to be redeemed
with the prepayment proceeds.
With respect to any Parcel that has prepaid a portion of the Maximum Special Tax,
the CFD Administrator shall indicate in the records of CFD No. 03-02 that there has
been a partial prepayment of the Maximum Special Tax, the amount of the Maximum
Special Tax which has been prepaid, and the amount of the Maximum Special Tax
which continue to be levied on such Parcel.
The Bond Redemption Amount, Redemption Premium, Defeasance Amount, and Reserve
Fund Credit shall be used to pay interest on and redeem Bonds in accordance with the
Indenture. Notwithstanding the foregoing, no prepayment shall be allowed unless the
amount of Maximum Special Taxes that may be levied in CFD No. 03-02 after the proposed
prepayment is at least the sum of (i) the estimated Administrative Expenses and (ii) one
hundred ten percent (110%) of the annual debt service on the Bonds, taking into account the
amount of Bonds to remain outstanding after such prepayment.
I.
TERM
The Maximum Special Tax shall be levied for a period not to exceed 50 Fiscal Years,
commencing with Fiscal Year 2005-2006.
C:\Home\temecula\Roripaugh Ranch\ RMA\CFD 2003-2 RMA 11 REVISED FINAL (Clean).doc
CFD No. 03-02
Page 12 of 12
January 5, 2005
APPENDIX C
SUMMARY APPRAISAL REPORT
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APPENDIX D
MARKET ABSORPTION STUDY
MARKET ABSORPTION STUDY
SUMMARY AND CONCLUSIONS
CITY OF TEMECULA
(RORIPAUGH RANCH)
CITY OF TEMECULA
RIVERSIDE COUNTY, CALIFORNIA
BY
EMPIRE ECONOMICS, INC.
MARKET STUDY UPDATE: FEBRUARY 2, 2006
(ORIGINAL STUDY: JULY 13, 2004)
Empire Economics
1
Release Date: February 2, 2006
CERTIFICATION OF INDEPENDENCE
The Securities & Exchange Commission has recently taken action against Wall Street firms that have
utilized their research analysts to promote companies that they conduct business with, citing this as a
potential conflict of interest. Accordingly, Empire Economics (Empire), in order to ensure that its
clients are not placed in a situation that could cause such conflicts of interest, provides a Certification
of Independence. Specifically, the Certificate states that Empire performs consulting services for
public entities only in order to avoid potential conflicts of interest that could occur if it also provided
consulting services for developers/builders. For example, if a research firm for a specific Community
Facilities District or Assessment District, were to provide consulting services to both the public entity
as well as the property owner/developer/builders, then a potential conflict of interest could be created,
given the different objectives of the public entity versus the property owner/developer.
Accordingly, Empire Economics certifies that the Market Absorption Study for CFD No. 03-02 of the
City of Temecula was performed in an independent professional manner, as represented by the
following statements:
¾ Empire was retained to perform the Market Absorption Study by the City of Temecula, not
the District’s property owner/developer, Ashby USA, LLC or the various builders.
¾ Empire has not performed any consulting services for the District’s property owner nor the
developer/builders during at least the past five years.
¾ Empire will not perform any consulting services for the District’s property owner nor the
developer/builders during at least the next three years.
¾ Empire’s compensation for performing the Market Absorption Study for the District is not
contingent upon the issuance of Bonds; Empire’s fees are paid on a non-contingency basis.
Therefore, based upon the statements set-forth above, Empire hereby certifies that the Market
Absorption Study for CFD No. 03-02 of the City of Temecula was performed in an independent
professional manner.
________________________
Empire Economics, Inc.
Joseph T. Janczyk, President
Empire Economics
2
INTRODUCTION TO THE BOND FINANCING PROGRAM
Roripaugh Ranch, a Planned Community of single-family homes and also a commercial-retail center
that is being developed by Ashby USA, LLC, is located in the northeasterly portion of the City of
Temecula, southerly of Murrieta Hot Springs Road and easterly/westerly of Butterfield Stage Road.
Roripaugh Ranch is expected to have some 1,745 single-family detached homes; this consists of 515
homes in Phase I, also referred to as the “panhandle” area, and another 1,230 homes in Phase II, also
referred to as the “pan” area. With regards to Phase I, 515 homes have already been approved, based
upon a recommendation from the Planning Commission. With regards to Phase II, 1,230 have already
been approved by the Planning Commission. Accordingly, for purposes of the Market Absorption
Study, Empire Economics is utilizing 1,745 single-family homes.
The City of Temecula along with the Property Owner, Ashby USA, LLC, have formed Community
Facilities District No. 03-02 to assist with the financing of the infrastructure that is required to support
the development of residential and commercial-retail products in the District, hereafter referred to as
CFD No. 03-02. Specifically, the Bond Issue would be utilized to provide funds for various items,
including roadway, drainage, park, water and sewer improvements. The specific size of the Bond Issue
and the particular improvements included will depend upon various factors which will be finalized
when these bonds are sold.
The purpose of the Market Absorption Study for the City of Temecula’s Bond Financing for CFD No.
03-02 is to provide an estimate of the probable absorption schedules for the forthcoming residential
properties. Specifically, from the viewpoint of prospective Bond Purchasers, the particular components
of the infrastructure should be time-phased and location-phased in a manner that approximately
coincides with the expected marketability/absorption of the projects in CFD No. 03-02. Otherwise, to
the extent that the infrastructure is not appropriately phased, then the following types of market
inefficiencies may occur:
On the one hand, if certain projects do not have the infrastructure that is required to
support their development in a timely manner, then they would not be able to respond to the
demand in the marketplace, resulting in a market shortage.
On the other hand, if too much infrastructure is built, then projects for which there is not
presently a market demand would incur high carrying costs due to the market surplus, and
this could adversely impact their financial feasibility.
Thus, the Market Absorption Study formulates guidelines on the appropriate or optimal time-phasing
and location-phasing of the infrastructure for the properties located in the City of Temecula’s CFD No.
03-02, as a means of providing the bond purchasers with a reasonable amount of security from a
market absorption perspective.
Furthermore, the absorption schedules for CFD No.03-02 are based upon Ashby USA, LLC delivering
the parcels to the various builders according to the time schedule that was provided to Empire
Economics by Ashby USA, LLC, based upon their fulfillment of numerous and complex conditions of
development in a timely manner.
Empire Economics
3
Empire Economics
SOUTHERN CALIFORNIA MARKET REGION
4
CFD NO. 03-02 (RORIPAUGH RANCH)
BOUNDARIES OF THE CFD NO.03-02 (RORIPAUGH RANCH) MARKET AREA
Empire Economics
5
CHARACTERISTICS OF THE EXPECTED PRODUCT MIX
FOR THE PROJECTS/PRODUCTS IN CFD NO. 03-02
For purposes of the Market Absorption Study for the CFD No. 03-02 Mello-Roos Bond Financing,
Empire Economics has performed a review of the planning approvals that Roripaugh Ranch has
received as well as the development strategy of Ashby USA, LLC, the developer.
CFD No. 03-02 (Roripaugh Ranch) is expected to have 1,745 single-family detached homes in two
separate phases. The expected number of housing units as well as their characteristics, such as prices
and sizes of living area, are as follows:
Phase I is expected to have a total of 515 single-family detached housing units, 29.5%
of the total, that are priced at some $507,302 for some 2,783 sq.ft. of living area, on the
average, and these are spread among five Planning Areas with three builders;
accordingly, their characteristics are as follows:
Planning Area # 2: Davidson is expected to have 99 homes on lots of some
6,265 sq.ft. that are priced at some $538,000 to $558,000 for some 2,960 to
3,357 sq.ft. of living area.
Planning Area # 1: D.R. Horton is expected to have 104 homes on lots of
some 6,285 sq.ft. that are priced at some $410,000 to $480,000 for some
1,949 to 2,949 sq.ft. of living area.
Planning Area # 3: Tanamera is expected to have 99 homes on lots of some
6,000 sq.ft. that are priced at some $459,990 to $519,990 for some 1,974 to
2,699 sq.ft. of living area.
Planning Area # 4A: Tanamera is expected to have 100 homes on lots of
Planning Area # 4B: Tanamera is expected to have 113 homes on lots of
Phase II is expected to have a total of 1,230 single-family homes, 70.5% of the total,
that are priced at some $510,671 for some 2,864 sq.ft. of living area, on the average,
and these are spread among fifteen Planning Areas with the only builder being KB
Home; accordingly, their characteristics by market segments and planning areas are as
follows:
Market Segment #1 is expected to have 607 homes in five projects with homes priced at
some $370,000-$430,990 for some 1,809-2,300 sq.ft. of living area, and their
characteristics are as follows:
Empire Economics
6
Planning Areas: 31, 22, 12, 14 & 15
* Planning Area # 31: 169 homes on lots of some 3,150 sq.ft. that are priced
at some $370,000 - $415,990 for some 1,809 to 2,300 sq.ft. of living area.
Planning Area # 22: 130 homes on lots of some 3,150 sq.ft. that are priced
Planning Area # 14: 92 homes on lots of some 3,880 sq.ft. that are priced at
some $405,990 - $430,990 for some 2,050 to 2,300 sq.ft. of living area.
some $415,990-$545,990 for some 2,029-3,711 sq.ft. of living area, on the average and
their characteristics are as follows:
Planning Areas: 23, 24, 16, 17 & 18
some $779,990 to $909,990 for some 3,676 to 5,318 sq.ft. of living area, and their
characteristics are as follows:
Planning Areas: 10, 19, 20, 21 & 33
Half-Acre Lots: 76 homes on lots of some 20,000 sq.ft. that are priced at
some $779,990 to $909,990 for some 4,001 to 5,187 sq.ft. of living area.
Acres Lots: 36 homes on lots of some 42,298 sq.ft. that are priced at some
$787,990 - $909,990 for some 3,676 to 5,318 sq.ft. of living area.
Therefore, CFD No. 03-02 is partitioned into two phases and each of these have single-family detached
homes with a broad price range, from $370,000 to $909,990 and so the product mix is regarded as
being diversified. CFD No. 03-02 is also expected to have some 15.4 acres for commercial-retail
projects that are expected to be oriented towards the households in CFD No. 03-02.
For additional information on the expected characteristics of the forthcoming residential products in
CFD No. 03-02, please refer to the following graphs.
Empire Economics
7
CFD NO.03-02 (RORIPAUGH RANCH) EXPECTED PRODUCT MIX
BY PHASES AND PLANNING AREAS
180
160
140
120
100
80
60
40
20
0
Phase I
Units
PA-1
PA-2
PA-3
PA-4A
PA-4B
104
99
99
100
113
Phases II+
Segment
#1
PA-31
PA-22
PA-12
PA-14
PA-15
169
130
112
92
104
Segment
#2
PA-23
PA-24
PA-16
PA-17
PA-18
Segment PA: 10,19- PA: 10,19#3
21,33
21,33
47
75
121
147
121
76
36
CFD NO.03-02 (RORIPAUGH RANCH) EXPECTED PRODUCT MIX
EXPECTED PRICES FOR THE FORTHCOMING HOMES
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
Empire Economics
8
PA: 10,19-21,33
PA: 10,19-21,33
Segment # 3
PA-18
PA-17
PA-16
PA-24
PA-23
Segment # 2
PA-15
PA-14
PA-12
PA-22
PA-31
Segment # 1
Phases II+
PA-4B
PA-4A
PA-3
PA-2
PA-1
Phase I
$0
ROLE OF THE MARKET STUDY IN THE BOND FINANCING
The Market Absorption Study for CFD No. 03-02 has a multiplicity of roles with regards to the Bond
Financing; accordingly, these are now discussed.
Marketing Prospects for the
Various Product Types
Official Statement
Prospective Bond Purchasers
Aggregate Levels of
Special Tax Revenues
Maximum Special Taxes
for the Residential Products
Conforming to the Issuer’s Policies
Share of Payments:
Developer/Builders vs. Final-Users
Determined by the Absorption Schedule
Appraisal of Property
Discounted Cash Flow – Present Value
Absorption Schedules
The Issuing Agency for the Bond Issue, the City of Temecula, along with the Financial Advisor can
utilize the Market Absorption Study, Appraisal, and Special Tax Revenue to structure the Bond Issue
for CFD No. 03-02.
Empire Economics
9
METHODOLOGY UNDERLYING THE MARKET STUDY
To perform a comprehensive analysis of the macroeconomic and microeconomic factors that are
expected to influence the absorption of the residential single-family detached and commercial-retail
products in CFD No. 03-02, Empire's Market Absorption Study conducts a systematic analysis of the
following factors:
MACROECONOMIC FACTORS
FOR CFD NO. 03-02
* Market Supply
Planning Projections
* Market Demand
Economic Conditions
* Reconciliation
* Growth Potential for the
Market Area
MICROECONOMIC FACTORS
FOR CFD NO. 03-02
Regional Development Patterns
Socioeconomic: School and Crime
Housing Price Trends and Patterns
Competitive Market Analysis – Product Type
Residential Single-Family Detached
*Location
*Product Type
*Prices
*Special Taxes
*Features/Amenities
ABSORPTION SCHEDULES
Product Type
*Residential
Single-Family Detached
Commercial-Retail Center
*Market Entry to Build-Out
Therefore, the Market Absorption Study systematically proceeds from the macroeconomic
analysis of the Market Region's future housing, industrial and commercial growth to the
microeconomic analysis of the estimated absorption schedules for the residential single-family
detached and commercial-retail products in CFD No. 03-02.
Empire Economics
10
RECENT/EXPECTED ECONOMIC TRENDS/PATTERNS
The purpose of this section is to discuss the recent/expected economic trends/patterns for the United
States (US), California (CA), and Riverside County (RC), including Gross Domestic Product,
employment, housing starts, mortgage rates and gas prices.
Recent /Expected Real Gross Domestic Product Trends/Patterns
With regards to the recent/expected growth rates for Gross Domestic Product (GDP) for the United
States economy, they are as follows:
x During 1999 and 2000, real GDP increased at strong rates of by 4.50% and 3.70%,
respectively.
x Then, in 2001 and 2002, as the economy slowed, real GDP increased by only 0.80% and
1.60%, respectively.
x In 2003 and 2004, as the economy rebounded, real GDP increased by some 2.70% and 4.20%,
respectively.
x For 2005, real GDP growth moderated somewhat to a rate of 3.38%.
x For 2006, real GDP is expected to moderate further to a rate of some 2.85%.
Next, with respect to the actual/expected rates of change for the various components of real GDP for
2005 as compared to 2006 are as follows:
x Consumption, which increased at some 3.58% in 2005 is expected to moderate to a rate of
some 2.78% in 2006.
x Business investment, which increased at some 7.15% in 2005 is expected to moderate to 4.83%
in 2006.
x Finally, with respect to government purchases, which grew at a rate of 1.88% in 2005 are
expected to increase by 2.13% in 2006.
Therefore, comparing the rates of growth for the various components of real GDP for 2006 as
compared to 2005 reveals that the overall rate of growth is expected to moderate somewhat while
among the various sectors, consumption and investment are expected to moderate while the rate of
growth for government spending rises.
UNITED STATES REAL GDP AND ITS COMPONENTS: ANNUALLY
RATE OF CHANGE - ANNUALLY
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
Empire Economics
1999
2000
2001
2002
2003
2004
2005
2006
US: Overall
4.50%
3.70%
0.80%
1.60%
2.70%
4.20%
3.38%
2.85%
Consumption
4.90%
4.70%
2.50%
2.70%
2.90%
3.90%
3.58%
2.78%
Investment
6.20%
5.50%
-8.00%
-5.50%
6.40%
9.80%
7.15%
4.83%
Government
3.70%
2.10%
3.40%
4.40%
2.80%
2.10%
1.88%
2.13%
11
Recent/Expected Employment Trends/Patterns
With regards to the recent/expected growth rates for employment, these are now discussed for the
United States, California, and Riverside-San Bernardino counties economies.
For the United States economy, the recent trends/patterns for employment have been as follows:
x In 1999 and 2000, employment growth was strong, some 2.44% and 2.20%, respectively.
x Then, in 2001, due to the economic slowdown, employment was virtually stable.
x For 2002, employment declined by -1.13%, followed by a decrease of -0.26% in 2003.
x In 2004, as the economy moved into its recovery phase, employment rose by some 1.13%.
x For 2005, as the economy expanded further, employment rose by 1.64%.
x For 2006, as the economy slows, employment growth is expected to moderate to 1.25%
California’s employment followed a generally similar pattern:
x Strong rates of employment growth in 1999 and 2000 of 2.90% and 3.50%, respectively.
x Then in 2001, employment rose only moderately, some 0.80%.
x However, in 2002 to 2003, employment declined to -0.99% and -0.45%, respectively.
x For 2004, the economy moved into a recovery, with an employment gain of 1.02%.
x In 2005, the economy had stronger growth, with employment rising at a rate of 1.54%.
x For 2006, as the economy slows, employment growth is expected to moderate to 1.10%
Riverside-San Bernardino (R-SB) counties, on a comparative basis, have performed favorably:
x R-SB counties experienced strong, though diminishing, rates of employment growth during
1999-2002, from 6.44% in 1999 to 3.38% in 2002.
x Employment growth moderated in 2003, with a growth rate of 3.26%.
x Then, in 2004, employment rose at higher level of some 4.60%.
x For 2005, employment growth moderated to a rate of some 2.00%.
x For 2006, the rate of employment growth is expected to moderate further, to some 1.45%
Therefore, during 2006, the United States, California and R-SB counties economies are all expected to
experience lower rates of employment growth.
UNITED STATES, CALIFORNIA & RIVERSIDE - SAN BERNARDINO COUNTIES
RECENT/EXPECTED EMPLOYMENT TRENDS: ANNUALLY
RATE OF CHANGE - ANNUALLY
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
1999
2000
2001
2002
2003
2004
2005
2006
United States
2.44%
2.20%
0.00%
-1.13%
-0.26%
1.13%
1.64%
1.25%
California
2.90%
3.50%
0.80%
-0.99%
-0.45%
1.02%
1.54%
1.10%
R_SB
6.44%
5.26%
4.18%
3.38%
3.26%
4.60%
2.00%
1.45%
Empire Economics
12
Recent/Expected Trends/Patterns for Housing Starts
With regards to the recent trends and patterns for housing starts, they are as follows:
x
The United States housing market experienced a strong growth during the 2000 to 2005 time
period, with the number of new homes rising from 1,573,400 in 2000 to 2,044,125 in 2005. For
2006, the United States housing market is expected to moderate to some 1,803,550 new homes,
due to the combined impacts of a slowing economy as well as higher mortgage rates.
x
For the California housing market, housing starts have had strong growth during 1999 to 2005,
as the number of new homes rose from 139,073 in 1999 to 212,954 in 2005. The California
housing market is expected to decrease somewhat in 2006 to some 183,180 new homes, also as
a result of a slowing economy and higher mortgage rates.
x
Finally, with respect to Riverside County, housing starts rose dramatically during the 19992004 time period, from 14,577 homes in 1999 to 35,696 homes in 2005. For 2006, the level of
activity is expected to moderate somewhat, to some 29,740 homes, due to the expectation of
higher mortgage rates as well as higher gas prices.
So, for 2006, the United States, California, and Riverside County housing markets are expected to
decline somewhat from their 2005 levels, due primarily to a slowing economy as well as higher levels
of mortgage rates as well as higher gas prices.
2,500,000
250,000
2,000,000
200,000
1,500,000
150,000
1,000,000
100,000
500,000
0
Left: United States
50,000
1999
2000
2001
2002
2003
2004
2005
2006
0
1,663,100 1,573,400 1,601,200 1,712,340 1,858,760 1,963,700 2,044,125 1,803,550
Right: California
139,073
148,540
148,757
164,318
194,882
210,150
212,954
183,180
Right: Riverside County
14,577
17,692
19,890
20,990
28,366
33,870
35,696
29,740
Empire Economics
CALIFORNIA AND COUNTY
UNITED STATES
UNITED STATES, CALIFORNIA AND RIVERSIDE COUNTY
HOUSING STARTS: ANNUALLY
13
Recent/Expected Trends in Mortgage Rates
The recent/expected trends/patterns for mortgage rates, including the 15 year fixed rate mortgage, as
well as the 10-year Treasury Bond which influences the 15 year fixed rate mortgage, and the 1 year
adjustable, are now discussed:
x
During the 2000 to 2003 time period, the rates on the 10-year Treasury Bond, 15 year fixed
mortgage and the 1 year adjustable mortgage all declined: the 10-year Treasury Bond from
6.00% to 3.95% (-2.05%), the 15 year fixed mortgage from 7.73% to 5.17% (-2.56%), and the
1 year adjustable mortgage from 7.05% to 3.76% (-3.29%).
x
From 2003 to 2005, the rates started to rise: on the 10-year Treasury Bond from 3.95% to
4.29% (+0.34%), the 15 year fixed mortgage from 5.17% to 5.42% (+0.25%), and the 1 year
adjustable mortgage from 3.76% to 4.49% (+0.73%).
x
For 2006 as compare to 2005, the rates are expected to rise further, the 10-year Treasury Bond
from 4.29% to 4.75% (+0.46%), the 15 year mortgage from 5.42% to 6.07% (+0.65%), and the
1 year adjustable mortgage from 4.49% to 5.44% (+0.95%).
So, during 2006, financial rates are expected to rise at a faster pace, with an increase in the 10-year
Treasury Bond driving up the 15 year fixed rates by some 0.65% while the increases in the federal
fund rate by the Federal Reserve Board drives up the 1 year adjustable rate mortgages by some 0.95%.
UNITED STATES MORTGAGE RATES: ANNUALLY
9.00%
LEVEL - ANNUALLY
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2000
2001
2002
2003
2004
2005
2006
10-Yr Bond
6.00%
5.00%
4.60%
3.95%
4.27%
4.29%
4.75%
1 Yr Adjustable
7.05%
5.82%
4.62%
3.76%
3.88%
4.49%
5.44%
15 Year - Fixed
7.73%
6.50%
5.98%
5.17%
5.20%
5.42%
6.07%
30-Year Fixed
8.06%
6.97%
6.54%
5.83%
5.97%
5.87%
6.51%
Empire Economics
14
Recent/Expected Trends/Patterns for Gas Prices in California
With regards to the recent/expected annual gas prices per gallon in California, they are as follows:
x
From 1999 to 2000, California gas prices rose significantly from $1.47 to $1.77, respectively,
an increase of some $0.30.
x
Then, gas prices declined to $1.62 in 2002, a decrease of -$0.12 from $1.74 in 2001.
x
However, with the invasion of Iraq and uncertainty in the Middle East, California gasoline
prices rose dramatically to $2.23 in 2004, an increase of $0.61 from 2002.
x
For 2005, gas prices rose further to $2.61, an additional increase of some $0.38 from 2004.
x
For 2006, gas prices are expected to decline slightly, to some $2.51, a decrease of some $0.10
from 2005.
So, during 1999 to 2005, California gas prices have risen significantly, by some $1.14 per gallon but
they are expected to decline slightly in 2006, by some $0.10.
CALIFORNIA GAS PRICES: ANNUALLY
$3.00
PRICE - ANNUALLY
$2.50
$2.00
$1.50
$1.00
$0.50
$Gasoline Prices - CA
Empire Economics
1999
2000
2001
2002
2003
2004
2005
2006
$1.47
$1.77
$1.74
$1.62
$1.94
$2.23
$2.61
$2.51
15
COMPETITIVENESS OF CFD NO. 03-02
FROM A REGIONAL PERSPECTIVE
From a regional perspective, the competitiveness of CFD No. 03-02’s forthcoming residential and
commercial-retail projects/products are influenced by the development patterns for employment and
housing within the Southern California Market Region (MR), and their interrelationships with the CFD
No. 03-02 Market Area. Specifically, Business Parks generate industrial-office development while
Planned Communities generate residential and commercial-retail development; additionally, the flow
of traffic between them is facilitated by the freeways and highways.
¾ Expansion of Employment Centers and Business Parks
The currently established major employment centers are Orange, San Diego and Los
Angeles (OC/SD/LA) counties as well as the western portions of Riverside and San
Bernardino counties. Furthermore, there has been some expansion from these into various
Business Parks located in the CFD No. 03-02 Market Area, the southwestern portion of
Riverside County. Specifically, these Business Parks are situated primarily along Interstates
15 and 215, major north-south freeways that link the western portions of Riverside and San
Bernardino counties. The potential for the future expansion of Business Parks depends, to a
significant degree, upon their freeway accessibility.
Ï The Eastern Transportation Corridor, which links Orange County and western Riverside
County, facilitates the expansion of the employment centers into Riverside County.
With respect to the expansion of these employment centers in western Riverside County
this has occurred primarily along Route 91 as well as Interstates 15 and 215.
¾ Commuting Patterns: Employment Centers to Residential Areas
Some of the households employed in the OC/SD/LA and western San Bernardino County
employment centers reside in the CFD No. 03-02 Market Area, since it offers moderately
priced housing; these commuting patterns are based upon the freeways/highways that link
the employment centers to the Market Area. The expansion of the residential centers
depends upon accessibility, whether by freeway or secondary roads.
Ï There is strong spillover of housing demand from San Diego County into southwestern
Riverside County along Interstates 15 and 215, major north-south freeways that link
Riverside and San Diego counties.
Ï Additionally, the completion of the Eastern Transportation Corridor which links Orange
County with Riverside County facilitates the commute to the western portion of
Riverside County. With respect to commuting in western Riverside County this is
based upon the use of Route 91 as well as Interstates 15 and 215.
For additional information on the regional development patterns, please refer to the following exhibit.
Empire Economics
16
ECONOMIC BASES SUPPORTING DEVELOPMENT FOR CFD NO.03-02 (RORIPAUGH RANCH)
Empire Economics
RESIDENTIAL DEVELOPMENT PATTERNS: 1997-2000 AND 2001-2010+
17
SOCIOECONOMIC CHARACTERISTICS:
CRIME LEVELS AND THE QUALITY OF SCHOOLS
When households consider the purchase of a home, the primary factors are the location (relative
to their place of employment) and price (within their income/affordability levels). Furthermore,
secondary socioeconomic factors that are significant are the safety of the neighborhood as well as
the quality of the schools; accordingly, these are now discussed.
Crime Levels and Neighborhood Safety
To gauge the safety of Riverside County and the CFD No. 03-02 Neighborhood Area, information on
crime levels was obtained utilizing the most recently available data from the Federal Bureau of
Investigation (FBI) Index.
The FBI Crime Index represents a compilation of crime data using the Uniform Crime Reporting
system to ensure reliability and consistency among various geographical areas. The FBI Crime Index
has two components for crime: violent crime and property crime. Violent crime consists of murder and
non-negligent man-slaughter, forcible rape, robbery, and aggravated assault. Property crime consists of
burglary, larceny-theft, motor vehicle theft and arson. For the state of California, approximately 88%
of all crimes are property crimes whereas 12% are violent crimes. However, it should be noted that
these statistics do not measure the “human or emotional” reactions of individuals to different types of
crime. To adjust for the population differences of various geographical areas, Empire Economics
divides the crime levels by the population to represent the number of crimes per 1, 000 people.
For California, as a whole, the average crime rate is approximately 40.2 per 1,000 people per year. For
Southern California the rate is 39.1, which is slightly lower than the state average. While for Riverside
County, the rate is 45.0, somewhat higher than for Southern California and also California. With
respect to the CFD No. 03-02 Market Area, in particular, the crime rate is some 31.5 per 1,000 people,
substantially below the crime rate for Riverside County.
RIVERSIDE COUNTY CRIME RATES BY CITY
* DESIGNATES CITY IN THE CFD MARKET AREA
CRIMES PER ONE THOUSAND PEOPLE
120
Riverside County Average: 45.0
100
80
60
40
20
Empire Economics
Desert Hot Springs
Palm Springs
Indio
Hemet
Perris
Indian Wells
Riverbank
La Quinta
Lake Elsinore
Blythe
18
Moreno Valley2
Coachella
Beaumont
Norco
Corona
Banning
Calimesa
Temecula
Murrieta
Canyon Lake
0
Quality of Schools and Education
To gauge the quality of schools in Riverside County and the CFD No. 03-02 Neighborhood Area,
information was compiled on educational achievement, specifically the SAT I scores.
For the Southern California counties, as a whole, the SAT I scores (with 1,600 being the highest
possible) were at a level of 1,014 and this is similar to the scores for California as a whole, some
1,015. While for Riverside County, in particular, the SAT I scores amount to 958, somewhat below
the overall averages for California and also Southern California.
SAT I TEST SCORES: MATH AND VERBAL AVERAGE
( * DESIGNATES SCHOOL DISTRICT IN THE CFD)
1600
1400
Riverside County Average: 958
1200
1000
800
Banning Unified
San Jacinto Unified
Val Verde Unified
Jurupa Unified
Alvord Unified
Moreno Valley Unified
Perris Union High
Corona-Norco Unified
Palm Springs Unified
Lake Elsinore Unified
Riverside Unified
Desert Sands Unified
Palo Verde Unified
Hemet Unified
Beaumont Unified
400
Murrieta Valley
Unified
600
Temecula Valley
Unified
SAT SCORES: MATH AND VERBAL AVERAGE FOR EACH DISTRICT (SOURCE - CA
DEPT OF EDUCATION)
For Riverside County, the average SAT I score was 958. For the school districts in the vicinity of CFD
No. 03-02, Temecula and Murrieta, the SAT I scores amounted to 1036 and 1018, respectively, and
both of these are higher than the county average.
Therefore, from a socioeconomic perspective, Riverside County has a higher crime rate and a
lower educational achievement level than California and also Southern California, as a whole.
Within Riverside County, the City of Temecula has a significantly lower crime rate (more
desirable) and a generally higher educational achievement levels (also more desirable). So,
comparing the CFD No. 03-02 Market Area with Riverside County as a whole reveals that the
City of Temecula is regarded as being very desirable from a socioeconomic perspective.
Empire Economics
19
POTENTIAL “FINANCIAL” RISK FACTORS UNDERLYING THE
CREDIT QUALITY AND BOND SIZING FOR LAND SECURED
FINANCINGS IN SOUTHERN CALIFORNIA
There has recently been a substantial amount of discussion on the potential for a housing market
bubble, including remarks of “froth in some local markets” by the former Federal Reserve Board
Chairman, Alan Greenspan, based primarily upon the use of exotic mortgage structures; these remarks
have dealt with the housing market on a national as well as a regional level. However, developing
Planned Communities have characteristics that differentiate them from broader markets: they represent
the marketing of new homes to purchasers at current prices that exclusively utilize current mortgage
rates and financing structures, and they are also concentrated in particular geographical locations.
The purpose of this section is to focus specifically on the potential implications of the recent use of
adjustable rate and creative financing techniques that are presently available for home purchasers on
the credit quality underlying land-secured financings in Southern California.
There has been a fundamental shift in the driving force underlying the recent
rates of housing price appreciation, from the historical role of employment
growth as the driving force to the recent role of adjustable rate and creative
financing techniques as the driving force. These financial factors have been
the primary driving force underling the extraordinary rate of housing price
appreciation in Southern California of more than 75% since January 2002.
Consequently the current levels of housing prices and land values are subject
to potentially substantial downward adjustments, due to mortgage rate resets
(as mortgages are adjusted from teaser rates to market rates) as well as
higher short-term rates (due to rate hikes by the Federal Reserve Board).
These adjustments, in turn, may cause a softening in housing prices and land
values that could adversely impact the credit quality underlying land-secured
financings.
Creative financing refers to the use of loan structures other than fixed-rate or 1 year adjustable,
including the following: interest only, payment option loans as well as initial teaser rates (below
market rates that are offered only for a limited time period) with very low initial payments that result
in negative amortizations (higher principal balance), less stringent lending standards such as low/no
documentation, and much higher mortgage payment to income ratios, among others.
Structural Shift of Factors Underlying Housing Price Appreciation
Since January 2002 there has been a fundamental shift in the primary factor underlying housing price
appreciation in Southern California; the primary driving force was initially declining mortgage rates as
well as the extensive use of adjustable and creative financing as compared to the traditional driving
force of strong employment growth.
Specifically, the term “driving force” is utilized herein to refer to a SIGNIFICANT CHANGE in a
major economic/financial factor that has STRONG DISCERNIBLE IMPACT on housing prices.
Empire Economics
20
¾ January 2002 through June 2003: The rates on fixed 30-year mortgage loans declined to
recent historic lows in June 2003, and were a driving force underlying the rate of housing price
appreciation of some 13.4% on an annualized basis; however, since June 2003, fixed rate
mortgages have been ABOVE their recent historic lows.
¾ July 2003 to March 2004: As fixed mortgage rates rose, purchasers shifted to adjustable rate
mortgages which offered significantly lower rates, and these were a driving force underlying
the rate of housing price appreciation of some 18.8% on an annualized basis; however, since
March 2004, adjustable rates have been ABOVE their recent historic lows.
¾ April 2004 – Presently: As adjustable mortgage rates rose due to the Federal Reserve Board
increasing the federal funds rate, home buyers shifted to various types of creative financial
structures, and these were a driving force underlying the rate of housing price appreciation of
some 24.1% on an annualized basis; however, since Fall-2005, some lenders have started to
tighten their qualification standards.
Potential Adjustments for Mortgage Payments
The extensive use of adjustable rate mortgages and also creative mortgage structures since June 2003
means that such homeowners have monthly mortgage payments which are subject to significant
upward adjustments due to automatic mortgage rate resets as well as potentially higher interest rates:
¾ Mortgage Resets (Stable Mortgage Rates) reflect the changes in mortgage payments that
households with adjustable and creative mortgage structures will incur as the initial “teaser”
rates are realigned with the current “market” rates. The dollar volume of mortgages subject to
resets for the United States mortgage market is expected to increase from $83 billion in 2005 to
more that $1 trillion in 2007.
¾ Higher Mortgage Rates would result in even higher monthly payments for homeowners with
adjustable rate mortgages as well as creative mortgage structures; the increase in their
mortgage payments depends upon the degree to which short-term rates rise.
The recent use of adjustable rate and creative financing techniques by home purchasers is especially
significant for residential land secured financings, since these financings are predominately for
developing Planned Communities that represent the marketing of new homes to purchasers at current
prices that exclusively utilize current mortgage rates and financing structures and they are also
concentrated in particular geographical locations.
Specific Impacts of Rate Resets and Higher Mortgage Rates on the Land Secured Credit Quality
To the extent that mortgage payments rise due to various possible combinations of automatic mortgage
rate resets as well as potentially higher short-term rates that directly impact adjustable rate and creative
mortgages, then the credit quality underlying recent land-secured financings may be diminished in the
following ways:
Empire Economics
21
¾ Lower housing prices resulting in a higher Special Tax to Housing Price Burden for
homeowners, possibly in excess of the Issuer’s policy of a maximum total tax burden, typically
some 1.8% to 2.0% of the initial sales prices, even though these maximums may have been
satisfied at the time that the Special Taxes were established.
¾ Significantly lower land values resulting in a reduced Value/Lien ratio, possibly below the
Issuer’s policy of typically some 3 to 1 or 4 to 1 when the bonds are sold, thereby diminishing
the security for bond holders.
(The Appraisal for the Bond Issue is valid only for the stated Date of Value;
it is not meant to be a prediction of future values.)
¾ Higher levels of Special Tax delinquencies as monthly payments of owners increase resulting
in diminishing the maximum Special Tax to the bond debt service coverage ratios for bond
holders that may adversely impact the Issuer’s ability to meet the debt service payments in a
timely manner, possibly resulting in the use of the bond reserve fund. Adjustable rate
mortgages (some 79% of current mortgages) have significantly higher delinquency rates than
fixed rate mortgages; additionally, homeowners that use adjustable rate mortgages also have
higher loan to value ratios as well, some 90% as compared to homeowners with fixed rate
loans, some 81%.
Accordingly, in arriving at these conclusions, this section systematically discusses the following:
1. Recent Shift in the Primary Factors Underling Housing Price Appreciation
2. Financial Factors “Driving” Recent Housing Price Appreciation
3. Mortgage Rate Resets: Realignment of Adjustable/Creative Loans to Market Rates
4. Mortgage Rate Increases: Potential for Further Federal Reserve Board Rate Hikes
5. Specific Impacts of Higher Mortgage Rates on the Land-Secured Credit Quality
This section should not be construed as a forecast that mortgage rates will rise significantly in the
foreseeable future; rather, it sets forth the POTENTIAL risk factors that mortgage rate resets as well as
higher mortgage rates along with the near-term policy of the Federal Reserve Board would have on the
credit quality underlying land-secured financings. Empire Economics acknowledges that financial
markets, due to their high degree of economic efficiency and complexity, are difficult to forecast, and,
as such, the use of the term “Potential” Risk Factor is regarded as being appropriate.
Empire Economics
22
1. Recent Shift in the Primary Factors Underlying Housing Price Appreciation
The primary factors underlying housing price appreciation in Southern California since January 2002,
declining mortgage rates as well as the extensive use of adjustable and creative financing, represent a
fundamental shift from the traditional factor, employment growth.
Specifically, the term “driving force” is utilized herein to refer to a SIGNIFICANT CHANGE in a
major economic/financial factor that has STRONG DISCERNIBLE IMPACT on housing prices.
¾ During 1984-2001 housing price appreciation was driven by employment growth, along with
accommodating financial factors, such as stable or somewhat declining mortgage rates. During
this time period financial factors played only a secondary role: for instance, during 1991-1993
when employment decreased, housing prices declined, even though mortgage rates fell by
more than two percentage points from their 1989-1990 levels.
¾ However, since January 2002, as housing prices escalated at strong rates, the primary
fundamental factor, employment growth, has experienced only minimal growth, less than 1%
per year, on the average. Instead, housing price appreciation has been driven primarily by
financial factors, particularly the use of adjustable rate mortgages and creative financing
techniques.
SOUTHERN CALIFORNIA
EMPLOYMENT, HOUSING PRICES AND MORTGAGE RATES,
HOUSING PRICE CHANGES DRIVEN BY EMPLOYMENT CHANGES
30%
MORTGAGE RATES
10.31%
9.86%
7.75%
6.93%
20%
7.35%
7.26%
6.05%
25%
CHANGES IN EMPLOYMENT AND
HOUSING PRICE APPRECIATION
0%
SINCE 2002, EMPLOYMENT GROWTH
HAS BEEN MINIMAL YET PRICE
APPRECIATION HAS BEEN STRONG
20%
-20%
18.70%
15%
8.56%
9.81%
10%
STRONG EMPLOYMENT
RESULTED IN STRONG
HOUSING PRICE
APPRECIATION
-40%
4.68%
9.63%
3.94%
5%
-60%
2.77%
2.24%
2.44%
1.20%
-2.29%
0.69%
-80%
0%
-1.37%
-4.70%
Empire Economics
-5%
-100%
1984-1988
1989-1990
Employment Changes
1991-1993
1994-1995
1996-1998
Mortgage Rates - Fixed
1999-2001
2002-2005
Housing Price Changes
Sources: Empire Economics, Employment Development Department, Freddie Mac & Office of Federal Housing
During 2002 to 2005 the financial factors have been the strong driving force underlying the rates of
housing price appreciation. Specifically, the rates of housing price appreciation have been generally
similar among all of the Southern California counties, despite their differences in geographic location,
employment growth and housing supply.
Empire Economics
23
¾ The rates of employment growth for the counties varied substantially during 2002 to 2005,
from a low of -1.15% per year for Los Angeles County to a high of 4.60% per year for
Riverside-San Bernardino counties.
¾ The supply of new housing has also exhibited a wide variation during 2002 to 2005 as
compared to 1999-2001, from declines of -26% in Ventura County and -14% in Orange County
to increases of 80% in Riverside-San Bernardino counties.
Therefore, the financial factors have been so strong that they have effectively overshadowed other
possible explanatory factors such as geographical locations, employment growth and housing supply.
2. Financial Factors “Driving” Recent Housing Price Appreciation in Southern California
The particular factors that have been the driving forces underlying recent strong rates of housing price
appreciation in Southern California during January 2002 through 2005 are now discussed.
Specifically, the factors which have driven housing prices since January 2002 started with fixed
mortgage rates declining to recent historic lows, then a shift to adjustable rate mortgages, and, most
recently, a shift to “creative” mortgage structures.
January 2002 to June 2003: Prices Driven by Declining Fixed Rates; Fixed Rates Now Higher
¾ Fixed-rate 30-year mortgage loans declined from 7.00% in January 2002 to a low of 5.23% in
June 2003, and were a driving force underlying the rate of housing price appreciation of some
13.4% on an annualized basis.
¾ Since June 2003, rates on fixed rate mortgages have been ABOVE their recent historic lows
and, as such, they are no longer considered to be a driving force underlying housing price
appreciation.
RECENT MORTGAGE RATE TRENDS: FIXED-RATE MORTGAGE LOANS
8.00%
7.00%
MORTGAGE RATES
6.00%
5.00%
4.00%
3.00%
TRENDLINE: FIXED RATE
MORTGAGES DECLINE
TRENDLINE
FIXED RATE MORTGAGES RISE
TO HISTORIC LOWS
2.00%
FIXED RATE MORTGAGES AT
HISTORIC LOWS: JUNE 2003
1.00%
0.00%
October
July -- . 2005
April
January - .2005
October
July -- . 2004
April
January - .2004
October
July -- . 2003
April
January - .2003
October
July -- . 2002
April
January - .2002
Sources: Empire Economics & Freddie Mac
Empire Economics
24
July 2003 to March 2004: Prices Driven by Adjustable Rate Loans; Adjustable Rates Higher
¾ Starting in July 2003, as rates on fixed rate mortgages rose, households shifted to adjustable
rate mortgages which offered favorable terms, due to the Federal Reserve Board maintaining a
low federal funds rate, and these attained a recent historic low of 3.41%. During the July 2003
to March 2004 time period, adjustable rates were significantly below fixed rates of by some
215 basis points. The use of adjustable rates were a driving force underlying the rate of housing
price appreciation of some 18.8% on an annualized basis.
¾ Since March 2004, the rates on adjustable rate mortgages have been ABOVE their recent
historic lows, and, as such, they are no longer considered to be a driving force underlying
housing price appreciation.
RECENT MORTGAGE RATE TRENDS: 1-YEAR ADJUSTABLE RATE LOANS
6.00%
FEDERAL RESERVE BOARD LOWERS THE FEDERAL FUNDS RATES DUE TO THE NASDAQ
MELTDOWN AND 9-11 ATTACKS.
FEDERAL RESERVE BOARD RAISES THE FEDERAL
FUNDS RATE DUE TO INFLATIONARY CONCERNS.
5.00%
MORTGAGE RATES
4.00%
3.00%
TRENDLINE
ADJUSTABLE RATE
MORTGAGES DECLINE
2.00%
TRENDLINE
ADJUSTABLE
RATE
MORTGAGES
ADJUSTABLE RATE
MORTGAGES AT
HISTORIC LOWS:
MARCH 2004
1.00%
0.00%
November
September
July -- . 2005
May
March
January - .2005
November
September
July -- . 2004
May
March
January - .2004
November
September
July -- . 2003
May
March
January - .2003
November
September
July -- . 2002
May
March
January - .2002
Sources: Empire Economics & Freddie Mac
¾ For Southern California, the percentage of adjustable rate loans has risen dramatically, from
19% in 2001 to 79% during 2005; conversely, fixed rate loans have decreased from 81% in
2001 to only 21% in 2005. Additionally, each of the Southern California counties exhibited a
similar pattern in the shift from fixed-rate to adjustable rate mortgages as well.
TYPES OF MORTGAGE LOANS - SOUTHERN CALIFORNIA
100%
90%
80%
SHARE OF LOANS
70%
60%
50%
40%
30%
20%
10%
0%
2001
2002
2003
Share-Fixed
2004
2005
Share-Variable
Sources: Empire Economics, Mortgage Bankers Association & Real Property
Fil
Empire Economics
25
¾ Furthermore, for Southern California, the ratio of the mortgage loans (first and seconds) to the
housing purchase prices during 2001 to 2005 has risen for homeowners with adjustable rate
mortgages as compared to homeowners with fixed-rate loans. For homeowners with adjustable
rate loans, the ratio of their loans to the purchase price of the homes has risen from 85% in
2001 to 90% in 2005, a gain of five percentage points. While for homeowners with fixed-rate
mortgages the ratio of their loans to the purchase price of their homes has declined from 87%
in 2001 to 81% in 2005, a decrease of six percentage points. So, homeowners with adjustable
rate mortgages have substantially higher amounts of mortgage debt (90%) as compared to
homeowners with fixed rate mortgages (81%).
LOAN TO VALUE RATIOS - SOUTHERN CALIFORNIA
FIXED-RATE VS. VARIABLE-RATE LOANS
100%
SHARE OF LOANS
95%
90%
85%
80%
75%
2001
2002
2003
Fixed: Loan/Value
2004
2005
Variable: Loan/Value
Sources: Empire Economics, Mortgage Bankers Association & Real Property
Fil
April 2004 to Present: Prices Driven by Shifting to Creative Loan Structures:
¾ Since April 2004, as adjustable rates rose due to the Federal Reserve Board increasing the
federal funds rate, home buyers shifted to various types of creative financial structures. These
have been the driving force underlying the rate of housing price appreciation of some 24.1% on
an annualized basis.
including the following: interest only, payment option loans as well as initial teaser rates such
as 1% for the first year that results in negative amortizations (higher principal balance), less
stringent lending standards such as low/no documentation, and much higher mortgage payment
to income ratios, among others.
During the 2001 to 2004 time period, for the United States as a whole, there has been a
dramatic shift from fixed rate to adjustable rate loans: fixed rate mortgage loans declined from
75% in 2001 to only 19% in 2004. Adjustable rates that were amortized (interest and principal)
rose from 20% to 29% while adjustable rates that are interest only (no reduction of principal)
rose dramatically, from 5% in 2001 to 53% in 2004.
Empire Economics
26
RECENT TRENDS FOR VARIOUS MORTGAGE LOAN STRUCTURES
FIXED RATE, ADJUSTABLE RATE AND INTEREST ONLY
100%
90%
PERCENTAGE OF HOME BUYERS
80%
70%
60%
50%
40%
30%
20%
10%
0%
Fixed Rate
ARM- Amortized
2001
2002
2003
ARM-Interest Only
2004
Sources: Empire Economics, Loan Performance & Mortgage Bankers Association
Conclusions
In conclusion, since January 2002, the primary driving force underlying housing price appreciation has
been households initially taking advantage of recent historically low fixed rates through June 2003,
then a shift to adjustable rate mortgages through March 2004, and finally, since then, the use of
creative financing structures. Specifically, for the same monthly mortgage payment, the use of lower
mortgage rates and creative mortgage structures has bolstered housing prices substantially since
January 2002.
RELATIONSHIP OF HOUSING PRICE APPRECIATION
AND TYPES OF MORTGAGE FINANCINGS
50%
Shift to Creative
Structures; April 2004
to December 2005,
Appreciation: 42.1%
45%
APPRECIATION RATES - TIME PERIODS
40%
35%
30%
25%
20%
15%
Fixed Rates Decline:
Jan-2002 to June 2003
Appreciation: 20.1%
Shift to Variable Rates:
July-2003 to March
2004
Appreciation: 14.1%
10%
5%
0%
Sources: Empire Economics & Office of Federal Housing
Empire Economics
27
3. Mortgage Rate Resets: Realignment of Adjustable/Creative Loans to Market Rates
There may be some softness in housing prices and land values even if mortgage rates remain stable
during the foreseeable future, as households with various types of “adjustable rate” and “creative” debt
structures have their initial teaser rates realigned to the current market rates.
The resets are expected to generally result in higher monthly payments for homeowners since both the
fixed as well as adjustable rate loans attained their recent historical lows in June 2003 and March 2004,
respectively, and, since then, these rates have moved upwards:
¾ Fixed Rate Loans were recently at some 6.32%, some 109 basis points above their recent
historic low.
¾ Adjustable Rate Loans were recently at some 5.22%, some 181 basis points above their recent
historic lows.
With regard to the amount of mortgages that are subject to such resets, based upon data for the United
States mortgage market as a whole, these are expected to rise dramatically, from some $0.83 billion in
2005 to more that $1.0 trillion in 2007.
ESTIMATED MORTGAGE LOAN - RESETS
VARIABLE RATE LOANS WITH ADJUSTABLE MORTGAGE RATES
$1.20
$1.001
MORTGAGE LOANS - TRILLIONS $$$
$1.00
$0.80
$0.60
$0.40
$0.330
$0.20
$0.083
$0.00
2005
2006
Mortgage Loans - TRILLIONS
2007
Sources: Empire Economics & DB Global Markets Research
The specific types of resets that may occur for adjustable rate and creative loan structures as rates are
realigned with the marketplace are as follows:
¾ Adjustable Rate Mortgages are expected to have upward reset adjustments to their monthly
payments as a result of the Federal Reserve Board’s policy since June 2004 which has caused
the short end of the yield curve to rise significantly. The one-year adjustable loans, which were
at their recent historic lows in March 2004, have started to have higher monthly payments, and
such loans are now some 181 basis points above their cyclical lows.
Empire Economics
28
For instance, a household that entered into an adjustable rate loan in March 2004 with a rate of
3.41% would encounter an approximate adjustment in March 2005 to a rate of 4.23%. This
represents an increase of some 82 basis points which results in the household’s mortgage
payment rising by some 24%. So, for a household with a monthly mortgage payment of some
$2,000 per month, their payment would increase to some $2,480 per month.
¾ Creative Mortgage Structures will undergo reset adjustments over time as the starter teaser
rates are adjusted to their market rates. Since creative mortgages are typically based upon
short-term rates and also have further adjustments due to teaser rates, then the mortgage
payments of such households may rise by much more than for adjustable rate mortgages.
So, households with adjustable and creative mortgage structures will encounter higher mortgage
payments as their initial teaser rates are realigned to the market rates which have significantly higher
mortgage payments due to the recent hikes of the federal funds rate by the Federal Reserve Board.
For example, the types of adjustments that may occur for various loan structures can be gauged by
comparing their initial payments with their payments at the start of year six, after the five year time
span during which rates are fixed at a low level; accordingly, these adjustments for various interest
rate scenarios are as follows:
Mortgage Loan of $500,000
Fixed Rate
30- Year
Hybrid ARM
Interest Only
Option ARM
Initial Min. Pymts.
$2,998
(Interest & Principal)
$2,553
(Interest Only)
$1,608
(Minimum Payments)
(Negative Amortization)
Rates Decline 100 BP
Payment: Start of Sixth-Yr.
Change from Initial Pymt.
$2,998
0%
$2,960
16%
$3,289
105%
Rates Stable
$2,998
0%
$3,260
28%
$3,575
122%
Rates Rise 100 BP
$2,998
0%
$3,513
38%
$3,928
144%
Initial Payments - First Five Years
¾ Homeowners with fixed rate mortgages can expect stable mortgage payments of some $2,998
per year for the entire term of the loan of 30 years, regardless of what happens to mortgage
rates after they originate their loans.
¾ Homeowners with Hybrid ARM Interest Only Loans have lower payments for the initial five
years but can then can expect higher mortgage payments starting in year six: from $2,553 to
$3,260 (+28%) if rates are stable or, if rates rise by 100 basis points (one percent), from $2,553
to $3,513 (+38%).
¾ Homeowners with Option ARMs that initially make minimum payments (negative
amortization) of some $1,608 can expect very significant increases in their monthly payments
at the start of year six: from the initial payment of $1,608 to $3,575 (+122%) if rates are stable,
or if rates rise by 100 basis points, from $1,608 to $3,928 (+144%).
Empire Economics
29
Additionally, the mortgage delinquency levels for homeowners with adjustable and creative mortgages
have traditionally been significantly higher than for homeowners with fixed rate loans. This is
typically attributed to homeowners with adjustable rate loans having difficulty with higher mortgage
payments as rates rise as well as such households having “low” equity levels (due to higher loan to
price ratios as well as negative amortization), and hence less of an incentive to “hold-on” to the home,
especially if the rate of appreciation diminishes.
During the 2000-2005 time period, the 5.4% delinquency rate for adjustable rate loans has been above
the 3.6% delinquency rate for fixed rate loans by some 50% (5.4% vs. 3.6%.).
DELINQUENCY RATES:
FIXED-RATE VS. VARIABLE-RATE LOANS
7%
6%
PERCENTAGE OF LOANS
5%
4%
3%
2%
1%
0%
2000
2001
2002
Fixed-Rate
2003
2004
2005
Variable-Rate
Sources: Empire Economics & National Delinquency
S
4. Mortgage Rate Increases: Potential for Further Federal Reserve Board Rate Hikes
Since the financial markets, being very efficient, are difficult to forecast, especially mid-term and longterm rates, it is not the position of Empire Economics to forecast that mortgage rates will rise.
Nevertheless, it is worthwhile to explore the potential implications of the Federal Reserve Board
continuing its current policy of increasing the federal funds rate, since this directly impacts the shortend of the yield curve, and, in turn, adjustable rate mortgage rates as well as the creative mortgage
structures.
The Federal Reserve Board, according to some analysts, is expected to raise the federal funds rate to
some 4.75%, significantly above its prior level of 1.0% in June 2004; the federal funds rate is presently
at 4.50%. Consequently, the primary driving forces underlying the strong rates of housing price
appreciation, adjustable rates and creative financing structure, will diminish substantially over time.
(Note: Since the recent fixed rate of some 6.32% is some 110 basis points above the recent one-year
adjustable rate of 5.22%, even a moderate decline in fixed rates would not become a driving force for
further price appreciation because they are significantly higher than adjustable rates.)
Empire Economics
30
Therefore, further increases in the federal funds rate will result in the short-term rates rising, and this,
in turn, will cause the following:
¾ Existing Borrowers would have higher monthly payments as adjustable rate mortgages rise
and creative teaser rates are realigned to HIGHER market rates, as compared to the current
market rates.
¾ New Borrowers would face HIGHER rates, reducing their ability to qualify for loans that
support existing prices, thereby placing downward pressure on home prices.
RECENT MORTGAGE RATES FIXED AND ADJUSTABLE
AND THE FEDERAL RESERVE BOARD
8.00%
PRICE APPRECIATION: --------- 13.4%/yr--------------.||-----------------18.8%/yr --------------|| ----------------------------------24.1%/yr-------------------
MORTGAGE AND FINANCIAL RATES
7.00%
6.00%
FIXED RATE MORTGAGES RISE
5.00%
FIXED RATE MORTGAGES AT
HISTORIC LOWS: JULY 2003
4.00%
ADJUSTABLE RATE
MORTGAGES RISE
3.00%
ADJUSTABLE RATE MORTGAGES AT
HISTORIC LOWS: MARCH 2004
2.00%
1.00%
FEDERAL RESERVE BOARD RAISES THE FEDERAL
FUNDS RATES DUE TO POTENTIAL INFLATIONARY
PRESSURES.
FEDERAL RESERVE BOARD LOWERS THE FEDERAL FUNDS
RATES DUE TO NASDAQ MELTDOWN AND 9-11 ATACKS.
0.00%
January - .2006
October
July -- . 2005
April
January - .2005
October
Fixed: 30-Yr
July -- . 2004
April
January - .2004
October
July -- . 2003
April
January - .2003
October
July -- . 2002
April
January - .2002
Federal Funds
Variable 1-Yr
Sources: Empire Economics, Federal Reserve Board & Freddie Mac
5. Specific Impacts of Higher Mortgage Rates on the Land-Secured Credit Quality
The widespread use of adjustable rate and creative financing for newly developing residential
projects have significant implications for the Credit Quality underlying Land Secured
Financing:
¾ Special Tax Rates set-forth in the Rate and Method of Apportionment of Special Taxes are
based upon current housing prices which have recently realized strong rates of appreciation as a
result of the utilization of adjustable and creative financing techniques by home purchasers.
Empire Economics
31
Appraisals are based upon current land values, which, in turn, are derived from current housing
prices, that have appreciated at a strong rate in recent years, and so they also reflect the use of
adjustable and creative financing techniques. Furthermore, since the value of the land is a residual
value, that is, the price of the home less the construction costs of building the home, most of the
decline in the price of a home is passed through to the land, since construction costs are relatively
stable in the short-run.
For example, if a home with an initial price of $400,000 declines to $350,000, a reduction of
some -$50,000 or -12.5%, the value of the finished lot for the same sized home declines from
$149,000 to $113,600, a reduction of -$35,400 or -23.8%. Similarly, a decline in the price of a
home by 25% results in a reduction of the value of a finished lot for the same sized home by
some 48%!
(Note: The above discussion focuses on the value of a finished lot which includes entitlements
and infrastructure improvements; by comparison, the value of “raw” land, land without any
entitlements or infrastructure improvements, may approach zero.)
CHANGES IN HOUSING PRICES AND FINISHED LOT LAND VALUES
* LAND VALUES DELCINE AT A FASTER RATE
0%
CHANGES IN HOUSING PRICES AND LAND VALUES
0.0%
0.0%
-6.3%
-10%
-11.9%
-12.5%
-20%
-18.8%
-23.8%
-25.0%
-30%
-35.7%
-40%
-47.6%
-50%
-60%
Price $ 400,000
Price $ 400,000 to
$375,000
Price $ 400,000 to
$350,000
Change in Housing Prices
Price $ 400,000 to
$325,000
Price $ 400,000 to
$300,000
Change in Finished Lot Value
Therefore, the Credit Quality underlying Land Secured Financings reflects the use of current
prices and land values, and, as such, includes, among other factors, the underlying use of
adjustable and creative loan structures by homeowners.
Empire Economics
32
Consequently, should mortgage rates rise significantly, the Credit Quality of the land secured bonds is
subject to substantial weakening due to the following:
¾ Lower housing prices resulting in a higher Special Tax to Home Price Burden for
loans, some 81%.
Therefore, as mortgage rate resets occur to the current market rates, and furthermore, to the extent that
mortgage rates rise further, then the Credit Quality for Land Secured financing may be diminished,
resulting in Higher Tax Burdens due to lower housing prices, Lower Value/Lien Ratios due to lower
land values, and Higher Special Tax Delinquencies due to higher monthly mortgage payments.
Empire Economics
33
COMPETITIVE MARKET ANALYSIS OF THE PROJECTS
IN THE CFD NO. 03-02 COMPETITIVE HOUSING MARKET AREA
The purpose of this section is to provide an overview of the currently active Planned Communities and
other residential projects in the CFD No. 03-02 Competitive Housing Market Area, and then to
compare these to the expected characteristics of the forthcoming residential projects/products in CFD
No. 03-02.
Original Market Surveys Conducted in July 2005
(A sample of these projects was re-surveyed in January 2006, and these had prices that were slightly or
somewhat higher than those reported in July 2005, and so this section has not been updated
except for the CFD No. 03-02 product characteristics.)
The CFD No. 03-02 Housing Competitive Market Area currently has several Major Planned
Communities (PC) or project groupings with single-family detached homes that are located in the City
of Temecula and its vicinity.
The twenty-one currently active projects, along with the forthcoming projects in CFD No. 03-02, have
a total of 3,735 housing units: 1,745 forthcoming homes in CFD No. 03-02 and 1,990 homes in the
currently active projects. Of these, 1,121 homes in the currently active projects have closed escrow and
so they are considered to be occupied.
¾
¾
¾
¾
¾
CFD No. 03-02: forthcoming projects with 1,745 homes.
Harveston: 6 active projects with 600 homes of which 311 have closed escrow.
Rancho Bella Vista: 5 active projects with 686 homes of which 497 have closed escrow.
Not in PC: 6 active projects with 652 homes of which 313 have closed escrow.
Large Lot Products: 4 active projects with 52 homes of which none have closed escrow.
CFD NO.03-02 (RORIPAUGH RANCH) COMPETITIVE HOUSING MARKET AREA:
CHARACTERISTICS OF ACTIVE PROJECTS DEVELOPMENT STATUS
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Escrows Closed
Future Units
Empire Economics
CFD No.03-02
(Roripaugh
Ranch)
Harveston
Rancho Bella
Vista
Not in PC
0
311
497
313
0
1,745
289
189
339
52
34
Large Lot
Products
The prices of homes in these projects, including the currently active comparable projects and also the
forthcoming projects in the CFD, are some $614,595 for some 3,068 sq.ft., on the average, and the
prices for the projects in the various categories are as follows:
¾
¾
¾
¾
¾
CFD No. 03-02: $509,680 for some 2,840 sq.ft. of living area.
Harveston: $465,081 for some 2,386 sq.ft. of living area.
Rancho Bella Vista: $451,590 for some 2,569 sq.ft. of living area.
Not in PC: $456,872 for some 2,857 sq.ft. of living area.
Large Lot Products: $1,333,750 for some 5,007 sq.ft. of living area.
CFD NO.03-02 (RORIPAUGH RANCH) COMPETITIVE HOUSING MARKET
AREA HOUSING PRICES AND LIVING AREAS
$1,600,000
6,000
PRICES OF HOUSING UNITS
5,000
$1,200,000
4,000
$1,000,000
$800,000
3,000
$600,000
2,000
$400,000
1,000
SIZE OF LIVING AREA - SQUARE FEET
$1,400,000
$200,000
$0
LEFT: Price
RIGHT: Living Area
0
CFD No.03-02
(Roripaugh
Ranch)
Harveston
Rancho Bella
Vista
Not in PC
Large Lot
Products
Totals/Average
s
$509,680
$465,081
$451,590
$456,872
$1,333,750
$614,595
2,840
2,386
2,569
2,857
5,007
3,068
To compare the prices of the homes in these projects, their value ratios are utilized, the price per sq. ft.
of living area, since this effectively makes adjustments for differences in their sizes of living areas.
Accordingly, the value ratios for all of the projects amount to $194 per sq. ft. of living area and their
Special Taxes/Assessments amount to some $2,786/yr. (0.50% as a ratio to the housing prices);
accordingly, the value ratios and Special Tax/Assessment characteristics for the forthcoming product
types in CFD No. 03-02 and the currently active comparable projects are as follows:
¾ CFD No. 03-02 has an expected value ratio of $179, somewhat below the overall average and
the expected Special Taxes amount to $3,375/yr. (0.61%), above the overall average/ratio.
¾ Harveston has a value ratio of $199, similar to the overall average and their Special
Taxes/Assessments amount to $3,127/yr. (0.67%), above the overall average/ratio.
¾ Rancho Bella Vista has a value ratio of $178, somewhat below the overall average and their
Special Taxes/Assessments amount to $2,096/yr. (0.47%), below the overall average/ratio.
¾ Not in PC projects have a value ratio of $163, significantly below the overall average and their
Special Taxes/Assessments amount to $2,413/yr. (0.53%), slightly above the overall ratio.
¾ Large Lot Products have a value ratio of $265, substantially above the overall average (due to
their large lots sizes as well as their customized features) and their Special Taxes/Assessments
amount to $3,108/yr. (0.12%), significantly below the overall ratio.
Empire Economics
35
CFD NO.03-02 (RORIPAUGH RANCH) COMPETITIVE HOUSING
MARKET AREA VALUE RATIOS AND SPECIAL TAXES
VALUE RATIO: PRICE / LIVING AREA
$3,500
$250
$3,000
$200
$2,500
$2,000
$150
$1,500
$100
$1,000
$50
$500
$0
LEFT: Value Ratio
RIGHT: Special Assmt/Tax
CFD No.03-02
(Roripaugh
Ranch)
SPECIAL TAXES / ASSESSMENTS - ANNUALLY
$4,000
$300
$0
Harveston
Rancho Bella
Vista
Large Lot
Products
Not in PC
Totals/Averages
$179
$199
$178
$163
$265
$194
$3,375
$3,127
$2,096
$2,413
$3,108
$2,786
The currently active residential projects have experienced escrow closings (move-ins) at a rate of some
911 homes per year, for an average of some 43 units per project per year; the distribution of these sales
is as follows:
¾ The six projects in Harveston have an overall sales rate of 295 homes annually, some 49 per
project, on the average.
¾ The five projects in Rancho Bella Vista have an overall sales rate of 328 homes annually, some
66 per project, on the average.
¾ The six projects Not in Planned Communities (PC) but in the vicinity of CFD No. 03-02 have
an overall sales rate of 255 homes annually, some 43 per project, on the average.
¾ The four Large Lot Products projects have an overall sales rate of 33 homes annually, some 8
per project, on the average.
CFD NO.03-02 (RORIPAUGH RANCH) COMPETITIVE HOUSING
MARKET AREA SALES RATES
600
80
66
60
49
43
500
20
400
0
328
300
295
-20
255
-40
200
-60
SALES PER PROJECT- ANNUALLY
TOTAL SALES BY PC - ANNAULLY
40
8
-80
100
33
-120
0
Harveston
Empire Economics
-100
Rancho Bella Vista
36
Not in PC
Large Lot Products
Empire Economics
CHARACTERISTICS OF THE *COMPARABLE* ACTIVE PROJECTS IN THE COMPETITIVE HOUSING MARKET AREA BY GEOGRAPHICAL LOCATIONS
Special
Project
Project
Builder
Product Type
Locations
Project Size and Sales
Total
Escrows
Future
Closed
Housing Prices.
Sales
Lower
Average
Size of Living Area
Upper
Lower
Average
Value
Upper
Ratio
Rate/Yr.
Assessments/Taxes
Amount/
Ratio/
Year
Price
CFD No.03-02 (Roripaugh Ranch)
Phase I
Five - Builders
Single-family Detached
515
0
515
N/A
$471,594
$507,302
$525,594
2,247
2,783
3,040
$182
$3,000
0.59%
Phase II - Segment I
KB Home
607
0
607
N/A
$391,594
$408,792
$424,990
1,954
2,132
2,300
$192
$2,500
0.61%
Phase II - Segment II
KB Home
511
0
511
N/A
$460,990
$478,623
$498,990
2,499
2,931
3,325
$163
$3,000
0.63%
Phase II - Segment III
KB Home
112
0
112
N/A
$783,990
$845,490
$909,990
3,839
4,530
5,253
$187
$5,000
0.59%
Harveston I
Ashville
Lennar Homes
62
0
62
55
$370,990
$405,990
$440,990
1,684
1,913
2,141
$212
$2,680
0.66%
Harveston I
Auburn Lane
Lennar Homes
119
45
74
45
$397,000
$411,500
$426,000
1,767
1,934
2,101
$213
$2,922
0.71%
Harveston I
Lake Front Cottages
Lennar Homes
139
135
4
65
$425,000
$442,500
$460,000
1,991
2,125
2,259
$208
$2,965
0.67%
37
Harveston I
Sausalito
Lennar Homes
109
39
70
40
$434,990
$463,990
$492,990
1,873
2,205
2,537
$210
$3,155
0.68%
Harveston II
Chatham
Lennar Homes
78
51
27
50
$485,420
$525,505
$565,590
2,521
3,058
3,594
$172
$3,468
0.66%
Harveston I
Walden
Chrisptopher Homes
93
41
52
40
$505,000
$541,000
$577,000
2,770
3,082
3,393
$176
$3,571
0.66%
Rancho Bella Vista
San Lucas II
Centex Homes
153
115
38
73
$394,990
$399,990
$404,990
1,752
1,966
2,180
$203
$1,960
0.49%
Rancho Bella Vista
San Alicia
Centex Homes
139
112
27
70
$383,990
$432,490
$480,990
1,650
2,382
3,113
$182
$2,076
0.48%
Rancho Bella Vista
San Marino II
Centex Homes
182
126
56
80
$426,990
$440,990
$454,990
2,204
2,477
2,750
$178
$2,161
0.49%
Rancho Bella Vista
St. Augustine
Centex Homes
134
75
59
55
$411,990
$478,490
$544,990
2,058
2,915
3,771
$164
$2,058
0.43%
Rancho Bella Vista
Sr. Regis
Centex Homes
78
69
9
50
$466,990
$505,990
$544,990
2,600
3,107
3,613
$163
$2,226
0.44%
0.50%
Not in PC
Valdemosa
KB Home
79
0
79
30
$530,000
$295,250
$60,500
2,675
3,131
3,586
$94
$1,476
Not in PC
Jackson Crossing
Fieldstone Communities
140
56
84
45
$388,990
$392,990
$396,990
1,920
2,010
2,099
$196
$1,965
0.50%
Not in PC
Cascades II - Greens
Lennar Homes
70
8
62
30
$456,500
$488,000
$519,500
2,154
2,694
3,233
$181
$2,440
0.50%
Not in PC
Laurel Valley
Lennar Homes
36
3
33
30
$500,000
$512,000
$524,000
2,617
3,151
3,684
$163
$3,072
0.60%
Not in PC
Avondale
Richmond American
130
56
74
55
$490,000
$525,000
$560,000
2,811
3,140
3,468
$167
$2,888
0.55%
Not in PC
The Preserve
Centex Homes
197
190
7
65
$472,990
$527,990
$582,990
2,420
3,017
3,613
$175
$2,640
0.50%
0.05%
Large Lot Products
Gallery - Traditions
Gallery Homes
Semi - Custom Detached
8
0
8
8
$920,000
$1,010,000
$1,100,000
3,381
3,829
4,276
$264
$5,400
Large Lot Products
Las Alturas - De Luge
Craftman Homes
9
0
9
8
$1,000,000
$1,225,000
$1,450,000
4,700
5,100
5,500
$240
$980
0.08%
Large Lot Products
Las Alturas - La Cresta
Craftman Homes
7
0
7
7
$1,000,000
$1,300,000
$1,600,000
4,700
5,100
5,500
$255
$650
0.05%
Large Lot Products
The Reserve
Craftman Homes
28
0
28
10
$1,300,000
$1,800,000
$2,300,000
5,000
6,000
7,000
$300
$5,400
0.30%
N/A
4
1,745
0
1,745
N/A
$481,698
$509,680
$533,403
2,422
2,840
3,166
$179
$3,375
0.61%
49
6
600
311
289
295
$436,400
$465,081
$493,762
2,101
2,386
2,671
$199
$3,127
0.67%
Statistical Summary
Sales / Year
Harveston
Rancho Bella Vista
66
5
686
497
189
328
$416,990
$451,590
$486,190
2,053
2,569
3,085
$178
$2,096
0.47%
Not in PC
43
6
652
313
339
255
$473,080
$456,872
$440,663
2,433
2,857
3,281
$163
$2,413
0.53%
Large Lot Products
8
4
52
0
52
33
$1,055,000
$1,333,750
$1,612,500
4,445
5,007
5,569
$265
$3,108
0.12%
Totals/Averages
43
25
3,735
1,121
2,614
911
$554,800
$614,595
$673,883
2,631
3,068
3,493
$194
$2,786
0.50%
ESTIMATED ABSORPTION SCHEDULES FOR THE
PROJECTS/PRODUCTS IN CFD NO. 03-02
The purpose of this section is to estimate the absorption schedules for the forthcoming residential
and commercial retail projects/products in CFD No. 03-02; accordingly, this is based upon a
consideration of the following:
First, the potential demand schedules for the residential and commercial-retail projects/products for
CFD No. 03-02 were derived, based upon a consideration of the following:
¾ The growth prospects for the Southern California Market Region, in general, and Riverside
County, in particular.
¾ How much of this growth the CFD No. 03-02 Market Area, is expected to capture, in
particular.
¾ The proportion of the Market Area demand that is expected to be captured by the
projects/products in CFD No. 03-02, based upon an evaluation of their competitiveness in the
marketplace.
Thus, the result of this analysis is the POTENTIAL demand for the residential and commercial-retail
projects/products in CFD No. 03-02.
Next, the ability of the residential and commercial-retail projects/products in CFD No. 03-02 to
respond to this demand is estimated. Specifically, this represents, from a time perspective, when the
products will have the infrastructure in place that is required to support their development. So, the
result of this analysis is the INFRASTRUCTURE DEVELOPMENT of the projects/products in CFD
No. 03-02, and this reflects their ability to respond to the demand in the marketplace.
The following absorption schedules are based upon the critical assumption that the
developer, Ashby, USA, LLC, will be able to deliver the parcels to the various builders
according to the time schedule that was provided to Empire Economics by Ashby USA,
LLC. Specifically, this requires the fulfillment of numerous and complex conditions of
development in a timely manner. However, to the extent that the development conditions
are not fulfilled in a timely manner, and the delivery of the parcel to the various builders
does not occur according to the schedule set-forth by Ashby USA, LLC, then the
estimated absorption for the forthcoming projects in CFD No. 03-02 could be
substantially delayed. Ashby USA, LLC expects that building permits for the
forthcoming projects in Phase II will be released in January 2007.
Empire also considered comments provided by the City of Temecula on the Ashby USA,
LLC’s expected time schedule, and, based upon these, Empire assumed that building
permits for the forthcoming projects in Phase II will be released in September 2007.
Then, based upon a consideration of the POTENTIAL demand and the INFRASTRUCTURE
DEVELOPMENT, the absorption rate for the residential projects/products in the various market
segments are calculated, from the year in which the projects/products are expected to enter the
marketplace, and continuing thereafter on an annualized basis, until all of the units are occupied.
Accordingly, based upon an analysis of the economic and real estate conditions along with the
characteristics of the forthcoming residential product types/projects in CFD No. 03-02, the estimated
absorption schedules are as follows:
Empire Economics
38
Phase I is expected to have a total of 515 single-family detached housing units, 29.5%
of the total, that are priced at some $507,302 for some 2,783 sq.ft. of living area, on the
average, and these are spread among five Planning Areas with three builders, and they
are expected to be absorbed at the following rate:
65 homes during July-December 2006
266 homes in 2007
and then the remaining 184 homes in 2008
The development of the projects in Phase I is constrained by the number of building
permits that Ashby USA, LLC has available based upon the infrastructure improvements
that have been completed thus far. Specifically, the number of permits that are currently
available is significantly below the number of building permits that these projects require
for their full development. Accordingly, the Empire absorption schedules assume that
Ashby USA, LLC allocated the permits among the various builders in a manner that is
acceptable to them. Empire has received signed “Acknowledgements” as well as the
“Permit Sharing Agreement” from the various builders.
Phase II is expected to have a total of 1,230 single-family homes, 70.5% of the total,
that are priced at some $370,000 to $909,990 with living areas of 1,809 to 5,318 sq.ft,
and these are spread among fifteen Planning Areas with the only builder being KB
Home; accordingly, their estimated absorption schedule, based upon the assumption
that building permits are available as of September 2007, is as follows:
no homes in 2006 or 2007
328 homes in 2008
another 328 homes in 2009
230 homes in 2010
210 homes in 2011
and then the remaining 134 homes in 2012
Therefore, the 1,745 forthcoming residential units in the CFD No. 03-02 are expected to be absorbed
during the July 2006 to December 2012 time period, at a rate of some 328 homes per year, on the
average, when most of the projects are on the marketplace. Specifically, the rate of absorption is
expected to start at some 65 homes in 2006, as the first projects enter the marketplace, rise to peak
levels of 512 homes in 2008, when most of the projects are on the marketplace, decreases to 328, 230
and 210 homes in 2009, 2010, and 2011, respectively, as some of the projects are closed-out, and then,
finally, the remaining 134 homes in 2012.
With regards to the various commercial-retail project, 15.4 acres, its absorption is based upon the
occupancy of the homes in CFD No. 03-02 along with threshold levels required to support commercial
centers, and its absorption is expected to occur in 2008.
For additional information on the estimated absorption schedules for the residential products in the
CFD No. 03-02, please refer to the following table and graph.
Empire Economics
39
Potential Financial Risk Factors
The potential financial risk factor reflects the implications of the recent use of adjustable rate and
creative financing techniques by home purchasers on the credit quality underlying land-secured
financings in Southern California.
There has been a fundamental shift in the driving force underlying the recent
rates of housing price appreciation, from the historical role of employment
growth as the driving force to the recent role of adjustable rate and creative
financing techniques as the driving force. These financial factors have been
the primary driving force underling the extraordinary rate of housing price
appreciation in Southern California of more than 75% since January 2002.
Consequently the current levels of housing prices and land values are subject
to potentially substantial downward adjustments, due to mortgage rate resets
(as mortgages are adjusted from teaser rates to market rates) as well as
higher short-term rates (due to rate hikes by the Federal Reserve Board).
These adjustments, in turn, may cause a softening in housing prices and land
values that could adversely impact the credit quality underlying land-secured
financings.
including the following: interest only, payment option loans as well as initial teaser rates (below
market rates that are offered only for a limited time period) with very low initial payments that result
in negative amortizations (higher principal balance), less stringent lending standards such as low/no
documentation, and much higher mortgage payment to income ratios, among others.
Consequently, to the extent that mortgage payments rise due to various possible combinations of
automatic mortgage rate resets as well as potentially higher short-term rates that directly impact
adjustable rate and creative mortgages, then the credit quality underlying recent land-secured
financings may be diminished in the following ways:
¾ Lower housing prices resulting in a higher Special Tax to Housing Price Burden for
loans, some 81%.
Empire Economics
40
Empire Economics
EMPIRE ECONOMICS --- FEBRUARY 2, 2006; SUBJECT TO REVISION
CRITICAL ASSUMPTION: ASHBY USA, LLC COMPLETES THE CONDITIONS OF DEVELOPMENT IN A TIMELY MANNER
Planning Area
Units
Builder
Sale Rates
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
Average
Lot Size
Lower
Expected Housing Prices
Average
Upper
Lower
Expected Living Areas
Average
Upper
Annually
Jan-June
July-Dec.
Jan-June
July-Dec.
Jan-June
July-Dec.
Jan-June
July-Dec.
Jan-June
July-Dec.
Jan-June
July-Dec.
Jan-June
July-Dec.
Phase I
PA-2
99
Davidson
6,265
$538,000
$548,141
$558,000
2,960
3,181
3,357
50
0
25
25
25
24
0
0
0
0
0
0
0
0
0
PA-1
104
D.R. Horton
6,285
$410,000
$450,918
$480,000
1,949
2,642
2,949
55
0
0
27
27
27
23
0
0
0
0
0
0
0
0
PA-3
99
Tanamera
6,000
$459,990
$498,490
$519,990
1,974
2,434
2,699
55
0
20
27
27
25
0
0
0
0
0
0
0
0
0
PA-4A
100
Tanamera
6,310
$459,990
$522,364
$539,990
2,007
2,943
3,246
55
0
20
27
27
26
0
0
0
0
0
0
0
0
0
PA-4B
113
Tanamera
6,580
$489,990
$516,597
$529,990
2,346
2,714
2,951
55
0
0
27
27
27
32
0
0
0
0
0
0
0
0
0
Phases II+
Segment # 1: Below $420,000-Avg.
41
PA-31
169
KB Home
3,150
$370,000
$395,495
$415,990
1,809
2,080
2,300
70
0
0
0
0
35
35
35
35
29
0
0
0
0
PA-22
130
KB Home
3,150
$370,000
$395,495
$415,990
1,809
2,080
2,300
Sequence
0
0
0
0
0
0
0
0
6
35
35
35
19
0
PA-12
112
KB Home
6,120
$405,990
$417,657
$430,990
2,050
2,167
2,300
65
0
0
0
0
32
32
32
16
0
0
0
0
0
0
PA-14
92
KB Home
3,880
$405,990
$417,657
$430,990
2,050
2,167
2,300
Sequence
0
0
0
0
0
0
0
16
32
32
12
0
0
0
PA-15
104
KB Home
3,880
$405,990
$417,657
$430,990
2,050
2,167
2,300
Sequence
0
0
0
0
0
0
0
0
0
0
20
32
32
20
PA-23
47
KB Home
5,313
$415,990
$429,323
$445,990
2,029
2,408
2,707
60
0
0
0
0
30
17
0
0
0
0
0
0
0
0
PA-24
75
KB Home
5,313
$415,990
$429,323
$445,990
2,029
2,408
2,707
Sequence
0
0
0
0
0
13
30
30
2
0
0
0
0
0
PA-16
121
KB Home
6,696
$450,990
$480,990
$510,990
2,500
3,138
3,787
55
0
0
0
0
27
27
27
27
13
0
0
0
0
0
PA-17
147
KB Home
8,703
$510,990
$526,740
$545,990
2,969
3,350
3,711
50
0
0
0
0
25
25
25
25
25
22
0
0
0
0
PA-18
121
KB Home
8,703
$510,990
$526,740
$545,990
2,969
3,350
3,711
Sequence
0
0
0
0
0
0
0
0
0
3
25
30
30
33
PA: 10,19-21,33
76
KB Home
20,000
$779,990
$845,990
$909,990
4,001
4,681
5,187
30
0
0
0
0
15
15
15
15
16
0
0
0
0
0
PA: 10,19-21,33
36
KB Home
42,298
$787,990
$844,990
$909,990
3,676
4,378
5,318
Sequence
0
0
0
0
0
0
0
0
0
15
15
6
0
0
515
29.5%
$471,594
$507,302
$525,594
2,247
2,783
3,040
0
65
133
133
129
55
0
0
0
0
0
0
0
0
1,230
70.5%
Segment # 2: $420,000 - $530,000-Avg.
Segment # 3: Above $600,000-Avg.
Statsitical Summary:
Phase I
Phases II+
$485,908
$510,671
$536,657
2,495
2,864
3,219
0
0
0
0
164
164
164
164
123
107
107
103
81
53
Segment # 1: Below $420,000-Avg.
607
$391,594
$408,792
$424,990
1,954
2,132
2,300
0
0
0
0
67
67
67
67
67
67
67
67
51
20
Segment # 2: $420,000 - $530,000-Avg.
511
$460,990
$478,623
$498,990
2,499
2,931
3,325
0
0
0
0
82
82
82
82
40
25
25
30
30
33
Segment # 3: Above $600,000-Avg.
112
$783,990
$845,490
$909,990
3,839
4,530
5,253
0
0
0
0
15
15
15
15
16
15
15
6
0
0
1,745
$481,698
$509,680
$533,403
2,422
2,840
3,166
0
65
133
133
293
219
164
164
123
107
107
103
81
53
Overall
Empire Economics
CITY OF TEMECULA CFD NO. 03-02 (RORIPAUGH RANCH)
ESTIMATED RESIDENTIAL ABSORPTION SCHEDULES
42
NUMBER OF ESCROW CLOSINGS: ANNUALLY
600
500
400
300
200
100
0
2006
2007
2008
Phase I
2009
2010
Phases II+
2011
2012
ASSUMPTIONS AND LIMITING CONDITIONS
The Market Absorption Study for CFD No. 03-02 is based upon
assumptions and limiting conditions; accordingly, these are as follows:
various
Title to Property
Property Boundaries
Accuracy of Information from Others
Date of Study
Hidden or Unapparent Conditions
Opinions of a Legal/Specialized Nature
Right of Publication of Report
Soil and Geological Studies
Earthquakes and Seismic Hazards
Testimony or Court Attendance
Maps and Exhibits
Environmental and Other Regulations
Required Permits and Other Governmental Authority
Liability of Market Analyst
Presence and Impact of Hazardous Material
Structural Deficiencies of Improvements
Presence of Asbestos
Acreage of Property
Designated Economic Scenario
Provision of the Infrastructure; Role of Coordinator
Developer/Builders Responsiveness to Market Conditions
Financial Strength of the Project Developer/Builders
Market Absorption Study Timeliness of Results
For additional information on the various assumptions and limiting conditions, please
refer to the comprehensive Market Absorption Study.
Empire Economics
43
APPENDIX E
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:
“Account Party” means the property owner that provides a Letter of Credit to secure the
payment of Special Taxes on property the Account Party or its affiliates own in the District.
“Acquisition Account” means the account by that name established by the Fiscal Agent
Agreement within the Improvement Fund.
“Acquisition Agreement” means the Acquisition Agreement, dated as of March 1, 2006,
between the Authority and Ashby, USA, LLC, as originally executed and as it may be amended
from time to time.
“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; 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.
E-1
“Administrative Expense Fund” means the fund by that name established by the Fiscal
Agent Agreement.
“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 (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).
“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 action 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 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 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, 2006.
“Bonds” means the 2006 Bonds, and, if the context requires, any Parity Bonds, at any
time Outstanding under the Fiscal Agent Agreement or any Supplemental Agreement.
“Build-Out” means, when making calculations pursuant to the Fiscal Agent Agreement
as to one or more parcels of property, or otherwise in connection with clause (viii) of the
definition “Letter of Credit” in the Fiscal Agent Agreement, the assumption that the property
contains the number, size and type of homes projected in the development plans used by the
Tax Consultant in connection with its email regarding “Letter of Credit Calculations” dated
February 14, 2006, which provided the initial stated amounts of the Letters of Credit to be
delivered to the Fiscal Agent on the Closing Date by two of the landowners in the District,
which assumptions may be adjusted from time to time based upon actual completed
E-2
construction of homes in the District (as reported in connection with requests to reduce the
amount of any Letter of Credit by or on behalf of an Account Party or as otherwise known by
the Tax Consultant).
“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.
“Capitalized Interest Account” means the account by that name established within the
Bond Fund by the Fiscal Agent Agreement.
“City” means the City of Temecula, California.
“City Account” means the account by that name established by the Fiscal Agent
“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, 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 establishment of
the District, special tax consultant fees and expenses, preliminary engineering fees and
expenses, Bond (underwriter’s) discount, legal fees and charges, including bond counsel,
disclosure counsel and landowner’s counsel, financial consultants’ fees, charges for execution,
transportation and safekeeping of the Bonds, landowner expenses related to the District
formation and the issuance of the Bonds, City costs related to the District formation, and other
costs, charges and fees in connection with the foregoing.
“Costs of Issuance Fund” means the fund by that name established by the Fiscal Agent
Agreement.
“County” means the County of Riverside, California.
“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 on
the 2006 Bonds and the scheduled amount of interest and amortization of principal payable on
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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.
“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, including with respect to such
nondelinquent parcels the value of the then existing improvements and any facilities to be
constructed or acquired with any amounts then on deposit in the Improvement Fund and with
the proceeds of any proposed series of Parity Bonds, 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.
“District-wide Maximum Special Taxes” means the maximum Special Taxes that can be
levied on all property in the District assuming Build-Out of all property, as computed from
time to time by the Tax Consultant.
“EMWD” means the Eastern Municipal Water District.
“EMWD Account” means the account by that name established by the Fiscal Agent
“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
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yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable
direct obligation of the United States.
“Federal Securities” means any of the following which are non-callable and which at the
time of investment are legal investments under the laws of the State of California for funds held
by the Fiscal Agent: (i) direct general obligations of the United States of America (including
obligations issued or held in book entry form on the books of the United States Department of
the Treasury) and obligations, the payment of principal of and interest on which are directly or
indirectly guaranteed by the United States of America, including, without limitation, such of
the foregoing which are commonly referred to as “stripped” obligations and coupons; or (ii)
any of the following obligations of the following agencies of the United States of America: (a)
direct obligations of the Export-Import Bank, (b) certificates of beneficial ownership issued by
the Farmers Home Administration, (c) participation certificates issued by the General Services
Administration, (d) mortgage-backed bonds or pass-through obligations issued and guaranteed
by the Government National Mortgage Association, (e) project notes issued by the United
States Department of Housing and Urban Development, and (f) public housing notes and
bonds guaranteed by the United States of America.
“Fiscal Agent” means the Fiscal Agent appointed by the 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 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.
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“Interest Payment Dates” means March 1 and September 1 of each year, commencing
September 1, 2006.
“Joint Community Facilities Agreement – EMWD” means the Joint Community
Facilities Agreement, dated as of January 1, 2005, among the Authority, EMWD and Ashby
USA, LLC.
“Letter of Credit” means a standby letter of credit, which is:
(i) irrevocable during its term;
(ii) in a form reasonably satisfactory to the Treasurer and the Original Purchaser;
(iii) for the benefit of the Fiscal Agent;
(iv) issued by federal or state chartered bank or other financial institution
reasonably acceptable to the Treasurer and the Original Purchaser, which bank’s or
institution’s unsecured debt obligations are rated at least “A-” or better by Moody’s or
S&P;
(v) at the time of delivery thereof to the Fiscal Agent for purposes of the Fiscal
Agent Agreement, accompanied by one or more opinions addressed to the Fiscal Agent
and the Authority to the effect, singly or together, that the Letter of Credit is a legal,
valid and binding obligation of the provider thereof, enforceable against the provider
thereof in accordance with its terms, except as limited by applicable reorganization,
insolvency, liquidation, readjustment of debt, moratorium or other similar laws
affecting the enforcement of rights of creditors generally as such laws may be applied in
the event of a reorganization, insolvency, liquidation, readjustment of debt or other
similar proceeding of or moratorium applicable to the provider thereof and by general
principles of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(vi) for a term of at least one year, effective from no later than the date it is
delivered to the Fiscal Agent, and any Letter of Credit provided in substitution for any
then outstanding Letter of Credit shall be for a term of at least one year commencing not
later than the expiration date of the Letter of Credit for which it is being substituted;
(vii) for the account of any entity other than the City, the Authority, the District
or any other governmental entity;
(viii) in a stated amount equal to two years estimated expected annual Special
Taxes to be levied on the County Assessor’s parcels to which it pertains assuming BuildOut of such parcels; and
(ix) not secured, as to the reimbursement of any draws thereon, by any property
located in the District, or if so secured, any such security shall be expressly subordinate
to the lien of the Special Taxes.
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A standby letter of credit may be accompanied by a confirming letter of credit for the purposes
of satisfying the requirements in clause (iv) above; and if a confirming letter of credit is
provided, the legal opinion referred to in clause (v) above shall be with respect to the
confirming letter of credit and not the related Letter of Credit.
Any Letter of Credit delivered to the Fiscal Agent shall be accompanied by a written
certificate from the provider thereof or the account party thereto which identifies the County
Assessor’s parcels in the District to which such Letter of Credit initially pertains.
“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.
“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.
“Parcel Liens” means, with respect to any parcel or parcels of real property in the
District, sum of: (i) the aggregate principal amount of all Bonds then Outstanding allocable to
such parcel or parcels based upon the portion of the debt service payable on the Bonds from the
Special Taxes levied (or that, but for capitalized interest on the Bonds, could be levied) on such
parcel or parcels in the then annual Fiscal Year, plus (ii) the aggregate principal amount of any
fixed assessment liens on the parcel or parcels, plus (iii) a portion of the aggregate principal
amount of any and all other community facilities district bonds then outstanding and payable
at least partially from special taxes to be levied on such parcel or parcels (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 such parcel or parcels, 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.
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“Parcel 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 parcels of real
property in the District identified by an Account Party (the “Identified Parcels”), which
Identified Parcels are (i) parcels in the District with respect to which the Account Party has
provided a Letter of Credit, (ii) are subject to the levy of the Special Taxes, and (iii) are not
delinquent in the payment of any Special Taxes then due and owing, including with respect to
the Identified Parcels the value of the then existing improvements and any facilities to be
constructed or acquired with any amounts then on deposit in the Improvement Fund, all as
determined with respect to the Identified Parcels by reference to (A) an appraisal (or an update
to a prior appraisal) performed within the six (6) months prior to the date the Treasurer
prepares the written direction described in the Fiscal Agent Agreement by an MAI appraiser
(the “Appraiser”) selected by the Authority, or (B), in the alternative, the assessed value of all
the Identified 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 a
Parcel Value, the Authority may rely on an appraisal to determine the value of some or all of
the Identified Parcels and/or the most recent County real property tax roll as to the value of
some or all of the Identified Parcels. 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.
“Parity Bonds” means bonds issued by the Authority for the District on a parity with
any then Outstanding Bonds pursuant to the Fiscal Agent Agreement.
“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) Federal Securities.
(b) Time certificates of deposit or negotiable certificates of deposit issued by a
state or nationally chartered bank (including the Fiscal Agent and its affiliates) or trust
company, or a state or federal savings and loan association; provided, that the
certificates of deposit shall be one or more of the following: continuously and fully
insured by the Federal Deposit Insurance Corporation, and/or continuously and fully
secured by securities described in subdivision (a) of this definition of Permitted
Investments which shall have a market value, as determined on a marked-to-market
basis calculated at least weekly, and exclusive of accrued interest, of not less than 102
percent of the principal amount of the certificates of deposit.
(c) Commercial paper of “prime” quality of the highest ranking or of the highest
letter and numerical rating as provided by either Moody’s or S&P, which commercial
paper is limited to issuing corporations that are organized and operating within the
United States of America and that have total assets in excess of five hundred million
dollars ($500,000,000) and that have an “A” or higher rating for the issuer’s debentures,
other than commercial paper, by either Moody’s or S&P, provided that purchases of
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eligible commercial paper may not exceed 180 days’ maturity nor represent more than
10 percent of the outstanding commercial paper of an issuing corporation.
(d) A repurchase agreement with a state or nationally charted bank or trust
company or a national banking association or government bond dealer reporting to,
trading with, and recognized as a primary dealer by the Federal Reserve Bank of New
York, provided that all of the following conditions are satisfied: (1) the agreement is
secured by any one or more of the securities described in subdivision (a) of this
definition of Permitted Investments, (2) the underlying securities are required by the
repurchase agreement to be held by a bank, trust company, or primary dealer having a
combined capital and surplus of at least one hundred million dollars ($100,000,000) and
which is independent of the issuer of the repurchase agreement, and (3) the underlying
securities are maintained at a market value, as determined on a marked-to-market basis
calculated at least weekly, of not less than 103 percent of the amount so invested.
(e) An investment agreement or guaranteed investment contract with, or
guaranteed by, a financial institution or an insurance company the long-term unsecured
obligations or claims paying ability, as applicable, of which, at the time of the
investment, are rated “AA-” (or its equivalent) or better by Moody’s and S&P.
(f) The Local Agency Investment Account of the State Treasurer of the State of
California as permitted by the State Treasurer pursuant to Section 16429.1 of the
California Government Code.
(g) Investments in a money market account (including any accounts of the Fiscal
Agent or its affiliates) rated in the highest rating category by Moody’s or S&P.
“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.
“Project” means the facilities eligible to be funded by the District more particularly
described in the Resolution of Formation.
“Public Works Administration Account” means the account by that name created and
held by the Fiscal Agent pursuant to the Fiscal Agent Agreement.
“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 any Bond Year is not in excess of the debt
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service on the Bonds being refunded and the 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 Requirement” means, as of any date of calculation an amount equal to the
least of (i) the then Maximum Annual Debt Service, (ii) one hundred twenty-five percent
(125%) of the then average Annual Debt Service, or (iii) ten percent (10%) of the then
Outstanding principal amount of the Bonds.
“Resolution of Formation” means Resolution No. TPFA 05-01, adopted by the Board of
Directors of the Authority on January 11, 2005.
“Resolution of Intention” means Resolution No. TPFA 04-08, adopted by the Board of
Directors of the Authority on August 24, 2004, as amended by Resolution No. 04-10, adopted by
the Board of Directors of the Authority on September 28, 2004.
“S&P” means Standard & Poor’s Ratings Service, a division of McGraw-Hill, and any
successor thereto.
“Securities Depositories” means The Depository Trust Company, 55 Water Street, 50 th
Floor, New York, New York 10041-0099, Attention: Call Notification Department, Fax (212) 8557232; 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.
“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
the 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; provided that amounts
collected in respect of delinquent Special Taxes shall not be Special Tax Revenues to the extent,
and only to the extent, of any proceeds of a draw on a Letter of Credit under the Fiscal Agent
Agreement (which amounts shall be repaid to the Letter of Credit provider, as specified in the
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Fiscal Agent Agreement). “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.
“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 David Taussig & Associates, Inc. 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.
“2006 Bonds” means the Bonds so designated and authorized to be issued under the
Fiscal Agent Agreement.
Funds and Accounts
The Fiscal Agent Agreement provides for the following funds, in addition to the Special
Tax Fund, the Bond Fund and the Reserve Fund described in the text of this Official Statement:
Improvement Fund. There is established under the Fiscal Agent Agreement as a
separate fund to be held by the Fiscal Agent the Improvement Fund, and within the
Improvement Fund a City Account, an EMWD Account, an Acquisition Account and a Public
Works Administration Account. Deposits shall be made to the accounts within the
Improvement Fund as required by the Fiscal Agent Agreement. Moneys in the accounts within
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.
Amounts in the Improvement Fund, including the accounts therein, are not pledged as security
for the Bonds.
Disbursements from the City Account of 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 any of the portions of the Project to be constructed by the City, 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 City Account of
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.
Disbursements from the Acquisition Account within 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
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shall be for a Project cost identified in the Acquisition Agreement, or for a cost of the City or the
Authority in administering the Acquisition Agreement not able to be funded from amounts in
the Public Works Administration Account), that the disbursement is a proper expenditure from
the Acquisition Account of 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.
Disbursements from the EMWD Account of 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 an Acquisition Facility, as such term is defined in the Joint Community Facilities Agreement
– EMWD (and as such Acquisition Facilities are identified in Exhibit B to that agreement), that
the disbursement is consistent with the requirements of Section 7(e) of the Joint Community
Facilities Agreement – EMWD, that the disbursement is a proper expenditure from the EMWD
Account of 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.
Disbursements from the Public Works Administration Account shall be made by the
Fiscal Agent upon receipt of an Officer’s Certificate, or a written demand of the Public Works
Director of the City, which shall: (i) set forth the amount required to be disbursed and state that
the disbursement is for payment of costs of the City to administer the Acquisition Agreement;
and (ii) certify that no portion of the amount then being requested was set forth in any Officer’s
Certificate or written demand 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 accounts within 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 accounts within the Improvement Fund shall be retained in the
respective accounts of the Improvement Fund to be used for the purposes of the respective
account.
If: (i) the Treasurer determines in the Treasurer’s sole discretion that work necessary to
construct and complete the Project has been abandoned, or that for any reason (including, but
not limited to, termination of, or the occurrence of any event that would permit termination of,
the Acquisition Agreement), all or any portion of the amounts then on deposit in the
Acquisition Account, the EMWD Account and/or the City Account will not be expended for
Project costs, or (ii) Treasurer receives a written certificate of an Independent Financial
Consultant to the effect that the Project has been abandoned or all or any portion of the
amounts then on deposit in the Acquisition Account, the EMWD Account and the City Account
will not be expended for Project costs, the Treasurer shall file an Officer’s Certificate with the
Fiscal Agent to that effect and which identifies the amounts then on deposit in the accounts
within the Improvement Fund that are not expected to be used for Project costs due to such
abandonment or other reason. The Fiscal Agent, upon receipt of such certificate, shall transfer
the amounts identified therein from the Acquisition Account, the EMWD Account and the City
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Account, as applicable, to the Bond Fund to be used (i) to redeem the 2006 Bonds on the next
Interest Payment Date for which notice of redemption can timely be given pursuant to the
Fiscal Agent Agreement if the amount so transferred is at least $100,000, or (ii) if such amount is
less than $100,000, to pay debt service on the Bonds on the next Interest Payment Date.
On the earlier of (i) the date of receipt by the Fiscal Agent of an Officer’s Certificate to
the effect that Ashby, USA, LLC has notified the Authority in writing that no further
disbursements will be made from the EMWD Account, or (ii) March 1, 2016, the Fiscal Agent
shall transfer all amounts then on deposit in the EMWD Account to the Acquisition Account to
be used for the purposes of such account, or, if the Acquisition Account has theretofore been
closed, to the Bond Fund to be used to pay Debt Service on the Bonds on the next Interest
Payment Date, and following such transfer the EMWD Account shall be closed.
Upon receipt by the Fiscal Agent of an Officer’s Certificate to the effect that all
improvements to be funded from the City Account have been completed or that no further
withdrawals will be made from the City Account, any amounts remaining on deposit in the
City Account shall be transferred by the Fiscal Agent to the Acquisition Account, or, if the
Acquisition Account has theretofore been closed, to the Bond Fund to be used to pay Debt
Service on the Bonds on the next Interest Payment Date, and when no amounts remain on
deposit in the City Account the City Account shall be closed.
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 not
required to be paid from any of the City Account, the EMWD Account, or the Acquisition
Account of the Improvement Fund, the Fiscal Agent shall transfer the amount, if any,
remaining in the Public Works Administration Account to the Administrative Expense Fund to
be used for purposes of the Administration Expense Fund. Following such transfer, the Public
Works Administration Account shall be closed.
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 Acquisition Account, the Fiscal Agent shall transfer the
amount, if any, remaining in the Acquisition Account to the Bond Fund to be used to pay Debt
Service on the Bonds on the next Interest Payment Date, and when no amounts remain on
deposit in the Acquisition Account the Acquisition Account 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, 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
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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.
Reserve Fund. There is established under the Fiscal Agent Agreement as a separate
fund to be held by the Fiscal Agent the Reserve Fund, to the credit of which a deposit shall be
made as required by the Fiscal Agent Agreement equal to the Reserve Requirement as of the
Closing Date for the Bonds, and deposits shall be made as provided in the Fiscal Agent
Agreement. Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the
benefit of the Owners of the Bonds as a reserve for the payment of principal of, and interest and
any premium on, the Bonds and shall be subject to a lien in favor of the Owners of the Bonds.
Except as otherwise provided in the Fiscal Agent Agreement, all amounts deposited in
the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of
making transfers to the 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 or, in accordance with the provisions of the Fiscal Agent Agreement, for the purpose
of redeeming Bonds from the Bond Fund.
Whenever transfer is made from the Reserve Fund to the Bond Fund due to a deficiency
in the Bond Fund, the Fiscal Agent shall provide written notice thereof to the Treasurer,
specifying the amount withdrawn. The Treasurer shall then shall provide the notice described
in the Fiscal Agent Agreement.
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 Reserve Fund exceeds the Reserve
Requirement, the Fiscal Agent shall provide written notice to the Treasurer of the amount of the
excess and shall transfer an amount equal to the excess from the Reserve Fund (i) to the
Acquisition Account, so long as such account has not theretofore been closed, and (ii) following
the closure of the Acquisition Account, 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 Fiscal Agent
Agreement.
Whenever the balance in the Reserve Fund equals or exceeds the amount required to
redeem or pay the Outstanding Bonds, including interest accrued to the date of payment or
redemption and premium, if any, due upon redemption, the Fiscal Agent shall upon the
written direction of the Treasurer transfer the amount in 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, as applicable, of all of the Outstanding Bonds. In
the event that the amount so transferred from the Reserve Fund to the Bond Fund exceeds the
amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund
shall be transferred to the Authority to be used for any lawful purpose of the Authority.
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Notwithstanding the foregoing, no amounts shall be transferred from the Reserve Fund
pursuant to the Fiscal Agent Agreement until after (i) the calculation of any amounts due to the
federal government pursuant to the Fiscal Agent Agreement following payment of the Bonds
and withdrawal of any such amount from the Reserve Fund for purposes of making such
payment to the federal government, and (ii) 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
Reserve Fund (determined on the basis of the principal of Bonds to be redeemed, and the
original principal of the Bonds) shall be transferred on the Business Day prior to the
redemption date by the Fiscal Agent to the Bond Fund to be applied to the redemption of the
Bonds pursuant to the Fiscal Agent Agreement. The Treasurer shall deliver to the Fiscal Agent
an Officer’s Certificate specifying any amount to be so transferred, and the Fiscal Agent may
rely on any such Officer’s Certificate.
Amounts in the Reserve Fund may at any time be used, at the written direction of an
Authorized Officer, for purposes of paying any rebate liability under the Fiscal Agent
Agreement.
Moneys in the Reserve Fund shall be invested in accordance with the investment
provisions of the Fiscal Agent Agreement.
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 held by the Fiscal
Agent, the Capitalized Interest Account, to the credit of which deposits shall be made under the
Fiscal Agent Agreement. 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.
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 second
succeeding paragraph. Notwithstanding the foregoing, amounts in the Bond Fund as a result of
a transfer pursuant to the Fiscal Agent Agreement 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.
In the event that amounts in the Bond Fund are insufficient for the purposes set forth in
the preceding paragraph, the Fiscal Agent shall withdraw from the Reserve Fund to the extent
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of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts
so withdrawn from the Reserve Fund shall be deposited in the Bond Fund.
If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make
the payments provided for in the Fiscal Agent Agreement, the Fiscal Agent shall apply the
available funds first to the payment of interest on the Bonds, then to the payment of principal
due on the Bonds other than by reason of sinking payments, and then to payment of principal
due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled
shall be added to the sinking payment to be made on the next sinking payment date.
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 Capitalized Interest Account shall be transferred to the Bond Fund on the
Business Day prior to each Interest Payment Date, in the amount equal to and to be used for the
payment of interest on the Bonds due on the next succeeding Interest Payment Date; provided
that no such transfer shall exceed the amount then on deposit in the Capitalized Interest
Account. When no amounts remain on deposit in such account, the Capitalized Interest
Account shall be closed.
Moneys in the Bond Fund, the Capitalized Interest Account 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, the Capitalized Interest Account and the Special Tax Prepayments Account
shall be retained in the Bond Fund, the Capitalized Interest Account and the Special Tax
Prepayments Account, respectively, to be used for purposes of such fund and accounts.
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 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
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.
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On 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, the Capitalized Interest
Account 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 on such Interest Payment
Date, and (ii) to the Reserve Fund an amount, taking into account amounts then on deposit in
the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve
Requirement.
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
Annually, on the last day of each Fiscal Year commencing with the last day of Fiscal
Year 2005-2006, the Treasurer shall withdraw any amounts then remaining in the
Administrative Expense Fund in excess of $60,000 that have not otherwise been allocated to 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.
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On the Closing Date, all amounts on deposit in the Refunding Fund shall be transferred
by the Fiscal Agent to U.S. Bank National Association, as agent for the County, to be used to
pay in full and discharge the assessment liens on property in the District for the County’s
Assessment District No. 161. After disbursement of all amounts on deposit in the Refunding
Fund, the Refunding Fund shall be closed.
Letter of Credit Provisions
The Fiscal Agent shall hold any Letter of Credit delivered to it for the benefit of the
Reserve Fund. The Fiscal Agent shall advise the Treasurer in writing promptly following the
actual knowledge of the Fiscal Agent that the credit rating of the provider of any Letter of
Credit (or, if a confirming letter of credit has been delivered with a Letter of Credit, the credit
rating of the provider of the confirming letter of credit) then in effect has been reduced to BBB
(or its equivalent) or lower by S&P or Moody’s.
The Fiscal Agent shall draw upon a Letter of Credit promptly following receipt by the
Fiscal Agent of a written direction of the Treasurer instructing the Fiscal Agent to draw on a
Letter of Credit, identifying the Letter of Credit and the amount to be so drawn, and to the
effect that Special Taxes levied in the District on “parcels to which the Letter of Credit pertains”
(as such phrase is discussed in the Fiscal Agent Agreement) are then delinquent in the amount
so to be drawn on the Letter of Credit. The amount received pursuant to any draw on a Letter
of Credit under the Fiscal Agent Agreement shall not act as a credit in respect of the amount of
any Special Taxes that have been levied in the District on the parcels to which it pertains. Upon
collection of any delinquent Special Taxes with respect to the property for which a draw on a
Letter of Credit has been made, the Authority shall send to the provider of the Letter of Credit
(or its written designee) the amount so collected, less any costs or Administrative Expenses
incurred in connection with the delinquency or the related draw on the Letter of Credit, with
the amount to be sent to the provider not in any event to exceed the amount of the proceeds of
the draw on the Letter of Credit received by the Fiscal Agent. The proceeds of any draw on a
Letter of Credit described in this paragraph shall be deposited by the Fiscal Agent to the Special
Tax Fund.
In addition to the foregoing, the Fiscal Agent shall draw upon the full amount available
under a Letter of Credit (x) as soon as practicable following receipt by the Fiscal Agent of actual
knowledge that the then rating of the Letter of Credit provider’s unsecured debt obligations has
been reduced to BBB (or its equivalent) or lower by Moody’s or S&P (if a confirming letter of
credit has been delivered together with a Letter of Credit, the foregoing rating criteria shall be
applied to the ratings of the institution providing the confirming letter of credit), or (y) five
days prior to the stated termination date of the Letter of Credit (or any confirming letter of
credit provided therewith) if the Letter of Credit (and any related confirming Letter of Credit) is
not replaced prior to such expiration date by a letter of credit (which may include a confirming
letter of credit) which satisfies the requirements set forth in the definition of “Letter of Credit”
in the Fiscal Agent Agreement. The amount received pursuant to any draw on a Letter of
Credit under the Fiscal Agent Agreement shall in no way reduce or act as a credit in respect of
the amount of any Special Taxes that have been levied in the District. If a confirming letter of
credit has been provided with a Letter of Credit, the Fiscal Agent shall draw on the confirming
letter of credit as necessary to satisfy the foregoing requirements.
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The proceeds of any draw on a Letter of Credit described in the preceding paragraph
shall be held by the Fiscal Agent in a separate subaccount within the Reserve Fund created by
the Fiscal Agent for such purpose, to be (a) drawn upon by the Fiscal Agent and the proceeds of
such draw deposited by the Fiscal Agent to the Special Tax Fund, such draw to occur at the
written direction of the Treasurer prior to any Interest Payment Date to the effect that the
amount specified in such written direction to be drawn is in the amount of any delinquent
Special Taxes levied on the “parcels to which the Letter of Credit pertains” (as such phrase is
discussed in the Fiscal Agent Agreement), or (b) released or reduced at the written direction of
the Treasurer when the Letter of Credit to which such proceeds pertain would otherwise be
released or reduced under the Fiscal Agent Agreement (with any amount so reduced or
released to be sent by the Fiscal Agent to the account party with respect to the Letter of Credit
upon which the amounts so held were drawn).
The Fiscal Agent shall release, or reduce the amount available to be drawn on, a Letter
of Credit upon receipt of written direction from the Treasurer to the effect that (I)(x) the then
aggregate Parcel Value of the parcels in a planning area of the District identified in such written
direction (the “Identified Parcels”), for which Identified Parcels the applicable Letter of Credit
was provided, is at least three times the Parcel Liens, and (I)(y) the conditions precedent to the
issuance of building permits for all of the Identified Parcels (as such conditions precedent are
set forth in the Preannexation and Development Agreement, dated as of December 17, 2002, by
and between the City and Ashby USA, LLC, as amended and then in effect (the “Development
Agreement”)) have been satisfied; or (II) the amount of the Letter of Credit may be reduced to
$0.00 under the provisions of the Fiscal Agent Agreement; or (III) the Identified Parcels are
subject to less than 10% of the expected annual Special Tax levy in the District (assuming BuildOut). The Treasurer shall review appraisals (or updates to prior appraisals) submitted to the
Treasurer by or on behalf of an Account Party that are conducted by an appraiser and in a form
acceptable to the Treasurer, to determine if any Letter of Credit is to be released or reduced
pursuant to the Fiscal Agent Agreement and, if so, shall so advise the Fiscal Agent in writing.
Promptly following receipt of written direction from the Treasurer as to a Letter of Credit, the
Fiscal Agent shall complete and deliver to the applicable Letter of Credit provider the
appropriate certificates and annexes to the subject Letter of Credit to effectuate the release or
reduction of such Letter of Credit. In connection with any such reduction, the amount available
to be drawn on the applicable Letter of Credit shall be reduced to an amount equal to two times
the expected annual Special Taxes that may be levied on the “parcels to which the Letter of
Credit pertains” (as such phrase is discussed in the Fiscal Agent Agreement) assuming BuildOut of such parcels, other than the Identified Parcels specified in the written direction of the
Treasurer described above (however, in any event, the Letter of Credit shall be released if the
conditions referenced in clause (III) of the first sentence of the Fiscal Agent Agreement have
been satisfied).
The Fiscal Agent shall reduce or acknowledge reduction of the amount of any Letter of
Credit held by it upon receipt by the Fiscal Agent of:
(a) a Letter of Credit which satisfies the requirements set forth in the definition
of “Letter of Credit” in the Fiscal Agent Agreement in substitution or replacement for all
or a portion of the amount available to be drawn under any Letter of Credit then held by
the Fiscal Agent, accompanied by a written statement of the provider of or account
party under such new Letter of Credit as to the parcels and the outstanding Letter of
Credit to which the new Letter of Credit pertains, and then the amount under the then
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applicable outstanding Letter of Credit may be reduced by the amount available to be
drawn under the new Letter of Credit; or
(b) from time to time, but not more than once every six months (commencing no
sooner than six months after the Closing Date), an Account Party may present evidence
to the Treasurer as to the expected annual Special Taxes that may be levied on parcels in
the District to which the Letter of Credit pertains, assuming Build-Out (the “Maximum
Amount”). If the Maximum Amount, multiplied by two (herein, the “Revised Stated
Amount”), is less than the current stated amount of the applicable Letter of Credit, then
the Treasurer shall provide written direction to the Fiscal Agent to reduce the applicable
Letter of Credit by the difference between the current stated amount of the Letter of
Credit and the Revised Stated Amount of the Letter of Credit. Promptly following
receipt of such written direction from the Treasurer, the Fiscal Agent shall complete and
deliver to the applicable Letter of Credit provider the appropriate certificates and
annexes to the subject Letter of Credit to effectuate the reduction of the stated amount of
such Letter of Credit. Notwithstanding the foregoing, a Letter of Credit shall not be
reduced if the reason for the reduction is the sale of property to an owner (I) that will
own, together with its affiliates, property responsible for 10% or more of the expected
annual Special Taxes that may be levied on such parcels in the District (assuming BuildOut), and (II) that will own land in a planning area and either (x) the then Parcel Value
of such land is less than three times the Parcel Liens for such land, or (y) there are
conditions precedent to the issuance of building permits for all lots to be developed in
such planning area, as such conditions are set forth in the Development Agreement (as
such term is defined in clause (I)(y) in the preceding paragraph); unless the Account
Party provides evidence that the new owner has posted its own Letter of Credit
securing the payment of Special Taxes to be levied on such property.
The Fiscal Agent shall, on or each January 1, April 1, July 1 and October 1, ascertain,
with respect to each Letter of Credit then held by the Fiscal Agent, the then rating of each Letter
of Credit provider’s (or, if a confirming letter of credit has been provided with a Letter of
Credit, that the confirming letter of credit provider’s) unsecured debt obligations, in connection
with the administration of the Fiscal Agent Agreement.
In calculating the Maximum Amount described in the Fiscal Agent Agreement, and for
purposes of such clause as used in the Fiscal Agent Agreement, the term “parcels in the District
to which the Letter of Credit pertains” shall mean the parcels in the District which were initially
identified by the applicable Account Party as being the subject of the respective Letter of Credit
less any parcels that are, at the time of calculation, (a) owned by a party unaffiliated with the
applicable Account Party, so long as the maximum Special Taxes levied on such parcels
(assuming Build-Out) is less than 10% of the District-wide Maximum Special Taxes, (b) in a
planning area whose Parcel Value is more than three times the Parcel Liens, and are not subject
to conditions precedent to the issuance of building permits which conditions apply to all lots to
be developed in the planning area in which the parcels are located, as such conditions are set
forth in the Development Agreement (as such term is defined in clause (I)(y) in the third
preceding paragraph), (c) subject to a separate Letter of Credit, or (d) owned by individual
homeowners.
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Parity Bonds
The Authority may issue one or more series of Bonds, in addition to the 2006 Bonds, 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 other 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 Reserve Fund in an amount necessary so that the amount on
deposit therein, following the issuance of such Parity Bonds, is equal to the Reserve
Requirement.
(D) The District Value shall be at least three times the sum of: (i) the aggregate
principal amount of all Bonds then Outstanding, 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 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.
(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, 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 the Bonds and the proposed Parity Bonds, and (ii)
the Assigned Special Tax that may be levied on Developed Property (as such term is
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defined in the Rate and Method of Apportionment of Special Taxes for the District) in
the next Fiscal Year, based upon the status of the land in the District as of the date of
issuance of the Parity Bonds, shall not be less than the aggregate maximum Annual
Debt Service on the Bonds (to remain Outstanding following the issuance of the Parity
Bonds) and the proposed Parity Bonds.
(F) Unless all of the conditions to the release of any Letter of Credit set forth in
the Fiscal Agent Agreement have theretofore been satisfied, or the Letters of Credit have
all been reduced to $0.00 pursuant to the provisions of the Fiscal Agent Agreement,
there shall be delivered to the Fiscal Agent an amendment to each Letter of Credit then
held by the Fiscal Agent to increase the amount available to be drawn under each such
Letter of Credit to reflect the expected increase in the Special Taxes that will need to be
levied on the parcels to which each Letter of Credit pertains to pay the debt service on
the Parity Bonds, as determined by the Treasurer upon consultation with the Tax
Consultant. In the event that any Letter of Credit has theretofore been drawn upon
pursuant to the Fiscal Agent Agreement, there shall be deposited with the Fiscal Agent
monies in an amount equal to the otherwise amount that the corresponding Letter of
Credit would need to be increased pursuant to the preceding sentence, and the funds so
deposited shall be disposed of in the same manner as the proceeds of the draw on the
Letter of Credit under the Fiscal Agent Agreement.
(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, if applicable, (F) above 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.
Notwithstanding the foregoing, the Authority may issue Refunding Bonds as Parity
Bonds without the need to satisfy the requirements of clauses (D), (E) and (F) above, and
without limitation on the number of series of such Refunding Bonds; and, in connection
therewith, the Officer’s Certificate in clause (G) above need not make reference to said clauses
(D), (E) and (F).
Nothing in the Fiscal Agent Agreement prohibits the Authority from issuing bonds or
otherwise incurring debt secured by a pledge of Special Tax Revenues subordinate to the
pledge thereof 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 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 and the Capitalized Interest
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Account therein), the Reserve Fund 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 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 must be made of all transactions relating to the expenditure of amounts disbursed from
the Bond Fund (including Special Tax Prepayments Account and the Capitalized Interest
Account therein), the Special Tax Fund, the Reserve Fund, the Refunding Fund, the
Improvement Fund (including the accounts therein) and the Costs of Issuance Fund. Such
books of record and accounts must 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 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.
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 is required
provide the Treasurer with a notice stating the amount then on deposit in the Bond Fund, the
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Capitalized Interest Account and 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 Expenses and replenishment (if necessary)
of the Reserve Fund so that the balances therein equal the Reserve Requirement. 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 Reserve Fund for the Bonds 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. 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
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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 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 amount in the
Reserve Fund is at least equal to the Reserve Requirement. If the Treasurer determines that (i)
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, or (ii) there are ten (10) or fewer owners
of real property within the District, determined by reference to the latest available secured
property tax roll of the County, 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 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 2006 Bonds are not so used as to
cause the 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 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 2006 Bonds.
If necessary, the Authority may use amounts in the Reserve Fund, 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 under the Fiscal Agent Agreement in excess of the yield on the 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 2006 Bonds which, if such action had
been reasonably expected to have been taken, or had been deliberately and intentionally taken,
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on the date of issuance of the 2006 Bonds would have caused the 2006 Bonds to be “arbitrage
bonds” within the meaning of section 148 of the Code.
In determining the yield of the 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 2006 Bonds redeemed.
The Authority shall take all actions necessary to assure the exclusion of interest on the
2006 Bonds from the gross income of the Owners of the 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 2006 Bonds.
The Authority 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 under the Fiscal Agent Agreement; 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.
One or more owners of real property in the District as of the Closing Date have also
executed continuing disclosure agreements for the benefit of the holders and beneficial owners
of the Bonds. Any Participating Underwriter or holder or beneficial owner may take such
actions as may be necessary and appropriate directly against any such landowner to compel
performance by it of its obligations thereunder, including seeking mandate or specific
performance by court order; however the Authority shall have no obligation whatsoever to
enforce any obligations under any such agreement.
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.
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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 Fiscal Agent Agreement.
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.
Except as otherwise provided in 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, 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
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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 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.
Liability of Authority
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 therein or in
the Bonds assigned to or imposed upon it. The Authority 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 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 of 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 under the Fiscal Agent
Agreement, 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 under the Fiscal Agent Agreement 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 under the Fiscal Agent Agreement, such
matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the
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absence of willful misconduct on the part of the Authority, be deemed to be conclusively
proved and 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 under the Fiscal Agent Agreement, 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
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 company resulting from any merger, conversion or consolidation to
which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or
substantially all of its corporate trust business, provided such company shall be eligible under
the following paragraph, 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 Fifty Million Dollars ($50,000,000), 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.
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 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
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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.
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
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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 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.
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.
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 Agreement
pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a
meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the
Bonds then Outstanding, exclusive of Bonds disqualified as provided in the Fiscal Agent
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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
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
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
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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 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.
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.
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APPENDIX F
FORM OF AUTHORITY CONTINUING DISCLOSURE AGREEMENT
This CONTINUING DISCLOSURE AGREEMENT (the “Disclosure Agreement”) is executed and
entered into as of March 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. 03-02 (the “District”);
WITNESSETH:
WHEREAS, pursuant to the Fiscal Agent Agreement, dated as of March 1, 2006 (the “Fiscal Agent
Agreement”), by and between the Authority, for and on behalf of the District, and the Fiscal Agent, the
Authority has issued its 2006 Special Tax Bonds in the aggregate principal amount of $51,250,000 (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 April 13, 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). 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” approvedby the Securities and Exchange Commission.
For example, any filings under this 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.
(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
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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.
(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:
(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.
(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 balance in the Reserve Fund, if any, and a statement of the Reserve
Requirement as of the September 30 next preceding 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, and a 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
delinquenciesdeemed appropriate bythe District; provided,however, that
parcels with aggregate delinquencies of $5,000 or less (excluding
penalties andinterest) 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 levywho 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; and
(ix)
If the Authority or the City establishes a community facilities district
overlapping all or a portion of the District, the principal amount of bonds
authorized for such community facilities district, the percentage of such
bonds supported by special taxes on property within the District, and the
amount of bonds issued by such community facilities 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.
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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.
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
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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 Eventsdescribed underclauses (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 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 each
Repository or the Municipal Securities Rulemaking Board and each State Repository and shall provide a
copy of such notice to the Participating Underwriter. 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 of the 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
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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 undertakings herein, as proposed to be amended or waived, 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
(c)
the proposed amendment or waiver either (i) is approved by owners of 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
Outstanding Bonds, shall, upon receipt of indemnification reasonably satisfactory to the Fiscal Agent), or
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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
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 2006 Bonds 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 andowners 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,
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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:
43200 Business Park Drive
Temecula, California 92590
Attention: Director of Finance
Telephone: 951/694-6430
Telecopier: 951/694-6479
If to the Community
Facilities District:
Attention: Director of Finance
Telephone: 951/694-6430
If to the
Dissemination
Agent:
633 West Fifth Street, 24th Floor
LM-CA-T24T
Los Angeles, California 90071
Telephone: 213/615-6030
If to the
Fiscal Agent:
LM-CA-T24T
Telephone: 213/615-6030
If to the
Participating
Underwriter:
Stone & Youngberg LLC
One Ferry Building
San Francisco, California 94111
Telephone: 415/445-2300
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.
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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
Purchase Agreement shall be governed by the laws of the State of California.
Section16. 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.
Section 17. 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.
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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. 03-02 (RORIPAUGH
RANCH)
By: ______________________________________
Authorized Officer
U.S. BANK NATIONAL ASSOCIATION,
as Fiscal Agent
By: ______________________________________
Authorized Officer
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
FinancingAuthority Community Facilities District No.03-02 (Roripaugh Ranch)
Name of Bond Issue:
2006 Special Tax Bonds
Date of Issuance:
April 27, 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 March 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: ________, ____
U.S. BANK NATIONAL ASSOCIATION, as
Fiscal Agent, on behalf of the Temecula Public
Financing Authority
_______________________________________
Authorized Officer
cc: Temecula Public Financing Authority
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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):
$51,250,000
(RORIPAUGH RANCH)
Provide nine-digit CUSIP® numbers* if available, to which the information relates:
(Maturity)
2007
2008
2009
2010
2011
2012
87972YBV7
87972YBW5
87972YBX3
87972YBY1
87972YBZ8
87972YCA2
(Maturity)
2013
2014
2015
2016
2026
2036
87972YCB0
87972YCC8
87972YCD6
87972YCE4
87972YCM6
87972YCN4
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 Name (please include name of state where Issuer is located): _____________________________________________
Other Obligated Person’s Name (if any): ___________________________________________________________________
(Exactly as it appears on the Official Statement Cover)
Provide six-digit CUSIP® number(s)*, if available, of Issuer: ___________________________________________________
*(Contact CUSIP® ’s Municipal Disclosure Assistance Line at 212.438.6518 for assistance with obtaining the proper CUSIP ® numbers.)
TYPE OF FILING:
a Electronic (number of pages attached)___________________ a Paper (number of pages attached) _________________
If information is also available on the Internet, give URL: _____________________________________________________
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WHAT TYPE OF INFORMATION ARE YOU PROVIDING? (Check all that apply)
A. a Annual Financial Information and Operating Data pursuant to Rule 15c2-12
(Financial information and operating data should not be filed with the MSRB.)
Fiscal Period Covered: _____________________________________________________________________________
B. a Audited Financial Statements or CAFR pursuant to Rule 15c2-12
Fiscal Period Covered: _____________________________________________________________________________
C. a Notice of a Material Event pursuant to Rule 15c2-12 (Check as appropriate)
1.
a Principal and interest payment delinquencies
6.
a Adverse tax opinions or events affecting the taxexempt status of the security
2.
a Non-payment related defaults
7.
a Modifications to the rights of security holders
3.
a Unscheduled draws on debt service reserves reflecting
financial difficulties
8.
a Bond calls
4.
a Unscheduled draws on credit enhancements reflecting
financial difficulties
9.
a Defeasances
5.
a Substitution of credit or liquidity providers, or their
failure to perform
10.
a Release, substitution, or sale of property securing
repayment of the securities
11.
a Rating changes
D. a Notice of Failure to Provide Annual Financial Information as Required
E. a Other Secondary Market 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 _____________ State _____ Zip Code_____________
Telephone___________________________________________ Fax ____________________________________________
Email Address _______________________________________ Issuer Web Site Address ____________________________
Dissemination Agent Contact, if any:
Name ______________________________________________ Title ____________________________________________
Employer ___________________________________________________________________________________________
Telephone___________________________________________ Fax ____________________________________________
Email Address _______________________________________ Relationship to Issuer_______________________________
Obligor Contact, if any:
Name ______________________________________________ Title ____________________________________________
Employer ___________________________________________________________________________________________
Telephone___________________________________________ Fax ____________________________________________
Email Address _______________________________________ Obligor Web site Address ___________________________
Investor Relations Contact, if any:
Name ______________________________________________ Title ____________________________________________
Telephone_________________________________________ Email Address ____________________________________
F-14
APPENDIX G
FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT
A separate DeveloperContinuing DisclosureAgreement will be provided by (i) AshbyUSA, LLC and
(ii) Tanamera/Roripaugh, LLC; Tanamera/Roripaugh II, LLC and Traditions at Roripaugh, LLC.
Continental Residential, Inc., Davidson Roripaugh Ranch 122, LLC and KB Home Coastal, Inc. are not
considered a Major Developer (as defined below) and will not be subject to a Continuing Disclosure
Agreement.
This DEVELOPER CONTINUING DISCLOSURE AGREEMENT (this “Disclosure Agreement”)
is executed and entered into as of March 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,
as Dissemination Agent (the “Dissemination Agent”) and as Fiscal Agent (the “Fiscal Agent”), and [Ashby
USA, LLC, a California limited liability company (“Ashby USA, LLC”)]/[Tanamera/Roripaugh, LLC,
Tanamera/Roripaugh II, LLC andTraditions at Roripaugh, LLC, each a California limited liability company
(“Tanamera/Roripaugh, LLC,” “Tanamera/Roripaugh II, LLC” and “Traditions at Roripaugh, LLC,”
respectively, and together, the “Tanamera/Roripaugh Entities”). The parties hereto may be referred to in
some instances as a party (“Party”);
WITNESSETH:
WHEREAS, pursuant to the Fiscal Agent Agreement, dated as of March 1, 2006 (the “Fiscal Agent
Agreement”), by and between the Temecula Public Financing Authority (the “Authority”), for and on behalf
of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch)
(the “District”), and the Fiscal Agent, the Authority has issued its 2006 Special Tax Bonds, in the aggregate
principal amount of $51,250,000 (the “2006 Bonds”);
WHEREAS, [Ashby USA, LLC]/[Tanamera/Roripaugh Entities] is the owner of property within
the District planned for development with residential, commercial, park, open space and infrastructure uses;
and
WHEREAS,this Disclosure Agreement is being executed and delivered by[Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] 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 complying with 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:
“Affiliate” ofanother Person means (a)a Person directlyor indirectly owning, controlling, or holding
with power to vote, 15% or more of the outstanding voting securities of such other Person, (b) any Person
15% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with
power to vote, by such other Person, and (c) any Person directly or indirectly controlling, controlled by, or
under common control with, such other Person; for purposes hereof, “control” means the power to exercise
a controlling influence over the management or policies of a Person, unless such power is solely the result
of an official position with such Person. Notwithstanding the foregoing, none of the following entities shall
be considered to be an “Affiliate” of Ashby USA, LLC: Continental Residential, Inc., Davidson Roripaugh
Ranch 122, LLC, Tanamera/Roripaugh, LLC, Tanamera/Roripaugh II, LLC, Traditions at Roripaugh, LLC
and KB Home Coastal Inc.
“Assumption Agreement” means an agreement between a Major Developer, or an Affiliate thereof,
the Fiscal Agent and the Dissemination Agent containing terms substantially similar to this Disclosure
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Agreement, whereby such Major Developer or Affiliate agrees to provide Semi-Annual Reports and notices
of significant events with respect to the portion of the Property owned by such Major Developer and its
Affiliates.
“Bond Counsel” means an attorney or a firm of attorneys whose experience in matters relatingto the
issuance of obligations by the states and their political subdivisions and the tax-exempt status of the interest
thereon is recognized nationally.
“Development Plan” means, with respect to a Major Developer, the specific improvements such
Major Developer intends to make, or cause to be made, to such Major Developer’s Propertyin order for such
Property to enable production units or commercial property within the Property to be completed and sold to
third parties, the time frame in which such improvements are intended to be made and the estimated costs
of such improvements; [Ashby USA, LLC’s]/[Tanamera/Roripaugh Entities’] Development Plan, as of the
date hereof, is described in the Official Statement under the caption “PROPERTY OWNERSHIP AND
DEVELOPMENT – [Ashby USA, LLC]/[The Tanamera/Roripaugh Entities].”
“Dissemination Agent” means the Fiscal Agent, acting in its capacity as Dissemination Agent
hereunder, or any successor Dissemination Agent designated in writing by [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] and which has filed with the Fiscal Agent a written acceptance of such
designation.
“Event of Bankruptcy” means, with respect to a Person, that such Person files a petition or institutes
a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of
bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent,
or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be
adjudicated a bankrupt, or is to be discharged from any or all of such Person’s debts or obligations, or offers
to such Person’s creditors to effect a composition or extension of time to pay such Person’s debts or asks,
seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of such Person’s
debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar
kind or character is filed or instituted or taken against such Person and the same shall remain undismissed
for aperiod of 60 days, or if a receiver of the business or of the property or assets of such Person is appointed
by any court, or if such Person makes a general assignment for the benefit of such Person’s creditors.
“Financial Statements” means, with respect to a Major Developer, the full financial statements,
special purpose financial statements, project operating statements or other reports reflecting the financial
position of such Major Developer; provided that, if full financial statements, special purpose financial
statements, project operating statements or other reports reflecting the financial position are audited and
prepared in accordance with generally accepted accounting principles as in effect from time to time, then
Financial Statements shall include such audited financial statements or reports.
“Financing Plan” means, with respect to a Major Developer, the method by which such Major
Developer intends to finance its Development Plan, including specific sources of funding for such
Development Plan; [Ashby USA, LLC’s]/[the Tanamera/Roripaugh Entities’] Financing Plan, as of the date
hereof, is described in the Official Statement under the caption “PROPERTY OWNERSHIP AND
DEVELOPMENT – [Ashby USA, LLC]/[The Tanamera/Roripaugh Entities].”
“First Report Date” means March 31, of each year, commencing March 31, 2007.
“First Report Period” means with respect to a Report due on the First Report Date, the last six
months of the fiscal year just ended.
“Listed Events” means any of the events listed in Section 4(a) hereof.
“Major Developer” means any Property Owner, including [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities], that owns any portion of the Property within the District, for which
production units are not completed and sold to third parties, for which the Property owned by such Property
Owner together with Property owned by Affiliates of such Property Owner, is subject to 15% or more of the
Special Tax levy of the District for the then current Fiscal Year of the District; provided, however, that the
G-2
term shall not include any Property Owner that would otherwise qualify as a Major Developer if such
Property Owner has assumed the obligations hereunder pursuant to Section 5.
“National Repository” means any Nationally Recognized Municipal Securities Information
Repository for purposes of the Rule. The Nationally Recognized Municipal Securities Information
Repositories for purposes of the Rule are identified in the Securities and Exchange Commission website
located at sec.gov/info/municipal/nrmsir.htm.
“Official Statement” means the Official Statement, dated April 13, 2006, relating to the 2006 Bonds.
“Participating Underwriter” means Stone & Youngberg LLC.
“Person” means an individual, a corporation, a partnership, a limited liability company, an
association, a joint stock company, a trust, any unincorporated organization or a government or political
subdivision thereof.
“Property” means the real property within the boundaries of the District owned on the date of the
Official Statement by [Ashby USA, LLC] / [the Tanamera/Roripaugh Entities] and that is not exempt from
the Special Taxes.
“Property Owner” means any Person that owns a fee interest in any Property.
“Report Dates” means, collectively, the First Report Dates and the Second Report Dates.
“Report Period” means, with respect to a Report due on the First Report Date, the last six months
of the calendar year just ended, and with respect to a Report due on the Second Report Date, the first six
months of the then current calendar year.
“Repository” means each National Repository and each State Repository.
“Rule” means 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.
“Second Report Date” means September 30 of each year, commencing September 30, 2006.
“Second Report Period” means with respect to a Report due on the Second Report Date, the first six
months of the current calendar year.
“Semi-Annual Report” means any Semi-Annual Report provided by [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] pursuant to, and as described in, Sections 2 and 3 hereof.
“State Repository” means 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 Semi-Annual Reports. (a) So long as [Ashby USA, LLC’s]/[the
Tanamera/Roripaugh Entities’] obligations hereunder have not been terminated pursuant to Section 6, (i)
[AshbyUSA, LLC]/[Tanamera/RoripaughEntities] shallprepare a Semi-Annual Reportnot later than March
31 and September 30 of each year, and (ii) not later than April 15 and October 15 (15 days after the Report
Date) [Ashby USA, LLC]/[Tanamera/Roripaugh Entities] shall, or, upon receipt of the Semi-Annual Report
by the Dissemination Agent, the Dissemination Agent shall, provide to each Repository, the Authority, the
Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent), the District and the Participating
Underwriter a Semi-Annual Report which is consistent with the requirements of Section 3 of this Disclosure
Agreement, commencing with the first Semi-Annual Report Date to occur September 30, 2006. The SemiAnnual 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 hereof; provided, however, that the
audited financial statements of [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] may be submitted
separately from the balance of the Semi-Annual Report that is to be provided no later than the First Report
G-3
Date, and later than the date requiredabove for the filing of such Semi-Annual Report if not available by that
date. The Semi-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 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.
(b)
If by April 15 or October 15 (15 days after a Report Date), the Fiscal Agent has not received
a copy of the Semi-Annual Report, the Fiscal Agent shall notify [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] and the Dissemination Agent of such failure to receive the Semi-Annual
Report. [Ashby USA, LLC]/[The Tanamera/Roripaugh Entities] shall provide a written certification with,
or as part of, each Semi-Annual Report furnished to the Fiscal Agent to the effect that such Semi-Annual
Report constitutes the Semi-Annual Report required to be furnished by it hereunder. The Fiscal Agent and
Dissemination Agent may conclusively rely upon such certification of [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] and shall have no duty or obligation to review such Semi-Annual Report.
(c)
If the Fiscal Agent is unable to verify that a Semi-Annual Report has been provided to the
Repositories by the date required in subsection (a), the Fiscal Agent shall send a notice to the Municipal
Securities Rulemaking Board, the appropriate State Repository, if any, the Fiscal Agent and the Participating
Underwriter in substantially the form attached as Exhibit A.
(d)
The Dissemination Agent shall:
(i)
determine prior to each Report Date the name and address of each National
Repository and each State Repository, if any;
(ii)
herein; and
provide any Semi-Annual Report received by it to each Repository, as provided
(iii)
with respect to each Semi-Annual Report received by it and provided by it to each
Repository,file a report with the Authority, [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities],
the Fiscal Agent (if the Dissemination Agent is not the Fiscal Agent) and each Participating
Underwriter certifying that the Semi-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.
Section3. Content of Semi-Annual Reports. [Ashby USA, LLC’s]/[Tanamera/Roripaugh Entities’]
Semi-Annual Report shall contain or incorporate by reference the following:
(a)
With respect only to the Semi-Annual Report that is required to be provided no later than
each First Report Date, such Semi-Annual Report shall contain Financial Statements for each Major
Developer (other than any Major Developer with respect to which [Ashby USA, LLC’s]/[the
Tanamera/Roripaugh Entities’] obligations hereunder have been assumed in accordance with Section 5 or
terminated in accordance with Section 6 hereof). If audited Financial Statements are required to be provided,
and such audited Financial Statements are not available by the time such Semi-Annual Report is required to
be filed pursuant to Section 2(a) hereof, such Semi-Annual Report shall contain unaudited Financial
Statements, and the audited Financial Statements shall be filed as a supplement or amendment to the SemiAnnual Report when they become available. Such Financial Statements shall be for the most recently ended
fiscal year for the entity covered thereby. The Semi-Annual Report shall contain the following caveat about
all Financial Statements delivered as a part of the Semi-Annual Report:
“The Financial Statements of [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities]
included with, or referred to in, the Semi-Annual Report are for informational purposes
only. In the event of a failure to pay any installment of Special Taxes, and after depletion
of the Reserve Funds, the real property in Community Facilities District No. 03-02 is the
sole security for the 2006 Bonds. The obligation of [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] to pay unpaid Special Tax installments does not constitute
a personal indebtedness of [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] or any
G-4
member, parent, subsidiary, or person or entity controlling or controlled by the Developer
(each an “Affiliate”) for which the funds or assets (other than the property in Community
Facilities District No. 03-02 that is delinquent) of [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] or any Affiliate may be required, by operation of law or
otherwise, to be used to pay debt service on the 2006 Bonds. It should not be inferred from
the inclusion of the Financial Statements in the Semi-Annual Report of [Ashby USA,
LLC]/[the Tanamera/Roripaugh Entities] that the funds or assets of [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] or any Affiliate (other than the property in Community
Facilities District No 03-02) are available to cure any delinquencies in the payment of
Special Taxes.”
(b)
With respect to all Semi-Annual Reports, such Semi-Annual Reports shall contain the
following information with respect to each Major Developer (other than any Major Developer with respect
to which[Ashby USA, LLC’s]/[the Tanamera/Roripaugh Entities’] obligations hereunder have been assumed
in accordance with Section 5 or terminated in accordance with Section 6 hereof) for the First Report Period
or Second Report Period, as applicable; provided, that, if such information is required from [Ashby USA,
LLC]/[the Tanamera/Roripaugh Entities] as to another Major Developer which is not an Affiliate of [Ashby
USA, LLC]/[the Tanamera/Roripaugh Entities], [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] shall
only be required to provide such information that it has actual knowledge of:
(i)
If information regarding such Major Developer has not previously been included in
a Semi-Annual Report or in the Official Statement, the Development Plan of such Major Developer
or, if information regarding such Major Developer has previously been included in a Semi-Annual
Report or in the Official Statement, a description of the progress made in the Development Plan of
such Major Developer since the date of such information and a description of any material changes
in such Development Plan and the causes or rationale for such changes;
(ii)
If information regarding such Major Developer has not previously been included in
a Semi-Annual Report or in the Official Statement, the Financing Plan of such Major Developer or,
if information regarding such Major Developer has previously been included in a Semi-Annual
Report or in the Official Statement, a description of any material changes in the Financing Plan of
such Major Developer and the causes or rationale for such changes;
(iii)
Adescription or update of the status of tentative and final maps recorded within the
District relating to Property owned by such Major Developer;
(iv)
The number of building permits issued with respect to any of such Major
Developer’s Property during the six-month period ending on the last day of the applicable Report
Period as well as the number of building permits issued with respect to such Major Developer’s
Property included in each previous Semi-Annual Report, set forth opposite such previous reporting
period;
(v)
A description of how many residential lots and acres and how many commercial
acres of Property were owned by such Major Developer as of the end of the Report Period covered
by such Semi-Annual Report, and how many residential lots and acres and how many commercial
acres of such Major Developer’s Property (i) with respect to residential or commercial uses, have
production units or commercial buildings completed and sold to third parties, (ii) with respect to the
Major Developer’s Property planned for park/open space uses, have been developed with a park or
designated as open space on a final residential tract map and (iii) with respect to the Major
Developer’s Property planned for infrastructure use, have the infrastructure planned for such
property been constructed during the applicable Report Period, and how many acres of such Major
Developer’sProperty had notreached such level of development described in clauses (i), (ii) and (iii)
above;
(vi)
A description of any sales (including pending sales for which a non-refundable
deposit equal to or in excess of $50,000 has been made) of portions of such Major Developer’s
Property during the applicable Report Period, including the identification of each buyer (other than
individual home buyers) and the number of residential lots and commercial or other acres sold;
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provided, however, that sales of five or fewer commercial or other acres may be aggregated for the
purpose of such description;
(vii)
Astatement as to whether or not such Major Developer and all of its Affiliates paid,
prior to their becoming delinquent, all Special Taxes, property taxes, assessments and special taxes
levied on the Property owned by such Major Developer and such Affiliates that would have been
delinquent had they not been paid by the preceding December 10 or April 10, respectively, and if
such Major Developer or any of such Affiliates is delinquent in the payment of such Special Taxes,
property taxes, assessments or special taxes levied on the Property owned by such Major Developer
and its Affiliates, a statement identifying each parcel that is so delinquent, specifying the amount of
each such delinquency and describing any plans to resolve such delinquency;
(viii) An update of the status of any previously reported Listed Event described in
Section 4 hereof and information regarding Listed Events, if any, required to be reported pursuant
to Section 4 hereof;
(ix)
Unless disclosed in the Official Statement or a prior Semi-Annual Report, any
material change in the legal structure or organization of a Major Developer;
(x)
The filing and service of process on such Major Developer of a lawsuit against such
Major Developer seeking damages, or a judgment in a lawsuit against the Major Developer, either
of which could have a significant impact on the Major Developer’s ability to pay Special Taxes or
to sell or develop all or any portion of the Major Developer’s Property;
(xi)
If applicable, a statement that a Property Owner no longer meets the definition of
Major Developer, which statement shall be provided in the manner required for Semi-Annual
Reports by the next succeeding date on which a Semi-Annual Report would have been filed unless
such fact has previously been reported under this Section 3 or Section 4; and
(xii)
Information regarding the letter of credit provided
_________________. Describe Letter of Credit(s) provided, if applicable].
with respect to
(c)
Inaddition to anyof the information expressly required to be provided under paragraphs (a)
and (b) of this Section, [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] shall provide such further
information, if any, as may be necessary to make the specifically required statements, in the light of the
circumstances under which they are made, not misleading.
Major Developers that are Affiliates of each other may, but are not required to, file a single SemiAnnual Report covering all such entities. Any or all of the items listed above may be included by specific
reference to other documents 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
availablefrom the Municipal Securities Rulemaking Board. [Ashby USA, LLC]/[The Tanamera/Roripaugh
Entities] shall clearly identify each such other document so included by reference. If a Property Owner
which was a Major Developer no longer meets the definition of Major Developer, no Semi-Annual Report
shall be required to be filed by or with respect to such Property Owner under this Section 3; provided,
however, that notice that the Property Owner does not meet the definition of Major Developer shall be
provided in the manner required for Semi-Annual Reports by the next succeeding date on which a SemiAnnual Report would have been filed unless such fact has previously been reported under Section 3 or
Section 4.
Section 4. Reporting of Listed Events. (a) Pursuant to the provisions of this Section 4, [Ashby
USA, LLC]/[the Tanamera/Roripaugh Entities] shall promptly give, or cause to be given notice of the
occurrence of any of the following events with respect to each Major Developer (other than any Major
Developer with respect to which [Ashby USA, LLC’s]/[the Tanamera/Roripaugh Entities’] obligations
hereunder have been assumed in accordance with Section 5 or terminated in accordance with Section 6
hereof); provided, however, that, if such information is required from [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] as to another Major Developer which is not an Affiliate of [Ashby USA,
G-6
LLC]/[the Tanamera/Roripaugh Entities], [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] shall only
be required to provide such information that it has actual knowledge of:
(i)
Unless disclosed in the Official Statement or a prior Semi-Annual Report, any
conveyance by such Major Developer of any of its Property to an entity that is not an Affiliate of
such Major Developer, the result of which conveyance is to cause the transferee to become a Major
Developer. In addition, if the transferee has assumed any obligations of the Developer under this
Disclosure Agreement pursuant to Section 5 hereof, a copy of the executed Assumption Agreement
shall be attached to the Notice;
(ii)
Any failure of such Major Developer, or any Affiliate of such Major Developer, to,
in the reasonable judgment of such Major Developer, pay prior to delinquency general property
taxes, special taxes or assessments with respect to its Property;
(iii)
Any denial or termination of credit, any denial or termination of, or default under,
any line of credit or loan or any other loss of a source of funds expected to be used for the Project
that would have a material adverse affect on such Major Developer’s most recently disclosed
Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of
such Major Developer, to pay Special Taxes within the District prior to delinquency;
(iv)
The occurrence of an Event of Bankruptcy with respect to such Major Developer,
or anyAffiliate of such Major Developer, that, in the reasonable judgment of such Major Developer,
would have a material adverse affect on such Major Developer’s most recently disclosed Financing
Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major
Developer that owns any portion of the Property, to pay Special Taxes within the District prior to
delinquency;
(v)
Any significant amendments to land use entitlement approvals for such Major
Developer’s Property, if such amendments, in the reasonable judgment of such Major Developer,
would prevent or significantly delay the implementation of such Major Developer’s Development
Plan as described in the Official Statement or in any previous Semi-Annual Report;
(vi)
Any previously undisclosed governmentally-imposed preconditions to
commencement or continuation of development on such Major Developer’s Property, if such
preconditions, in the reasonable judgment of such Major Developer, would prevent or significantly
delay such Major Developer’s Development Plan as described in the Official Statement or in any
previous Semi-Annual Report;
(vii)
Any previously undisclosed legislative, administrative or judicial challenges to
development on such Major Developer’s Property, if such challenges, in the reasonable judgment
ofsuch Major Developer, would prevent or significantly delaysuch Major Developer’s Development
Plan as described in the Official Statement or in any previous Semi-Annual Report;
(viii) Anychanges, in the reasonable judgment of such Major Developer, in the alignment,
design or likelihood of completion of significant public improvements affecting such Major
Developer’sProperty, including major thoroughfares, sewers, water conveyance systems and similar
facilities that, in the reasonable judgment of such Major Developer, would prevent or significantly
delay such Major Developer’s Development Plan as described in the Official Statement or any
previous Semi-Annual Report;
(ix)
The filing of any lawsuit against a Major Developer which, in the reasonable
judgment of such Major Developer, will adversely affect the completion of the development of
Property owned by such Major Developer, or litigation which if decided against the Major
Developer, in the reasonable judgment of the Major Developer, would materially adversely affect
the financial condition of the Major Developer; or
(x)
Any previously undisclosed information relating to endangered species, hazardous
substances or archaeological resources, which could have a significant impact on the Major
G-7
Developer’s ability to pay Special Taxes or to sell or develop all or any portion of the Major
Developer’s Property.
(b)
Whenever[Ashby USA, LLC obtains]/[the Tanamera/Roripaugh Entities obtain knowledge
of the occurrence of a Listed Event, [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] shall promptly
notify the Dissemination Agent, the Fiscal Agent, the Participating Underwriter and the District in writing.
The Fiscal Agent shall report the occurrence pursuant to subsection (c) below. [Ashby USA, LLC]/[The
Tanamera/Roripaugh Entities] 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.
(c)
If the Fiscal Agent has received notice of a Listed Event, the Fiscal Agent shall file a notice
of such occurrence with each Repository or the Municipal Securities Rulemaking Board and each State
Repository and shallprovide a copy of such notice to each Participating Underwriter, to the Fiscal Agent and
to the District. A form of information cover sheet for municipal secondary market disclosure recommended
by the Municipal Securities Rulemaking Board is attached as Exhibit B.
Section 5. Assumption of Obligations. If any portion of the Property owned by [Ashby USA,
LLC]/[the Tanamera/Roripaugh Entities], or any Affiliate of [Ashby USA, LLC]/[the Tanamera/Roripaugh
Entities], is conveyed to a Person such that, upon such conveyance, such Person will be a Major Developer,
all of the obligations of [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] hereunder with respect to
the Property owned by such Major Developer and its Affiliates shall be assumed by such Major Developer
or by an Affiliate. In order to effect such assumption, such Major Developer or Affiliate thereof shall enter
into an Assumption Agreement. A copy of the Assumption Agreement shall be provided to the Participating
Underwriter and to the Dissemination Agent, the Fiscal Agent and the District as set forth in Section 4(a)(i)
in the mannerprovided in Section 4(b) and 4(c). Property sold in numerous takedowns to a Major Developer
may be the subject ofa single Assumption Agreement that will automatically include anyadditional property
purchased by such Major Developer. Notwithstanding the foregoing, there shall be no requirement that a
transferee enter into an Assumption Agreement provided that such transferee is an Affiliate of [Ashby USA,
LLC]/[the Tanamera/Roripaugh Entities] pursuant to the Option Agreements (as defined in the Official
Statement), as such agreements may be amended.
Section 6. Termination of Reporting Obligation. [Ashby USA, LLC’s]/[The Tanamera/Roripaugh
Entities’] obligations under this Disclosure Agreement with respect to a Major Developer shall terminate
upon the earliest to occur of (a) the date on which such Major Developer is no longer a Major Developer,
as defined herein, (b) the date on which [Ashby USA, LLC’s]/[the Tanamera/Roripaugh Entities’]
obligations with respect to such Major Developer are assumed under an Assumption Agreement entered into
pursuant to Section 5 hereof, or (c) the date on which all Special Taxes levied on any Property owned by
such Major Developer and its Affiliates are paid or prepaid in full; provided, however, that upon the
occurrence of any of the events described in clause (a) through (c) with respect to a Major Developer, [Ashby
USA, LLC’s]/[the Tanamera/Roripaugh Entities’] obligations hereunder with respect to each other Major
Developer, if any, not previously terminated shall remain in full force and effect. All of [Ashby USA,
LLC’s]/[the Tanamera/Roripaugh Entities’] obligations under this Disclosure Agreement shall terminate,
except as provided in Section 11 hereof, upon the earliest to occur of (x) the date on which no Property
Owner is a Major Developer, (y) the date on which (i) [Ashby USA, LLC]/[the Tanamera/Roripaugh
Entities] is no longer a Major Developer, and (ii) [Ashby USA, LLC is]/[the Tanamera/Roripaugh Entities
are] no longer [has/have] any obligations under this Disclosure Agreement with respect to any remaining
Property as a result of the sale of Property to owners who are not Major Developers or such obligations
having been assumed under one or more Assumption Agreements entered into pursuant to Section 5 hereof,
or (z) the date on which all of the 2006 Bonds have been legally defeased, redeemed, or paid in full. Upon
the occurrence of any such terminationprior to the final maturity of the 2006 Bonds, [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] shall give notice of such termination in the same manner as for a Listed Event
under Section 4 hereof.
Section 7. Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National
Association. [Ashby USA, LLC]/[The Tanamera/Roripaugh Entities] may, from time to time, appoint or
engage a Dissemination Agent to assist [it/them] in carrying out [its/their] obligations under this Disclosure
Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor
G-8
Dissemination Agent. [Ashby USA, LLC]/[The Tanamera/Roripaugh Entities] may serve as Dissemination
Agent. The Dissemination Agent may resign by providing thirty (30) days’ written notice to [Ashby USA,
LLC]/[the Tanamera/Roripaugh Entities], the Authority and the Fiscal Agent (if the Fiscal Agent is not the
Dissemination Agent), such resignation to become effective upon acceptance of the appointment by a
successor Dissemination Agent. Upon receiving notice of such resignation, [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] shall promptly appoint a successor Dissemination Agent by an instrument in
writing, delivered to the Fiscal Agent. If no appointment of a successor Dissemination Agent shall be made
pursuantto the foregoing provisions of this Section within forty-five(45) days after the Dissemination Agent
shall have given to [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities], the Authority and the Fiscal
Agent written notice of its resignation, the Dissemination Agent may apply to any court of competent
jurisdiction to appoint a successor Dissemination Agent. Said court may thereupon after such notice, if any,
as such court may deem proper, appoint a successor Dissemination Agent. The Authority shall provide
[Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] and the Fiscal Agent with written notice of the
identity of any successor Dissemination Agent appointed or engaged by [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities]. The Dissemination Agent shall have no duty to prepare the Semi-Annual
Report nor shall the Dissemination Agent be responsible for filing any Semi-Annual Report not provided to
it by [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] in a timely manner and in a form suitable for
filing. If the Dissemination Agent is other than the Fiscal Agent, the Dissemination Agent shall be paid
compensation by[Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] for its services provided hereunder
in accordance with the Dissemination Agent’s schedule of fees as amended from time to time, which
schedule, as amended, shall be reasonably acceptable, and all reasonable expenses, reasonable legal fees and
advances incurred by the Dissemination Agent in for the performance of its duties hereunder. If the
Dissemination Agent is the Fiscal Agent, the Authority shall be responsible for payingthe fees and expenses
of the Dissemination Agent for its services provided hereunder in accordance with its agreement with the
Authority.
Section8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement,
[Ashby USA, LLC]/[the Tanamera/Roripaugh Entities], the Dissemination Agent and the Fiscal Agent may
amend this Disclosure Agreement (and the Fiscal Agent shall agree to any amendment so requested by
[Ashby USA, LLC]/[the Tanamera/Roripaugh Entities], provided that the Fiscal Agent shallnot be obligated
to enter into such amendment that modifies or increases its duties and obligations hereunder), and any
provision of this Disclosure Agreement may be amended or waived, provided that the following conditions
are satisfied:
(a)
if the amendment or waiver relates to Sections 2(a), 3 or 4(a) hereof, 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 (as defined in the
Rule) with respect to the 2006 Bonds, or type of business conducted;
(b)
the undertakingsherein, as proposed to be amended or waived, would, in the opinion
of Bond Counsel approved by the Authority, 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
(c)
the proposed amendment or waiver either (i) is approved by owners of the 2006
Bonds in the manner provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent
Agreement with the consent of owners of the 2006 Bonds, or (ii) does not, in the opinion of Bond
Counsel, materially impair the interests of owners or beneficial owners of the 2006 Bonds.
If the financial information or operating data contained within the Financial Statements to be
provided in the Semi-Annual Report or amendment or supplement thereto is amended pursuant to the
provisions hereof, the first Semi-Annual Report containing the operating data or financial information in
accordance with such amendment 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.
As required bythe Rule, if an amendment is made to the provisions hereof specifying the accounting
principles to be followed in preparing Financial Statements, the financial information for the year in which
the change is made shall present a comparison between the Financial Statements or information prepared on
G-9
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
Statements, in order to enable investors to evaluate the ability of the Major Developer to generally meet its
obligations. 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 hereof.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent
[Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] 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 Semi-Annual Report or notice of occurrence of a Listed Event, in
addition to that which is required by this Disclosure Agreement. If [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] [chooses/choose] to include any information in any Semi-Annual Report or
notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure
Agreement, [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] shall have no obligation under this
Disclosure Agreement to update such information or include it in any future Semi-Annual Report or notice
of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of [Ashby USA, LLC]/[the Tanamera/Roripaugh
Entities] or the Fiscal Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent
may (and, at the written direction of the Participating Underwriter or the owners of at least 25% aggregate
principal amount of Outstanding Bonds, and after adequate indemnification, shall), 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 [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities], 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, andthe sole remedy under this Disclosure
Agreement in the event of any failure of [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities], the
Dissemination Agent or the Fiscal Agent to comply with this Disclosure Agreement shall be an action to
compel performance.
Section 11. Duties, Immunities and Liabilities of Fiscal Agent and Dissemination Agent. Neither
the Fiscal Agent nor the Dissemination Agent (if other than the Fiscal Agent or the Fiscal Agent in its
capacity as Dissemination Agent) shall have any responsibility for the content of any Semi-Annual Report.
The Dissemination Agent (if other than the Fiscal Agent or the Fiscal Agent in its capacity as Dissemination
Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement, and [Ashby
USA, LLC agrees]/[the Tanamera/Roripaugh Entities agree] to indemnify andsave the Dissemination Agent
(if other than the Fiscal Agent), its officers, directors, employees and agents, harmless against any loss,
expense and liabilities which it or they may incur arising out of or in the exercise or performance of their
powers and duties hereunder, including the reasonable costs and expenses (including attorneys fees) of
defending against any claim of liability with counsel approved by [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities], which approval shall not be unreasonably withheld, but excluding losses,
expenses and liabilities due to such Dissemination Agent’s negligence, willful misconduct or failure to
comply with any provision of this Disclosure Agreement. The obligations of [Ashby USA, LLC]/[the
Tanamera/Roripaugh Entities] under this Section shall survive resignation or removal of such Dissemination
Agent and payment of the 2006 Bonds and the resignation or removal of the Fiscal Agent. Any action for
which indemnification is sought from [Ashby USA, LLC]/[the Tanamera/Roripaugh Entities] shall be
deemed an action on a contract (this Agreement) for which the provisions of Section 18 are applicable. All
of the protections from liability applicable to the Fiscal Agent shall apply to the Dissemination Agent. The
Dissemination Agent and Fiscal Agent shall have no responsibility for the preparation, review, form or
content of any Semi-Annual Report or any notice of a Listed Event. No provision of this Disclosure
Agreement shall require or be construed to require the Dissemination Agent or Fiscal 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 and Fiscal Agent may conclusively rely on the determination of [Ashby USA,
LLC]/[the Tanamera/Roripaugh Entities] as to the materiality of any event for purposes of Section 4 hereof.
G-10
Neither the Fiscal Agent nor the Dissemination Agent make any representation as to the sufficiency of this
Disclosure Agreement for purposes of the Rule. [Ashby USA, LLC’s]/[The Tanamera/Roripaugh Entities’]
obligations under this Section shall survive the termination of this Disclosure Agreement.
Section 12. Notices. Any notice or communications to or among any of the parties to this Disclosure
Agreement shall be given to all of the following and may be given as follows:
[If to Ashby USA, LLC: Ashby USA, LLC
470 East Harrison Street
Corona, California 92879
Telephone: (951) 898-1692
Telecopier: (951) 898-1693
Attention: Chief Financial Officer]/
If to the Tanamera
Entities:
Twinleaf Homes, LLC
28475 Old Town Front Street, Suite D
Telephone: (951) 857-0070
Telecopier: (951) 639-9025
Attention: Ken Rose
If to the Community
Facilities District:
Community Facilities District No. 03-02
(Roripaugh Ranch)
Telephone: (951) 694-6430
Telecopier: (951) 694-6499
Attention: Finance Director
If to the
Dissemination
Agent:
LM-CA-T24T
Telephone: (213) 615-6005
Telecopier: (213) 615-6199
If to the
Fiscal Agent:
LM-CA-T24T
Telephone: (213) 615-6005
Telecopier: (213) 615-6199
If to the
Participating
Underwriter:
One Ferry Building
San Francisco, California 94111
Telephone: (415) 445-2300
Telecopier: (415) 445-2395
Attention: Municipal Research Department
Section13. Beneficiaries. The Participating Underwriter and the owners and beneficial owners from
time to time of the 2006 Bonds shall be third party beneficiaries under this Disclosure Agreement. This
Disclosure Agreement shall inure solely to the benefit of [Ashby USA, LLC]/[the Tanamera/Roripaugh
Entities], 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. Any
action by a beneficiary of this Agreement shall be subject to Section 18 below.
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Section14. 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.
Section 15. 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.
Section 16. 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 17. 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 18. Attorneys’ Fees. In the event of the bringing of any action or suit by any Party
against another Party arising out of this Agreement, the Party in whose favor final judgment shall
be entered shall be entitled to recover from the other Party all costs and expenses of suit, including
reasonable attorneys’ fees.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the
date first above written.
[ASHBY USA, LLC,
a California limited liability company
By:
Ashby Development Company, Inc.,
a California corporation, its Managing Member
By: _____________________________________
Justin K. Ashby, President
By:
USA Investment Partners, LLC,
a Nevada limited liability company, its Member
By:
USA Commercial Mortgage Company,
a Nevada corporation,
its non-Member Manager
By: _____________________________________
Joseph D. Milanowski, [Title]/
[TANAMERA/RORIPAUGH, LLC,
_____________________________________________
Name:
Title:
TANAMERA/RORIPAUGH II, LLC,
_____________________________________________
Name:
Title:
TRADITIONS AT RORIPAUGH, LLC,
_____________________________________________
Name:
Title:]
G-13
as Fiscal Agent
By: _________________________________________
Authorized Officer
as Dissemination Agent
By: _________________________________________
Authorized Officer
G-14
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE SEMI-ANNUAL REPORT
Name of Obligated Person::
[Ashby USA, LLC, a California limited liability company]/
[Tanamera/Roripaugh, LLC, Tanamera/Roripaugh II, LLC and Traditions
at Roripaugh, LLC, each a California limited liability company
Name of Bond Issue:
2006 Special Tax Bonds
Date of Issuance:
April 27, 2006
NOTICE IS HEREBY GIVEN that [Ashby USA, LLC has]/[Tanamera/Roripaugh, LLC,
Tanamera/Roripaugh II, LLC and Traditions at Roripaugh, LLC have] not provided a Semi-Annual Report
with respect to the above-named Bonds as required by Section 2 of the Continuing Disclosure Agreement,
dated as of March 1, 2006, by and between [Ashby USA, LLC]/[Tanamera/Roripaugh, LLC,
Tanamera/Roripaugh II, LLC and Traditions at Roripaugh, LLC] and U.S. Bank National Association, as
Fiscal Agent. [Ashby USA, LLC]/[Tanamera/Roripaugh, LLC, Tanamera/Roripaugh II, LLC and Traditions
atRoripaugh, LLC] [anticipates/anticipate] that the Semi-Annual Report will be filed by ________________.
Dated: __________
U.S. Bank National Association, as Dissemination
Agent, on behalf of [Ashby USA,
LLC]/[Tanamera/Roripaugh, LLC,
Tanamera/Roripaugh II, LLC and Traditions at
Roripaugh, LLC]
________________________________________
Authorized Officer
cc: Temecula Public Financing Authority
c/o City of Temecula
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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):
$51,250,000
(RORIPAUGH RANCH)
Provide nine-digit CUSIP® numbers* if available, to which the information relates:
(Maturity)
2007
2008
2009
2010
2011
2012
87972YBV7
87972YBW5
87972YBX3
87972YBY1
87972YBZ8
87972YCA2
(Maturity)
2013
2014
2015
2016
2026
2036
87972YCB0
87972YCC8
87972YCD6
87972YCE4
87972YCM6
87972YCN4
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 Name (please include name of state where Issuer is located): ____________________________________________
Other Obligated Person’s Name (if any): ___________________________________________________________________
(Exactly as it appears on the Official Statement Cover)
Provide six-digit CUSIP® number(s)*, if available, of Issuer: ___________________________________________________
*
(Contact CUSIP® ’s Municipal Disclosure Assistance Line at 212.438.6518 for assistance with obtaining the proper CUSIP ®
numbers.)
TYPE OF FILING:
a Electronic (number of pages attached) ___________ a Paper (number of pages attached) ________________
If information is also available on the Internet, give URL: ____________________________________________
G-16
WHAT TYPE OF INFORMATION ARE YOU PROVIDING? (C HECK ALL THAT APPLY)
A. a Annual Financial Information and Operating Data pursuant to Rule 15c2-12
(Financial information and operating data should not be filed with the MSRB.)
Fiscal Period Covered: ______________________________________________________________________
B. a Audited Financial Statements or CAFR pursuant to Rule 15c2-12
Fiscal Period Covered: ______________________________________________________________________
C. a Notice of a Material Event pursuant to Rule 15c2-12 (Check as appropriate)
1.
a Principal and interest payment delinquencies
6.
2.
3.
a Non-payment related defaults
a Unscheduled draws on debt service reserves
reflecting financial difficulties
a Unscheduled draws on credit enhancements
reflecting financial difficulties
a Substitution of credit or liquidity providers, or
their failure to perform
7.
8.
a Adverse tax opinions or events affecting the taxexempt status of the security
a Modifications to the rights of security holders
a Bond calls
9.
a Defeasances
10.
a Release, substitution, or sale of property securing
repayment of the securities
a Rating changes
4.
5.
11.
D. a Notice of Failure to Provide Annual Financial Information as Required
E. a Other Secondary Market 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 ____________ State _____ Zip Code___________
Telephone_____________________________________ Fax _________________________________________
Email Address _________________________________ Issuer Web Site Address _________________________
Dissemination Agent Contact, if any:
Name ________________________________________ Title _________________________________________
Employer __________________________________________________________________________________
Telephone_____________________________________ Fax _________________________________________
Email Address _________________________________ Relationship to Issuer____________________________
Obligor Contact, if any:
Name ________________________________________ Title _________________________________________
Employer __________________________________________________________________________________
Telephone_____________________________________Fax __________________________________________
Email Address _________________________________ Obligor Web site Address ________________________
Investor Relations Contact, if any:
Name ______________________________________ Title _________________________________________
Telephone____________________________________ Email Address _________________________________
G-17
APPENDIX H
FORM OF OPINION OF BOND COUNSEL
April 27, 2006
Board of Directors
OPINION:
$51,250,000 Temecula Public Financing Authority Community Facilities
District 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds
Members of the Board of Directors:
We have acted as bond counsel in connection with the issuance by the Temecula Public
Financing Authority (the “Authority”) of its $51,250,000 Temecula Public Financing Authority
Community Facilities District 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds (the “Bonds”)
pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq.,
of the California Government Code) (the “Act”), a Fiscal Agent Agreement, dated as of March
1, 2006 (the “Fiscal Agent Agreement”), by and between the Authority for and on behalf of the
Temecula Public Financing Authority Community Facilities District 03-02 (Roripaugh Ranch)
(the “District”), and U.S. Bank National Association, as fiscal agent, and Resolution No. TPFA
06-01 adopted by the Authority on February 28, 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.
H-1
April 27, 2006
Page 2
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, on a parity with the
pledge thereof for the security of any Parity Bonds that may be issued under, and as such term
is defined in, the Fiscal Agent Agreement.
4.
The Bonds have been duly authorized, executed and delivered by the Authority
and are 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, on a parity with any
Parity Bonds that may be issued under and as such term is defined in the Fiscal Agent
Agreement.
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’ rights heretofore or
hereafter enacted and also may be subject to the exercise of judicial discretion in accordance
with general principles of equity.
In rendering this opinion, we have relied upon certifications of the Authority and 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,
H-2
APPENDIX I
BOOK-ENTRY SYSTEM
The following description of the procedures and record keeping with respect 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 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 million issues of U.S.
and non-U.S. equity issues, corporate and municipal debt issues and money market instruments from over
85 countries that DTC’s participants (the “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. andnon-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, Government Securities Clearing Corporation, MBS Clearing
Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, 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 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 (the “Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The DTC Rules
applicable to its Participants are on file with the Securities and Exchange Commission. More information
about DTC can be found at www.dtcc.com.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which
will receive a credit for the 2006 Bonds on DTC’s records. The ownership interest of each actual purchaser
of each 2006 Bond (the “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.
Tofacilitate subsequent transfers,all Bonds deposited byDirect 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 2006 Bonds with DTC and their registration in the name of Cede &
Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge
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of the actual Beneficial Owners of the 2006 Bonds; DTC’s records reflect only the identity of the Direct
Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners.
The Direct 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 by Direct Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory or regulatory requirements as may
be in effect from time to time. Beneficial Owners of 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 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 by aDirect 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 payment 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 orthe Fiscal Agent, on a payment 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
(nor the nominee), the Fiscal Agent, the Authority or the District, subject to any statutory and 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 Fiscal Agent, disbursement of such payments to Direct Participants will be
the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providingits service as depository with respect to the 2006 Bonds at any time
by giving reasonable notice to the Fiscal Agent. Under such circumstances, in the event that a successor
depository is not obtained, Bond certificates are required to be printed and delivered as described in the
The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or
a successor securities depository). In that event, Bond certificates will be printed and delivered as described
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, thenthe Authority will discontinue the Book-Entry System with DTC forthe 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, andredemption 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
The Authority, the District and the Fiscal Agent do not have anyresponsibility 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 any DTC 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 J
BOUNDARY MAP OF THE COMMUNITY FACILITIES DISTRICT
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APPENDIX K
BUILDING PERMIT THRESHOLDS
Building Permit Thresholds
As of January 15, 2006
Building Permit Threshold/
Requirement
Status
Ashby USA, LLC‘s
Estimated
Date of
Completion1
Prior to the 1st Building Permit:
a.
Initially, prior to issuance of the 1st building permit, complete flow-by detention
basins relating to Planning Areas 3, 4A and 4B.
Complete.
Complete.
b.
Submit plans for structural protection from vegetation fires to the Fire Prevention
Bureau.
Complete for Phase I; Murietta Hot
Springs Road serves as fuel buffer.
Phase I complete.
Complete.
Complete.
Improvements substantially complete;
Certain utility fees must be paid in
connection with installation of permanent
utilities.
Estimated completion 2nd
quarter 2006.
2 properties need to access Nicolas Road;
driveway construction by Ashby USA,
LLC is required.
Estimated receipt of
permission in the 1st
quarter of 2006.
Phase I (Planning Areas 1-4B, 6 (neighborhood park) and 32 (fire station)
Prior to the 34th Building Permit
a.
Provide secondary access for each Planning Area to existing Murrieta Hot
Springs Road.
Prior to the 100th Building Permit
a.
Complete 0.3 acre mini-park site to the satisfaction of the Community Services
Director, including permanent utilities.
Prior to the 108th Building Permit:
a.
Obtain permission from adjacent affected property owners to allow for grading
and any related driveway improvements necessary to continue to allow legal
vehicular access on to Nicolas Road.
1As provided by Ashby USA, LLC. The City has reviewed Ashby USA, LLC’s schedule and noted that the schedule assumes minimal completion delays and
weather delays. The City has indicated a completion range from March 2007 to September 2007. The Market Absorption Study and Appraisal assume
completion of improvements to allow issuance of remaining building permits in Phase I by September 2006 and in Phase II by September 2007.
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b.
Pay $2,000,000 for design and construction of a fire station and complete
construction of the fire station and acquire fire truck. City Manager must find
that the permanent fire station is substantially under construction and permanent
access to the fire station via Butterfield Stage Road, Murrieta Hot Springs Road
and via Calle Chapos between the fire stations’ eastern most driveway and
Walcott lane will be completed concurrent with the opening of the fire station
and all other requirements of the Development Agreement and Conditions of
Approval of the Land Use Entitlements for the issuance of the building permits
have been fulfilled
$2 million paid, plus an additional $1.1
million paid subject to reimbursement after
Bond proceeds are received; contract
awarded and notice to proceed issued.
Estimated fire station
completion February 2006.
Operation subject to Ashby
USA, LLC completion of
other improvements,
including all required road
access.
c.
Butterfield Stage Road – Construct half-width improvements from Murrieta Hot
Springs Road to the south project boundary at Planning Area 32, including
construction of two full-width bridges within and over Santa Gertrudis Creek and
Long Valley Wash.
Rough grading approximately 65%
complete; bid package is ready; Resource
Agencies1 approval obtained.
Estimated completion in
the 3rd quarter of 2006.
d.
Butterfield Stage Road - Dedicate full-width right-of-way from the northern
project boundary to Murrieta Hot Springs Road.
Dedication complete.
Dedication complete.
e.
Butterfield Stage Road - full-width grading from northern project boundary to
Murrieta Hot Springs Road.
Grading complete.
Grading Complete.
f.
Murrieta Hot Springs Road - Construct full-width improvements from east of
Pourroy Road at the northern project boundary to the MWD pipeline property.
Rough grading complete; underground
utilities complete; remaining
improvements in construction.
the 2nd quarter 2006.
g.
Murrieta Hot Springs Road - Construct half-width improvements from the MWD
pipeline property to Butterfield Stage Road.
Rough grading complete; underground
utilities installation complete; street
improvements under contract.
the 3rd quarter 2006.
h.
Nicolas Road - Offer a dedication for a 110 foot right-of-way from Butterfield
Stage Road to the west project boundary.
Dedication complete in Final Tract Map
29353-2; acceptance of dedication upon
completion of improvements.
Offer of dedication is
complete; construction
completion estimated in the
2rd quarter of 2006.
i.
Nicolas Road - Construct northerly half-width plus 10 feet from Butterfield Stage
Road to the western project boundary.
Rough grading completed; improvement
plans approved pending payment of fees;
contract for storm drain awarded August
2005.
j.
South Loop Road - Construct southerly half-width in front of fire station (Planning
Area 32).
Rough grading completed; improvement
plans approved pending payment of fees;
potential impact to fire station operation.
Estimated completion in the
2nd quarter of 2006.
1 Resource Agencies include the California Department of Fish and Game, the Army Corp of Engineers and the California Regional Water Quality Control
Board.
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k.
Construct full width arch culverts for Santa Gertrudis Creek at Butterfield Stage
Road and North Loop Road.
Plans approved; bid opened February 28.
l.
Construct full width arch culverts for Long Valley Wash at Butterfield Stage
Road.
Plans approved; bid opened February 28;
need access road easement from Property
Owner.
m.
Nicolas Road - Construct 40 foot improvements 450 feet east of the existing
Nicolas Road/Calle Girasol intersection to MWD ROW, including full-width
bridge over Santa Gertrudis Creek.1
No grading yet; EMWD underground
utilities complete.
n.
Complete secondary access for the Phase I area at one of
Completion of various facilities listed
elsewhere are expected to satisfy this
requirement.
Coordinating with Resource Agencies and
Flood Control District.
(ii) Calle Chapos, or
Bid package under review.
(iii) Butterfield Stage Road to Rancho California Road.
Plans for Butterfield Stage Road to Rancho
California Road are approved pending
recordation of easements required.
Estimated completion 3rd
quarter of 2006.
Estimated Completion in
the first quarter of 2007.
(i) Nicolas/Calle Girasol intersection,
Estimated Completion
prior to June 1, 2007.
a.
Complete park portion of the private recreation center in Planning Area 5 to the
satisfaction of the Community Services Director.
90% of construction has been completed.
the 1st quarter of 2006.
98% complete. plastering and filling of
pool on hold until sufficient residents are
in the community.
Prior to the 350st Building Permit:
a.
Complete the building and pool portion of the private recreation center in
Planning Area 5 to the satisfaction of the Community Services Director.
a.
Complete 5.1 acre neighborhood park (Planning Area 6) including all permanent
utilities and the 90 day maintenance period and grant deed accepted by the City.
Rough grading 100% complete; Park plans
approved; bids opened January 2006;
construction commencing March 2006.
b.
“A” Street (Roripaugh Valley Road)- Construct full-width improvements from
Murietta Hot Springs Road to Butterfield Stage Road.
90% complete; dry utility sidewalk and
striping improvements not complete.
the 2nd quarter of 2006.
1 Nicolas Road improvement east of the existing Nicolas Road/Calle Girasol intersection to MWD Right of Way is only required if Nicolas Road will serve as the
secondary access. Ashby USA, LLC anticipates secondary access will be satisfied by via Calle Chapos.
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c.
“B” Street (Fiesta Ranch Road)- Construct full-width improvements from
Nicolas Road to “A” Street (Roripaugh Valley Road).
90% complete; dry utility sidewalk and
striping improvements not complete.
d.
North Loop Road - Construct a full-width bridge over and within Santa Gertrudis
Creek and connect the bridge to Butterfield Stage Road with full width
improvements.
Minor grading completed; bid opened
February 28, 2006.
Bid being awarded.
Traffic signals may be required, as warranted, at the two other project entrances
from Murrieta Hot Springs Road located to the east and west of the Pourroy Road
main project entrance.
The City will install if the City determines
it is appropriate.
The City will install if the
City determines it is
appropriate.
Complete nature walk and adjacent landscape areas (Lot 36), including all
permanent utilities and the 90 day maintenance period and grant deed accepted
by the City. Complete the trail in Planning Area 7A and the trail between
Planning Areas 4B and 6.
Nature walk 90% complete; Planning Area
7A trail 90% complete; trail between
Planning Areas 4B and 6 not yet started;
revised landscaping plans for the Phase I
perimeter slopes are required by the City
Planning Department.
e.
1.
2.
f.
Construct the following traffic signals and related intersection improvements:
Traffic signal at the intersection of Pourroy Road and Murrieta Hot Springs Road.
PHASE II (Planning Areas 10, 11, 12, 14 - 24, 27 - 31, 33A and 33B2)
Prior to the issuance of any building permit in Phase II, the following improvements
must be completed:
a.
Complete acquisition of right of way for the off-site or County portions of
Butterfield Stage Road.
Easements acquired except for two
property owners (Developer has asked the
City to assist with the acquisition of these
easements); grading bid package in
process.
the 4th quarter of 2006.
b.
Construct Santa Gertrudis Creek Channel from the arch culvert/bridge crossing
Butterfield Stage Road westerly to the confluence with the existing Santa
Gertrudis Creek.
Bid package is ready pending Flood
Control District approval of plan which is
waiting for execution of easements on
other facilities.
2 A Specific Plan amendment was approved by the City Council in January 2005 increasing the permit threshold from prior to the 510th building permit to prior
to the 516th building permit.
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c.
Butterfield Stage Road - Construct remaining half-width improvements from
Murrieta Hot Springs Road to the south project boundary at Planning Area 32,
including construction of two full-width bridges within and over Santa Gertrudis
Creek and Long Valley Wash.
See item c of 108 th Building Permit
threshold. Completion of bridge and street
improvements. Full width under
construction.
d.
Murrieta Hot Springs Road - Construct remaining half-width improvements from
the MWD pipeline property to Butterfield Stage Road.
See item f of 108 th Building Permit
threshold. Full width of Murrieta Hot
Springs Road is under construction.
e.
North Loop Road - Construct full-width improvement from the bridge structure at
North Loop Road/Santa Gertrudis Creek crossing to the Long Valley Wash
Bridge structure at South Loop Road.
Mass grading 100% complete; public and
private portions are each in final plan
check; bid packages are being prepared for
public section.
f.
South Loop Road - Construct the full width bridge structure crossing Long Valley
Wash and construct full width street improvements from the bridge to gatehouse
(private road improvements).
Mass grading 60% complete; bridge
contract awarded; public and private
portions of improvement plans are each in
final plan check.
g.
Nicolas Road - Construct remaining improvements from Butterfield Stage Road
to western project boundary.
See Item (i) of 108th Building Permit
threshold.
h.
Construct specified traffic signals and related intersection improvements at
Butterfield Stage Road at (i) Murrieta Hot Springs Road, (ii) Nicolas Road and
(iii) Calle Chapos.
Traffic signal plans approved.
i.
Butterfield Stage Road - Construct full width improvement from the southern
project boundary at Planning Area 32 to Rancho California Road, excluding any
existing improvements.
Improvement plans approved pending right
of way acquisition – See item a of Phase
II; Shea Homes Limited Partnership has
built 2 lanes of paving in front of its
development at La Serena; bid package
under review; easement acquisition of 2
parcels may impact schedule.
j.
Nicolas Road - Construct 40 foot improvement from 450 feet east of the existing
Nicolas Road/Calle Girasol intersection to Liefer Road, including the full width
bridge structure over Santa Gertrudis Creek.
Portions of road plans approved; channel
and bridge design in process; EIR
amendment in process.
Estimated completion prior
to June 1, 2007.
k.
Calle Girasol and the Nicolas Road/Calle Girasol intersection - relating to the
ultimate intersection with Nicolas Road, including right-of-way acquisition.
Offers of dedication in process; requires
payment of acquisition costs; portions of
road plans approved and other plan
revisions in process; EIR amendment in
process.
Estimated completion prior
to June 1, 2007.
l.
Calle Chapos - Construct 38 foot width on center improvements from Butterfield
Stage Road to the existing paved terminus at Walcott Lane.
Rough grading 80% complete.
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m.
Winchester Road at Nicolas Road traffic signal with the ultimate lane
configurations.
Plan approved with minor revisions; in
process of obtaining property owner
acceptance of easement.
n.
Butterfield Stage Road at Rancho California Road traffic signal with the ultimate
lane configurations.
Engineering plans in plan check.
the 1st quarter of 2007.
o.
Submit plans for structural protection from vegetation fires to the Fire Prevention
Bureau.
Proposed fuel modification plan is street
layout included in a draft Tentative Map
for Phase II Planning Areas; the proposed
plan is subject to review by the Fire
Prevention Bureau once submitted.
Phase II estimated
completion in the 2nd
quarter of 2006.
p.
Complete sewer in Nicolas Road in accordance with Eastern Municipal Water
District requirements.
Sewer complete from Liefer Road to the
west project boundary.
Estimated completion in the
2nd quarter of 2006.
Graded to 100% of mass graded condition;
park plans submitted; conceptual design
approved by TCSD; bid package being
prepared.
Final revisions submitted to Riverside
Flood Control.
Plans in review by City Planning Dept.
Plans in review by City Planning Dept.
a.
Complete the 19.7 acre sports park site (Planning Area 27), satisfy the 90 day
maintenance period and grant deed accepted by the City.
b.
Complete the riverwalk multi-use trails on both sides of Long Valley Wash.
a.
Complete park portion of the private recreation center in Planning Area 30 and
satisfy the 90 day maintenance period and grant deed acceptable to the City.
Prior to the 1,150th Building Permit:
a.
Complete the building and pool portion of the private recreation centers in
Planning Areas 27 and 30.
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