This Preliminary Official Statement and the information contained herein are subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted prior to the time the Official
Statement is delivered in final form. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sale of these securities in
any jurisdiction in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
PRELIMINARY OFFICIAL STATEMENT DATED December 8, 2009
NEW ISSUE — FULL BOOK ENTRY
RATING:
S&P: “BBB+”
See “Rating” Herein
In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under existing law (i) assuming continuing
compliance with certain covenants and the accuracy of certain representations, interest on the Bonds is excluded from gross income for federal
income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and
corporations, and (ii) interest on the Bonds is exempt from personal income taxation by the State of California. For a more complete discussion of
the tax aspects, see “TAX MATTERS” herein.
COUNTY OF SAN DIEGO
STATE OF CALIFORNIA
$16,600,000*
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY
(PARKWAY BUSINESS CENTER)
SPECIAL TAX REFUNDING BONDS
SERIES 2009
(Bank Qualified)
Dated: Date of Delivery
Due: August 15, 2015, as shown below
The Community Facilities District No. 88-1 of the City of Poway (Parkway Business Center) Special Tax Refunding Bonds, Series 2009
(the “Bonds”) are being issued by Community Facilities District No. 88-1 of the City of Poway (the “District”) to refinance the District’s outstanding
(Parkway Business Center) Special Tax Refunding Bonds, Series 1998 (the “Prior Bonds”), to fund, in whole or in part, a reserve account with respect
to the Bonds and to pay the costs of issuance of the Bonds. The City of Poway (the “City”) formed the District pursuant to the provisions of the
Mello-Roos Community Facilities Act of 1982, as amended, being California Government Code Section 53311, et seq. (the “Act”). The City Council
acts as the legislative body of the District.
The Bonds are being issued as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository Trust Company,
New York, New York (“DTC”), and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple thereof, under the
book-entry system maintained by DTC. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds.
Interest on the Bonds is payable on February 15 and August 15 of each year (each an “Interest Payment Date”), commencing February 15, 2010.
Payments of the principal of, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co., by The Bank of
New York Mellon Trust Company, N.A., as Trustee (the “Trustee”), so long as DTC or Cede & Co. is the registered owner of the Bonds.
Disbursements of such payments to Participants is the responsibility of DTC and disbursements of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants, as more fully described herein.
The Bonds are not subject to optional or mandatory sinking fund redemption prior to maturity. The Bonds are subject to
Extraordinary Redemption as set forth herein. See “THE BONDS – Redemption.”
The Bonds are special tax obligations of the District authorized pursuant to the Act, and are issued pursuant to a Bond Indenture dated as
of December 1, 2009 between the District and the Trustee (the “Indenture”). The Bonds are payable solely from a Special Tax (less amounts allocated
to pay Administrative Expenses) received by the District as more fully described herein, and from certain funds held by the Trustee. The annual levy
of the Special Tax is calculated to be sufficient to permit the District to pay the principal of and interest on the Bonds when due. The Special Tax will
be collected in the same manner and at the same time as ad valorem real property taxes are collected by the County Tax Collector of San Diego
County, State of California.
If a delinquency occurs in the payment of the Bonds, the District will have a duty only to transfer from the Reserve Account the amount of
such delinquency to pay the principal of and interest on the Bonds when due and institute foreclosure proceedings as provided in the Indenture. There
is no assurance that sufficient funds will be available in the Reserve Account for this purpose.
Except for the Special Taxes, neither the faith and credit nor the taxing power of the City, the District, the State of California or any
political subdivision thereof is pledged to the payment of the Bonds. The Bonds are limited obligations of the District, payable from moneys to be
received by the District from the payment of the Special Tax by the owners of real property within the District, and from certain funds held by the
Trustee.
This cover page contains certain information for general reference only. It is not a summary of all of the provisions of the Bonds.
Prospective investors must read the entire Official Statement to obtain information essential to the making of an informed investment
decision. See “SPECIAL RISK FACTORS” herein for a discussion of the special risk factors that should be considered, in addition to the
other matters set forth herein, in evaluating the investment quality of the Bonds.
MATURITY SCHEDULE*
Maturity
(August 15)
2010
2011
2012
Principal
Amount
Interest
Rate
Yield
CUSIP No.(1)
Maturity
(August 15)
2013
2014
2015
Principal
Amount
Interest
Rate
Yield
CUSIP No.(1)
____________________
*
Preliminary, subject to change.
(1)
CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by Standard & Poors, CUSIP Service
Bureau, a division of The McGraw-Hill Companies, Inc.
The Bonds are offered when, as and if issued, subject to approval as to their validity by Richards, Watson & Gershon, A Professional
Corporation, Los Angeles, California, Bond Counsel, and certain other conditions. Certain legal matters will be passed on by Best Best & Krieger
LLP, Riverside, California as disclosure counsel. It is anticipated that the Bonds will be available for delivery to DTC in New York, New York, on or
about December 29, 2009.
SOUTHWEST SECURITIES, INC.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE 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 BONDS TO CERTAIN DEALERS AND
DEALER BANKS AND BANKS ACTING AS AGENTS 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 BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS
HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY
STATE.
This Official Statement speaks only as of its date, and the information contained herein is subject to
change. This Official Statement and any continuing disclosure documents of the City and the District are
intended to be made available through the City at the address indicated below. The City has undertaken to
provide certain continuing disclosure pursuant to a Continuing Disclosure Agreement, as described herein.
Copies of the resolutions and other documents relating to the issuance of the Bonds are available upon
request, and upon payment to the City of a charge for copying, mailing and handling, from the office of the
City Director of Administrative Services, 13325 Civic Center Drive, Poway, California 92064.
No dealer, broker, salesperson or other person has been authorized to give any information or to make
any representations in connection with the offer or sale of the Bonds described herein, other than as
contained in this Official Statement, and if given or made, such other information or representations must not
be relied upon as having been authorized by the City, the District or the Underwriter. This Official Statement
does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, the
Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer,
solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds.
Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion,
whether or not expressly so described herein, are intended solely as such and are not to be construed as a
representation of facts.
The information set forth herein has been obtained from the City and other sources believed to be
reliable, but the accuracy or completeness of such information is not guaranteed by, and should not be
construed as a representation by, the City, the District or the Underwriter. The information and expressions
of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any
sale made hereunder will, under any circumstances, create any implication that there has been no change in
the affairs of the City or the District since the date hereof. All summaries contained herein of any resolutions,
the Indenture, or other documents are made subject to the provisions of such documents and do not purport to
be complete statements of any or all such provisions.
THE UNDERWRITER HAS REVIEWED THE INFORMATION SET FORTH IN THIS
OFFICIAL STATEMENT IN ACCORDANCE WITH ITS RESPONSIBILITIES UNDER THE FEDERAL
SECURITIES LAWS, BUT DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF
THE INFORMATION.
CITY OF POWAY
San Diego County, California
City Council
Don Higginson, Mayor
Carl Kruse, Deputy Mayor
Merrilee Boyack, Councilmember
Jim Cunningham, Councilmember
Betty Rexford, Councilmember
City Staff
Rod Gould, City Manager
Lisa A. Foster, City Attorney
Linda Troyan, City Clerk
Steve Didier, Director of Administrative Services
Peter Moote, Assistant Director of Administrative Services
Special Services
Bond Counsel
Richards, Watson & Gershon, A Professional Corporation
Los Angeles, California
Financial Advisor
Public Financial Management, Inc.
Los Angeles, California
Trustee and the Escrow Bank
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Verification Agent
The Arbitrage Group, Inc.
Tuscaloosa/Buhl, Alabama
TABLE OF CONTENTS
Page
INTRODUCTION ............................................... 1
THE REFUNDING PLAN .................................. 3
THE BONDS ....................................................... 3
Authority for Issuance ................................... 3
Description of the Bonds ............................... 4
Redemption ................................................... 4
Transfer and Exchange of Bonds .................. 5
Book-Entry System ....................................... 5
ESTIMATED SOURCES AND USES
OF FUNDS .......................................................... 7
DEBT SERVICE SCHEDULE............................ 8
SOURCES OF PAYMENT FOR THE
BONDS ................................................................ 8
Special Taxes................................................. 8
Special Tax Methodology.............................. 9
Priority of Lien ............................................ 10
Delinquent Payments of Special Tax;
Covenant for Superior Court
Foreclosure .................................................. 10
Reserve Account.......................................... 11
No Parity Debt ............................................. 12
Conditions for the Issuance of
Subordinate Debt ......................................... 12
THE CITY OF POWAY .................................... 12
History and Location ................................... 13
City Organization ........................................ 13
CITY COUNCIL ............................................... 13
Population.................................................... 13
Housing and Income .................................... 13
Climate ........................................................ 13
Transportation ............................................. 14
Services and Facilities ................................. 14
THE DISTRICT ................................................. 14
General ........................................................ 14
Availability of Public Utilities..................... 15
Land Use Within the District ....................... 15
The Improvements ....................................... 15
Prior Delinquencies ..................................... 15
Allocation of Special Tax ............................ 16
Special Tax Levy and Collections ............... 17
Tax Delinquencies ....................................... 18
ASSESSED VALUE OF PROPERTY
WITHIN THE DISTRICT ................................. 20
Assessed Valuation of All Property
Within the District and Value-to-Lien
Ratio ............................................................ 20
Direct and Overlapping Debt and
Value-to-Lien Ratios ................................... 22
Priority of Lien ............................................ 23
SPECIAL RISK FACTORS .............................. 23
Concentration of Ownership........................ 23
Page
Future Land Use Regulations and
Growth Control Initiatives ........................... 23
Hazardous Substances ................................. 24
Land Values ................................................. 25
Bankruptcy .................................................. 25
Other Public Facilities ................................. 25
Disclosure to Future Property Owners ........ 26
Parity Taxes and Special Assessments ........ 26
Insufficiency of Special Taxes .................... 26
Tax Delinquencies ....................................... 27
No General Obligation of the City .............. 27
No Acceleration Provision .......................... 27
Loss of Tax Exemption ............................... 27
Value-to-Lien Ratios ................................... 27
Parity Taxes and Special Assessments ........ 28
Payments by FDIC ...................................... 28
Constitutional Amendment .......................... 29
Future Initiatives.......................................... 30
Limited Secondary Market .......................... 30
Limitations on Remedies ............................. 30
CONTINUING DISCLOSURE ......................... 30
RATING ............................................................ 31
VERIFICATION OF MATHEMATICAL
COMPUTATIONS ............................................ 31
LEGAL OPINION ............................................. 31
TAX MATTERS ................................................ 31
NO LITIGATION .............................................. 33
FINANCIAL ADVISOR ................................... 33
UNDERWRITING............................................. 33
MISCELLANEOUS .......................................... 33
APPENDIX A – RATE AND METHOD OF
APPORTIONMENT OF SPECIAL TAX ....... A-1
APPENDIX B – THE CITY OF POWAY ...... B-1
APPENDIX C – SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE ........... C-1
APPENDIX D – CONTINUING DISCLOSURE
CERTIFICATE ................................................ D-1
APPENDIX E – FORM OF BOND COUNSEL
OPINION ......................................................... E-1
-i-
OFFICIAL STATEMENT
$16,600,000*
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY
(PARKWAY BUSINESS CENTER)
SPECIAL TAX REFUNDING BONDS
SERIES 2009
INTRODUCTION
This Official Statement, including the cover page and all Appendices hereto (collectively, the
“Official Statement”), is provided to furnish certain information in connection with the issuance by
Community Facilities District No. 88-1 of the City of Poway (Parkway Business Center) (the “Community
Facilities District” or the “District”) of the City of Poway (the “City”), of $16,600,000  aggregate principal
amount of bonds designated Community Facilities District No. 88-1 of the City of Poway (Parkway Business
Center) Special Tax Refunding Bonds, Series 2009 (the “Bonds”). The Bonds will be issued pursuant to the
Mello-Roos Community Facilities Act of 1982, as amended, California Government Code Section 53311 et
seq. (the “Act”) and a Bond Indenture (the “Indenture”) dated as of December 1, 2009 between the District
and The Bank of New York Mellon Trust Company, N.A. (the “Trustee”).
The Act was enacted by the California Legislature to provide an alternative method of financing
certain public facilities and services, especially in developing areas. 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 qualified
electors and compliance with the provisions of the Act, a community facilities district may issue bonds and
may levy and collect special taxes within such district to repay such bonds.
The Bonds are being sold to provide the District with funds to refinance the District’s outstanding
(Parkway Business Center) Special Tax Refunding Bonds, Series 1998 (the “Prior Bonds”), to fund, in whole
or in part, a reserve account with respect to the Bonds and to pay the costs of issuance of the Bonds. See
“ESTIMATED SOURCES AND USES OF FUNDS.” The Prior Bonds refunded two prior series of bonds
issued in 1989 and 1990 (referred to herein together as the “Original Bonds”) to finance improvements
needed to support the commercial and industrial development within the boundaries of the District (the
“Improvements”). Construction and acquisition of the Improvements is complete. See “THE DISTRICT.”
The Bonds shall be issued only as fully registered bonds in book-entry form, registered in the name
of Cede & Co., as nominee of The Depository Trust Company (“DTC”), without coupons in the
denomination of $5,000 or any integral multiple thereof and shall be dated as of and bear interest from the
date of original delivery, at the rate or rates set forth on the cover page hereof. Payments of the principal of,
premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co., by the
Trustee, so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursements of such
payments to DTC’s Participants is the responsibility of DTC and disbursements of such payments to the
Beneficial Owners is the responsibility of DTC’s Participants and Indirect Participants, as more fully
described herein. See “THE BONDS - Book-Entry System.”
Pursuant to the Act, the governing body of the City of Poway (the “City”) adopted resolutions stating
its intent to establish the District, to authorize the levy of the Special Tax (as hereinafter defined) on land
 Preliminary, subject to change.
1
within the boundaries of the District, to authorize the issuance of bonds and to have elections held pursuant
to the Act. The landowners who comprised the qualified electors of the District at the time of its creation
authorized the District to incur bonded indebtedness in an amount not to exceed $45,000,000 to finance the
Improvements and approved the rate and method of apportionment (the “Special Tax Formula”) of special
taxes for the District (the “Special Tax” or “Special Taxes”). See “SOURCES OF PAYMENT FOR THE
BONDS - Special Tax Methodology” and “APPENDIX A - RATE AND METHOD OF
APPORTIONMENT OF SPECIAL TAX.” Pursuant to Resolution No. 98-046, the District reduced the total
amount of authorized bonded indebtedness of the District to the initial principal amount of the Prior Bonds
($35,445,000), and to lower the maximum Special Tax within the District. The maximum annual Special
Tax is $16,500 per net useable acre. (See “SOURCES OF PAYMENT FOR THE BONDS - Special Tax
Methodology” herein).
The Indenture provides that the District may not issue any additional series of bonds on a parity with
the Bonds, whether for refunding Outstanding Bonds or otherwise.
The District consists of 102 lots comprising approximately 294 gross acres of land in the City. The
net developable land in the District is approximately 258.8 acres and is being used for commercial and
industrial purposes. Eighty-eight of the 102 lots have an improved value associated with their assessed
value. Approximately 52.49% of the entire special tax liability within the District is borne by the top ten
property owners. See “SPECIAL RISK FACTORS – Concentration of Ownership” and “The District –
Ownership of Property.” Fourteen parcels within the District remain vacant. There are no single family or
multifamily homes located within the District.
The Special Tax levied on certain properties within the District became delinquent commencing in
December, 1992. Following such delinquencies, the District attempted to commence foreclosure proceedings
against all delinquent property owners in February, 1993, although such foreclosure actions were delayed by
certain landowner bankruptcy filings. During this delay, the City loaned in excess of $4,700,000 to the
District to pay debt service on the Original Bonds. As of July 1, 2009, the amount owed by the District to the
City under this arrangement had been reduced to $1,000,000. The District makes payments on this loan from
Special Taxes on a subordinate basis to its obligations to make payments on the Bonds.
As of November 20, 2009, there were four delinquent installments of Special Taxes within the
District totaling $48,348 or approximately 1.4% of the total Special Tax levy within the District. See
“SOURCES OF PAYMENT FOR THE BONDS – Delinquent Payments of Special Taxes, Covenant for
Superior Court Foreclosure.”
The District has covenanted in the Indenture to levy in each fiscal year the Special Tax (see
“APPENDIX A - RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX” herein for a
description of the Special Tax) in an amount sufficient to pay annual debt service on the Bonds and any
parity bonds issued by the District and administrative expenses of the City related to the District, including
Trustee fees, plus the amount, if any, necessary to replenish the Reserve Account (as defined herein) to an
amount equal to the Reserve Requirement (see “SOURCES OF PAYMENT FOR THE BONDS - Reserve
Account”), subject to the limitation on the maximum amount of the Special Tax that may be levied within the
District, and the other limitations on the levy of the Special Tax as set forth in the Special Tax Formula. The
District will collect the Special Tax in the same manner and at the same time as ad valorem real property
taxes are collected by the Tax Collector of the County of San Diego (the “County”).
The District has covenanted that under certain circumstances described more fully herein, for the
benefit of the owners of the Bonds, it will institute civil actions in superior court to foreclose the lien of
Special Tax on properties delinquent in payment of the Special Tax under the conditions set forth in the
Indenture and described in this Official Statement under the caption “SOURCES OF PAYMENT FOR THE
BONDS - Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure.” The District may
in a particular case, but is not obligated to, advance the amount of any particular delinquency and thus relieve
itself of the obligation of bringing a foreclosure action against the related parcel.
2
The value of the land within the District is a critical factor in determining the investment quality of
the Bonds. If a property owner is delinquent in the payment of the Special Tax, the District’s only remedy is
to commence foreclosure proceedings in an attempt to obtain funds to pay the Special Tax. See “ASSESSED
VALUE OF PROPERTY WITHIN THE DISTRICT’ for a discussion of the development status of property
in the District and the assessed value (and value-to-lien ratios) of property within the District. No appraisal of
the property within the District has been undertaken by the City in connection with the issuance of the
Bonds. The assessed value of the property within the District is $584,376,009 based upon the County’s
2009/10 Tax Roll, and based on the aggregate initial principal amount of the Bonds of $16,600,000, the
value-to-lien ratio for the entire District is 35.2* to 1. Within the District there are other liens and
overlapping indebtedness. When combined with debt service on the Bonds the total value-to-lien ratio
within the District is 19.61* to 1. See THE DISTRICT – Direct and Overlapping Debt and Value-to-Lien
Ratios.”
See the section of this Official Statement entitled “SPECIAL RISK FACTORS” for a discussion of
special factors that should be considered, in addition to the other matters set forth herein, in considering the
investment quality of the Bonds.
Brief descriptions of the Bonds, the Special Tax, the City, the District, special risk factors, the
Indenture 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 Bonds, the Indenture and other
documents are qualified in their entirety by reference to each such document and the information with
respect thereto included in the Bonds, such Indenture and other documents. Capitalized terms used herein
and not defined herein shall have the meanings set forth in the Indenture.
Copies of the Indenture and other documents may be obtained from the office of the City Director of
Administrative Services, 13325 Civic Center Drive, Poway, California 92064.
THE REFUNDING PLAN
Concurrently with the issuance of the Bonds, the District will enter into an Escrow Agreement, dated
as of December 1, 2009 (the “Escrow Agreement”), with The Bank of New York Mellon Trust Company,
acting as escrow bank (the “Escrow Bank”). A portion of the proceeds from the sale of the Bonds, along with
certain proceeds relating to the Prior Bonds, will be deposited into the escrow fund established under the
Escrow Agreement (the “Escrow Fund”). Amounts maintained in the Escrow Fund will be invested solely in
direct obligations of the United State Treasury, the principal of and interest on which, together with any
available cash to be held and invested, will be sufficient to pay the principal of and interest on the Prior
Bonds to and including the respective dates of redemption thereof, as verified by The Arbitrage Group, Inc.
(the “Verification Agent”). See “Verification of Mathematical Computations” herein.
The moneys and securities held in the Escrow Fund are pledged solely to the payment of the Prior
Bonds. Neither the moneys nor the principal of the escrow securities deposited with the Escrow Bank nor the
interest thereon will be available for the payment of the Bonds.
THE BONDS
Authority for Issuance
The Bonds are issued pursuant to the Indenture, as approved by a Resolution of the City acting as the
legislative body of the District on December 1, 2009, and the Act. The District was established and
authorized to incur bonded indebtedness in an aggregate principal amount not to exceed $45,000,000 (later
reduced to $35,445,000) at a special election in the District held on November 1, 1988 pursuant to the Act.
Under the provisions of the Act, since there were fewer than 12 registered voters residing within the District,
 Preliminary, subject to change.
3
the qualified electors were the landowners who were entitled to cast one vote for each acre or portion of an
acre of land owned within the District. The landowners who comprised the initial qualified voters in the
District voted to incur the indebtedness and to approve the annual levy of Special Taxes to be collected
within the District for the purpose of paying for the Improvements, including repaying any indebtedness of
the District, replenishing the Reserve Account and paying the administrative expenses of the District. See
“THE DISTRICT” herein.
Description of the Bonds
The Bonds will be issued only as one fully registered Bond for each maturity, in the name of Cede &
Co., as nominee for The Depository Trust Company, New York, New York (“DTC”), as registered owner of
all Bonds, and will be available to ultimate purchasers in the denomination of $5,000 or any integral multiple
thereof, under the book-entry system maintained by DTC in denominations of $5,000 or any integral multiple
thereof. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the
Bonds . So long as the Bonds are registered in the name of Cede & Co., as nominee of DTC, references
herein to the owners shall mean Cede & Co., and shall not mean the ultimate purchasers of the Bonds. See
“Book-Entry System” below.
Place and Form of Payment. The Bonds shall be payable both as to principal and interest, and as to
any premiums upon the redemption thereof, in lawful money of the United States of America. The principal
of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and
surrender thereof at the Principal Office of the Trustee, or at the designated office of any successor Trustee.
Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of
authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date in which event
interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record
Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable
from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of
authentication is prior to the close of business on the first Record Date occurring after the issuance of such
Bond, in which event interest shall be payable from the dated date of such Bond, as applicable; provided,
however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall
be payable from the last Interest Payment Date to which the interest has been paid or made available for
payment or, if no interest has been paid or made available for payment on that Bond, interest on that Bond
shall be payable from its dated date. Interest on any Bond shall be paid to the person whose name shall
appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such
interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, to such Bondowner
at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by
the Trustee on or before the applicable Record Date from an Owner of $1,000,000 or more in principal
amount of the Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately
available funds to an account designated by such Owner.
Payments of the principal of, premium, if any, and interest on the Bonds will be made directly to
DTC, or its nominee, Cede & Co., by the Trustee, so long as DTC or Cede & Co. is the registered owner of
the Bonds. Disbursements of such payments to Participants is the responsibility of DTC and disbursements
of such payments to the Beneficial Owners is the responsibility of Participants and Indirect Participants, as
more fully described herein. See “Book-Entry System.” below.
Redemption
The Bonds are not subject to optional redemption or mandatory sinking fund redemption prior to
maturity.
Extraordinary Redemption. The Bonds are subject to extraordinary redemption as a whole, or in part
on a pro rata basis among maturities on any Interest Payment Date and shall be redeemed by the Trustee,
from Prepayments deposited to the Redemption Account pursuant to the Indenture, plus amounts transferred
4
from the Reserve Account pursuant to the Indenture, at 100% of the principal amount to be redeemed,
without premium, together with accrued interest to the redemption date.
Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed,
the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal
amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the
Trustee shall treat such Bonds as representing that number of Bonds of $5,000 denominations which is
obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000.
Notice of Redemption. When Bonds are due for redemption under the Indenture, the Trustee shall
give notice, in the name of the District, of the redemption of such Bonds; provided, however, that such notice
of redemption shall be conditioned on there being on deposit on the redemption date sufficient money to pay
the redemption price of the Bonds to be redeemed. Such notice of redemption shall (a) specify the CUSIP
numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption,
except that where all of the Bonds are subject to redemption, or all the Bonds of one maturity, are to be
redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and
surrender of the Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the
Bonds are to be redeemed; (e) in the case of Bonds to be redeemed only in part, state the portion of such
Bond which is to be redeemed; (f) state the date of issue of the Bonds as originally issued; (g) state the rate
of interest borne by each Bond being redeemed; and (h) state any other descriptive information needed to
identify accurately the Bonds being redeemed as shall be specified by the Trustee. Such notice shall further
state that on the date fixed for redemption, there shall become due and payable on each Bond or portion
thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the
redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At
least thirty (30) days but no more than forty-five (45) days prior to the redemption date, the Trustee shall
mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their
addresses appearing on the Bond Register, and to the original purchaser of the Bonds. The actual receipt by
the Owner of any Bond or the original purchaser of any Bond of notice of such redemption shall not be a
condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect
the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the
redemption date.
Transfer and Exchange of Bonds
Subject to the limitations set forth in the following paragraph, the registration of any Bond may, in
accordance with its terms, be transferred upon the Bond Register by the person in whose name it is
registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation
at the office of the Trustee, accompanied by delivery of written instrument of transfer in a form acceptable to
the Trustee and duly executed by the Bondowner or his or her duly authorized attorney.
Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Bonds
for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the
Owner any charge for any new Bond issued upon any exchange or transfer, but shall require the Bondowner
requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with
respect to such exchange or transfer. Whenever any Bonds shall be surrendered for registration of transfer or
exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds of
the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be
required to register transfers or make exchanges of (i) Bonds for a period of fifteen (15) days next preceding
any selection of the Bonds to be redeemed; or (ii) any Bonds chosen for redemption.
Book-Entry System
The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the
Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s
5
partnership nominee) or such other name as may be requested by an authorized representative of DTC. One
fully-registered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal
amount of such maturity, and will be deposited with DTC.
DTC, the world’s largest securities depository, is a limited-purpose trust company organized under
the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York
Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of
U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from
over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates
the post-trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct Participants’
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations,
and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing
Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation
and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by
the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S.
and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear
through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect
Participants”). DTC has 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 and www.dtc.org.
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which
will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of
each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records.
Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial 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 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 Bonds, except in the event that
use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered
in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an
authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of
Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the
Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial
Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings
on behalf of their customers.
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 Bonds may wish to take certain steps to augment the
transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders,
defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may
wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit
notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and
addresses to the registrar and request that copies of notices be provided directly to them.
6
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being
redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such
maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to
Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual
procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose
accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium (if any), and interest payments on the Bonds will be made to Cede & Co., or such
other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit
Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the
District or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s
records. Payments by Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee, or
the District, subject to any statutory or regulatory requirements as may be in effect from time to time.
Principal, premium (if any), and interest payments with respect to the Bonds to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or
the Trustee, 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 providing its services as depository with respect to the Bonds at any time by
giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a
successor depository is not obtained, Bond certificates are required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry-only transfers through DTC
(or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC
in accordance with the provisions of the Indenture.
The information in this section concerning DTC and DTC’s book-entry system has been obtained
from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy
thereof.
ESTIMATED SOURCES AND USES OF FUNDS
Proceeds from the sale of the Bonds, along with certain proceeds of the Prior Bonds, are expected to
be used to refund the Prior Bonds, to establish a Reserve Account with respect to the Bonds and to pay the
costs of issuance of the Bonds.
For a detailed discussion of the accounts and funds established under the Indenture and related to the
Bonds, see “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE” hereto.
The following is a summary of the estimated sources and uses of funds associated with the sale of
the Bonds and the refunding of the Prior Bonds.
Estimated Sources of Funds:
Principal Amount of Bonds
Proceeds Relating to Prior Bonds
Original Issue Premium (Discount)
Underwriter’s Discount
TOTAL
7
$
$
Estimated Uses of Funds:
Deposit to Escrow Fund
Deposit to Reserve Account
Costs of Issuance Account(1)
Deposit to Administration Account
TOTAL
$
$
_________________
(1)
Includes fees of Bond Counsel, Disclosure Counsel, and the Financial Advisor,
initial fees, expenses and charges of the Trustee, costs of printing the Official
Statement, rating agency fee(s), administrative fees of the District and other
costs of issuance.
DEBT SERVICE SCHEDULE
The following is the debt service schedule for the Bonds (assuming no redemptions are made as
scheduled).
Year Ending
(August 15)
2009
2010
2011
2012
2013
2014
2015
TOTAL
Principal
Total
Debt Service
Interest
$
$
$
$________
$_____________
$_____________
SOURCES OF PAYMENT FOR THE BONDS
Special Taxes
Principal of and interest on the Bonds is payable from the annual Special Taxes to be levied and
collected on taxable developed property within the District (less amounts allocated to pay annual
Administrative Expenses) and from the proceeds, if any, from the sale of such property for delinquency of
such Special Taxes. See “Special Tax Methodology” below.
The amount of Special Taxes that the District may levy in any year is strictly limited by the
maximum rates approved by the qualified electors within the District and certain covenants of the District
made in connection with the issuance of the Bonds (see “Special Tax Methodology” below). The Special
Taxes and any interest earned on the Special Taxes shall constitute a trust fund for the principal of and
interest on the Bonds, and so long as the principal of and interest on such Bonds remains unpaid, the Special
Taxes and investment earnings thereon shall not be used for any other purpose, except as permitted by the
Indenture or any Supplemental Indenture, and shall be held in trust for the benefit of the owners thereof and
shall be applied pursuant to the Indenture and any Supplemental Indenture.
In the opinion of Bond Counsel, the Special Taxes are exempt from the property tax limitation of
Article XIIIA of the California Constitution, pursuant to Section 4 thereof as a “special tax” authorized by a
two-thirds vote of the qualified electors. The levy of the Special Taxes was authorized by the landowners
who, pursuant to the Act, comprised the qualified electors of the District at a special election held on
November 1, 1988. Consequently, the District has the power and is obligated to cause the levy and collection
of the Special Taxes in an amount determined according to a methodology that the electors approved. The
8
landowners who comprised the qualified electors of the District authorized the District to incur bonded
indebtedness in an amount not to exceed $45,000,000 to finance (and refinance) the Improvements.
Although the bond authorization at the time of formation was $45,000,000, the City Council adopted
Resolution No. 98-046 which reduced the total amount of authorized bonded indebtedness of the District to
the initial principal amount of the Prior Bonds ($35,445,000), and to lower maximum Special Tax within the
District to $16,500 per net useable acre. See “INTRODUCTION” and “SOURCES OF PAYMENT FOR
THE BONDS – Special Tax Methodology.” The Rate and Method of Apportionment of Special Tax (the
“Special Tax Formula”) apportions the total debt service requirement (principal and interest and
replenishment of the Reserve Account, if required) and administrative expenses of the District each year
among the taxable parcels of real property within the District. See “APPENDIX A - RATE AND METHOD
OF APPORTIONMENT OF SPECIAL TAX.”
Special Tax Methodology
The District has covenanted to annually levy the Special Tax in an amount sufficient to pay the
principal of and interest on the Bonds, and the administrative expenses for the ensuing fiscal year, plus the
amount, if any, necessary to replenish the Reserve Account to an amount equal to the Reserve Requirement.
Because each Special Tax levy is limited to the maximum Special Tax rates authorized by the qualified
electors of the District as set forth in the Special Tax Formula, no assurance can be given that, in the event of
Special Tax delinquencies, the foregoing amount will in fact be able to be levied in any given year. See
“SPECIAL RISK FACTORS - Insufficiency of Special Taxes” herein. See also “THE DISTRICT Allocation of Special Tax” herein for a discussion of the historical application of the Special Tax Formula.
The Special Tax formula for the rate and method of apportioning the Special Tax sets a maximum
rate per acre which strictly limits the Special Tax that may be levied each year, which has been reduced
pursuant to certain covenants of the District as described below, and a sequence for applying such rate to the
parcels in the District based on a classification of such parcels as either developed, undeveloped or exempt.
Developed property is defined as all property with respect to which a final map has been recorded as of the
March 1 preceding the July 1 on which the legislative body of the District determines the Special Tax
amounts to be levied for the ensuing Fiscal Year. The undeveloped property classification includes all other
taxable property within the District. Property which is a public street or right-of-way or is used for public
utility purposes and thus not useable for private beneficial use, plus up to 200 acres of additional
undeveloped property conveyed or offered for dedication to a public agency for public uses other than such
street or right-of-way, are exempt from Special Tax. As of March 11, 1997, all property within the District
was classified as “developed property.”
Resolution No. 98-046 adopted by the City Council acting as the legislative body of the District on
April 28, 1998 reduced the total amount of authorized bonded indebtedness of the District to the initial
principal amount of the Prior Bonds ($35,445,000) and lowered the maximum Special Tax which can be
levied on property within the District. The annual maximum Special Tax is $16,500 per net useable acre.
After taking into account available revenue, the Special Tax rate is applied each year in the following
sequence until a sufficient amount is levied to include the sum necessary for Bond debt service,
Administrative Expenses and Reserve Account replenishment: (1) first, to developed property at up to 87%
of the maximum rate, (2) then, to undeveloped property at up to 87% of the maximum rate, (3) then, to all
developed and undeveloped property up to 100% of the maximum rate, (4) then to non-exempt, undeveloped
property offered for dedication to a public agency up to the maximum rate, and (5) finally, to non-exempt
undeveloped property conveyed to a public agency up to the maximum rate. In each step of the sequence, the
rate is applied proportionately to all properties subject to such step, as needed to produce the sum required.
All Taxable Property within the District is subject to the Special Tax in accordance with the Special
Tax Formula set forth as APPENDIX A hereto. Under no circumstances may the Special Tax on any parcel
exceed the maximum Special Tax rate determined by the District. See “APPENDIX A - RATE AND
METHOD OF APPORTIONMENT OF SPECIAL TAX” herein. The Special Tax is collected for the District
9
by the County in the same manner and at the same time as ad valorem property taxes are collected, although
the District may provide for other methods of collecting the Special Tax.
Priority of Lien
The principal of and interest on the Bonds are payable from the Special Tax authorized to be
collected within the District, and payment of the Special Tax is secured by a lien on certain real property
within the District. There are currently no other special tax or assessment liens on the property within the
District. In the event any such liens were to be levied in the future, such liens would be co-equal to and
independent of the lien for general taxes and any lien imposed under the Act, including that of the District,
regardless of when they are imposed on the property in the District. The imposition of additional special
taxes, assessments and general property taxes would increase the amount of independent and co-equal liens
which must be satisfied in foreclosure. For a discussion of valuation of the property within the District, see
the information below under the caption “SPECIAL RISK FACTORS - Value-to-lien Ratios.”
Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure
In the event of a delinquency in the payment of any installment of Special Taxes, the District is
authorized by the Act to order institution of an action in superior court to foreclose any lien therefor. The Act
provides that, upon foreclosure, the Special Tax lien will have the same lien priority as is provided for ad
valorem taxes.
The District covenants for the benefit of the Owners of the Bonds that it (i) will commence
foreclosure actions against any parcel with either (A) at least two (2) consecutive installments of delinquent
Special Taxes or (B) delinquent Special Taxes in excess of $35,000 on any one parcel, in each instance by
the December 1 following the close of each Fiscal Year in which such Special Taxes were due; and (ii) will
commence foreclosure actions against all parcels with delinquent Special Taxes by the December 1
following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than
95% of the total Special Tax levied and the amount on deposit in the Reserve Account is at less than the
Reserve Requirement, and (iii) will diligently pursue such foreclosure actions until the delinquent Special
Taxes are paid, and in no event shall such foreclosure actions exceed the time periods specified in Section
53356.1 of the Act.
In connection with the issuance of the Prior Bonds, the District undertook a similar obligation to
commence judicial foreclosure proceedings against parcels with delinquent Special Taxes in excess of
$1,500 by October 1 following the close of each fiscal year. As of November 20, 2009 there were four
delinquent installments of Special Taxes for Fiscal Year 2008/09 totaling $48,348 within the District and
foreclosure lawsuits have not yet been filed with respect to these delinquencies. The City has initiated the
foreclosure process by ordering title reports with respect to the delinquent parcels which is necessary before
a lawsuit can be filed. The City expects to file lawsuits against the delinquent parcels by the end of
December 2009.
Foreclosure proceedings are instituted by the bringing of an action in the superior court of the county
in which the parcel lies, naming the owner and other interested persons as defendants. The action is
prosecuted in the same manner as other civil actions. In such action, the real property subject to the Special
Taxes may be sold at a judicial foreclosure sale for a minimum price which will be sufficient to pay or
reimburse the delinquent Special Taxes.
The owners of the Bonds benefit from the Reserve Account established pursuant to the Indenture;
however, if delinquencies in the payment of the Special Taxes with respect to the Bonds are significant
enough to completely deplete the Reserve Account, there could be a default or a delay in payments of
principal and interest to the owners of the Bonds pending prosecution of foreclosure proceedings and receipt
by the District of the proceeds of foreclosure sales. Provided that it is not levying the Special Tax at the
maximum limits set forth in the Special Tax Formula and the Indenture, the District may adjust (but not to
10
exceed the maximum limits) the Special Taxes levied on all property within the District to provide an amount
required to pay interest on the Bonds and to replenish the Reserve Account.
Under current law, a judgment debtor (property owner) has at least 140 days from the date of service
of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to redeem and the
property is sold, his or her only remedy is an action to set aside the sale, which must be brought within 90
days of the date of sale. If, as a result of such an action a foreclosure sale is set aside, the judgment is revived
and the judgment creditor is entitled to interest on the revived judgment as if the sale had not been made
(California Code of Civil Procedure Section 701.680).
Foreclosure by court action is subject to normal litigation delays, the nature and extent of which are
largely dependent upon the nature of the defense, if any, put forth by the debtor and the condition of the
calendar of the superior court of the County. Such foreclosure actions can be stayed by the superior court on
generally accepted equitable grounds or as the result of the debtor’s filing for relief under the Federal
bankruptcy laws.
Reserve Account
In connection with the issuance of the Bonds, the District has established a Reserve Account
pursuant to the Indenture. In order to secure further the timely payment of principal of and interest on the
Bonds, the District is required to maintain on deposit in the Reserve Account an amount set forth in the
Indenture. Initially the Reserve Account will be funded in the amount of $_________. Interest earnings on
the Reserve Account shall be retained therein until the amount on deposit is equal to the lesser of maximum
annual debt service, 10% of the original principal amount of the Bonds or 125% of average annual debt
service. See “APPENDIX C – SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE”.
Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of,
including Sinking Fund Payments, and interest on any Bonds when due in the event that the moneys in the
Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the
Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due
and for the purpose of making any required transfer to the Rebate Fund upon written direction from the
District. If the amounts in the Interest Account, the Principal Account or the Redemption Account or the
Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on
any Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate
Fund when required, the Trustee shall withdraw from the Reserve Account for deposit in the Interest
Account, the Principal Account or the Redemption Account of the Special Tax Fund or the Rebate Fund, as
applicable, moneys necessary for such purposes.
Whenever moneys are withdrawn from the Reserve Account, after making the required transfers to
the Administrative Expenses Account, the Interest Account, the Principal Account, and the Redemption
Account, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund,
or from any other legally available funds which the District elects apply to such purpose, the amount needed
to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund
shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such
amounts will not be needed to make the deposits required to be made to the Administrative Expense
Account, the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund on
or before the next August 15. If the amounts in the Special Tax Fund together with any other amounts
transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve
Requirement, then the District shall include the amount necessary fully to restore the Reserve Account to the
Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special
Tax rates.
In connection with an extraordinary redemption of Bonds, or a partial defeasance of Bonds, amounts
in the Reserve Account may be applied to such extraordinary redemption or partial defeasance so long as the
11
amount on deposit in the Reserve Account following such extraordinary redemption or partial defeasance
equals the Reserve Requirement. To the extent that the Reserve Account is at the Reserve Requirement as of
the first day of the final Bond Year, amounts in the Reserve Account may be applied to pay the principal of
and interest due on the Bonds in the final Bond Year. Moneys in the Reserve Account in excess of the
Reserve Requirement not transferred in accordance with the preceding provisions of this paragraph shall be
withdrawn from the Reserve Account on the Business Day before each February 15 and August 15 and
transferred to the Interest Account of the Special Tax Fund.
No Parity Debt
The District may not issue any bonds or obligations or otherwise incur any loans, advances, or
indebtedness payable from the Net Taxes or any amounts deposited in the Special Tax Fund which are
secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding
Bonds, whether for refunding all or a portion of the Bonds then Outstanding or otherwise.
Conditions for the Issuance of Subordinate Debt
The District may issue bonds or obligations or incur loans, advances, or indebtedness which are
either (i) payable from, but not secured by a pledge of or lien upon, the Net Taxes or amounts deposited in
the Special Tax Fund, or (ii) secured by a pledge of or lien upon the Net Taxes and/or amounts deposited in
the Special Tax Fund which is subordinate to the pledge of and lien upon the Net Taxes and amounts
deposited in the Special Tax Fund (other than the Administrative Expenses Account therein) under the
Indenture for the security of the Bonds (“Subordinate Debt”) in such amount as shall be determined by the
District. The District may issue or incur such Subordinate Debt subject to the following specific conditions;
(1)
The District shall be in compliance with all covenants set forth in the Indenture and all
Supplemental Indentures;
(2)
If, and to the extent, such Subordinate Debt is payable from the Net Taxes and/or amounts
deposited in the Special Tax Fund, then the sum of the principal amount of (A) all Outstanding Bonds
coming due and payable following the issuance of such Subordinate Debt and (B) all Subordinate Debt that
is also bonded indebtedness shall not exceed $35,445,000, the reduced maximum amount of authorized
bonded indebtedness of the District established pursuant to Resolution No. 98-046 of the legislative body of
the District, adopted on April 28, 1998;
(3)
If, and to the extent such Subordinate Debt is bonded indebtedness, Net Taxes estimated to
be received for the then current Fiscal Year and all subsequent Fiscal Years shall be at least equal to 100% of
annual debt service on such Subordinate Debt, together with debt service on the Bonds then Outstanding and
all debt with a lien on Net Taxes senior to the lien of such Subordinate Debt (if any); and
(4)
The District shall deliver to the Trustee a written Certificate of an Authorized Representative
of the District certifying that the conditions precedent to the issuance of such Subordinate Debt set forth in
clauses (1) through (3) above have been satisfied.
THE CITY OF POWAY
The following material is descriptive of the City of Poway. It has been prepared by or excerpted
from sources as noted herein. For further information, see “APPENDIX B – THE CITY OF POWAY”
attached hereto.
12
History and Location
Poway developed as an unincorporated community until November 1980, when its 33,500 residents
voted to incorporate an area of about 38 square miles. It began its formal existence as a City on December 1,
1980. In November, 1986, the City annexed an additional 1,325 acres, for a total area of about 40 square
miles. Poway is located inland about three miles east of Interstate Highway 15, and is surrounded on three
sides by the City of San Diego. Driving distance southerly to downtown San Diego or the San Diego
International Airport is about 25 miles. The terrain is hilly and steep in some areas with gentle slopes in the
center of the City. Poway is relatively new in that over 70% of the housing stock postdates 1970.
City Organization
The City has, since incorporation, been governed and operated under the Council- Manager form of
government. The City Manager directs a work force of 226 full-time employees and appoints department
heads on the basis of specialized knowledge, experience and education in their area of responsibility. The
City employees are members of the State Public Employees Retirement System. The contributions to the
System are current and no unfunded contractual liability exists for past services. The following are the
current members of the City Council:
CITY COUNCIL
Council Member
Don Higginson, Mayor
Merrilee Boyack, Councilmember
Jim Cunningham, Councilmember
Carl Kruse, Councilmember
Betty Rexford, Councilmember
Term Expires
November, 2010
November, 2012
November, 2012
November, 2010
November, 2010
A petition recalling one Member of the City Council is currently being circulated in the City of
Poway. The recall proponents have until February 2, 2010 to submit over 5,000 signatures for verification.
If the signatures are found sufficient, the item will be placed on the June 2010 ballot. Even if the recall effort
is successful, the City Attorney has determined that the recall will have no affect on the actions taken by the
City to authorize the issuance, delivery and sale of the Bonds.
Population
At incorporation in 1980, there were about 33,500 people in the City limits. Poway has grown to a
population of 51,126, and expects to be built out according to general plan estimates to a population of
54,180. Poway is a low density community predominately of single family homes.
Housing and Income
The median selling price for new and existing single family homes in the City is about $502,000.
median household income for Poway in 2008 was $78,000, the second highest of incorporated cities in the
County. The median age of Poway residents is 40, and the family/household size was 3.3 in 2008. Owner
occupancy is high, and Poway is predominantly a single family community.
Climate
Poway, as part of San Diego County, has a relatively dry climate and its inland location spares it
much of the summer fog experienced along the coast. Temperatures are frost-free over 350 days per year,
and the City receives on the average approximately 9.6 inches of rain, principally between the months of
October and April.
13
Transportation
Poway is served by a variety of transportation modes. Commercial air travel is supplied by
Lindbergh Field, approximately 25 miles south in San Diego, and is supplemented by private and charter
plan service from the Palomar Airport, about 20 minutes to the west. Automobile travel is facilitated by
Interstate 15 which runs north/south several miles to the west of Poway. Public transportation is supplied by
the Metropolitan Transit District.
Services and Facilities
The City of Poway supplies its residents with water and sewer service. Power is supplied by San
Diego Electric and Gas, and telephone service by Pacific Bell. The City has its own parks and community
services departments and provides fire protection service, but contracts for police service from the County.
The current contract with the County for law enforcement services expires on June 30, 2012.
Health care facilities are provided by Pomerado Hospital campus, owned and operated by the
Palomar Pomerado Health System, Pomerado is a 107-bed acute care facility which features the adjacent
129-bed Villa Pomerado Convalescent Care Center. The hospital is licensed by the California Department of
Health, and accredited by the Joint Commission on Accreditation of Healthcare Organizations. Educational
facilities in the Poway Unified School District include 25 elementary schools, 6 middle schools and 6 high
schools, one of which is a continuation school. These educational facilities serve the populace of Poway as
well as the neighboring communities of Rancho Bernardo and Rancho Penasquitos. Several schools within
the City have recently been awarded national honors for excellence.
Recreational facilities in the City of Poway include a 20,000 square foot library, 25 parks, 4,700
acres of open space, and a community center. The community center also includes lighted softball/baseball
fields and a swimming pool. Golfing is available at local nonmembership country clubs. The 815-seat Poway
Center for the Performing Arts opened in 1990, and features professional touring artists, entertainers and
community programs. Residents of Poway have access to cultural and recreational facilities in the
metropolitan San Diego area as well.
THE DISTRICT
General
On September 13, 1988, the City adopted a Resolution of Intention to form a community facilities
district under the Act and to levy a Special Tax and incur bonded indebtedness for the purpose of financing
the Improvements. After conducting a noticed public hearing, on October 18, 1988, the City adopted the
Resolution of Formation, which established Community Facilities District No. 88-1 of the City of Poway
(Parkway Business Center), set forth the Special Tax Formula within the District and set forth a resolution
stating the necessity to incur bonded indebtedness in a total amount not to exceed $45,000,000, and called for
an election on the proposition of incurring the bonded indebtedness and levying the Special Tax. The total
amount of bonded indebtedness was reduced to $35,455,000 in connection with the issuance of the Prior
Bonds.
On November 1, 1988, an election was held within the District in which a sufficient number of the
landowners eligible to vote approved the proposition authorizing the proposed bonded indebtedness and levy
of the Special Tax. 100% of the eligible votes were cast, and all of the votes cast were “yes.”
The District consists of approximately 294 acres, of which 258.8 net usable acres are subject to the
Special Tax. The District is located in the southernmost section of the City between Community Road on the
west and Sycamore Canyon Road on the east. The District is bisected by Scripps Poway Parkway, which
intersects with Interstate 15 approximately 3 miles to the west. The net developable land in the District is
approximately 258.8 acres and is being used for commercial and industrial purposes (88 of the 102 lots are
14
currently developed). Approximately 52.49% of the entire special tax liability within the District is borne by
ten property owners. See “SPECIAL RISK FACTORS – Concentration of Ownership” and “The District –
Ownership of Property” of the lots remain undeveloped and the City does not know when or if such lots will
be developed. See “Ownership of Property” below.
Within the District there are 85 individual property owners. The property within the District is
currently considered built out and is being used for commercial and industrial purposes. Top tax payers
within the District include publically traded companies such as Cohu Inc. (“Cohu”), General Employment
Insurance Company (“GEICO”) and First American Title Insurance Company (“First American”). GEICO is
owned by Berkshire Hathaway Inc. and occupies the largest single parcel within the District. The parcel
consists of 20.6 acres and includes on-site amenities such as a fitness center, credit union and dining
facilities. Cohu, supplier of semiconductor test handling equipment, has its headquarters located on the
second largest parcel within the District, which consists of 16.5 acres. Six parcels within the District are
occupied by Slough Properties, which is owned by fortune 500 company HCP REIT. First American owns
three parcels of undeveloped property within the District which is planned for expansion according to local
commercial realtors. Shamrock Poway Investors, a land investment company, owns two parcels of
undeveloped property. See Table 5 under the heading “ASSESSED VALUE OF PROPERTY WITHIN THE
DISTRICT” herein for a more detailed description of the largest taxpayers within the District and assessed
value of property values therein.
Availability of Public Utilities
The District is served by the following public utilities:
Electricity:
Natural Gas:
Telephone Service:
Water Treatment/Distribution:
Sewer Collection/Disposal:
San Diego Gas & Electric
San Diego Gas & Electric
Pacific Bell
City of Poway
City of Poway
Land Use Within the District
The current estimated area of parcels in the District which are developed with a structure, currently
under development or ready for such development is approximately 258.8 acres (or 100% of the net useable
acreage). See “ASSESSED VALUE OF PROPERTY WITHIN THE DISTRICT – Assessed Valuation of
All Property Within the District and Value-to-Lien Ratio” below.
The Improvements
All improvements, including streets, curbs, drainage utilities, traffic signals and related infrastructure
improvements financed either by the Original Bonds or property owners have been completed. These public
improvements include streets, curbs, drainage utilities, and equipment and traffic signals.
Prior Delinquencies
The Special Tax levied on certain properties to pay debt service on the Original Bonds became
delinquent commencing in December, 1992. Following such delinquencies, the District attempted to
commence foreclosure proceedings against all delinquent property owners beginning in February, 1993,
although such foreclosure actions were delayed by certain landowner bankruptcy filings. During this delay,
the City loaned in excess of $4,700,000 to the District to pay debt service on the Original Bonds.
Additionally, the Trustee for the Original Bonds withdrew funds from the Original Bonds reserve fund to pay
debt service in 1994, 1995 and 1996. As of July 1, 2009, the amount owed by the District to the City under
this arrangement had been reduced to $1,000,000. Table 3 below demonstrates historical Special Tax
15
delinquencies within the District. See “SOURCES OF PAYMENT FOR THE BONDS – Delinquent
Payment of Special Tax; Covenant for Superior Court Foreclosure.”
Allocation of Special Tax
As of March 11, 1997, all of the property in the District was considered “Developed Property”
within the definition of the Special Tax Formula. The methodology of the allocation of the Special Tax
among properties within the District is set forth in “APPENDIX A - RATE AND METHOD OF
APPORTIONMENT OF SPECIAL TAX.” See also “SOURCES OF PAYMENT FOR THE BONDS Special Tax Methodology” herein.
The District has covenanted to annually levy the Special Tax in an amount sufficient to pay the
principal of and interest on the Bonds, and the administrative expenses for the ensuing fiscal year, plus the
amount, if any, necessary to replenish the Reserve Account to an amount equal to the Reserve Requirement.
The Special Tax Formula sets a maximum rate per acre which strictly limits the Special Tax that may be
levied each year, and a sequence for applying such rate to the parcels in the District based on a classification
of such parcels as either developed, undeveloped or exempt. Developed Property is generally defined as all
property with respect to which a final map has been recorded, which now includes all net usable property
within the District.
For purposes of determining the maximum Special Tax, the Special Tax Formula provides that
acreage of a parcel shall be determined by reference to the most current parcel map or other subdivision tract
map recorded in the Office of the County Recorder for San Diego County, or by another reliable means
established by the District. Since formation of the District, the City Council, acting in its capacity as the
legislative body of the District, has applied the Special Tax Formula based on the net useable acres of each
parcel, which excludes undevelopable portions of such property, such as slopes. As the Special Tax Formula
does not specify the method of determining parcel acreage, the City has determined to utilize the net useable
acre method for both Community Facilities District 88-1 and the adjoining Community Facilities District No.
1. If the City was required to levy the Special Tax on some other basis, it estimates such a reallocation would
involve no more than 3% to 5% of the annual Special Tax. Such reallocation would not affect the total
Special Tax levied, but it could increase the amount levied on individual parcels within the District. To the
extent such an increase resulted in a delinquency in payment, the City’s recourse would be foreclosure on
such property and/or to increase the levy on nondelinquent parcels up to the maximum Special Tax.
The Special Tax has been imposed on all property within the District, except those excluded as
provided in the Special Tax Formula. The amount of the annual Special Tax is determined by the City
Council, acting in its capacity as the legislative body of the District, based on the Special Tax Formula. That
amount includes the sum necessary to pay for current debt service, to create or replenish reserve funds, and
to pay for administrative expenses such as Trustee fees and arbitrage rebate calculations. In Fiscal Year
2008/09 the Special Tax was established by the District at $13,246.26 per net usable acre, which was 97.1%
of the maximum tax rate for all taxable parcels. In connection with the issuance of the Prior Bonds, the
District lowered the maximum Special Tax. The maximum Special Tax is $16,500 per net useable acre.
(See “SOURCES OF PAYMENT FOR THE BONDS - Special Tax Methodology” herein).
The City has received numerous inquiries regarding the levy of the Special Tax in the District from
parties interested in acquiring property therein. These inquiries have generally occurred when a party was
either preparing to make an offer or after an offer had been accepted, as part of the purchaser’s due diligence
process. Some inquiries also came from parties during the time when the City was marketing the property
within the District as part of foreclosure sales (see “Prior Delinquencies” above). In response to these
inquiries and in any material the City has provided about the property, the City has uniformly explained how
the Special Tax was spread on the net useable acreage of each parcel, how future Special Taxes were
determined, and other provisions relating to the District and the Prior Bonds.
16
Special Tax Levy and Collections
The Special Tax is levied by the District pursuant to the Rate and Method of Apportionment of
Special Taxes (see APPENDIX A hereto).
The total Special Tax levied in the District in Fiscal Year 2008/09 was $3,428,132, of which 98.61%
was collected. The Special Tax levy for Fiscal Year 2009/10 was $3,471,394.
The Act requires the District to levy the Special Tax no later than August 10 of each year, or August
21 with the prior written consent of the County Auditor. Table 1 below shows the total historical Special Tax
levy for property within the District for Fiscal Years 1999/00 through 2009/10.
TABLE 1
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY
(PARKWAY BUSINESS CENTER)
HISTORICAL SPECIAL TAX LEVY
(As of June 30)
Fiscal
Total
Year
Special Tax
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
$3,471,394
3,428,132
3,427,560
3,426,843
3,409,539
3,428,687
3,429,118
3,540,521
3,547,262
3,491,569
3,512,160
3,490,161
___________________
Source: City of Poway.
Table 2 below sets forth the ratio of Special Taxes levied at the maximum rate to the total revenues
required by the District to pay debt service on the Bonds, assuming there is no further change in the net
useable acreage in the District after the Bonds have been issued. Unless there are delinquencies, the Special
Tax is not expected to be levied at the maximum rate.
17
TABLE 2
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY
(PARKWAY BUSINESS CENTER)
ADEQUACY OF SPECIAL TAX REVENUE
Year
(August 15)
Debt Service
for Bonds*
Special Tax Levy at
Maximum Rate(1)
Ratio of
Maximum
Special Tax Levy
to Debt Service*
2010
$3,400,000
$4,270,000
2011
$3,400,000
$4,270,000
2012
$3,400,000
$4,270,000
2013
$3,400,000
$4,270,000
2014
$3,400,000
$4,270,000
2015
$1,485,000
$4,270,000
___________________
Source: City of Poway; Southwest Securities Inc.
* Preliminary, subject to change.
(1)
The annual maximum Special Tax is $16,500 per net useable acre.
PAYMENT FOR THE BOND - Special Tax Methodology” herein).
1.23%
1.23%
1.23%
1.23%
1.23%
2.88%
(See “SOURCES OF
Tax Delinquencies
As of November 20, 2009, there were four delinquencies in payment of the first installment of the
Fiscal Year 2008/09 Special Tax. These delinquencies totaled $48,348 and represented 1.4% of the total
Special Tax levied within the District. The City has undertaken the initial legal steps to file foreclosure
lawsuits with respect to these delinquencies. See “SOURCES OF PAYMENT FOR THE BONDS –
Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure”. See “Prior Delinquencies”
above for a discussion of historical Special Tax delinquencies in the District occurring prior to 1999 and
actions taken to correct the delinquencies.
The following table illustrates the historical Special Tax and cumulative Special Tax delinquencies
for property located within the District.
18
TABLE 3
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY
(PARKWAY BUSINESS CENTER)
HISTORICAL SPECIAL TAX DELINQUENCIES
(As of June 30)*
Fiscal
Year
Reporting
Date
Delinquent
Installments
Total Special
Tax Levy
Amount
Delinquent
Percent
Delinquent
2009
11/20/2009
4
$3,428,132
$48,248(1)
1.4%
2008
7/9/2008
1
3,427,560
15,893(2)
0.5%
2007
7/16/2007
3
3,426,843
55,613(3)
1.6%
2006
7/18/2006
2
3,409,539
63,458(4)
1.9%
(5)
2005
7/28/2005
2
3,428,687
12,943
0.4%
2004
7/21/2004
2
3,429,118
6,342(6)
0.2%
2003
7/21/2003
2
3,540,521
96,098(6)
2.7%
2002
7/24/2002
3
3,547,262
26,821(6)
0.8%
2001
7/24/2001
1
3,491,569
21,662(6)
0.6%
2000
7/25/2000
2
3,512,160
22,401(6)
0.6%
(6)
1999
7/16/1999
3
3,490,161
99,385
2.9%
___________________
Source: City of Poway
*
See “Prior Delinquencies” above.
(1)
As of November 20, 2009. Includes $4,310 plus interest unpaid from Fiscal Year 2005/06, which could
be subject to County foreclosure. Also, APN 317-28-740 is delinquent since second installment in Fiscal
Year 2008/09 for a total of $31,000.
(2)
This delinquency remained unpaid as of apportionment number 7 dated February 11, 2009.
(3)
The delinquency of $5,959 was paid in Fiscal Year 2007/08 by apportionment number 4 dated
October 31, 2007. Two delinquency totaling $49,655 remain unpaid as of apportionment number 6 dated
January 16, 2008.
(4)
This delinquency was paid in Fiscal Year 2006/07 by apportionment number 10 dated April 25, 2007.
(5)
The delinquency for $4,301 was paid in Fiscal Year 2005/06 by apportionment number 5 dated
December 8, 2004. The delinquency of $8,642 remains unpaid as of August 1, 2009. However, the Fiscal
Year 2005/06 and Fiscal Year 2006/07 assessments for this parcel were paid in full.
(6)
All prior delinquencies were paid in full.
19
ASSESSED VALUE OF PROPERTY WITHIN THE DISTRICT
Assessed Valuation of All Property Within the District and Value-to-Lien Ratio
The assessed value of all taxable property within the District as of August 1, 2009 was $584,376,009
in accordance with the County Assessor’s office. Based on the aggregate initial estimated principal amount
of the Bonds of $16,600,000 the value-to-lien ratio for the entire District is 35.2* to 1. However, not all
areas within the District share the same value-to-lien ratio. In addition, when all overlapping debt within the
District is taken into account, the value-to-lien ratio is 19.61* to 1. The following table shows the value-tolien ratio based on the assessed value. See “SPECIAL RISK FACTORS – Value-to-Lien Ratios” below. See
“SPECIAL RISK FACTORS - Future Initiatives” herein for a discussion of the potential impact of recent
growth control initiatives on future development of property within the District.
TABLE 4
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY
(PARKWAY BUSINESS CENTER)
SUMMARY OF VALUE-TO-LIEN RATIOS(1) (2) (3)
Value-to-Lien
Range
No. of
Parcels
Acres
Estimated
Fiscal Year
2009/10
Special Tax
Percent of
Total Special
Tax
1.99:1 or less
0
0
$0
0.00%
2:00:1-2.49:1
2
7
87,187
2.51%
2.50:1-2.99:1
2
6
76,457
2.20%
3.00:1-3.99:1
3
7
91,211
2.63%
4.00:1-4.99:1
0
0
0
0.00%
5.00:1-9.99:1
6
14
189,129
5.45%
10.00:1-19.99:1
11
22
300,930
8.67%
20.00:1 and higher
76
194
2,608,000
75.13%
TOTALS
100
250
$3,352,914
96.59%
________________
Source: City of Poway, Southwest Securities
(1)
Two parcels do not hold an assessed value, they are owned by the City and San Diego Gas &
Electric and make up the differences in Parcels, Acres and Special Tax.
(2)
Based upon Fiscal Year 2009-10 Assessed Valuations and $3,471,394 in Special Tax.
(3)
Based on Fiscal Year 2009-10 Special Tax levy of $13,413.42 per net usable acre.
Notwithstanding the foregoing and following discussions and estimates of value, there is no
assurance that, in the event of a foreclosure sale for delinquent Special Taxes, any bid would be received for
such property or that any bid received would be sufficient to pay such delinquent Special Taxes. See the
section herein entitled “SPECIAL RISK FACTORS.”
Table 5 below shows the ratio of the Assessed Value of the fifteen largest parcels in the District to
the levy of the Special Tax.
 Preliminary, subject to change.
20
TABLE 5
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY
(PARKWAY BUSINESS CENTER)
ASSESSED VALUES AND VALUE-TO-LIEN RATIOS
Property Owner
Geico
Slough Poway
Cohu Inc.
First American Title
Insurance Company
Sorrento West Properties
Poway Commerce Center
Crest
Shamrock Poway Investors
Poway Flex
City of Poway
Auerbach Family Trust
Crosthwaite Properties
Wells Lloyd Gift Trust
G R E Poway Property
Poway-Stowe
All Other Parcels
# of
Parcels
3
6
1
3
1
3
2
2
1
2
1
2
1
1
1
74
Assessed
Land
Value
$15,207,210
36,618.000
8,190,918
4,164,448
Assessed
Improved
Value
$45,880,612
44,590,000
17,170,188
19,403,060
Total
Assessed
Value
FY 2009/10
$61,087,822
81,208,000
25,361,106
23,567,508
7,854,000
13,770,000
6,072,443
3,671,792
9,259,560
17,340,000
11,782,290
11,868,867
--7,001,640
25,194,000
25,552,290
17,941,310
3,671,792
16,261,200
(1)
(1)
(1)
4,588,748
835,181
3,097,405
4,161,600
629,430
85,677,882
10,284,537
1,261,666
12,160,189
18,207,000
--146,614,732
14,873,285
2,096,847
15,257,594
22,368,600
629,430
232,292,614
___________________
Source: City of Poway, Southwest Securities
* Preliminary, subject to change.
(1)
Exempt property.
21
Estimated
FY 2009/10
Tax Levy
$386,307
375,576
221,321
210,591
126,086
124,745
101,942
92,553
93,894
89,065
83,163
80,481
69,750
64,384
54,995
1,296,542
% of
FY 2009/10
Tax Levy
11.13%
10.82%
6.38%
6.07%
3.63%
3.59%
2.94%
2.67%
2.70%
2.57%
2.40%
2.32%
2.01%
1.85%
1.58%
37.35%
Share of
Bonds*
1,847,295
1,795,981
1,058,346
1,007,032
602,937
596,522
487,481
442,581
448,995
425,904
397,682
384,853
333,539
307,883
262,983
6,395,000
Value
To Lien
Ratio
33.07
45.22
23.96
23.40
41.79
42.84
36.80
8.46
58.91
N/A
37.40
37.57
45.74
72.65
2.39
37.44
In comparing the assessed value of the real property within the District and the principal amount of
the Bonds, it should be noted that only the real property upon which there is a delinquent Special Tax can be
foreclosed upon, and the real property within the District which is current on its Special Taxes cannot be
foreclosed upon to pay delinquent Special Taxes levied on another parcel. Individual parcels may only be
foreclosed upon to pay delinquent Special Taxes levied against such parcels.
Direct and Overlapping Debt and Value-to-Lien Ratios
Table 6 shows the existing authorized indebtedness payable from taxes and assessments that may be
levied within the District as of November 1, 2009. Other public agencies may issue additional indebtedness
at any time, without the consent or approval of the City. See “SPECIAL RISK FACTORS – Future
indebtedness.”
TABLE 6
DIRECT AND OVERLAPPING DEBT SUMMARY
2009-10 Local Secured Assessed Valuation:
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:
Metropolitan Water District
Palomar Community College District
Poway Unified School District School Facilities Improvement District No. 2002-1
Poway Unified School District School Facilities Improvement District No. 2007-1
Palomar Pomerado Hospital District
City of Poway Community Facilities District No. 88-1
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
OVERLAPPING GENERAL FUND DEBT:
San Diego County General Fund Obligations
San Diego County Pension Obligations
San Diego County Superintendent of Schools Obligations
Palomar Community College District Certificates of Participation
Poway Unified School District Certificates of Participation
City of Poway Certificates of Participation
TOTAL OVERLAPPING GENERAL FUND DEBT
(2)
(3)
Debt 11/15/09
$
1,467
963,613
5,096,732
2,144,489
3,900,602
17,520,000(1)
$29,626,903
% Applicable(2)
0.002%
0.002
0.002
0.011
0.029
0.193
Debt 11/15/09
$
8,613
17,070
440
766
36,965
94,618
$ 158,472
$29,785,375(3)
COMBINED TOTAL DEBT
(1)
% Applicable
0.0005%
0.635
2.866
2.898
0.934
100.
Equal to outstanding amount of the Prior Bonds.
Based on redevelopment adjusted assessed valuation of $8,391,523.
Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds
and non-bonded capital lease obligations.
Ratios to 2009-10 Assessed Valuation:
Direct Debt ($17,520,000) .......................................................
Total Direct and Overlapping Tax and Assessment Debt ........ 5.07%
Combined Total Debt.................................................................
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/09: $0
22
3.00%
5.10%
Priority of Lien
The principal of and interest on the Bonds are payable from the Special Tax collected within the
District (less amounts allocated to Administration Fee), and payment of the Special Tax is secured by a lien
on certain real property within the District. There currently are other special taxes or assessments levied on
property within the District.
No additional bonds may be issued within the District. Although the bond authorization at the time
of formation was $45,000,000, the City Council adopted Resolution No. 98-046 which determined to
eliminate remaining authorized but unissued debt and to lower maximum Special Tax within the District.
See “INTRODUCTION” and “SOURCES OF PAYMENT FOR THE BONDS – Special Tax Methodology.”
Other public agencies whose boundaries overlap those of the District could, without the consent of
the City and in certain cases without the consent of the owners of the land within the District, impose
additional taxes or assessment liens on the land within the District for the purpose of financing additional
regional or local public improvements or services. The lien created on the land within the District through the
levy of such additional taxes or assessments may be on a parity with the lien of the Special Tax. The
imposition of additional Special Taxes, assessments and general property taxes will increase the amount of
independent and co-equal liens which must be satisfied in foreclosure.
In addition to future bonds secured by property within the District, construction loans may be
obtained by the developers in order to complete their projects. The deeds of trust securing debt on the
property within the District take a junior position to the lien of the Special Tax.
SPECIAL RISK FACTORS
The following is a discussion of certain special risk factors which should be considered, in addition
to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not
purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein
could adversely affect the ability or willingness of the home owners in the District to pay their Special Taxes
when due. Such failures to pay Special Taxes could result in the inability of the City to make full and
punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events
discussed herein could adversely affect the value of the property in the District. See “THE APPRAISAL
AND VALUE-TO-LIEN RATIOS” and “LIMITATIONS ON REMEDIES” below.
Concentration of Ownership
Approximately 52.49% of the entire Special Tax liability within the District is borne by ten property
owners. Because of this concentration of ownership of District land, the timely payment of the Bonds
depends upon the willingness and ability of those owners to pay the Special Tax with respect to their
property when due. The only asset of each owner of property within the District which constitutes security
for the Bonds is that owner’s real property holdings located within the District and subject to the Special Tax.
Future Land Use Regulations and Growth Control Initiatives
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 growth. While it is expected that none of the
initiatives are relevant to the District, due to the existence of a development agreement and certain actions
taken by the Developer with respect to the property within the District, owners of the Bonds should assume
that any event that significantly affects the ability to develop land in the District would cause the land values
within the District to decrease substantially and could affect the willingness and ability of the owners of the
land within the District to pay the Special Taxes when due.
23
Government Code Section 66474.3, enacted by the California State Legislature in 1988, provides
some limited protection against the adverse impact resulting from a growth management initiative. The
provision empowers a local legislative body to allow a project to develop in spite of a growth management
initiative or ordinance if the local legislative body finds that application of the enacted initiative measure is
likely to cause a default on land-secured bonds issued to finance infrastructure benefiting the project. In such
case, the City or the County could permit development in the District to proceed in a manner consistent with
the approved tentative map. The cited Government Code Section includes in the definition of land- secured
bonds, any bonds issued pursuant to the Act so long as such bonds were issued and sold at least 90 days
before the proposed initiative was adopted by either popular vote or by ordinance adopted by the legislative
body.
In evaluating the investment quality of the Bonds, investors should assume that the possible
enactment of more restrictive land use policies or regulations by the City, by the County or by voter initiative
presents a substantial risk to the timely construction and completion of development in the District, except
with respect to units for which building permits have already been issued and substantial work and liabilities
have been incurred in good faith reliance thereon prior to the date of adoption of any such land use
regulations.
The failure to complete development in the District as planned, or substantial delays in the
completion of the development due to litigation or other causes may increase the amount of delinquencies
and/or reduce the value of the property within the District.
Hazardous Substances
Any discovery of a hazardous substance detected on property within the District would affect the
marketability and the value of some or all of the property in the District. In that event, the owners and
operators of a parcel within the District may be required by law to remedy conditions of the parcel relating to
releases or threatened releases of hazardous substances. The federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, sometimes referred to as “CERCLA” or the “Superfund
Act,” is the most well-known and widely applicable of these laws. California laws with regard to hazardous
substances are also applicable to property within the District and are as stringent as the federal laws. Under
many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition of
property whether or not the owner (or operator) has anything to do with creating or handling the hazardous
substance. The effect, therefore, should any of the parcels be contaminated by a hazardous substance is to
reduce the marketability and value of the parcel by the costs of remedying the condition, because the
purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels within
the District resulting from the existence, currently, on the parcel of a substance presently classified as
hazardous but which has not been released or the release of which is not presently threatened, or may arise in
the future resulting from the existence, currently, on the parcel of a substance not presently classified as
hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the
existence of a hazardous substance but from the method of handling it. All of these possibilities could
significantly affect the value of a parcel within the District that is realizable upon a foreclosure sale.
A 5.5 acre parcel within the District is owned by the Poway Redevelopment Agency, and is utilized
as a City material handling yard (the “Yard”) designed to process and temporarily store all kinds of matter
collected by the City in the course of its daily operations. This matter includes: silt, vegetation and debris
from the storm drainage infrastructure, including open channels and local natural waterways; green waste
from tree trimmings; and roadway trash, old asphalt and concrete collected from the rights-of-way. These
materials are placed in temporary staging areas at the Yard awaiting sorting and other processing to separate
that which is recyclable from that which must be disposed of in landfills. The Yard is also used for long-term
storage of various lengths and diameters of concrete and PVC pipe, as well as special fittings, used to make
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emergency repairs to the City’s water and sewerage systems. Additionally, there is a permanent household
hazardous waste collection facility (“PHHWCF”) located at the Yard for the drop-off convenience of private
citizens of household hazardous waste (“HHW”) such as used oil, paints, unused pesticides, solvents, etc.
Temporary storage of this HHW material, pending the segregation of like materials into appropriate shipping
containers, is also provided at the PHHWCF. This facility is operated under contract by the County of San
Diego’s Environmental Health Department (“DEH”). It is a permitted facility and subject to monthly and “at
will” monitoring. Moreover, the DEH is required to make annual reports to the State Department of Toxic
Substance and Control. The PHHWCF is open each Saturday except on holiday weekends. Neither the City
nor the Agency is aware of, or has received notice regarding, any hazardous substance condition which
would adversely affect the value of the Yard.
Land Values
The value of the land within the District is a critical factor in determining the investment quality of
the Bonds. If a property owner is delinquent in the payment of the Special Tax, the District’s only remedy is
to commence foreclosure proceedings in an attempt to obtain funds to pay the Special Tax. Reductions in
land values due to a downturn in the economy, physical events such as earthquakes or floods, stricter land
use regulations or other events will adversely impact the security of the Special Tax and the Bonds.
The assessed value of property within the District is an estimate of the value of the property within
the District as determined by the County. No assurance can be given that the land values will not decline in
the future, if one or more events, such as natural disasters or adverse economic conditions, occur.
No assurance can be given that, should a parcel with delinquent Special Tax be foreclosed upon and
sold for the amount of the delinquency, any bid will be received for such property or, if a bid is received, that
such bid will be sufficient to pay all delinquent Special Taxes with respect to such parcel.
The City is not aware of any seismic conditions or endangered species issues which would adversely
affect the ability of the Developer or subsequent owners to develop the property within the District.
Bankruptcy
The payment of property owners’ taxes and the ability of the District to foreclose the lien of
delinquent unpaid Special Taxes 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 “SOURCES OF PAYMENT
FOR THE BONDS - Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure,”
herein.
The various legal opinions to be delivered concurrently with the delivery of the Bonds (including
Bond Counsel’s approving legal opinion) will be qualified, as to the enforceability of the various legal
instruments, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors
generally.
Although bankruptcy proceedings would not cause the Special Taxes to become extinguished,
bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings.
Such delay would increase the likelihood of a default in payment of the interest on the Bonds and the
possibility of delinquent tax installments not being paid in full.
Other Public Facilities
The City, the County and certain other public agencies are authorized by the Act to form other
community facilities districts and improvement areas and, under other provisions of State law, to form
special assessment districts, either or both of which could include all or a portion of the land within the
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District. There can be no assurance that the property owners within the District will not petition for the
formation of other community facilities districts and improvement areas or for a special assessment district or
districts and that parity Special Taxes or special assessments will not be levied by the City or some other
public agency to finance additional public facilities. See “Parity Taxes and Special Assessments,” herein.
Disclosure to Future Property Owners
The City has recorded a Notice of Special Tax Lien, pursuant to Section 53328.3 of the Act, in the
Office of the County Recorder of the County of San Diego. While title companies normally refer to such
notice in title reports and sellers of property may be required to give prospective buyers of property a notice
of special tax in accordance with Sections 53340.2 or 53341.5 of the Act, there can be no assurance that such
reference will be made or notice given if made, that a prospective property owner or lender will consider
such Special Tax obligation in the purchase of property or lending of money thereon. There also can be no
assurance that if such obligation is considered, that a prospective homebuyer or lender will not regard the
obligation as too costly. Failure to disclose the existence of the Special Tax may affect the willingness and
ability of future owners of land within the District to pay the Special Taxes when due.
Parity Taxes and Special Assessments
The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land
on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and
special assessments and is co-equal to and independent of the lien for general property taxes upon the same
property regardless of when they are imposed. The Special Taxes have priority over all existing and future
private liens imposed on the property. For a discussion of the existing assessment obligations of the District,
see “THE DISTRICT - Priority of Lien.”
Insufficiency of Special Taxes
The Special Tax Formula specifies a procedure for determining the amount of the Special Tax to be
levied in order to equal the amount needed to be collected. Basically, Taxable Property will be taxed up to
the maximum rates applicable, until the amount levied equals the amount needed. The only property that is
exempt from the Special Tax is property that has been or will be conveyed or irrevocably offered for
dedication to a public agency, certain property utilized for common benefit and certain property to remain as
open space; property designated as exempt totals approximately 28.2 acres.
The Act provides that, if any property within the District not otherwise exempt from the Special Tax
is acquired by a public entity through a negotiated transaction, or by gift or device, the Special Tax will
continue to be levied on and enforceable against the public entity that acquired the property. In addition, the
Act provides that, if property subject to the Special Tax is acquired by a public entity through eminent
domain proceedings, the obligation to pay the Special Tax with respect to that property, to the extent
necessary to cover outstanding debt, is to be treated as if it were a special assessment and be paid from the
eminent domain award. The constitutionality and operation of these provisions of the Act have not been
tested in the courts. If the federal government or another non-taxable entity successfully takes the position
that property owned by it and subject to the Special Tax becomes exempt from taxation, the Special Tax will
be reallocated to the remaining taxable properties within the District, subject to the limitation of the
maximum authorized rate of levy on each parcel. This could result in the owners of such property paying a
greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special
Tax. Moreover, if a substantial portion of land within the District became exempt from the Special Tax
because of public ownership, or otherwise, the Maximum Special Tax which could be levied upon the
remaining acreage might not be sufficient to pay the interest on the Bonds when due.
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Tax Delinquencies
Under provisions of the Act, the Special Taxes will be billed to the properties within the District 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 nonpayment, as do regular property tax installments.
Special Tax installment payments cannot be made separately from property tax payments. 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
Special Tax payments in the future.
As of November 20, 2009, there were four delinquent installments of Special Taxes within the
District that were Taxes that were levied in fiscal year 2009/10 in the total amount of $48,348 representing
1.4% of the taxes that were levied within in the District. See “SOURCES OF PAYMENT FOR THE
BONDS - Delinquent Payments of Special Tax; Covenant for Superior Court Foreclosure,” for a discussion
of the provisions which apply, and procedures which the City is obligated to follow, in the event of
delinquency in the payment of Special Taxes.
A large portion of the undeveloped property in the District was delinquent from 1992 until 1997,
when it was purchased by the Developer. See “THE DISTRICT - Prior Delinquencies” herein.
No General Obligation of the City
The Bonds are not general obligations of the City or the District but are limited obligations of the
City and the District payable solely from the proceeds of the Special Tax and certain funds held under the
Indenture, including amounts deposited in the Reserve Account and investment income thereon, and the
proceeds, if any, from the sale of property in the event of a foreclosure. See “SOURCES OF PAYMENT
FOR THE BONDS.” Any tax for the payment of the Bonds will be limited to the Special Tax to be collected
within the jurisdiction of the District.
No Acceleration Provision
The Indenture does not contain a provision allowing for the acceleration of the principal of the
Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture.
Loss of Tax Exemption
As discussed in this Official Statement under the caption “TAX MATTERS,” interest on the Bonds
could become includable in gross income for purposes of federal income taxation retroactive to the date the
Bonds were issued, as a result of future acts or omissions of the District in violation of its covenants in the
Indenture. Should such an event of taxability occur, the Bonds are not subject to a special redemption and
will remain outstanding until maturity or until redeemed under one of the other redemption provisions
contained in the Indenture.
Value-to-Lien Ratios
Neither the City nor the District makes any representation as to whether the assessed value of the
land in the District or the value-to-lien ratios for such land will remain at such value or the ratios discussed
herein. Moreover, purchasers of the Bonds should not assume that the property within the District could be
sold at its assessed value at a foreclosure sale to collect delinquent Special Taxes.
No additional bonds may be issued within the District. Although the bond authorization at the time
of formation was $45,000,000, the City Council adopted Resolution No. 98-046 which reduced the total
amount of authorized bonded indebtedness of the Prior Bonds and to lower maximum Special Tax within the
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District. See “INTRODUCTION” and “SOURCES OF PAYMENT FOR THE BONDS – Special Tax
Methodology.”
Purchasers of the Bonds should also understand that property values may vary throughout the
District. Consequently, the ratios discussed under “ASSESSED VALUE OF PROPERTY WITHIN THE
DISTRICT” are not consistent among different parcels in the District. See “SECURITY FOR THE BONDS Direct and Overlapping Debt and Value-to-Lien Ratio” and “- Other Financing Districts.” These inconsistent
property values are significant because the only remedy available to the City for collection of delinquent
Special Taxes is to initiate judicial foreclosure proceedings against the properties with delinquent Special
Taxes.
Parity Taxes and Special Assessments
Property within the Improvement Area is subject to taxes and assessments imposed by public
agencies other than the City that also have jurisdiction over the land within the Improvement Area. See
“SECURITY FOR THE BONDS - Direct and Overlapping and Value-to-Lien Ratio” and “- Other Financing
Districts”. The Special Taxes and any penalties and interest thereon will constitute a lien upon the lots and
parcels of land in the Improvement Area upon which the Special Taxes will annually be levied until they are
paid. Such lien is on a parity with special taxes and special assessments levied by other agencies and is
coequal to and independent of the lien for general property taxes regardless of when they are imposed upon
the same property. The Special Taxes have priority over all existing and future private liens imposed on
property in the Improvement Area, including mortgage loans on owner-occupied residential properties. The
City has no control, however, over the ability of other agencies and districts to incur indebtedness secured by
special taxes or assessments payable from all or a portion of the property in the Improvement Area. Any such
special taxes or assessments will be secured by a lien on such property on a parity with the lien of the Special
Taxes and any penalties and interest thereon.
Payments by FDIC
The ability of the City to collect interest and penalties allowed by State law and to foreclose on
property with delinquent Special Taxes may be limited if the Federal Deposit Insurance Corporation (the
“FDIC”) has or obtains an interest in the property. The FDIC would obtain such an interest by taking over a
financial institution which has made a loan which is secured by real property within the Improvement Area.
The FDIC has issued a policy statement (the “Policy Statement”) which provides that real property
owned by the FDIC is subject to state and local 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 and the orderly administration of the affairs of the institution for which the FDIC is
acting, 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 or recognize liens for such amounts. If any property taxes (including interest) on
FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC),
the FDIC will pay the taxes. The Policy Statement further provides that 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 its consent.
The Policy Statement provides 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 Mello-Roos
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Community Facilities Act and any 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.
The City is unable to predict what effect the FDIC’s application of the Policy Statement would have
if there were a delinquency in Special Taxes levied on a parcel in the Improvement Area in which the FDIC
had an interest. However, it should be assumed that there would not be a buyer at a foreclosure sale if the
FDIC’s lien could not be foreclosed. It should also be assumed that the City will be unable to foreclose on
any parcel owned by the FDIC. In either event, there would be a draw on the Reserve Fund and, if the
delinquency continued, there could be a default in payment of principal of and interest on the Bonds.
Constitutional Amendment
An initiative measure commonly referred to as the “Right to Vote on Taxes Act” (the “Initiative”),
Proposition 218, was approved by the voters of the State of California at the November 5, 1996 general
election. The Initiative added Article XIII C (“Article XIII C”) and Article XIII D to the California
Constitution. 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.”
Among other things, Section 3 of Article XIII C states that “... the initiative power will not be
prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge.”
The City believes, however, that Article XIII C confers on the voters no greater power as to the reduction or
repeal of the Special Taxes than the power reserved to the legislative body of the District (i.e., the Board of
Education).
The Act imposes on the City Council a statutory duty to levy that amount of Special Taxes which is
required for the payment of the principal of and interest on the Bonds, including any necessary replenishment
of bond reserve funds and any amount required by federal law to be rebated to the United States for the
Bonds (the “Minimum Levy”). In addition, the Act prohibits the Board of Education from adopting any
resolution to reduce the rates of the Special Taxes or terminate the levy of the Special Taxes pledged to repay
the Bonds unless it determines that the reduction or termination of the Special Taxes would not interfere with
the timely retirement of the Bonds. Accordingly, the City believes that the Initiative has not conferred on the
voters the power to repeal or reduce the Special Taxes below the amounts required for the Minimum Levy.
However, the application of the Initiative will ultimately be determined by the courts. It is not possible to
predict, with certainty, how the courts will interpret the Initiative or the nature of any remedy that may be
granted by the courts. See “Limitations on Remedies” below.
Further, no assurance can be given regarding the future levy of the Special Taxes in amounts greater
than the level required for the Minimum Levy. Nevertheless, the City has covenanted that, to the extent it is
legally permitted to avoid doing so, it will not initiate and conduct proceedings to reduce the maximum
Special Tax rates for the Improvement Area. The maximum Special Tax rates may be reduced, however,
upon the full or partial prepayment of the obligation of a parcel of property in the Improvement Area to pay
the Special Taxes as permitted by the Rates and Method of Apportionment of Special Tax. In connection
with the foregoing covenants, the Board of Education has made a legislative finding and determination that
any elimination or reduction of Special Taxes below the amounts required for the Minimum Levy would
interfere with the timely retirement of the Bonds. The City has further covenanted that in the event an
ordinance is adopted by initiative which purports to reduce the maximum Special Tax rates, it will
commence and pursue legal action in order to preserve its ability to comply with these covenants to levy
Special Taxes. However, no assurance can be given as to the enforceability of such covenants.
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Future Initiatives
The Initiative was submitted to and approved by the voters of the State pursuant to the State’s
constitutional initiative process. The Supreme Court of the State has held that an initiative can repeal a tax
ordinance and prohibit the imposition of further such taxes, and that the exemption of taxes from the
referendum requirements does not apply to initiatives. From time to time, other initiative measures could be
adopted by the voters of the State. The adoption of any such initiative might place limitations on the ability
of the State, the City and other local districts to increase revenues or increase appropriations.
Limited Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary
market exists, that the Bonds can be sold for any particular price. Although the City 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 required financial
information does not give rise to monetary damages but only an action for specific performance.
Occasionally, because of general market conditions, lack of current information, or the absence of a credit
rating for bonds, or because of adverse history or economic prospects associated with a particular bond issue,
secondary marketing practices in connection with a bond issue are suspended or terminated. Also, prices of
bond issues for which a market is being made will depend upon current circumstances, and could be
substantially different from the original purchase price.
Limitations on Remedies
Remedies available to 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 Bonds or to preserve the tax-exempt status of
the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the
extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance
or transfer, moratorium, or other similar laws affecting generally the enforcement of creditors’ rights, by
equitable principles and by the exercise of judicial discretion. Additionally, the Bonds are not subject to
acceleration in the event of the breach of any covenant or duty under the Indenture. The lack of availability
of certain remedies or the limitation of remedies may entail risks of delay, limitation, or modification of
Bondowner rights.
CONTINUING DISCLOSURE
The City has covenanted for the benefit of holders and beneficial owners of the Bonds to provide
certain financial information and operating data relating to the City and the District by not later than six
months following the end of the Authority’s fiscal year (which currently would be January 1), commencing
with the report for the 2009/10 Fiscal Year (which would be available by January 1, 2011) (the “Annual
Report”) and to provide notices of the occurrence of certain enumerated events, if material. The Annual
Report will be filed by the City with each Nationally Recognized Municipal Securities Information
Repository, and with the appropriate State information repository, if any (collectively, the “Repositories”).
The notices of material events will be filed by the City with the Repositories. The specific nature of the
information to be contained in the Annual Report or the notices of material events is summarized below
under the caption in “APPENDIX D - Form of Continuing Disclosure Certificate.” These covenants have
been made in order to assist the Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). The City has
never failed to comply in all material respects with any previous undertakings with respect to the Rule 15c212(b)(5) to provide annual financial information or notices of material events.
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RATING
Standard & Poors Ratings Group (“S&P”) has assigned its municipal bond rating of “BBB+” to the
Bonds. An explanation of the significance of the rating may be obtained from S&P at 55 Water Street, New
York, New York, 10041. There is no assurance that the rating will continue for any given period of time or
that the rating will not be revised downward or withdrawn entirely by such rating agency, if, in its judgment,
circumstances so warrant. Any such downward revision or withdrawal of the rating may have an adverse
effect on the market price of the Bonds.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
Upon delivery of the Bonds, The Arbitrage Group, Inc., independent certified public accountants,
will deliver a report stating that the firm has reviewed (a) the mathematical accuracy of certain computations
relating to the adequacy of the Investment Securities (as defined in the Escrow Agreement) and the interest
thereon to pay when due the redemption price, and principal and interest due and to become due on the Prior
Bonds on and prior to the redemption date thereof, and (b) the computations of actuarial yields of the Bonds
and of investments in the Escrow Fund established pursuant to the Escrow Agreement. Such computations
were based solely on assumptions and information supplied by the Underwriter on behalf of the District. The
Arbitrage Group, Inc. has restricted its procedures to examining the arithmetical accuracy of certain
computations and has not made any study or evaluation of the assumptions and information on which the
computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness
of the assumptions, or the achievability of future events.
LEGAL OPINION
The validity of the Bonds and certain other legal matters are subject to the approving legal opinion of
Richards, Watson & Gershon, A Professional Corporation, Los Angeles, California, Bond Counsel. Bond
Counsel undertakes no responsibility to the Bond investors for the accuracy, completeness or fairness of this
Official Statement. A complete copy of the proposed form of Bond Counsel opinion is set forth in
APPENDIX E to this Official Statement. Fees payable to Bond Counsel, the Financial Advisor and the
Trustee are contingent upon the sale and delivery of the Bonds.
TAX MATTERS
The Internal Revenue Code of 1986, as amended (the “Code”) establishes certain requirements
which must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain
excluded from gross income for Federal income tax purposes. Noncompliance with such requirements could
cause interest on the Bonds to be included in gross income for Federal income tax purposes retroactive to
their date of issue. These requirements include, but are not limited to, provisions which limit how the
proceeds of the Bonds may be spent and invested, and generally require that certain investment earnings be
rebated on a periodic basis to the United States of America. The District has made certifications and
representations and has covenanted to maintain the exclusion of the interest on the Bonds from gross income
for Federal income tax purposes pursuant to Section 103(a) of the Code.
In the opinion of Richards, Watson & Gershon, A Professional Corporation, Bond Counsel, under
existing law and, assuming the accuracy of such certifications and representations by the District and
compliance with such covenants, (i) interest on the Bonds is excluded from gross income for Federal income
tax purposes under Section 103 of the Code, and (ii) the Bonds are not “specified private activity bonds”
within the meaning of Section 57(a)(5) of the Code and, therefore, interest on the Bonds is not a preference
item for purposes of computing the alternative minimum tax imposed by Section 55 of the Code. Bond
Counsel is also of the opinion that interest on the Bonds is exempt from State of California personal income
taxes. Bond Counsel is also of the opinion that, under current federal income tax laws, the Bonds will
qualify as qualified tax-exempt obligations under Section 265(b)(3) of the Code.
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Although a portion of the interest on certain tax-exempt obligations earned by certain corporations
may be included in the calculation of adjusted current earnings for purposes of the federal corporate
alternative minimum tax, interest on certain tax-exempt obligations issued in 2009 and 2010, including the
Bonds, is excluded from that calculation. Interest on the Bonds may be subject to a federal branch profits tax
imposed on certain foreign corporations doing business in the United States and to a federal tax imposed on
excess net passive income of certain S corporations. The exclusion of interest from gross income for federal
income tax purposes may have certain adverse federal income tax consequences on items of income,
deduction or credit for certain taxpayers, including financial institutions, certain insurance companies,
recipients of Social Security and Railroad Retirement benefits, those deemed to incur indebtedness to acquire
tax-exempt obligations, and individuals eligible for the earned income tax credit. Bond Counsel will express
no opinion regarding these and other such consequences.
Bond Counsel has not undertaken to advise in the future whether any circumstances or events
occurring after the date of issuance of the Bonds may affect the tax status of interest on the Bonds. No
assurance can be given that future legislation, or amendments to the Code, if enacted into law, will not
contain provisions which could eliminate, or directly or indirectly reduce the benefit of the exclusion of
interest on the Bonds from gross income for Federal income tax purposes. Certain requirements and
procedures contained or referred to in relevant documents may be changed and certain actions may be taken,
under the circumstances and subject to the terms and conditions set forth in such documents, upon the advice
or with the approving opinion of nationally recognized bond counsel. Bond Counsel expresses no opinion as
to any Bond, or the interest thereon, if any such change occurs or action is taken upon the advice or approval
of bond counsel other than Richards, Watson & Gershon, A Professional Corporation.
If the issue price of a Bond (the first price at which a substantial amount of the bonds of a maturity
are to be sold to the public) is less than the stated redemption price at maturity of such Bond, the difference
constitutes original issue discount, the accrual of which is excluded from gross income for Federal income
tax purposes to the same extent as interest on the Bonds. Further, such original issue discount accrues
actuarially on a constant yield method over the term of each such Bond and the basis of each Bond acquired
at such initial offering price by an initial purchaser thereof will be increased by the amount of such accrued
original issue discount. The accrual of original issue discount may be taken into account as an increase in the
amount of tax-exempt income for purposes of determining various other tax consequences of owning such
Bonds. Purchasers who acquire Bonds with original issue discount are advised that they should consult with
their own independent tax advisors with respect to the state and local tax consequences of owning such
Bonds.
If the issue price of a Bond is greater than the state redemption price at maturity of such Bond, the
difference constitutes original issue premium, the amortization of which is not deductible from gross income
for Federal income tax purposes. The amount of amortizable Bond premium for a taxable year is determined
actuarially on a constant interest rate basis over the term of each such Bond, or in the case of a callable bond,
possibly on a more accelerated basis. For purposes of determining gain or loss on the sale or other
disposition of such Bond, the purchaser is required to decrease such purchaser’s adjusted basis in such Bond
annually by the amount of amortizable Bond premium for the taxable year.
Prospective purchasers of the Bonds should consult their own independent tax advisers regarding
pending or proposed federal and state tax legislation and court proceedings, and prospective purchasers of
the Bonds at other than their original issuance at the respective prices indicated on the cover of this Official
Statement should also consult their own tax advisers regarding other tax considerations such as the
consequences of market discount, as to all of which Bond Counsel expresses no opinion.
The Internal Revenue Service has established a program to audit issues of tax-exempt bonds in order
to determine whether, in its view, interest should instead be included in gross income of the Bondowners for
purposes of federal income taxation. It cannot be predicted whether or not the Bonds will be subjected to
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such an audit. If such an audit is undertaken, it could adversely affect the market value of the Bonds until the
audit is concluded, regardless of the ultimate outcome of the audit.
NO LITIGATION
At the time of delivery of and payment for the Bonds, the District will deliver its Certificate that
except as disclosed herein, to the best of its knowledge there is no action, suit, proceeding, inquiry or
investigation at law or in equity before or by any court or regulatory agency pending against the City or the
District affecting their existence or the titles of their respective officers to office or seeking to restrain or to
enjoin the issuance, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with
the Indenture, or the collection or application of the Special Tax to pay the principal of and interest on the
Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Indenture or any
action of the City or the District contemplated by any of said documents, or in any way contesting the
completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting
the powers of the City or the District or their authority with respect to the Bonds or any action of the City or
the District contemplated by any of said documents.
FINANCIAL ADVISOR
The City has retained Public Financial Management, Inc., Newport Beach, California, as Financial
Advisor for the sale of the Certificates. The Financial Advisor is not obligated to undertake, and has not
undertaken to make, an independent verification or to assume any responsibility for the accuracy,
completeness of fairness of the information contained in this Official Statement.
Public Financial Management, is an independent advisory firm and is not engaged in the business of
underwriting, trading, or distributing municipal or other public securities.
UNDERWRITING
Southwest Securities, Inc., the Underwriter of the Bonds, has agreed to purchase the Bonds from the
District at a purchase price of $__________ (representing the par amount of the Bonds less an Underwriters’
discount of $___________, and plus an original issue premium of $___________). The purchase contract
pursuant to which the Underwriter is purchasing the Bonds provides that the Underwriter will purchase all of
the Bonds if any are purchased. The obligation of the Underwriter to make such purchase is subject to certain
terms and conditions set forth in such contract of purchase.
The public offering prices of the Bonds may be changed from time to time by the Underwriter. The
Underwriter may offer and sell Bonds to certain dealers and others at prices lower than the offering prices
stated on the cover page hereof.
MISCELLANEOUS
All quotations from, and summaries and explanations of the Indenture, the Bonds, the Act or other
statutes and documents contained herein do not purport to be complete, and reference is made to said
documents and statutes for full and complete statements of their provisions.
This Official Statement is submitted only in connection with the sale of the Bonds by the District.
All estimates, assumptions, statistical information and other statements contained herein, while taken from
sources considered reliable, are not guaranteed by the City, the District or the Underwriter. The information
contained herein should not be construed as representing all conditions affecting the City, the District or the
Bonds.
33
All information contained in this Official Statement pertaining to the District has been furnished by
the City and the District and the execution and delivery of this Official Statement has been duly authorized
by the District.
COMMUNITY FACILITIES DISTRICT NO. 88-1
(PARKWAY BUSINESS CENTER) OF THE CITY OF
POWAY
By: ___________________________________________
City Manager
34
APPENDIX A
RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY,
The Special Tax to be levied and collected by the District shall be determined for all land in the
District using the following formula, as contained in Resolution No. 88-122 adopted by the City Council:
“A Special Tax applicable to each Assessor’s Parcel in Community Facilities District No. 88-1
(“CFD No. 88-1”) shall be levied and collected according to the tax liability determined by the City Council
of the City of Poway acting in its capacity as the legislative body of CFD No. 88-1 (herein the “City
Council”) through the application of the appropriate amount or rate for “Developed Property” or
“Undeveloped Property”, as described below. All of the property in CFD No. 88-1, unless exempted by law
or by the provisions of Section E below, shall be taxed for the purposes, to the extent and in the manner
herein provided.
“A
Definitions.
The terms hereinafter set forth have the following meanings:
“Developed Property” means all Assessor’s Parcels in CFD No. 88-1 for which a final map
has been recorded as of March 1 of the preceding Fiscal Year; provided, however, that Developed Property
shall not include property owned by or offered for dedication to a public agency or owned by a public utility
for use as an unmanned facility, which property is subject to tax as Undeveloped Property only to the extent
set forth in Section E below.
“Fiscal Year” means the period starting on July 1 and ending the following June 30.
“Maximum Special Tax” means the maximum Special Tax, determined in accordance with
Section C, that can be levied by the City Council in any Fiscal Year for each class of Developed Property and
for Undeveloped Property, as applicable.
“Taxable Property” is all of the area within the boundaries of CFD No. 88-1 which is not
exempt from the Special Tax pursuant to law or Section E below.
“Undeveloped Property” means all Taxable Property in CFD No. 88-1 not classified as
Developed Property.
“B
Assignment to Land Use Class.
On July 1 of each year, all Taxable Property within CFD No. 88-1 Shall be categorized
either as a Developed Property or an Undeveloped Property and shall be subject to tax in accordance with the
rate and method or apportionment determined pursuant to Sections C and D below.
“C
Maximum Special Tax Rate1
The Maximum Special Tax for an Assessor’s Parcel classified as Developed Property or as
Undeveloped Property shall be $15,000 per acre for Fiscal Year 1988-89 and shall increase by 2.0% in each
subsequent Fiscal Year. For purposes of this Section C, the acreage of an Assessor’s Parcel shall be
1
Pursuant to Resolution No. 98-046 the Maximum Special Tax was changed to $16,500 per net useable
acre. See “SOURCES FOR PAYMENT OF THE BONDS-Special Tax Methodology” herein.
A-1
determined by reference to the most current parcel map or other subdivision tract map recorded in the Office
of the County Recorder for San Diego County or by another reliable means established by the District.
“D
Method of Apportionment of the Special Tax to Developed Property and Undeveloped
Property.
Starting in Fiscal Year 1988-89 and for each following Fiscal Year, the City Council shall
determine the amount of money to be collected from Taxable Property in CFD No. 88-1 in that Fiscal Year.
Such amount shall include the sums necessary to pay for current debt service on indebtedness of CFD No.
88-1, to create or replenish reserve funds determined necessary by CFD No. 88-1 for existing or future
indebtedness, and to pay for administrative and construction expenses to be paid from Special Tax proceeds.
After taking into account other available revenues, the City Council shall levy the Special Tax as follows
until the amount of the levy equals the remaining amount to be collected.
First: The Special Tax shall be levied on Developed Property in equal percentages up to 87%
of the Maximum Special Tax for such Fiscal Year;
Second: If additional moneys are needed after the first step has been completed, the Special
Tax shall be levied proportionately on each parcel of Undeveloped Property (exclusive of Undeveloped
Property exempted pursuant to Section E below) up to 87% of the Maximum Special Tax for such Fiscal
Year;
Third: If additional moneys are needed after the first two steps have been completed, then
the levy of the Special Tax on Developed Property and Undeveloped Property (exclusive of Undeveloped
Property exempted pursuant to Section E below) shall be increased in equal percentages above the rates
levied pursuant to the first step above, up to the Maximum Special Tax for such Fiscal Year;
Fourth: If additional moneys are needed after the first three steps have been completed, then
the Special Tax shall be levied proportionately on each parcel of Undeveloped Property offered for
dedication to a public agency which has not been exempted from the Special Tax pursuant to Section E, up to
the Maximum Special Tax for such Fiscal Year for such property; and
Fifth: If additional moneys are needed after the first four steps have been completed, then the
Special Tax shall be levied proportionately on each parcel of Undeveloped Property conveyed to a public
agency which has not been exempted from the Special Tax pursuant to Section E, up to the Maximum
Special Tax for such Fiscal Year for such property.
“E.
Limitations.
The City Council shall not impose any Special Tax on property which is (i) owned by a
public agency for public right-of-way or is subject to a public easement for a street or for another public use
which prevents any private beneficial use of such land or (ii) is owned be a public utility for use as an
unmanned utility property or is subject to a utility easement making impractical its utilization for other than
the purpose set forth in the easement.
“In addition, the City Council shall not impose any Special Tax on up to 200 acres of
Undeveloped Property conveyed or offered for dedication to a public agency for public uses other than those
described in (i) above. If the total number of acres of land conveyed or offered for dedication to a public
agency for such other uses exceeds 200 acres, then the acres exceeding such total of 200 shall be taxed as
Undeveloped Property to the extent set forth in steps four and five in Section D above.”
A-2
APPENDIX B
THE CITY OF POWAY
The information in this section of the Official Statement is presented as general background data.
The Bonds are payable solely from the proceeds of the Special Tax and other sources as described in the
Official Statement. The taxing power of the City, the State of California, or any political subdivision thereof
is not pledged to the payment of the Bonds.
The following material is descriptive of the City of Poway and the surrounding areas of San Diego
County. It has been prepared by or excerpted from sources as noted herein and has not been reviewed by
Bond Counsel or the Underwriter.
History and Location
Poway developed as an unincorporated community until November 1980, when its 33,500 residents
voted to incorporate an area of about 38 square miles. It began its formal existence as a City on December 1,
1980. In November, 1986, the City annexed an additional 1,325 acres, for a total area of about 40 square
miles. Poway is located inland about three miles east of Interstate Highway 15, and is surrounded on three
sides by the City of San Diego. Driving distance southerly to downtown San Diego or the San Diego
International Airport is about 25 miles. The terrain is hilly and steep in some areas with gentle slopes in the
center of the City. Poway is relatively new in that over 70% of the housing stock postdates 1970.
City Organization
The City has, since incorporation, been governed and operated under the Council- Manager form of
government. The City Manager directs a work force of 226 full time employees and appoints department
heads on the basis of specialized knowledge, experience and education in their area of responsibility. The
City employees are members of the State Public Employees Retirement System. The contributions to the
System are current and no unfunded contractual liability exists for past services.
Climate
Poway, as part of San Diego County, has a relatively dry climate and its inland location spares it
much of the summer fog experienced along the coast. Temperatures are frost-free over 350 days per year,
and the City receives on the average approximately 9.6 inches of rain, principally between the months of
October and April.
Population
At incorporation in 1980, there were about 33,500 in the City limits. Poway has grown to 51,126 and
expects to be built out according to general plan estimates to a population of [54,180]. Poway is a low
density community predominately of single family homes. Table B-1 illustrates comparative population
figures.
B-1
TABLE B-1
SAN DIEGO COUNTY
TOTAL POPULATION BY JURISDICTION
1980-2009
San Diego County
Carlsbad
Chula Vista
Coronado
Del Mar
El Cajon
Encinitas
Escondido
Imperial Beach
La Mesa
Lemon Grove
National City
Oceanside
Poway
San Diego
San Marcos
Santee
Solana Beach
Vista
Balance Of County
Incorporated
TOTAL
1980
1,861,846
35,490
83,927
18,790
5,017
73,892
64,355
22,689
50,308
20,780
48,772
76,698
(1)
875,538
17,479
(1)
35,834
432,277
1,429,569
1990
2,480,100
62,800
134,200
28,500
4,830
88,300
54,900
107,400
26,300
52,700
23,800
54,100
126,100
43,000
1,102,900
37,900
52,600
12,950
70,700
396,100
2,084,000
2000(2)
2,813,833
78,306
173,543
24,100
4,389
94,869
57,955
133,663
26,992
54,749
24,918
54,260
161,039
48,044
1,223,415
54,977
52,946
12,979
89,857
442,832
2,371,001
2005
3,034,388
94,961
217,143
23,579
4,533
97,514
62,650
141,430
27,656
55,908
25,481
55,622
174,741
50,424
1,297,189
72,911
54,370
13,373
93,926
470,977
2,563,411
______________
Source: California State Department of Finance.
(1)
Unincorporated at the time.
(2)
As of April 1, 2000.
B-2
2006
3,058,413
98,625
223,490
22,894
4,524
96,881
62,825
141,145
27,568
55,769
25,366
55,742
174,953
50,400
1,305,412
76,740
54,717
13,329
94,456
473,577
2,584,836
2007
3,088,891
101,125
227,242
22,919
4,539
97,052
63,127
141,919
27,653
56,133
25,398
55,921
176,271
50,566
1,315,921
79,646
55,044
13,390
94,765
480,260
2,608,631
2008
3,131,552
103,406
230,397
23,030
4,561
97,555
63,615
143,259
28,092
56,445
25,511
56,144
178,102
50,744
1,333,617
82,419
55,850
13,447
95,400
489,958
2,641,594
2009
3,173,407
104,652
233,108
23,028
4,591
98,133
64,145
144,831
28,243
56,881
25,650
56,522
179,681
51,126
1,353,993
83,149
56,848
13,547
96,089
499,190
2,674,217
Assessed Valuation and Collections
The assessed valuation of property in the City is established by the County Assessor, except for
public utility property which is assessed by the State Board of Equalization. Assessed valuations are
reported at 100% of the “full value” of the property, as defined in Article XIIIA of the California
Constitution. Prior to 1981-82, assessed valuations were reported at 25% of the full value of property.
Certain classes of property, such as churches, colleges, not-for-profit hospitals, and charitable institutions,
are exempt from property taxation and do not appear on the tax rolls.
Property within the District had a net taxable assessed valuation for fiscal year 2009/10 of
$8,478,038,396. Shown in the following table are the assessed valuations for the City. The District’s
assessed valuation increased by approximately 113% between fiscal year 200/01 and fiscal year 2009/10.
TABLE B-2
CITY OF POWAY
ASSESSED VALUATION
(As of June 30)
Fiscal
Year
Total
Secured
Total
Unsecured
Total
Assessed
Value
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
$3,865,978,320
4,324,796,978
4,778,986,842
5,248,688,875
5,653,721,929
6,146,945,172
6,831,719,719
7,421,464,367
7,937,409,731
8,119,956,679
8,189,308,710
$106,169,614
139,125,104
162,481,953
200,414,378
190,767,595
187,042,681
245,308,882
278,291,264
272,804,881
254,000,489
288,729,686
$3,972,147,934
4,463,922,082
4,941,468,795
5,449,103,253
5,844,489,524
6,333,987,853
7,077,028,601
7,699,755,631
8,210,214,612
8,373,957,168
8,478,038,396
_______________
Source: City of Poway Comprehensive.
B-3
Percent
Change From
Previous Year
---%
12.38%
10.70%
10.27%
7.26%
8.38%
11.73%
8.80%
6.63%
1.99%
1.24%
TABLE B-3
CITY OF POWAY
PROPERTY TAX LEVIES AND COLLECTIONS
(As of June 30)
Fiscal
Year
Current
Levy
Current
Collections
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
$13,317,472
13,683,327
14,105,425
14,461,370
14,539,338
15,074,377
15,924,752
16,494,681
17,034,013
17,295,459
$13,122,841
13,541,508
13,958,405
14,250,473
14,432,902
14,925,461
15,669,141
16,171,714
16,641,698
16,805,480
Collection
Rate %
98.54%
98.96%
98.96%
98.54%
99.27%
99.01%
98.39%
98.04%
97.70%
97.17%
Delinquent
Tax
Collections
$269,313
208,718
173,832
213,119
250,896
124,804
153,982
269,763
329,517
378,562
Total Tax
Collections
Percent of
Total Tax
Collections
To Tax Levy
Outstanding
Delinquent
Taxes
$13,392,154
13,750,226
14,132,237
14,463,592
14,683,798
15,050,265
15,823,123
16,441,477
16,971,215
17,184,041
100.56%
100.49%
100.19%
100.02%
100.99%
99.84%
99.36%
99.68%
99.63%
99.36%
$360,070
318,829
305,016
319,779
203,480
238,155
367,095
473,911
606,595
785,998
Percent of
Delinquent
Taxes to
Tax Levy
2.70%
2.33%
2.16%
2.21%
1.40%
1.58%
2.31%
2.87%
3.56%
4.54%
_______________
Source: City of Poway Comprehensive Annual Financial Report for Fiscal Year 2008/09.
$16,805,480 is 0.20% of the total assessed value in Fiscal Year 2008/09 of $8,478,038,396. See
Table B-3 above for a discussion of delinquencies in connection with the payment of property taxes.
TABLE B-4
CITY OF POWAY
TEN LARGEST TAXPAYERS
(June 30, 2009)
Name
Assessed Valuation
Sorrento West Properties Inc.
PDP Pomerado LLC
Slough Poway I LLC
Prudential Insurance Co of America
Sysco Food Services of San Diego
Costco Wholesale Corporation
Government Employees Insurance Co
Fairfield Township LLC
Poway Crossings Investors LLC
Poway Tech Center Investors LLC
TOTAL:
$88,745,482
69,558,551
66,779,944
39,714,613
35,374,370
35,326,203
35,299,468
33,686,003
31,275,000
27,030,000
$462,789,634
_____________________
Source: City of Poway Comprehensive Annual Financial Report for Fiscal Year 2008/09.
Audits
The City, all its funds and the Poway Redevelopment Agency are audited annually by the certified
public accounting firm of Caporiccio & Larson, CPAs of 4858 Mercury Street, Suite 106, San Diego,
California 92111.
B-4
Copies of the audited financial statements for the fiscal years through Fiscal Year 2007/08 are on file
with the City.
Retail and Total Taxable Sales
Retail sales in the City increased over 19.78% in the period of 2000 to 2007. Total sales in the City
increased over 69.29% in the same period. The following table present the retail taxable transactions of the
City of Poway and San Diego County for the calendar years 2000 through third quarter of 2008.
TABLE B-5
CITY OF POWAY
NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS
($ in thousands)
Retail Stores
Total All Outlets
Year
No. of
Permits
Taxable
Transactions
2000
2001
2002
2003
2004
2005
2006
2007
2008(1)
528
573
585
646
644
671
635
605
n/a
$475,197
525,464
579,422
691,777
865,270
941,577
963,390
889,456
569,205
%Change
-10.5%
10.3
19.4
25.1
8.8
2.3
(7.7)
--
No. of
Permits
Taxable
Transactions
1,449
1,486
1,530
1,601
1,631
1,690
1,659
1,571
n/a
$664,118
712,327
767,375
889,578
1,075,622
1,174,167
1,185,548
1,124,276
747,946
% Change
-7.3%
7.7
15.9
20.9
9.2
9.7
(5.2)
--
_________________
Source: California State Board of Equalization
(1)
As of third quarter 2008.
TABLE B-6
COUNTY OF SAN DIEGO
NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS
($ in thousands)
Retail Stores
Year
No. of
Permits
2000
2001
2002
2003
2004
2005
2006
2007
2008(1)
35,748
36,753
38,358
41,456
42,138
42,917
42,359
40,011
n/a
Total All Outlets
Taxable
Transactions
$24,953,089
26,263,388
27,421,599
29,520,551
32,345,460
33,784,795
34,619,067
34,038,545
24,155,935
%Change
No. of
Permits
Taxable
Transactions
% Change
-5.3%
4.4
7.7
9.6
4.4
2.5
(1.6)
--
79,598
80,245
81,462
84,829
88,295
90,620
91,251
85,341
n/a
$36,245,418
37,699,333
38,595,547
40,863,978
44,470,338
46,679,471
47,835,514
47,485,988
34,411,050
-4.0%
2.3
5.8
8.8
5.0
2.5
(0.7)
--
________________
Source: California State Board of Equalization
(1)
As of third quarter 2008.
B-5
Construction Activity
Residential and commercial construction values for Fiscal Years 1985/86 through 1995/96 are shown
in Table B-7.
TABLE B-7
CITY OF POWAY
RESIDENTIAL AND COMMERCIAL CONSTRUCTION ACTIVITY
(As of June 30)
Fiscal
Year
(June 30)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Dwelling
Units
148
160
122
173
91
69
40
27
36
64
Value of
Residential
Construction
Value of
Commercial
Construction
$50,705,886
34,909,914
28,863,062
37,841,099
38,220,873
29,206,563
19,642,801
11,085,613
16,294,667
22,700,169
$4,074,341
5,282,560
6,376,673
9,702,858
17,826,923
2,523,708
14,891,986
6,609,852
5,405,589
2,230,306
__________________
Source: City of Poway Planning Department.
Income
The following table compares personal income on an aggregate and per capita personal income for
the years 2003 to 2007 for San Diego County, the State of California and the United States.
Personal income is the aggregate of wages and salaries, other labor related income (such as employer
contributions to private pension funds), proprietor’s income, rental income (which includes imputed rental
income of owner-occupants of non-farm dwellings), dividends paid by corporations, interest income from all
sources, and transfer payments (such as pensions and welfare assistance).
Deducted from this total are personal taxes (federal, state, and local), non-tax payments (fines, fees,
penalties, etc.), and personal contributions to social insurance.
B-6
TABLE B-8
SAN DIEGO COUNTY
PERSONAL INCOME
(Yearly Average for Calendar Years 2002 through 2007)
Year and Area
Personal
Income
Percentage
Change
Per Capita
Personal Income
Percentage
Change
2002
San Diego County
California
United States
$ 100,655,726
1,147,715,704
8,872,871,000
3.8%
1.1
1.8
$34,642
32,870
30,838
2.5%
(0.1)
0.8
San Diego County
California
United States
$ 104,630,453
1,187,040,144
9,150,320,000
3.9%
3.4
3.1
$35,743
33,620
31,530
3.2%
2.3
2.2
San Diego County
California
United States
$ 113,003,044
1,265,970,355
9,711,363,000
8.0%
6.6
6.1
$38,567
35,531
33,157
7.9%
5.7
5.2
San Diego County
California
United States
$ 118,457,509
1,342,753,688
10,252,973,000
4.8%
6.1
5.6
$40,406
37,418
34,690
4.8%
5.3
4.6
San Diego County
California
United States
$ 125,471,524
1,445,580,645
10,978,053,000
5.9%
7.7
7.1
$42,721
40,020
36,794
5.7%
7.0
6.1
San Diego County
California
United States
$ 131,499,657
1,520,754,918
11,634,322,000
4.8%
5.2
6.0
$44,430
41,805
38,615
4.0%
4.5
4.9
2003
2004
2005
2006
2007
_________________
Source: United States Department of Commerce Bureau of Economic Analysis.
Housing
The average selling price for new and existing single family homes is approximately $502,000 as of
April 2008. The median income for Poway was $78,000 as of 2007. The median age of Poway residents is 40
years, and the family/household size was 3.3 in 2008. Owner occupancy is high, and Poway is predominantly
a single family community.
Employment
The City of Poway is primarily a residential community, thus, there are few major employers in the
community. The City itself, the Pomerado Hospital District, and the Poway Unified School District are the
largest employers in the area. Numerous small businesses make up the rest of the employment base in the
community. [Civilian labor force statistics for the City are unavailable.]
Poway is part of the Metropolitan Statistical Area (MSA) comprised of San Diego County. The two
tables which follow set forth information with respect to employment by industry groups and the labor force
in general in the County of San Diego.
B-7
TABLE B-9
COUNTY OF SAN DIEGO
EMPLOYMENT BY MAJOR INDUSTRY GROUP
(2005-2009)
Major Industry Group
2005
2006
2007
Agriculture
10,700
10,900
10,900
Mining and Logging
400
500
400
Construction
90,800
92,700
87,000
Manufacturing
104,500
103,900
102,500
Trade, Transportation &
Utilities
219,400
222,000
222,300
Information
37,400
37,300
37,600
Financial Activities
83,200
83,700
80,300
Professional & Business
Services
210,400
213,600
216,800
Educational & Health
Services
122,500
125,100
129,500
Leisure & Hospitality
149,600
156,500
161,800
Other Services
48,800
48,400
48,300
Government
215,100
217,900
222,400
Total
1,292,800
1,312,500 1,319,700
___________________
Source: State of California Employment Development Department.
(1)
As of September 2009.
2008
2009(1)
10,800
300
76,200
102,300
11,200
300
65,800
93,600
215,900
38,700
75,800
202,900
37,300
73,700
217,000
204,800
135,500
163,600
48,800
225,200
1,310,000
134,500
158,800
47,900
222,000
1,252,900
TABLE B-10
COUNTY OF SAN DIEGO
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
(2005-2009)
2005
2006
2007
2008
2009(1)
Civilian Labor Force
1,497,900 1,511,200 1,531,200 1,566,200 1,560,000
Civilian Employment
1,433,000 1,451,200 1,461,500 1,472,400 1,400,200
Civilian Unemployment
64,900
60,000
69,700
93,800
159,800
Civilian Unemployment Rate
4.3%
4.0%
4.6%
6.0%
10.2%
__________________
(1)
As of September 2009.
Source: State of California Employment Development Department
Transportation
Poway is served by a variety of transportation modes. Commercial air travel is supplied by
Lindbergh Field, approximately 25 miles south in San Diego, and is supplemented by private and charter
plane service from the Palomar Airport, about 20 minutes to the west. Automobile travel is facilitated by
Interstate 15 which runs north/south several miles to the west of Poway. Public transportation is supplied by
Metropolitan Transit District.
B-8
Services and Facilities
The City of Poway supplies its residents with water and sewer service. Power is supplied by San
Diego Electric and Gas, and telephone service by Pacific Bell. The City has its own parks and community
services departments and provides fire protection service, but contracts for police service from the County.
Health care facilities are provided by Pomerado Hospital, a 107-bed, full-service facility.
Educational facilities in the Poway Unified School District include 22 elementary schools, 6 middle schools
and 5 high schools, one of which is a continuation school. These educational facilities serve the populace of
Poway as well as the neighboring communities of Rancho Bernardo and Rancho Penasquitos.
The community is served by nine banks.
Recreational facilities in the City of Poway include a 20,000 square foot library, 25 parks, and 4,700
acres of open space, and a community center. The City’s “Sports Park,” a cooperative recreational complex
with private-sector management, offers three nearly professional quality baseball fields, batting cages,
basketball courts and roller hockey facilities. The community center also includes lighted softball/baseball
fields and a swimming pool. Golfing is available at local nonmembership country clubs. A 815-seat Poway
Center for the Performing Arts opened in 1990, and features professional touring artists, entertainers and
community programs. Residents of Poway have access to cultural and recreational facilities in the
metropolitan San Diego area as well.
B-9
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
The following is a summary of certain definitions and provisions of the Indenture which are not
described elsewhere in the Official Statement. This Summary does not purport to be comprehensive and
reference should be made to the Indenture for a full and complete statement of its provisions.
DEFINITIONS
“Account” means any account created pursuant to the Indenture.
“Act” means the Mello-Roos Community Facilities Act of 1982, as amended, being Section 53311
et seq. of the California Government Code.
“Administrative Expenses” means the administrative costs with respect to the calculation and
collection of the Special Taxes, including all attorneys’ fees and other costs related thereto, the fees and
expenses of the Trustee, any fees and related costs for credit enhancement for the Bonds which are not
otherwise paid as Costs of Issuance, any costs related to the District’s compliance with state and federal laws
requiring continuing disclosure of information concerning the Bonds and the District, and any other costs
otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District
as set forth in the Resolution of Formation and any obligation of the District under the Indenture.
“Administrative Expenses Account” means the account by that name created and established in the
Special Tax Fund pursuant to the Indenture.
“Administrative Expenses Priority Cap” means an amount equal to $30,000 per Bond Year.
“Alternative Penalty Account” means the account by that name created and established in the Rebate
Fund pursuant to the Indenture.
“Annual Debt Service” means the principal amount of any Outstanding Bonds payable in a Bond
Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding
Bonds in such Bond Year, if the Bonds are retired as scheduled.
“Authorized Investments” means any of the following which at the time of investment are legal
investments under the laws of the State for the moneys proposed to be invested therein:
(1)
(A)
Direct obligations (other than an obligation subject to variation in principal
repayment) of the United States of America (“United States Treasury Obligations”); (B) obligations
fully and unconditionally guaranteed as to timely payment of principal and interest by the United
States of America; (C) obligations fully and unconditionally guaranteed as to timely payment of
principal and interest by any agency or instrumentality of the United States of America when such
obligations are backed by the full faith and credit of the United States of America; or (D) evidences
of ownership of proportionate interests in future interest and principal payments on obligations
described above held by a bank or trust company as custodian, under which the owner of the
investment is the real party in interest and has the right to proceed directly and individually against
the obligor and the underlying government obligations are not available to any person claiming
through the custodian or to whom the custodian may be obligated.
(2)
Federal Housing Administration debentures.
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(3)
The listed obligations of government-sponsored agencies which are not backed by
the full faith and credit of the United States of America:
-
Federal Home Loan Mortgage Corporation (FHLMC)
Participation certificates (excluded are stripped mortgage securities which are
purchased at prices exceeding their principal amounts)
Senior Debt obligations
-
Farm Credit Banks (formerly: Federal Land Banks, Federal
Intermediate Credit Banks and Banks for Cooperatives)
Consolidated system-wide bonds and notes
-
Federal Home Loan Banks (FHL Banks)
Consolidated debt obligations
-
Federal National Mortgage Association (FNMA)
Senior debt obligations
Mortgage-backed securities (excluded are stripped mortgage securities which are
purchased at prices exceeding their principal amounts)
-
Student Loan Marketing Association (SLMA)
Senior debt obligations (excluded are securities that do not have a fixed par value
and/or whose terms do not promise a fixed dollar amount at maturity or call date)
-
Financing Corporation (FICO)
Debt obligations
-
Resolution Funding Corporation (REFCORP)
Debt obligations
(4)
Unsecured certificates of deposit, time deposits, and bankers’ acceptances (having
maturities of not more than 30 days) of any bank (including the Trustee and any affiliate) the shortterm obligations of which are rated “A-1” or better by Standard & Poor’s.
(5)
Deposits the aggregate amount of which are fully insured by the Federal Deposit
Insurance Corporation (FDIC), in banks (including the Trustee and any affiliate) which have capital
and surplus of at least $5 million.
(6)
Commercial paper (having original maturities of not more than 270 days rated, at the
time of investment, “A-1+” by Standard & Poor’s and “Prime-1” by Moody’s and issued by an entity
meeting the criteria in either clause (A) or (B):
C-2
(A)
the entity (i) is organized and operating in the United States as a general
corporation, (ii) has total assets in excess of $500,000,000, and (iii) has debt other than
commercial paper, if any, that is rated “A” or higher by Standard & Poor’s or Moody’s; or
(B)
the entity (i) is organized within the United States as a special purpose
corporation, trust, or limited liability company, (ii) has programwide credit enhancements
including, but not limited to, overcollateralization, letters of credit, or surety bond, and (ii)
has commercial paper rated “A-1” or higher by Standard & Poor’s or “A1” by Moody’s.
(7)
Money market funds rated “AAm” or “AAm-G” by Standard & Poor’s, or better
(including funds for which the Trustee or its affiliates provides investment advisory or other
management services).
(8)
“State Obligations,” which means:
(A)
Direct general obligations of any state of the United States of America or
any subdivision or agency thereof to which is pledged the full faith and credit of a state the
unsecured general obligation debt of which is rated “A3” by Moody’s and “A” by
Standard & Poor’s, or better, or any obligation fully and unconditionally guaranteed by any
state, subdivision or agency whose unsecured general obligation debt is so rated.
(B)
Direct general short-term obligations of any state agency or subdivision or
agency thereof described in (A) above and rated “A-1+” by Standard & Poor’s and “Prime-l”
(“MIG-1”) by Moody’s.
(C)
Special Revenue Bonds (as defined in the United States Bankruptcy Code)
of any state, state agency or subdivision described in (A) above and rated “AA” or better by
Standard & Poor’s and “Aa” or better by Moody’s.
(9)
Pre-refunded municipal obligations rated “AAA” by Standard & Poor’s and “Aaa”
by Moody’s meeting the following requirements:
(A)
the municipal obligations are (1) not subject to redemption prior to maturity
or (2) the trustee for the municipal obligations has been given irrevocable instructions
concerning their call and redemption and the issuer of the municipal obligations has
covenanted not to redeem such municipal obligations other than as set forth in such
instructions;
(B)
the municipal obligations are secured by cash or United States Treasury
Obligations which may be applied only to payment of the principal of, interest and premium
on such municipal obligations;
(C)
the principal of and interest on the United States Treasury Obligations (plus
any cash in the escrow) has been verified by the report of independent certified public
accountants to be sufficient to pay in full all principal of, interest, and premium, if any, due
and to become due on the municipal obligations (“Verification”);
(D)
the cash or United States Treasury Obligations serving as security for the
municipal obligations are held by an escrow agent or trustee in trust for owners of the
municipal obligations;
C-3
(E)
no substitution of a United States Treasury Obligation shall be permitted
except with another United States Treasury Obligation and upon delivery of a new
Verification; and
(F)
the cash or United States Treasury Obligations are not available to satisfy
any other claims, including those by or against the trustee or escrow agent.
(10)
Repurchase agreements:
(A)
With (1) any domestic bank, or domestic branch of a foreign bank, the long
term debt of which is rated at least “A” by Standard & Poor’s and Moody’s; or (2) any
broker-dealer with “retail customers” or a related affiliate thereof which broker-dealer has,
or the parent company (which guarantees the provider) of which has, long-term debt rated at
least “A” by Standard & Poor’s and Moody’s, which broker-dealer falls under the
jurisdiction of the Securities Investors Protection Corporation; or (3) any other entity rated
“A” or better by Standard & Poor’s and Moody’s, provided that:
(a)
The market value of the collateral is maintained at levels and upon
such conditions as would be acceptable to S&P and Moody’s to maintain an “A”
rating in an “A” rated structured financing (with a market value approach);
(b)
The Trustee or a third party acting solely as agent therefor or for the
District (the “Holder of the Collateral”) has possession of the collateral or the
collateral has been transferred to the Holder of the Collateral in accordance with
applicable state and federal laws (other than by means of entries on the transferor’s
books);
(c)
The repurchase agreement shall state and an opinion of counsel shall
be rendered at the time such collateral is delivered that the Holder of the Collateral
has a perfected first priority security interest in the collateral, any substituted
collateral and all proceeds thereof (in the case of bearer securities, this means the
Holder of the Collateral is in possession);
(d)
All other requirements of S&P in respect of repurchase agreements
shall be met; and
(e)
The repurchase agreement shall provide that if during its term the
provider’s rating by either Moody’s or Standard & Poor’s is withdrawn or
suspended or falls below “A-“ by Standard & Poor’s or “A3” by Moody’s, as
appropriate, the provider must, at the direction of the District or the Trustee, within
10 days of receipt of such direction, repurchase all collateral and terminate the
agreement, with no penalty or premium to the District or Trustee.
(B)
Notwithstanding the above, if a repurchase agreement has a term of 270
days or less (with no evergreen provision), collateral levels need not be as specified in (a)
above, so long as such collateral levels are 103% or better and the provider is rated at least
“A” by Standard & Poor’s and Moody’s, respectively.
C-4
(11)
Investment agreements with a domestic or foreign bank or corporation (other than a
life or property casualty insurance company) the long-term debt of which or, in the case of a
guaranteed corporation the long-term debt, or, in the case of a monoline financial guaranty insurance
company, claims paying ability, of the guarantor is rated at least “AA” by Standard & Poor’s and
“Aa2” by Moody’s; provided that, by the terms of the investment agreement:
(A)
interest payments are to be made to the Trustee at times and in amounts as
necessary to pay debt service on the Bonds;
(B)
the invested funds are available for withdrawal without penalty or premium,
at any time upon not more than seven days’ prior notice; the District and the Trustee hereby
agree to give or cause to be given notice in accordance with the terms of the investment
agreement so as to receive funds thereunder with no penalty or premium paid;
(C)
the investment agreement shall state that is the unconditional and general
obligation of, and is not subordinated to any other obligation of, the provider thereof, or, if
the provider is a bank, the agreement or the opinion of counsel shall state that the obligation
of the provider to make payments thereunder ranks pari passu with the obligations of the
provider to its other depositors and its other unsecured and unsubordinated creditors;
(D)
the District and the Trustee receives the opinion of domestic counsel (which
opinion shall be addressed to the District and the Trustee) that such investment agreement is
legal, valid, binding and enforceable upon the provider in accordance with its terms and of
foreign counsel (if applicable) in form and substance acceptable, and addressed to, the
District;
(E)
the investment agreement shall provide that if during its term.
(1)
the provider’s rating by either Standard & Poor’s or Moody’s falls
below “AA-” or “Aa3”, respectively, the provider shall, at its option, within 10 days
of receipt of publication of such downgrade, either (i) collateralize the investment
agreement by delivering or transferring in accordance with applicable state and
federal laws (other than by means of entries on the provider’s books) to the District,
the Trustee or a third party acting solely as agent therefor (the “Holder of the
Collateral”) collateral free and clear of any third-party liens or claims the market
value of which collateral is maintained at levels and upon such conditions as would
be acceptable to Standard & Poor’s and Moody’s to maintain an “A” rating in an
“A” rated structured financing (with a market value approach); or (ii) repay the
principal of and accrued but unpaid interest on the investment; and
(2)
the provider’s rating by either Standard & Poor’s or Moody’s is
withdrawn or suspended or falls below “A-” or “A3”, respectively, the provider
must, at the direction of the District or the Trustee, within 10 days of receipt of such
direction, repay the principal of and accrued but unpaid interest on the investment, in
either case with no penalty or premium to the District or Trustee; and
(F)
The investment agreement shall state and an opinion of counsel shall be
rendered, in the event collateral is required to be pledged by the provider under the terms of
the investment agreement at the time such collateral is delivered, that the Holder of the
Collateral has a perfected first priority security interest in the collateral, any substituted
collateral and all proceeds thereof (in the case of bearer securities, this means the Holder of
the Collateral is in possession); and
C-5
(G)
the investment agreement must provide that if during its term
(1)
the provider shall default in its payment obligations, the provider’s
obligations under the investment agreement shall, at the direction of the District or
the Trustee, be accelerated and amounts invested and accrued but unpaid interest
thereon shall be repaid to the District or Trustee, as appropriate, and
(2)
the provider shall become insolvent, not pay its debts as they
become due, be declared or petition to be declared bankrupt, etc. (“event of
insolvency”), the provider’s obligations shall automatically be accelerated and
amounts invested and accrued but unpaid interest thereon shall be repaid to the
District or Trustee, as appropriate.
(12)
The State of California Local Agency Investment Fund; provided that the Trustee
may restrict investments in such Fund to the extent necessary to keep moneys available for the
purposes of the Indenture.
(13)
Certificates of deposit, savings accounts, deposit accounts or money market deposits
(including those of the Trustee and its affiliates) which are fully insured by the Federal Deposit
Insurance Corporation, including certificates of deposit placed through the CDARS program.
“Authorized Representative of the City” means the City Manager of the City, the Director of
Administrative Services of the City, the Assistant Director of Administrative Services of the City, or any
other person or persons designated by the City Manager or the Director of Administrative Services by a
written certificate signed by the City Manager or the Director of Administrative Services and containing the
specimen signature of each such person.
“Authorized Representative of the District” means the City Manager of the City, the Director of
Administrative Services of the City, the Assistant Director of Administrative Services of the City, or any
other person or persons designated by the City Manager or the Director of Administrative Services by a
written certificate signed by the City Manager or the Director of Administrative Services and containing the
specimen signature of each such person.
“Bond Counsel” means an attorney at law or a firm of attorneys selected by the District of nationally
recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and
their political subdivisions duly admitted to the practice of law before the highest court of any state of the
United States of America or the District of Columbia.
“Bond Register” means the books which the Trustee shall keep or cause to be kept on which the
registration and transfer of the Bonds shall be recorded.
“Bondowner” or “Owner” means the person or persons in whose name or names any Bond is
registered.
“Bonds” means the Series 2009 Bonds.
“Bond Year” means the twelve month period commencing on August 16 of each year and ending on
August 15 of the following year, except that the first Bond Year for the Bonds shall begin on the Delivery
Date and end on the first August 15 which is not more than 12 months after the Delivery Date.
“Business Day” means a day which is not a Saturday or Sunday or a day of the year on which banks
in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee
is located, are not required or authorized to remain closed.
C-6
“Certificate of an Authorized Representative” means a written certificate executed by an Authorized
Representative of the City or District, as applicable.
“Certificate of the Special Tax Administrator” means a certificate of an Authorized Representative of
the District, or any successor entity appointed by the City, to administer the calculation and collection of the
Special Taxes.
“City” means the City of Poway, California.
“Code” means the Internal Revenue Code of 1986, as amended, and any Regulations, rulings,
judicial decisions, and notices, announcements, and other releases of the United States Treasury Department
or Internal Revenue Service interpreting and construing it.
“Continuing Disclosure Certificate” means that certain Continuing Disclosure Certificate dated as of
December 1, 2009, executed by the District, together with any amendments thereto.
“Costs of Issuance” means the costs and expenses incurred in connection with the formation of the
District and the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses
of the Trustee, legal fees and expenses, costs of printing the Bonds and the preliminary and final official
statements for the Bonds, fees of financial consultants and all other related fees and expenses, as set forth in a
Certificate of an Authorized Representative of the City.
“Costs of Issuance Fund” means the fund by that name created and established pursuant to the
Indenture.
“Delivery Date” means ___________, 2009, the date on which the Bonds were issued and delivered
to the initial purchasers thereof.
“Depository” shall mean The Depository Trust Company, New York, New York, and its successors
and assigns as securities depository for the Certificates, or any other securities depository acting as
Depository under the Indenture.
“Developed Property” shall have the meaning ascribed to such term in the Rate and Method.
“District” means Community Facilities District No. 88-1 of the City of Poway (Parkway Business
Center) established pursuant to the Act and the Resolution of Formation.
“Escrow Agreement” means the Escrow Agreement, dated as of even date herewith, by and between
the District and The Bank of New York Mellon Trust Company, N.A., a national banking association, as
escrow agent, relating to the refunding of the remaining outstanding portion of the District’s Special Tax
Refunding Bonds, Series 1998, scheduled to mature on August 15, 2010 and August 15, 2015.
“Escrow Fund” means the fund by that name established under the Escrow Agreement.
“Event of Default” means an “event of default” under the Indenture as described below under the
heading “EVENTS OF DEFAULT; REMEDIES.”
“Federal Securities” means any of the following: (a) non-callable direct obligations of the United
States of America (“Treasuries”), (b) evidence of ownership of proportionate interests in future interest and
principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the
investment is the real party in interest and has the right to proceed directly and individually against the
obligor and the underlying Treasuries are not available to any person claiming through the custodian or to
whom the custodian may be obligated, and (c) pre-refunded municipal obligations rated “AAA” and “Aaa”
C-7
by Standard & Poor’s and Moody’s, respectively, (d) securities eligible for “AAA” defeasance under then
existing criteria of Standard & Poor’s, or (e) any combination of the foregoing.
“Fiscal Year” means the period beginning on July 1 of each year and ending on the next following
June 30.
“Gross Taxes” means the amount of all Special Taxes received by the District, together with the
proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture for the
delinquency of such Special Taxes remaining after the payment of all costs related to such foreclosure
actions.
“Indenture” means the Bond Indenture dated as of December 1, 2009 pursuant to which the Bonds
have been issued, together with any Supplemental Indenture approved pursuant to the Indenture.
“Independent Financial Consultant” means a financial consultant or firm of such consultants
generally recognized to be well qualified in the financial consulting field, appointed and paid by the District,
who, or each of whom:
(1)
is in fact independent and not under the domination of the District or the City;
(2)
does not have any substantial interest, direct or indirect, in the District or the City;
and
(3)
is not connected with the District or the City as a member, officer or employee of the
District or the City, but who may be regularly retained to make annual or other reports to the District
or the City.
“Interest Account” means the account by that name created and established in the Special Tax Fund
pursuant to the Indenture.
“Interest Payment Date” means each February 15 and August 15, commencing August 15, 2010;
provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will
be paid on the Business Day next succeeding such date.
“Investment Agreement” means one or more agreements for the investment of funds of the District
complying with the criteria therefor as set forth in Subsection (11) of the definition of Authorized
Investments.
“Maximum Annual Debt Service” means the maximum sum obtained for any Bond Year prior to the
final maturity of the Bonds by adding the following for each Bond Year:
(1)
the principal amount of all Outstanding Bonds payable in such Bond Year either at
maturity or pursuant to a Sinking Fund Payment; and
(2)
the interest payable on the aggregate principal amount of all Bonds Outstanding in
such Bond Year if the Bonds are retired as scheduled.
“Moody’s” means Moody’s Investors Service, its successors and assigns.
“Net Taxes” means Gross Taxes minus amounts set aside to pay Administrative Expenses, not to
exceed the Administrative Expenses Priority Cap.
“1989 Bonds” means the District’s $30,000,000 aggregate initial principal amount Special Tax
Bonds, Series 1989.
C-8
“1990 Bonds” means the District’s $8,000,000 aggregate initial principal amount Special Tax Bonds,
Series 1990.
“1998 Bonds” means the District’s $35,445,000 aggregate initial principal amount Special Tax
Refunding Bonds, Series 1998.
“Nominee” shall mean the nominee of the Depository, which may be the Depository, as determined
from time to time pursuant to the Indenture.
“Ordinance” means Ordinance No. 289 adopted by the legislative body of the District on April 18,
1989, providing for the levying of the Special Tax.
“Outstanding” or “Outstanding Bonds” means all Bonds theretofore issued by the District, except:
(1)
Indenture;
Bonds theretofore cancelled or surrendered for cancellation in accordance with the
(2)
Bonds for payment or redemption of which moneys shall have been theretofore
deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds),
provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such
redemption shall have been given as provided in the Indenture; and
(3)
Bonds which have been surrendered to the Trustee for transfer or exchange pursuant
to the Indenture or for which a replacement has been issued pursuant to the Indenture.
“Participants” shall mean those broker-dealers, banks and other financial institutions from time to
time for which the Depository holds Bonds as securities depository.
“Person” means natural persons, firms, corporations, partnerships, associations, trusts, public bodies
and other entities.
“Prepayments” means any amounts paid by the District to the Trustee and designated by the District
as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate
and Method.
“Principal Account” means the account by that name created and established in the Special Tax Fund
pursuant to the Indenture.
“Principal Office of the Trustee” means the corporate trust office of the Trustee located in Los
Angeles, California, or such other office or offices as the Trustee may designate from time to time, or the
office of any successor Trustee where it principally conducts its business of serving as trustee under
indentures pursuant to which municipal or governmental obligations are issued, except that with respect to
presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the
office or agency of the Trustee at which, at any particular time, its corporate trust agency business shall be
conducted.
“Project” means those public facilities described in the Resolution of Formation which are to be
acquired or constructed within and outside of the District, including all engineering, planning and design
services and other incidental expenses related to such facilities and other facilities, if any, authorized by the
qualified electors within the District from time to time.
“Project Costs” means the amounts necessary to finance the Project, to create and replenish any
necessary reserve funds, to pay the initial and annual costs associated with the Bonds, including, but not
C-9
limited to, remarketing, credit enhancement, Trustee and other fees and expenses relating to the issuance of
the Bonds and the formation of the District, and to pay any other “incidental expenses” of the District, as
such term is defined in the Act.
“Rate and Method” means the rate and method of apportionment of Special Taxes attached to the
Resolution of Formation, as it may be amended or modified from time to time.
“Rating Agency” means Moody’s and Standard & Poor’s, or both, as the context requires.
“Rebate Account” means the account by that name created and established in the Rebate Fund
pursuant to the Indenture.
“Rebate Fund” means the fund by that name established pursuant to the Indenture in which there are
established the Accounts described in the Indenture.
“Rebate Regulations” means any final, temporary or proposed Regulations promulgated under
Section 148(f) of the Code.
“Record Date” means the fifteenth day of the month preceding an Interest Payment Date, regardless
of whether such day is a Business Day.
“Redemption Account” means the account by that name created and established in the Special Tax
Fund pursuant to the Indenture.
“Regulations” means the regulations adopted or proposed by the Department of Treasury from time
to time with respect to obligations issued pursuant to Section 103 of the Code.
“Representation Letter” shall mean the Blanket Letter of Representations from the District and the
Paying Agent to the Depository as described in the Indenture.
“Reserve Account” means the account by that name created and established in the Special Tax Fund
pursuant to the Indenture.
“Reserve Financial Guaranty” shall mean a policy of municipal bond insurance or surety bond issued
by a municipal bond insurer or a letter of credit issued by a bank or other institution if the obligations insured
by such insurer or issued by such bank or other institution, as the case may be, have ratings at the time of
issuance of such policy or surety bond or letter of credit in the highest rating category (without regard to
qualifiers) by Standard & Poor’s and Moody’s and, if rated by A.M. Best & Company, also in the highest
rating category (without regard to qualifiers) by A.M. Best & Company.
“Reserve Requirement” means that amount as of any date of calculation equal to the lesser of
(i) 10% of the initial principal amount of the Bonds, if any, (ii) Maximum Annual Debt Service on the then
Outstanding Bonds, if any; and (iii) 125% of average Annual Debt Service on the then Outstanding Bonds, if
any.
“Resolution of Formation” means Resolution No. 88-122 adopted by the City Council of the City on
October 18, 1988, pursuant to which the City formed the District.
“Series 2009 Bonds” means the District’s Special Tax Refunding Bonds, Series 2009, issued on their
Delivery Date in the aggregate principal amount of $___________.
“Sinking Fund Payment” means the annual payment to be deposited in the Redemption Account to
redeem a portion of the Term Bonds in accordance with the schedules set forth in the Indenture.
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“Six-Month Period” means the period of time beginning on the Delivery Date of each issue of
Bonds, as applicable, and ending six consecutive months thereafter, and each six-month period thereafter
until the latest maturity date of the Bonds (and any obligations that refund an issue of the Bonds).
“Special Tax Fund” means the fund by that name created and established pursuant to the Indenture.
“Special Taxes” means the taxes authorized to be levied by the District on property within the
District in accordance with the Ordinance, the Resolution of Formation, the Act and the voter approval
obtained at the November 1, 1988 election in the District, including any scheduled payments and any
Prepayments thereof, the net proceeds of the redemption or sale of property sold as a result of foreclosure of
the lien of the Special Taxes to the amount of said lien, and penalties and interest thereon.
“Standard & Poor’s” means Standard & Poor’s Ratings Group, a division of McGraw-Hill, its
successors and assigns.
“Subaccount” means any subaccount created pursuant to the Indenture.
“Subordinate Debt” means any bonds, obligations, loans, advances, or indebtedness issued or
incurred by the District pursuant to the Indenture, which are either (i) payable from, but not secured by a
pledge of or lien upon, the Net Taxes or amounts deposited in the Special Tax Fund, or (ii) secured by a
pledge of or lien upon the Net Taxes and/or amounts deposited in the Special Tax Fund which is subordinate
to the pledge of and lien upon the Net Taxes and amounts deposited in the Special Tax Fund (other than the
Administrative Expenses Account therein) under the Indenture for the security of the Bonds.
“Supplemental Indenture” means any supplemental indenture amending or supplementing the
Indenture.
“Surplus Fund” means the fund by that name created and established pursuant to the Indenture.
“Tax Certificate” means the Certificate Regarding Compliance with Certain Tax Matters (or similar
document) pertaining to the use and investment of proceeds of a series of Bonds, executed and delivered by a
duly authorized officer of the District and of the City on the related Delivery Date, including any and all
exhibits and attachments thereto.
“Tax-exempt” means, with respect to interest on any obligations of a state or local government,
including the interest on the Bonds, that such interest is excluded from gross income for federal income tax
purposes whether or not such interest is includable as an item of tax preference or otherwise includable
directly or indirectly for purposes of calculating tax liabilities, including any alternative minimum tax, under
the Code.
“Term Bonds” means none of the Series 2009 Bonds.
“Trustee” means The Bank of New York Mellon Trust Company, N.A., a national banking
association duly organized and existing under the laws of the United States of America, at its corporate trust
office in Los Angeles, California, and its successors or assigns, or any other bank or trust company which
may at any time be substituted in its place as provided in the Indenture and any successor thereto.
“Underwriter” means, Southwest Securities, Inc., with respect to the Series 2009 Bonds.
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CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Creation of Funds; Application of Proceeds.
(a)
The Trustee has established the following funds and accounts:
(1)
The Community Facilities District No. 88-1 of the City of Poway Special Tax Fund
(the “Special Tax Fund”) (in which there shall be established and created an Interest Account, a
Principal Account, a Redemption Account, a Reserve Account and an Administrative Expenses
Account).
(2)
The Community Facilities District No. 88-1 of the City of Poway Rebate Fund (the
“Rebate Fund”) (in which there shall be established a Rebate Account and an Alternative Penalty
Account).
(3)
The Community Facilities District No. 88-1 of the City of Poway Costs of Issuance
Fund (the “Costs of Issuance Fund”).
(4)
The Community Facilities District No. 88-1 of the City of Poway Surplus Fund (the
“Surplus Fund”).
The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by
the Trustee and the Trustee shall invest and disburse the amounts in such funds, accounts and subaccounts in
accordance with the provisions of the Indenture and shall disburse investment earnings thereon in accordance
with the provisions of the Indenture.
(b)
The proceeds of the sale of the Bonds shall be received by the Trustee on behalf of the
District and deposited and transferred as set forth in the Official Statement under the caption “SOURCES
AND USES OF FUNDS.”
Deposits to and Disbursements from Special Tax Fund.
(a)
To the extent the District receives any Prepayments, the District shall deposit such
Prepayments with the Trustee, together with a Certificate of an Authorized Representative designating such
Special Taxes as Prepayments and specifying the respective amounts to be deposited in the various funds and
accounts under the Indenture, and the Trustee shall make such deposits as specified in such certificate on the
same day as its receipt thereof. Except for any Prepayments to be deposited pursuant to the foregoing, the
Trustee shall, on each date on which the Special Taxes are received from the District, deposit the Special
Taxes in the Special Tax Fund to be held in trust for the Owners. The Trustee shall transfer the Special
Taxes on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections,
in the following order of priority, to:
(1)
the Administrative Expenses Account of the Special Tax Fund;
(2)
the Interest Account of the Special Tax Fund;
(3)
the Principal Account of the Special Tax Fund;
(4)
the Redemption Account of the Special Tax Fund;
(5)
the Reserve Account of the Special Tax Fund;
(6)
the Rebate Fund; and
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(7)
the Surplus Fund.
(b)
At least five (5) Business Days prior to each Interest Payment Date, the Trustee shall transfer
to the Interest Account, the Principal Account and the Redemption Account, as applicable, from the Special
Tax Fund the amounts required for debt service on the Bonds on such Interest Payment Date.
(c)
At maturity of all of the Bonds and, after all principal and interest then due on the Bonds
then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full,
moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful
purpose.
Administrative Expenses Account of the Special Tax Fund. From time to time, the District may
provide the Trustee with a Certificate of an Authorized Representative of the District, requesting the payment
of Administrative Expenses as set forth therein. Upon its receipt of any such certificate, the Trustee shall
transfer from the Special Tax Fund and deposit in the Administrative Expenses Account of the Special Tax
Fund amounts necessary to make timely payment of any such Administrative Expenses as set forth in the
Certificate of an Authorized Representative of the District; provided, however, that, except as set forth in the
following sentence, the total amount transferred in a Bond Year shall not exceed the Administrative
Expenses Priority Cap until such time as there has been deposited (a) to the Interest Account and the
Principal Account an amount, together with any amounts already on deposit therein, that is sufficient to pay
the interest and principal on all Bonds due in such Bond Year, (b) to the Redemption Account an amount,
together with any amounts already on deposit therein, that is sufficient to call and redeem Term Bonds in
accordance with the Sinking Fund Payment schedules set forth in the Indenture, and (c) to the Reserve
Account an amount, together with any amounts already on deposit therein, that is sufficient to restore the
Reserve Account to the Reserve Requirement. Notwithstanding the foregoing, amounts in excess of the
Administrative Expenses Priority Cap may be transferred to the Administrative Expenses Account to the
extent necessary to collect delinquent Special Taxes. Moneys in the Administrative Expenses Account of the
Special Tax Fund may be invested in any Authorized Investments as directed in writing by an Authorized
Representative of the District and shall be disbursed as directed in a Certificate of an Authorized
Representative. The Trustee shall have no obligation to transfer any amount from the Special Tax Fund for
deposit in the Administrative Expenses Account of the Special Tax Fund except upon its receipt of a
Certificate of an Authorized Representative of the District pursuant to this section.
Interest Account and Principal Account of the Special Tax Fund. The principal of and interest
due on the Bonds until maturity, other than principal due upon redemption, shall be paid by the Trustee from
the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of
assuring that the payment of principal of and interest on the Bonds will be made when due and after making
the transfer required by the Indenture, at least five (5) Business Days prior to each February 15 and August
15, the Trustee shall make the following transfers from the Special Tax Fund first to the Interest Account and
then to the Principal Account; provided, however, that to the extent that deposits have been made in the
Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds or
otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts
in the Special Tax Fund (exclusive of the Reserve Account) are inadequate to make the foregoing transfers,
then any deficiency shall be made up by transfers from the Reserve Account:
(a)
To the Interest Account, an amount such that the balance in the Interest Account five (5)
Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the
Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date
which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the
Bonds as the same become due.
(b)
To the Principal Account, an amount such that the balance in the Principal Account five (5)
Business Days prior to August 15 of each year, commencing August 15, 2010, shall equal the principal
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payment due on the Bonds maturing on such August 15 and any principal payment due on a previous August
15 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of
such Bonds as the same become due at maturity.
Redemption Account of the Special Tax Fund.
(a)
With respect to each August 15 on which a Sinking Fund Payment is due and after the
deposits have been made to the Administrative Expenses Account, the Interest Account, and the Principal
Account of the Special Tax Fund as required by the preceding two paragraphs, the Trustee shall next transfer
into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to
make the balance in the Redemption Account five (5) Business Days prior to each August 15 equal to the
Sinking Fund Payment due on any Outstanding Bonds on such August 15; provided, however, that, if
amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be
made up by an immediate transfer from the Reserve Account, if funded, pursuant to the Indenture. Moneys
so deposited in the Redemption Account shall be used and applied by the Trustee to call and redeem Term
Bonds in accordance with the Sinking Fund Payment schedules set forth in the Indenture.
(b)
After making the deposits to the Administrative Expenses Account, the Interest Account and
the Principal Account of the Special Tax Fund and to the Redemption Account for Sinking Fund Payments
then due pursuant to the preceding paragraph, and in accordance with the District’s election to call Bonds for
optional redemption as set forth in the Indenture, the Trustee shall transfer from the Special Tax Fund and
deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal and
the premiums, if any, payable on the Bonds called for optional redemption; provided, however, that amounts
in the Special Tax Fund (other than the Administrative Expenses Account therein) may be applied to
optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account
will equal the Reserve Requirement.
(c)
Prepayments deposited to the Redemption Account shall be applied on the redemption date
established pursuant to the Indenture for the use of such Prepayments to the payment of the principal of,
premium, and interest on the Bonds to be redeemed with such Prepayments.
(d)
Moneys set aside in the Redemption Account shall be used solely for the purpose of
redeeming Bonds and shall be applied on or after the redemption date to the payment of principal of and
premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds and in the case
of an optional redemption or an extraordinary redemption from Prepayments to pay the interest thereon;
provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the
Redemption Account, other than Prepayments, may be used to purchase Outstanding Bonds in the manner
provided in the next sentence. Purchases of Outstanding Bonds may be made by the District at public or
private sale as and when and at such prices as the District may in its discretion determine but only at prices
(including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys
set aside for an optional redemption or an extraordinary redemption, the premium applicable at the next
following call date according to the premium schedule established pursuant to the Indenture. Any accrued
interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account
of the Special Tax Fund for the payment of interest on the next following Interest Payment Date.
Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of
the Special Tax Fund an amount equal to the Reserve Requirement. The Reserve Requirement may be
satisfied by crediting to the Reserve Account moneys or one or more Reserve Financial Guaranties or any
combination thereof, which in the aggregate make funds available in the Reserve Account in an amount
equal to the Reserve Requirement. Upon the deposit with the Trustee of any such Reserve Financial
Guaranty, the Trustee shall release moneys from the Reserve Account to the Interest Account of the Special
Tax Fund, in an amount equal to the face amount of such Reserve Financial Guaranty. If funded, the
amounts in the Reserve Account shall be applied as follows:
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(a)
Except as otherwise provided below, moneys in the Reserve Account shall be used solely for
the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds when
due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund
are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to
make a Sinking Fund Payment when due and for the purpose of making any required transfer to the Rebate
Fund upon written direction from the District. If the amounts in the Interest Account, the Principal Account
or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including
Sinking Fund Payments, or interest on any Bonds when due, or amounts in the Special Tax Fund are
insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve
Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special
Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes.
(b)
Whenever moneys are withdrawn from the Reserve Account, after making the required
transfers to the Administrative Expenses Account, the Interest Account, the Principal Account and the
Redemption Account, the Trustee shall transfer to the Reserve Account from available moneys in the Special
Tax Fund, or from any other legally available funds which the District elects to apply to such purpose, the
amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the
Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee
determines that such amounts will not be needed to make the deposits required to be made to the
Administrative Expenses Account, the Interest Account, the Principal Account or the Redemption Account
of the Special Tax Fund on or before the next August 15. If amounts in the Special Tax Fund together with
any other amounts transferred to replenish the Reserve Account are inadequate to restore the Reserve
Account to the Reserve Requirement, then the District shall include the amount necessary fully to restore the
Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the
maximum permitted Special Tax rates.
(c)
In connection with an optional or extraordinary redemption of Bonds, or a partial defeasance
of Bonds in accordance with the Indenture, amounts in the Reserve Account may be applied to such
redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such
redemption or partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate
of an Authorized Representative the amount in the Reserve Account to be transferred to the Redemption
Account on a redemption date or to be transferred pursuant to the Indenture to partially defease Bonds, and
the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the
limitation in the preceding sentence.
(d)
To the extent that the Reserve Account is at the Reserve Requirement as of the first day of
the final Bond Year for the Bonds in accordance with the Indenture, amounts in the Reserve Account may be
applied to pay the principal of and interest due on the Bonds in the final Bond Year for such issue.
(e)
Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in
accordance with the preceding provisions of this section shall be withdrawn from the Reserve Account on
the Business Day before each February 15 and August 15, and such moneys shall be transferred and
deposited into the Interest Account of the Special Tax Fund; provided, however, to the extent that, as of a
date ninety (90) days prior to the next occurring Interest Payment Date, the amount on deposit in the Reserve
Account is equal to or greater than the aggregate remaining principal payments to be paid on the Bonds, any
and all amounts in the Reserve Account may be applied to effect a redemption of all Outstanding Bonds
pursuant to the Indenture. The District shall set forth in a Certificate of an Authorized Representative the
amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be
transferred pursuant to the Indenture to defease Bonds, and the Trustee shall make such transfer on the
applicable redemption or defeasance date.
Rebate Fund. The Trustee shall establish and maintain a fund separate from any other fund
established and maintained under the Indenture designated as the Rebate Fund and shall establish a separate
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Rebate Account and Alternative Penalty Account therein. All money at any time deposited in the Rebate
Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for
payment to the United States Treasury. All amounts on deposit in the Rebate Fund with respect to the Bonds
shall be governed by the Indenture and the Tax Certificate for such issue, unless the District obtains an
opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest
payments on the Bonds will not be adversely affected if such requirements are not satisfied.
Surplus Fund. After making the transfers required by the Indenture, as soon as practicable after
each August 15, and in any event prior to each September 15, the Trustee shall transfer all remaining
amounts in the Special Tax Fund to the Surplus Fund, unless on or prior to such date, it has received a
Certificate of an Authorized Representative directing that certain amounts be retained in the Special Tax
Fund because the District has included such amounts as being available in the Special Tax Fund in
calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to the Indenture. Moneys
deposited in the Surplus Fund will be transferred by the Trustee at the direction of an Authorized
Representative of the District (i) to the Interest Account, the Principal Account or the Redemption Account
of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, premium, if any, and
interest on the Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of
the Special Tax Fund are insufficient therefor, (ii) to the Reserve Account in order to replenish the Reserve
Account to the Reserve Requirement, (iii) to the Administrative Expenses Account of the Special Tax Fund
to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expenses
Account of the Special Tax Fund are insufficient to pay Administrative Expenses, or (iv) for any other lawful
purpose of the District.
The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by
the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the
moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, the District will notify the
Trustee in a Certificate of an Authorized Representative and the Trustee will segregate such amount into a
separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested at
the written direction of the District in Authorized Investments the interest on which is excludable from gross
income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for
purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in
Authorized Investments at a yield not in excess of the yield on the issue of Bonds to which such amounts are
to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect
the exclusion from gross income for federal income tax purposes of interest on the Bonds.
Costs of Issuance Fund. The moneys in the Costs of Issuance Fund shall be disbursed by the
Trustee pursuant to a Certificate of an Authorized Representative of the District, and any balance therein
shall be transferred by the Trustee to the Special Tax Fund 180 days after the Delivery Date of the Bonds.
Investments. Moneys held in any of the Funds, Accounts, and Subaccounts under the Indenture
shall be invested at the written direction of the District in accordance with the limitations set forth below
only in Authorized Investments which shall be deemed at all times to be a part of such Funds, Accounts and
Subaccounts. Any loss resulting from such Authorized Investments shall be credited or charged to the Fund,
Account or Subaccount from which such investment was made, and any investment earnings on a Fund,
Account or Subaccount shall be applied as follows: (i) investment earnings on all amounts deposited in the
Costs of Issuance Fund, the Special Tax Fund, the Surplus Fund and the Rebate Fund and each Account and
Subaccount therein (other than the Reserve Account of the Special Tax Fund) shall be deposited in those
respective Funds, Accounts, and Subaccounts, and (ii) investment earnings on all amounts deposited in the
Reserve Account shall be applied as set forth in the Indenture. Moneys in the Funds, Accounts, and
Subaccounts held under the Indenture may be invested by the Trustee as directed in writing by the District,
from time to time, in Authorized Investments subject to the following restrictions:
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(a)
Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which
will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close
as practicable to the date the District estimates the moneys represented by the particular investment will be
needed for withdrawal from the Costs of Issuance Fund.
(b)
Moneys in the Interest Account, the Principal Account and the Redemption Account of the
Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in
the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to
ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due.
(c)
Moneys in the Reserve Account of the Special Tax Fund may be invested only in Authorized
Investments which, taken together, have a weighted average maturity not in excess of five years; provided
that such amounts may be invested in an Investment Agreement to the later of the final maturity of the Bonds
so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with
the Indenture; and provided that no such Authorized Investment of amounts in the Reserve Account allocable
to the Bonds shall mature later than the respective final maturity date of the Bonds.
(d)
Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type
described in clause (1) of the definition thereof which by their terms will mature, as nearly as practicable, on
the dates such amounts are needed to be paid to the United States Government or in Authorized Investments
of the type described in clause (7) of the definition thereof.
(e)
In the absence of written investment directions from the District, the Trustee shall invest
solely in Authorized Investments specified in clause (7) of the definition thereof; provided, however, that any
such investment shall be made by the Trustee only if, prior to the date on which such investment is to be
made, the Trustee shall have received a Certificate of an Authorized Representative of the District specifying
a specific money market fund that satisfies the requirements of said paragraph in which such investment is to
be made and, if no such Certificate of an Authorized Representative is so received, the Trustee shall hold
such moneys uninvested.
COVENANTS AND WARRANTY
Warranty. The District shall preserve and protect the security pledged under the Indenture to the
Bonds against all claims and demands of all persons.
Covenants. So long as any of the Bonds issued under the Indenture are Outstanding and unpaid, the
District has made the following covenants with the Bondowners under the provisions of the Act and the
Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are
necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however,
that said covenants do not require the District to expend any funds or moneys other than the Special Taxes
and other amounts deposited to the Special Tax Fund:
Punctual Payment; Against Encumbrances. The District has covenanted that it will receive all
Special Taxes in trust for the Owners and will instruct the Treasurer to deposit all Special Taxes with the
Trustee immediately upon their apportionment to the District, and the District shall have no beneficial right
or interest in the amounts so deposited except as provided by the Indenture. All such Special Taxes shall be
disbursed, allocated and applied solely to the uses and purposes set forth in the Indenture, and shall be
accounted for separately and apart from all other money, funds, accounts or other resources of the District.
The District has covenanted that it will duly and punctually pay or cause to be paid the principal of
and interest on every Bond issued under the Indenture, together with the premium, if any, thereon on the
date, at the place and in the manner set forth in the Bonds and in accordance with the Indenture to the extent
that Net Taxes and other amounts pledged under the Indenture are available therefor, and that the payments
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into the Funds and Accounts created under the Indenture will be made, all in strict conformity with the terms
of the Bonds and the Indenture, and that it will faithfully observe and perform all of the conditions,
covenants and requirements of the Indenture and all Supplemental Indentures and of the Bonds.
The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the
Net Taxes except as provided in the Indenture, and will not issue any obligation or security having a lien or
charge upon the Net Taxes superior to or on a parity with the Bonds. Nothing in the Indenture shall prevent
the District from issuing or incurring indebtedness which is payable from a pledge of Net Taxes which is
subordinate in all respects to the pledge of Net Taxes to repay the Bonds.
Levy of Special Tax. The legislative body of the District has represented it has levied the Special
Tax for Fiscal Year 2009-2010 pursuant to the Rate and Method, and so long as any Bonds issued under the
Indenture are Outstanding, but subject to the Rate and Method, the legislative body of the District has
covenanted it will continue to levy the Special Tax in an amount equal to the Special Tax Requirement (as
defined in the Rate and Method), which includes, but is not limited to, amounts sufficient, together with other
amounts on deposit in the Special Tax Fund and available for such purpose, to pay (1) the principal of and
interest on the Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish
the Reserve Account of the Special Tax Fund to the Reserve Requirement. The District has also covenanted
that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the
District’s authority to levy the Special Tax for so long as the Bonds are Outstanding.
Commence Foreclosure Actions. The District has covenanted for the benefit of the Owners of the
Bonds that it (i) will commence foreclosure actions against any parcel with either (A) at least two (2)
consecutive installments of delinquent Special Taxes or (B) delinquent Special Taxes in excess of $35,000,
in each instance by the December 1 following the close of each Fiscal Year in which such Special Taxes
were due; and (ii) will commence foreclosure actions against all parcels with delinquent Special Taxes by the
December 1 following the close of each Fiscal Year in which it receives Special Taxes in an amount which is
less than 95% of the total Special Tax levied and the amount on deposit in the Reserve Account is at less than
the Reserve Requirement, and (iii) will diligently pursue such foreclosure actions until the delinquent Special
Taxes are paid, and in no event shall such foreclosure actions exceed the time periods specified in Section
53356.1 of the Act.
The District has covenanted that it will deposit the net proceeds of any foreclosure in the Special Tax
Fund and will apply such proceeds remaining after the payment of Administrative Expenses to make current
payments of principal and interest on the Bonds, to bring the amount on deposit in the Reserve Account up to
the Reserve Requirement and to pay any delinquent installments of principal or interest due on the Bonds.
Notwithstanding the foregoing, the District may elect (but is not obligated) to advance the amount of
any particular delinquency (excluding penalties and interest) and deposit such amount to the Special Tax
Fund. Upon a deposit of such money in the Special Tax Fund, the District will not need to initiate a
foreclosure action as provided above; provided, however, the District may reimburse itself for such advance
when the Special Tax on such property is paid in the amount of such advance plus interest on such amount at
a rate equal to the yield on the Outstanding Bonds. Interest and penalties paid in excess of the amount
advanced by the District shall be deposited in the Special Tax Fund.
Books and Accounts. The District will keep proper books of records and accounts, separate from all
other records and accounts of the District, in which complete and correct entries shall be made of all
transactions relating to the Project, the levy of the Special Tax and the deposits to the Special Tax Fund.
Such books of records and accounts shall at all times during business hours be subject to the inspection of the
Trustee or of the Owners of not less than 10% of the principal amount of the Bonds then Outstanding or their
representatives authorized in writing.
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Federal Tax Covenants. Absent an opinion of Bond Counsel that the exclusion from gross income of
interest on the Bonds issued on a tax-exempt basis for federal income tax purposes will not be adversely
affected for federal income tax purposes, the District has covenanted to comply with all applicable
requirements of the Code necessary to preserve such exclusion from gross income and specifically
covenants, without limiting the generality of the foregoing, as follows:
(1)
The District will not take any action, or fail to take any action, if any such action or
failure to take action would adversely affect the Tax-exempt status of interest on the Bonds under
Section 103(a) of the Code or cause interest on the Bonds to be an item of tax preference for
purposes of the federal alternative minimum tax imposed on individuals and corporations under
Section 55 of the Code; and
(2)
In furtherance of the foregoing tax covenant, the District will comply with the
provisions of the Tax Certificate, which is incorporated into the Indenture as if fully set forth therein.
These covenants shall survive payment in full or defeasance of the Bonds.
Reduction of Maximum Special Taxes. The District has covenanted, that it shall not initiate
proceedings to reduce the maximum Special Tax rates for the District.
Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the
qualified electors in the District which purports to reduce the maximum Special Tax below the levels
specified in the Indenture or to limit the power of the District to levy the Special Taxes for the purposes set
forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with
such covenants.
Limitation on Right to Tender Bonds. The District has covenanted that it will not adopt any policy
pursuant to the Act permitting the tender of Bonds in full payment or partial payment of any Special Taxes
unless the District shall have first received a certificate from an Independent Financial Consultant that the
acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the
principal of and interest on the Bonds when due.
AMENDMENTS TO INDENTURE
Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District may from
time to time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any
of the following purposes:
(a)
to cure any ambiguity, to correct or supplement any provisions in the Indenture which may
be inconsistent with any other provision in the Indenture, or to make any other provision with respect to
matters or questions arising under the Indenture or in any additional resolution or order, provided that such
action is not materially adverse to the interests of the Bondowners;
(b)
to add to the covenants and agreements of and the limitations and the restrictions upon the
District contained in the Indenture, other covenants, agreements, limitations and restrictions to be observed
by the District which are not contrary to or inconsistent with the Indenture as theretofore in effect or which
further secure Bond payments;
(c)
to modify, amend or supplement the Indenture in such manner as to permit the qualification
thereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect,
or to comply with the Code or regulations issued under the Indenture, and to add such other terms, conditions
and provisions as may be permitted by said act or similar federal statute, and which shall not materially
adversely affect the interests of the Owners of the Bonds then Outstanding;
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(d)
to modify, alter or amend the Rate and Method in any manner so long as such changes do
not reduce the maximum Special Taxes that may be levied in each year on property within the District to an
amount which is less than the sum of the estimated Administrative Expenses and 110% of the principal and
interest due in each corresponding future Bond Year with respect to the Bonds Outstanding as of the date of
such amendment; or
(e)
to the extent necessary to obtain an Insurance Policy or to obtain a rating on the Bonds, or in
connection with satisfying all or a portion of the Reserve Requirement by crediting a Financial Guaranty to
the Reserve Account; provided that such amendments which shall not materially adversely affect the
interests of the Owners of the then Outstanding Bonds; or
(f)
to modify, alter, amend or supplement the Indenture in any other respect which is not
materially adverse to the Bondowners.
Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the
Supplemental Indentures described in the preceding paragraph the Owners of not less than a majority in
aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the
adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the
District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular,
any of the terms or provisions contained in the Indenture; provided, however, that nothing in the Indenture
shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the
payment date of interest on, any Bond, (b) a reduction in the principal amount of, or redemption premium on,
any Bond or the rate of interest thereon, (c) a preference or priority of any Bond over any other Bond, or
(d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent
to such Supplemental Indenture, without the consent of the Owners of all Bonds then Outstanding.
If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms
of this Section shall require the consent of the Bondowners, the District shall so notify the Trustee and shall
deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of
the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage
prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly
set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the
office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such
notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the
Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding as required by
the Indenture. Whenever at any time within one year after the date of the first mailing of such notice, the
Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a
majority in aggregate principal amount of the Bonds Outstanding, which instrument or instruments shall refer
to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and
approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as
on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall
thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the
Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any
Supplemental Indenture, Bonds which are owned by the District or by any person directly or indirectly
controlling or controlled by or under the direct or indirect common control with the District, shall be
disregarded and shall be treated as though they were not Outstanding for the purpose of any such
determination.
Upon the adoption of any Supplemental Indenture and the receipt of consent to any such
Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the
Outstanding Bonds in instances where such consent is required pursuant to the provisions of this section, the
Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the
respective rights, duties and obligations under the Indenture of the District and all Owners of Outstanding
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Bonds shall thereafter be determined, exercised and enforced under the Indenture, subject in all respects to
such modifications and amendments.
The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental
Indenture authorized by the Indenture which materially adversely affects the Trustee’s own rights, duties or
immunities under the Indenture or otherwise.
TRUSTEE
Trustee. The Bank of New York Mellon Trust Company, N.A., a national banking association, has
been appointed the Trustee for the Bonds unless and until another Trustee is appointed by the District under
the Indenture. The District may, at any time, appoint a successor Trustee satisfying certain requirements
under the Indenture for the purpose of receiving all money which the District is required to deposit with the
Trustee under the Indenture and to allocate, use and apply the same as provided in the Indenture.
Removal of Trustee. The District may at any time at its sole discretion remove the Trustee initially
appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove
the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a
bank, national banking association, or trust company having a combined capital (exclusive of borrowed
capital) and surplus of at least $100,000,000, and subject to supervision or examination by federal or state
authority. Any removal shall become effective only upon acceptance of appointment by the successor
Trustee. Any removal of the Trustee and appointment of a successor Trustee shall become effective only
upon acceptance of appointment by the successor Trustee and notice being sent by the successor Trustee to
the Bondowners of the successor Trustee’s identity and address.
Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District
and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their
addresses appearing in the registration books in the office of the Trustee. Upon receiving such notice of
resignation, the District shall promptly appoint a successor Trustee satisfying the criteria in the Indenture by
an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee
shall become effective only upon acceptance of appointment by the successor Trustee.
If no successor Trustee shall have been appointed and have accepted appointment within forty-five
(45) days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any
Bondholder (on behalf of itself and all other Owners of the Bonds) may petition any court of competent
jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if
any) as it may deem proper, appoint such successor Trustee.
EVENTS OF DEFAULT; REMEDIES
Events of Default. Any one or more of the following events shall constitute an “event of default”:
(a)
default in the due and punctual payment of the principal of or redemption premium, if any,
on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed,
by declaration or otherwise;
(b)
default in the due and punctual payment of the interest on any Bond when and as the same
shall become due and payable; or
(c)
except as described in (a) or (b), default shall be made by the District in the observance of
any of the agreements, conditions or covenants on its part contained in the Indenture, the Bonds, and such
default shall have continued for a period of thirty (30) days after the District shall have been given notice in
writing of such default by the Trustee or the Owners of twenty-five percent (25%), in aggregate principal
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amount of the Outstanding Bonds; provided, that if such default (other than a default arising from
nonpayment of the Trustee’s fees and expenses) be such that it cannot be corrected within the applicable
period, it shall not constitute an Event of Default if corrective action is instituted by the District within the
applicable period and diligently pursued until the default is corrected.
The Trustee has agreed to give notice to the Owners as soon as practicable upon the occurrence of an
Event of Default under (a) or (b) above and within thirty (30) days of the Trustee’s knowledge of an event of
default under (c) above.
Remedies of Owners. Upon the occurrence of an Event of Default, the Trustee may pursue any
available remedy at law or in equity to enforce the payment of the principal of, premium, if any, and interest
on the Outstanding Bonds, and to enforce any rights of the Trustee under or with respect to the Indenture,
including:
(a)
By mandamus or other suit or proceeding at law or in equity to enforce his rights against the
District and any of the members, officers and employees of the District, and to compel the District or any
such members, officers or employees to perform and carry out their duties under the Act and their
agreements with the Owners as provided in the Indenture;
(b)
By suit in equity to enjoin any actions or things which are unlawful or violate the rights of
the Owners; or
(c)
By a suit in equity to require the District and its members, officers and employees to account
as the trustee of an express trust.
If an Event of Default shall have occurred and be continuing and if requested so to do by the Owners
of at least 25% in aggregate principal amount of Outstanding Bonds and if indemnified to its satisfaction, the
Trustee shall be obligated to exercise such one or more of the rights and powers conferred by the Indenture,
as the Trustee, being advised by counsel, shall deem most expedient in the interests of the Owners of the
Bonds.
No remedy conferred in the Indenture upon or reserved to the Trustee or to the Owners is intended to
be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every
other remedy given under the Indenture or now or hereafter existing, at law or in equity or by statute or
otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the
Act or any other law; provided, under no circumstance will the Bonds, or the obligation of the District to pay
installments of principal thereof and interest thereon, be accelerated.
Application of Revenues and Other Funds After Default. All amounts received by the Trustee
pursuant to any right given or action taken by the Trustee under the provisions of the Indenture relating to the
Bonds shall be applied by the Trustee in the following order upon presentation of the several Bonds:
First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default
and in carrying out the provisions of the Indenture, including reasonable compensation to its agents,
attorneys and counsel, and to the payment of all other outstanding fees and expenses of the Trustee; and
Second, to the payment of the whole amount of interest on and principal of the Bonds then due and
unpaid, with interest on overdue installments of principal and interest to the extent permitted by law at the
net effective rate of interest then borne by the Outstanding Bonds; provided, however, that in the event such
amounts shall be insufficient to pay in full the full amount of such interest and principal, then such amounts
shall be applied in the following order of priority:
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(a)
first to the payment of all installments of interest on the Bonds then due and unpaid on a pro
rata basis based on the total amount then due and owing,
(b)
second, to the payment of all installments of principal, including Sinking Fund Payments, of
the Bonds then due and unpaid on a pro rata basis based on the total amount then due and owing, and
(c)
third, to the payment of interest on overdue installments of principal and interest on the
Bonds on a pro rata basis based on the total amount then due and owing.
Third, to deposit such amounts in the Reserve Account to restore the balance therein to the Reserve
Requirement.
After payment or deposit of such amounts, the Trustee may apply any remaining amounts received
toward the payment of Rebatable Arbitrage pursuant to the Indenture or to the payment of the fees, costs and
expenses of the District in connection with such Event of Default.
Power of Trustee to Control Proceedings. In the event that the Trustee, upon the happening of an
Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties
under the Indenture, whether upon its own discretion or upon the request of the Owners of 25% in aggregate
principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for
the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal,
compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless
there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise
dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written
request signed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds under
the Indenture opposing such discontinuance, withdrawal, compromise, settlement or other such litigation.
Any suit, action or proceeding which any Owner of Bonds shall have the right to bring to enforce any right or
remedy under the Indenture may be brought by the Trustee for the equal benefit and protection of all Owners
of Bonds similarly situated and the Trustee has been appointed (and the successive respective Owners of the
Bonds issued under the Indenture, by taking and holding the same, shall be conclusively deemed so to have
appointed it) the true and lawful attorney in fact of the respective Owners of the Bonds for the purposes of
bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on
behalf of the respective Owners of the Bonds as a class or classes, as may be necessary or advisable in the
opinion of the Trustee as such attorney-in-fact.
Appointment of Receivers. Upon the occurrence of an Event of Default under the Indenture, and
upon the filing of a suit or other commencement of judicial proceedings to enforce the rights of the Trustee
and of the Owners of the Bonds under the Indenture, the Trustee shall be entitled, as a matter of right, to the
appointment of a receiver or receivers of the Net Taxes and other amounts pledged under the Indenture,
pending such proceedings, with such powers as the court making appointment(s) shall confer.
Non-Waiver. Nothing in the Indenture, or in the Bonds, shall affect or impair the obligation of the
District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the
respective Owners of the Bonds at the respective dates of maturity, as provided in the Indenture, out of the
Net Taxes and other moneys pledged in the Indenture for such payment.
Limitations on Rights and Remedies of Owners. No Owner of any Bond issued under the
Indenture shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy
under or upon the Indenture, unless (a) such Owner shall have previously given to the Trustee written notice
of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all
the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers in the
Indenture before granted or to institute such action, suit or proceeding in its own name; (c) said Owners shall
have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and
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liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to
comply with such request for a period of sixty (60) days after such written request shall have been received
by, and said tender of indemnity shall have been made to, the Trustee.
Such notification, request, tender of indemnity and refusal or omission are, in every case, to be
conditions precedent to the exercise by any Owner of Bonds of any remedy under the Indenture; it being
understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever
by his or their action to enforce any right under the Indenture, except in the manner provided in the
Indenture, and that all proceedings at law or in equity to enforce any provision of the Indenture shall be
instituted, had and maintained in the manner provided in the Indenture and for the equal benefit of all
Owners of the Outstanding Bonds.
The right of any Owner of any Bond to receive payment of the principal of and interest and premium
(if any) on such Bond as provided in the Indenture or to institute suit for the enforcement of any such
payment, shall not be impaired or affected without the written consent of such Owner, notwithstanding any
other provision of the Indenture.
Termination of Proceedings. In case the Trustee shall have proceeded to enforce any right under
the Indenture by the appointment of a receiver or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been determined adversely, then and in every such
case, the District, the Trustee and the Owners shall be restored to their former positions and rights under the
Indenture, respectively, with regard to the property subject to the Indenture, and all rights, remedies and
powers of the Trustee shall continue as if no such proceedings had been taken.
DEFEASANCE; NO PARITY BONDS; CONDITIONS FOR SUBORDINATE DEBT
Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the
Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the
manner stipulated in the Indenture or any Supplemental Indenture, then the Owner of such Bond shall cease
to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and
other obligations of the District to the Owner of such Bond under the Indenture shall thereupon cease,
terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding
Bonds pursuant to the defeasance provisions of the Indenture, the Trustee shall execute and deliver to the
District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee
shall pay over or deliver to the District’s general fund all money or securities held by it pursuant to the
Indenture which are not required for the payment of the principal of, premium, if any, and interest due on
such Bonds.
Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the
preceding paragraph if such Bond is paid in any one or more of the following ways:
(a)
by paying or causing to be paid the principal of, premium, if any, and interest on such Bond,
as and when the same become due and payable;
(b)
by depositing with the Trustee, in trust, at or before maturity, money which, together with
the amounts then on deposit in the Special Tax Fund (exclusive of the Administrative Expenses Account)
and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on
such Bond, as and when the same shall become due and payable; or
(c)
by depositing with the Trustee or another escrow bank appointed by the District, in trust,
Federal Securities, in which the District may lawfully invest its money, in such amount as will be sufficient,
together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of
the Administrative Expenses Account) and available for such purpose, together with the interest to accrue
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thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the
same shall become due and payable.
If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding
Bonds shall not have been surrendered for payment, all obligations of the District under the Indenture and
any Supplemental Indenture with respect to such Bond shall cease and terminate, except for the obligation of
the Trustee to pay or cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums
due thereon and except for the federal tax covenants of the District or any covenants in a Supplemental
Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not
less than ten (10) days prior to the proposed defeasance date, or such shorter period of time as may be
acceptable to the Trustee. In connection with a defeasance under (b) or (c) above, there shall be provided to
the District a verification report from an independent nationally recognized certified public accountant
stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow
bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds to be
defeased in accordance with this Section, as and when the same shall become due and payable, and an
opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect
that the Bonds being defeased have been legally defeased in accordance with the Indenture and any
applicable Supplemental Indenture.
No Parity Bonds; Conditions for the Issuance of Subordinate Debt.
(a)
No Parity Bonds. The District may not issue any bonds or obligations or otherwise incur any
loans, advances, or indebtedness payable from the Net Taxes or any amounts deposited in the Special Tax
Fund which are secured by a lien and charge upon such amounts equal to the lien and charge securing the
Outstanding Bonds, whether for refunding all or a portion of the Bonds then Outstanding or otherwise.
(b)
Conditions for the Issuance of Subordinate Debt. The District may issue bonds or
obligations or incur loans, advances, or indebtedness which are either (i) payable from, but not secured by a
pledge of or lien upon, the Net Taxes or amounts deposited in the Special Tax Fund, or (ii) secured by a
pledge of or lien upon the Net Taxes and/or amounts deposited in the Special Tax Fund which is subordinate
to the pledge of and lien upon the Net Taxes and amounts deposited in the Special Tax Fund (other than the
Administrative Expenses Account therein) under the Indenture for the security of the Bonds (“Subordinate
Debt”) in such amount as shall be determined by the District. The District may issue or incur such
Subordinate Debt subject to the following specific conditions, which are hereby made conditions precedent
to the issuance of any such Subordinate Debt:
(1)
The District shall be in compliance with all covenants set forth in the Indenture and
all Supplemental Indentures;
(2)
If, and to the extent, such Subordinate Debt is payable from the Net Taxes and/or
amounts deposited in the Special Tax Fund, then the sum of the principal amount of (A) all
Outstanding Bonds coming due and payable following the issuance of such Subordinate Debt and
(B) all Subordinate Debt that is also bonded indebtedness shall not exceed $35,445,000, the reduced
maximum amount of authorized bonded indebtedness of the District established pursuant Resolution
No. 98-046 of the legislative body of the District, adopted on April 28, 1998;
(3)
If, and to the extent such Subordinate Debt is bonded indebtedness, Net Taxes
estimated to be received for the then current Fiscal Year and all subsequent Fiscal Years shall be at
least equal to 100% of annual debt service on such Subordinate Debt, together with debt service on
the Bonds then Outstanding and all debt with a lien on Net Taxes senior to the lien of such
Subordinate Debt (if any); and
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(4)
The District shall deliver to the Trustee a written Certificate of an Authorized
Representative of the District certifying that the conditions precedent to the issuance of such
Subordinate Debt set forth in clauses (1) through (3) above have been satisfied.
MISCELLANEOUS
Cancellation of Bonds. All Bonds surrendered to the Trustee for payment upon maturity or for
redemption shall be upon payment therefor, and any Bond purchased by the District as authorized in the
Indenture and delivered to the Trustee for such purpose shall be, cancelled forthwith and shall not be
reissued.
Unclaimed Moneys. Any money held by the Trustee in trust for the payment and discharge of any
of the Outstanding Bonds which remain unclaimed for two (2) years after the date when such Outstanding
Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2)
years after the date of deposit of such money if deposited with the Trustee after the date when such
Outstanding Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute
property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto
and the Owners shall look only to the District for the payment of such Outstanding Bonds; provided,
however, that, before being required to make any such payment to the District, the Trustee at the expense of
the District, shall cause to be mailed by first-class mail, postage prepaid, to the registered Owners of such
Outstanding Bonds at their addresses as they appear on the registration books of the Trustee a notice that said
money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty
(30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be
returned to the District.
Provisions Constitute Contract. The provisions of the Indenture shall constitute a contract
between the District and the Bondowners, and the provisions thereof shall be construed in accordance with
the laws of the State of California.
In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or
taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the
Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their
former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.
After the issuance and delivery of the Bonds the Indenture shall be irrepealable, but shall be subject
to modifications to the extent and in the manner provided in the Indenture, but to no greater extent and in no
other manner.
Future Contracts. Nothing contained in the Indenture shall be deemed to restrict or prohibit the
District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net
Taxes which is subordinate to the pledge under the Indenture, or which is payable from the general fund of
the District or from taxes or any source other than the Net Taxes and other amounts pledged under the
Indenture.
Further Assurances. The District will adopt, make, execute and deliver any and all such further
resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention
or to facilitate the performance of the Indenture, and for the better assuring and confirming unto the Owners
of the Bonds the rights and benefits provided in the Indenture.
Severability. If any covenant, agreement or provision, or any portion thereof, contained in the
Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or
unenforceable, the remainder of the Indenture and the application of any such covenant, agreement or
provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be
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affected thereby, and the Indenture and the Bonds shall remain valid and the Bondowners shall retain all
valid rights and benefits accorded to them under the laws of the State of California.
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APPENDIX D
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by
Community Facilities District No. 88-1 of the City of Poway (Parkway Business Center) (the “Issuer”) in
connection with the issuance and delivery by the Issuer of its $_______________ Community Facilities
District No. 88-1 of the City of Poway (Parkway Business Center) Special Tax Refunding Bonds, Series
2009. The Bonds are being issued pursuant to a Bond Indenture (the “Indenture”) dated as of December 1,
2009, by and between the Issuer and The Bank of New York Mellon Trust Company, N.A., as Trustee (the
“Trustee”). The Issuer covenants as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed
and delivered by the Issuer, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to
assist the Participating Underwriter in complying with the Rule (as defined below).
SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to
any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the
following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and as described
in, Sections 3 and 4 of this Disclosure Certificate.
“Beneficial Owner” shall mean any person which (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through
nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal
income purposes.
“Disclosure Representative” shall mean the City Manager, or his or her designee, or the City
Director of Administrative Services or such other officer or employee as the Issuer shall designate in writing
to the Dissemination Agent from time to time.
“Dissemination Agent” shall mean, initially, the Issuer, or any successor Dissemination Agent
designed in writing by the Issuer which has filed with the then current Dissemination Agent a written
acceptance of such designation.
“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
“National Repository” shall mean, for purposes of the Rule, the Electronic Municipal Market Access
system of the Municipal Securities Rulemaking Board.
“Participating Underwriter” shall mean any of the original underwriters of the Bonds required to
comply with the Rule in connection with offering of the Bonds.
“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 Certificate, there is no State Repository.
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“Tax-exempt” shall mean that interest on the Bonds is excluded from gross income for federal
income tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise
includable directly or indirectly for purposes of calculating any other tax liability, including any alternative
minimum tax or environmental tax.
SECTION 3.
Provision of Annual Reports.
(a)
The Issuer shall, or shall cause the Dissemination Agent by written direction to such
Dissemination Agent to, not later than the March 1 after the end of the Issuer’s fiscal year (which currently
ends on June 30), commencing with the report for the fiscal year ending June 30, 2009, provide to each
Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure
Certificate. The Annual Report may be submitted as a single document or as separate documents comprising
a package, and may include by reference other information as provided in Section 4 of this Disclosure
Certificate; provided that the audited financial statements of the Issuer may be submitted separately from and
later than the balance of the Annual Report if they are not available by the date required above for the filing
of the Annual Report.
An Annual Report shall be provided at least annually notwithstanding any fiscal year longer
than 12 calendar months. The Issuer’s fiscal year is currently effective from July 1 to the immediately
succeeding June 30 of the following year. The Issuer will promptly notify each Repository or the Municipal
Securities Rulemaking Board and the Dissemination Agent of a change in the fiscal year dates.
(b)
In the event that the Dissemination Agent is an entity other than the Issuer, then the
provisions of this Section 3(b) shall apply. Not later than fifteen (15) Business Days prior to the date
specified in subsection (a) for providing the Annual Report to Repositories, the Issuer shall provide the
Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to such date the
Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact
the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The
Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to
the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder.
The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty
or obligation to review such Annual Report.
(c)
If the Issuer is the Dissemination Agent and the Issuer is unable to provide to the
Repositories an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the
Municipal Securities Rulemaking Board and the Repositories, if any, in substantially the form attached to
this Disclosure Certificate as Exhibit A. If the Dissemination Agent is other than the Issuer and if the
Dissemination Agent is unable to verify that an Annual Report has been provided to Repositories by the date
required in subsection (a), the Dissemination Agent shall send a notice to each Repository, 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)
promptly after receipt of the Annual Report, file a report with the Issuer certifying
that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it
was provided and listing all the Repositories to which it was provided.
SECTION 4.
reference:
Content of Annual Reports. The Issuer’s Annual Report shall contain or include by
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(a)
Financial Statements. The audited financial statements of the Issuer for the most recent fiscal
year of the Issuer then ended. If the audited financial statements are not available by the time the Annual
Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the
Issuer in a format similar to the audited financial statements, and the audited financial statements shall be
filed in the same manner as the Annual Report when they become available. Audited financial statements of
the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the
Indenture. Audited financial statements shall be prepared in accordance with generally accepted accounting
principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided,
however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the
basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis
upon which its financial statements are prepared, the Issuer shall provide a notice of such modification to
each Repository, including a reference to the specific federal or state law or regulation specifically describing
the legal requirements for the change in accounting basis.
(b)
Financial and Operating Data. The Annual Report shall contain or incorporate by reference
the following information:
(i)
the principal amount of Bonds outstanding as of June 30 of each year;
(ii)
the balance in each fund under the Indenture as of the June 30 preceding the filing of
the Annual Report;
(iii)
an update of the Tables entitled “Historical Special Tax Levy,” “Historical Special
Tax Delinquencies,” “Summary of Value-to-Lien Ratios,” and “Assessed Values and Value-to-Lien
Ratios” in the Official Statement for the Bonds based on the assessed values within the District for
the prior fiscal year and the Special Tax levy for the fiscal year in which the Annual Report is being
filed;
(iv)
any changes to the Rates and Method of Apportionment of the Special Tax approved
or submitted to the qualified electors for approval prior to the filing of the Annual Report;
(v)
the status of any foreclosure actions being pursued by the District with respect to
delinquent Special Taxes; and
(vi)
any information not already included under (i) through (vi) above that the Issuer is
required to file in its annual report to the California Debt and Investment Advisory Commission
pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended.
(c)
Any or all of the items listed in (a) or (b) above may be included by specific reference to
other documents, including official statements of debt issues of the Issuer 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 Issuer shall clearly identify each such other document so included by
reference.
SECTION 5.
Reporting of Significant Events.
(a)
Pursuant to the provisions of this Section 5, the Issuer shall give, or cause the Dissemination
Agent to give, notice of the occurrence of any of the following events with respect to the Bonds, if material:
(1)
principal and interest payment delinquencies.
(2)
non-payment related defaults.
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(3)
unscheduled draws on the Bond Reserve Account of the Special Tax Fund reflecting
financial difficulties.
(4)
unscheduled draws on any credit enhancements reflecting financial difficulties.
(5)
substitution of credit or liquidity providers, or their failure to perform.
(6)
adverse tax opinions or events adversely affecting the tax-exempt status of the
(7)
modifications to the rights of Bond Owners.
(8)
unscheduled redemption of any Bond.
(9)
defeasances.
(10)
any release, substitution, or sale of property securing repayment of the Bonds.
(11)
rating changes.
Bonds.
(b)
Whenever the Issuer obtains knowledge of the occurrence of a Listed Event, the Issuer shall
as soon as possible determine if such event would be material under applicable federal securities laws.
(c)
If the Issuer has determined that knowledge of the occurrence of a Listed Event would be
material under applicable federal securities laws and if the Dissemination Agent is other than the Issuer, the
Issuer shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination
Agent to report the occurrence pursuant to subsection (e).
(d)
If the Issuer determines that the Listed Event would not be material under applicable federal
securities laws and if the Dissemination Agent is other than the Issuer, the Issuer shall so notify the
Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to
subsection (e).
(e)
If the Issuer is acting as Dissemination Agent and determines that knowledge of the
occurrence of a Listed Event would be material under applicable federal securities laws, the Issuer shall
promptly file a notice of such occurrence with (i) the Municipal Securities Rulemaking Board or (ii) each
National Repository and the State Repository. If the Dissemination Agent has been instructed by the Issuer to
report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with
(i) the Municipal Securities Rulemaking Board or (ii) each National Repository, and in either case, to each
State Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and
(5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is
given to Owners of affected Bonds pursuant to the Indenture. In each case of the Listed Event, the
Dissemination Agent shall not be obligated to file a notice as required in this subsection (e) prior to the
occurrence of such Listed Event.
(f)
The Issuer hereby agrees that the undertaking set forth in this Disclosure Certificate is the
responsibility of the Issuer and the Dissemination Agent shall not be responsible for determining whether the
Issuer’s instructions to the Dissemination Agent under this Section 5 comply with the requirements of the
Rule.
SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the
Dissemination Agent under this Disclosure Certificate shall terminate upon the legal defeasance, prior
redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the
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Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under
Section 5.
SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under the Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The
initial Dissemination Agent shall be the Issuer. The Dissemination Agent may resign by providing (i) thirty
days written notice to the Issuer, and (ii) upon appointment of a new Dissemination Agent hereunder.
SECTION 8.
Amendment.
(a)
This Disclosure Amendment may be amended, by written agreement of the parties, without
the consent of the Owners, if all of the following conditions are satisfied: (1) such amendment is made in
connection with a change in circumstances that arises from a change in legal (including regulatory)
requirements, a change in law, or a change in the identity, nature or status of the Issuer or the type of
business conducted thereby, (2) this Disclosure Certificate as so amended would have complied with the
requirements of the Rule as of the date of this Disclosure Certificate, after taking into account any
amendments or interpretations of the Rule, as well as any change in circumstances, (3) the Issuer shall have
delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in
federal securities laws, addressed to the Issuer and the Participating Underwriter, to the same effect as set
forth in clause (2) above, (4) the Issuer shall have delivered to the Dissemination Agent an opinion of
nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the
effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners, or
such amendment shall have been approved by the Owners in the same manner as an amendment to the
Indenture, and (5) the Issuer shall have delivered copies of such opinion and amendment to each Repository.
(b)
This Disclosure Certificate also may be amended by written agreement of the parties upon
obtaining consent of Owners in the same manner as provided in the Indenture for amendments to the
Indenture with the consent of the Owners of the Bonds; provided that the conditions set forth in Section
8(a)(1), (2) and (3) have been satisfied.
(c)
To the extent any amendment to this Disclosure Certificate results in a change in the type of
financial information or operating data provided pursuant to this Disclosure Certificate, the first Annual
Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the
impact of the change in the type of operating data or financial information being provided.
(d)
If an amendment is made to the basis on which financial statements are prepared, the Annual
Report for the year in which the change is made shall present a comparison between the financial statements
or information prepared on the basis of the new accounting principles and those prepared on the basis of the
former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably
feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in
the accounting principles on the presentation of the financial information.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the Issuer from disseminating any other information, using the means of dissemination set forth in
this Disclosure Certificate or any other means of communication, or including any other information in any
Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this
Disclosure Certificate. If the Issuer chooses to include any information in any Annual Report or notice of
occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate,
the Issuer shall have no obligation under this Certificate to update such information or include it in any future
Annual Report or notice of occurrence of a Listed Event.
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SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent to comply
with any provision of this Disclosure Certificate, any Owner or Beneficial Owner of the Bonds may take
such actions as may be necessary and appropriate, including seeking mandate or specific performance by
court order, to cause the Issuer and/or the Dissemination Agent to comply with their respective obligations
under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of
Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure
of the Issuer or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to
compel performance.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination
Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Issuer
agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents,
harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or
performance of their powers and duties hereunder, including the costs and expenses (including attorneys
fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent’s
negligence or willful misconduct. Any Dissemination Agent other than the Issuer shall be paid (i)
compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be
mutually agreed to; and (ii) all expenses, legal fees and advances made or incurred by the Dissemination
Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation
to review any information provided to it by the Issuer pursuant to this Disclosure Certificate. The obligations
of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment
of the Bonds. No person shall have any right to commence any action against the Dissemination Agent
seeking any remedy other than to compel specific performance of this Disclosure Certificate. The
Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for
any breach under this Disclosure Certificate.
SECTION 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the
Issuer, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time
to time of the Bonds, and shall create no rights in any other person or entity.
SECTION 13. Notices. Notices with respect to this Disclosure Certificate should be sent in writing
to the following address: Director of Administrative Services, City of Poway, 13325 Civic Center Drive,
Poway, California 92064.
Dated: __________, 2009
COMMUNITY FACILITIES DISTRICT NO. 88-1
OF THE CITY OF POWAY (PARKWAY
BUSINESS CENTER)
By: ______________________________________
Director of Administrative Services of the
City of Poway
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EXHIBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer:
Community Facilities District No. 88-1 of the City of Poway
(Parkway Business Center)
Name of Bond Issue:
$_______________ Community Facilities District No. 88-1 of the City of
Poway (Parkway Business Center) Special Tax Refunding Bonds,
Series 2009.
Date of Issuance:
December 29, 2009
NOTICE IS HEREBY GIVEN that the City of Poway (the “City”) has not provided an Annual
Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure
Certificate, dated as of _____________, 2009. [The City anticipates that the Annual Report will be filed by
_______________.]
Dated: _______________________
_________________________________________
as Dissemination Agent
cc: City of Poway
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APPENDIX E
FORM OF BOND COUNSEL OPINION
Upon issuance and delivery of the Bonds, Richards, Watson & Gershon, A Professional Corporation, Bond
Counsel, proposes to render its final approving opinion in substantially the following form:
[Date of Delivery]
Community Facilities District No. 88-1 of
the City of Poway (Parkway Business Center)
13325 Civic Center Drive
Poway, California 92064
Opinion of Bond Counsel
with reference to
$_________
Community Facilities District No. 88-1
of the City of Poway
(Parkway Business Center)
Special Tax Refunding Bonds
Series 2009
Ladies and Gentlemen:
We have examined (i) a record of proceedings relating to the issuance by Community Facilities
District No. 88-1 of the City of Poway (Parkway Business Center) (the “District”) of the above-captioned
bonds (the “Series 2009 Bonds”), (ii) the Bond Indenture, dated as of December 1, 2009 (the “Indenture”),
by and between the District and Wells Fargo Bank, National Association, as trustee (the “Trustee”), and (iii)
such other matters of law as we have deemed necessary to enable us to render the opinions expressed herein.
As to questions of fact material to this opinion, we have relied upon such certificates and documents without
undertaking to verify the same by independent investigation. Capitalized terms used but not defined herein
have the meanings ascribed to them in the Indenture.
The Series 2009 Bonds are issued under and pursuant to the Indenture and the Mello-Roos
Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the California Government Code)
(the “Act”) to refinance certain public facilities as authorized by the Act.
From such examination, we are of the opinion that:
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1.
The Indenture has been duly and lawfully authorized, executed and delivered by the
District and, assuming due authorization, execution and delivery by the Trustee, is in full force and effect in
accordance with its terms and is valid and binding upon the District, enforceable in accordance with its
terms, and no other authorization for the Indenture is required. The Indenture creates the valid pledge which
it purports to create of the Net Taxes and certain funds established by the Indenture, including the
investments, if any, thereof, subject only to the provisions of the Indenture permitting the application thereof
for the purposes and on the terms and conditions set forth in the Indenture.
2.
The District is duly authorized and entitled to issue the Series 2009 Bonds. The
Series 2009 Bonds have been duly and validly authorized and issued by the District in accordance with the
Constitution and statutes of the State of California, including the Act, and in accordance with the Indenture.
The Series 2009 Bonds constitute the valid and binding special obligations of the District, payable solely
from Net Taxes and certain funds established by and as provided in the Indenture.
3.
Interest on the Series 2009 Bonds is exempt from personal income taxes of the State
of California and, assuming compliance with the covenants described below, is excluded from gross income
for Federal income tax purposes. The Series 2009 Bonds are not “specified private activity bonds” within
the meaning of Section 57(a)(5) of the Internal Revenue Code of 1986, as amended (the “Code”) and,
therefore, interest on the Series 2009 Bonds will not be treated as a preference item for purposes of
computing the alternative minimum tax imposed by Section 55 of the Code. Under the Code, interest on the
Series 2009 Bonds is excluded from the calculation of a corporation’s adjusted current earnings for purposes
of the corporate alternative minimum tax, but interest on the Series 2009 Bonds may be subject to a branch
profits tax imposed on certain foreign corporations doing business in the United States and to a tax imposed
on excess net passive income of certain S corporations.
The Code sets forth certain requirements that must be met subsequent to the issuance and delivery of
the Series 2009 Bonds for interest thereon to be and remain excluded from gross income for Federal income
tax purposes. Noncompliance with such requirements could cause the interest on the Series 2009 Bonds to
be included in gross income retroactive to the date of issue of the Series 2009 Bonds. The District has
covenanted to satisfy, or take such actions as may be necessary to cause to be satisfied, each provision of the
Code necessary to maintain the exclusion of the interest on the Series 2009 Bonds from gross income for
Federal income tax purposes pursuant to Section 103(a) of the Code.
Certain requirements and procedures contained or referred to in the Indenture and other relevant
documents may be changed and certain actions may be taken or omitted, under the circumstances and subject
to the terms and conditions set forth in such documents, upon the advice or with the approving opinion of
nationally recognized bond counsel. We express no opinion as to any Series 2009 Bond, or the interest
thereon, if any change occurs or action is taken or omitted upon the advice or approval of any bond counsel
other than ourselves.
Except as stated in the foregoing paragraph numbered 3 and the paragraph immediately following
paragraph 3, we express no opinion as to any Federal or state tax consequences of the ownership or
disposition of the Series 2009 Bonds.
The opinions expressed in the paragraphs numbered 1 and 2 hereof are qualified to the extent that the
enforceability of the Indenture and the Series 2009 Bonds may be limited by any applicable bankruptcy,
insolvency, debt adjustment, fraudulent conveyance or transfer, moratorium, reorganization or other similar
laws affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion
in appropriate cases and to the limitations on legal remedies against public entities in the State of California.
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We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of
forum or waiver provisions contained in the foregoing documents.
The opinions expressed herein are based on an analysis of existing law and cover certain matters not
directly addressed thereby. Such opinions may be affected by actions taken or omitted or events occurring
after the date hereof, and we have not undertaken to determine, or to inform any person, whether any such
actions or events are taken or do occur. We have assumed the genuineness of all documents and signatures
presented to us. We have not undertaken to verify independently, and have assumed, the accuracy of the
factual matters represented, warranted or certified in such documents. Furthermore, we have assumed
compliance with all agreements and covenants contained in the Indenture. We have not undertaken any
responsibility for the accuracy, completeness or fairness of the Official Statement or any other offering
material relating to the Series 2009 Bonds and no opinion is expressed herein with respect thereto.
Respectfully submitted,
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