HomeMy WebLinkAbout1990-08-28; City Council; 10794; Alga Road Assessment District No. 88-01CIT _ OF CARLSBAD - . c
AB# l/J 799 T-ALGA ROAD ASSESSMENT DISTRICT NO. 88-l
MTG 8/2@/90 AUTHORIZING ISSUANCE OF BONDS AND . APPROVING BOND PURCHASE CONTRACT AND CITY A* I DEPT ENG:MP . OFFICIAL STATEMENT CITY MGRzkik
RECOMMENDED ACTION:
Adopt Resolution No. %-z/y Authorizing Issuance of Bonds and Approving Bond Indenture.
Adopt Resolution No. Ap %-%?# proving Bond Purchase Contract and Preliminary Official Statement.
ITEM EXPLANATION:
Council, on July 10, 1990, held a public hearing and confirmed the Alga Road Assessment District. The cash payment period ended on August 13, 1990 and now bonds will be sold. On April 10, 1990, after a review of proposals, Council approved the selection of Smith Barney as the underwriter for the bonds.
The first resolution approves all formal terms and conditions relating to the sale of bonds through the approval of the bond indenture. A draft bond indenture is on file with the City Clerk and will be subject to minor modifications and amendments with final authorization to be evidenced by the signature of the Finance Director upon delivery of the bonds.
The second resolution approves and accepts Smith Barney's proposal for the sale of bonds through the approval of the purchase contract.
FISCAL IMPACT:
The total confirmed assessment district cost is $20,630,969. Bonds will be sold for that amount less any cash payments made by property owners prior to the deadline.
No City contribution was made to this district. Consultants hired by the City and City staff administration time has been paid for by developer deposits. The developer will be reimbursed for these costs and the costs of construction performed by the developer and acquired by the district with proceeds received from the sale of the bonds.
EXHIBITS:
1. Resolution No. th fti'-$/y Au orizing Issuance of Bonds and Approving Bond Indenture.
2. Resolution No. @-d&Approving Bond Purchase Contract and Preliminary Official Statement.
3. Bond Indenture (on file in the Office of the City Clerk).
4. Purchase Contract (on file in the Office of the City Clerk).
5. Preliminary Official Statement (on file in the Office of the City Clerk).
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RESOLUTION NO. go-319
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, AUTHORIZING ISSUANCE'OF
BONDS AND APPROVING BOND INDENTURE
WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD,
CALIFORNIA, is conducting proceedings for the construction of
certain public improvements in a special assessment district
pursuant to the terms and provisions of the "Municipal Improve-
ment Act of 1913", being Division 12 of the Streets and Highways
Code of the State of California, said special assessment
district known and designated as ASSESSMENT DISTRICT NO. 88-1
(ALGA ROAD) (hereinafter referred to as the "Assessment
District"); and,
WHEREAS, this legislative body has previously declared in
its Resolution of Intention to issue bonds to finance said
improvements, said bonds to issue pursua'nt to the terms and
provisions of the "Improvement Bond Act of 1915", being Division
10 of said Code; and,
WHEREAS, at this time this legislative body is desirous to
set forth all formal terms and conditions relating to the autho-
rization, issuance and administration of said bonds; and,
WHEREAS, there has been presented, considered and ready for
approval a bond indenture setting forth formal terms and condi-
tions relating to the issuance and sale of bonds.
NOW, THEREFORE, IT IS HEREBY RESOLVED AS FOLLOWS:
RECITALS
SECTION 1. That the above recitals are true and correct.
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BOND AUTHORIZATION
SECTION 2. That this legislative body does authorize the
issuance of bonds pursuant to the terms and provisions of the
"Improvement Bond Act of 1915", being Division 10 of the Streets
and Highways Code of the State of California, and also pursuant
to the specific terms and conditions as set forth in the BOND
INDENTURE presented herein.
BOND INDENTURE
SECTION 3. The BOND INDENTURE is approved substantially in
the form presented herein, and is subject to modifications as
necessary and as approved by the Finance Director. Final
approval of the BOND INDENTURE shall be conclusively evidenced
by the signature of the Finance Director upon final delivery of
bonds and receipt of proceeds. A copy of said BOND INDENTURE
shall be kept on file with the transcript of these proceedings
and open for public inspection.
FINAL ASSESSMENTS
SECTION 4. That the Certificate of Paid and Unpaid Assess-
ments, as certified by the Treasurer, shall remain on file in
that office and be open for public inspection for all particu-
lars as it relates to the amount of unpaid assessments to secure
bonds for this Assessment District.
SUPERIOR COURT FORECLOSURE
SECTION 5. This legislative body does further specifically
covenant for the benefit of the bondholders to commence and
prosecute to completion foreclosure actions regarding delinquent
installments of the assessments in the manner, within the time
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limits and pursuant to the terms and conditions as set forth in
the Bond Indenture as submitted and approved through the
adoption of this Resolution.
PASSED, APPROVED AND ADOPTED by the City Council of the
City of Carlsbad at its regular meeting held on the 28th day
of August , 1990, by the following vote, to wit:
AYES: Council Members Lewis, Larson and Pettine
NOES: None
ABSENT: Council Members Mam
i ATTEST:
ALETHA L. RAuTENKRANZ, City C erk
(SEAL)
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RESOLUTION NO. go-320
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, APPROVING BOND PURCHASE
CONTRACT AND PRELIMINARY OFFICIAL STATEMENT
WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD,
CALIFORNIA, has heretofore undertaken proceedings pursuant to
the "Municipal Improvement Act of 1913", being Division 12 of
the Streets and Highways Code of the State of California, and
has confirmed assessments upon lands within a special assessment
district described in a Resolution of Intention previously
adopted for said improvements, said special assessment District
known and designated as ASSESSMENT DISTRICT NO. 88-l (ALGA ROAD)
(hereinafter referred to as the "Assessment District"); and,
WHEREAS, said proceedings provided for the issuance of
bonds pursuant to the "Improvement Bond Act of 1915", being
Division 10 of the Streets and Highways Code of the State of
California; and,
WHEREAS, there has now been presented for consideration by
this legislative body a Bond Purchase Contract; and,
WHEREAS, there has also been presented for consideration by
this legislative body a Preliminary Official Statement contain-
ing information including but not limited to the Assessment
District and the type of bonds, including terms and conditions
thereof.
NOW, THEREFORE, IT IS HEREBY RESOLVED AS FOLLOWS:
SECTION 1. That the above recitals are all true and
correct.
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SECTION 2. That the Bond Purchase Contract submitted by
Smith Barney, Harris Upham & Co., Inc. is hereby approved and
accepted, and the City Manager is authorized to execute the
contract on behalf of the City.
SECTION 3. The Preliminary Official Statement, as prepared
and submitted, is hereby approved and adopted, and the execution
and distribution is hereby authorized. A copy of said Prelimi-
nary Official Statement shall be kept on file with the tran-
script of these proceedings and be open for public inspection.
SECTION 4. The City Manager, with the concurrence of Bond
Counsel, is hereby authorized to approve a Final Official State-
ment at or prior to the bond closing.
PASSED, APPROVED AND ADOPTED by the City Council of the
City of Carlsbad at its regular meeting held on the 28th day
of August , 1990, by the following vote, to'wit:
AYES: Council Members Lewis, Larson and Pettine
NOES: None
ABSENT: Council Members Mamaux
ATTEST:
ALETHA L. ' RAUTENKRANZ, City lerk
(SEAL)
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S-740
BOND INDENTURE
This Bond Indenture (the "Indenture") dated as of August 21, 1990, entered into and 1
approved by the City of Carlsbad, California (the "Issux, a municipal corpora-
tion, to establish the terms and conditions pertaining to the issuance of bonds in a
special assessment district known and designated as ASSESSMENT DISTRICT NO. 00-l
(ALGA ROAD) (the "Assessment District"). t
SECTION 1.
SECTION 2.
SECTION 3.
SECTION 4.
SECTION 5.
SECTION 6.
Issuance, Designation and Amount. Pursuant to the provisions of the
*'Improvement Bond Act of 1915" (the "Act"), being Division 10 of the
Streets and Highways Code of the State of California, the Issuer does
hereby authorize the issuance of bonds to represent unpaid assessments
within the Assessment District in principal amount of not to exceed
$20,630,969.41, and designated as the City of Carlsbad, Assessment
District No. 88-l (Alga Road) Limited Obligation Improvement Bonds (the
"Bonds").
Unpaid Assessments. The Issuer shall, immediately upon the completion
of the 30-day cash collection period, determine the assessments which
are unpaid and the aggregate amount thereof as authorized by Section
8621 of the Streets and Highways Code of the State of California.
Term of Bonds. Bonds to represent the unpaid assessments, and bear
interest at a rate not to exceed the maximum rate of 12% per annum,
will be issued in the manner provided in the Act, the last installment
of which Bonds shall mature a maximum of not to exceed nineteen (19)
years from the second day of September next succeeding twelve (12)
months from their date. The provisions of Part 11.1 of said Act,
providing an alternative procedure for the advance payment of
assessments and the calling of Bonds, shall apply.
Registered Bonds and Denominations. Said Bonds shall be issuable only
as fully registered Bonds in the denomination of $5,000, or any
integral multiple thereof, except for one bond maturing in the first
year of maturity, which shall include the amount by which the total
issue exceeds the maximum integral multiple of $5,000 contained
therein.
Date of Bonds. All of said Bonds shall be dated the 2nd of September,
1990, and interest shall accrue from that date.
Maturity. The Bonds shall be issued in serial and term form with
annual maturities on September 2nd of the years succeeding twelve (12)
months after their date shown on Exhibit "A" attached hereto, until the
whole is paid. Section 4 of Resolution No. 90-172 of the City Council
of the Issuer is amended by the Resolution approving this Indenture to
provide for the issuance of the Bonds both in serial and in term form,
as aforesaid. The amount maturing each year shall be such as to result in approximately equal annual debt service during the term of the issue
considering the interest rate and/or rates borne by the Bonds and the
principal amounts maturing in the respective years of maturity as shown
on Exhibit "A" attached hereto as modified by the mandatory redemption
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. set forth in Section 9(a)(ii) of this Indenture, and the Issuer shall,
immediately upon completion of the cash collection period, prescribe
the annual maturities of the Bonds, which shall be in convenient
amounts, not necessarily equal, and shall further provide for their
issuance and delivery.
SECTION 7. Interest. Each Bond shall be of a single maturity and shall bear
interest at the rate set forth in Exhibit "A" attached hereto from the
interest payment date next preceding the date on which it is authenti-
cated and registered, unless (i) said Bond is authenticated and
registered on or before an interest payment date and after the preced-
ing Record Date, in which case it shall bear interest from said
interest payment date, (ii) said Bond is authenticated and registered
prior to the first Record Date, in which case it shall bear interest
from its date, or (iii) interest on said Bond is in default as of the
date of authentication thereof, in which case it shall bear interest
from the date to which interest has been paid in full, until payment of
its principal sum has been discharged.
SECTION 8. Place of Payment. The principal on the Bonds shall be payable in
lawful money of the United States of America upon surrender of the Bond
at the office of the designated registrar,
transfer agent and paying agent of the Issuhr ("Payin Agent"), or such I
other registrar, transfer agent or paying agent&as may be designated by
supplemental Indenture of the Issuer.
Interest on said Bonds shall be paid on March 2 and September 2 of each
year, commencing September 2, 1991, by check or draft &mailed to the I
registered owner thereof at his address as it appears on the books of
registration as of the 15th day of the month immediately preceding said
interest payment date (the "Record Date"); or, upon the written request
of a bondowner of at least $l,OOO,OOO in aggregate principal amount of
Bonds, received by theAPaying Agent prior to the applicable Record I
Date, by wire transfer in immediately available funds to an account in
the continzntal United States designated by such owner. (
SECTION 9. Redemption.
(a) (i) Optional. The Bonds are subject to redemption prior to
maturity in whole or in part on any March 2 or September 2
at the principal amount thereof and accrued interest to the
date of redemption, together with the premium set forth
below:
Bonds Redeemed in - Premium
1991 to 2000
2001
2002 to maturity
3%
1.5%
0%
(ii) Mandatory. Bonds maturing in 2011 are also subject to
redemption in part on September 2, and on each
September 2,thereafter at the principal amo'unt thereof and I accrued interest thereon to the date fixed for redemption,
without premium, in the following amounts:
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Redemption Date Principal Amount
(b) Selection of Bonds for Redemption. If less than all of the
outstanding Bonds are to be redeemed, the&Paying Agent shall
select the Bonds to be redeemed in authorized denominations from
each maturity in the same proportion which such maturity
represents with respect to all of the outstanding Bonds and by lot
within a single maturity; provided, however, that 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 a multiple thereof,
and that, in selecting portions of such Bonds for redemption, the
c Paying Agent shall treat each such Bond 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. TheAPaying Agent shall promptly notify the Issuer in
writing of the Bonds, or portions thereof, selected for
redemption.
(c) Notice of Redemption. When the&Paying Agent shall receive notice
from the Issuer of its election to redeem Bonds at least sixty
(60) days prior to the applicable redemption date, or when Bonds
are otherwise to be redeemed pursuant to this Section 9, the
&Paying Agent shall give notice, in the name and at the expense of
the Issuer, of the redemption of such Bonds. Such notice of
redemption shall (a) specify the numbers of the Bonds selected for
redemption, except that where all the Bonds are subject to
redemption, the numbers thereof need not be specified; (b) state
the date fixed for redemption; (c) state the redemption price; (d)
state the place or places where the Bonds are to be redeemed; and
(e) in the case of Bonds to be redeemed only in part, state the
portion of the Bond which is to be redeemed. 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 30 days but no more than 45 days prior to the redemption
date, theAPaying Agent shall mail by first class mail, a copy of
such notice, postage prepaid, to the respective owners of the
Bonds to be redeemed at their addresses appearing on the bond
register. The actual receipt by the owner of any Bond of notice of
such redemption shall not be a condition precedent thereto, and failure to receive such notice shall not affect the validity of
the proceedings for the redemption of such Bonds, or the cessation
of interest on the redemption date. A certificate by the&Paying
Agent that notice of such redemption has been given as herein
provided shall be conclusive as against all parties, and no bondowner shall be entitled to prove, or to prevail upon proof,
that such bondowner failed to receive notice of such redemption.
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(d)
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Partial Redemption of Bonds. upon surrender of any Bond to be
redeemed in part only, the Issuer shall execute and theAPaying 1
Agent shall authenticate and deliver to the bondowner, at the
expense of the Issuer, a new Bond or Bonds of authorized denomina-
tions equal in aggregate principal amount to the unredeemed
portion of the Bond surrendered, with the same interest rate and
the same maturity.
Effect of Notice and Availability of Redemption Money. Notice of
redemption having bee11 duly given, as provided in this Section 9,
and the amount necessary for the redemption having been made
available for that purpose and being available therefor on the
date fixed for such redemption:
(1) The Bonds, or portions thereof, designated for redemption
shall, on the date fixed for redemption, become due and
payable at the redemption price thereof as provided in this
Indenture, anything in this Indenture or in the Bonds to the
contrary notwithstanding;
(2) Upon presentation and surrender thereof at the principal
corporate trust office of thefiPaying Agent, such Bonds shall \
be redeemed at the specified redemption price;
(3) From and after the redemption date the Bonds or portions
thereof so designated for redemption shall be deemed to be no
longer outstanding and such Bonds or portions thereof shall
cease to bear further interest; and
(4) From and after the date fixed for redemption no owner of any
of the Bonds or portion thereof so designated for redemption
shall be entitled to any of the benefits of this Indenture,
or to any other rights, except with respect to payment of the
redemption price and interest accrued to the redemption date
from the amounts so made available,
SECTION 10. Transfer of Registered Bonds. Any Bond may, in accordance with its
terms, be transferred, upon the books of registration required to be
kept pursuant to the provisions of Section 12, by the owner in whose
name it is registered, or by his duly authorized attorney or legal
representative, upon surrender of such Bond for registration of such
transfer, accompanied by delivery of a written instrument of transfer
in the form printed on the Bonds, or failing that, in a form approved
by thehPaying Agent and duly executed by the owner of said Bonds. I
The Paying Agent shall require the payment by the Bondowner requesting
IT- ,\ sue transfer of any tax or other governmental charge required to be paid with respect to such transfer and such charges as provided for in the system of registration for registered debt obligations.
No transfer of Bonds shall be required to be made during the fifteen
(15) days preceding the selection of any Bonds for redemption prior to
the maturity thereof, nor with respect to any Bond which has been selected for redemption prior to the maturity thereof.
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Upon any such registration of transfer, a new Bond or Bonds shall be
authenticated and delivered in exchange for such Bond, in the name Of
the transferee, of any denomination or denominations authorized by this
Indenture, and in an aggregate principal amount equal to the principal
amount of such Bond so surrendered and of -the same maturity. In all
case3 in which Bond3 shall be exchanged or transferred, the&Paying
Agent shall authenticate at the earliest practical time, Bonds in
accordance with the provisions of this Indenture. All Bonds
surrendered in such exchange or registration transfer shall forthwith
be cancelled.
SECTION 11. Exchange of Bonds. Bonds may be exchanged at the office of the&Paying
Agent for a like aggregate principal amount of Bonds of the same
interest rate and maturity, subject to the terms and condition3
provided in the system of registration for registered debt obligations,
including the payment of certain charges, if any, upon surrender and
cancellation of the Bond. Upon such transfer and exchange, a new regis-
tered Bond or Bonds of any authorized denomination or denominations of
the same maturity for the same aggregate principal amount will be
issued to the transferee in exchange therefor.
SECTION 12. Books of Registration. There shall be kept by the&Paying Agent I
sufficient books for the registration and transfer of the Bonds and,
upon presentation for such purpose, the,,Payinq Agent shall, under such 1 reasonable regulations as it may prescribe, register or transfer or
cause to be registered or transferred, on said register, Bonds as
hereinbefore provided.
SECTION 13. Execution of Bonds. The Bonds shall be executed in facsimile by the
Treasurer and by the City Clerk, and the corporate seal shall be
imprinted in facsimile on the Bonds. The Bonds shall then be delivered
to the/Paying- Agent for authentication and registration. In case an I
officer who shall have signed or attested to any of the Bond3 (by facsimile or otherwise) shall cease to be such officer before the authentication, delivery and issuance of the Bonds, such Bonds
nevertheless may be authenticated, delivered and issued, and upon such
authentication, delivery and issue, shall be as binding as though those
who signed and attested the same had remained in office.
SECTION 14. Authentication. Only such of the Bonds as shall bear thereon a certifi-
cate of authentication substantially in the form below, manually executed by theAPaying Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certifi-
cate of the transfer agent and registrar shall be conclusive evidence
that the Bonds so authenticated have been duly executed, authenticated
and delivered hereunder, and are entitled to the benefite of this
Indenture.
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. FORM OF CERTIFICATE OF AUTHENTICATION AND REGISTRATION
This is one of the Bonds described in the Bond Indenture
authorizing the issuance of the Bonds.
as Paying Agent
By:
Authorized signatory
Dated:
SECTION 15. Ownership of Bonds. The person in whose name any Bond shall be regis-
tered shall be deemed and regarded as the absolute owner thereof for
all purposes, and payment of or on account of the principal and redemp-
tion premium, if any, of any such Bond, and the interest on any such
Bond, shall be made only to or upon the order of the registered owner
thereof or his legal representative. All such payments shall be valid
and effectual to satisfy and discharge the liability upon such Bond,
including the redemption premium, if any, and interest thereon, to the
extent of the sum or sums so paid.
SECTION 16. Mutilated, Destroyed, Stolen or Lost Bonds. In case any Bond secured
hereby shall become mutilated or be destroyed, stolen or lost, the
Issuer shall cause to be executed and authenticated a new Bond of like
date and tenor in exchange and subetitution for and upon the cancella-
tion of such mutilated Bond or in lieu of and in substitution for such
Bond mutilated, destroyed, stolen or lost, upon the owner's paying the
reasonable expenses and charges in connection therewith, and, in the
case of a Bond destroyed, stolen or lost, his filing with theLPayinq I Agent and Issuer of evidence satisfactory to them that such Bond was
destroyed, stolen or lost, and of his ownership thereof, and furnishing
Agent and Issuer with indemnity satisfactory to them. I
SECTION 17. Cancellation of Bonds. _- All Bonds paid or redeemed, either at or before
maturity, shall be cancelled upon the payment or redemption of such
Bonds, and shall be delivered to theAPaying Agent when such payment or 1 redemption is made. All Bonds cancelled under any of the provisions of
this Indenture shall be destroyed by the Paying Agent, which shall
execute a certificate in duplicate describkg the Bonds so destroyed, \
and shall retain said executed certificate in its permanent files for
the issue.
SECTION 18. Application of Bond Proceeds. The proceeds of the sale of Bonds and
any good faith security deposit shall be received by the Finance Director at the time of the delivery of the Bonds. r\ I
SECTION 19. Creation of Funds.
directed
TheAFinance Director is hereby authorized and \
to establish the following Funds for purposes of making
payment for the costs and expenses for the works of improvement and
payment of principal and interest on the Bonds. The Funds to be
created are designated as follows:
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IMPROVEMENT FUND: The proceeds from the sale of the Bonds, after
deposit of required amounts in the Reserve Fund and Redemption Fund,
shall be placed by theA Finance Director in the Fund hereby created,
pursuant to Sections 10602 and 10424 of the California Streets and
Highways Code, as amended, which shall be called the "Improvement
Fund", and the monies in said Fund shall be used only for Project Costs
as that term is defined hereinafter. "Project Costs" shall mean the
costs of acquisition or construction of the works of improvement as
authorized in the assessment proceedings and all incidental costs
related thereto, all as more particular described in the Engineer's
Report for Assessment District No. 88-l (Alga Road) on file in the
office of the City Clerk.
Upon receipt of a "Payment Request Form" in substantially the form
attached hereto as Exhibit "B", duly executed by the City Manager, the
Treasurer or the designee of either official (each an "Authorized
Representative"), the Finance Director shall pay the Project Costs from
amounts in the Improvement Fund directly to the contractor&such
other person, corporation or entity entitled to payment hereunder. * /phe Finance Director shall be responsible for the safekeeping and invest-
ment of the monies held in the Improvement Fund and the disposition
thereof in accordance withfihis Indenture. The FinanceDirector may
rely on an executed Payment Request Form as complete authorization for
said payments.
Any surplus in the Improvement Fund after completion of the improve-
mellts shall remain in the Improvement Fund for a period of two (2)
years from the receipt of Bond proceeds as provided in Section 10427.1
of the California Streets and Highways Code, and thereafter shall be
utilized or distributed as determined by the Issuer in accordance with
said Section and with the proceedings of the Issuer heretofore and
herewith taken. Section 6 of Resolution No. 90-172 of the City Council
of the Issuer is amended by the Resolution approving this Indenture, to
provide that such surplus, or any portion of it as directed by the
Issuer, may be used to call outstanding Bonds.
REDEMPTION FUND: The Paying Agent is hereby authorized and directed to
keep a Redemption Fund designated by the name of the proceedings, into
which shall be placed (i) initially, an amount from proceeds of the
Bonds which, together with accrued interest, if any, on the Bonds
equals the interest on the Bonds to and including September 2, 1991,
(ii) all sums received from the collection of the assessments and the
interest thereon, together with all penalties, if applicable, and (iii)
any surplus in the Improvement Fund authorized by the Issuer pursuant
to Streets and Highways Code Section 10427.1 to be credited against unpaid assessments.
The Issuer
Agent (i)
shall transfer or cause to be transferred to the Payinq
all sums received from the collection of the assessments,
interest and penalties thereon at least two (2) business days before
each March 1 and September 2; and (ii) and ail sums received for the
prepayment of assessments at least sixty (60) days before the next
March 2 or September 2.
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Principal of and interest on said Bonds shall be paid by the Paying
Agent to the registered owners out of the Redemption Fund to the extent
funds on deposit in said Redemption Fund are available therefor. In
all respects not recited herein, said Bonds shall be governed by the
provisions of the Act. Under no circumstances shall the Bond5 Or
interest thereon be paid out of any other fund except as provided by
law.
Prior to the first redemption date there shall be established by the
&Paying Agent a prepayment subaccount within the Redemption Fund to be
known as the Prepayment Account ("Prepayment Account"). The,Payinq
Agent shall deposit in the Prepayment Account all monies received from
theAFinance Director representing the principal of and redemption
premium on any prepaid assessments and any surplus in the Improvement
Fund authorized by the Issuer pursuant to Streets and Highways Code
Section 10427.1 to be used to call outstanding Bonds. Such amount6
shall be identified in writing to the Paying Agent. such monies
shall be applied solely to the payment of principal of and premium on
Bonds to be redeemed prior to maturity pursuant to the provisions of
Section 9 of this Indenture.
RESERVE FUND: Pursuant to Part 16 of Division 10 of the California
Streets and Highways Code, as amended, there shall be created by the
Finance Director a special reserve fund for the Bonds to be designated
by the name of the Assessment District and specified as the "Reserve
Fund". An amount equal to the Reserve Requirement as hereinafter
defined shall be deposited in the Reserve Fund out of the Bond
proceeds.
Monies in the Reserve Fund shall be applied by the Finance Director as
follows:
A. Whenever there are insufficient funds in the Redemption Fund to pay
the next maturiny installment of principal of or interest on the
Bonds on the business day preceding such date of payment, the
Finance Director shall transfer the amount necessary to make up
such deficiency from the Reserve Fund to the Payinq Aqent for
deposit in the Redemption Fund. The amounts 50 advanced shall be
reimbursed upon receipt thereof by the Issuerkor deposit into the
Reserve Fund from the proceeds of redemption or sale of the parcels
for which payment of delinquent installmente of assessments and
interest thereon have been made from the Reserve Fund.
El. In the event an unpaid assessment is paid in cash in advance of the
final Bond maturity date, the Issuer is required to credit such
prepaid assessment with a proportionate share of the Reserve Fund,
thus reducing the total amount of the Reserve Fund. The amount to
be eo credited is the pro-rata share of the original amount
deposited in the Reserve Fund, less any amount previously trana- ferred from the Reserve Fund to the Redemption Fund as a result of
the delinquency in the payment of assessment inatallments for the
parcel for which the assessment is being prepaid. The Finance
Director shalldransfer the amount representing such credit from
the Reserve Fund to the Redemption Fund.
\
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I
I
I
1
I
a
. C. Interest earned on permitted investments of Reserve Fund monies
shall remain in the Reserve Fund so that the amount therein may
accumulate to and subsequently be maintained at the "Reserve
Requirement". "Reserve Requirement" means an amount equal to the
lesser of (i) the maximum annual debt service on the Bonds, (ii)
125% of the average annual debt service on the Bonds, or (iii) 10%
of the original principal amount of the Bonds, as such amount may
be reduced by credits as set forth in B. above. "Annual Debt
Service" on the Bonds for each year ending September 2 shall equal
the sum of (a) the interest falling due on the outstanding Bonds in
such 12 month period, assuming that the outstanding Bonds are
retired as scheduled, and (b) the principal amount of the outstand-
ing Bonds falling due during such 12 month period. "Average Annual
Debt Service" shall mean the average annual debt service during the
term of the Bonds. "Maximum Annual Debt Service" shall mean, as
computed from time to time, the largest annual debt service during
the period from the date of such computation through the final
maturity of any outstanding Bonds.
D. Prior to each interest payment date, any interest earned on the
investment of monies on deposit in the Reserve Fund which would
cause the amount therein to exceed the Reserve Requirement shall be
transferred by theAFinance Director to the&Payinq Agent for deposit
tithe Redemption Fund and shall be credited towards unpaid assess-
ments each year during which part of the Bonds remain outstanding.
The auditor's record prepared pursuant to Section 0682 of the Act
shall reflect credits against each of the unpaid assessments in the
manner provided in Section 10427.1 therein in amounts equal to each
assessment parcels‘ proportionate share of any Reserve Fund
disbursement.
E. All sums remaining in the Reserve Fund in the year in which the
last installments of the assessments become due and payable shall
be credited toward the assessments as follows:
Prior to June 30th of the Fiscal Year next preceding the Fiscal
Year in which the last unpaid assessment installment becomes due
and payable, the Issuer shall determine the amount remaining in the
Reserve Fund, if any, after all sums advanced and interest thereon
have been reimbursed, and shall order the same to be distributed
and/or credited pursuant to its written direction in the manner set
forth in Section 10427.1 of the Act, provided only that where all
or any part of such assessments remain unpaid and are payable in
installments, the amount apportioned to each parcel shall be
credited against the last unpaid assessment installment, then such
excess shall be credited against the next to last unpaid assessment
installment.
Whenever the balance in the Reserve Fund is sufficient to retire all
remaining outstanding Bonds, whether by advance retirement or other- wise, collection of the principal and interest on the assessments shall
be discontinued and the Reserve Fund shall be
in the retirement of the Bonds. \
9
In the event that the balance in the Reserve Fund at the time of liqui-
dation exceeds the amount required to retire all Outstanding Bonds in
the issue, the excess may be used for any of the purposes set forth in
Section 10427. If such excess is to be paid to property owners, it
shall be apportioned to each parcel upon which the individual assess-
ment remained unpaid at the time the balance in the Reserve Fund was
sufficient to retire all outstanding Bonds in the issue. The payments
shall be made in cash by the Issuer to the respective owners of the
parcels except that, if the excess is not greater than one thousand
dollars ($l,OOO), the excess may be transferred to the General Fund of
the Issuer.
REBATE FUND! The Finance Director shall transfer into the Rebate Fund
all amounts required by the Finance Director.to be transferred in accor-
dance with the provisions of the Arbitrage Rebate Provisions attached
hereto as Exhibit "C". Subject to the provisions of said Arbitrage
Rebate Provisions, amounts on deposit in the Rebate Fund shall only be
applied to payments made to the United States in accordance with
written instructions of the Issuer. Notwithstanding any other provi-
sions of this Indenture, all earnings on amounts on deposit in the
Rebate Fund shall remain therein until paid to the Federal government.
SECTION 20. Investments. Obligations purchased as investments of monies in any Of
the funds and accounts in which investments are authorised shall be
deemed at all times to be part of such funds and accounts. Except as
provided in Section 19 hereof with respect to the Reserve Fund and the
Rebate Fund, all investment earnings on monies held under this Inden-
ture shall., prior to the earlier of (i) the substantial completion of
the works of improvement
of the Bonds,
,r\(ii) two (2) years from the date of delivery
or (iii) the date on whichtin amount equal to the Bond
proceeds allocable to the works of improvement and authorized
incidental expense have been expended ("Completion Date"), be deposited
into the Improvement Fund. After the Completion Date, all such
investment earnings shall be deposited in the Redemption Fund. Subject
to the restrictions set forth herein, monies in said funds and accounts
may from time to time be invested by theginance Director in Authorized
Investments (as defined hereinafter) and described in (7) below,
provided that:
(a) Monies in the Improvement Fund shall be invested in obligations
which will by their terms mature as close as practicable to the
date the Issuer estimates the monies represented by the particular
investment will be needed for withdrawal from such fund;
(b) Monies in the Redemption Fund shall be invested only in obliga-
tions which will by their terms mature on such dates so as to
ensure the payment of principal of and interest on the Bonds as
the same become due; and
(cl Half of the monies in the Reserve Fund may be invested in obliga-
tions which shall mature not more than five (5) years from the
date of purchase and fi the balance may be invested in obligations I
which shall mature not more than ten years from the date of
purchase ,,,provided that no such obligation shall mature later than )
the final maturity of the bonds.
10
. The&Finance Director shall sell at the best price reasonably obtainable
or present for redemption any obligations so purchased whenever it may
be necessary to do so in order to provide monies to meet any payment or
transfer for such funds and accounts or from such funds and accounts.
For the purpose of determining at any given time the balance in any
such funds or accounts, any such investments constituting a part of
such funds and accounts shall be valued at the lesser of their market
value or cost. h
"Authorized Investments" means any of the following to the extent such
securitiee are eligible for the legal investment of funds of the
w:
(1) United States Treasury notes, bonds, bills or certificates of
indebtedness, or those for which the faith and credit of the
United States is pledged for the payment of principal and
interest;
(2) Time certificates of deposit or negotiable certificates of deposit
issued by a state or nationally chartered bank or trust company,
including the Paying Agent, or a state or federal savings and loan
association; provided, that such certificates of deposit shall be
(i) continuously and fully insured by the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance
Corporation, or (ii) issued by a bank or trust company organized
under the laws of any state of the United States of America or a
national banking association (including the Paying Agent) having a
combined capital and surplus of at least one hundred million
dollars ($100,000,000), and such certificates shall have maturi-
ties of six (6) months or less, or (iii) continuously and fully
secured by such securities as are described in clause (1) above,
which securities shall have a market value (as determined on a
marked-to-market basis calculated at least weekly, and exclusive
of accrued interest) of not less than the principal amount of such
certificates of deposit;
(3) Bills of exchange or time drafts drawn on and accepted by a cornmer-
cial bank (including the Paying Agent), otherwise known as
bankers' acceptances, which are eligible for purchase by members
of the Federal Reserve System; provided, that purchases of
eligible bankers' acceptances may not exceed two hundred seventy
(270) days' maturity;
(4) Commercial paper of "prime" quality of the highest ranking or of
the highest letter and numerical rating as provided by either
Moody's or Standard & Poor's, which commercial paper is limited to issuing corporations that are organized and operating within the
United States of America and that have total assets in excess of
five hundred million dollars ($500,000,000) and that have an "A"
or higher rating for the issuer's debentures, other than commer-
cial paper, as provided by either Moody's or Standard & Poor's;
provided, that purchases of eligible commercial paper may not
exceed one hundred eighty (180) days' maturity nor represent more
than ten percent (10%) of the outstanding commercial paper of an
issuing corporation;
31
(5) Any repurchase agreement with a bank or trust company organized
under the laws of any state of the United State8 of America
(including the Paying Agent) or a national banking association or
government bond dealer reporting to, trading with and recognised
as a primary dealer by, the Federal Reserve Bank of New York,
which agreement is secured by any one or more of the securities
described in clause (1) above; provided, that the underlying
securities are (i) required by the repurchase agreement to be held
by such bank, trust company or primary dealer having a combined
capital and surplus of at least one hundred million dollars
($100,000,000) and being independent of the issuer of such
repurchase agreement, and (ii) maintained at a market value (as
determined on a marked-to-market basis calculated at least weekly)
of not less than 103% of the amount so invested;
(6) Bonds, notes, warrants or other evidence of indebtedness of the
State of California or of any political subdivision or public
agency thereof which are rated in one of the two highest short-
term or long-term rating categories by either Moody's or Standard
& Poor's;
(7) Units of a taxable government money market portfolio restricted to
obligations issued or guaranteed as to payment of principal and
interest by the full faith and credit of the United States govern-
ment or repurchase agreements collateralized by such obligations;
and
(8) The Local Agency Investment Fund established pursuant to Section
16429.1 of the Government Code of the State of California.
SECTION 21. No Issuer Liability. It is hereby further determined and declared that
the Issuer will not obligate itself to advance any available funds from
its Treasury to cure any deficiency or delinquency which may occur in
the Bond Redemption Fund by failure of property owners to pay annual
special assessments. This determination shall be clearly set forth and
stated in the title of the Bonds to be issued pursuant to these proceed-
ings as authorized and required by Section 8769 of the Streets and
Hiyhways Code of the State of California.
SECTION 22. Covenant to Foreclose. The legislative body hereby covenants that upon
default of any assessment payment due and the continuing of such
default through the delinquency date of the second installment of
property taxes, it will cause Superior Court foreclosure proceedings to
be brought within one hundred fifty (150) days of such default and
thereafter diligently prosecute to completion such proceedings. Such foreclosure proceedings as to developed property may be deferred so
long as the special Reserve Fund is maintained at no less than 80% the
level set forth in the Section entitled "Reserve Fund" hereinabove.
SECTION 23. Covenant to Maintain Tax-Exempt Status. The Issuer covenants that it will not make any uee of the proceeds of the Bonds issued hereunder which would cause the Bonds to become "arbitrage bonds" subject to
Federal income taxation pursuant to the provisions of Section 148(a) of
the Code, or to become "Federally-guaranteed obligations" pursuant to
12
the provisions of Section 149(b) of the Code, or to become "private
activity bonds" pursuant to the provisions of Section 141(a) of the
code. To that end, the Issuer will comply with all applicable require-
ments of the code and all regulations of the United States Department
of Treasury issued thereunder to the extent such requirements are, at
the time, applicable and in effect. Additionally, the Issuer agrees to
implement and follow each and every recommendation provided by bond
counsel and deemed to be necessary to be undertaken by the Issuer to
ensure compliance with all applicable provisions of the Code in order
to preserve the exemption of interest on the Bonds from Federal income
taxation.
SECTION 24. Covenant Regarding Arbitrage. The Issuer shall neither take, permit
nor suffer to be taken alry action with respect to the gross proceeds of
the Bonds (as such term is defined under the Code) which, if such
action had been reasonably expected to have been taken, or had been
deliberately and intentionally taken, on the date of issuance of the
Bonds, would have caused the Bonds to be "arbitrage bonds" within the
meaning of Section 148 of the Code and the regulations promulgated
thereunder.
SECTION 25. Order to Print and Authenticate Bonds. The Treasurer is hereby
instructed to cause Bonds, as set forth above, to be printed, and to
proceed to cause said Bonds to be authenticated by the Paying Agent and
delivered to an authorized representative of the purchaser, upon
payment of the purchase price as set forth in the accepted proposal for
the sale of Bonds.
SECTION 26. Arbitrage Certificate. On the basis of the facts, estimates and circum-
stances now in existence and in existence on the date of issue of the
Bonds, as determined by thehFinance Director, said Finance Director is
hereby authorized to certify that it is not expected that the proceeds
of the issue will be used in a manner that would cause such obligations
to be arbitrage Bonds. Such certification shall be delivered to the
purchaser together with the Bonds.
SECTION 27. Paying Agent. The Issuer hereby appoints as Paying
Agent for the Bonds and approves the Paying Agent Agreement by and
between the Issuer and said Paying Agent, which Agreement is on file in
the office of the City Clerk of the Issuer. The Paying Agent is hereby
authorized to and shall mail or wire transfer interest payments to the
Bondowners, select Bonds for redemption, give notice of redemption of Bonds, maintain the Bond register and maintain and administer the Redemption Fund, the Reserve Fund, the Improvement Fund and the Rebate Fund. The Paying Agent is hereby authorized to pay the principal of
and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for
the registration of transfer and exchange of Bonds presented to it for
such purposes, to provide for the cancellation of Bonds, all as
provided in this Indenture, and to provide for the authentication of
Bonds, and shall perform all other duties assigned to or imposed on it
as provided in this Indenture. The Paying Agent shall keep accurate
records of all funds administered by it and all Bonds paid and discharged by it. The Paying Agent initially appointed, and any
13
successor thereto, may be removed by the Issuer and a successor or
successors may be appointed. so long as any Bonds are outstanding and
unpaid the Paying Agent and any successor or successors thereto
designated by the Issuer shall continue to be Paying Agent of the
Issuer for all of said purposes until the designation of a successor or
successors as Paying Ayent. The Issuer shall compensate the Paying
Agent for the performance of its services hereunder pursuant to the
Paying Agent Agreement.
A Paying Agent appointed hereunder may resign at any time upon 90 days'
written notice and after appointment of a successor. upon merger,
consolidation or reorganization of a Paying Agent, the Issuer will
appoint a new Paying Agrzlrt, which may be the corporation resulting from
such reorganization.
SECTION 2%. Liability of Paying Agent. The recitals of fact and all promises,
covenants and agreements contained herein and in the Bonds shall be
taken as statements, promises, covenants and agreements of the Issuer,
and the Paying Agent assumes no responsibility for the correctness of
the same and makes no representations as to the validity or sufficiency
of this Indenture or of the Bonds, and shall incur no responsibility in
respect thereof other than in connection with its duties or obligations
herein, or in the Bonds or in the certificate of authorization assigned
to or imposed upon the Paying Agent. The Paying Agent shall be under
no responsibility or duty with respect to the issuance of the Bonds for
value. The Paying Agent shall not be liable in connection with the
performance of its duties hereunder, except for its own negligence or
willful misconduct. The Paying Agent shall be protected in acting on
any notice, resolution, request, consent, certificate or other document
believed by it to be genuine and to have been signed or presented by
the proper party.
SECTION 29. Defeasance. If all outstanding Bonds shall be paid and discharged in
any one or more of the following ways:
(a) by paying or causing to be paid the principal of and interest with
respect to all Bonds outstanding, as and when the same become due
and payable;
(f-=1 by depositing with the Paying Agent, in trust, at or before maturity, money which, together with the amounts then on deposit
in the Redemption Fund and the Reserve Fund, is fully sufficient
to pay the principal of and interest on all Bonds outstanding as
and when the same shall become due and payable; or
(c) by depositing with the Paying Agent, in trust, direct obligations
of, or obligations guaranteed by, the United States of America, in
which the Issuer may lawfully invest its money, in such amount as
a firm of certified public accountants selected by the Issuer shall determine, at the expense of the Issuer, will, together with
the interest to accrue thereon and monies then on deposit in the
Redemption Fund and the Reserve Fund together with the interest to
accrue thereon, be fully sufficient to pay and discharge the
principal of and interest on all Bonds outstanding as and when the
same shall become due and payable;
14
then, at the election of the Issuer, and notwithstanding that any Bonds
shall not have been surrendered for payment, all obligations of the
Issuer under this Indenture (i) with respect to the Paying Agent shall
cease and terminate, except for the obligation to pay the fees and
expellees of the Paying Agent incurred to such date of deposit and any
indemnifications which by their terms survive the termination of this
Indenture, and (ii) with respect to all outstanding Bonds shall cease
and terminate, except for the obligation of the Paying Agent to pay or
cause to be paid to the owners of the Bonds not so surrendered and
paid, all sums due thereon. Notice of such election shall be filed
with the Paying Agent. Any funds held by the Paying Agent, at the time
of receipt of such notice from the Issuer, which are not required for
the purpose above mentioned, shall be paid over to the Treasurer.
SECTION 30. Purpose. Proceeds from the Bonds shall be used for payment of the
costs and expenses of the authorised public capital facilities, and all
appurtenances and incidental costs as set forth above.
SECTION 31. Provisions Constitute Contract. The provisions of this Indenture and
the Bonds shall constitute a contract between the Issuer and the
bondowners and the provisions hereof and thereof shall be enforceable
by any bondowner for the equal benefit and protection of all bondowners
similarily situated by mandamus, accounting, mandatory injunction or any other suit, action or proceeding at law or in equity that is now or
may hereafter be authorised under the laws of the State of California
in any court of competent jurisdiction. Said contract is made under
and is to be construed in accordance with the laws of the State of
California.
After the issuance and delivery of the Bonds this Indenture shall not
be subject to recission, but shall be subject to modification to the
extent and in the manner provided in this Indenture, but to no greater
extent and in no other manner.
SECTION 32. Unclaimed Funds. Notwithstanding any provisions of this Indenture,
subject to applicable state escheat laws, any monies held by the Paying
Agent in trust for the payment of the principal or premium, if any, or
interest on, any Bonds and remaining unclaimed for four years after the
principal of all of the Bonds has become due and payable (whether at
maturity or upon call for redemption or by declaration as provided in
this Indenture), if such monies were held at such date, or four years
after the date of deposit of such monies if deposited after said date when all of the Bonds became due and payable, shall be repaid to the Issuer free from the lien created by this Indenture, and all liability
of the Paying Agent with respect to such monies shall thereupon cease
and the bondowners shall, upon such payment, look only to the Issuer for payment; provided, however, that before the repayment of such monies to the Issuer as aforesaid, the Paying Agent may (at the cost of the Issuer) first publish at least once in a nationally recognised financial publication published in New York, New York, and Los Angeles,
California, a notice, in such form as may be deemed appropriate by the
Paying Agent, with respect to the provisions relating to the repayment
to the Issuer of the monies held for the payment thereof.
15
-..
. IN WITNESS WHEREOF, the Issuer has executed this Bond Indenture effective the date
first written hereinabove.
TREASURER
CITY OF CARLSBAD
STATE OF CALIFORNIA
16
YEAR
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
EXHIBIT "A"
MATURITY SCHEDULE
PRINCIPAL INTEREST RATE
17
EXHIBIT "B"
PAYMENT REQUEST FORM
(Attach duplicate original of Payee's
statement(s) or invoice(s))
( 1 PROGRESS PAYMENT
[check one]
( ) FULL/FINAL PAYMENT
Theflinance Director is hereby requested to pay from the City of Carlsbad, \
Assessment District No. 88-l (Alga Road) Improvement Fund established by the Bond
Indenture dated August 21, 1990, to the person, corporation or other entity desig- I nated below as Payee, the sum set forth below such designation, in payment of the
Project Costs described below. The amount shown below is due and payable under a
purchase order, contract or other authorization with respect to the Project Costs
described below and has not formed the basis of any prior request for payment.
Payee:
Address:
Amount: $
Description of Project Costs or portion thereof accepted by the Treasurer on behalf
of Assessment District No. 88-1 (Alga Road), and authorized to be paid to the Payee:
Executed by Authorized Representative
of the City of Carlsbad
Signature:
Name:
Title:
Dated:
Payment Request No.
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EXHIBIT "C!"
ARBITRAGE REBATE PROVISIONS
This document sets forth instructions regarding the investment and disposition of
monies deposited in various funds and accounts established for the City of Carlsbad
("Issuer") Assessment District No. 88-l (Alga Road) in aggregate principal amount of
not to exceed $20,630,969.41 ("Bonds").
The purpose of these instructions is to provide the Issuer with information
necessary to ensure that the investment of the monies in the funds and accounts
described herein will comply with the arbitrage limitations imposed by the Internal
Revenue Code of 1986.
DEFINITIONS
For purposes of these instructions, the following terms shall have the meanings Set forth below:
Bond Year. The term "Bond Year" means the 12 month period commencing on the
Delivery Date of the Bonds and each 12 month period thereafter.
Code. The term "Code" means the Internal Revenue Code of 1986.
Deliveeate. The term "Delivery Date" means the date the Bonds are delivered to
the initial purchaser.
Excess Investment Earnings. The term "Excess Investment Earnings" means an amount
equal to the sum of:
(1) The excess of
(a) The aggregate amount earned from the date of delivery of the Bonds on all
Non-purpose Obligations in which Gross Proceeds of the Bonds are invested
(other than amounts attributable to an excess described in this paragraph
(l)), over
(b) The amount that would have been earned if the Yield on such Non-purpose
Obligations (other than amounts attributable to an excess described in
this paragraph (1)) had been equal to the Yield on the Bonds,
plus
(2) Any income attributable to the excess described in paragraph (1).
Gross Proceeds. The term "Gross Proceeds" means the sum of the following amounts:
(1) Original proceeds, i.e., the net amount after payment of all expenses of
issuance of the Bonds received by the Issuer as a result of the sale of the
Bunds, excluding original proceeds of the Bonds which become transferred
proceeds (determined in accordance with applicable Regulations) of obligations issued to refund in whole or in part the Bonds;
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(2) Investment proceeds, i.e., amounts received at any time by the Issuer, such as
interest and dividends, resulting from the investment of any original proceeds
(as referenced in (2) above) or investment proceeds in Non-purpose Obligations,
increased by any profits and decreased (if necessary, below zero) by any losses
on such investments, excluding investment proceeds which become transferred
proceeds (determined in accordance with applicable Regulations) of obligations
issued to refund in whole or in part the Bonds;
(3) Sinking fund proceeds, i.e., amounts, other than original proceeds, investment
proceeds or transferred proceeds (as referenced in (1) above) of the Bonds,
which are held in the Redemption Fund and any other fund to the extent that the
Issuer reasonably expects to use such other funds to pay principal or interest
on the Bonds;
(4) Amounts in the Reserve Fund and in any other fund established as a reasonably
required reserve or replacement fund;
(5) Amounts, other than as specified in this definition, used to pay principal and
interest on the Bonds; and,
(6) Amounts received as a result of investing amounts described in this definition.
Investment Property. The term "Investment Property" means any security (as defined
in Section 165(g)(2) (A) or (B) of the Code), obligation, annuity or investment-type
property within the meaning of Section 148(b)(2) of the Code in which Gross Proceeds
are invested, but, excluding, however, obligations of the type described in Notice
87-22 published in the Internal Revenue Bulletin 1987-10 on March 9, 1987, and other
property excluded under the Regulations.
Non-purpose Obligation. The term "Non-purpose Obligation" means any Investment
Property which is acquired with the Gross Proceeds of the Bonds and is not acquired
in order to carry out the governmental purpose of the Bonds.
Purchase Price. The term "Purchase Price", for the purpose of computation of the
Yield of the Bonds, has the same meaning as the term "Issue Price" in Sections
1273(b) and 1274 of the Code, and, in general, means the initial offering price to
the public (not including bond houses and brokers, or similar persons or
organizations acting in the capacity of underwriters or wholesalers) at which price
a substantial amount of the Bonds are sold. The term "Purchase Price", for the
purpose of computation of Yield of Non-purpose Obligations means the fair market
value of the Non-purpose Obligation on the date of use of Gross Proceeds of the
Bonds for acquisition thereof, or if later, on the date that Investment Property
constituting a Non-purpose Obligation becomes a Non-purpose Obligation of the
Bonds.
Regulations. The term "Regulations"
promulgated under Section 148 of the Code.
means temporary and permanent Regulations
Yield. The term "Yield" means that yield which, when used in computing the present worth of all payments of principal and interest (or other payments in the caee of
Non-purpose Obligations which require payments in a form not characterized as princi-
pal and interest) on a Non-purpose Obligation or on the Bonds produces an amount equal to the Purchase Price of such Non-purpose Obligation or the Bonds, all computed as prescribed in applicable Regulations.
20
REBATE PROVISIONS
Creation of Rebate Fund. The Issuer shall create a Rebate Fund. Annually, on the
last day of each BondYear, or on the preceding business day in the event that such
last day is not a business day, the Issuer shall transfer from the Improvement Fund,
Reeerve Fund and Redemption Fund, as appropriate, for purposes of
the United States, an amount equal to Excees Investment Earnings.
Calculation of Excess Investment Earnings. Prior to the last day
Year, the Issuer shall calculate the Excess Investment Earnings.
to the last day of each Bond Year and on the date of retirement
Issuer shall calculate the amount of Excess Investment Earnings.
ultimate rebate to
of the first Bond
Thereafter, prior
of the Bonds, the
This calculation
shall be made or caused to be made by the Issuer in accordance with the following
rules:
(1) Except as provided in paragraph (2) below, in determining the amount described
in paragraph (l)(a) of the definition of Excess Investment Earnings, the aggre-
gate amount earned on Non-Purpose Obligations shall include (i) all income
realized under Federal income tax accounting principles (whether or not the
person earning such income is subject to Federal income tax) with respect to
such Non-purpose Obligations and with respect to the reinvestment of investment
receipts from such Non-purpose Obligations (without regard to the transaction
costs incurred in acquiring, carrying, selling or redeeming such Non-purpose
Obligations), including, but not limited to, gain or loss realized on the dispo-
sition of such Non-purpose Obligations (without regard to when such gains are
taken into account under Section 453 of the Code relating to taxable year of
exclusion of gross income), and income under Section 1272 of the Code (relating
to original issue discount) and (ii) any unrealized gain or loss as of the date
of retirement of the Bonds in the event that any Non-purpose Obligation is
retained after such date.
(21 Investment Property shall be treated as acquired for its fair market value at
the time it becomes a Non-purpose Obligation, so that gain or loss on the dispo-
sition of such Investment Property shall be computed with reference to such
fair market value as its adjusted basis.
(3) In determining the amount described in paragraph (l)(b) of the definition of
Excess Investment Earnings, the Yield on the Bonds shall be determined based on
the actual Yield of the Bonds during the period between the date of issuance of
the Bonds and the date the computation is made (with adjustments for discount).
(4) In determining the amount described in paragraph (ii) of the definition of
Excess Investment Earnings, all income attributable to the excess described in
paragraph (1) of said definition must be taken into account, whether or not
that income exceeds the Yield on the Bonds, and no amount may be treated as
"negative arbitrage".
(5) In determining the amount described in the definition of Excess Investment Earn-
ings, there shall be excluded any amount earned on any fund or account which is
used primarily to achieve a proper matching of revenues and debt service within
21
each Bond Year and which is depleted at least once a year, except for reason-
able carryover amount not in excess of the greater of one year's earnings on
such fund or account or l/12 of annual debt service, as well as amounts earned
on said earnings.
Payment to United States. The Issuer shall pay from the Rebate Fund an amount equal
to Excess lnvestment Earnings to the United States in installments with the first
payment to be made not later than thirty (30) days after the end of the fifth Bond
Year, and with subsequent payments to be made not later than five (5) years after
the preceding payment was due. The Issuer shall assure that each such installment
is in an amount equal to at least ninety percent (90%) of the Excess Investment
Earnings with respect to the Bonds as of the close of the computation period. Not
later than sixty (GO) days after the retirement of the Bonds, the Issuer shall pay from the Rebate Fund to the United States one hundred percent (100%) of the tl:eretofore unpaid Excess Investment Earnings of the Bonds. In the event that there
are any amounts remaining in the Rebate Fund following the payment required by the
preceding sentence, the Issuer shall use such amount for any lawful purpose of the
Iseuer. The Issuer shall remit payments to the United States at the address
prescribed by the Regulations as the same may be from time to time in effect with
such reports and statements as may be prescribed by such Regulations. In the event
that, for any reason, amounts in the Rebate Fund are insufficient to make the
payments to the United States which are required hereunder, the Issuer shall assure
that such payments are made to the United States on a timely basis from any funds
lawfully available therefor.
Further Obligation of Issuer. The Issuer shall assure that Excess Investment
Earninge are not paid or disbursed except as provided in these instructions. To
that end, the Issuer shall assure that investment transactions are on an arms-length
basis. In the event that Non-purpose Obligations consist of certificates of deposit
or investment contracts, investment in such Non-Purpose Obligations shall be made in
accordance with the procedures described in applicable Regulations as from time time
in effect.
MAINTENANCE OF RECORDS. The Issuer shall keep and retain for a period of six (6) years following the retirement of the Bonds, records of all determinations made pursuant to these Instructions.
* * * k
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$
CITY OF CARLSBAD LIMITED OBLIGATION IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 88-l (ALGA ROAD)
BOND AGREEMENT
September -, 1990
City Council City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, California
Ladies and Gentlemen:
Smith Barney, Harris Upham & Co. Inc. (the "Underwriter"), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement with the City of Carlsbad, California (the WCityW), which upon acceptance will be binding upon the City and upon the Underwriter. This offer is made subject to the City's acceptance by the approval, adoption and execution of this Bond Purchase Agreement and its delivery to the Underwriter at or before 5:00 p.m., local time, on September -, 1990, and, if not so accepted, will be subject to withdrawal by the Underwriter upon notice delivered to the City at any time prior to the acceptance hereof by the City.
1. e. Sale and Delivery of the Bo& .
(a) Subject to-the terms and conditions and in reliance upon the representations, warranties and agreements herein set forth, the Underwriter, hereby agrees to purchase from the City, and the City hereby agrees to sell to the Underwriter, all (but not less than all) of the City's Limited Obligation Improvement Bonds, Assessment District No. 88-l (Alga Road) (the "Bonds"), in an aggregate principal amount not to.exceed $ . The Bonds shall be issued as determined by the City for the construction and/or acquisition of certain public improvements. The Bonds will be dated, bear interest (payable on March 2 and September 2 of each year commencing March 2, 1991) at the rates per annum and mature on the dates and in the amounts specified in Exhibit A hereto.
(b) The purchase price for the Bonds shall be percent ( %) of the principal amount thereof, plus accrued interest thereon, if any, calculated on the basis of a 360-day year consisting of twelve 30-day months, from the Bond Date to the Closing Date (hereinafter defined). The Bonds shall be substantially in the form described in, shall be issued and secured under the provisions of, and shall be payable and subject to redemption as provided in the Bond Indenture (the "Bond Indenture") and the Improvement Bond Act of 1915, being Division 10 (commencing with Section 8500) of the Streets and Highways Code of the State of California (the "Act").
(c) Attached hereto as Exhibit A is the schedule for the Bonds indicating the maturity years, the principal amount maturing in each such year and the interest rate applicable to each such principal amount.
(d) The purchase of the Bonds will be subject to the following requirements, unless waived in writing by.' the Underwriter:
(1) The Bonds shall have a minimum value-to-lien ratio of 3:l on each Planning Area (as defined in the Official Statement) securing the lien (except as may otherwise be agreed to by the City and the Underwriter), including prior liens and special tax authorizations as delineated in Exhibit C hereto and based on the value of the land and non-agricultural improvements;
(2) Such ratio shall be determined by an appraisal, conducted by an appraiser designated or approved by the Underwriter, the cost of which shall be paid by the Underwriter but subject to reimbursement by the City as a part of the bond issuance costs;
(3) Final resolution of all legal challenges to the utilization of the assessed land and expiration of the corresponding appeal periods: 'and
(4) Any other conditions imposed by mutual consent of the Underwriter and the City affecting the assessment district or the Bonds.
(e) Attached hereto as Exhibit B is a copy of the Preliminary Official Statement of the City, dated August -, 1990 relating to the Bonds, which, together with the cover page and all appendices thereto, and together with such other changes as may be made thereto, with the approval of the City Manager or Finance Director, from time to time prior to the Closing Date (including any supplements thereto), is herein called the
-
"Official Statement." The City hereby authorizes the Underwriter to use and distribute, in connection with the offer and sale of the Bonds, the Preliminary Official Statement, the Official Statement, the Bond Indenture and other documents or contracts to which the City is a
party, this Bond Purchase Agreement and all information contained therein, and all other documents, certificates and statements required to be furnished by the City to the Underwriter in connection with the transaction by this Bond Purchase Agreement.
(f) At or before 9:00 o'clock A.M. Pacific Standard time September -, 1990, or at such other time or date as shall be agreed upon by the Underwriter and the City (such date being herein referred to as the "Closing Date"), the City will deliver to the Underwriter, at the office of the Paying Agent, as designated in the Bond Indenture or by other official action of the City Council, or at such other location as may be agreed upon by the Underwriter and the City, the Bonds in definitive i form (all bonds being printed or lithographed on steel engraved borders or in such other form as may be agreed to by the City and the Underwriter and having had CUSIP numbers assigned to them printed thereon), duly executed by the City in the manner provided for in the Bond Indenture and the Act, and the documents herein mentioned; and the Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in paragraph (b) of this section by wire transfer or certified or official bank check payable in Los Angeles Clearinghouse funds (such delivery and payment being herein referred to as the "Closing"). The Bonds shall be made available to the Underwriter, or its designee, not later than two business days before the Closing Date for purposes of inspection, registration and packaging. The Bonds shall be in fully registered form and shall be registered in accordance with instructions to be supplied to the Registrar by the Underwriter not less than five (5) business days prior to the Closing Date.
2. Representations, Warranties and Agreements of the City. The City represents, warrants and agrees with the Underwriter that:
(a) The City is duly orqanized and validly existing as a municipal corporation under the Constitution and laws of the State of California and has, and at the Closing Date will have, full legal right, power and authority (i) to enter into this Bond Purchase Agreement, (ii) to issue, sell and deliver the Bonds to the Underwriter pursuant to the Bond Indenture as provided herein, and (iii) to carry out, give effect to and consummate the transactions contemplated by this Bond Purchase Agreement, the Bond Indenture and the Official Statement.
(b) The City has duly and validly: (i) authorized and approved this Bond Purchase Agreement and any other applicable agreements, (ii) authorized and approved the performance by the City of its obligations contained in, and the taking of any and all action as may be necessary to carry out, give effect to and consummate the transactions contemplated by each of said documents, subject to the City's authorization, execution, and approval of the assessment district proceedings after the public hearing therefor, and (iii) pursuant to the resolution authorizinq issuance of the Bonds and approving financing documents and this agreement, authorized the Mayor to give final approval to the Official Statement within one week of the adoption thereof by the City.
(c) The City is not, and at the Closing Date will not be, in breach of or default under any law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of either; thereof, of any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound, which breach or default would have a material and adverse impact on the City's ability to perform its obligations under the Bonds, the Bond Indenture, this Bond Purchase Agreement or any other applicable agreements relating thereto, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument; to the best knowledge of the official signing this Bond Purchase Agreement, the adoption of the Bond Indenture, and the execution and delivery of the Bonds, this Bond Purchase Agreement, the contract or contracts for the construction of the public improvements which will be financed with the proceeds from the sale of the Bonds, any other applicable agreements and the other instruments contemplated by any of such documents to which the City is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States of America, or of any department, division, agency or instrumentality of any thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the City is a party or is otherwise subject or bound;
(d) Except as may be required under the blue sky or other securities laws of any jurisdiction, all approvals, consents, authorizations, elections and orders of or
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3632m5
filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the City of its obligations hereunder and under the Bond Indenture, the Bonds and any other applicable agreements have been or will be obtained and are or will be in full force and effect;
(e) There are no outstanding assessment liens against any of the properties within Assessment District No. 88-l which are senior to or on a parity with the assessment liens referred to in paragraph (f) hereof, other than those described in Exhibit C attached hereto, and the City has no present intention of conducting further proceedings leading to the levying of additional assessments or special taxes against any of the properties within Assessment District No. 88-l except as described in such Exhibit C;
(f) The information contained in the cover of the.' Preliminary Official Statement and the information contained in the Preliminary Official Statement (provided that no representation is made with respect to the Developer, the Property Owners or any contractual arrangements between the Developer and the Property Owners) is, and such information in the Official Statement is as of the date hereof, and will be, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to paragraph (i) below, true, correct and complete in all material respects and does not, as of the date hereof, and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuant to paragraph (i) below, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(q) During the period commencing on the date hereof and ending on the date 90 days following the Closing Date, if any event shall occur as a result of which it may be necessary to supplement the Official Statement in order to make the statements therein, in light of the circumstances existing at such time, not misleading, the City shall forthwith notify the Underwriter of any such event of which it has knowledge and, if in the opinion of the Underwriter such event requires an amendment or supplement to the Official Statement, the City will at its expense amend or supplement the Official Statement in a form and manner jointly approved by the City and the Underwriter so that the statements therein as so amended or supplemented will not be misleading,in light of the circumstances existing at such time;
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(h) No action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, or public board or body is pending, or to the best knowledge of the City, threatened, in any way affecting the existence of the City or the titles of its officers to their respective offices 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 Bond Indenture, or the collection or application of assessments pledged or to be pledged to pay the principal of and interest on the Bonds, or the pledge thereof, or in any way contesting or affecting the validity or enforceability of the Bonds, the Bond Indenture, any other applicable agreements, this Bond Purchase Agreement, or any action of the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Preliminary Official Statement, the Official Statement or the powers of the City or its authority with respect to the Bonds, the Bond Indenture, any other applicable agreements, this Bond Purchase Agreement or any action of the City contemplated by any of said documents, or which would adversely affect the exemption of interest paid on the Bonds from federal income taxation or California personal income taxation, nor to the knowledge of the City, is there any basis therefor;
(i) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request to qualify the Bonds for offer and sale under the “blue sky” or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate; provided, however, that the City shall not be required to register as a dealer or broker of securities or consent to the jurisdiction of any State of the United States, other than the State of California:
(j) Any certificate signed by any official of the City authorized to do so shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein;
(k) The City will apply the proceeds of the Bonds in accordance with the Bond Indenture and all other applicable documents, and as described.in the Official Statement;
(1) To the extent required or permitted by law, the City will notify the Underwriter prior to any reapportionment of assessments, and any such reapportionment will be approved only to the extent that security is not reduced or impaired; and
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3632m5
(m) Until such time as moneys have been set aside in an amount sufficient to pay all then outstanding Bonds at maturity or to the date of redemption if redeemed prior to maturity, plus unpaid interest thereon and premium, if any, to maturity or to the date of redemption if redeemed prior to maturity, the City will faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Bond Indenture.
The execution and delivery of this Bond Purchase Agreement by the City shall constitute a representation to the Underwriter that the representations and warranties contained in this Section 2 are true as of the date hereof.
3. Conditions to the Obligation of the Underwriter. The obligations of the Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the representations and warranties on the part of the City contained herein as of the date hereof and as of the: Closing Date, to the accuracy in all material respects of the- statements of the officers and other officials of the City made in any certificates or other documents furnished pursuant to the provisions hereof, to the performance by the City of its obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions:
(a) At the Closing Date, the Bond Indenture and any other applicable agreements shall be in full force and effect, and shall not have been amended, modified or supplemented, except as may have been agreed to in writing by the Underwriter, and there shall have been taken in connection therewith, with the issuance of the Bonds and with the transactions contemplated thereby and by this Bond Purchase Agreement, all such actions as, in the opinion of Brown, Harper, Burns & Hentschke, Bond Counsel ("Bond Counsel") for the City, shall be necessary and appropriate;
(b) At the Closing Date, the Official Statement shall be in form and substance satisfactory to the Underwriter;
(c) Between the date hereof and the Closing Date, the market price or marketability, at the initial offering prices set forth in Exhibit A,, of the Bonds shall not have been materially adversely affected, in the judgment of the Underwriter (evidenced by a written notice to the City terminating the obligation of the Underwriter to accept delivery of and pay for the Bonds), by reason of any of the following:
(1) Legislation introduced in or enacted (or resolution passed) by the Congress or recommended to the Congress by the President of the United States,
7
the Department of the Treasury, the Internal Revenue Service, or any member of Congress, or favorably reported for passage to either branch of Congress by any committee of such branch to which such legislation has been referred for consideration, or a decision rendered by a court established under Article III of the Constitution of the United States of America or by the Tax Court of the United states of America, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Treasury Department of the United States of America or the Internal Revenue Service, with the purpose or effect, directly or indirectly, of imposing federal income taxation upon such assessments and the interest thereon as would be received by the City under the Bond Indenture or upon the interest on the Bonds as would be received by any holders of the Bonds;
(2) Legislation introduced in or enacted (or ' resolution passed) by the Congress or an order, . decree or injunction issued by any court of competent jurisdiction, or an order, ruling, regulation (final, temporary or proposed), press release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission, or any other governmental agency having jurisdiction of the subject matter, to the effect that obligations of the general character of the Bonds, or the Bonds, including any or all underlying arrangements, are not exempt from registration under or other requirements of the Securities Act of 1933, as amended, or that the Bond Indenture is not exempt from qualification under or other requirements of the Trust Indenture Act of 1939, as amended, or that the issuance, offering or sale of obligations of the general character of the Bonds, or of the Bonds, including any or all underlying arrangements, as contemplated hereby or by the Official Statement or otherwise, is or would be in violation of the federal securities laws as amended and then in effect;
(3) A general suspension of trading in securities on the New York Stock Exchange, or a general banking moratorium declared by federal, State of New York or State of California officials authorized to do so, or a war or other national calamity;
(4) The withdrawal or downgrading of any rating of any securities of the City by a national rating agency;
3632m5
(5) The introduction, proposal or enactment of any amendment to the federal or California Constitution or action by any federal or California court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the City, its property, income, securities (or interest thereon), the validity or enforceability of the assessments or the ability of the City to acquire and improve the project as contemplated by the Bond Indenture and the Official Statement; or
(6) Any event occurring or information becoming known which, in the judgment of the Underwriter, makes untrue in any material respect any statement or information contained in the Official Statement, or has the effect that the Official Statement contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make I the statements therein, in the light of the circumstances under which they were made, not misleading;
(d) At or prior to the Closing Date, the Underwriter shall have received 3 counterpart originals or certified copies of the following documents, in each case satisfactory in form and substance to the Underwriter:
(1) The Official Statement, executed on behalf of the City by the Mayor;
(2) The Bond Indentuke together with a certificate of the City Clerk dated as of the Closing Date, to the effect that it is true, correct and complete copy of the one duly adopted and approved by the City and that it has not been amended, modified or rescinded (except as may have been agreed to-by the Underwriter) and is in full force and effect as of the Closing Date;
(3) An unqualified approving opinion, of Bond Counsel, dated the Closing Date and addressed to the City, in form and substance satisfactory to the Underwriter and its counsel, concerning the validity of the proceedings and, that interest on the Bonds is excluded from gross income for federal income tax purposes, is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes and is exempt from State of California personal income taxes, and a reliance letter, dated the Closing Date and addressed to the Underwriter, to the effect that such opinion addressed to the City may be relied upon by the
9
. Underwriter to the same extent as if such opinion was addressed to it;
(4) A supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, in form and substance satisfactory to the Underwriter and its counsel, to the effect that (i) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended; (ii) the Bonds and the Bond Indenture conform as to form and tenor to the descriptions thereof contained in the Official S-atement, and the statements contained in the Official Statement on the cover and under the major headings '*INTRODUCTION," "THE BONDS," and "TAX EXEMPT STATUS," insofar as such statements purport to summarize certain provisions of the Municipal Improvement Act of 1913, the Improvement Bond Act of 1915, the Bonds, the Bond Indenture and other applicable laws, present a fair and accurate summary of such provisions; (iii) the Bond Indenture and the Bonds constitute legal, valid and binding agreements of the City enforceable in accordance with their terms except as such enforceability may be limited by bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights in general and the application of equitable principles if equitable remedies are sought; and (iv) the Bond Indenture creates a valid pledge of, lien upon and security interest in the proceeds of the Bonds, the unpaid assessments in Assessment District No. 88-l and the interest thereon and the moneys in all funds and accounts established pursuant to the Bond Indenture, including the investment thereof, subject in all cases to the provisions of the Bond Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein;
(5) An opinion, dated the Closing Date and addressed to the Underwriter on behalf of Counsel to the Underwriter, addressing such matters as the Underwriter may reasonably request;
(6) A certificate, dated the Closing Date and signed by the Mayor, City Manager. or such other officer of the City as either the Mayor or the City Manager may select, to the effect that (i) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date; (ii) to the best knowledge of said officer, with respect to the cover of the Official Statement and the Official Statement
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.
and the Preliminary Official Statement referred to in Section 2(h) hereof, no event has occurred since the date of the Official Statement which should be disclosed in the Official Statement for the purpose for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; and (iii) except as approved in writing by the Underwriter, the City has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under this Bond Purchase Agreement, the Bond Indenture and the Official Statement at and prior to the Closing Date;
(7) An opinion, dated the Closing Date and addressed to the Underwriter, of the Attorney to the City, in form and substance satisfactory to the Underwriter and its counsel, to the effect that (i) no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any: court, regulatory agency, public board or body, is . pending or, to his knowledge, threatened in any way affecting the existence of the City or the titles of its officers to their respective offices, 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 Bond Indenture, or the collection or application of the assessments and the interest thereon 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 Bond Indenture, this Bond Purchase Agreement, or any other applicable agreements or any action of the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Official Statement or the powers of the City or its authority with respect to the Bonds, the Bond Indenture, this Bond Purchase Agreement, or any other applicable agreement, or any action on the part of the City contemplated by any of said documents, or which would adversely affect the exemption of interest paid on the Bonds from federal income taxation or California personal income taxation, nor to his knowledge is there any basis therefor; (ii) the City is duly organized and validly existing as a municipal corporation and public entity under the Constitution and laws of the State of California, with full legal right, power and authority to issue the Bonds and to perform all of its obligations under this Bond Purchase Agreement, the Bonds and all other applicable agreements; (iii) the City has duly and validly adopted the Bond Indenture, and it is now in full
3632m5
11
force and effect and has not been amended, modified or supplemented, and the City has duly authorized, executed and delivered this Bond Purchase Agreement and the Official Statement and duly authorized the distribution of the Preliminary Official Statement and assuming due authorization, execution and delivery by the Underwriter, the Bond Purchase Agreement constitutes a legal, valid and binding agreement of the City enforceable in accordance with its terms; (iv) the information contained in the cover of the Preliminary Official Statement and the information contained in the Preliminary Official Statement (provided that no representation is made with respect to the Developer, the Property Owners or any contractual arrangements between the Developer and the Property Owners) is, and such information in the Official Statement is as of the date hereof, and will be, as of the Closing Date and as of the date of any supplement or amendment thereto pursuant to section 2(i) hereof, true, correct and complete in all material respects and does not, as of the date hereof, and will not, as of the Closing Date or as of the date of any supplement or amendment thereto pursuapt to section 2(i) hereof below, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (v) the execution and delivery of the Bonds and the authorization of the Official Statement and compliance with the provisions of the Bonds and the Bond Indenture under the circumstances contemplated thereby do not and will not in any material respect conflict with or constitute on the part of the City a breach of or default under any agreement or other instrument to which the City is a party or by which it is bound or any existing State law, regulation, court order or consent decree to which the City is subject; (vi) the Bonds are payable from the assessments which have been-duly and validly authorized and the assessments will be fixed and levied annually in.an amount which, together with the other available funds, is required for the payment of the principal of and interest on the Bonds when due and payable, for the replenishment of the Reserve Fund, and for the payment of administrative expenses of the City, all as provided in the Bond Indenture; (vii) no authorization, approval, consent or other order of the State or any local agency of the State, other than such authorizations, approvals and consents which have been obtained, is required for the valid authorization, execution and delivery by the City of the Bonds or the Bond Indenture and the authorization of the Official Statement; provided,
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however, that no opinion is expressed as to any action required under state securities or blue sky laws in connection with the purchase or distribution of the Bonds by the Underwriter; and (viii) the City is not in breach of or default under any applicable law or administrative regulation of the State or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party or is otherwise subject which breach or default would materially adversely affect the City’s ability to enter into or perform its obligations under the Bonds or the Bond Indenture, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute such a breach or default;
(8) Two counterpart originals or copies certified by the City Clerk of a transcript of all proceedings relating to the authorization, issuance,: sale and delivery of the Bonds;
(9) A certificate dated the Closing Date, addressed to the Underwriter and signed by an authorized principal of Roberts b Roberts, to the effect that the excerpts from the Appraisal Report (as such term is defined in the Official Statement) attached to the Official Statement as Appendix D fairly and accurately described the market values of the properties in the Assessment District which are subject to the assessment and the excerpts from the Appraisal Report are reproduced as a part of the Official Statement with the consent of such firm and that, in connection with such firm’s participation in the preparation of the Official Statement, such principal has no reason to believe that the material in the Official Statement under the headings ” INTRODUCTION” and “SECURITY FOR THE BONDS - Land Values, ” insofar as such material contained under such captions purports to summarize certain provisions of the Appraisal Report, as of the Closing Date, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading;
(10) A certificate, dated the Closing Date, addressed to the Underwriter and signed by an authorized principal of Aviara Land Associates Limited Partnership, a Delaware limited partnership, in substantially the form attached hereto as Exhibit D; and
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(11) Such additional legal opinions, certificates (including a non-arbitrage certificate containing appropriate federal tax covenants), instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the City's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by the City in connection with the transactions contemplated hereby and by the Bond Indenture and the Official Statement.
All the opinions, letters, certificates, instruments and other documents mentioned in this section or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the terms hereof if, and only if, they are in form and substance satisfactory to the Underwriter.
If any of the conditions to. the obligations of the Underwriter contained in this section or elsewhere in this Bond Purchase Agreement shall not have been satisfied when and as required herein, all obligations of the Underwriter hereunder may be terminated by the Underwriter at, or at any time prior to, the Closing Date by written notice to the City.
4. Exuenses.
(a) Whether or not the Underwriter accepts delivery of and pays for the Bonds as set forth herein, it shall be under no obligation to pay, and the City shall pay or cause to be paid out of the proceeds of the Bonds or any other legally available funds of the City, all expenses incident to the performance of the City's obligations hereunder, including but not limited to the cost of printing, engraving and delivering the Bonds to the Underwriter, costs related to the printing of CUSIP numbers on the Bonds and the CUSIP Service Bureau charge for the assignment of such numbers, the cost of preparation, printing (and/or word processing and reproduction) and shipping of the Preliminary Official Statement and the Official Statement, the fees and expenses of obtaining a statement of overlapping indebtedness from California Municipal Statistics, Inc., the fees and disbursements of [Bankers Trust] or its designee (as registrar, transfer agent and paying agent), Bond Counsel, Underwriter's counsel, accountants, engineers, appraisers, economic consultants and any other experts or consultants retained in connection with the issuance and sale of the Bonds, except that the
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Underwriter shall pay the cost of the appraisal, subject to reimbursement by the City from Bond proceeds at Closing; and any other expenses not specifically enumerated in paragraph (b) of this section incurred in connection with the issuance and sale of the Bonds.
(b) Whether or not the Bonds are delivered to the Underwriter as set forth herein, the City shall be under no obligation to pay, and the Underwriter shall pay, the fees and expenses of Underwriter's Counsel, CDAC fees, expenses to qualify the Bonds for sale under any "blue sky" laws, if such qualification is sought, and all other expenses incurred by the Underwriter in connection with the public offering and distribution of the Bonds not specifically enumerated in paragraph (a) of this section.
5. Notices. Any notice or other communication to be given to the City under this Bond Purchase Agreement may be given by delivering the same in writing at the City's address set forth above, Attention: City Manager; and any notice or other communication to be given to the Underwriter under this Bond. Purchase Agreement may be given by delivering the same in writing to Smith Barney, Harris Upham & Co. Inc., 350 California Street, San Francisco, California, Attention: Chris Romer.
6. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the City and the Underwriter (including successors or assignees of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof.
7. Survival of Representations and Warranties. The representations and warranties of the City shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Bond Purchase Agreement and regardless of any investigations made by or on behalf of the Underwriter (or statements as to the results of such investigations) concerning such representations and statements of the City and regardless of delivery of and payment for the Bonds.
8. Execution in Counterparts. This Bond Purchase Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.
9. No Prior Aqreements. This Bond Purchase Agreement supercedes and replaces all prior negotiations, agreements and understandings between the parties hereto in relation to the sale of Bonds for the City.
10. Applicable Law; Non-assignability. This Bond Purchase Agreement shall be governed by the laws of the State of
15
h
California. This Bond Purchase Agreement shall not be assigned by the City.
11. Effective. This Bond Purchase Agreement shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by the City and shall be valid and enforceable as of the time of such acceptance.
Very truly yours,
SMITH BARNEY, HARRIS UPHAM & CO. INC.
BY Vice President
ACCEPTED:
CITY OF CARLSBAD
BY Claude "Buddy" Lewis, Mayor
16
EXHIBIT A
MATURITY SCHEDULE OF IMPROVEMENT DISTRICT BONDS, ASSESSMENT DISTRICT No. 88-1
Year (September 2) Principal Interest Amount Rate
Initial Offering Price
A-l
EXHIBIT B
PRELIMINARY OFFICIAL STATEMENT
B-l
EXHIBIT C
PRIOR ASSESSMENT AND SPECIAL TAX LIENS
PROPOSED FUTURE ASSESSMENT AND SPECIAL TAX LIENS
C-l
EXHIBIT D
CERTIFICATE OF DEVELOPER
To: Smith Barney, Harris Upham & Co. Inc.
Pursuant to Section 3(d)(lO) of the Bond Purchase Agreement ("Bond Purchase Agreement") dated August -, 1990, by and among Smith Barney, Harris Upham SC Co. Inc. as Underwriter (the "Underwriter") and the City of Carlsbad (the "City"), the undersigned, to the best of my knowledge after diligent investigation, hereby certifies as of the date hereof as follows:
1. I am, and at all pertinent times mentioned herein have been, the of Aviara Land Associates Limited Partnership, a Delaware limited partnership ("Developer") and am authorized to make this certification on behalf of the Developer.
2. I have reviewed the contents of the Preliminary Official Statement and the Official Statement (both as defined in the Purchase Agreement). I have reviewed the contents of this Certificate and have met with our counsel, for the purpose of discussing the meaning of its contents.
3. All information submitted by, or on behalf of, the Developer to the Underwriter in connection with the preparation of the Preliminary Official Statement and the Official Statement and to the Appraiser (as defined therein) in connection with preparation of the Appraisal Report was, to the best of my knowledge, true and correct.
4. The statements relating to the Developer, the Property Owners (as defined in the Preliminary Official Statement and Official Statement), the proposed development, its property ownership and contractual arrangements, if any, contained in the Official Statement under the captions "SPECIAL RISK FACTORS - Concentration of Ownership" and "THE DEVELOPMENT AND THE DEVELOPERS" do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
5. No proceedings are pending or threatened in which the Developer may be adjudicated as bankrupt or discharged from any and a.11 of its debts or obligations or granting an extension of time to pay its debts or a reorganization or readjustment of its debts.
-l-
6. No action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, is pending or, to my knowledge, threatened in any way seeking to restrain or to enjoin the development of the property within the Assessment District.
7. None of the property within the Assessment District is delinquent in the payment of any taxes or assessments.
8. The Developer agrees to indemnify and hold harmless, to the extent permitted by law, the City and the Underwriter and their officials, employees and agents, and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified party may become subject under any statute or at law or in equity or otherwise, and shall reimburse any such indemnified party for any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state in the cover or in the sections of the Preliminary Official Statement or the Official Statement captioned "SPECIAL RISK FACTORS - Concentration of Ownership" and "THE DEVELOPMENT AND THE DEVELOPERS" or any amendment or supplement to such information in the Official Statement of a material fact necessary to make the statements therein not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any indemnified party, provided that in no event shall the Developer be obligated for double indemnification.
The foregoing is true and correct.
Executed on September -, 1990.
AVIARA LAND ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership
-2-
OFFICIAL STATEMENT
NEW ISSUE
OH&S Draft of 8/20/90
In the opinion of Brown, Harper, Burns & Hentschke, Bond Counsel, based on existing laws, regulations, rulings and court decisions and assuming,
among other matters, compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt
from State of California personal income taxes. In the opinion of Bond
Counsel, interest on the Bonds is not a specific preference item for purposes
of the federal individual or corporate alternative minimum taxes, provided,
however, that such interest is included in adjusted net book income and
adjusted current earnings in calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding other federal or state- income tax consequences relating to the accrual or receipt of
Bonds. See "TAX-EXEMPT STATUS" herein.
$ CITY OF CARLSBAD
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 88-l
(ALGA ROAD)
SAN DIEGO COUNTY, CALIFORNIA
Dated: September 2, 1990 Due : September 2 as shown below
The City of Carlsbad Limited Obligation Improvement Bonds, Assessment District No. 88-l (Alga Road) (the "Bonds"), are being issued by the City of Carlsbad (the "City") for the purpose of providing funds to finance the cost of acquiring certain street improvements (the "Improvements") within the City which are of particular benefit to the properties within City of Carlsbad Assessment District No. 88-l (Alga Road) (the "Assessment District"). The construction and installation of the Improvements will be undertaken as authorized under the provisions of the Municipal Improvement Act of 1913 (Division 12 of the California Streets and Highways Code). The Bonds are being issued pursuant to the provisions of the Improvement Bond Act of 1915 (Division 10 of said Code), and an indenture dated as of September -' 1990 entered into by the City (the "Indenture").
The Bonds are issued only as fully registered Bonds in the denomination of $5,000 or any integral multiple thereof, exceptjfor one Bond due in 1992 which will include the amount by which the principal amount of the issue exceeds the largest integral multiple of $5,000 contained therein. Interest is payable on March 2, 1991, and semtirmually thereafter on
September 2 and March 2 of each year. Principal of and premium, if any, on
the Bonds, will be payable at maturity or at an earlier redemption date upon
presentation by the registered owner or his duly authorized representative at the trust office, in , California, of Paying
Agent or such other registrar, transfer agent or paying agent as may'be
designated by Supplemental Indenture of the City. Interest on the Bonds is payable by check or draft mailed to the registered owners thereof as of the 15th day of the month preceding the interest payment date or upon the written request delivered to the Paying Agent by the applicable Record Date of a Bondowner of at least $l,OOO,OOO in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United
States designated by such Owner.
The Bonds will mature on September 2 of each of the years and in the
amounts, and will bear interest at the rates, as set forth in the following
schedule.
$ Serial Bonds - Price %
Maturity Date
(September 2)
Principal
Amount*
Interest
Rate
1992 %
1993 1994
1995
1996
1997
1998
1999
2000
2001
2002
2003 2004 2005
2006
(PLUS ACCRUED INTEREST)
$ % Term Bonds due September 2, 2011 - Price -%
The Bonds are subject to redemption prior to maturity in whole or in
part on any March 2 or September 2 at the principal amount thereof plus accrued interest to the date of redemption, together with the premium as set
forth herein. Notice of redemption must be given to the registered owner of the Bond, by first-class mail, at least 30 days prior to any such redemption
date. The Bonds may be refunded pursuant to the Refunding Act of 1984 for 1915 Act Improvement Bonds.
*Preliminary, subject to change.
\
.
Under the provisions of the Improvement Bond Act of 1915,
installments of principal and interest sufficient to meet annual debt service on the Bonds and for administrative expenses shall be included on the regular county tax bills for parcels of property against which there are unpaid assessments. Principal and interest on the Bonds shall be paid by the Paying Agent out of the Redemption Fund established under the Indenture.
To provide funds for payment of the Bonds and the interest thereon in the event of any delinquent assessment installments, the City will establish a special Reserve Fund and deposit therein Bond proceeds equal to
the lesser of (i) the maximum annual debt service on the Bonds, or (ii) ten
percent (10%) of the aggregate principal amount of the Bonds. The Reserve
Fund shall be maintained as set forth herein. Additionally, the City has covenanted under certain circumstances to initiate judicial foreclosure in the event of a delinquency, as more particularly described herein.
NEITHER THE FULL FAITH AND CREDIT NOR THE GENERAL TAKING POWER OF
THE CITY, THE STATE OF CALIFORNIA, NOR ANY POLITICAL SUBDIVISION THEREOF IS
PLEDGED TO THE PAYMENT OF THE BONDS. IF A DELINQUENCY OCCURS IN THE PAYMENT
OF ANY ASSESSMENT INSTALLMENT, THE CITY WILL HAVE A DUTY ONLY TO TRANSFER INTO
THE REDEMPTION FUND THE AMOUNT OF THE DELINQUENCY OUT OF THE RESERVE FUND.
THIS DUTY OF THE CITY IS CONTINUING DURING THE PERIOD OF DELINQUENCY, ONLY TO
THE EXTENT OF FUNDS AVAILABLE FROM THE RESERVE FUND, UNTIL REINSTATEMENT,
REDEMPTION OR SALE OF THE DELINQUENT PROPERTY. THERE IS NO ASSURANCE THAT -
SUFFICIENT FUNDS WILL BE AVAILABLE FROM THE RESERVE FUND FOR THIS PURPOSE. IN
ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT
IT WILL.NOT OBLIGATE ITSELF TO ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY
DEFICIENCY IN THE REDEMPTION FUND.
THE BONDS ARE NOT RATED AND HAVE A SUBSTANTIAL DEGREE OF RISK. SEE
THE SECTION OF THIS OFFICIAL STATEMENT ENTITLED, “SPECIAL RISK FACTORS” FOR A
DISCUSSION OF SPECIAL FACTORS WHICH SHOULD BE CONSIDERED, IN ADDITION TO THE
OTHER MATTERS SET FORTH HEREIN, IN EVALUATING THE INVESTMENT QUALITY OF THE
BONDS.
The Bonds will be offered when, as and if issued and received by the Underwriter, subject to the approval of legality by Brown, Harper, Burns &
Hentschke, San Diego, California, Bond Counsel. Certain other legal matters will be passed upon for the City by the City Attorney. Certain legal matters will be passed upon for the Underwriter, Smith Barney, Harris Upham & Co.
Inc., by Orrick, Herrington & Sutcliffe, Los Angeles, California. The Bonds, in definitive form, will be available for delivery on or about September -' 1990 in , California.
SMITH BARNEY, HARRIS UPHAM & CO. INC.
Dated: August , 1990 -
GENERAL
No dealer, broker, salesman, or other person has been authorized by the City of Carl&ad (the "City") or the Underwriter to give any information or to make representations, other than those contained herein, and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Underwriter. This Official Statement constitutes neither an offer to sell nor the solicitation of an offer to buy, nor shall there be any sale of the Bonds described herein by any
person in any jurisdiction in which it is unlawful for such a person to make
such offer, solicitation or sale.
The information set forth herein has been obtained from the City and
from certain other sources which are believed to be reliable, but is not guaranteed as to accuracy or completeness. Neither this information nor any
statement which may have been made orally or in writing is to be construed as a contract with the purchasers of any of the Bonds to be presently issued. Statements contained in this Official Statement involving estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts.
The summaries of and references to any Code, Act, Resolution or -
Indenture and to other statutes and documents in this Official Statement do
not purport to be comprehensive nor definitive, and are qualified in their entireties by reference to each statute and document.
The Bonds will not be rated. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended, and the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended. The Bonds will not be listed on any stock or other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state,
or other governmental entity or agency will have passed upon the accuracy or
adequacy of the Official Statement or approved the Bonds for sale.
IN CONNECTION WITH THIS BOND UNDERWRITING, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE BONDS DESCRl6ED HEREIN 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
DESCRIBED HEREIN TO CERTAIN DEALERS AND DEALER BANKS ACTING AS AGENTS AT
PRICES LOWER THAN THE PUBLIC OFFERING PRICES AND SAID PUBLIC OFFERING PRICES
MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.
.’ -
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PROJECT
NORTH No Scale
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. . . &ii REGIONAL MAP
.
OHS Draft of 8/20/90
CITY OF CARLSEAD
CITY COUNCIL
Claude "Buddy" Lewis, Mayor Ann J. Kulchin, Mayor Pro Tern
John J. Mamaux, Councilman Mark V. Pettine, Councilman Eric Larson, Councilman
CITY STAFF
Raymond Patchett, City Manager Vincent F. Biondo, City Attorney Aletha L. Rautenkranz, City Clerk
Lloyd B. Hubbs, City Engineer
James F. Elliott, Finance Director
ASSESSMENT ENGINEER NBS/Lowry Incorporated San Diego, California
BOND COUNSEL
Brown, Harper, Burns 6 Hentschke San Diego, California
PAYING AGENT
, California
FINANCIAL ADVISOR ‘Kadie-Jensen, Johnson & Bodnar San Diego, California --..
TABLE OF CONTENTS
INTRODUCTION ........................................................ 1
THEBONDS ........................................................... 3
Authority for Issuance ............................................ 3
Description of the Bonds .......................................... 3
Registration, Transfer and Exchange ............................... 4
Mutilated, Destroyed, Stolen or Lost Bonds ......................... 5
Optional Redemption and Prepayment of Bonds ....................... 5
Mandatory Sinking Fund ............................................ 6
Refunding Bonds ................................................... 6
Disposition of Surplus from the Improvement Fund .................. 7
Creation of Funds ................................................. 7
Arbitrage Covenant ................................................ 8
Sources and Uses .................................................. 9
Debt Service Schedule ............................................. 9
SECURITY FOR THE BONDS .............................................. 11
General ........................................................... 11
Covenant to Commence Superior Court Foreclosure ................... 12
Reserve Fund ...................................................... 13
Land Value ........................................................ .14
Summary of Planning Area Values and Liens ......................... 16
Direct and Overlapping Debt ....................................... 18
SPEZIAL RISK FACTORS ................................................ 19
General ........................................................... 19
Limited Obligation of the City Upon Delinquency ................... 19
Concentration of Ownership ........................................ 20
Factors which may affect Land Development and Property Values ..... 20
Future Land Use Regulations and Growth Control Initiatives ........ 21
Future Indebtedness ............................................... 23
Collection of Assessments ......................................... 25
Availability of Funds to Pay Delinquent Assessment Installments ... 25
Absence of Market for the Bonds ................................... 25
Loss of Tax Exemption ............................................. 26
Bankruptcy ......................................................... 26
Articles XIII A and XIII B of the California Constitution ......... 26
Price Realized Upon Foreclosure ................................... 27
Priority of Lien .................................................. 28
THE ASSESSMENT DISTRICT ............................................ 30
Description of Improvements ........................................ 30
District Location Map .............................................. 31
Estimated Improvement Costs and Uses of Funds ...................... 32
Method of Assessment .............................................. 33
Environmental Review .............................................. 34
Parcel Ownership/Use ........................................ 1 ..... 34
Page
I
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2391c5
Page
Prior Liens ....................................................... 35
Parcel Tax Delinquency ............................................ 35
Assessment District Litigation .................................... 35
THE DEVELOPMENT AND THE DEVELOPERS .................................. 35
The Aviara Development ............................................ 36
Entitlements ...................................................... 36
Number of Units ................................................... 38
Identity of Owners and Developers ................................. 39
Aviara Development -- Development Projections ..................... 42
THE CITY OF CARLSBAD ................................................ 44
Organization ...................................................... 44
Assessed Valuations ............................................... 44
Tax Rates ......................................................... 45
City Tax Delinquencies ............................................ 46
City Tax Levies and Collections ................................... 46
Population, Economy and Employment ................................ 46 City and County Population ........................................ 47 City Taxable Transactions ......................................... 47
Employment and Industry ........................................... 49
Major Employers ................................................... 50
Building Activity ................................................. 51
TAX-EXEMPT STATUS ................................................... -51
UNDERWRITING ........................................................ 52
MISCELLANEOUS ....................................................... 52 LEGAL OPINION ....................................................... 53
NO RATING ........................................................... 53
APPENDIX A: City of Carlsbad Select Financial and Statistical Data APPENDIX B: Assessment District Map APPENDIX c: Excerpts from the Appraisal Report
A-l
B-l C-l
.
ii
$ CITY OF CARLSBAD
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 88-l
(ALGA ROAD) SAN DIEGO COUNTY, CALIFORNIA
INTRODUCTION
This Official Statement, including the appendices hereto, is
provided to furnish information relating to the issuance by the City of
Carlsbad (the "City"), County of San Diego, California, of $ principal amount of its Limited Obligation Improvement Bonds (the "Bonds") for the City of Carlsbad Assessment District No. 88-l (Alga Road) (the "Assessment District"). The Bonds are being issued pursuant to the Improvement Bond Act of 1915, being Division 10 of the California Streets and Highways Code (the "1915 Act"), and an indenture &ted as of August 28, 1990, entered into by the City (the "Indenture").
The City was incorporated on July 16, 1952, as a general-law city and is governed by a five-member city council under the council/manager form of government. The City is located in the County of San Diego (the "County'!) on the Pacific coast, approximately 90 miles south of Los Angeles and 35 miles
north of San Diego. The City contains approximately 39 square miles of land.
The Assessment District was formed by the City Council of the City (the "City Council") on June 5, 1990, pursuant to the Municipal Improvement Act of 1913, being Division 12 of the California Streets and Highways Code
(the "1913 Act"). The Assessment District covers in excess of 1,024 acres of land, and development and zoning within the Assessment District are predominantly residential and commercial. With the exception of Parcels 1, 2, 3, and 4, all of the parcels within the Assessment District are within a private development commonly known as the Aviara Development. See THE DEVELOPMENT AND THB DEVELOPERS - "The Aviara Development."
The Bonds are being issued for the purpose of financing and the
construction and installation of certain street improvements, including
grading, paving, curbs and gutters, sewer, water, drainage, street lights and
utility installation and undergrounding, together with appurtenances and
acquisition where necessary (the "Improvements"). The estimated total cost of
the project is $15,885,846.45, as more specifically described below in THE
ASSESSMHNT DISTRICT - "Estimated Improvement Costs and Uses of Funds."
Funding for the project will be from cash payments of assessments and bond
proceeds. At the conclusion of the cash collection period on August 13, 1990, four of the owners of the parcels had paid their assessments. The cash payments were deducted from the total assessments to determine the amount of Bonds to be issued. I
The City Council, pursuant to ResolJti<n No. 90-222, confirmed the assessment and diagram for the Assessment Distri&.on July 10, 1990, and the _ ' assessment was duly recorded in the office of the San Diego County Recorder. as designee of t::e Superintendent of Streets on July 19, 1990.
Based on an opinion of value of Roberts & Roberts, of San Diego,
California, (the "Appraiser") dated August the estimated aggregate fair market value ofthe 1990 (the "Appraisal Report"), fee simple interest of the parcels with unpaid assessments, assuming construction of the Improvements, as of [August 11 1990, was $210,000,000 (assuming that development in the Aviara Development reaches the expected level of 2,002 residential dwelling units), with a minimum fair market value of $191,500,000 (assuming that development in
the Aviara Development reaches at least 1,764 residential dwelling units).
See SPECIAL RISK FACTORS - "Future Land Use Regulations and Growth Control Initiatives." When all direct and overlapping debt on land in the Assessment District is included, the resulting value to lien ratio of combined land and
improvements to the total amount of assessments and such prior liens is in a
range of approximately [5.8] to one to [5.3] to one, by planning area. For a
further discussion of the Appraisal Report, see SECURITY FOR THE BONDS - "Land Values," SECURITY FOR THE BONDS - "Summary of Planning Area Values and Liens" and Appendix C - "Excerpts from the Appraisal Report," These ratios do not
include additional liens or future indebtedness currently proposed or under
consideration by the City including, but not limited to, the proposed City-wide Community Facilities District. See SPECI'L RISK FACTORS - "Future Indebtedness."
Under the provisions of the 1915 Act and the Indenture, assessment
installments sufficient to meet annual debt service and administrative
expenses are to be collected on the regular County tax bills sent to owners 'of property against which there are unpaid assessments. These annual installments are to be paid into the Redemption Fund, which will be held by
the Paying Agent, and a portion of such installments sufficient to pay bond
principal and interest is to be used to pay bond principal and interest as
they become due. The installments billed against each property each year represent a pro rata share of the total principal and interest coming due that year plus an administrative charge of the City, based on the percentage which the unpaid assessment against that property bears to the total of unpaid assessments within the Assessment District.
The City Council will establish a special Reserve Fund in the amount
of $ which amount is egual to the lesser of (i) maximum annual debt service on the Bonds or (ii) ten percent (10%) of the aggregate principal
amount of the Bonds, from which necessary amounts will be transferred to the Redemption Fund in the event of delinquencies in the payment of the assessment installments. Additionally, the City has covenanted under certain
circumstances to commence appropriate judicial foreclosure in the event of delinquencies. See SECURITY FOR THE BONDS - "Covenant to Commence Superior Court Foreclosure" below for a description of the City's foreclosure covenant.
As authorized by the 1915 Act, the City has elected not to obligate itself to advance available funds from its treasury to cure any deficiency which may occur in the Redemption Fund by reason of the failure,of a property owner to pay an assessment installment. ,
The Bonds are not an obligation of t$e City, the State of California (the "State") nor any of its political subdivisi&s, nor has the City, the State nor any of its political subdivisions pledged its full faith and credit for the payment of the Bonds.
2 2391c5
The discussions and information herein do not purport to be comprehensive nor definitive. All references to the Bonds and the assessment proceedings are qualified in their entirety by reference to the City's resolutions and the Indenture (defined below) setting forth the terms and descriptions thereof.
THE BONDS
AUTHORITY FOR ISSUANCE
The proceedings for the formation of the Assessment District are being conducted pursuant to the 1913 Act and Resolution of Intention No. 90-172, (the "Resolution of Intention") adopted by the City Council on
June 5, 1990. The Bonds, which represent the unpaid assessments levied
against privately owned property in the Assessment District, are being issued
pursuant to the provisions of the 1915 Act, and Resolution No. - (the "Resolution of Issuance") adopted on August 14, 1990 by the City Council, approving the issuance of the Bonds under provisions of the 1915 Act and the terms of the Indenture dated as of August , - 1990, entered into by the City.
The Bonds will be dated September 2, 1990, and will be issued in fully registered form in integral multiples of $5,000, except that there will be one bond in the first year of maturity in the amount of $ , which
shall include the amount by which the total issue exceeds the maximum integral
DESCRIPTION OF THE BONDS
multiple of $5,000 contained therein.
The Bonds will be issued as serial and term bonds with maturities on September 2 of each of the years and in the amounts shown in the following Maturity Schedule. Principal of and premium, if any, on the Bonds, will be
payable at maturity or at an earlier redemption date upon presentation by the
registered owner or his duly authoriaed representative at the trust office of the Paying Agent or such other fiscal agent as may be designated by Supplemental Indenture of the City. Interest on the Bonds will be payable semi-annually on March 2 and September 2 of each year, except that the first interest payment, on March 2, 1991, will represent interest from September 2, 1990. Interest on the Bonds is payable by check or draft mailed to the registered owners thereof as of the 15th day of the month preceding the interest payment date (each a "Record Date"), or upon the written request delivered to the Paying Agent by the applicable Record Date of
a Bondowner of at least $l,OOO,OOO in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United
States designated by such Bondowner.
3 2391c5
Maturity Date September 2
1992
1993 1994
1995
1996
1997
1998 1999 2000
2001
2002 2003 2004 2005 2006
Maturity Schedule
$
Principal
Amount
$
Serial Bonds
Interest Pate Price
$ % Term Bonds due September 2, 2011, price %
REGISTRATION, TRANSFER AND EXCHANGE
The Bonds are issued as fully registered bonds payable to the registered owners thereof. There shall be kept by the Paying Agent sufficient
books for the registration and transfer of the Bonds and, upon presentation
for such purpose, the Paying Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said register, Bonds as provided in the Indenture. Transfer of ownership of a Bond shall be made by exchanging the same for a new fully registered Bond or Bonds of the same maturity in the same aggregate principal
amount. All of such exchanges shall be made in such manner and upon such reasonable regulations as set forth in the Indenture. No such exchange or transfer is required to be made by the Paying Agent (i) within the 15 days prior to the date designated by the Paying Agent as the date for selecting Bonds for redemption, or (ii) for any Bond selected for redemption. Such
registration and transfer shall take place at the trust office of the Paying
Agent. The Paying Agent may make a charge for every exchange or transfer and
shall require the Bondholder to pay for any tax or governmental charge
required to be paid with respect to such exchange or transfer.
Bonds may be exchanged at the office of the Paying Agbnt for a like aggregate principal amount of Bonds of the same interest rate and maturity, subject to the terms and conditions provided h-the system of registration for registered debt obligations, including the paymenf-of certain charges, if any, upon surrender and cancellation of the Bond. Upon such transfer and exchange, a new registered Bond or Bonds of any authorized denomination or denominations
4
2391c5
of the same maturity for the same aggregate principal amount will be issued to the transferee in exchange therefor.
MUTILATED, DESTROYED, STOLEN OR LOST BONDS
If any Bond is mutilated, destroyed, stolen or lost, the City may
execute, and the Paying Agent may authenticate and deliver, a new Bond of like date and tenor in exchange and substitution thereof in the same aggregate principal amount and of the same maturity. Mutilated Bonds must be
surrendered to the Paying Agent. In the case of a destroyed, stolen or lost
Bond, the City and the Paying Agent may require satisfactory evidence of the
destruction, theft, or loss of the Bond and of ownership of such Bond, and indemnification prior to authenticating and delivering a new Bond. The City
and Paying Agent may charge the owners of mutilated, destroyed, stolen or lost Bonds for their reasonable fees and expenses in connection with the replacing of such Bonds.
OPTIONAL REDEMPTION AND PREPAYMENT OF BONDS
Any Bond may be called for redemption prior to maturity, in whole or
in part, on any March 2 or September 2, commencing March 2, 1991, upon payment
of accrued interest to the date of redemption, the principal amount of the
Bond being called and a redemption premium on the principal amount established
as follows:
Redemption Date Redemption Premium
March 2, 1991 through September 2, 2000 3%
March 2, 2001 1.5%
March 2, 2002 or thereafter 0%
No interest will accrue on a Bond beyond the March 2 or September 2 on which said Bond is called for redemption. Notice of redemption must be given to the registered owner of the Bond, by first-class mail, at least 30 days prior to the redemption date, as provided in the 1915 Act. The determination as to which Bond or Bonds are to be called will be made by the Paying Agent in accordance with the 1915 Act. From and after the date fixed for redemption no owner of any of the Bonds or portion thereof so designated for redemption shall be entitled to any of the benefits of the Indenture, or to any other rights, except with respect to payment of the redemption price
and interest accrued to the redemption date from the amounts so made available. Development of parcels within the Assessment District, transfers of property ownership and other similar circumstances could result in prepayment of all or part of the assessment. Such prepayment would result in redemption of all or a portion of the Bonds prior to their stated maturities.
In lieu, or partially in lieu, of such call and redemption, monies
deposited in the Redemption Fund may be used t?omrchase Outstanding Bonds in
the manner hereinafter described. Purchases of Outstanding Bonds may be made
by the City prior to the selection of Bonds for redemption by the Paying
Agent, at public or private sale as and when and at such prices as the City
5
may in its discretion determine but only at prices (including brokerage or other expenses) of not more than par plus accrued interest, and any accrued interest payable upon the purchase of Bonds may be paid from the amount in the Redemption E'und for payment of interest on the next following Interest Payment Date.
MANDATORY SINKING FUND
The Bonds maturing on September 2, 2011 (the "2011 Term Bonds") are
subject to man&tory sinking payment redemption in part on September 2, 2008
and on each September 2 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows:
Redemption Date Principal Amount (September 2) to be Redeemed
2007 $ 2008 2009 2010 2011 (maturity)
REFUNDING BONDS
Pursuant to the Refunding Act of 1984 for 1915 Act Improvement Bonds
(Division 11.5 of the Streets & Highways Code of the State of California), the
City may issue refunding bonds for the purpose of redeeming the Bonds. The City may issue and sell refunding bonds without giving notice to and conducting a hearing for the owners of property in the Assessment District, or
giving notice to the owners of the Bonds, if the City Council finds that:
A)
B)
Cl
Each estimated annual installment of principal and interest on
the reassessment to secure the refunding bonds is less than the
corresponding annual installment of principal and interest on
the portion of the original assessment being superseded and supplanted by the same percentage for all subdivisions of land within the Assessment District. Any amount added to the annual installments on the reassessment due to a delinquency in payment on the original assessment need not be considered in this calculation;
The number of years to maturity of all refunding bonds is not more than the number of years to the last maturi!y of the Bonds; and ,
The principal amount of the reassessment on each subdivision of land within the Assessment Districizis less than the unpaid
principal amount of the portion of the original assessment
being superseded and supplanted by the same percentage for each
6 2391c5
,-
subdivision of land within the Assessment District. Any amount
added to a reassessment because of a delinquency in payment on
the original assessment need not be considered in this
calculation.
Upon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding bonds on any basis which the City Council determines is for the City's benefit, if the Bondowners consent to the exchange. As an alternative to exchanging the refunding bonds for the Bonds,
the City could sell the refunding bonds and use the proceeds to pay the
principal of and interest and redemption premium, if any, on the Bonds as they become due, or advance the maturity of the Bonds and pay the principal of and interest and redemption premium thereon.
DISPOSITION OF SURPLUS FROM THE IMPROVEMENT FUND
The entire amount of any surplus remaining in the Improvement Fund after completion of the Improvements (as hereinafte: defined) and payment of all claims shall, in accordance with section 10427.1 of the California Streets
and Highways Code and the Indenture, remain in the Improvement fund for a
period of two (2) years from the receipt of Bond proceeds and thereafter be
applied as a credit to the assessment or, as an.altemative, any portion of. the surplus may be used to call outstanding bonds, as the City Council may determine.
CREATION OF FUNDS
Under the Indenture, the City will establish the following Funds for
purposes of making payment for the costs and expenses for the Improvements and
payment of principal and interest on the Bonds:
(1) IMPROVEMENT FUND The proceeds from the sale of the Bonds, after deposit of required amounts in the Reserve Fund and Redemption Fund,
shall be placed by the City in a fund designated as the II
Improvement Fund." The monies in the Improvement Fund shall be used
only for Project costs as that term is defined in the Indenture.
(2) REDEMPTION FUND The City shall keep a Redemption Fund, which fund
shall be known as the " Redemption Fund", into which shall
be placed (i) initialiy, an amount from proceeds of the Bonds which, together with accrued interest, if any, on the Bonds equals the interest on the Bonds to and including September 2, 1991, (ii) all sums received from the collection of the assessments and the interest thereon, together with all penalties, if applicable, and (iii) any surplus in the Improvement Fund authorized by the City
pursuant to Streets and Highways Code Section 10427.1,to be credited against unpaid assessments. I , ---..
7
2391c5
Principal of and interest on the Bonds shall be paid by the Paying Agent to the registered owners out of the Redemption Fund to the extent funds on deposit in the Redemption Fund are available therefor.
Prior to the first redemption date there shall be established by the
City a prepayment subaccount within the Redemption Fund to be known as the Prepayment Account ("Prepayment Account"). The City shall deposit in the Prepayment Account all monies received from the City
Treasurer representing the principal of and redemption premium on
any prepaid assessments and any surplus in the Improvement Fund authorized by the City pursuant to Streets and Highways Code Section 10427.1 to be used to call outstanding Bonds. Such monies shall be applied solely to the payment of principal of and premium on Bonds to be redeemed prior to maturity pursuant to the provisions of
Section 9 of the Indenture.
(3) RESERVE FUND The City shall establish a special reserve or fund
for the Bonds to be designated as the )( Reserve Fund". An amount equal to the lesser of (i) the maximum annual debt service on
the Bonds or (ii) ten percent (10%) of the principal amount of the
Bonds issued shall be deposited in the Reserve Fund out of the Bond
proceeds. Monies in the Reserve Fund shall be (i) used to make up
any deficiencies in the Redemption Fund whenever there are
insufficient funds in the Redemption Fund to pay the next maturing
installment of principal of or interest on the Bonds; (ii) used to retire all Outstanding Bonds in the issue, whenever the balance in the Reserve Fund is sufficient to retire all remaining outstanding Bonds; and (iii) credited toward the assessments in the event that
sums remain in the Reserve Fund in the year in which the last
installments of the assessments become due and payable.
(4) REBATE FUND The City shall establish a rebate fund to be designated as the I' Rebate Fund." The City shall transfer into the Rebate Fund all amounts required by the City Treasurer to be transferred in accordance with the provisions of the Arbitrage Rebate Certificate attached to the Indenture as Exhibit "C" . Subject to the provisions of said Arbitrage Rebate Certificate, amounts on deposit in the Rebate Fund shall only be
applied to payments made to the United States in accordance with written instructions of the City Treasurer. All earnings on amounts
on deposit in the Rebate Fund shall remain therein until paid to the
Federal government.
ARBITRAGE COVENANT
The City covenants that it will not take any action, or fail to take any action, if any such action or failure to take action would adversely affect the exclusion from gross income of the interest on the Bonds under Section 103 of the Internal Revenue Code of 1986 (the "Code"). The City will not directly or indirectly use or permit the use of any proceeds of the Bonds
or any other funds of the City, or take or omit to take any action that would
8
-.. # . i
cause the Bonds to be "arbitrage bonds" within the meaning of Section 148(a)
of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code or classified as a "private activity bond" under Section 141 of the Code to the extent applicable to the Bonds. The City expects to expend the proceeds of the Bonds within two years of the date of issuance of the Bonds. In the event the City fails to meet this expenditure schedule, the City may be subject to the payment of certain amounts to the United States Treasury. Failure to pay such amounts could result in interest on the Bonds being includable in gross income for purposes of federal income taxes.
SOURCES AND USES
Upon the sale of the Bonds and after certain other disbursements, the balance of the proceeds will be placed in the Improvement Fund, the Reserve Fund, the Redemption Fund and the Rebate Fund, such Funds to be held
by the City Treasurer and disbursed therefrom as provided in the Resolution of
Issuance.
The Bond proceeds are to be applied as follows:
Source of Funds:
Principal Amount of Bonds Accrued Interest $ - $ r
Uses of Funds:
Accrued Interest Improvement Fund
Reserve Fund
Capitalized Interest -- Redemption Fund
Rebate Fund Underwriter's Discount Costs of Issuance City Administration
TOTAL, USE OF FUNDS
DEBT SERVICE SCHEDULE
The following table presents debt service for the Bonds assuming no
prior redemptions other than man&tory sinking fund payments on 2011 term Bonds.
\
9
2391cs
.
TABLE
CITY OF CAiiiSBAD
$ 1915 ACT LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 88-l
(ALGA ROAD)
DEBT SERVICE SCHEDULE
Maturity
September 2 Principal
Principal
Maturing Interest
Total Debt
Service
1991 1992 1993 1994
1995
1996
1997
1998 1999
2000
2001
2002
2003
2004
2005
2006
2007
2008 2009 2010 2011
!# §i
Source: Smith Barney, Harris Upham & Co. Inc.
2391c5 10
SECURITY FOR THE BONDS
GENERAL
The Bonds are secured by unpaid assessments levied against private
property within the Assessment District pursuant to the assessment
proceedings. Such unpaid assessments, together with interest thereon and
monies in the Redemption Fund, constitute a trust fund for the redemption and payment of the principal of, premium, if any, and interest on the Bonds. Principal of, premium, if any, and interest on the Bonds are payable
exclusively out of the Redemption Fund. The Reserve Fund is also a trust fund
for the benefit of the registered owners of the Bonds. (see "SECURITY FOR THE BONDS - Reserve Fund.")
The assessments and each installment thereof and any interest and
penalties thereon constitute liens against the parcels of land on which they
are levied until the same are paid. Such liens are subordinate to all fixed
special assessment liens previously imposed upon the same property, but have priority over all existing and future private liens and over all fixed special assessment liens which may thereafter be created against the property. Such liens are co-equal to and independent of the liens for general property taxes
and special taxes. There are prior specia1 assessment liens or special taxes
against the parcels in the Assessment District. See SECURITY FOR THE BONDS -
Direct and Overlapping Debt."
Although the unpaid assessments constitute liens on assessed parcels, they do not constitute a personal indebtedness of the respective property owners. There is no assurance that the property owners will be financially able to pay the annual assessment installments or that they will pay such installments even if financially able to do so.
The Bonds are not secured by the general taxing power of the City,
the State, nor any of its political subdivisions, nor is the full faith and
credit of the City, the State nor any of its political subdivisions pledged to
the payment of the Bonds.
Assessment installments sufficient to meet annual payments of principal of and interest on the Bonds are to be collected on the regular property tax bills sent to owners of property against which there are unpaid assessments. These annual assessment installments are to be paid into the
Redemption Fund, which will be held by the City Treasurer, and used to pay the
principal of and interest on the- Bonds as such become due. The installment
billed with respect to each property each year represents such property's
proportionate share of the total amount of principal of and interest on the Bonds payable with respect to such year. The failure of a property owner to
pay an annual assessment installment will not result in an increase in
assessment installments against other property in the Assessment District.
In the event of a delinquency in the payment of any installment of an assessment, the City Treasurer will transfer from the Reserve Fund, to the extent of available funds therein, to the Redempljon Fund, the amount . necessary, in addition to the monies on deposit therein, to pay the next maturing installsent of principal of and interest on the Bonds. In the event
2391c5 11
a Superior Court foreclosure action is instituted to enforce a delinquent
assessment installment, and the City purchases such property, the Reserve Fund
will be used, to the extent of available funds, to make advances to the
Redemption Fund for payment of the delinquent amount of the assessment installment on the property and future assessment installments, including interest thereon, until such property is resold by the City.
In the proceedings for the authorization and issuance of the Bonds, the City has determined not to obligate itself to advance any available funds
from the City treasury toover any deficiency or delinquency which may occur
in the Redemption Fund by reason of the failure of a property owner to pay an
annual assessment installment. (This determination by the City would not prevent the City, in its sole discretion, from so advancing such funds.)
COVENANT TO COMMENCE SUPERIOR COURT FORECLOSURE
The 1915 Act provides that in the event any assessment or
installment thereof or any interest thereon is not :aid when due, the City may
order the institution of a court action to foreclose the lien of the unpaid assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Indenture the City has covenanted with the Bondowners that it will commence appropriate judicial foreclosure
proceedings as set forth below. In the event such Superior Court foreclosure or foreclosures are necessary, there may be a delay in payments to Bondowners pending prosecution of the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the applicable property would be received at the foreclosure sale.
The City has covenanted in the Indenture that upon default of any assessment payment due, it will cause Superior Court foreclosure proceedings to be brought within one hundred fifty (150) days of such default and
thereafter diligently prosecute to completion such proceedings. Such foreclosure proceedings as to developed property may be deferred so long as no
single delinquent installment of a property owner is in excess of $500 and the special Reserve Fund is maintained at no less than 80% of the level set forth in the Section entitled "Reserve Fund" hereinabove.
Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such foreclosure sales has been repealed. However, a period of 140 days must
elapse after a court adjudges and decrees a lien against the lot or parcel of land covered by an assessment before the sale of such parcel can be made. Furthermore, if the purchaser at the sale is the judgment creditor, i.e. the City, an action may be commenced by the delinquent property owner within 6 months after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation which repeals the one year redemption period has not been tested and there can be no assur+nc. that, if tested, such legislation will be upheld. . .
12 2391c5
RESERVE FUND
The City shall establish a special reserve fund for the Bonds to be
designated as the *’ Reserve Fund”. An amount equal to the lesser of (i) the maximum annual debt service on the Bonds or (ii) ten percent (10%) of the principal amount of the Bonds issued shall be deposited in the Reserve Fund out of the Bond proceeds.
Monies in the Reserve Fund shall be applied by the City as follows:
A. Whenever there are insufficient funds in the Redemption Fund to pay
the next maturing installment of principal of or interest on the Bonds on the business day preceding such date of payment, the City shall transfer the amount necessary to make up such deficiency from the Reserve Fund to the Redemption Fund. The amounts so advanced shall be reimbursed upon receipt thereof for deposit into the
Reserve Fund from the proceeds of redemption or sale of the parcels
for which payment of delinquent installments of assessments and interest thereon have been made from the Reserve Fund. Such proceeds shall be transferred by the City Treasurer to the City within ten (10) business days of receipt thereof by the City Treasurer and the City shall immediately deposit such proceeds in the Reserve Fund.
B. In the event an unpaid assessment is paid in cash in advance of the
final Bond maturity date, the City shall credit such prepaid
assessment with a proportionate share of the Reserve Fund, thus
reducing the total amount of the Reserve Fund. The amount to be so credited is the pro-rata share of the original amount deposited in the Reserve Fund, less any amount previously transferred from the Reserve Fund to the Redemption Fund as a result of the delinquency in the payment of assessment installments for the parcel for which the assessment is being prepaid. The City Treasurer shall direct the City in writing to transfer the amount representing such credit from the Reserve Fund to the Redemption Fund.
C. Interest earned on permitted investments of Reserve Fund monies (as
specified in the Indenture) shall remain in the Reserve Fund so that
the amount therein may accumulate to and subsequently be maintained
at the Reserve Requirement. As specified in the Indenture, the
Reserve Requirement means an amount equal to the lesser of (i) the
maximum annual debt service on the Bonds, or (ii) 10% of the
original principal amount of the Bonds, less any amounts credited to prepaid assessments, discussed in B, above.
D. Prior to each interest payment date, any interest earned on the investment of monies on deposit in the Reserve Fund which would cause the amount therein to exceed the Reserve Requirement shall be transferred by the City to the Paying Agent for deposit to the Redemption Fund and shall be creditedyo-wards unpaid assessments each year during which part of the Donds remain outstanding. The
auditor's record prepared pursuant to Section 8682 of the Act shall
13
reflect credits against each of the unpaid assessments in the manner provided in Section 10427.1 therein in amounts equal to each assessment parcels' proportionate share of any Reserve Fund disbursement.
E. All sums remaining in the Reserve Fund in the year in which the last
installments of the assessments become due and payable shall be
credited toward the assessments. Whenever the balance in the
Reserve Fund is sufficient to retire all remaining outstanding Bonds, collection of the principal and interest on the assessments shall be discontinued and the Reserve Fund shall be used in the retirement of the Bonds.
In the event that balance in the Reserve Fund at the time of liquidation exceeds the amount required to retire all Outstanding
Bonds in the issue, the excess shall be apportioned to each parcel
upon which the individual assessment remained unpaid at the time the
balance in the Reserve Fund was sufficient to retire all outstanding
Bonds in the issue. The payments shall be made in cash by the City to the respective owners of the parcels except that, if the excess
is not greater than one thousand dollars ($l,OOO), the excess may be
transferred to the General Fund of the City.
LAND VALUE
The value of the land within the Assessment District is a critical
factor in determining the investment quality of the Bonds. If a property owner defaults in the payment of an assessment, the City's only remedy is to commence foreclosure proceedings in an attempt to obtain funds with which to pay the delinquent assessments. See SPECIAL RISK FACTORS -- "Bankruptcy" and SECURITY FOR THE BONDS - "Covenant to Commence Superior Court Foreclosure." Reductions in Assessment District property values due to a down-turn in the
economy, natural disasters such as earthquakes or floods, stricter land use
regulations or other events could have an adverse impact on the security of
the assessments.
The Appraisal was prepared by Roberts 6 Roberts, of San Diego, California, for the purpose of estimating the market value of the land and
existing and expected improvements in the Assessment District as of July -, 1990. The Appraiser has assumed that all governmental approvals necessary to complete the development at the densities assumed in the Appraisal will be granted. No assurance can be given that such public improvements will be built or that all such governmental approvals will be obtained on the dates and to the degree assumed by the Appraiser. Should future conditions and events, such as growth control initiatives or the imposition of government regulations reduce the level of permitted development or delay qhe completion of the projected development, the value of the land would likely be reduced from that estimated by the Appraiser. See APPENDIX C -- "Excepts from the Appraisal Report" for a description of other assumptions made by the Appraiser. Accordingly, because the Appraiser arrives at an estimate of market value based upon certain assumptions which may or may not be fulfilled, no assurance can be given that should the parcels become delinquent due to unpaid assessments, and be foreclosed upon and sold for the amount of the delinquency, that any bid would be received for such property or, if a bid is received, that such bid would be sufficient to pay such delinquent assessments.
14 2391c5
The Appraiser did not attempt to ascertain the fair market value of individual parcels of land in the Assessment District because much of the land in the Assessment District has not yet been subdivided. Property values are not likely to be evenly distributed throughout the Assessment District; thus, certain parcels may have a greater value per acre than others. Consequently, no assurance may be given that the ratios shown under SECURITY FOR THE BONDS -
"Land Value" would be consistent for different parcels within the Assessment
District. This disparity is significant because in the event of non-payment of an assessment the City's only remedy is to foreclose against the
individually delinquent parcel.
The Appraiser has estimated the fair market value of the land and
existing improvements in the Assessment District as of August 1, 1990 to be
between $191,500,000 and $210,000,000 depending on the number of residential
dwelling units actually constructed in the Assessment District. The Appraiser
(the "City 0") assumed a range from 1,764 (minimum) to 2,002 (expected)
dwelling units. When all direct and overlapping debt on land in the Assessment District is included, the resulting value to lien ratio of combined
land and improvements to the total amount of assessments and such prior liens
is in a range of approximately 15.81 to one to 15.31 to one, by planning
area. For a further discussion of the Appraisal Report, see SECURITY FOR.THE BONDS - "Land Values," SECURITY FOR THE BONDS - "Summary of Planning Area
Values and Liens" and Appendix C - "Excerpts from the Appraisal Report." These ratios do not include additional liens or future indebtedness currently proposed or under consideration by the City including, but not limited to, the proposed City-wide Community Facilities District. See SPECIAL RISK FACTORS - "Future Indebtedness." No assurance can be given that any of the foregoing ratios can or will be maintained during the period of time that the Bonds are outstanding in that the City has no control over the amount of additional
indebtedness that may be issued in the future by other public agencies, the
payment of which, through the levy of a tax or special tax, is on a parity
with the assessments levied against the land in the Assessment District. The City and other public agencies have authorized but unissued debt of approximately $ which would be payable from taxes and other charges on the land within the Assessment District. See WXXIRITY FOR THE BONDS -- Direct and Overlapping Debt."
Reference is made to Appendix C which contains excerpts from the Appraisal Report sunmrarizing the Appraiser's opinion with respect to the value of the parcels located in the Assessment District. The valuation of the land
discussed in the Appraisal Report assumes the Improvements are completed and
all parcels are capable of development to their Highest and Best Use (as
defined in the Appraisal Report). Based upon the analysis set forth therein, the value of each parcel of land will exceed the amount of the full assessment lien against it. However, there is no assurance that in the event of a foreclosure sale for a delinquent assessment installment any bid will be received for such property or that any bid received or resale price will be sufficient to pay such delinquent installments (plus costs and penalties). The 1915 Act requires that a parcel be sold for only the delinquent amount (plus costs and penalties) and not the entirejou%+anding assessment. Furthermore, under certain circumstances, the'1915 Act allows for a parcel to
be sold for less than the delinquent amount. See SPECIAL RISK FACTORS - "Price Realized upon Foreclosure."
The Appraiser has made various assumptions in order to derive the
valuation estimates of the assessed parcels. See Appendix C for an explanation of methodology and a statement of limiting conditions and assumptions used by the Appraiser to derive the value of each parcel. Although these limiting conditions and assumptions were considered reasonable
by the Appraiser based on information available to the Appraiser, neither the
Appraiser nor the City can give any assurance that any parcel will be
developed in accordance with the uses that the Appraiser has projected.
SUMARY OF PLANNING AREA VALUES AND LIENS
The following table presents by planning area the assessed
valuations, appraised values, and confirmed assessments and other outstanding
debt of the Assessment District. This table does not reflect additional debt which may be issued in the future, including, but not limited to, the proposed City-wide Community Facilities District. See SPECIAL RISK FACTORS - "Future
Indebtedness."
16
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DIRECT AND OVERLAPPING DEBT
The following table presents the estimated direct and overlapping bonded
debt of the Assessment District No. 88-l as of August, 1990.
CITY OF CARLSBAD
ASSESSMENT DISTRICT NO. 88-l
(ALGA ROAD)
Estimated Direct and Overlapping Bonded Debt As of August 15, 1990
1989-90 Assessed Valuation: $144,700,595
DIRECT AND OVERLAPPING BONDED DEBT: % Applicable
San Diego County Building Authorities San Diego County Water Authority San Diego County Water Authority
Certificates of Participation
Metropolitan Water District
Carlsbad Municipal Water District
Certificates of Participation
Carlsbad Municipal Water Districts
I.D.'s #2 and #4
0.141% 0.145
0.145
0.023
3.624
8.134 & 3.624 Mira Costa Community College District Certificates of Participation Carlsbad Unified School District and Authorities
0.871
4.038-4.042 Carlsbad Unified School District,
Community Facilities District #l 99.773
City of Carlsbad and Authorities 2.930 City of Carlsbad Assessment District #88-l 100.000 TriXity Hospital District 1.380
TOTAL DIRECT AND OVERLAPPING BOND DEBT
Patios to 1990-91 Assessed Valuation: Direct Debt 14.26% - Total Gross Debt 23.90%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/90: $9,325
Yv: ($350)
(1) 1915 Act bonds to be sold. 1 ---..,.
Source: California Municipal Statistics, Inc:
Debt 8/l/90
$430,893
34.996
135,430
164,809
482,354
4,933
26,130
197,645
12,147,363
304,867 20,630,969 (1) 24,357
$34,584,746
\ ,
18
SPECIAL RISK FACTORS
GENERAL
Under the provisions of the 1915 Act, assessment installments, from which funds for the payment of annual installments of principal of and interest on the Bonds are derived, will be billed to properties against which there are unpaid assessments on the regular property tax bills sent to owners of such properties. Such assessment installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property
tax installments. Assessment installment payments cannot be made separately
from property tax payments. 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 assessment installment payments in the future.
In order to pay debt service on the Bonds, it is necessary that
unpaid installments of assessments on land within the Assessment District are
paid in a timely manner. Should the installments not be paid on time, the City has established a Reserve Fund in the original amount of the lesser of (i) the maximum annual debt service on the Bonds or (ii) ten percent (10%) of the aggregate principal amount of the Bond issue to cover delinquencies. The assessments are secured by a lien on the parcels of land and the City can . institute foreclosure proceedings to sell land in the Assessment District with
delinquent installments for the amount of such delinquent installments (or, in
certain circumstances, for an amount less than the delinquent installments),
in order to obtain funds to pay debt service on the Bonds. See SECURITY FOR
THE BONDS - 'Covenant to Commence Superior Court Foreclosure" and SPECIAL RISK
FACTORS - "Price Realized Upon Foreclosure."
Failure by owners of the parcels to pay installments of assessments
when due, depletion of the Reserve Fund, or the inability of the City to sell parcels which have been subject to foreclosure proceedings for amounts sufficient to cover the delinquent installments of assessments levied against such parcels may result in the inability of the City to make full or punctual
payments of debt service on the Bonds and Bondowners would therefore be
adversely affected.
Unpaid assessments do not constitute a personal indebtedness of the
owners of the lots and parcels within the Assessment District. There is no
assurance the owners will be able to pay the assessment installments or that
they will pay such installments even though financially able to do so.
LIMITED OBLIGATION OF THE CITY UPON DELINQUENCY
If a delinquency occurs in the payment of any assessment installment, the City has a duty only to transfer into the Redemption Fund the amount of the delinquency out of the Reserve Fund and under certain circumstances to undertake judicial foreclosure pyoceedings to recover such delinquencies. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption or sale of the delinquent property. There is no assurance that funds will be available for this purpose
and if, during the period of delinquency, there are insufficient funds in the
Reserve Pun& a delay may occur in payments to the owners of the Bonds. If there are additional delinquencies after exhaustion of funds in the Reserve Fund, the City is not obligated to transfer into the Redemption Fund the
amount of such delinquencies out of any other available monies of the City.
THE CITY’S LEGAL RESPONSIBILITIES WITH RESPECT TO SUCH DELINQUENT
INSTALLMENTS ARE LIMITED TO ADVANCING THE AMOUNT THEREOF SOLELY FROM ANY
AVAILABLE MONIES IN THE RESERVE FUND AND UNDER CERTAIN CIRCUMSTANCES TO
UNDERTAKING JUDICJAL FORECLOSURE PROCEEDINGS TO RECOVER SUCH DELINQUENCIES.
THIS DUTY OF THE CITY TO ADVANCE FUNDS IS CONTINUING DURING THE PERIOD OF
DELINQUENCY ONLY TO THE EXTENT OF FUNDS AVAIlABLE FROM THE RESERVE FUND UNTIL
REINSTATEMENT, REDEMPTION OR SALE OF THE DELINQUENT PROPERTY. IN ACCORDANCE
WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT
ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND.
CONCENTRATION OF OWNERSHIP
Most of the land within the Assessment District is currently owned by Aviara Land Associates Limited Partnership, a Delaware limited partnership
(the "Master Developer"). The Master Developer and the other merchant
builders and developers are collectively referred to as the "Developers". The
Developers intend to develop the land within the Assessment District for sale
to other merchant builders and/or to construct homes for sale to the public
and for hotel/resort, golf course and other commercial projects (the "Development"). For a description of the Development and a summary of the current ownership of land in the Assessment District, see THE DEVELOPMENT AND THEDEVELOPERS- "Identity of Owners and Developers." There may be subsequent transfers of ownership of the property within the Assessment District prior to
completion of the Development; however, until any such transfers occur, the
timely payment of the Bonds depends on the willingness and ability of the
Developers to pay the assessments when due. This lack of diversity of
ownership presents significant risk to Bondowners. Failure of the owners of
undeveloped property to pay the annual assessments when due could result in
the rapid, total depletion of the Reserve Fund prior to replenishment from the
resale of property upon a foreclosure or otherwise or delinquency redemptions
after a foreclosure sale if any. In that event, there could be a default in
payments of the principal of, and interest on, the Bonds.
FACTORS WHICH MAY AFFECT LAND DEVELOPMENT AND PROPERTY VALUES
The land within the Assessment District is substantially undeveloped and is subject to a number of contingencies which could slow or prevent future
development. Consequently, no assurance can be given that such development will be partially or fully completed, and in assessing the investment quality of the Bonds, prospective purchasers should consider the risks of noncompletion. \
Development in the Assessment District and the City as well as
property values may be affected by changes in',ge_neral economic conditions,
fluctuations in the real estate market, availabirfty and cost of construction
financing, competition from other developing areas and other factors beyond
the control of the property owners and developers. In addition, development
2391c5 20
may be subject to future federal, state and local regulations. Approval may be required from various agencies from time to time in connection with the
layout and design of development in the Assessment District, the nature and
extent of public improvements, land use, zoning and other matters. Failure to
meet any such regulations or obtain any such approvals in a timely manner
could delay or adversely affect development in the Assessment District and
property values. The development of property within the Assessment District could be adversely affected if lawsuits or other actions were commenced to restrict or prevent further development within the City. In addition, future
land use regulations, future initiatives approved by the voters or regulations
adopted by the City could add more restrictions and requirements on
development within the Assessment District. See SPECIAL RISK FACTORS - "Future Land Use Regulations and Growth Control Initiatives."
Moreover, there can be no assurance that land development operations within the Assessment District will not be adversely affected by a future deterioration of the real estate market and economic conditions or future
local, State and federal governmental policies relating to real estate
development, changes in the income tax treatment of real property ownership,
or a downturn in the national economy. A slowdown of the development process and the absorption rate (the rate at which newly-built housing becomes occupied) could adversely affect land values and reduce the ability or desire
of the property owners to pay the annual assessments. In that event, there'
could be a default in the payment of principal of, and interest on, the Bonds.
Another risk to the Bondowners involves the value of undeveloped property. Undeveloped property is less valuable per unit of area than developed land, especially if there are no plans to develop such land or if there are severe restrictions on the development of such land. The undeveloped property also provides less security to the Bondowners should it
be necessary for the City to foreclose on undeveloped property due to the non-payment of the assessments. Furthermore, an inability to develop the land within the Assessment District as currently proposed will make the Bondowners dependent upon timely payment of the assessments on undeveloped property. Because of the current concentration of ownership of the undeveloped property, the timely payment of the Bonds depends upon the willingness and ability of those landowners to pay the assessments levied on the undeveloped property when due. See SPECIAL RISK FACTORS - "Concentration of Ownership". A slowdown or stoppage in the continued development of the Assessment District could reduce the willingness and ability of such owners to pay assessments on undeveloped property, and could greatly reduce the value of such property in the event that it were foreclosed upon. See SECURITY FOR THE BONDS --
"Appraised Value" below.
FUTURE LAND USE REGULATIONS AND GROWTH CONTROL INITIATIVES
There can be no assurance that land development operations within
the Assessment District will not be adversely,affected by future governmental
policies, including, but not limited to, gove&nniental policies to restrict or
I . control development. Recently, citizens of a‘number of local communities in Southern Califorqia, including citizens of the County of Orange, the County of
Riverside and the County of San Diego, have placed measures on the ballot
21
designed to control the rate of future growth in those areas. Although none
of those measures affected the Assessment District, it is possible that future
initiatives applicable to the Assessment District could be enacted and could
negatively impact the ability of the property owners to further develop their
land. Bondowners should assume that any event that significantly impacts the
ability to develop land in the Assessment District could cause the land values
within the Assessment District to decrease substantially and could affect the
willingness and ability of the owners of land to pay the assessments when due or to proceed with development of land in the Assessment District. See the discussion under "SPECIAL RISK FACTORS -- Factors Which May Affect Land Development and Property Values" herein.
In 1987, the City of Carlsbad adopted its Growth Management Program and its Citywide Facilities and Improvements Plan (collectively, the "Growth Management Plan") which is intended to provide an overall policy on public
facility implementation and development phasing, and which has severely
limited the number of building permits issued by the City. The Growth
Management Plan mandates that growth and developmerL in the City be based upon the ability to provide an adequate traffic circulation system and certain other public facilities and services. The Growth Management Plan applies a comprehensive three-tiered approach to the City's current and prospective land use planning. The Growth Management Plan established Citywide, quadrant, and
Community Zone performance standards for eleven public facilities and requires
that the appropriate public facilities must be available in conformance with
the adopted performance standards in an area when new development occurs.
Unless each of these eleven public facility standards have been complied with,
no new development can occur. The Growth Management Plan's intent is to link
residential, commercial and industrial development directly to the availability of public services and facilities. The Growth Management Plan also set limits on the total number of housing units to be built and increased the total amount of open space to be preserved in the City.
The Growth Management Plan provides that building permits will not be issued if any specified public facility falls below designated service
levels. Building permits will not be issued until such substandard facilities
are improved to provide required service levels. However, public facilities
may fall below designated service levels for reasons unrelated to the
increased need for public facilities generated by building permit applicants.
The Aviara Development has an approved Master Plan that has been
found to be consistent with the City's Growth Management Plan, and approved Zone 19 Local Facilities Management Plan that has been found to be consistent with the Citywide Facilities and Improvements Plan, and The Aviara Development
has recorded Phase I and also has a final subdivision map and all necessary approvals. See THE DEVELOPMENT AND THE DEVELOPERS - "The Aviara Development". However, for Phases 2 and 3 certain other discretionary approvals of the City, the California Coastal Commission and other
governmental bodies will be required to complete the development. See THE DEVELOPMENT AND THE DEVELOPERS - "Entitlements." None of the landowners in the Assessment District have vesting tentativ$ maps (as permitted by Government Code Section 66498.1) or development agreements (as permitted by Government Code Section 65865) and it is not expected that the City will enter
22
into development agreements with any landowner. None of the landowners in the
Assessment District have acquired any "vested right" to complete any private
* development in the Assessment District.
The City has experienced drought conditions for the past four years, and the City Council implemented a Stage II water alert of the Water Management Program of the Carlsbad Municipal Water District on Nay 8, 1990. The San Diego County Water Authority, from which the City receives 100% of its water, has asked that member agencies achieve a 10% reduction in water use over expected 1990 levels. The Developers have received a will-serve letter from the City for Phase 1 of the project. However for Phases II and III the will-serve letter is contingent on receiving entitlements to Phases II and III
of the project, and no assurances can be given that they will receive such
entitlements.
Although there are currently no plans to impose water rationing or a water ordinance within the City [the City staff has recommended that building permits be limited in the event that continued drought forces the City to declare a Stage IV water alert]. No assurances can be given that continued drought would not lead to the adoption of a water rationing system, a reduction of the City's current allocation of water from the San Diego County
Water Authority [or other authorities], or ultimately a slowdown of
development within the City, or change in the City's Growth Management Plan,
In evaluating the investment quality of the Bonds, investors should
assume that existing land use regulations or the possible enactment of more restrictive land use regulations by the City or by voter initiative presents a substantial risk to the timely construction and completion of the development in the Assessment District as described in THE DEVELOPMENT AND THE DEYELOPERS.
Failure to complete the development within the Assessment District as planned, or substantial delays in the completion of the development due to litigation or other causes may reduce the value of the property within the
Assessment District, and may affect the willingness and ability of the owners
of land within the Assessment District to pay the assessments when due.
FUTURE INDEBTEDNESS
The assessments 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 levied by other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The assessments have priority over all existing and future private liens imposed on the property. The Assessment
District, however, has no control over the ability of other entities and
districts to issue indebtedness secured by special taxes or assessments
payable from all or a portion of the property within the Assessment District.
In addition, the landowners within the Assess*e$ District may, without the
consent or knowledge of the Assessment District, petition other public
agencies to issue public indebtedness secured by special taxes or assessments. Any ad valorem or special taxes will have a lien on such property on a parity with the assessments.
2391c5 23
The ability of an owner of land within the Assessment District to pay the assessments and the general property tax levy could be adversely affected if additional debt is issued which is payable by the owners of land within the Assessment District. For example, other public agencies whose boundaries overlap those of the Assessment District could, without the consent of the Assessment District, and in certain cases without the consent of the owners of the land within the Assessment District, impose additional taxes or assessment liens on the property within the Assessment District in order to finance public improvements or services. The lien created on the property within the Assessment District through the levy of such additional taxes or assessments may be on a parity with the lien of the assessments. The imposition of additional liens on a parity with the assessments may reduce the ability or willingness of the landowners to pay the assessments and increases
the possibility that foreclosure proceeds will not be adequate to pay
delinquent assessments.
In addition to the above, the City has announced its intention to form a community facilities district (the "City CFD") that would include substantial portions of the undeveloped land within the City, including all or
a substantial portion of the land that is included within the Assessment District. The City CPD would be formed for the purpose of imposing a special tax and issuing bonds secured thereby to finance master planned capital
improvements within the City, including the I-5 Poinsettia Lane interchange-
that will be of benefit to land within the Assessment District. Any special
taxes imposed by the City CFD would be on a parity with the assessments.
Under the City's proposal, a special tax would be imposed on undeveloped land until application for a building permit is made, at which time a further "one-time" tax would be paid. No further special taxes would be imposed after payment of the "one-time" tax except in limited circumstances with respect to commercial developments. The proposed undeveloped land tax ranges from
approximately $220 to $2,200 per acre for residential land depending on
dewelling unit density per acre, and approximately $3,000 per acre for
commercial land. The proposed "one-time" tax ranges from approximately $2,000
to $3,850 per residential acre depending on density and would result in
credits against development fees otherwise payable to the City. At this time,
the City estimates that the maximum total principal amount of bonds to be
issued by the City CFD at $150,000,000. The portion of such bonds that may be
allocable to land within the Assessment District, would be approximately 8.5%,
as the City CFD as contemplated would cover 12,680.64 acres of land, of which
1,024 acres would be within the Assessment District.
The School District is- authorized to levy ad valorem taxes on property within the Assessment District pursuant to propositions which were adopted at elections in the School District held on May 27, 1975 and November 8, 1977. the proceeds of such ad valorem taxes are used by the School District to make lease payments on certain school facilities specified
in the 1975 and 1977 propositions. On the June 5, 1990 ballot, the School
District placed Propositions L and M. Both Propositions L and b were approved
by a majority of the electorate voting and as a result, the School district is
now permitted to use the existing authorized ad valorem levy for certain specified facilities other than those specified-in the original 1975 and 1977 propositions. The maximum authorized ad valorem levy is $39.50 per $100,000 of assessed valuation. Property in the Assessment District was previously
2391c5 24
levied by the School District at approximately one-half that amount. Passage
of Propositions L and/or M has resulted in some increase in the ad valorem levy by the School District, but the levy does not exceed the authorized maximum amount. [Amount to be provided by James Elliot]
COLLECTION OF ASSESSMENTS
In order to pay debt service on the Bonds, it is necessary that the
assessments within the Assessment District be paid in a timely manner.
Under provisions of the Act, the assessments, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, will be billed to the properties within the Assessment District on the regular property tax bills sent to owners of such properties. Such assessments are due and payable, and bear the same penalties and interest for
non-payment, as do regular property tax installments. Assessment payments
cannot be made separately from property tax payments. The unwillingness or inability of a property owner to pay regular property tax bills as evidenced
by property tax delinquencies may also indicate an unwillingness or inability
to make regular property tax payments and assessment payments in the future.
There are no current delinquencies and property tax installments levied on the
parcels of land within the Assessment District have been paid through March 1,
1990.
AVA I LAB
The City has established a Reserve Fund out of Bond proceeds in the original amount of ten percent (10%) of the principal amount of the Bonds
($ ). As discussed in the section herein entitled "THE BONDS - Reserve Fund", if a delinquency occurs in the payment of any assessment
installment, the City has a duty to transfer into the Redemption Fund the
amount of the delinquency out of the Reserve Fund. This duty of the City is
continuing during the period of delinquency, until reinstatement, redemption
or sale of the delinquent property. There is no assurance that the balance in the Reserve Fund will always be adequate to pay all delinquent installments and if, during the period of delinquency, there are insufficient funds in the
Reserve Fund to pay all delinquent installments, a delay or default may occur in payments to the owners of the Bonds.
ABSENCE OF MARKET FOR THE BONDS-
No application has been made for a credit rating for the Bonds, and it is not known whether a credit rating could be secured either now or in the future for the Bonds. There can be no assurance that there will ever be a secondary market for purchase or sale of the Bonds, and from time to time
there may be no market for them, depending on prevailing marketlconditions,
the financial condition or market position of firms which may make the
secondary market for the Bonds and the financ$al_ condition and the progress of
the proposed development within the Assessment Dhtrict.
25 2391c5
_-
LOSS OF TAX EXEMPTION
As discussed under the caption "TAX-EXEMPT STATUS" herein, 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 City in violation of its covenants in the
Indenture.
BANKRUPTCY
The payment of assessment installments and the ability of the City to foreclose on the lien of a delinquent unpaid assessment may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of California relating to judicial foreclosure. See SECURITY FOR THE BONDS - "Covenant to Commence Superior Court Foreclosure."
The various legal opinions to be delivered concurrently with the delivery of the Bonds, including Bond Counsel's approving legal opinion, will be qualified as to the enforceability of the various legal instruments by reference to bankruptcy, reorganization, insolvency, arrangement, moratorium and other similar laws affecting the rights of creditors generally, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies in the State of - California.
Although bankruptcy proceedings would not cause the assessment liens to become extinguished, bankruptcy of a property owner in all likelihood would
result in a delay in prosecuting superior court foreclosure proceedings. Such
a delay would increase the likelihood of a delay or default in payment of the
principal of and interest on the Bonds, and the possibility that delinquent
assessment installments might not be paid in full.
ARTICLES XIII A AND XIII B OF THE CALIFORNIA CONSTITUTION
On June 6, 1978, California voters approved an amendment to the
California Constitution, commonly known as Proposition 13 (the Jarvis/Gann
Initiative) which added Article XIII A to the California Constitution. The
effect of Article XIII A is to limit ad valorem taxes on real property. On
November 7, 1978, California voters approved Proposition 8, which made certain
clarifications to Article XIII A;
Enactment of Article XIII A has reduced the amount of general property tax revenues received by the City. This reduction in such revenues
makes it less likely that the City will have surplus funds in its treasury,
other than monies in the Reserve Fund, with which to advance funds to cure any deficiency in the Redemption Fund should the City Council, in the exercise of its discretion, choose to do so. If there are additional delinquencies after exhaustion of funds in the Reserve Fund, the City has no obligation to transfer into the Redemption Fund the amount of-any such delinquencies out of * any surplus monies of the City. .
-2391c5 26
,“-
On July 2, 1979, the Fifth District Court of Appeal (94 Cal. App. 3d 974) rendered a 3-O decision in the case of County of Fresno v. Malmstrom determining that special assessments are not subject to the limitations of Article XIII A (Proposition 13). The Court held that the one percent tax limitation imposed by California Constitution Article XIII A on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of 1911 and the Municipal Improvement Act of 1913 (Streets and Highways Code, Section 5000 et seq. and 10000 et seq., respectively). The Court further held that because special assessments pursuant to such acts are not within the definition of “special taxes" in Article XIII A, the Constitution does not require the levy of assessments and the issuance of Bonds to be
approved by a two-thirds vote of the qualified electors voting on the
proposition. On September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court's decision.
In the November 6, 1979 general election, Proposition 4 (the Gann Initiative) was approved by the voters of California. Such proposition added Article XIII B to the California Constitution. Article XIII B limits the annual appropriations of the City to the amount of ;ppropriations for the
prior year, with adjustments for changes in the cost of living and population.
On December 17, 1980, the Third District Court of Appeal (113 Cal. App. 3d 443) rendered a 3-O decision in the case County of Placer v. Corin _ that determined that special assessments are not subject to the limitation of Article XIII B (Proposition 4). The Court held that the definition of "proceeds of taxes" imposed by California Constitution Article XIII B does not apply to special assessments and improvement bonds issued pursuant to the 1915 Act and the 1913 Act. The decision of the Court was not appealed. The enactment of Article XIII A of the California Constitution (Proposition 13) and subsequent legislative enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and .collect a special tax (in an amount necessary to meet delinquencies, but not to exceed ten cents on each $100 of assessable property within the City in any
one year) if other funds are not available to cover delinquencies.
PRICE REALIZED UPON FORECLOSURE
Amendments to the 1915 Act enacted in 1988 and effective January 1, 1989 provide that under certain circumstances property may be sold upon foreclosure at less than the Minimum Price or without a Minimum Price. "Minimum Price" as used in this.section is the amount equal to the delinquent installments of principal and interest on the assessment or reassessment, together with all interest, penalties, costs, fees, charges and other amounts more fully detailed in the 1915 Act. The court may authorize a sale at less than the Minimum Price if the court determines, based on the evidence introduced at the required hearing, any of the following: \
A) Sale at less than the Minimum Price or without a Minimum Price will not result in an,ultimate loss to the Bondowners. -.
2391c5 27
B) Bondowners of 75% or more of the outstanding Bonds, by principal amount, havecconsented to such sale and the sale
will not result in an ultimate loss of the non-consenting
Bondowners.
Cl Bondowners of 75% or more of the outstanding Bonds, by principal amount, have consented to the petition and all of
1)
2)
3)
4)
5)
the following apply:
By reason of determination pursuant to the 1915 Act, the City is not obligated to advance funds to cure a deficiency (the City made such a determination not to be so obligated with respect to the Bonds).
No bids equal to or greater than the Minimum Price have been received at the foreclosure sale.
No funds remain in the Reserve Fund.
The City has reasonably determined that a reassessment
and refunding proceeding is not practicable, or has in
good faith endeavored to accomplish a reassessment and refunding and has not been successful, or has completed a reassessment and refunding arrangement which will, to the maximum extent feasible, minimize
the ultimate loss to the Bondowners.
No other remedy acceptable to Bondowners of 75% or
more of the outstanding Bonds, by principal amount, is
reasonably available.
The assessment or reassessment lien upon property sold pursuant to
this procedure at a lesser price than the Minimum Price shall be reduced by
the difference between the Minimum Price and the sale price. In addition, the
court shall permit participation by the Bondowners in its consideration of the petition as necessary to its determinations.
Implementation of the above-described Minimum Price provision by the
court upon foreclosure could result in non-payment of amounts due to
Bondowners who are not in agreement with the 75% of such Bondowners required
to approve the sale at less than the Minimum Price. Reference should be made
to Section 8836 of the 1915 Act for the complete presentation of this provision.
PRIORITY OF LIEN
The assessment (and any reassessment) and each installment thereof, and any interest and penalties thereon, constitute a lien against the parcel of land on which it was imposed until the same repaid. Such a lien is
subordinate to all fixed special assessment liens previously imposed upon the
same property, but has priority over all private liens and over all fixed
special assessment liens which may thereafter be created against the
28 2391c5
_-
property. Such a lien is co-equal to and independent of the lien for general
property taxes and special taxes. The City has been informed that there are prior special assessment or special tax liens against the parcels in the Assessment District other than the lien imposed under these proceedings. See, SFCURITy FOR THE BONDS - “Direct and Overlapping Debt. ”
29 2391c5
. -
THE ASSESSMENT DISTRICT
The Assessment District proceedings are being conducted pursuant to
the Municipal Improvement Act of 1913 and the Resolution of Intention
No. 90-172 adopted by the City Council on June 5, 1990. A public hearing on
the proposed Assessment District was conducted by the City Council on July 10,
1990. The City Council adopted Resolution No. on July 10, 1990, confirming
assessments in the amount of $20,630,969.41. The City received in cash payments with respect to the assessments within
30 days of recordation of the assessments. Therefore, $20,630,969.41 is the
total amount of unpaid assessments to be bonded.
DESCRIPTION OF IMPROVEMENTS
The Improvements consist of the construction and installation of certain street improvements, including grading, paving, curbs and gutters, sewer, water, drainage, street lights and utility installation and undergrounding, to upgrade Alga Road and Pointsettia Lane to full City standards and link these two presently dead-end roads, providing four lanes of travel over portions of the City of Carlsbad. At present, these streets. permit only limited access to adjoining property and, in general, point access is limited at intervals of 600 feet and 1,200 feet, respectively. Linking - these two dead-end roads will provide an additional route between Interstate 5 and El Camino Real. This link will directly benefit the property owners
adjacent to Alga Road and Poinsettia Lane by providing access to their lands.
30
.
\ \ \
OceansIde
I Im 4a
1 NORTH WI oca1. Leucadia
.
. . . . Ia VICINITY MAP
.
ESTIMATED IMPROVEMENT COSTS AND USES OF FUNDS
The following table shows a summary of the confirmed estimated construction and incidental costs. All of these costs are based upon
estimates and the amounts shown below may differ from actual expenditures.
TABLE
CITY OF CARLSBAD
ASSESSMENT DISTRICT NO. 88-l
(ALGA ROAD)
Estimated Improvement Costs
Improvements
Acquisition Phase Public Works of Construction Future Traffic Signals
Total Improvement Costs
Right-of-Way Acquisition
Incidental Expenses
Acquisition Phase Public Works of Construction
Total Incidental Expenses
Financing Costs (1)
Bond Discount (3%) 618,929.08
Bond Reserve (10%) 2,063,096.94
Capitalized Interest 2,063,096.94
Total Financing Costs
Total Assessment Amount
(1) Subject to change.
$ 7,533,058.85
2,<'8,722.00
8Cr5,000.00
$1,346,929.09
787,015.OO
$10,836,830.85
$ 2,865,071.51
$ 2,183,944.09
$ 4,745,122.96
$20,630,969.41
Source: Engineer's Report, NBS/Lowry Incorporated
I %-... .
32
METHOD OF ASSESSMENT
Because of the nature of the public improvements, the upgrading of
Alga Road and Poinsettia Lane to thoroughfares meeting full City standards,
and the linking of these two dead-end streets, the improvements will directly benefit the properties adjacent to Alga Road and Poinsettia Lane by providing access to their lands.
Each parcel within the district boundary was assigned the number of equivalent dwelling units that could be developed on the parcel based on either approved final maps, tentative maps, specific plan, local facilities management plan, or general land use plan maps. The number of units for properties within Local Facilities Management Plan Zone 20, were determined by multiplying the density control point for each land use by the net usable residential acreage. Average daily trips were determined at the rate of ten
trips per day for single family detached homes and eight trips per day for single family attached homes.
An assessment per gross area was determined for each parcel based on
trip yield.
The commercial areas were assigned average daily trips based on the
rates published in the Engineer's Report for the City of Carlsbad, Bridge and Thoroughfare Benefit District No. 1. Commercial trips were reduced sixty percent, identical to the reduction in the Bridge and Thoroughfare District. This reduction was done to eliminate double counting, as it was assumed that sixty percent of the commercial traffic would come from within the district and would have already been counted.
All property owners within the district receive a direct benefit by the acquisition and construction of street and utility improvements within the Poinsettia Lane right-of-way. However, only properties within the Aviara
subdivision receive benefit by the acquisition and construction of street and
utility improvements within the Alga Road right-of-way and that portion of the
Poinsettia Road right-of-way within the Aviara subdivision boundary. Properties adjacent to Poinsettia Lane and Alga Road would be required to improve these roadways as a condition of subdivision development and therefore receive a direct benefit. The benefits to the properties have been spread based on each properties' proportion of the total average daily trips and the proportional cost of the improvements, incidentals, right-of-way and financing costs.
It is anticipated that total assessments and cash payments will cover total costs.
As required by the 1913 Act, a diagram has been prepared showing the Assessment District and also the boundaries and dimensions of the respective subdivisions of land within said Assessment District, as the same existed at the time of the passage of the Resolution of Intention. Each of the lots,
parcels, or subdivisions of land within the bdur+ries of the Assessment
District is set forth in a list and numbered to correspond with the numbers on the diagram. For a more particular description of each parcel, lot or subdivision, reference is made to said diagram and list.
33
2391cs
ENVIRONMENTAL REVIEW
The City believes that all necessary environmental action has been
taken with respect to the formation of the Assessment District, issuance of
the Bonds and construction of the Improvements and that all statutory time periods for environmental challenges to those actions have run. The City Council certified the Aviara Master Plan Environmental Impact Report on December 12, 1987, and certified a mitigated negative declaration regarding the off-site improvements on July 10, 1990. In connection with the establishment of the Aviara CFD, a Negative Declaration was adopted with
respect to such matters on May 31, 1989. See THE DEVELOPMENT AND THE
DEVELOPERS - "Entitlements" regarding necessary environmental action taken
with respect to the Master Plan, zoning and other land use matters with respect to the development of land in the Assessment District. It is possible that future discretionary approvals necessary to complete the Development will
be subject to the Environmental Quality Act. Challenges to such discretionary approvals could slow the rate of development in the Assessment District. See
SPECIAL RISK FACTORS - "Future Land Use Regulations and Growth Control
Initiatives" and SPECIAL RISK FACTORS - "Factors Which May Affect Land
Development and Property Values."
PARCEL OWNERSHIP/USE
As of May 25, 1990, the parcels in the Assessment District were owned by property owners. All but [one] of the parcels with unpaid assessments within the Assessment District are improved. Development and zoning is predominantly residential and commercial.
Development in the Assessment District may be affected by changes in general economic conditions, fluctuations in the real estate market and other similar factors. In addition, land development is subject to federal, state and local regulations. Approval is required from various agencies in connection with the development of the remaining unapproved buildings, sites
and uses in the Assessment District and other discretionary approvals as may
be required in the future by those governmental agencies.
Failure to obtain any such approval would adversely affect land development operations. Moreover, there can be no assurance that the land development operations within the Assessment District will not be adversely affected by future deterioration of real estate and economic conditions or future local, state and federal-governmental policies relating to real estate development, income tax treatment of real estate, or the national economy. A slowdown of the development process and the absorption rate (the rate at which the community assimilates newly-built housing) could result in delinquencies in the payment of annual assessment installments and property taxes. In that
event, there could be a default in the payments in principal and interest on
the Bonds.
There are proposed to be 182 parcel4 jncluded in the Assessment
District totalling 1,019.48 acres. Further information on the parcels is
included in Appendix B.
34 2391c5
PRIOR LIENS
Parcels located and assessed within the Assessment District have outstanding prior liens levied pursuant to proceedings undertaken by Carlsbad and by the County of San Diego. Such liens are on a parity with the assessment liens. For a further description of overlapping indebtedness, see SECURITY FOR THE BONDS - "Estimated Direct and Overlapping Bonded Debt."
PARCEL TAX DELINQUENCY
There are currently no tax payment delinquencies on parcels within the Assessment District. No assurance can be given that owners of parcels will continue to pay their taxes on a timely basis.
ASSESSMENT DISTRICT LITIGATION
There is no pending litigation seeking to enjoin the issuance, sale or delivery of the Bonds or affecting the security pledged therefore.
THE DEVELOPMENT AND THE DEVELOPERS
Land within the District is composed of a master-planned private
development commonly known as the Aviara Development, which comprises 99.6% of
the confirmed assessments, and four parcels owned by individuals which represent the remaining 0.4% of confirmed assessments. Information regarding the Aviara Development and its ownership has been provided by Aviara Land Associates Limited Partnership, a Delaware limited partnership (the "Master Developer"), which owns a majority of the land within the Aviara Development. Certain other portions of the Aviara Development are owned by various entities ("Merchant Builders") that have purchased land in order to construct residential units for sale to the general public. The information provided in this section "THE DEVELOPMENT AND THE DEVELOPERS" has been included because it may be considered relevant to an informed evaluation and analysis of the Bonds and the District. No assurance can be given that the proposed development will occur as described below. As the proposed land development progresses
and parcels are sold, it is expected that the ownership of the land within the
District will become more diversified. Although development has commenced on
a portion of the Aviara Development described below, no assurance can be given
that development of the land within the District will occur, or that it will occur in a timely manner or in the configuration or intensity described herein, or that any landowner described herein will retain ownership of any of the land within the District. The Bonds and Assessments are not personalized obligations of any landowners. The Bonds are secured solely bylthe Assessments and other amounts on deposits with the Paying Agent: See SECURITY
FOR THE BONDS and SPECIAL RISK FACTORS. V, -r-.-
The District covers a land area of approximately 1027 gross acres
within the City of Carlsbad. The Aviara Development represents approximately 990 acres. The proposed development plans of the parcels within the District are listed below.
35
I--
THE AVIARA DEVELOPMENT
The Aviara Development is located on the north shore of the
Batiquitos Lagoon in the City of Carlsbad. It consists of 32 separate Planning Areas (identified as such in the Master Plan and shown in the map
contained in APPENDIX A--"Appraisal Summary" hereto) and will primarily
consists of 24 separate residential neighborhoods, a resort Hotel, a Golf Course and an adjacent Sports Complex. Planning Areas 6 and 32, a school site and park site, respectively, are not within the District.
The Aviara Development will be constructed in three separate Phases. Phase I (Planning Areas 1 through 16) includes the Hotel, Golf Course, Sports Complex, Restaurant and 11 residential Planning Areas. The current development plan contemplates the construction of 876 dwelling units within these 11 residential Planning Areas. Current development plans for Phase II (Planning Areas 24 through 30) contemplate the construction of 542
dwelling units. Current development plans for Phase III (Planning Areas 17
through 23, and 32) contemplate the construction of 577 dwelling units.
The Aviara Development contains approximately 990 gross acres, over sixty percent (60%) of which will be active or passive open space. Each residential neighborhood will be separated from adjacent neighborhoods by an extensive open space system including community hiking trails and certain - areas designated for parks. A twenty-four (24) acre park (Planning Area 32, which is immediately adjacent to but not in the District) has been conveyed to the City. The City is responsible for constructing the Park, although funding for construction of the park facilities has been provided by the Master Developer, subject to certain reimbursement rights from park fees collected by
the City from future non-Aviara development. In addition, a school site
(Planning Area 6, which is not within the District) has been conveyed to the
Carlsbad Unified School District.
ENTITLEMENTS
The basic entitlements for the Aviara Development are embodied in that certain Master Plan &ted November 4, 1987 ("Master Plan"), and approved by the City on December 22, 1987 and that certain Zone 19 Local Facilities
Managment Plan dated October 9, 1987 (the "Facilities Plan"), and approved by the City on December 22, 1987. The Master Plan and Facilities Plan were found to be consistent with the City's Growth Management Program and its Citywide Facilities and Improvement Plan (collectively, the "Carlsbad Growth Management Plan"). Concurrently with the approval of the Master Plan, the City also
certified the final environmental impact report for the Master Plan and granted certain other approvals relating to the development of Phase I. The Master Developer believes that all necessary environmental approvals have been obtained with respect to the approved Master Plan and the developments contemplated therein and the Master Developer is in compliance &ith all requirements imposed on the Master Developer in such approvals. However, it
is possible that future discretionary approvals'iracessary to complete the
. Aviara Development will be subject to further'review under the California Environmental mlity Act. The Master Plan and the Phase I development were
approved by the Coastal Commission on April 14, 1988.
36
The Master Plan conditionally approves the construction of a maximum number of dwelling units for each Planning Area, which, in the aggregate, equals 2,836 ("Maximum Unit Number"). The maximum aggregate number of units ConditioMlly approved for Phase I was 1515. As further discussed herein, it is anticipated that the number of units that will be actually built within the Aviara Development will not equal the Maximum Unit Number (2,836) and that the number of units to be built within Phase I will not equal the aggregate number of units approved for the Planning Areas within Phase I. However, the Master Developer believes that, subject to the risks discussed herein, the 2,002 dwelling units projected in Table A below is reasonably achievable based on
the Master Developer's knowledge of the facts and circumstances currently
applicable to the Aviara Development.. See SPECIAL RISK FACTORS and THE
DEVELOPMENT AND THE DEVELOPERS - "The Aviara Development" and THE DEVELOPMENT
AND THE DEVELOPERS - "Number of Units."
A series of five subdivision maps for the lots contained within Phase I of the Aviara Development were recorded on June 29, 1989. However, further discretionary approvals are still needed fcf;- some of the development contemplated within Phase I. Certain of the Planning Areas purchased by Merchant Builders require further subdivision mapping in order to delineate the specific site plan contemplated by that Merchant Builder, and those are being processed by the Merchant Builders in question. Further, certain site plan approvals and an amendment to the Master Plan with respect to the Hotel
are being processed by the Resort Developer.
Rough grading of the Phase I property began in the last half of 1988
and is now substantially completed. Final grading for the respective multi-family residential Planning Areas is to be completed by the respective
Merchant Builders. Building permits are available for some portions of
Phase I, and building is expected to begin for certain of these portions, including the resort, in September 1990.
A tentative map for Planning Area 24 in Phase II of the Aviara Development was submitted in April 1990 to the City for review and approval and a master tentative map for the remainder of Phase II has been submitted to the City for review and approval. A Master Plan amendment is being processed
concurrently with these tentative maps. It is expected that these will be approved in the first guarter of 1991. Once Coastal Commission approval is
obtained for Phase II in January, 1991, it is anticipated that mass grading of the Phase II property will commence in April 1991. The construction of units within Phase II is expected to occur some time between 1991 and 1993.
With respect to Phase III, engineering studies have begun and a
tentative map is expected to be approved by the City approximately
February 1992. Grading of the Phase III property and construction of Phase III units are expected to occur in the time period between,1992 and 1995.
The progress with respect to Phases II and III is subject to a variety of factors beyond the control of the Master Developer. Among those are the process of land use discretionary approval, many of the aspects of which are discussed above in the section entitled SPECIAL RISK FACTORS -
37 2391c5
"Future Land Use Regulations and Growth Control Initiatives." In addition,
and notwithstanding other approvals received from the City for aspects of the
Aviara Development; it is possible that building within the Aviara Development
could be delayed or halted by virtue of provisions in the Carlsbad Growth Management Plan should certain circumstances occur which (as discussed in that Growth Management Plan) result in the shortage of important facilities for the
region. The principal concern raised by the Carlsbad Growth Management Plan 'with respect to the Aviara Development is the expansion of the interchange between Poinsettia Lane and the Interstate 5 ("I-5") freeway. It is expected that a financing program for the expansion of the I-5/Poinsettia Lane interchange will be required before building permits for Phase III can be
issued. The I-5/Poinsettia Lane interchange is among the facilities included
in the City's proposed Citywide Community Facilities District. See SPECIAL
RISK FACTORS - "Future Indebtedness."
NUMBER OF UNITS
While the Master Plan contains conditional approval for the construction of the Maximum Unit Number (2,836), the actual number of dwelling units that will be constructed in each Planning Area within the Aviara Development will almost certainly deviate from the number of approved units for each Planning Area set forth in the Master Plan. Table A below identifies the numerical differences from the maximums approved in the Master Plan and-
the number of units that the Master Developer reasonably believes will be
constructed in the Aviara Development, based upon the Master Developer's knowledge of the facts and circumstances currently applicable to the Aviara Development and subject to the risks discussed herein or in "SPECIAL RISK
FACTORS” above . The primary reason for this change in Phase I has been the need to meet a strong market for low density multi-family units, but other land use factors and requirements have also contributed.
Table A sets forth accurately the projections currently contemplated by the Master Developer for Phases II and III, and the most recent information known to the Master Developer concerning Phase I. However, it must be recognized that over the extended time period within which the Aviara Development will be developed, these projections are subject to change because
of various factors, many of which are beyond the control of the Master
Developer. As can be seen in Table A, most of the projected numbers would result in density decreases. Some involve changes in land use designation
from those currently set forth in the approved Master Plan. Three Planning Areas in Phase III reflect proposed density transfers which would result in increases from the density set forth in the approved Master Plan. Any such
increases and any changes in land use designation are expected to require amendment of the Master Plan, and accompanying discretionary approvals from
the City and the California Coastal Commission (the "Governing Entities"). Although the Master Developer currently intends to seek those changes, and believes that persuasive reasons exist to support those changes,and reasonably believes that the changes would be approved, no assurance can be given that such changes will be approved or that they will<esult in total development densities equal to, greater than or less thanthose projected in Table A.
2391c5 38
r r
Second, the Master Developer does not have a vested right to proceed with the development of the Aviara Development. It is always possible that changes in the political climate, general economic conditions, city government or in the applicable rules and regulations which govern the land use development process in the City would result in reduction of the actual
building permits which could be obtained. Third, in light of ever changing
market forces and the extended period of time over which future Phases will be
developed, it cannot be assured that market influence will not result in a
change in the number or type of dwelling units for future Phases. Finally, once a particular Planning Area is sold to a Merchant Builder, control over
the actual decision to build passes from the Master Developer to the
respective Merchant Builder in question. Each Merchant Builder is subject to the effect of forces and influences beyond the control of the Master
Developer, and the Master Developer cannot safely predict or guarantee that
any Merchant Builder will in fact construct the dwelling units for which he is authorized under the Master Plan as it may be amended from time to time. Accordingly, while the numbers and product types set forth in Table A do represent the best information, professional opinion and intention of the
Master Developer as of this time, it is impossible to predict accurately or to
guarantee the actual number of dwelling units for which building permits will
be obtained.
IDENTITY OF OWNERS AND DEVELOPERS
The Master Developer owns a majority of the land within the Aviara
Development governed by the Master Plan. The Master Developer's general partners are Aviara Land Company, a Delaware corporation, and Republic
Development Company, a California corporation, each of which is affiliated
with Hillman Properties West, Inc., a Delaware corporation ("Hillman").
The Master Developer acquired the Aviara Development in May 1988 after the previous owner had obtained both City and California Coastal Commission approvals for the Master Plan and Phase I of the Aviara Development. The Master Developer's plan has always been to sell a number of the Planning Areas (discussed below) to Merchant Builders for the construction of the residential portions of the community, and to convey the land comprising the resort (discussed below) to a specific resort entity. Pursuant
to that plan, certain land within the Aviara Development has been transferred
to and is owned by entities other than the Master Developer. Table A provides
information as to which Planning Areas are owned by which entities, the
currently approved and currently proposed types of units to be constructed on
the Planning Areas, and the currently approved and currently proposed number
of units to be constructed on said Planning Areas,
The Aviara Development is to contain a resort hotel (to be operated by Four Season Resorts), "Resort"). a sports complex and golf course (collectively, the The Resort will be owned by Aviara Resort Associates Limited Partnership, a California limited partnership ("Resort Developer"), of which the general partners are TAT Aviara, Ltd., a California corporation, and the Master Developer. The Resort Developer has titlcto the hotel site and the sports complex site, and will also acquire title to the golf course site upon completion of further development work to the satisfaction of the existing first trust deed holder.
2391c5 39
i
Certain other portions of the Aviara Development are owned by the Merchant Builders, which will be constructing units pursuant to the approvals contained in the Master Plan and Phase I final maps obtained by the Master Developer unless separate approvals are sought and obtained by any respective Merchant Builder.
Set forth below is a brief description of the entities that own portions of the land within the Aviara Development. The following information regarding owners and developers other than the Master Developer is based
solely on information provided to the Master Developer by the respective
owners and developers, and has not been independently verified or confirmed by
the Master Developer. However, the Master Developer believes that the following information is correct.
Planning Areas 1, 2 and 10 - Resort Developer. Planning Areas 2 (hotel) and 10 (sports complex) are owned by the Resort Developer. Planning Area 1 (golf course and clubhouse) is to be-conveyed by the Master Developer to the Resort Developer by September 30, 1990. Specific site designs for these Planning Areas are currently being reviewed by the City, as is an amendment to the Master Plan to accommodate the design of the Four Seasons Hotel. Approvals for these improvements were granted on June 5, 1990 by the City Council and on July 10, 1990 by the California Coastal Commission. Completion of construction on these Planning Areas is projected to occur by'
Spring of 1992.
Planning Areas 3 and 4 - RDC DevCo II Limited Partnership. RDC
DevCo II Limited Partnership, a Delaware limited partnership ("RDC"), is the
owner of Planning Areas 3 and 4. The managing general partner of RDC is
Republic Development Company, a California corporation, which is a wholly
owned subsidiary of Hillman. The Master Plan contains approvals for 27
single-family units to be constructed in Planning Area 3 and 103 single-family
units to be constructed in Planning Area 4. RX has received discretionary
approvals from the Governing Entities to build 115 single-family units (20
units in Planning Area 3 and 95 units in Planning Area 4).
Planning Area 3A - Aviara. Planning Area 3A, which comprises 7 lots, has been retained by the Master Developer. No sale has been contemplated.
Planning Area 5 and 9 - McKellar Development. Planning Area 5 is projected to contain multi-family units. It is owned by Aviara - 5, a California limited partnership, of which the general partner is McKellar Development of La Jolla, a California corporation ("McKellar"). The Master Plan contains approval for a maximum of 189 units to be constructed on this site; however, McKellar's proposed design plan for this site consists of 145 multi-family units. Planning Area 9 is projected to contain multi-family units. It is owned by Aviara - 9, a California limited partnership of which the general partner is McKellar. The Master Plan contains approval for a maximum of 100 units to be constructed on this site; however, McKellar's proposed design plan for this site consists of &multi-family units.
Planning Area 7 - Lyon Communities Inc. Lyon Communities Inc., a California corporation ("Lyon"), owns Planning Area 7, which is designated
40 239ic5
under the Master Plan as a multi-family site. Although the Master Plan contains approval for 240 multi-family units, Lyon proposes to construct approximately 145 units in Planning Area 7.
Planning Areas 7 and 14 - Davidson Coscan Partners. Davidson Coscan Partners, a California general partnership ("Davidson"), is the owner of Planning Areas 8 and 14, which are designated as single-family neighborhoods under the Master Plan. The Master Plan contains approval for the construction of 75 units in Planning Area 8 and 52 units in Planning Area 14. Davidson has obtained discretionary approvals from the Governing Entities for the construction of 65 units in Planning Area 8 and 47 units in Planning Area 14.
Planning Area 12 - A-M Homes. A-M Homes, a California limited
partnership ("A-M"), owns Planning Area 12, which is designated in the Master
Plan as a multi-family site. The Master Plan contains approval for the construction of 351 units on this site. A-M currently proposes to construct 103 units on this site.
Planning Area 16 - Bramalea. Bramalea California, Inc., a California corporation ("Bramalea"), owns Planning Area 16 which, under the Master Plan, is approved for the construction of 121 multi-family units. Bramalea currently proposes to construct 53 multi-family units on this site. Bramalea is also in negotiations with the Master Developer to purchase Planning Area 15, and the proposed number of units shown in Table A is the number which Bramalea has said it intends to build if it acquires Planning Area 15.
Planning Area 6 - Carl&ad Unified School District (not within the
District). Planning Area 6 has been conveyed to the School District and is to
contain the Facilities previously financed by the Bonds issued by the Aviara
CFD.
Planning Area 31 - State of California. Planning Area 31 was conveyed to the State of California acting by and on through the State Lands Commission on June 10, 1988.
Planning Area 32 - City of Carlsbad (not within the District).
Planning Area 32 has been conveyed to the City and is designated as a park in the Master Plan.
Planning Areas 11, 15 and 17 throuqh 30, inclusive - Master Developer. Planning Areas 11 and 17 through 30, inclusive, are owned by the
Master Developer. The number of units approved in the Master Plan and the
proposed number of units to be constructed by the Master Developer (or future Merchant Builders purchasing from the Master Developer) on the remaining Planning Areas are set forth in Table A below.
Homeowners' Associations. Certain portions of the Aviara
Development land have been or will be conveyed to a master homeowners'
association to be formed by the Master Developer, which association shall be
responsible for the maintenance of the property &ned by it. In addition, . various other homeowners' associations will be established by respective
Merchant Builder%, which associations shall be responsible for the maintenance
of property within the respective separate Planning Areas.
2391c5 41
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THE CITY OF CARLSRAD
ORGANIZATIW
The City of Carlsbad is a general law city, with a five-member City
Council serving as the governing board of the City. The councilmembers are
elected to four-year terms, and the mayor is elected by the voters every four
years.
Engineering and administrative functions for the City are performed by a staff headed by the Chief Engineer, Lloyd B. Hubbs, who has been with the City since November, 1986.
The City has a staff of approximately 520 employees, including about 10 professional engineers and surveyors. Salaries and office expenses are allocated to projects or administration and maintenance activities in each
zone as required by the task.
City officials provide the broad variety of legal, personnel, tax
collection, auditing and other functions as indicated in the listing on the
title page.
ASSESSED VALUATIONS
Assessed valuations in the City are established by the San Diego County Assessor, except for utility property, which is assessed by the State Board of Equalization. The Board of Equalization's Utility Roll is comprised of State assessed properties of regulated public utilities and companies such as telephone and gas companies. Basically, there are three classes of utility property: unitary, operating non-unitary and non-operating non-unitary.
Effective for the 1988189 fiscal year and fiscal years thereafter,
Assembly bill 454, approved by the Governor on September 9, 1987, amended the
Revenue and Taxation Code. This Bill changed the method by which the property
tax on unitary and operating non-unitary properties is charged to utility
companies and subsequently allocated to taxing entities. Generally, these
changes should have a minimal effect on the property tax levies of most taxing
entities, with a potentially greater effect on those entities with substantial
amounts of unitary and operating non-unitary assessed value. AB 454
consolidate8 the assessed value of unitary and operating non-unitary
properties into one tax rate area per county rather than several hundred tax
rate areas as was the case prior to AB 454. The legislation also had the
effect of making it impossible to identify the assessed value of unitary and operating non-unitary assessed values to individual taxing agencies.
Consequently, numerous public agencies experienced an elimination in State
Board Utility Roll assessed values as of the 1988-89 fiscal year (the unitary
and operating non-unitary properties represented approximately 97% of the
total State Board Roll). However, AB 454 provides a formula for counties to distribute unitary and operating non-unitary taxti. to taxing agencies generally based on what they have received from these properties in the prior year.
44
California law exempts $7,000 of the assessed valuation of an
owner-occupied dwelling, but this exemption does not result in any loss of revenue to local agencies since an amount equivalent to the taxes which would have been payable on such exempt values is made by the State. Effective with the 1980/81 fiscal year, State law has also exempted 100 percent (100%) of the value of business inventories from taxation, rather than 50 percent (50%) as in prior years. The law provides for reimbursements by the State to local agencies based on their share of the revenues derived from the application of
the maximum tax rate applied to business inventories in the 1979180 fiscal
year, with adjustments to reflect increases in population and the. consumer
price index.
The summary below presents the City's 1989190 assessed valuations before and after giving effect to State-reimbursed exemptions and excluding
unitary value.
CITY OF CARLSBAD
1989/90 Assessed Valuations
Local Assessed
Tax Roll Valuation
State-reimbursed
Exemptions
Assessed Valuation
for Revenue Purposes
Secured $4,904,468,193 $87,162,600 $4,817,305,593 - Unsecured 155,250,344 155,250,344
Total $5,059,718,537 $87,162,600 $4,972,555,937
Source: San Diego County Auditor<ontroller/Treasurer's records.
TAX RATES
The basic tax rate for all taxing entities within a particular tax code area is $1 per $100 of assessed valuation in accordance with Article XIII A of the State Constitution. To this may be added whatever tax rates are necessary to meet debt service on indebtedness approved by the voters prior to
July 1, 1978 or subsequent to such date if approved by the voters constituting
two-thirds of the qualified electors voting in such election. Although the
assessments are collected in the same manner as are ordinary property taxes,
assessments are not taxes and thus are not subject to the limitations of Article XIII A. Therefore, additional special assessments could be levied on the area which would affect the total payments on the tax bill.
[The City Council adopted San Diego County's 1990 tax rates on
1, - .] Various agencies within San Diego County trill receive their portion of the $1 general County tax rate for fiscal year'1990191 pursuant to the provisions of Assembly Bill 8t!(Statutes of 1979) and Senate Bill 180 (Statutes of 1980). '-.
45
2391c5
.
CITY TAX DELINQUENCIES
Taxes and 1915 Act Assessment District Bond Assessments are collected by the San Diego County Tax Collector. Taxes and Bond Assessments on the secured roll are payable in two installments on and - - of each fiscal year, and become delinquent after and -' respectively. Taxes on unsecured property are assessedynd
payable and become delinquent the following in the next fiscal year. Aten percent (10%) penalty is added to delinquenttaxes
and assessments which have been levied on property on the secured role.
The following tabulation shows a five year history of secured
assessed valuation subject to tax and percentage of delinquent taxes as of
June 30 for the City of Carlsbad.
CITY OF CARLSBAD
Tax Levies and Collections
State and Local Combined
Fiscal Year
1984/85 $2,420,718,979 3.9% 1985186 2,815,709,020 4.0% 1986/87 3,071,734,358 3.3% 1987188, 3,916,958,266 3.4% 1988189 4,185,757,322 - 3.0% 1989190 4,817,305,593 2.9%
Assessed Valuation Percentage Taxes Delinquent for Revenue Purposes as of June 30, 1990
Source: San Diego County Auditor-Controller/Treasurer's records.
POPULATION, ECONOMY AND EMPLOYMENT
The City's population at January 1, 1990 was approximately 63,500 as estimated by the State Department of Finance. This is an increase of
approximately 2.6% over the January 1, 1989 population of approximately 61,900, and an increase of approximately 78.9% over the 1980 population of 35,490. The City of Carlsbad has exceeded the growth rate experienced by the balance of San Diego County. The City and County experienced substantial growth during the 1970's. During that period, Carlsbad's rate of growth nearly tripled the rate for the County. Despite the lower growth rate experienced in the 1980's, Carlsbad has maintained the position as the fastest growing city in San Diego County. There is no assurance that previous growth rates will be sustained in the future. \ \
.
46
.
Year
1970 14,944 1,357,854 1975 19,200 1,560,700 1980 35,490 1,861,846 1981 35,600 1,895,200 1982 27,650 1,944,ooo 1983 39,200 1,988,600 1984 40,650 2,041,400 1985 44,950 2,102,500
1986 48,850 2,165,500
1987 55,300 2,240,700
1988 58,900 2,327,700
1989 61,900 2,417,600
1990 63,500 - 2,509,900
CITY OF CARLSBAD
COUNTY OF SAN DI EGO
Population Estimates
City county
Source: 1970 and 1980: U.S. Census. 1975, 1981-1990: State of California Department of Finance.
The figures below represent taxable transactions in the City since
1982. During the 1982-89 interval, retail sales in the City increased by
approximately 111.4%. Non-retail transactions increased by approximately
358.6% during this period.
CITY OF CARLSBAD
Total Taxable Transactions and Number of Sales Permits
(Taxable Transactions in Thousands of Dollars)
Year Retail Retail Sales Total Taxable Issued Sales Sales Permits Transactions Permits
1982 $327,179 422 $359,774 1,121 1983 369,888 436 407,933 1,169 1984 439,885 448 482,963 1,304 1985 483,198 470 542,677 1,417 1986 503,109 522 571,855 1,612 1987 541,052 568 607,566 1,777 1988 603,778 604 703,130 1,981
1989 691,719 658 808,259 2,154
1 L
Source: State Board of Equalization, Taxable &es in California
2391c5
47
The figures below summarize the breakdown of transactions by the type of business in 1989, the last year that full statistics are available. Auto dealer sales dominate retail sales with a 42.4% share, primarily due to the Car Country Carlsbad auto mall. General merchandise stores accounted for 14.4% of retail sales in 1989.
CITY OF CARLSBAD
1989 Total Taxable Transactions by Type (In Thousands of Dollars)
Type of
Business Permits
Retail Stores:
Apparel Stores
General Merchandise Stores
Drug Stores
Food Stores Packaged Liquor Stores Eating and Drinking Places Home Furnishings and Appliances Building Materials and Farm Implements Auto Dealers and Auto Supplies Service Stations Other Retail
Total Retail Stores
All Other Outlets
TOTAL ALL OUTLETS
97 $ 55,401
16 99,527
6 8,060
49 35,623 2 N/A
103 49,348
57 9,186
22 45,802
23 293,263
16 29,268
267 66,241
658 691,719
1,496 116,540
2,154 $808,259
Taxable
Transactions
Source: State Board of Egualization, Taxable Sales in California
48 2391c5
A
,
EMPLOYMENT AND INDUSTRY
The following figures show the annual average wage and salary
employment figures by industry classification for San Diego County for the year 1985 through 1989.
SAN DIEGO COUNTY
Estimated Number of Workers By Industry
1985-l 989
ANNUAL AVERAGES
(In Thousands)
Agriculture Mining Construction
Manufacturing
Transportation,
Public Utilities
Wholesale Trade Retail Trade
Finance, Insurance, Real Estate Services Government
TOTAL (2)
1985 1986 1987 1989(l)
11.9 11.8 12.4 12.1 11.7
0.8 0.8 0.8 0.8 0.8
47.5 50.9 54.6 57.4 63.3
121.6 121.8 124.3 130.1 135.0
31.6 32.3 33.7 35.1 35.5
33.6 35.2 37.9 41.0 43.8
153.3 161.1 169.1 181.9 191.5
52.0 56.6 61.4 65.0 66.7
197.9 211.1 229.0 242.5 257.5
145.7 149.9 156.0 162.8 168.9
795.7 831.5 879.2 928.7 974.7
(1) Forecast
(2) Totals may not add due to independent rounding.
Source: State Department of Employment Development.
2391c5
49
.
As of May 1, 1987, the civilian labor force for the City was 22,580, of which 21,826 were employed. The following table sets forth the largest
employers in the City.
CITY OF CARLSBAD
Schedu I e of Principal Employers
1986-87
Firm
Manufacturinq:
Hughes Aircraft Company
Taylor Made Golf Eaton-Leonard Corp Beckman Industries Dyna Industries Incorporated Watkins Products DynaMed Incorporated Sierracin-Magnedyne, Inc. Sargent Industries
Employment Products
1,500 Electronic Components
280 Golf Equipment
275 Vending Machines
240 Microbics Operation
195 Medical Products
185 Portable Spas
180 Medical Products
162 Electronic Motors
150 Industrial Seals
Source: City of Carlsbad audited financial statements.
Firm Employment Products
Non-Manufacturinq:
Plaza Camino Real
La Costa Hotel and Spa
Car County Carlsbad
City of Carlsbad Carlsbad Unified School District
San Diego Gas 6 Electric
Farmers Insurance Group
Pea Soup Anderson's Daniel's Cablevision
1,000 Shopping Center
1,000 Hotel/Health Spa
500 Car Dealerships
435 Government
425 Education
384 Electricty and Gas 320 Insurance 200 Restaurant/Hotel 90 Cable TV
Source: City of Car&bad Chamber of Commerce.
50 2391c5
BUILDING ACTIVITY
The following table shows construction activity in the City for the
past five years.
CITY OF CARLSBAD
Building Permit Valuation (In Thousands of Dollars)
fype
Residential
New Single Housing $122,340 $185,433 $ 74,859 $ 52,179 $ 47,173 New Multi-Dwelling 77,129 96,803 20,963 10,328 5,086 Alternations/Additions 3,261 3,809 5,464 5,526 7,024 Total $202,730 $286,045 $101,286 $68,033 $59,283
Non-Residential
New Commercial New Industrial
Other .' Alterations/Additions Total
Total Building Val. $271,462 $340,212 $141,736 $130,678 $124,652
Number of New Dwelling Units: Single-Family Multi-Family
Total
1988 1988 1987 1988 1989
$ 31,921 $ 33,934 $ 11,199 $ 26,449 $ 38,352
745 2,509 13,726 12,698 3,667 17,072 5,444 1,985 1,411 4,775 18,994 12,280 13,540 22,088 18,575 $ 68,732 $ 54,167 $ 40,450 $ 62,646 $ 65,369
1,267 1,779 523 327 272
1,528 1,338 287 100 78 2,795 3,117 810 427 350
Source: Security Pacific Bank, California Construction Trends, and Economic Sciences Corporation for calendar year 1987.
TAX-EXEMPT STATUS \ ,
In the opinion of Brown, Harper, Burps & Hentschke, Bond Counsel, based on existing statutes, regulations, rulings.and court decisions, interest on the Bonds is excluded from gross Income for federal income tax purposes and is pxempt from California personal income taxes.
51 2391c5
The Internal Revenue Code of 1986, as amended (the "Code"), imposes various restrictions, conditions and requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations such as the Bonds. The City has covenanted to comply with certain restrictions designed to assure that interest on the Bonds will not be included in federal gross income, possibly from the date of issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the date of issuance of the Bonds may
affect the tax status of interest on the Bonds.
Bond Counsel is further of the opinion that interest on the Bonds is not a specific preference item for purposes of the Code's individual or
corporate alternative minimum tax provisions. However, interest on the
Bonds received by corporations will be included in adjusted net book
income and adjusted current earnings, a portion of which may increase the
alternative minimum taxable income of such corporations.
Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from federal gross income, the accrual or receipt of interest on the Bonds may otherwise affect a Bondowners's federal tax liability. The extent of these other tax consequences will depend upon the Bondholder's particular tax status and the Bondowners's other items of income or deduction. Bond Counsel expresses no opinion regarding any such
other tax consequences. Accordingly, all potential Bondowners should
consult,their tax advisors before purchasing any Bonds.
UNDERWRITING
Smith Barney, Harris Upham 6 Co. Inc., the Underwriter, will
purchase the Bonds from the City under a Bond Purchase Agreement dated
1990 at an aggregate discount of $ from the total par value of;he Bonds as set forth on the cover page of this Official Statement, plus accrued interest from --, 1990 to the delivery date thereof.
The initial public offering prices stated on the cover hereof 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
Insofar as any statements made in this Official StateTent involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statehen+ made will be realized.
Neither this Official Statement nor any statehenf'xwhich may have been made verbally or in writing is to be construed as a contract with Bondowners.
2391~5 52
.
LEGAL OPINION
All proceedings in connection with the issuance of the Bonds are
subject to the approval of Brown, Harper, Burns & Hentschke, San Diego, California, Bond Counsel for the City. A copy of the legal opinion, certified by the official in whose office the original is filed, will be printed on each Bond.
NO RATING
The City has not made, and does not contemplate making, application to any rating agency for the assignment of a rating to the
Bonds.
The execution and delivery of this Official Statement by the Mayor of the City of Carlsbad has been duly authorized by the City Council.
CIT?Z OF CARLSBAD
Claude "Buddy" Lewis
Mayor of the City of Carlsbad .
2391c5 53
2391~
2391c5
APPENDIX A
CITY OF CARLSBAD
SELECT FINANCIAL AND STATISTICAL DATA
[TO BE PROVIDED BY JAMES F. ELLIOTT]
\
A-l
54
ASSESSMENT DISTRICT NO. 88-1 (ALGA ROAD) \?$ “i
0 c C”
, ASSESSMENT DI3TRICf BOUNDARY
I
.*
E!i
P&O Techologkt3 ’
401 WEstAs~~2sOO SAN OlW30, cAuK)(#A 92 10 1
Tdwhono: (d 19) 232-4406
REV. 7/l6/90
-PARK SITE
/
SCHOOL SITE
LEGEND: ’
-a m N ASSESSMENT DIS)IRICt BOUNOAAY
- EXISTIN ROAD
lllllllllllllllllulwllluuu PROPOSED PROJECT NOT TO SCALE
Appendix
DRAFT
August 1, 1990
Mr. Lloyd B. Hubbs, P.E. City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008-1989
Re: City of Carlsbad
Assessment District No. 88-l (Alga Road)
Dear Mr. Hubbs:
In accordance with your request and authorization, transmitted
herewith in this letter is the summary of conclusions of value of the parcels
for the above referenced district as detailed in the accompanying appraisal report.
On a date of value of August 1, 1990 the following values of the
project are found; these values are subject to following description, data Certification, and Assumptions and Limiting Conditions found in further detail in the report:
.
C-l
56
,-
TOTAL DISTRICT CURRENT "AS IS" VALUE (DISCOUNTED) AT THE "EXPECTED" LOT YIELD
TWO HUNDRED TEN MILLION DOLLARS ($210,000,000)
TOTAL DISTRICT CURRENT "AS IS" VALUE (DISCOUNTED) AT THE
"MINIMUM" LOT YIELD
ONE HUNDRED NINETY-ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($191,500,000)
In brief, the district will encompass the prospective development of Hillman Properties and related entities of the Aviara project. This project consisting of detached single family residences, multi-family residences, resort hotel, golf course, sports center, and restaurant is being developed on approximately 1,000 acres bordering the northern shore of Batiquitos Lagoon in the City of Carlsbad, County of San Diego, State of California. The district also encompassed four severed parcels created by ti;e new extension of Alga and
Poinsettia Roads.
This district will utilize 1915 Act Assessment Bonds to finance the
land acquisition and construction of the completion of Alga Road.
The bulk of the property affected by the financing district is in the Hillman Properties' Aviara site. The Aviara project is a residential and resort community covering approximately 1,000 acres on the north shore of the Batiquitos Lagoon. The master planned community will include a 492-room Four
Seasons resort hotel, Arnold Palmer-designed championship golf course and 24 residential neighborhoods. Over 60% of the site area will be devoted to active and passive open space. Each neighborhood will be separated from adjacent neighborhoods by an extensive open space system which will include hiking trails (6 miles) and a community park (24 acres). Also planned are a
restaurant and sports complex (45,000 sq.ft.1.
The Aviara Master Plan is approved by the City of Carlsbad for a
maximum of 2,836 residential units. However, because of environmental
restraints and the strength of the single family detached housing market, it
is anticipated that the authorized 2,836 units will be reduced to 2,002
dwelling units. This change results primarily from conversion of multi-family sites to less dense single family use.
c-2
57
2391c5
At present, the site is in various stages of development. The entire Aviara project is subject to an approved Master Plan. The sixteen planning areas in Phase I (approximately 540 acres) have recorded final maps
and are currently being developed. All Phase I planning areas have achieved
rough graded lot status as of the date of this report. Approximately $6,000,000 of improvements remain to be completed in Phase I, primarily collector roads and landscape. The four single family neighborhoods designated for production homes have been sold to merchant builders (the fifth will be retained by Hillman for a custom lot sales program). Five of the six multi-family sites have been sold. These sites require further processing by the merchant builders prior to actual development. This processing is currently under way with the City of Carlsbad. The sports center, golf
course, and hotel sites have been acquired by a partnership of Aviara Land
Associates, TSA Development and Four Seasons Hotels. The restaurant site has
been retained by Aviara Land Associates. The remaining planning area is for
the school. The site has been dedicated to the Carlsbad Unified School District and will be developed using the proceeds from an overlapping bond issue.
The Phase II planning areas have tentative maps submitted to the City and the Phase IIA and III planning areas are in the preliminary site design stage of development.
The property is appraised in its current state of development and approvals in the “As Is" condition. Because of the approved master plan (on the Aviara project), risk of future entitlements has been minimized. Areas of other than final mapped single family detached units have been considered both
at the expected final unit yield as well as under a “minimum yield scenario"
based on the strictest application of the City of Car&bad development standards. It should be noted that the approved Aviara Master Plan yields 2,836 units so that the "expected" 2,002 unit analysis and the "Minimum"
1,764 unit analysis are both conservative estimates. The reduction from the
units in the approved Master Plan to the "expected" yield results from changes
initiated by the developer to achieve a product mix more closely related to
the market demand and from the reasonable expectation of City induced
reductions, as based upon study of approved density of current Final Maps. The "minimum" lot count results from the most severe applications of lot standards.
c-3
58
The basis of value for the single family production lots in both
projects is $150,000 per lot and $80,000 per unit for the multi-family units
(Aviara only). The hotel site is valued at $675,000 per acre ($15.50/sq.ft.), the sports center site at $461,500 per acre ($10.60/sq.ft rounded) and the restaurant site at $650,000 per acre ($14.92/sq.ft.). The golf course has been valued primarily as open space at $10,000 per acre. There are three custom home lot areas which have been valued at $140,000 per unit (in planning
area 22) to $225,000 (in planning areas 13 and 28) based on lot size and view orientation. The rough graded lot valuation for the single family planning
areas is under the assumption of bulk sale to a merchant builder in groups of
50 to 100 lots.
It is the land, the finished lots, and eventually the finished homes
(and other improvements) as completed that will become the security for the
special tax, regardless of the timing of completion of the residential
building construction on the finished lot. The best measure of this security
value is the sale of such groups of lots, multi-family sites and other rough
graded lots to merchant builders as illustrated by the market &ta of comparable sales. This sale of rough graded lots to merchant builders for construction and resale, as indicated by the market data included in the appraisal report is the basis of the appraised value.
It is proper to observe that, while the value for these study - purposes is based upon a conservative view of bulk sale with builder bulk discount, the individual lot as a separate parcel would have a higher individual value in the market as a separate lot. Bulk sale value tends to indicate the lower limit of the value of the individual lot for security for the debt.
While the approved Master Plan minimizes the level of future entitlement risk, areas not final mapped will nonetheless have a greater level
of risk and entrepreneurial effort to achieve final mapped status. In
addition to the entitlement risk, areas with less progress in the planning
process are naturally further away in time from final mapped (and rough
graded) status. Events further away in time are more difficult to predict. Market conditions change over time both as the result of economic factors as well as changes in the political climate. Because of the increasing risk over
time, market participants demand greater profit potential for building sites
where the ability to pull building permits is further in the future. For this
reason, the discount rates used in appraising the current market value of the subject
c-4
59 2391c5
/-
property vary with the planning stage of the particular area in question.
The problem of discounting for future risk is complicated somewhat by the pending citywide Community Facilities District that is currently planned to finance certain citywide civic improvements. The Phase I areas which are all final mapped are not affected by this issue. However, Phase II, IIA, Phase III and the four remaining parcels may be impacted by the citywide district issue with traffic "level of service" thresholds at certain locations being the determining factor. The major issue affecting the unmapped
properties within the district is the redesign (and subsequent improvement) of
the Poinsettia Lane bridge over I-5. The citywide district would fund these
improvements as will as many others. If the citywide district is not formed,
another financing mechanism would have to be created prior to development in
these areas. This could have the form of a smaller Community Facilities District or a cost sharing arrangement among the developers affected by those facilities. Most observers believe that this issue will be resolved either by the citywide district or by a smaller district. Nevertheless, the issue does create some uncertainty as to the timing if final map approval for the unmapped areas within the district. The uncertainty is considered in the discount rates utilized in the value estimates for Phase II, IIA and III planning areas.
Final mapped areas are discounted (exclusive of inflation) at an _ annual rate of 10% (compounded monthly). Areas with tentative maps submitted to the City are discounted at an annual rate of 12% (compounded monthly). Areas that are still in the preliminary site design stage are discounted at an
annual rate of 14% (compounded monthly). All areas are discounted from the
point in time when it is anticipated that rough graded final mapped lots will
be available for sale to merchant builders for development. It is believed
that the discount rates reflect the perception in the market place of the
entrepreneurial return demanded by capital for these investments at varying
rates. It must be emphasized that this return is exclusive of expected inflation.
The unit values have been increased at 4% per year (monthly) as a capital growth factor over inflation to reflect the historic price increases
above inflation commonly found as neighborhoods are established and the
cumulative effect of advertising is felt. This increase is caused by several factors. Among these factors are the following: 1) as a neighborhood is built out community facilities such as schools, parks, greenbelts, etc are put in place; 2) construction activity and the associated truck traffic, noise and dust diminish as progress is made toward project completion; and 3) offsite improvements such as new roads to serve the area are completed. These factors are completely outside of the influence of the general rate of inflation or the increase of real estate prices in particular.
2391c5
c-5
60
/-
As the "remainder parcels" have no master plan or other significant
planning process toward development, they have been appraised as potential subdivision acreage. Each of the parcels have been recently appraised by this office for the condemnation of the right-of-way for Poinsettia Lane and
associated slope easements. The values utilized herein for these parcels are the "value of the remainder in the after condition" as calculated in these
recent appraisals (note: a portion of one of the remainders, the Tabata
property, previously appraised is not within the boundaries of the assessment
district; the value of the remainder utilized herein is only the value of the
portion within the district).
In recognition of these approvals and activities, as well as an increase in the demand with dwindling supply in the real estate market occasioned by the countywide trend toward growth controls, the parcels in their current condition of approvals and improvement, as of August, 1990 (discounted) are appraised at a $209,500,000 (rounded) in the "expected" analysis and $191,000,000 (rounded) in the "minimum" analysis.
TOTAL DISTRICT CURRENT "AS IS" VALUE (DISCOUNTED) AT THE
"EXPECTED" LOT YIELD
TWO HLINDRED NINE MILLION FIVE HUNDRED THOUSAND DOLLARS
($209,500,000)
.
C-6
/-
APPENDIX A
CITY OF CARLSBAD
SELECT FINANCIAL AND STATISTICAL DATA
[TO BE PROVIDED BY JAMES F. ELLIOTT]
A-l
2391c
,- --
APPENDIX B
ASSESSMENT DIAGRAM
B-l
2391c
Appendix
DRAFT
August 1, 1990
Mr. Lloyd B. Hubbs, P.E.
City of Carlsbad
1200 Carlsbad Village Drive
Carl&ad, CA 92008-1989
Re: City of Carlsbad Assessment District No. 88-l (Alga Road)
Dear Mr. Hubbs:
In accordance with your request and authorization, transmitted herewith in this letter is the summary of conclusions of value of the parcels
for the above referenced district as detailed in the accompanying appraisal
report.
On a date of value of August 1, 1990 the following values of the
project are found; these values are subject to following description, data
Certification, and Assumptions and Limiting Conditions found in further detail
in the report:
C-l
TOTAL DISTRICT CURRENT "AS IS" VALUE (DISCOUNTED) AT THE "EXPECTED" LOT YIELD
TWO HUNDRED TEN MILLION DOLLARS
($210,000,000)
TOTAL DISTRICT CURRENT "AS IS" VALUE (DISCOUNTED) AT THE
"MINIMUM" LOT YIELD
ONE HUNDRED NINETY-ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($191,500,000)
In brief, the district will encompass the prospective development of
Hillman Properties and related entities of the Aviara project. This project consisting of detached single family residences, multi-family residences, resort hotel, golf course, sports center, and restaurant is being developed on approximately 1,000 acres bordering the northern shore of Batiquitos Lagoon in the City of Carlsbad, County of San Diego, State of California. The district also encompassed four severed parcels created by the new extension of Alga and Poinsettia Roads.
This district will utilize 1915 Act Assessment Bonds to finance the land acquisition and construction of the completion of Alga Road.
The bulk of the property affected by the financing district is in the Hillman Properties' Aviara site. The Aviara project is a residential and resort community covering approximately 1,000 acres on the north shore of the
Batiquitos Lagoon. The master planned community will include a 492-room Four
Seasons resort hotel, Arnold Palmer-designed championship golf course and
24 residential neighborhoods. Over 60% of the site area will be devoted to
active and passive open space. Each neighborhood will be separated from
adjacent neighborhoods by an extensive open space system which will include
hiking trails (6 miles) and a community park (24 acres). Also planned are a
restaurant and sports complex (45,000 sq.ft.1.
The Aviara Master Plan is approved by the City of Carlsbad for a
maximum of 2,836 residential units. However, because of environmental
restraints and the strength of the single family detached housing market, it
is anticipated that the authorized 2,836 units will be reduced to 2,002
dwelling units. This change results primarily from conversion of,multi-family
sites to less dense single family use.
c-2
At present, the site is in various stages of development. The entire Aviara project is subject to an approved Master Plan. The sixteen planning areas in Phase I (approximately 540 acres) have recorded final maps and are currently being developed. All Phase I planning areas have achieved rough graded lot status as of the date of this report. Approximately $6,000,000 of improvements remain to be completed in Phase I, primarily collector roads and landscape. The four single family neighborhoods designated for production homes have been sold to merchant builders (the fifth will be retained by Hillman for a custom lot sales program). Five of the six multi-family sites have been sold. These sites require further processing by the merchant builders prior to actual development. This processing is currently under way with the City of Carlsbad. The sports center, golf
course, and hotel sites have been acquired by a partnership of Aviara Land
Associates, TSA Development and Four Seasons Hotels. The restaurant site has been retained by Aviara Land Associates. The remaining planning area is for
the school. The site has been dedicated to the Carlsbad Unified School District and will be developed using the proceeds from an overlapping bond
issue.
The Phase II planning areas have tentative maps submitted to the City and the Phase IIA and III planning areas are in the preliminary site
design stage of development.
The property is appraised in its current state of development and approvals in the "AS Is" condition. Because of the approved master plan (on the Aviara project), risk of future entitlements has been minimized. Areas of other than final mapped single family detached units have been considered both at the expected final unit yield as well as under a "minimum yield scenario" based on the strictest application of the City of Carlsbad development standards. It should be noted that the approved Aviara Master Plan yields 2,836 units so that the "expected" 2,002 unit analysis and the "Minimum" 1,764 unit analysis are both conservative estimates. The reduction from the units in the approved Master Plan to the "expected" yield results from changes initiated by the developer to achieve a product mix more closely related to the market demand and from the reasonable expectation of City induced
reductions, as based upon study of approved density of current Final Maps.
The "minimum" lot count results from the most severe applications of lot
standards.
.
c-3
The basis of value for the single family production lots in both
projects is $150,000 per lot and $80,000 per unit for the multi-family units
(Aviara only). The hotel site is valued at $675,000 per acre ($15.50/sq.ft.J,
the sports center site at $461,500 per acre ($10.60/sq.ft rounded) and the
restaurant site at $650,000 per acre ($14.92/sq.ft.). The golf course has been valued primarily as open space at $10,000 per acre. There are three custom home lot areas which have been valued at $140,000 per unit (in planning area 22) to $225,000 (in planning areas 13 and 28) based on lot size and view
orientation. The rough graded lot valuation for the single family planning
areas is under the assumption of bulk sale to a merchant builder in groups of
50 to 100 lots.
It is the land, the finished lots, and eventually the finished homes
(and other improvements) as completed that will become the security for the
special tax, regardless of the timing of completion of the residential
building construction on the finished lot. The best measure of this security
value is the sale of such groups of lots, multi-family sites and other rough
graded lots to merchant builders as illustrated by-the market data of comparable sales. This sale of rough graded lots 'co merchant builders for construction and resale, as indicated by the market data included in the appraisal report is the basis of the appraised value.
It is proper to observe that, while the value for these study .
purposes is based upon a conservative view of bulk sale with builder bulk
discount, the individual lot as a separate parcel would have a higher
individual value in the market as a separate lot. Bulk sale value tends to indicate the lower limit of the value of the individual lot for security for
the debt.
While the approved Master Plan minimizes the level of future
entitlement risk, areas not final mapped will nonetheless have a greater level
of risk and entrepreneurial effort to achieve final mapped status. In
addition to the entitlement risk, areas with less progress in the planning
process are naturally further away in time from final mapped (and rough
graded) status. Events further away in time are more difficult to predict. Market conditions change over time both as the result of economic factors as
well as changes in the political climate. Because of the increasing risk over
time, market participants demand greater profit potential for building sites
where the ability to pull building permits is further in the future. For this
reason, the discount rates used in appraising the current market value of the
subject
c-4
property vary with the,planning stage of the particular area in question.
The problem of discounting for future risk is complicated somewhat by the pending citywide Community Facilities District that is currently planned to finance certain citywide civic improvements. The Phase I areas which are all final mapped are not affected by this issue. However, Phase II, IIA, Phase III and the four remaining parcels may be impacted by the citywide district issue with traffic "level of service" thresholds at certain locations being the determining factor. The major issue affecting the unmapped properties within the district is the redesign (and subsequent improvement) of the Poinsettia Lane bridge over I-5. The citywide district would fund these improvements as will as many others. If the citywide district is not formed, another financing mechanism would have to be created prior to development in
these areas. This could have the form of a smaller Community Facilities
District or a cost sharing arrangement among the developers affected by those
facilities. Most observers believe that this issue will be resolved either by
the citywide district or by a smaller district. Nevertheless, the issue does
create some uncertainty as to the timing if final map approval for the
unmapped areas within the district. The uncertainty is considered in the
discount rates utilized in the value estimates for Phase II, IIA and III
planning areas.
Final mapped areas are discounted (exclusive of inflation) at an
annual rate of 10% (compounded monthly). Areas with tentative maps submitted
to the City are discounted at an annual rate of 12% (compounded monthly). Areas that are still in the preliminary site design stage are discounted at an
annual rate of 14% (compounded monthly). All areas are discounted from the
point in time when it is anticipated that rough graded final mapped lots will
be available for sale to merchant builders for development. It is believed that the discount rates reflect the perception in the market place of the entrepreneurial return demanded by capital for these investments at varying
rates. It must be emphasized that this return is exclusive of expected inflation.
The unit values have been increased at 4% per year (monthly) as a
capital growth factor over inflation to reflect the historic price increases
above inflation commonly found as neighborhoods are established and the
cumulative effect of advertising is felt. This increase is caused by several
factors. Among these factors are the following: 1) as a neighborhood is
built out community facilities such as schools, parks, greenbelts, etc are put
in place; 2) construction activity and the associated truck traffic, noise and
dust diminish as progress is made toward project completion; and 3) offsite
improvements such as new roads to serve the area are completed. These factors
are completely outside of the influence of the general rate of inflation or
the increase of real estate prices in particular.
‘..
c-5
As the "remainder parcels" have no master plan or other significant planning process toward development, they have been appraised as potential
subdivision acreage. Each of the parcels have been recently appraised by this office for the condemnation of the right-of-way for Poinsettia Lane and
associated slope easements. The values utilized herein for these parcels are the "value of the remainder in the after condition" as calculated in these
recent appraisals (note: a portion of one of the remainders, the Tabata property, previously appraised is not within the boundaries of the assessment district; the value of the remainder utilized herein is only the value of the
portion within the district).
In recognition of these approvals and activities, as well as an increase in the demand with dwindling supply in the real estate market
occasioned by the countywide trend toward growth controls, the parcels in
their current condition of approvals and improvement, as of August, 1990
(discounted) are appraised at a $209,500,000 (rounded) in the "expected" analysis and $191,000,000 (rounded) in the "minimum" analysis.
TOTAL DISTRICT CURREXT "AS IS" VALUE (DISCOUNTED) AT THE "EXPECTED" LOT YIELD
TWO HUNDRED NINE MILLION FIVE HUNDRED THOUSAND DOLLARS ($209,500,000)
C-6
. c
,. -\
TOTAL DISTRICT CURRENT "AS IS" VALUE (DISCOUNTED) AT THE "MINIMUM" LOT YIELD
ONE HUNDRED NINETY-ONE MILLION DOLLARS ($191,000,000)
This letter of transmittal is not the appraisal, it merely
summarizes the conclusions found in the report.
These values are subject to the Assumptions and Limiting Conditions
and the further discussion as included in the appraisal.
Thank you for the opportunity to be of service to you.
Sincerely,
Thomas L. Roberts, MA1
c-7