HomeMy WebLinkAbout2004-05-04; City Council; 17623; AD 2003-01 benefit area no. 1 finance doc4- @ CITY OF CARLSBAD -AGENDA BILL
I. 1
AB# 17,623
MTG. 05/04/04
DEPT. FIN
TITLE:
ASSESSMENT DISTRICT NO. 2003-01
(COLLEGE BOULEVARD AND CANNON ROAD
FINANCING DOCUMENT APPROVAL
EAST) BENEFIT AREA NO. 1 (CALAVERA HILLS II) ClTy MGRq
RECOMMENDED ACTION:
Prdopt Resolution No. 2004-152 authorizing and providing for the issuance of limited obligation
improvement bonds for Benefit Area No. 1 of Assessment District No. 2003-01, approving the form of
the following documents and authorizing certain actions:
1. Bond Indenture by and between the City of Carlsbad and BNY Western Trust Company as
paying agent;
2. Preliminary Official Statement;
3. Bond Purchase Agreement between Stone & Youngberg as the underwriter and the City of
Carlsbad;
4. Continuing Disclosure Agreement.
ITEM EXPLANATION:
On July 15, 2003, the City Council adopted a Resolution stating its intent to form an assessment district to fund certain public improvements necessary to serve the Calavera Hills II and Robertson Ranch East developments. Then, on September 16, 2003, the City Council conducted the required Public Hearing, tabulated the results of the assessment ballots, and adopted a resolution forming the
assessment district.
The boundaries of the district generally consist of the area of the Calavera Hills II and the Robertson Ranch East developments as shown on the attached map (Exhibit 1). The improvements to be paid by the assessment district include:
0
0
0
0
4 lanes of College Boulevard from Carlsbad Village Drive to Cannon Road, including storm drain,
sewer, water, recycled water and dry utilities;
4 lanes of Cannon Road from El Camino Real to College Boulevard, including sewer, water, and
dry utilities;
Storm drain detention basin BJB and storm drain line BJA (less any improvements be reimbursed
to the Developer from Master Plan Local Drainage Area Fees collected by the City); and
Related costs for environmental, acquisition and creation of mitigation lands, engineering and
inspection.
The total estimated costs for the improvements as shown in the engineer’s report are $21.8 million.
The assessment district tax-exempt bonds will be sold in two series, Benefit Area No. 1 (the Calavera
Hills II development) and Benefit Area No. 2 (Robertson Ranch East development), as these areas
are developing at different times. The total amount of bonds for both of the benefit areas will not
exceed $23.9 million. This amount includes the cost of acquiring the improvements, formation costs,
debt issuance costs, and the establishment of a debt service reserve fund. The City is not
responsible for the repayment of the bonds, when issued. The bonds will be secured by the property
within the District and repaid through the levy of assessments on the property.
Page 2 of Agenda Bill # 17,623
The first series of bonds will include all assessments in Benefit Area No. 1, with the total estimated
assessments totaling $12.83 million. The second series of bonds, which will not be sold until the
Robertson Ranch East property develops, will be approximately $11.0 million and will cover the
remaining cost of the improvements. Although, the bonds will be issued in series, the majority of the
road improvements will be completed this year by the developer. The only remaining work will be the
addition of the outside lanes on Cannon Road and related improvements. Reimbursement to the
developer for improvement costs in excess of the amount of the bonds authorized in this agenda bill
will be delayed until the second series is issued.
Thus, this agenda item contains the actions necessary to allow for the issuance of the first series of
bonds only, in an amount not to exceed $12.83 million. Due to the restrictions of Council Policy 33 and
previous Council guidance, there are several provisions of this District and bond financing which are
unique. These provisions are included in the attached documents and adoption of the resolutions will
indicate Council’s acceptance of these provisions. These terms have been reviewed and approved by
the underwriter, financial advisor and bond counsel.
Overall Value to Lien:
According to Council Policy 33, the project property value to lien ratio should be 4:l after the
installation of the improvements to be financed. A project may be approved with a ratio between 4:l
and a minimum of 3:l if both the underwriter andlor the financial advisor recommend the ratio, and if
the City Council finds the reduced ratio to be within parameters acceptable to them. In addition, there
should be no overlapping bond assessments or tax liens unless the combined assessments are within
the property value ratios noted above and approved by the City Council, upon the advice of bond
counsel.
The overall value to lien based on the most recent preliminary bond sizing is approximately 8.93:l for
Benefit Area No. 1 of the Assessment District.
Tax Burden Restriction:
A further restriction on the size of the bond issue is that under council policy, the total tax burden for
any single family home in the District should not be expected to exceed 1.8% of the estimated
purchase price. At this time, it is anticipated that the total amount of tax burden will not exceed 1.7% of
the estimated purchase price of a single-family home.
Sale of the Bonds
The attached resolution authorizes the sale of the bonds to Stone & Youngberg on a negotiated basis.
Council previously authorized Stone & Youngberg to act as the underwriter on this bond issue. The
resolution sets the total amount of the underwriter’s discount at an amount not to exceed 2.0% of the
bond issue. It also states that the interest rate on the bonds cannot exceed 7% per annum. The
actual amount of the discount and the interest rate will be set when the bonds are priced. The City’s
financial advisor, Fieldman, Rolapp & Associates, will participate in the negotiations to ensure that the
City is receiving a fair price for the bonds.
Reauested Actions
Staff is requesting that Council adopt the attached resolution which will:
1. Authorize issuance of bonds not to exceed $1 2,830,000 for Benefit Area No. 1.
2. Approve the form of the documents needed to cause the bonds to be issued, sold and delivered
and authorize certain officials to execute the documents with such additions and changes as
advisable subject to review by the City Attorney and Bond Counsel. These documents are on file
with the City Clerk and include the following:
Page 3 of Agenda Bill # 17,623
0 Preliminary Official Statement
0 Bond Indenture
0 Continuing Disclosure Agreements
0 Bond Purchase Agreement
FISCAL IMPACT:
Benefit Area No. 1 of the College Boulevard and Cannon Road Assessment District will fund improvements and related costs totaling approximately $1 2.83 million. This estimate includes debt issuance costs and the establishment of a debt service reserve fund. The City will receive reimbursement for certain administrative costs related to the formation of the assessment district as well as to cover ongoing costs. The City is not responsible for the funding of any of the improvements included with the District. The calendar calls for the bonds in Benefit Area No. 1 to be sold in June 2004.
The assessment lien amounts on individual single-family homeowners are estimated to range from
$16,503 to $28,151. The annual assessment amounts are estimated to range from $1,200 to $2,046.
EXHIBITS:
1. Location Map
2. Resolution No. 2004-152 authorizing and providing for the issuance of limited obligation
improvement bonds for benefit area No. I of assessment district No. 2003-01(College Blvd.
And Cannon Road East), approving the form of bond indenture, preliminary official statement,
bond purchase agreement, continuing disclosure agreement and authorizing certain actions in
connection therewith.
3. Preliminary Official Statement (On file in the City Clerk’s Office)
4. Bond Indenture (On file in the City Clerk’s Office)
5. Continuing Disclosure Agreements (On file in the City Clerk’s Office)
6. Bond Purchase Agreement (On file in the City Clerk’s Office)
DEPARTMENT CONTACT: Kevin B ranca (760) 602-2430, kbranaci .cads bad .ca. us
3
LOCAT-ION MAP
NO SCALE
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
RESOLUTION NO. 2004-152
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, AUTHORIZING AND
PROVIDING FOR THE ISSUANCE OF LIMITED
OBLIGATION IMPROVEMENT BONDS FOR BENEFIT
AREA NO. 1 OF ASSESSMENT DISTRICT NO. 2003-01
(COLLEGE BOULEVARD AND CANNON ROAD EAST),
APPROVING THE FORM OF BOND INDENTURE,
PRELIMINARY OFFICIAL STATEMENT, BOND
PURCHASE AGREEMENT, CONTINUING DISCLOSURE
AGREEMENT AND AUTHORIZING CERTAIN ACTIONS
IN CONNECTION THEREWITH.
WHEREAS, the City Council of the City of Carlsbad, California (this “City Council”) has
conducted proceedings to form and did form an assessment district for the purpose of financing
a portion of the cost of the acquisition or construction of certain public improvements pursuant to
the terms and provisions of the “Municipal Improvement Act of 1913”, being Division 12 of the
Streets and Highways Code of the State of California, such assessment district known and
designated as ASSESSMENT DISTRICT NO. 2003-01 (College Boulevard and Cannon Road
East) (the “Assessment District”); and,
WHEREAS, this City Council has previously declared its intention to issue bonds to
finance that portion of the cost of the acquisition or construction of such public improvements
representing the special benefit to the properties within the Assessment District from such
improvements, such bonds to issue pursuant to the terms and provisions of the “Improvement
Bond Act of 191 5, being Division 10 of the Streets and Highways Code of the State of California
(the “Bond Act”); and,
WHEREAS, at this time this City Council desires to set forth the general terms and
conditions relating to the authorization, issuance and administration of such bonds to be secured
by the assessments levied within Benefit Area No. 1 of the Assessment District; and,
WHEREAS, there have been presented to and considered and ready for approval by this
City Council the forms of the following documents:
5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
A.
B.
C.
D.
Bond Indenture by and between the City of Carlsbad (the “City”) and BNY Western
Trust Company as Paying Agent (the “Paying Agent”) setting forth the terms and
conditions relating to the issuance and sale of bonds (the “Bond Indenture”);
Bond Purchase Agreement authorizing the sale of bonds to Stone & Youngberg LLC,
the designated undewriter (the “Bond Purchase Agreement”);
Preliminary Official Statement containing information including but not limited to the
Assessment District and Benefit Area No. 1 thereto and the type of bonds, including
terms and conditions thereof (the “Preliminary Official Statement”); and
Continuing Disclosure Agreement pursuant to which the City will be obligated to
provide both annual disclosure and additional disclosure upon the occurrence of
certain events relating to the Assessment District and Benefit Area No. 1 thereto and
the bonds (the “Continuing Disclosure Agreement”); and
WHEREAS, this City Council, with the aid of City staff, has reviewed and considered the
forms of the Bond Indenture, the Bond Purchase Agreement, Preliminary Official Statement and
the Continuing Disclosure Agreement and finds the forms of these documents suitable for
approval, subject to the conditions set forth in this resolution; and
WHEREAS, all conditions, things and acts required to exist, to have happened and to
have been performed precedent to and in the issuance of the bonds and the levy of the
assessments as contemplated by this resolution and the documents referred to herein exist,
have happened and have been performed or have been ordered to have been performed in due
time, form and manner as required by the laws of the State of California, including the Bond Act
and the applicable policies and regulations of the City.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Carlsbad,
California, as follows:
1. That the above recitals are true and correct.
2. BOND AUTHORIZATION. Pursuant to the Bond Act, this resolution and the Bond
Indenture, limited obligation improvement bonds of the City for the assessment district
designated as “City of Carlsbad Assessment District No. 2003-01 (College Boulevard and
Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement Bonds” (the “Bonds”) in
b Page 2 of Resolution No. 2004-152
I
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
an aggregate principal amount not to exceed $1 2,830,000 are hereby authorized to be issued.
The final principal amount of the Bonds shall be equal to the final aggregate amount of the
unpaid assessments within Benefit Area No. 1 of the Assessment District which amount may be
reduced by subsequent action of this City Council from that amount set forth in the Final
Engineer’s Report dated July 31, 2003 to reflect savings in the costs of acquisition or
construction of the authorized improvements andlor in the costs of issuing the Bonds. The date,
manner of payment, interest rate or rates, interest payment dates, denominations, form,
registration privileges, manner of execution, place of payment, terms of redemption and other
terms, covenants and conditions of the Bonds shall be as provided in the Bond Indenture as
finally executed.
3. AUTHORIZATION AND CONDITIONS. The City Manager, the Finance Director and
such other officials of the City as may be designated in writing by the City Manager or the
Finance Director (each, an “Authorized Officer”) are, and each of them individually is, hereby
authorized and directed for and on behalf of the City to execute and deliver the various
documents and instruments described in this resolution in substantially the form approved
hereby with such changes, insertions and omissions as the Authorized Officer executing the
same may deem necessary or advisable; provided, however, that no additions or changes shall
authorize an aggregate principal amount of Bonds in excess of $12,830,000, an annual interest
rate on the Bonds in excess of seven percent (7.00%) per year and a purchase price for the
Bonds not less than ninety eight percent (98.00%) of the par amount of the Bonds. The approval
of such additions or changes shall be conclusively evidenced by the execution and delivery of
such documents or instruments by the Authorized Officer, following consultation with and review
by the City Attorney and Best Best & Krieger LLP, the City’s bond counsel for the Bonds.
4. BOND INDENTURE. The proposed form of Bond Indenture by and between the City
and the Paying Agent, with respect to the Bonds as presented to this City Council and on file
with the City Clerk is hereby approved.
5. SALE OF BONDS; BOND PURCHASE AGREEMENT. This City Council hereby
authorizes and approves the sale of the Bonds by negotiation to Stone & Youngberg LLC (the
Page 3 of Resolution No. 2004-152 7’
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
“Underwriter”). The form of the Bond Purchase Agreement presented to this City Council and on
file with the City Clerk is hereby approved.
6. OFFICIAL STATEMENT. The form of Preliminary Official Statement presented to this
City Council and on file with the City Clerk is hereby approved.
The Authorized Officers, acting for and on behalf of the City, are, and each of them
individually is, hereby authorized and directed to approve such changes, insertions and
omissions therein as are necessary to enable such Authorized Officer to certify on behalf of the
City that the approved Preliminary Official Statement is deemed final as of its date except for the
omission of certain information as permitted by Section 240.15~2-12(b)(l) of Title 17 of the Code
of Federal Regulations.
The Authorized Officers, acting for and on behalf of the City, are, and each of them
individually is, further authorized and directed to cause the City to bring the Preliminary Official
Statement into the form of a final official statement (the “Final Official Statement”) and to execute
a statement that the facts contained in the Final Official Statement, and any supplement or
amendment thereto (which shall be deemed an original part thereof for the purpose of such
statement) were, at the time of sale of the Bonds, true and correct in all material respects and
that the Final Official Statement did not, on the date of sale of the Bonds, and does not, as of the
date of delivery of the Bonds, contain any untrue statement of a material fact with respect to the
City, the Assessment District and Benefit Area No. 1 thereof and/or the Bonds or omit to state
material facts with respect to the City, the Assessment District and Benefit Area No. 1 thereof
and/or the Bonds required be stated where necessary to make any statement made therein not
misleading in the light of the circumstances under which it was made.
The Underwriter is hereby authorized to distribute copies of the Preliminary Official
Statement to persons who may be interested in the purchase of the Bonds and is directed to
deliver copies of the Final Official Statement to all actual purchasers of the Bonds from the
Underwriter acting in such capacity.
7. CONTINUING DISCLOSURE AGREEMENT. The form of the Continuing Disclosure
Agreement presented to this City Council and on file with the City Clerk is hereby approved.
Page 4 of Resolution No. 2004-152
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
8. BONDS PREPARED AND DELIVERED. Upon the execution of the Bond Purchase
Agreement, the Bonds shall be prepared, authenticated and delivered, all in accordance with the
applicable terms of the Bond Act and the Bond Indenture, and any Authorized Officer and other
responsible City officials are hereby authorized and directed to take such actions as are required
under the Bond Purchase Agreement and the Bond Indenture to complete all actions required to
evidence the delivery of the Bonds upon the receipt of the purchase price thereof from the
Underwriter.
9. ANNUAL ASSESSMENT INSTALLMENTS. A copy of the resolution confirming the
assessments levied within Benefit Area No. 1, which assessments shall constitute the security
for the Bonds, shall be delivered to the Finance Director and the Finance Director shall keep or
cause to be kept the record showing the several installments of principal and interest on the
assessments levied within Benefit Area No. 1 which are to be collected each year during the
term of the Bonds. An annual portion of each such assessment, together with annual interest on
said assessment, shall be payable in the same manner and at the same time and in the same
installment as the general property taxes of the County of San Diego and shall be payable and
become delinquent at the same time and in the same proportionate amount. Each year the
annual installments shall be submitted to the San Diego County Auditor for purposes of
collection.
IO. SUPERIOR COURT FORECLOSURE. This City Council does hereby specifically
covenant for the benefit of the holders of the Bonds to commence and prosecute foreclosure
actions regarding delinquent installments of the assessments levied within Benefit Area No. 1 in
the manner, within the time limits and pursuant to the terms and conditions as shall be set forth
in the Bond Indenture.
11. ACTIONS. All actions heretofore taken by the officers and agents of the City with
respect to the establishment of the Assessment District and the sale and issuance of the Bonds
are hereby approved, confirmed and ratified, and the proper officers of the City are hereby
authorized and directed to do any and all things and take any and all actions and execute any
and all certificates, agreements, contracts, and other documents, which they, or any of them,
may deem necessary or advisable in order to consummate the lawful issuance and delivery of
q Page 5 of Resolution KO. 2004-152
1
2
3
4
5
6
7
8
9
IO
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
the Bonds in accordance with the Bond Act, this Resolution, the Bond Indenture, the Bond
Purchase Agreement , the Continuing Disclosure Agreement, and any certificate, agreement,
contract, and other document described in the documents herein approved.
12. EFFECTIVE DATE. This resolution shall take effect upon its adoption.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad City
Council held on the 4th day of May , 2004 by the following vote, to wit:
AYES: Council Members Lewis,
NOES: None
ABSENT: None
ATTEST: .
r !i
E M. OOD, City Clerk' -7
Page 6 of Resolution No. 2004-152
(SEAL)
Exhibit 3
Draft of 4/6/04
PRELIMINARY 0 FFl Cl AL STATEMENT DATED ,2004
NEW ISSUE - FULL BOOK-ENTRY NOT RATED
In the opinion of Best Best & Krieger LLP, San Diego, California, Bond Counsel, under
existing statutes, regulations, rulings and judicial decisions, and assuming certain
representations and compliance with certain covenants and requirements described herein,
interest on the Bonds is excluded from gross income for federal income tax purposes and is not
an item of tax preference for purposes of calculating the federal alternative minimum tax
imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on
the Bonds is exempt from State of California personal income tax. See “TAX MATTERS,’
herein.
STATE OF CALIFORNIA COUNTY OF SAN DIEGO
$ *
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. I (CALAVERA HILLS II)
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 2003-01
Dated: Date of Delivery Due: September 2, as shown on inside cover
The Bonds described herein (the “Bonds”) are special, limited obligation bonds being
issued by the City of Carlsbad (the “City”) (i) to finance the acquisition and construction of
certain public improvements specially benefiting properties located within the boundaries of
Benefit Area No. 1 (Calavera Hills II) (“Benefit Area No. I”) of the City’s Assessment District No.
2003-01 (College Boulevard and Cannon Road East) (the “Assessment District”), (ii) to fund a
Reserve Fund for the Bonds, (iii) to fund capitalized interest on the Bonds until September 2,
2004, and (iv) to pay the costs of issuing the Bonds. The Assessment District was formed, and
the acquisition and construction 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 “1913 Act”). The Bonds are issued pursuant to the provisions of the
Improvement Bond Act of 1915 (Division 10 of the California Streets and Highways Code) (the
“1915 Act”), and a Bond Indenture, dated as of May I, 2004 (the “Indenture”), between the City
and BNY Western Trust Company, Los Angeles, California, as Paying Agent for the Bonds (the
“Paying Agent”).
The Bonds are being issued as fully registered bonds, registered in the name of Cede &
Co. as nominee of The Depository Trust Company, New York, New York (“DTC”), and will be
available to the Beneficial Owners in denominations of $5,000 or any integral multiple thereof,
under the book-entry system maintained by DTC. See “THE BONDS - Book-Entry System.
”Principal, interest at maturity or upon earlier redemption, as applicable, and redemption
premiums, if any, with respect to the Bonds will be payable upon presentation and surrender
thereof at the corporate trust office of the Paying Agent. Interest on the Bonds will be payable
* Preliminary, subject to change.
Carlsbad Cannon Road POS (1 1).DOC
from their date of delivery semiannually on September 2 and March 2, commencing
September 2, 2004 (each an “Interest Payment Date”) of each year.
The Bonds are subject to optional and mandatory redemption as more fully described
herein. Transfers of property ownership and other similar circumstances could result in
prepayment of all or part of the assessments, which would result in redemption of all or a
portion of the Bonds prior to their stated maturities.
Unpaid Assessments constitute fixed liens on the lots and parcels assessed within the
Assessment District and do not constitute a personal indebtedness of the respective owners of
such lots and parcels. Accordingly, in the event of delinquency, proceedings may be conducted
only against the real property securing the delinquent Assessment. Thus, the value of the real
property within the Assessment District which has been allocated a portion of the Assessment
is a critical factor in determining the investment quality of the Bonds. A summary of values of
property within the Assessment District is set forth herein. See “OWNERSHIP AND VALUE OF
PROPERTY WITHIN BENEFIT AREA NO. 1 .”
To provide funds for payment of the Bonds and the interest thereon as a result of any
delinquent assessment installments, the City will establish a Reserve Fund which is required to
be maintained in the amount of the “Reserve Requirement” as described herein. The City has
covenanted, under the circumstances described herein, to initiate judicial foreclosure in the
event of a delinquency in the payment of assessments. See “SECURITY FOR 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. THUS, IF, DURING THE PERIOD OF
DELINQUENCY, THERE ARE INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR
IN PAYMENTS TO THE OWNERS OF THE BONDS. IN ACCORDANCE WITH 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.
This cover page contains certain information for quick reference only. It is not a
Investors must read the entire Official Statement to obtain summary of the issue.
information essential to the making of an informed investment decision.
THE BONDS ARE NOT SECURED BY THE GENERAL TAXING POWER OF THE
CITY, THE COUNTY OF SAN DIEGO (THE “COUNTY”), OR THE STATE OF CALIFORNIA
(THE ”STATE”) OR ANY POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE
CITY, THE COUNTY, NOR THE STATE NOR ANY POLITICAL SUBDIVISION OF THE STATE
HAS PLEDGED ITS FULL FAITH AND CREDIT FOR THE PAYMENT OF THE BONDS.
The Bonds are being offered when, as, and if issued by the City and received by the
Underwriter, subject to prior sale and to the approval of validity by Best Best & Krieger LLP,
San Diego, California, Bond Counsel, and the approval of certain matters for the City by the
City Attorney and by Nossaman, Guthner, Knox & Elliott, LLP, Irvine, California, Disclosure
Counsel. It is expected that the Bonds in book-entry form will be available for delivery in New
York, New York, on , 2004.
STONE & YOUNGBERG LLC
Dated:
MATURITY SCHEDULE* $ Serial Bonds
Maturity Principal Interest Price or
{September 2) Amount - Rate - Yield CUSlP@
2005
2006
2007
2008
2009
2010
201 1
2012
2013
2014
201 5
$ % Term Bonds Due September 2, (CUSIP: ); Price or Yield: - %
$ % Term Bonds Due September 2, (CUSIP: ); Price or Yield: %
* Preliminary, subject to change.
@ Copyright 2002, American Bankers Association. CUSIP data herein is provided by Standard
& Poor’s, CUSIP Services Bureau, a division of The McGraw-Hill Companies, Inc.
THE CITY OF CARLSBAD
ELECTED OFFICIALS
Claude A. “Bud” Lewis, Mayor
Ramona Finnila, Mayor Pro Tem
Ann J. Kulchin, Councilmember
Matt Hall, Councilmember
Mark Packard, Councilmember
Lorraine M. Wood, City Clerk
James M. Stanton, City Treasurer
CITY OFFICIALS
Raymond R. Patchett, City Manager
Frank Mannen, Assistant City Manager
Ronald Ball, Esq., City Afforney
James F. Elliott, Administrative Services Director
Lloyd Hubbs, Public Works Director
Lisa Hilda brand, Finance Director
SPECIAL SERVICES
Bond Counsel
Best Best & Krieger LLP
San Diego, California
Paying Agent, Registrar, and Transfer Agent
BNY Western Trust Company
Los Angeles, California
Appraiser
Bruce W. Hull & Associates
Ventura, California
Financial Advisor
Fieldman Rolapp & Associates
Irvine, California
Assessment Engineer
Galen N. Peterson
San Diego, California
Absorption Consultant
Empire Economics
Capistrano Beach, California
Disclosure Counsel
Nossaman, Guthner, Knox & Elliott, LLP
Irvine, California
No dealer, broker, salesperson or other person has been authorized by the City or the
Underwriter to give any information or to make any representations other than those contained
in this Official Statement, and, if given or made, such other information or representations must
not be relied upon as having been authorized by any of the foregoing. This Official Statement
does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale
of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make
such offer, solicitation or sale.
The information set forth herein has been obtained from the City and other sources
which are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and it
is not to be construed as a representation by the City or the Underwriter. The Underwriter has
reviewed the information in this Official Statement in accordance with, and as part of, its
responsibilities under federal securities laws, as applied to the facts and circumstances of this
transaction, but the Underwriter does not guarantee the accuracy or completeness of such
information. The information and expressions of opinion herein are subject to change without
notice, and neither the delivery of this Official Statement nor any sale made hereunder will,
under any circumstances, create any implication that there has been no change in the affairs of
the City or the Assessment District since the date hereof.
This Official Statement is submitted in connection with the sale of the Bonds referred to
herein and may not be reproduced or used, in whole or in part, for any other purpose.
All information material to the making of an informed investment decision with respect to
the Bonds is contained in this Official Statement. While the City maintains an internet website
for various purposes, none of the information in its website is incorporated by reference into this
Official Statement.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
TABLE OF CONTENTS
Paqe
INTRODUCTION ........................................................................................................................ 1
The City ................................................................................................................................ 1
The Assessment District ....................................................................................................... 1
The Developer ...................................................................................................................... 2
The Bonds ............................................................................................................................ 2
Other Information .................................................................................................................. 3
THE BONDS ............................................................................................................................... 4
Purpose of the Bonds ........................................................................................................... 4
Authority For Issuance .......................................................................................................... 4
General ................................................................................................................................. 4
Redemption .......................................................................................................................... 5
Refunding Bonds .................................................................................................................. 7
Book-Entry System ............................................................................................................... 7
ESTIMATED SOURCES AND USES OF FUNDS ....................................................................... 8
DEBT SERVICE SCHEDULE ..................................................................................................... 9
SECURITY FOR THE BONDS ................................................................................................... 9
Limited Obligation ................................................................................................................. 9
Assessments ...................................................................................................................... 10
Limited Obligation Upon Delinquency ................................................................................. 10
Establishment of Special Funds .......................................................................................... 11
Covenant to Commence Superior Court Foreclosure .......................................................... 12
No Obligation of the City to Advance Funds ........................................................................ 14
Priority of Lien ..................................................................................................................... 14
THE IMPROVEMENT PROJECT .............................................................................................. 14
The Improvements .............................................................................................................. 14
Cost of the Improvements ................................................................................................... 15
Environmental Compliance ................................................................................................. 17
THE ASSESSMENT DISTRICT ................................................................................................ 19
The City and the Assessment District ................................................................................. 19
Allocation of Assessments .................................................................................................. j9
Prepayments ....................................................................................................................... 19
Maps ................................................................................................................................... 20
Availability of Public Utilities ................................................................................................ 20
Description of the Property .................................................................................................. 20
Overlapping Debt ................................................................................................................ 20
Status of Development Within Assessment District ............................................................. 23
OWNERSHIP AND VALUE OF PROPERTY WITHIN BENEFIT AREA NO . 1 .......................... 25
The Developers ................................................................................................................... 25
Plan of Development ........................................................................................................... 29
Developer Representations ................................................................................................. 31
Market Absorption Study ..................................................................................................... 31
Appraised Value of Property Within Benefit Area No . 1 ...................................................... 31
SPECIAL RISK FACTORS ....................................................................................................... 35
General ............................................................................................................................... 35
Limited Obligation of the City Upon Delinquency ................................................................ 36
Ownership of Property Within Benefit Area No . 1 ............................................................... 25
-1-
Bankruptcy and Foreclosure ............................................................................................... 36
Concentration of Property Ownership ................................................................................. 36
Failure to Develop Land ...................................................................................................... 37
Future Land Use Regulations and Growth Control .............................................................. 37
Land Development Costs .................................................................................................... 38
Unavailability of City Funds ................................................................................................. 38
Factors Which May Affect Land Development and Property Value ..................................... 39
Land Value .......................................................................................................................... 39
Endangered Species ........................................................................................................... 40
Earthquakes and Natural Disasters ..................................................................................... 40
Hazardous Substances ....................................................................................................... 41
Future Overlapping Indebtedness ....................................................................................... 42
No Acceleration Provision ................................................................................................... 43
Ballot Initiatives ................................................................................................................... 43
Proposition 21 8 ................................................................................................................... 43
Enforceability of Remedies ................................................................................................. 43
Loss of Tax Exemption ........................................................................................................ 44
Absence of Market for the Bonds; No Rating ...................................................................... 44
CONTINUING DISCLOSURE ................................................................................................... 44
ABSENCE OF MATERIAL LITIGATION ................................................................................... 45
TAX MATTERS ......................................................................................................................... 46
General ................................................................................................................................ 46
APPROVAL OF LEGALITY ...................................................................................................... 46
NO RATING .............................................................................................................................. 47
UNDERWRITING ..................................................................................................................... 47
MISCELLANEOUS ................................................................................................................... 47
APPENDIX A . EXCERPTS FROM ENGINEER’S REPORT ................................................ A-1
APPENDIX B . SUMMARY OF THE APPRAISAL ................................................................ B-I
APPENDIX C -MARKET ABSORPTION REPORT ............................................................... C-I
APPENDIX D . SUMMARY OF THE INDENTURE ............................................................... D-I
APPENDIX E . GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION .................. E-I
APPENDIX F . FORM OF BOND COUNSEL OPINION ......................................................... F-I
APPENDIX G . FORM OF CONTINUING DISCLOSURE AGREEMENT .............................. G-I
APPENDIX H- BOOK-ENTRY SYSTEM ............................................................................... H-I
-11-
Draft of 4/6/04
LOCATION MAP
Draft of 4/6/04
OFFICIAL STATEMENT
A *
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. 1 (CALAVERAS HILL II)
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 2003-01
INTRODUCTION
This Official Statement sets forth certain information concerning the issuance and sale
by the City of Carlsbad, California (the “City”) of $ * in principal amount of its
Assessment District No. 2003-01 (College Boulevard and Cannon Road East) Benefit Area No.
1 (Calavera Hills II) Limited Obligation Improvement Bonds (the “Bonds”). The Bonds are
issued pursuant to the Improvement Bond Act of 1915, being Division 10 of the California
Streets and Highways Code (the “1915 Act”), and a Bond Indenture, dated as of May 1, 2004
(the “Indenture”), between the City and BNY Western Trust Company, Los Angeles, California,
as Paying Agent for the Bonds (the “Paying Agent”).
The City
The City was incorporated in 1952, and currently serves an area of approximately 42
square miles with an estimated 2004 population of 90,300. The City is located on the Pacific
Ocean in northern San Diego County (the “County”), approximately 35 miles north of the City of
San Diego. See “APPENDIX E - GENERAL ECONOMIC AND DEMOGRAPHIC
INFORMATION”.
The Assessment District
The Assessment District No. 2003-01 (College Boulevard and Cannon Road East) (the
“Assessment District”) was formed by the City in accordance with the Municipal Improvement
Act of 1913, being Division 12 of the California Streets and Highways Code (the “1913 Act”).
The Assessment District is located within the boundaries of the City, and includes two benefit
areas. Benefit Area No. 1 includes the Calavera Hills II development, consisting of 9 separate
developments, or “Villages,” with a total of 689 proposed residential units, 2 community
facilities, and several recreational lots to be owned by related homeowner associations. Benefit
Area No. 2 includes the Robertson Ranch East development, currently owned by Calavera Hills
II LLC (“Calavera”), consisting of approximately 500 proposed residential units, community
recreation and several homeowners’ association recreation lots. Assessments levied in
Benefit Area No. 2, when and if levied, are not security for the Bonds. For purposes of this
Official Statement, all references to the Assessment District will mean only those properties
located within Benefit Area No. 1 of the Assessment District.
* Preliminary, subject to change.
-1 -
The Assessment District, as shown in the Engineer’s Report, was originally comprised of
nine assessment numbers corresponding to the original parcels, of which seven are currently
subject to the levy of unpaid assessments. Subsequent to the confirmation of assessments,
the Developers have recorded final maps and the original nine assessment numbers have been
subdivided into 624 separate parcels, including sites for 583 single-family homes. An amount
equal to the assessments which would have been levied on two of the original assessment
numbers (numbers 2 and 9) will be contributed by Calavera through a reduction of the
acquisition price paid for the Improvements (defined below). Only parcels on which single-
family homes will be constructed are subject to the levy of the assessments. None of the
assessments have been prepaid.
The Developer
The property in Benefit Area No. 1 is owned by (i) McMillin Ravinia LLC. and McMillin
Montara, LLC, both of which are subsidiaries of McMillin Companies LLC (“McMillin”), which
own lots currently expected to be developed into 217 future single-family units, and (ii) Cal El
LLC and Calavera W LLC, both of which are subsidiaries of Brookfield San Diego Holdings LLC
(“Brookfield”), which own lots currently expected to be developed into 366 future single-family
units (collectively, the “Developers”). The Developers have received approved final subdivision
maps dividing the property subject to the assessment into 331 lots for 331 single-family
detached units and 8 lots for 252 single-family attached condominium units. The Developers
anticipate constructing all 583 dwelling units for sale to individual homeowners (see
“OWNERSHIP AND VALUE OF PROPERTY WITHIN BENEFIT AREA NO. 1” herein). In
addition, one lot in the Assessment District is owned by CIC Calavera, which lot is to be
developed into 106 multi-family units. An amount equal to the assessment which would have
been levied on this parcel is being contributed by Calavera through a reduction in the purchase
price of the Improvements (as defined below), and therefore no assessment is being levied on
this property.
The Bonds
Proceeds of the Bonds will be used in part to pay for acquisition and construction costs
of certain infrastructure improvements (the “Improvements”), which improvements are
necessary for development of property within the Assessment District, as described in the
Engineer’s Report (described herein). See “THE ASSESSMENT DISTRICT” and “THE
IMPROVEMENT PROJECT.”
Upon issuance of the Bonds, there will remain authorization to issue an additional
$1 1,035,893 of bonds to be secured by assessments levied on property in Benefit Area No. 2.
These assessments will not secure the Bonds, and any bonds issued in connection with Benefit
Area No. 2 will not be secured by the assessments levied in Benefit Area No. 1.
The City ordered preparation of an appraisal report (the “Appraisal Report”) by Bruce W.
Hull & Associates (the “Appraiser”) for the value of the property within Benefit Area No. 1. The
Appraisal Report sets forth an estimated aggregate retail land value of $114,540,000 for the
lots subject to unpaid assessments as of March 1, 2004, assuming the lots are in their current
condition. The resulting aggregate appraised value-to-lien ratio is 8.93*. See “THE
Preliminary, subject to change. *
-2-
ASSESSMENT DISTRICT” and “OWNERSHIP AND VALUE OF PROPERTY WITHIN THE
DISTRICT” herein for a discussion of development of property in Benefit Area No. 1, and the
value (and value to lien ratios) of each parcel. See also “SPECIAL RISK FACTORS” herein for
a discussion of certain risks associated with the purchase of the Bonds.
The Bonds are issued upon and secured by the unpaid assessments levied on property
within Benefit Area No. 1 which, together with interest thereon, constitute a trust fund for the
redemption and payment of the principal of the Bonds and the interest thereon. Under the
provisions of the 1915 Act, assessment installments sufficient to meet annual debt service on
the Bonds will be collected on the regular property tax bills sent to owners of property within
Benefit Area No. 1 against which there are unpaid assessments. These annual installments are
to be paid into the Redemption Fund, which will be held by the City and used to pay Bond
principal and interest as it becomes due. The unpaid assessments represent fixed liens on the
parcels of land within Benefit Area No. 1 assessed under the proceedings and failure to pay the
assessments could result in proceedings to foreclose title to the delinquent property. The
assessments do not constitute the personal indebtedness of the owners of assessed parcels
and no proceedings to collect directly from an owner is permitted.
The City will establish a Reserve Fund (the “Reserve Fund”) from Bond proceeds,
initially in the amount set forth herein under the heading “ESTIMATED SOURCES AND USES
OF FUNDS” (the “Reserve Requirement”), which amount will be transferred to the Redemption
Fund in the event of delinquencies in the payment of the assessment installments to the extent
of such delinquencies. The Reserve Fund will be maintained at the Reserve Requirement less
any amounts transferred to the Redemption Fund when assessments are paid off following the
issuance of the Bonds. See “SECURITY FOR THE BONDS - Establishment of Special
Funds - Reserve Fund” and APPENDIX D hereto.
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 when due.
If there are additional delinquencies after depletion 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 Bonds are not secured by the general taxing power of the City, the County or
the State of California (the “State”) or any political subdivision of the State, and neither
the City, the County, nor the State nor any political subdivision of the State has pledged
its full faith and credit for the payment of the Bonds.
Other Information
There follow brief descriptions of the Bonds, the City, the Improvements, the
Assessment District, Benefit Area No. 1, the Indenture, and certain other matters. Such
descriptions and the discussions and information contained herein do not purport to be
comprehensive or definitive. All references in this Official Statement to documents, the Bonds,
and the assessment proceedings are qualified in their entirety by references to the actual
documents and the City’s resolutions setting forth the terms thereof. Copies of the Indenture
and other documents described in this Official Statement may be obtained from the Finance
Director of the City, 1635 Faraday Avenue, Carlsbad, CA 92008.
-3-
THE BONDS
Purpose of the Bonds
Proceeds from the sale of the Bonds will be used to finance the acquisition and
construction of certain public improvements, and the payment of incidental costs, including but
not limited to costs of issuance, as described in the section herein entitled “THE
IMPROVEMENT PROJECT - The Improvements.”
Authority For Issuance
The City proceedings were conducted pursuant to the 1913 Act and Resolution No.
2003-197 (the “Resolution of Intention”) adopted by the City Council of the City on July 15,
2003. The Bonds, which represent the unpaid assessments levied against privately owned
property in Benefit Area No. 1, are issued pursuant to the provisions of the 1915 Act and the
Indenture.
Galen N. Peterson of San Diego, California (the “Assessment Engineer”) prepared a
written report (the “Engineer’s Report”) which contains, among other things, the proposed
assessment for each parcel of land in Benefit Area No. 1 securing the Bonds. The Engineer’s
Report was filed and preliminarily approved by the City Council by Resolution No. 2003-1 98,
adopted on July 15, 2003. On September 16, 2003, a public hearing was held at which
property owners in the Assessment District had the right to protest the levy of the proposed
assessments in writing prior to or at the commencement of the hearing and to be heard at the
hearing. In addition, property owners were provided an assessment ballot to express either
support or opposition to the levy of the assessments, and 100% of the assessment ballots were
returned. The results of the mailed ballots were 100% “yes” votes. On September 16, 2003,
the City Council adopted its resolution confirming and levying the assessments. The City
Council confirmed a total modified assessment in Benefit Area No. 1 of $12,826,846 and
recorded such confirmed assessment. After confirmation and recordation, the assessments
became liens against the various assessed parcels.
Upon issuance of the Bonds, there will remain authorization to issue an additional
$11,035,893 of bonds to be secured by assessments levied on property in Benefit Area No. 2.
These assessments will not secure the Bonds, and any bonds issued in connection with Benefit
Area No. 2 will not be secured by the assessments levied in Benefit Area No. 1.
All property owners in the Assessment District were then given published and mailed
notice of the opportunity to pay all or a portion of their assessments in cash. None of the
assessments were prepaid during the cash payment period.
General
The Bonds will be issued in fully registered form, without coupons, in the denomination
of $5,000 each or in any integral multiple thereof. The Bonds will be dated the date of delivery,
and will bear interest at the rates per annum, will mature on the dates (each a “Principal
Payment Date”), and will mature in the amounts set forth on the inside front cover of this Official
Statement.
-4-
The Bonds are being issued as fully registered bonds, registered in the name of Cede &
Co. as nominee of The Depository Trust Company, New York, New York (“DTC”) and will be
available to Beneficiary Owners under the book-entry system maintained by DTC. While the
Bonds are subject to the book-entry system, the principal, interest and any prepayment
premium with respect to a Bond will be paid by the Trustee to DTC, which in turn is obligated to
remit such payment to its DTC Participants for subsequent disbursement to Beneficial Owners
of the Bonds as described herein. See “Book-Entry System” below.
Interest on the Bonds is payable September 2, 2004, and thereafter semiannually on
March 2 and September 2 of each year (each an ”Interest Payment Date”). Each Bond shall
bear interest from the Interest Payment Date next preceding the date of authentication thereof
unless (i) it is authenticated after a Record Date and before the close of business on the next
Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or
(ii) it is authenticated on or before the Record Date preceding the first Interest Payment Date, in
which event it shall bear interest from the date of the Bonds; provided, however, that if at the
time of authentication of a Bond, interest is in default thereon, such Bond will bear interest from
the Interest Payment Date to which interest has previously been paid or made available for
payment thereon or from the date of original delivery of the Bonds, if no interest has previously
been paid or made available for payment thereon.
Interest on the Bonds is payable by check of the Paying Agent mailed by first class mail,
postage prepaid, on each Interest Payment Date, until the principal amount of a Bond has been
paid or made available for payment, to the registered Owner thereof at such registered owner’s
address as it appears on the registration books maintained by the Paying Agent at the close of
business on the Record Date preceding such Interest Payment Date. Principal of, redemption
premium, if any, and interest payable to any Owner of Bonds in aggregate principal amount of
$1,000,000 or more will be paid, upon the written request of any such owner in form and
substance satisfactory to the Paying Agent, by wire transfer of immediately available funds to
an account within the United States of America designated by such Owner on or before a
Record Date.
.
See APPENDIX D hereto for a summary of the provisions of the Indenture.
Redemption*
Optional Redemption. The Bonds maturing on and after September 2, 20- are
subject to redemption prior to their stated maturity dates on September 2, 20- or on any
Interest Payment Date thereafter, on a pro rata basis among maturities (and by lot within any
one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by
the City from any source, at the following redemption prices (expressed as percentages of the
principal amount of the Bonds to be redeemed), together with accrued interest to the date of
redemption:
Redemption Date
September 2, and March 2,
September 2, and March 2,
September 2, and thereafter
Redemption Premium
* Preliminary, subject to change.
-5-
Mandatory Redemption From Assessment Prepayments. The Bonds are subject to
mandatory redemption prior to their stated maturity dates on any Interest Payment Date, as
selected by the City, in integral multiples of $5,000, from moneys derived by the City from
Assessment Prepayments, at the following redemption prices (expressed as percentages of the
principal amount of the Bonds to be redeemed), together with accrued interest to the date of
redemption:
Redemption Date Redemption Premium
September 2, 2004 through March 2,
September 2, and March 2,
September 2, and March 2,
September 2, and thereafter
In selecting Bonds for such mandatory redemption, the City shall select such Bonds in
such a way that the ratio of the principal amount of the Bonds in each maturity of the Bonds that
will remain Outstanding to the aggregate principal amount of the Bonds that will remain
Outstanding will be approximately the same as it was prior to the redemption of such Bonds,
insofar as possible.
Mandatory Sinking Fund Redemption. The Outstanding Bonds maturing on
September 2, 20-, are subject to mandatory sinking fund redemption, in part, on September 2,
20-, and on each September 2 thereafter prior to maturity, by lot, at a redemption price equal
to the principal amount thereof to be redeemed, together with accrued interest to the date of
redemption, without premium, from sinking fund payments as follows:
Sinking Fund Principal Amount
/September 2) Redeemed
Redemption Date to be
The amounts in the foregoing schedule shall be reduced pro rata among redemption
dates, in order to maintain substantially level Annual Debt Service, as directed in writing to the
Paying Agent by the City, as a result of any prior partial redemption of the Bonds pursuant
optional or mandatory redemption.
Purchase of Bonds. In lieu of payment at maturity or redemption, moneys in the
Redemption Fund may be used and withdrawn by the Paying Agent for purchase of
Outstanding Bonds, at public or private sale as and when, and at such prices (including
brokerage and other charges) as the City may provide, but in no event may Bonds be
purchased at a price in excess of the principal amount thereof, plus interest accrued to the date
of purchase.
Notice of Redemption. The Paying Agent shall cause notice of any redemption to be
mailed by first class mail, postage prepaid, at least 30 days but not more than 60 days prior to
-6-
the date fixed for redemption, to the respective registered Owners of any Bonds designated for
redemption, at their addresses appearing on the Bond registration books maintained by the
Paying Agent at its Principal Office; but such mailing shall not be a condition precedent to such
redemption and failure to mail or to receive any such notice, or any defect therein, shall not
affect the validity of the proceedings for the redemption of such Bonds.
Refunding Bonds
Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5
of the Streets and Highways Code) (the “1984 Act”), 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 makes the findings required in the
1984 Act.
Book-Entry System
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-
registered bonds registered in the name of Cede & Co. (DTC’s partnership nominee). One
fully-registered Bond will be issued for each maturity of the Bonds, each in the aggregate
principal amount of such maturity, and will be deposited with DTC. See APPENDIX H hereto
for a description of DTC and the book-entry system.
-7-
ESTIMATED SOURCES AND USES OF FUNDS
The proceeds of the sale of the Bonds will be deposited pursuant to the terms of the
Indenture in the amounts set forth below. The moneys in the Improvement Fund established
for the Bonds will be used to acquire, construct or otherwise finance the Improvements and to
pay certain costs associated with the issuance and delivery of the Bonds. A portion of the
proceeds of the Bonds will be deposited in the Reserve Fund.
A summary of the estimated sources and uses of funds associated with the sale of the
Bonds is as follows:
Estimated Sources of Funds:
Principal Amount of Bonds
Net Original Issue [Discount] [Premium]
TOTAL SOURCES:
Estimated Uses of Funds:
Deposit to Improvement Fund
Deposit to Redemption Fund (I)
Deposit to Reserve Fund
Costs of Issuance(*)
TOTAL USES
Capitalized interest on the Bonds until September 2, 2004.
(2) Includes fees of Bond Counsel, initial fees, expenses and charges of
the Paying Agent, costs of printing the Official Statement,
administrative fees of the City, Underwriter’s discount and other costs
of issuance.
-8-
DEBT SERVICE SCHEDULE
The annual debt service on the Bonds based on the interest rates and maturity schedule
set forth on the cover of this Official Statement is set forth below.
Year
2005
2006
2007
2008
2009
201 0
201 1
2012
201 3
2014
201 5
201 6
201 7
201 8
201 9
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
TOTALS
jSeptember 2) Principal Interest Total
SECURITY FOR THE BONDS
Limited Obligation
The obligation of the City relating to the Bonds is not be a general obligation of the City,
but is a limited obligation, payable solely from the unpaid assessments within Benefit Area No.
1 and from the funds pledged therefor under the Indenture. Neither the faith and credit nor the
taxing power of the City or the State of California, or any political subdivision thereof, is pledged
to the payment of the Bonds. The City is not obligated to advance available surplus funds
-9-
from the City treasury to cure any deficiency in the Redemption Fund; provided,
however, the City is not prevented, in its sole discretion, from so advancing funds.
Assessments
The Bonds are issued upon and secured by the unpaid assessments against the
property in Benefit Area No. 1, together with interest thereon, and such unpaid assessments,
together with interest thereon, constitute a trust fund for the redemption and payment of the
principal of the Bonds and the interest thereon. The Bonds are further secured by the moneys
in the Redemption Fund and the Reserve Fund created pursuant to the assessment
proceedings. Principal of and interest and redemption premiums, if any, on the Bonds are
payable exclusively out of the Redemption Fund.
The assessments and each installment thereof and any interest and penalties thereon
constitute a lien against the parcels of land within Benefit Area No. 1 on which the assessments
are levied until the same are paid. Such lien is subordinate to all fixed special assessment liens
previously imposed upon the same property, but has priority over all existing and future private
liens and over all fixed special assessment liens which may thereafter be created against the
property. Such lien is co-equal to and independent of the lien for general property taxes. See
“THE ASSESSMENT DISTRICT - Direct and Overlapping Debt” herein.
The Bonds are not secured by the general taxing power of the City, the County, or
the State or any political subdivision of the State, and neither the City, the County, the
State nor any political subdivision of the State has pledged its full faith and credit for the
payment thereof.
Although the unpaid assessments constitute fixed liens on the parcels assessed, they
do not constitute the personal indebtedness of the owners of said parcels. Furthermore, there
can be no assurance as to the ability or the willingness of such owners to pay the unpaid
assessments. In addition, there can be no assurance that the present owners will continue to
own said parcels, or that any future owner will be able or willing to pay the assessments.
The unpaid assessments will be collected in annual installments, together with interest
on the declining balance, on the San Diego County tax roll on which general taxes on real
property are collected, and are payable and become delinquent at the same time and in the
same proportionate amounts and bear the same proportionate penalties and interest after
delinquency as do said general taxes, and the property upon which the assessments were
levied is subject to foreclosure, sale and redemption if the assessment installments are not paid
when due. These annual installments are to be paid into the Redemption Fund, which will be
held by the City and used to pay the principal of and interest on the Bonds as they become due.
The installments billed against all of the parcels of property in Benefit Area No. 1 subject to the
assessments will be equal to the total principal and interest coming due on all of the Bonds that
year, plus, with respect to each parcel in Benefit Area No. 1, an amount to cover the
administrative charges of the City related to the Bonds and the assessments.
Limited Obligation Upon Delinquency
THE BONDS ARE LIMITED OBLIGATIONS OF THE CITY AND ARE PAYABLE
SOLELY FROM THE ASSESSMENTS ON PROPERTY WITHIN BENEFIT AREA NO. 1 AND
THE FUNDS PLEDGED THEREFOR UNDER THE RESOLUTION OF ISSUANCE. THE CITY
-1 0-
HAS NO LEGAL OR MORAL OBLIGATION TO ADVANCE AVAILABLE FUNDS FROM THE
CITY TREASURY TO PAY BOND DEBT SERVICE IN THE EVENT OF DELINQUENT
ASSESSMENT INSTALLMENTS. BONDOWNERS SHOULD NOT RELY UPON THE CITY TO
ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO THE REDEMPTION FUND.
NOTWITHSTANDING THE FOREGOING, THE CITY MAY, AT ITS SOLE OPTION AND IN
ITS SOLE DISCRETION, ELECT TO ADVANCE SUCH FUNDS.
Establishment of Special Funds
For administering the proceeds of the sale of Bonds and payment of interest and
principal on the Bonds, the City will establish and direct to be maintained three funds or
accounts under the Indenture to be known as the Improvement Fund, the Redemption Fund
and the Reserve Fund. See APPENDIX D hereto for a summary of the provisions of the
Indenture.
Improvement Fund. The moneys in the Improvement Fund will be held by the City and
disbursed for the purpose of paying the costs of issuance of the Bonds and paying or
reimbursing the cost of acquiring and constructing the Improvements, in accordance with the
budget of estimated costs and expenses set forth in the Engineer’s Report (defined herein) on
file in the office of the City, as the same may be modified from time to time pursuant to the 1913
Act.
After completion of the Improvements, and the payment of all claims from the
Improvement Fund, including claims, if any, by the City for amounts advanced by the City to the
Improvement Fund toward the costs of the Improvements, the City Council shall determine the
amount of the surplus, if any, remaining in the Improvement Fund. Any such surplus shall be,
in such amounts as the City Council shall determine, for one of more of the following purposes:
(a) For transfer to the general fund of the City, provided that the amount transferred
shall not exceed the lesser of one thousand dollars ($1,000) or 5% of the total amount
expended from the Improvement Fund;
(b) As a credit upon the assessments and any supplemental assessments;
(c) For the maintenance of the Improvements; or
(d) To call Bonds.
Redemption Fund. All payments of principal and interest installments on the
assessments, together with penalties, if any, will be deposited in the Redemption Fund, which
will be maintained by the City as a trust fund for the benefit of the Bondowners. Payment of the
Bonds at scheduled mandatory or optional redemption prior to maturity and at maturity, and all
interest on the Bonds will be made from the Redemption Fund. On or before each Interest
Payment Date, there shall be withdrawn from the Redemption Fund for payment to the
Bondowners the principal of (including Sinking Fund Payments), and interest and any premium,
then due and payable on the Bonds. Prior to each Interest Payment Date, the City shall
determine if the amounts on deposit in the Redemption Fund are sufficient to pay the Debt
Service due on the Bonds on the next such Interest Payment Date. In the event the amounts in
the Redemption Fund are insufficient for such purpose, the City shall cause to be withdrawn
from the Reserve Fund, to the extent of any funds therein, the amount of such insufficiency,
-1 1-
and cause such amount to be transferred to the Redemption Fund. Amounts so withdrawn
from the Reserve Fund and deposited to the Redemption Fund shall be applied to the payment
of the Bonds. If, after the foregoing transfers, there are insufficient funds in the Redemption
Fund to make the payments to the Bondowners on any Interest Payment Date, the available
funds shall be applied as set forth in the Indenture (see APPENDIX D hereto).
Reserve Fund. Out of the proceeds of the sale of the Bonds, the Reserve Fund will be
funded in the amount set forth in “ESTIMATED SOURCES AND USES OF FUNDS” herein (as
subsequently adjusted pursuant to the following paragraph, the “Reserve Requirement”). The
Reserve Fund will be maintained by the City as a trust fund for the benefit of the holders of the
Bonds.
In the event unpaid assessments are paid in cash prior to their final due date, the City
shall transfer from the Reserve Fund for deposit in the Debt Service Account an amount equal
to the ratio of the total amount initially provided for in the Reserve Fund to the total amount
originally assessed in the proceedings for the Bonds multiplied by the reduction in said
assessments, which shall be calculated by the City. After each such transfer, the Reserve
Requirement shall be reduced by the amount of such transfer.
Whenever there are insufficient funds in the Debt Service Account to meet the next
maturing installment of principal of or interest on the Bonds, the City shall transfer from the
Reserve Fund for deposit in the Debt Service Account an amount necessary to satisfy such
deficiency. The City agrees in the Indenture that if such insufficiency was caused by
delinquent payment of installments of assessments, then an amount equal to the amount so
transferred shall be reimbursed and transferred by the City for deposit in the Reserve Fund
from the proceeds of redemption or sale of the parcel in respect of which payment of
installments of assessments was delinquent.
If at any time the amount of interest earned by the investment of any portion of the
Reserve Fund, together with the principal amount in the Reserve Fund, shall exceed the
Reserve Requirement, such excess shall be transferred to the Redemption Fund and used in
the manner set forth in the 191 3 Act.
Whenever the balance in the Reserve Fund is sufficient to retire all the remaining
outstanding Bonds, the City shall transfer the balance in the Reserve Fund to the Debt Service
Account and the City shall cease the collection of the principal and interest on the unpaid
assessments. In such case, the City shall credit such balance against the assessments
remaining unpaid in the manner set forth in the 1915 Act.
THE CITY HAS NO OBLIGATION TO REPLENISH THE RESERVE FUND EXCEPT TO
THE EXTENT THAT DELINQUENT ASSESSMENTS ARE PAID OR PROCEEDS FROM
FORECLOSURE SALES ARE REALIZED.
Covenant to Commence Superior Court Foreclosure
The 1913 Act provides that in the event any assessment or installment thereof or any
interest thereon is not paid 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, pursuant to the Indenture, the City has covenanted for the benefit of
-1 2-
the Owners that it will order, and cause to be commenced, judicial foreclosure proceedings
against property or properties under common ownership with cumulative aggregate delinquent
assessment installments in excess of $10,000 by the October 1 following the close of the Fiscal
Year in which such delinquent installments first exceed such amount, and will commence
judicial foreclosure proceedings against all properties with delinquent assessment installments
by the October 1 following the close of each Fiscal Year in which it receives Assessment
Revenues (as defined in the Indenture) in an amount which is less than 95% of the total
Assessment Revenues which were to be received in such Fiscal Year and diligently pursue to
completion such foreclosure proceedings.
The 1913 Act provides that the court in a foreclosure proceeding has the power to order
property securing delinquent Assessment installments to be sold for an amount not less than all
assessment installments, interest, penalties, costs, fees and other charges that are delinquent
at the time the foreclosure action is ordered and certain other fees and amounts as provided in
the 191 3 Act. The court may also include subsequent delinquent assessment installments and
all other delinquent amounts.
If the property to be sold fails to sell for the minimum price described above, the City
may petition the court to modify the judgment so that the property may be sold at a lesser price
or without a minimum price. In certain circumstances, the court may modify the judgment after
a hearing if the court makes certain determinations, including, but not limited to, a determination
that the sale at less than the minimum price will not result in an ultimate loss to the owners of
the Bonds or a determination that the owners of at least 75% of the principal amount of the
Bonds outstanding have consented to the petition and the sale will not result in an uljimate loss
to the nonconsenting Bond owners. Neither the property owner nor any holder of a security
interest in the property nor any defendant in the foreclosure action nor any agent thereof may
purchase the property at the foreclosure sale for less than the minimum price.
Prior to July 1, 1983, the statutory right of redemption from such a judicial foreclosure
sale was limited to a period of one year from the date of sale. Legislation effective July 1, 1983
amended this statutory right of redemption to provide that before notice of sale of the
foreclosed parcel can be given following court judgment of foreclosure, a redemption period of
120 days must elapse. Furthermore, if the purchaser at the sale is the judgment creditor (here,
the City) an action may be commenced by the delinquent property owner within six 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
assurance that, if tested, such legislation will be upheld. In the event such foreclosure or
foreclosures are necessary, there may be a delay in payments to owners of the Bonds 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. See also “SPECIAL RISK FACTORS - Bankruptcy and
Foreclosure’’ herein.
In the event court foreclosure proceedings are commenced by the City, there may
be delays in payments to owners of the Bonds pending prosecution of the foreclosure
proceedings to completion, including the receipt of the City of the proceeds of the
foreclosure sale. It is also possible that no qualified bid will be received at the
foreclosure sale. See “SPECIAL RISK FACTORS” herein.
-1 3-
No Obligation of the City to Advance Funds
Under the 1913 Act, the City can determine, prior to issuing the Bonds pursuant thereto,
whether or not it will obligate itself to advance available funds from the City treasury to cure any
deficiency which may occur in the Redemption Fund.
THE CITY HAS DETERMINED IT WILL NOT OBLIGATE ITSELF TO ADVANCE, AND
WILL NOT ADVANCE, AVAILABLE FUNDS FROM THE CITY TREASURY TO CURE ANY
DEFICIENCY IN THE REDEMPTION FUND.
If a delinquency occurs in the payment of any assessment installment, the City has a
duty to transfer from the balance, if any, in the Reserve Fund to the Redemption Fund, the
amount of the delinquency. This duty continues during the period of delinquency, until
reinstatement, redemption or sale of the delinquent property. If, during the period of
delinquency, there are insufficient funds in the Reserve Fund to meet all such delinquencies, a
delay may occur in payment to the owner of the Bonds or there may be insufficient funds to
make such payments.
Priority of Lien
Each assessment (and any reassessment) and each installment thereof, and any
interest and penalties thereon, constitutes a lien against the parcel of land on which it was
imposed until the same is paid. 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 property. Such a
lien is co-equal to and independent of the lien for general property taxes and special taxes,
including, without limitation, special taxes created pursuant to the “Mello-Roos Community
Facilities Act of 1982” (being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of
the State of California), whenever created against the property.
There are certain special taxes authorized to be levied by the Carlsbad Unified School
District (the “School District”) with respect to property within Benefit Area No. 1 upon issuance
of building permits. See “THE ASSESSMENT DISTRICT - Direct and Overlapping Debt”
herein.
THE IMPROVEMENT PROJECT
The Improvements
Proceeds of the Bonds will be used to pay, in part, the cost of the acquisition of 4 lanes
of College Boulevard from Carlsbad Village Drive to the southern boundary of Benefit Area No.
I, including storm drain, sewer, water, recycled water and dry utilities (known as Reach C); and
the fair share allocable to Benefit Area No. 1 of the following: 2 lanes of College Boulevard from
the southern boundary of Benefit Area No. 1 to Cannon Road, including storm drain, sewer,
water, recycled water and dry utilities (known as Reach B); 2 lanes of Cannon Road from El
Camino Real to College Boulevard, including storm drain, sewer, water, and dry utilities (known
as Reach 3); storm drain detention basin BJB and storm drain line BJA (less any improvements
be reimbursed to the Developer from Master Plan Local Drainage Area Fees collected by the
-14-
City); and related costs for environmental, acquisition and creation of mitigation lands,
engineering, and inspection (the “Improvements”).
The Improvements are required for further development to occur in the Assessment
District. The Improvements, which are generally described above, are more fully described in
the Engineer’s Report pertaining to the Assessment District (the Engineer’s Report), prepared
by Galen N. Peterson, San Diego, California (the “Assessment Engineer”). The Engineer’s
Report is attached hereto as APPENDIX A (specifically, see Part VI, pages 36 and 37, of the
Engineer’s Report for a more complete description of the Improvements stated as
“Improvement No. I”). Calavera is the master developer within the Assessment District and is
responsible for the design and construction of the Improvements. Calavera is owned in equal
parts by McMillin and Brookfield Tamarack LLC, a wholly-owned subsidiary of Brookfield.
In connection with the Improvements to be constructed by Calavera, the City and
Calavera have entered into an Acquisition/Financing Agreement, dated as of December 11 ,
2002, as amended (the “Acquisition Agreement”). Upon the satisfaction of the conditions set
forth in the Acquisition Agreement, the City will purchase a portion of the Improvements with
proceeds of the Bonds, and take title to certain Improvements. Prior to such purchase,
Calavera will complete construction of such Improvements with its own funds. The levy of the
assessments is not conditioned upon the purchase of the Improvements. Calavera expects the
Improvements to be substantially completed by July, 2004.
Cost of the Improvements
The total cost of the Improvements to be financed by the assessments is estimated in
the Engineer’s Report (and is described below) to be $9,889,481, which amount does not
include incidental expenses relating to the issuance of the Bonds, and which reflects
contributions to be made by Calavera to offset assessments which would otherwise be levied
on certain parcels in the Assessment District, and to pay the portion of the Improvements which
provide general benefits. The total cost of the Improvements is currently estimated to be
approximately $21,772,858. However, pursuant to the Acquisition Agreement, $640,394 (the
value of the general benefit to property provided by the Improvements) is being contributed by
Calavera, which will also contribute $1,483,393 in special benefits (the amount of assessments
which would have been allocated to the multi-family parcel, two community facility parcels and
homeowners association parcels), as shown in the Engineer’s Report. The contributions by
Calavera are in the form of reductions in the purchase price to be paid by the City for the
acquisition of such Improvements.
The proceeds of the assessments will be used to pay the remaining costs of the
Improvements. The cost of the Improvements, the general benefit contribution from the
Developers, and the amount of special benefits, is summarized in the Engineer’s Report as
follows:
-1 5-
Draft of 4/6/04
TABLE NO. 1
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
SUMMARY OF IMPROVEMENT COSTS
ASSESSMENT DISTRICT NO. 2003-01
Estimated General Benefit
Construction & Contribution Cost of Item
Improvement Desim Cost(l1 bv Calavera Subtotal Funded
bv Bonds(2)
College Blvd and Cannon Rd Core Imp. $1 1,385,077 $640,394 $10,744,683 $5,879,743
College Blvd, Reach C, Frontage Imp. 4,523,233 0 4,523,233 4,131,595
College Blvd, Reach B, Frontage Imp. 1,379,057 0 1,379,057 0
Cannon Rd, Reach 3, Frontage Imp. 3,123,955 0 3,123,955 0
Basin BJB and Storm Drain Line BJA 1,361,536 0 1,361,536 1,361,536
Total Project Cost $21,772,858 $640,394 $21,132,464 $1 1,372,874
Less Contribution by Calavera(3) $1,483,393
Total Bonded Cost $9,889,48 1
Source: Galen N. Peterson.
(1)
(2)
Includes costs associated with Benefit Area No. 1 and Benefit Area No. 2.
Funded from Benefit Area No. 1. Remainder of costs to be contributed by Calavera (a
portion of which is subject to reimbursement by benefited properties outside of the
Assessment District) or paid from assessments to be levied in Benefit Area No. 2
Amount of special benefit to certain parcels. (3)
-1 6-
Draft of 4/6/04
Environmental Compliance
The Improvements and the development in the Assessment District are subject to the
California Environmental Quality Act (“CEQA). Under CEQA, a project which may have a
significant effect on the environment and which is to be carried out or approved by a public
agency, must comply with a comprehensive environmental review process. Generally, the
implementation of CEQA entails three separate phases. The first phase consists of a
preliminary review of a project to determine whether it is subject to CEQA. The second phase
involves preparation of an initial study to determine whether an environmental impact report
(“EIR”) or negative declaration is required. An EIR must be prepared when the public agency
determines that it can be fairly argued, based on substantial evidence, in light of the whole
record, that a project may have a significant effect on the environment. A negative declaration
may be prepared when no substantial evidence exists in light of the whole record that the
project may have a significant environmental impact. A mitigated negative declaration may be
prepared if the initial study identifies a potentially significant effect for which the project’s
proponent, before public release of a proposed negative declaration, has made or agrees to
make project revisions that clearly mitigate the effects. The third phase is preparation of an
EIR, if the project may have a significant environmental effect or of a mitigated negative
declaration if no significant effects will occur.
The Assessment District was deemed to be a “project” subject to the requirements of
CEQA since the levy of assessments and the issuance of bonds secured by such assessments
were to be committed to a specific project which may result in a potentially significant physical
impact on the environment. On January 15, 2002, the City Council adopted Resolution No.
2002-016 which certified the EIR, CEQA findings of fact, statements of overriding
considerations, a mitigation monitoring and reporting program, and approving a general plan
amendment, master plan amendment, Zone 7 Local Facilities Management Plan Amendment,
zone change, master tentative map and hillside development permit within the Calavera Hills
Master Plan on property generally located south of the City of Oceanside and west of Lake
Calavera in the northeast quadrant of the City. The EIR approved by the City Council included
all of the Improvements. Potentially significant impacts in the areas of air quality, biological
resources, cultural resources and hydrology/water quality will be mitigated through the
incorporation of mitigation measures contained in the above documents, which are on file with
and can be reviewed at the Planning Department.
-1 7-
Draft of 4/6/04
AERIAL PHOTO
[TO COME]
-1 8-
Draft of 4/6/04
THE ASSESSMENT DISTRICT
The City and the Assessment District
The City was incorporated in 1952, and currently serves an area of approximately 42
square miles with an estimated 2004 population of 90,300. The City is located on the Pacific
Ocean in northern San Diego County (the “County”), approximately 35 miles north of the City of
San Diego. See “APPENDIX E - GENERAL ECONOMIC AND DEMOGRAPHIC
IN FORMAT10 N”.
Benefit Area No. 1 of the Assessment District includes 689 proposed residential units,
located in nine distinct Villages, 2 community facilities, and several homeowners association
recreation lots. Benefit Area No. 2 of the Assessment District includes the Robertson Ranch
East development, consisting of approximately 500 proposed residential units, community
recreation and several homeowners’ association recreation lots. Assessments levied on
property in Benefit Area No. 2 will not secure the Bonds, and any bonds issued in connection
with Benefit Area No. 2 will not be secured by the assessments levied in Benefit Area No. 1.
See “OWNERSHIP AND VALUE OF PROPERTY WITHIN BENEFIT AREA NO. 1”
herein for a description of certain development within the Assessment District.
Allocation of Assessments
In order to relate costs of the Improvements to the various properties specially benefiting
therefrom, all properties that stand to specially benefit from the construction of the
Improvements, vacant or occupied, subdivided or unsubdivided, have been assessed a portion
of the costs by the Assessment Engineer. In general, the total special benefit costs are spread
in proportion to the special benefits that are derived by each parcel in the Assessment District.
The costs determined to be of general benefit by the Assessment Engineer are being
contributed by Calavera, through a reduction in the purchase price of the Improvements to be
paid by the City, pursuant to the Acquisition Agreement. The base objective of the assessment
spread is to distribute costs over the entire area within the Assessment District, in proportion to
the special benefits that are derived by each assessment number from the Improvements. The
total assessment levied against each assessment number is composed of its share of the
Improvement construction costs, plus the proportional share of the Assessment District
contingencies and incidental expenses.
The Assessment Engineer identified seven components of the Improvements, and each
property that specially benefited from a particular component of the Improvements was
assigned a share in the overall cost of that portion. The allocation of costs reflected the fact
that some groups of properties benefited in a different manner than others.
Prepayments
None of the assessments have been prepaid. Any future repayments will be used to
redeem Bonds prior to maturity. See “THE BONDS - Redemption” herein.
-1 9-
A map showing the boundaries of the Assessment District and the parcels therein is
included in the Engineer’s Report attached hereto as shown in APPENDIX A.
Availability of Public Utilities
The Assessment District is served by the following public utilities:
Electricity:
Natural Gas:
Water and Sewer:
San Diego Gas and Electric
San Diego Gas and Electric
City of Carlsbad
Description of the Property
The property in Benefit Area No. 1 is owned by (i) McMillin Ravinia LLC and McMillin
Montara, LLC, both of which are subsidiaries of McMillin, and which own lots currently expected
to be developed into 217 single-family units, and (ii) Cal El LLC, a Delaware limited liability
company, and Calavera W LLC, a Delaware limited liability company, both of which are
subsidiaries of Brookfield, and which own lots currently expected to be developed into 366
future single-family units (collectively, the “Developers”). The Developers have approved final
subdivision maps dividing the property subject to the assessment into 331 lots for 331 single-
family detached units, and 8 lots for 252 single-family attached condominium units. The
Developers anticipate constructing all 583 single-family dwelling units for sale to individual
homeowners. In addition, one parcel is owned by CIC Calavera, L.P., which lot is to be
developed into 106 multi-family units. An amount equal to the assessments which would have
been levied on this parcel is being contributed by Calavera, through a reduction in the
reimbursement of the costs of the Improvements, and therefore no assessment is being levied
on this property. All land on which assessments have been levied in Benefit Area No. 1 is fully
entitled. See “OWNERSHIP AND VALUE OF PROPERTY WITHIN BENEFIT AREA NO. 1” for
a description of development within the Assessment District. The property in Benefit Area No. 2
of the Assessment District is owned by Calavera and does not currently have full entitlement.
Develpment of the property in Benefit Area No. 1 is not conditioned in any way on development
of the property in Benefit Area No. 2.
Overlapping Debt
Several local agencies providing public services have outstanding bonds or other
indebtedness which constitute overlapping indebtedness within the Assessment District. See
also “SECURITY FOR THE BONDS - Priority of Lien herein. The direct and overlapping debt
of the property within the Assessment District subject to the assessment is shown in the table
below. The table excludes obligations with no lien on property, such as tax and revenue
anticipation notes, lease obligations and revenue bonds. See “SPECIAL RISK
FACTORS-Future Overlapping Indebtedness” herein for a discussion of the ability of other
public agencies to levy assessments and special taxes on property within the Benefit Area No.
1. The reference in the following table to the outstanding indebtedness within Benefit Area No.
1 reflects the current estimated principal amount of the Bonds.
-20-
TABLE NO. 2
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
STATEMENT OF DIRECT AND OVERLAPPING DEBT
(as of ,2004)
BENEFIT AREA NO. 1 DISTRICT NO. 2003-01
[TO COME]
Source: California Municipal Statistics, Inc.
Table 3 below sets forth estimated overall tax rates projected to be applicable to a
single-family residential units in Benefit Area No. 1 based on the Fiscal Year 2003/04 tax rate
and the estimated annual assessment installments in Fiscal Year 2004/05.
-21-
rc 0
00000 00000
ZZddddd sssssss
Draft of 4/6/04
Status of Development Within Assessment District
The following table shows a summary of property subject to the assessment within the
Assessment District, and the amount of the assessment attributable to each Village.
-23-
rc 0
h c
w
U
0
0 0 u3
I
a . z
0 -
d
Draft of 4/6/04
Ownership of Property Within Benefit Area No. 1
The following table illustrates the current property ownership within Benefit Area No. 1,
and the total assessment allocated to such owners’ properties. This information should not be
construed to suggest that the Bonds are personal obligations of the owners of the property.
The ownership of the parcels is subject to change. The assessments are not personal
obligations of the current owners of the property or of any subsequent landowners: Moreover,
there is no requirement that the assessment be prepaid upon transfer of ownership. The Bonds
are secured solely by the assessments and other assets pledged therefor under the Indenture.
See “SECURITY FOR THE BONDS” and “SPECIAL RISK FACTORS” herein.
TABLE NO. 5
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. 1
OWNERSHIP SUMMARY(1)(2)
ASSESSMENT DISTRICT NO. 2003-01
Assessment Percent
Owner Units Acres - Lien of Lien
Cal E-I LLC 252 72.536 $4,830,672 37.7%
McMlllin Montara, LLC 102 62.450 1,734,436 13.5
Calavera W LLC 114 37.030 3,209,194 25.0
McMillin Ravinia, LLC - 115 52.490 3,052,544 - 23.8
Totals 583 224.506 $1 2,826,846 100.0%
Source: Galen Peterson, Assessment Engineer; Bruce W. Hull & Associates.
(1) (2) Preliminary, subject to change.
Includes only property subject to lien of assessments.
For a description of the Developers, see “OWNERSHIP AND VALUE OF PROPERTY
WITHIN BENEFIT AREA NO. 1” herein. For a map of the property within the Assessment
District, see APPENDIX A hereto.
OWNERSHIP AND VALUE OF PROPERTY WITHIN BENEFIT AREA NO. I
The Developers
The following general information regarding ownership of parcels in the Assessment
District has been provided by the Developers. This information is included because it may be
relevant to an informed evaluation of the security for the Bonds. Neither the City or the
Underwriter makes any representation as to the completeness or accuracy of this information.
No representation is made as to the accuracy of adequacy of such information relating to the
Developers, or as to the experience, abilities or financial resources of the Developers. No
assurance can be given that the development projects will be completed as anticipated, or that
ownership of one or more of such parcels will not be changed or that the projects planned by
the Developers will occur, or will occur in a timely manner. See the section of this Official
Statement entitled “SPECIAL RISK FACTORS -- Failure to Develop Land. ” This information
-25-
should not be construed to suggest that the Bonds or the assessments securing the Bonds are
personal obligations of the landowners or that in the event of a default a deficiency action
against the landowners is an available remedy.
Cal E 1 LLC and Calavera W LLC. Cal E 1 LLC, a Delaware limited liability company
and Calavera W LLC, a Delaware limited liability company, are wholly owned by Brookfield San
Diego Holdings LLC, a Delaware limited liability company. Brookfield San Diego Holdings LLC
is a 90% owned subsidiary of Brookfield Homes Holdings Inc., a California corporation.
Brookfield Homes Holdings Inc. is a wholly owned subsidiary of Brookfield Homes Corporation,
a Delaware corporation (“Brookfield Homes”). Brookfield Homes, through its subsidiaries,
operates in five markets: the San Francisco Bay Area, Orange County/Los Angeles, San
Diego/Riverside; Sacramento in California, and Northern Virginia. The company has been
building homes and developing land in these markets since the mid-1990’s. The company is
publicly traded and its head office is in Del Mar, California. In 2003, Brookfield Homes ranked
within the top twenty largest homebuilders in the United States based on the number of homes
sold.
Brookfield Homes is listed on the NYSE under the ticker symbol “BHS”. Brookfield
Homes is subject to the informational requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and in accordance therewith files reports, proxy statements and
other information with the SEC. Financial information about Brookfield Homes is included in
documents filed with the SEC, particularly its Annual Report on Form 10-K and its most recent
quarterly Report on Form 10-Q. All documents subsequently filed by Brookfield Homes
pursuant to the requirements of the Exchange Act after the date of this Official Statement will
be available for inspection in the same manner as described above. Such reports, proxy
statements and other information may be inspected and copied at the public reference facilities
maintained by the SEC at prescribed rates at 450 Fifth Street, N.W., Washington, D.C. 20549
and at the SEC’s regional offices at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. In addition, the aforementioned material may also be
inspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005.
Brookfield Homes’ Internet home page is located at www.brookfieldhomes.com. This
Internet addresses is included for reference only and the information on such Internet site is not
a part of this Official Statement or incorporated by reference into this Officia! Statement. No
representation is made in this Official Statement as to the accuracy or adequacy of the
information contained on any Internet site.
McMillin Ravinia LLC. and McMillin Montara, LLC. McMillin Ravinia LLC. and
McMillin Montara, LLC, both of which are subsidiaries of the McMillin Companies LLC
(“McMillin”). McMillin is a privately held entity beneficially owned entirely by the McMillin family
headed by Macey L. “Corky” McMillin. Corky McMillin started the McMillin organization in 1960
as a real estate development and construction company. Today, the Corky McMillin
Companies operate in five areas including land development, home building, commercial, realty
and mortgage. The home building segment has included the construction of town houses,
condominiums, detached homes and also develop master planned communities. The Corky
McMillin Companies is San Diego’s largest and oldest privately-owned, locally-based developer
of mixed-use projects. Corky McMillin is the present Chairman of The Corky McMillin
Companies. For Fiscal Year 2003, total home closings exceeded 1,245 units. The Corky
McMillin Companies’ Internet home address is located at mcmillin.com. This Internet address is
included for reference only and the information on this Internet site is not a part of this Official
-26-
Statement or incorporated by reference into this Official Statement. No representation is made
in this Official Statement as to the accuracy or adequacy of the information contained on any
Internet site.
The Corky McMillin Companies are currently involved or have recently (within the past
two years) been involved in the following residential development projects:
-27-
Neighborhood Location Units
Calavera Hills
K (Montera) Carlsbad
X (Ravinia) Carlsbad
Central Valley
Ashton Park Hanford
Bo nte rra Tulare
Cameron Creek Visalia
Foxwood Tulare
Tierra Del Sol Tulare
Imperial Valley
El Dorado Estates Calexico
Las Brisas North Calexico
Las Brisas South Calexico
Parkside Estates Brawley
West
Reflections El Centro
Liberty Station
Admiralty Row Point Loma
Anchor Cove Point Loma
Beacon Point Point Loma
McMillin Lomas Verdes
Auburn Lane Chula Vista
Jasmine Chula Vista
Mandalay Chula Vista
Sienna Chula Vista
Morgan Hill
Artessa Temecula
Crista1 Temecula
Rolling Hills Ranch
Chambord Chula Vista
Fairhaven Chula Vista
StoneBridge Estates
Mill Creek Scripps Ranch
Temeku Hills
Brookhaven Temecula
Castle Pines Temecula
Cypress Point Temecula
Legends Temecula
Northwind Temecula
Vista Pacifica
Somerset Chula Vista
Suncrest Chula Vista
Tradewinds Chula Vista
Westview Chula Vista
102
115
160
86
126
169
163
90
226
73
227
91
80
140
129
92
126
101
163
116
116
114
121
109
140
85
121
186
196
144
127
116
98
Average Lot Close of
Size First Last Unit
(Square Feet) Move-Ins (Expected)
4,000
4,000
8,100
8,100
8,100
8,100
8,100
6,000
6,000
6,000
6,000
6,000
3,600
N/A (Condo)
2,900
5,000
4,000
6,000
5,000
5,000
5,500
7,200
6,000
5,000
4,250
6,950
6,700
5,800
6,950
6,600
5,500
5,900
6,200
12/03
05/04
10102
10/01
04/02
04/02
04/02
07/02
07/02
06/02
01/02
07/02
07/03
07/03
05/03
10103
12/03
10103
12/03
7/04
8/04
07/03
07/03
11/03
10100
06/02
05/01
02/00
08/99
10101
10/01
10102
04/02
6/04
7/05
02/06
06/04
01/04'
06/04
07/05
12/03'
12/05
09/03
12/05
12/03'
11/04
03/05
04/05
10105
05/06
12/05
10106
07/05
11/05
07/05
08/05
06/06
12/02'
12/03'
01/03'
02/03'
10102'
03/03'
04/03'
08/04
07/03'
Price Range
From the High $500,000~
From the High $500,000~
From the $130,000~
From the Mid $1 70,000s
From the $130,000~
From the $180,000~
From the Low $130,000~
From the Mid $100,000~
From the Low $1 00,000s
From the Low $1 00,000s
From the Low $1 00,000s
From the Mid $1 00,000s
From the Mid $700,000~
From the High $300,000~
From the Low $600,000~
Low to Mid $400,000~
Low to High $300,000~
Mid to High $400,000~
From the Mid $400,000~
From the High $300,000~
From the High $400,000~
From the High $400,000~
From the Low $400,000~
From the Low $500,000~
From the Mid $200,000~
From the Mid $300,000~
From the Low $300,000~
From the Mid $200,000~
From the High $200,000~
From the High $300,000~
From the Mid $300,000~
From the Low $300,000~
From the Mid $300,000~
Source: McMillin Companies LLC
Actual.
-2a-
Plan of Development
Cal E 1 LLC. The multi-family, attached tri-plex development which constitutes Cat E 1
LLC’s project within Benefit Area No. I, together with the estimated unit sizes and base sales
price range is set forth below.
Estimated Estimated Base
Villane Unit Size Sales Price Ranue Units
E- 1 1,363-1,535 High $300,000 to high-$400,000 117
U 1,363-1,535 High $300,000 to high-$400,000 135
The final maps for Village E-I was received in October, 2003, and grading and
infrastructure improvements are expected to be completed in April, 2004. The final map for
Village U was recorded in December, 2003, and grading and infrastructure improvements are
expected to be completed by the end of 2004. Construction of models commenced in January,
2004, with closings expected to commence in the fourth quarter of 2004 for the homes located
in Village E-I, and in the third quarter of 2005 for the homes located in Village U. Cal E 1 LLC
estimates that the units in Village E-I have a projected absorption rate of 30 units per quarter,
commencing the first quarter of 2004, and that the project in Village U has a projected
absorption rate of 30 units per quarter, commencing the first quarter of 2005.
Cal E 1 LLC expects to finance construction of in-tract improvements and housing units
through internal resources and short-term loans which currently total $24,279,000. Completion
of improvements and the cost of home construction (including funds needed to pay the
assessments when due) have been and are expected to continue to be provided by internal
resources, home sales and commercial borrowing. An additional $22,000,000 revolving home
construction loan is currently being negotiated. All loans are or will be secured by the property
in Villages E-I and U. All existing loans have been obtained from Union Bank of California.
Calavera W LLC. The single-family, detached development which constitutes Calavera
W LLC’s project within the Assessment District, together with the estimated lot sizes, unit sizes
and base sales price range is set forth below.
Min. Estimated Estimated Base
Villaue Lot Size Unit Size Sales Price Ranqe Units
W 4,000 sq. ft. 1,648-2.776 $425,000 to $550,000 114
The final maps for Village W was recorded in December, 2003, and grading and
infrastructure improvements are expected to be completed in August, 2004. Construction of
models is anticipated to begin in May, 2004, with closings expected to commence in the fourth
quarter of 2004. Calavera W LLC estimates that the units in Village W have a projected
absorption rate of 12 units per quarter, commencing the third quarter of 2004.
Calavera W LLC expects to finance construction of in-tract improvements and housing
units through internal resources and a short-term loan which currently totals $14,340,000. This
short-term loan is secured by the property in Village W, and has been obtained from Wells
Fargo Bank, National Association. Completion of improvements and the cost of home
construction (including funds needed to pay the assessments when due) have been and are
-29-
expected to continue to be provided by internal resources, home sales and commercial
borrowing. An additional revolving home construction loan is expected to be negotiated, which
will be secured by the property in Village W.
McMillin Montara, LLC. The single-family, detached development which constitutes
McMillin Montara, LLC’s project within the Assessment District, together with the estimated lot
sizes, unit sizes and base sales price range is set forth below.
Min. Estimated Estimated Base
Village Lot Size Unit Size Sales Price Range Units
K 4000 Sq. ft. 1,658-2,691 $524,990 to $607,990 84
L-2 4000 Sq. ft. 1,658-2,691 $524,990 to $607,990 14
R 4000 Sq. ft. 1,658-2,691 $524,990 to $607,990 4
The final maps for Villages K and L-2 were recorded in July, 2003, and grading and
infrastructure improvements are complete. The final map for Village R was recorded on April 6,
2004, and grading and infrastructure improvements for this village are expected to be
completed by , 200-. Construction of 3 models was completed as of January 30,
2003, and 31 homes are currently under construction in Village K. Sales commenced in the
first quarter of 2004 for the homes located in Village K, with 29 homes sold to date, and
commenced in the first quarter of 2004 for the homes located in Village L-2 and in the third
quarter of 2004 for the homes located in Village R. McMillin Montara, LLC estimates that the
units in Village K have a projected absorption rate of 10 units per quarter, commencing the first
quarter of 2004, that the project in Village L-2 has a projected absorption rate of 22 units per
quarter, commencing the first quarter of 2004 and that the project in Village R has a projected
absorption rate of 4 units per quarter, commencing the third quarter of 2004.
McMillin Montara, LLC financed its site acquisition and development costs through
internal resources and a short-term revolving loan in the initial principal amount of $15,385,000
,secured by its property in Villages K, L-2 and R, which it has obtained from Bank of the West.
McMillin Montara, LLC has also obtained a short-term home construction revolving loan in the
amount of $1 9,500,000 from Bank of the West.
McMillin Ravinia, LLC. The single-family, detached development which constitutes
McMillin Ravinia, LLC’s project within Benefit Area No. 1, together with the estimated lot sizes,
unit sizes and base sales price range is set forth below.
Estimated Estimated Estimated Base
Village Lot Size Unit Size Sales Price Range Units
X (Ravinia) 5,000 sq. ft. 1,643-2,712 $500,000’~ to $600,000’~ 115
The final map for Village X (Ravinia) was recorded in October, 2003, and grading and
infrastructure improvements are expected to be completed in May, 2004. Construction of
models is anticipated to begin in May, 2004, with sales expected to commence in the third
quarter of 2004. McMillin Ravinia, LLC estimates that the units in Village X (Ravinia) have a
projected absorption rate of 10 units per quarter, commencing the third quarter of 2004.
McMillin Ravinia, LLC financed its site acquisition and development costs through a
short-term loan of $1 6,500,000 from IndyMac Bank. A short-term home construction revolving
-30-
loan in the amount of approximately $20,000,000 is currently being negotiated with IndyMac
Bank, and is expected to be finalized by the second quarter of 2004.
Developer Representations
In connection with the issuance of the Bonds, the Developers have made the following
representations:
s None of the Developers have been delinquent in the payment of any ad
valorem property taxes, special assessments or special taxes in any material amount on their
respective property in the Assessment District or their other projects;
e None of the Developers are currently in material default on any loans,
lines of credit or other obligation related to their development in the Assessment District or any
of their other projects which default would in any way materially and adversely affect their ability
to develop their respective property in the Assessment District as described in the Official
Statement or to pay the assessment for which they are responsible;
s Each of the Developers is solvent and none of the Developers have filed
bankruptcy or been declared bankrupt, or have any proceeding pending or to their actual
knowledge threatened in which they may be adjudicated as bankrupt, or discharged from any or
all of their respective debts or obligations; and
s 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 threatened in any
way seeking to restrain or to enjoin the development of their respective property within the
Assessment District.
Market Absorption Study
Empire Economics, the market absorption consultant (the “Market Absorption
Consultant”) has prepared a market analysis of the property in Benefit Area No. 1 in its Market
Absorption Study, dated February IO, 2004 (the “Market Absorption Study”). The Market
Absorption Study is attached hereto as APPENDIX C.
Based upon its analysis of the expected demographic and economic trends, the Market
Absorption Consultant estimated Benefit Area No. 1 is expected to accommodate the
residential units at build-out by the end of 2007 (assuming closings commence in the third
quarter of 2004). The Market Absorption Consultant also confirmed the reasonableness of the
minimum residential pricing anticipated by the Developers. The Market Absorption Consultant‘s
estimated absorption rates were considered, but not necessarily followed, by the Appraiser
when it estimated values of the property within Benefit Area No. 1.
The Market Absorption Study is subject to a number of assumptions and limiting
conditions. See APPENDIX C - “MARKET ABSORPTION STUDY” for a discussion of the
assumptions and limiting conditions of the Market Absorption Study.
Appraised Value of Property Within Benefit Area No. 1
In connection with the issuance of the Bonds, the District authorized Bruce W. Hull &
Associates, Ventura, California (the “Appraiser“ ), to prepare an appraisal report dated March
-31-
15, 2004 (the “Appraisal”), indicating that the value of the land in Benefit Area No. 1 owned by
the Developers (the “Appraisal Parcels”) as of March 1, 2004. Appraisal is set forth in
APPENDIX B hereto. According to the Appraisal, the aggregate fair market value of the
Appraisal Parcels subject to the limiting conditions set forth therein, totals $1 14,540,000.
The Appraiser’s valuation assumes fee simple ownership of the property, subject to the
levy of the assessments and the levy of special taxes by Community Facilities District No. 3 of
the Carlsbad Unified School District and Community Facilities District No. 1 of the City, and
reflects the Appraiser’s estimation of the market value of all the Appraised Parcels. In
considering the estimates of value evidenced by the Appraisal, it should be noted that the
Appraisal is based upon a number of standard and special assumptions which affect the
estimates as to value. See APPENDIX B. The Appraisal sets forth the Appraiser’s opinion as
to value as of March 1, 2004 based upon data available at that time, consequently it does not
reflect any changes to value that might have occurred due to occurrences after the Appraisal
was prepared or which may occur in the future. The Appraiser’s valuation assumes fee simple
ownership of the property, and reflects the Appraiser’s estimation of the bulk sale of the
undeveloped parcels.
Included among the assumptions made in the Appraisal are assumptions that no
conditions exist that are not discoverable through normal, diligent investigation which would
affect the use and the value of the property and that no hazardous materials which may cause a
loss in value of the property exist within the property appraised. The Appraiser did not observe
any hazardous material in Benefit Area No. 1; however, it expressly disclaims in the Appraisal
any expertise with respect to detection of such substances or responsibility for such
substances. The Appraiser assumes no responsibility for building permits, zoning changes,
engineering or other services or duties connected with legally utilizing the property.
The information contained herein is a summary only of certain information contained in
the Appraisal, and such information and the information contained in APPENDIX B hereto are
qualified in their entirety by the complete Appraisal.
The Appraiser has determined that the market value of land within Benefit Area No. 1
owned by the Developers is at least equal to $1 14,540,000 (see APPENDIX B hereto for a copy
of the Appraisal). The assessments allocated to these properties total $12,826,846 .
Consequently, the aggregate appraised value of these properties is 8.93* times the
assessments levied on such properties.
The following is a summary of the property owned by the Developers within Benefit Area
No. 1, along with the allocation of assessments to such property and the estimated value-to-lien
ratios.
Preliminary, subject to change. *
-32-
Gi- Y n 7 Y W
(3 g4 ad >
3 QI
i a, a, S
cs) c W
.-
SS
a- a, .a, as?
TABLE NO. 7
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. I
SUMMARY OF APPRAISED VALUE OF PROPERTY BY OWNER(1)(2)
ASSESSMENT DISTRICT NO. 2003-01
Appraised Value-to Percent - Lien of Lien Owner - Units Value - Lien
Cal E-I LLC
McMlllin Montara, LLC
Calavera W LLC
McMillin Ravinia, LLC
252 $27,700,000 $4,830,672 5.73 37.7%
102 29,990,000 1,734,436 17.29 13.5
114 27,900,000 3,209,194 8.69 25.0 - 115 28,950,000 3,052,544 - 9.48 - 23.8
Totals 583 $1 14,540,000 $12,826,846 8.93 100.0%
Source: Bruce W. Hull & Associates; Galen Peterson, Assessment Engineer.
(1) (2) Preliminary, subject to change.
Includes only property subject to lien of assessments.
The following table illustrates to assessed value assigned by the County Assessor to the
property in Benefit Area No. 1 subject to the levy of unpaid assessment.
TABLE NO. 8
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. 1
SUMMARY OF ASSESSED VALUE OF PROPERTY BY VILLAGE(I)(2)
ASSESSMENT DISTRICT NO. 2003-01
Villaqe
E- 1
K
L-2
R
U w
X
Totals
Total FY 2003/04
Assessed Value - Lien
$3,395,865 $1,930,813
137,810 1,407,257
0 243,633
32,366 83,546
2,899,859 - 3,209,194 - 3,052,544
$1 2,826,846
-
Source: California Municipal Statistics, Inc.; Galen Peterson, Assessment Engineer.
(1) (2) Preliminary, subject to change.
Includes only property subject to lien of assessments.
There is no assurance that, in the event of a foreclosure sale for a delinquent
assessment installment, any bid would be received for such property or that any bid received
would be sufficient to pay such delinquent installment. See the section herein entitled
“SPECIAL RISK FACTORS.”
-34-
In comparing the appraised value of real property within Benefit Area No. 1 and the
principal amount of the Bonds, it should be noted that only real property upon which there is a
delinquent assessment can be foreclosed, and the real property within Benefit Area No. 1
cannot be foreclosed upon as a whole to pay delinquent assessments. In any event, individual
parcels may be foreclosed upon to pay delinquent installments of the assessments levied only
against such parcels.
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.
Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as
evidenced by property tax delinquencies may also indicate an unwillingness or inability to make
regular property tax payments and 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 Benefit Area No. 1 are paid in a timely manner. Should the
installments not be paid on time, the City has established a Reserve Fund which is required to
be maintained in the amount of the Reserve Requirement, to cover delinquencies in the
payment of assessments. The assessments are secured by a lien on the parcels of land and
the City can institute foreclosure proceedings to sell land in Benefit Area No. 1 with delinquent
installments for the amount of such delinquent installments in order to obtain funds to pay debt
service on the Bonds.
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.
The Bonds are not secured by the general taxing power of the City, the County, or the
State or any political subdivision of the State, and neither the City, the County, nor the State nor
any political subdivision of the State has pledged its full faith and credit for the payment thereof.
Unpaid assessments do not constitute a personal indebtedness of the owners of the lots
and parcels within Benefit Area No. 1. 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.
-35-
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 to undertake judicial foreclosure proceedings 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 Fund, 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 applicable Redemption Fund the amount of such delinquency out of any
other available moneys 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 MONEYS IN THE RESERVE FUND AND TO UNDERTAKING JUDICIAL
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.
Bankruptcy and Foreclosure
The payment of property owners’ assessments and the ability of the City to foreclose the
lien of a delinquent unpaid assessment pursuant to the foreclosure covenant, may be limited by
bankruptcy, insolvency, or other laws generally affecting creditors’ rights or by the laws of the
State relating to judicial foreclosure. See “SECURITY FOR THE BONDS.”
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 remedies, by bankruptcy, reorganization, insolvency or other similar laws
affecting the rights of creditors generally.
Although bankruptcy proceedings would not cause the assessments to become
extinguished, bankruptcy of a property owner could result in a delay in procuring Superior Court
foreclosure proceedings. Such delay would increase the likelihood of a delay or default in
payment of the principal of, and interest on, the Bonds and the possibility of delinquent tax
installments not being paid in full.
Concentration of Property Ownership
The Developers are currently responsible for payment of approximately 100% of the
total unpaid assessments (see “THE ASSESSMENT DISTRICT - Ownership of Property in the
Assessment District” herein). Because of this concentration of ownership of land in Benefit
Area No. 1, the timely payment of the Bonds depends upon the willingness and ability of the
Developer to pay the assessments with respect to its property when due. The only assets of
the Developers within Benefit Area No. 1 which constitute security for the Bonds is the
-36-
Developers’ respective real property holdings located within Benefit Area No. 1 and subject to
the assessment. See “Bankruptcy and Foreclosure” above and “SECURITY FOR THE BONDS - Covenant to Commence Superior Court Foreclosure” herein.
Failure to Develop Land
The property within Benefit Area No. 1 subject to the assessment lien includes a
significant amount of vacant land, although it is in various stages of development. The
incentive for certain property owners in Benefit Area No. 1 to pay their assessment installments
when due could be reduced if the development potential of their property is diminished. No
assurance can be given that such development potential of the vacant land in Benefit Area No.
1 will not be diminished.
The development potential of the vacant land in Benefit Area No. 1 is based, in part, on
the assumption that discretionary approvals to build a home, or in some cases, to further
subdivide land and build several homes can be obtained from the appropriate governmental
agencies. The future development of the land within Benefit Area No. 1 may be adversely
affected by existing or future governmental policies, or both, restricting or controlling the
development of land in Benefit Area No. 1. See also “Future Land Use Regulations and Growth
Control Initiatives” below. There can be no assurance that the owners of the vacant land in
Benefit Area No. 1 will be able to secure all of the necessary discretionary approvals necessary
to develop their properties. A failure to be able to secure those discretionary approvals could
reduce the desire of the property owners to pay their annual assessment installments when
due.
In addition to reducing the ability and/or willingness of the owners of the vacant land in
Benefit Area No. 1 to make assessment installment payments when due, a reduction of the
development potential of the land could adversely affect land values and reduce the proceeds
which could be collected at a foreclosure sale in the event that assessment installments are not
paid when due. See “Land Value” below.
Except as described herein, no property owner has provided the City with any
information about its development plan, its financial resources for such plan, its experience or
its abilities, nor has any such property owner participated in any other way in the issuance of
the Bonds. Furthermore, the City has not made, and will not make, any investigation of any
property owner. Therefore, no representation is made herein as to the exp,erience, abilities or
financial resources of any such property owner or as to the likelihood that any such property
owner will be successful in developing its property. Purchasers of the Bonds should not
assume that any property owner will have the experience, abilities or financial resources
necessary to successfully develop such property. A failure to complete final development of
such property would likely make the resale thereof more difficult, thereby limiting diversification
of ownership. Such lack of diversification could be perceived as adversely affecting the security
for the Bonds, which could reduce the value and marketability thereof.
Future Land Use Regulations and Growth Control
It is possible that future growth control initiatives could be enacted by the voters or
future local, State or Federal land use regulations could be adopted by governmental agencies
and be made applicable to the development of the vacant land within Benefit Area No. 1 with
the effect of negatively impacting the ability of the Owners of such land to complete the
-37-
development of such land if they should desire to develop it. This possibility presents a risk to
prospective purchasers of the Bonds in that an inability to complete desired development
increases the risk that the Bonds will not be repaid when due. The owners of the Bonds should
assume that any reduction in the permitted density or significant increase in the cost of
development of the vacant land due to more restrictive land use regulations would cause the
values of the vacant land within Benefit Area No. 1 to decrease due to diminished development
potential. A reduction in land values increases the likelihood that in the event of a default in
payment of assessment installments a foreclosure action will result in inadequate funds to
repay the Bonds when due. See “Land Value” below.
Under current State law, it is generally accepted that proposed development is not
exempt from future land use regulations until building permits have been issued and substantial
work has been performed and substantial liabilities have been incurred in good faith reliance on
the permits. The property securing a significant majority of the assessments is currently
undeveloped, although most of it is in various stages of development. Because future
development of this property in Benefit Area No. 1 will occur over time, if at all, the application
of future land use regulations to the development of the vacant land could cause significant
delays and cost increases not currently anticipated, thereby reducing the development potential
of the property and the ability or willingness of owners of such land to pay the assessment
installments when due or causing land values of such land within Benefit Area No. 1 to
decrease substantially.
Land Development Costs
In order to develop saleable space on unimproved property, the owners of such property
may need to construct public and private improvements in addition to those being financed with
the proceeds of the Bonds. The cost of any remaining public and private in-tract, on-site and
off-site improvements would likely increase the public and private debt for which the land within
the City is security. This increased debt could reduce the ability or desire of the property
owners to pay the annual assessments levied against the property. In that event there could be
a default in the payment of principal of, and interest on, the Bonds.
Unavailability of City Funds
As discussed in the section “SECURITY FOR THE BONDS,” if a delinquency occurs in
the payment of any assessment, the City has the duty to transfer the amount of such delinquent
assessment from the Reserve Fund into the Redemption Fund. If there are additional
delinquencies after exhaustion of the Reserve Fund, the City has no direct or contingent liability
for payment of the Bonds in the event of default in the payment of an assessment installment
but does have the duty to undertake judicial foreclosure as covenanted in the Indenture.
The City will establish a Reserve Fund and initially deposit therein a portion of Bond
proceeds. As discussed in “SECURITY FOR THE BONDS - Establishment of Special Funds
and Accounts” herein, if a delinquency occurs in the Redemption Fund, the City will transfer to
the Redemption Fund an amount from the Reserve Fund equal to such delinquency. There is
no assurance that the balance in the Reserve Fund will always be adequate to make such
transfer to the Redemption Fund in the event of delinquent assessment installments. If, during
the period of delinquency, there are insufficient funds in the Reserve Fund to make up any
deficiency in the Redemption Fund, a delay may occur in payments to the owners of the Bonds.
-38-
Factors Which May Affect Land Development and Property Value
Development in Benefit Area No. 1 as well as the property value may be affected by
changes in the general economic conditions, fluctuations in the real estate market, and other
factors. In addition, the development of unimproved parcels 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 proposed development in Benefit Area No. 1, the
nature and extent of public improvements, land use, zoning and other matters. Failure to meet
any such future regulations or obtain approvals in a timely manner could delay or adversely
affect development in Benefit Area No. 1.
Land Value
The value of land within Benefit Area No. 1 is an important factor in determining the
investment quality of the Bonds. If a property owner defaults in the payment of assessment
installments, the City’s only remedy is to commence foreclosure proceedings in an attempt to
obtain funds to pay the delinquent assessment.
The Appraisal Report summarize the Appraiser’s opinion with respect to the current
value of the land within Benefit Area No. 1. The Appraisal should be read in its entirety for an
explanation of the Appraiser’s methodology and the underlying assumptions and the conditions
limiting the valuation conclusions of the Appraiser.
Prospective purchasers of the Bonds should not assume that the property within Benefit
Area No. 1 could be sold for the appraised amount at a foreclosure sale for delinquent
assessments. The actual value of the property within Benefit Area No. 1 is subject to future
events which might render invalid the basic assumptions of the Appraiser that the property
within Benefit Area No. 1 can be sold or developed and absorbed. Many factors could prevent
or delay the development or sale of the property within Benefit Area No. 1.
While the property within Benefit Area No. 1 has received final map, other than four
proposed lot splits in Village -, and is currently being developed, a portion of the property
remains undeveloped and is subject to a number of contingencies which could slow or prevent
future development. Many factors could prevent or delay the development or sale of the
property within Benefit Area No. 1. Additionally, development in Benefit Area No. 1 may be
negatively affected by changes in general conditions, fluctuations in the real estate market and
other factors. Consequently, no assurance can be given that the property within Benefit Area No. 1 will be developed as planned, and in assessing the investment quality of the Bonds,
prospective purchasers should evaluate the risks of non-completion discussed below.
First, undeveloped land and land subject to development constraints is less valuable
than such land in a developed condition and provides less valuable security to the bond owners
should it be necessary for the City to foreclose due to the nonpayment of assessments.
Second, if unimproved property within Benefit Area No. 1 remains undeveloped, the
number of likely purchasers at a foreclosure sale, in the event the City forecloses the lien of a
delinquent unpaid assessment on such property, is likely to be reduced.
Third, in addition to potentially reducing the ability and willingness of the landowner to
pay assessment installments, a slowdown on the development process could adversely affect
-39-
land values and reduce the proceeds received at the foreclosure sale in the event assessment
installments are not paid when due.
Fourth, the property within Benefit Area No. 1 is currently owned by the Developers, who
are currently responsible for payment of approximately 100% of the annual aggregate
assessment installments. Because of this concentration of ownership, the timely payment of
the Bonds depends upon the willingness and ability of the Developers to pay their respective
assessments on the unimproved land when due. A slowdown or stoppage in the continued
development of Benefit Area No. 1 might reduce the willingness of the Developers, or any
successor, to pay assessment installments on undeveloped property.
*Endangered Species
At present, the property within Benefit Area No. 1 is known to be inhabited by certain
animal species which either the California Fish and Game Commission or the United States
Fish and Wildlife Service has proposed for addition to the endangered species list.
Furthermore, new species are proposed to be added to the State and federal protected lists on
a regular basis. The City will need to obtain all necessary permits relating to the protection of
wetlands and other biological resources necessary for full development of the Improvements
(see “THE IMPROVEMENTS - Environmental Compliance” herein). Any action by the State or
federal governments to protect species located on or adjacent to the unimproved property
within Benefit Area No. 1 could negatively impact the ability of the owners of vacant land to
develop such land. This, in turn, could reduce the likelihood of timely payment of the
assessment installments levied against such vacant land and would likely reduce the value of
such land and the potential revenues available at the foreclosure sale for delinquent
assessment installments. While existing development within Benefit Area No. 1 has conformed
to current standards and permit requirements, there can be no guaranty that these standards
and requirements will not change, and make future development more difficult or expensive.
See “Failure to Develop Land” and “Land Value” herein.
Earthquakes and Natural Disasters
The market value of the land and improvements within the Assessment District can be
adversely affected by a variety of factors, particularly those which may affect infrastructure and
other public improvements and private improvements of the parcels and the continued
habitability and enjoyment of such public and private improvements. Such additional factors
include, without limitation, geologic conditions (such as earthquakes), topographic conditions
(such as earth movements and floods) and climatic conditions (such as droughts and fire
hazard). The properties within Benefit Area No. 1 are not impacted by the 100-year flood.
Portions of the properties within Benefit Area No. 2 of the Assessment District lie within the area
inundated by the 100-year flood, including portions of Cannon Road, College Boulevard and
Retention Basin BJB. All of the proposed Assessment District improvements have been
designed to withstand or, in the case of Retention Basin BJB, mitigate the impacts of the 100-
year flood in accordance with City and Federal Emergency Management Agency (FEMA)
requirements. Portions of the future developable areas of the properties within Benefit Area
No. 2 also lie within the areas inundated by the 100-year flood. All future development within
these areas will be required to raise development pads above the level of the 100-flood and to
* To be discussed.
-40-
otherwise mitigate flood impacts to a level of non-significance in accordance with City and
FEMA requirements as a condition of development of the property.
The seismic risks to a structure are dependent upon several factors, including: the
distance of the structure from the fault, the character of the earthquake, the nature of
construction, and the geologic conditions underlying a structure. Ground surface rupture tends
to occur along lines of previous faulting, where fault displacement intersects the ground
surface. Displacement may either occur suddenly during an earthquake or it may occur slowly
as the fault “creeps” over a long period of time. The Assessment District is not in an
earthquake fault zone as designated by the California State Division of Mines and Geology.
These factors are taken into account in the design of public improvements and other
infrastructure. Further, building codes require that these factors be taken account in the design
of private improvements of the parcels, and the County has adopted the 1997 Uniform Building
Code standards, with some modifications, with regards to seismic standards. Design criteria in
any of these circumstances are established upon the basis of a variety of considerations and
may change, leaving previously designed improvements unaffected by more stringent
subsequently established criteria. In general, design criteria reflect a balance between the
present costs of protection and the future costs of lack of protection, based in part upon a
present perception of the probability that the condition will occur and the seriousness of the
condition should it occur. Consequently, neither the absence of nor the establishment of design
criteria with respect to any particular condition means that the builder has evaluated the
condition and has established design criteria in the situations in which such criteria are needed
to preserve value, or has established such criteria at levels that will preserve value. To the
contrary, it is expected that one or more of such conditions may occur and may result in
damage to improvements of varying seriousness, that the damage may entail significant repair
or replacement costs and that repair or replacement may never occur either because of the
cost or because repair or replacement will not facilitate habitability or other use, or because
other considerations preclude such repair or replacement. Under any of these circumstances,
the actual value of the parcels in the Assessment District may well depreciate or disappear
notwithstanding the establishment of design criteria for any such condition.
Earthquake insurance is available, but many property owners elect not to purchase it.
Damage or destruction to property within the Assessment District caused by earthquake or
other natural disasters could result in the failure of the owner of property within the Assessment
District to pay the assessments and could result in a significant reduction in the value of
property within the Assessment District, with no source of funds for reconstruction.
Hazardous Substances
While governmental taxes, assessments and charges are a common claim against the
value of a taxed parcel, other less common claims may be relevant. One of the most serious in
terms of the potential reduction in the value that may be realized to pay the assessment is a
claim with regard to a hazardous substance. In general, the owners and operators of a parcel
within the Assessment District may be required by law to remedy conditions of the parcel
relating to releases or threatened releases of hazardous substances. The federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes
referred to as “CERCLA” or “Superfund Act,” is the most well known and widely applicable of
these laws, but California laws with regard to hazardous substances are also stringent and
similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous
-41 -
substance condition of property whether or not the owner (or operator) has anything to do with
creating or handling the hazardous substance. The effect therefore, should any of the parcels
within the Assessment District be affected by a hazardous substance, is to reduce the
marketability and value of the parcel by the costs of remedying the condition, because the
owner is obligated to remedy the condition. Further, such liabilities may arise not simply from
the existence of a hazardous substance but from the method of handling it. All of these
possibilities could significantly affect the value of a property that is realizable upon a
delinquency and foreclosure.
The City is not aware of any hazardous substances located within Benefit Area No. 1.
Benefit Area No. 2 of the Assessment District was historically used for agricultural purposes.
Pursuant to the environmental studies done for the Assessment District, near surface soils were
found to contain pesticides within the graded area of Cannon Road and College Boulevard.
With the approval of the County of San Diego Department of Environmental Health, these
pesticide-impacted soils were excavated and utilized as deep-seated fill material within the
constructed roadbeds for Cannon Road and College Boulevard. Subsequent sampling and
analysis demonstrate that the material does not pose a measurable threat to public health or to
the environment. A similar approval from the State Regional Water Quality Control Board is
pending.
The future developable parcels within Benefit Area No. 2 will likely have similar
agricultural byproducts in their near surface soils. Such conditions are not unusual for
developments within the North San Diego County area. The City will require as part of the
environmental mitigation measures for the future development of the parcels within Benefit
Area No. 2, that all such agriculturally related hazardous substances are disposed of or
otherwise mitigated in accordance with all governmental regulations.
Future Overlapping Indebtedness
The ability of an owner of land within the Assessment District to pay the assessments
could be affected by the existence of other taxes and assessments imposed upon the property
subsequent to the date of issuance of the Bonds. In addition, other public agencies whose
boundaries overlap those of the Assessment District could, without the consent of the City, and
in certain cases without the consent of all of the owners of the land within the Assessment
District, impose additional taxes or assessment liens on the property within the Assessment
District to finance public improvements to be located inside of or outside of the Assessment
District.
The assessment and each installment thereof and any interest and penalties thereon
constitute a lien against the parcels on which they were imposed until the same are paid.
Pursuant to the 1913 Act, the lien of the assessment is subordinate to all fixed special
assessment liens imposed prior to the original assessment upon the same property, but has
priority over all private liens and over all fixed special assessment liens created against the
property after imposition of the lien of the original assessment. Such lien is coequal to and
independent of the lien for general taxes and any lien imposed under the Mello-Roos
Community Facilities Act of 1982, as amended. See “THE ASSESSMENT DISTRICT -
Overlapping Debt” for a discussion of existing overlapping debt in the Assessment District.
-42-
No Acceleration Provision
The Bonds do not contain a provision allowing for the acceleration of the Bonds in the
event of a payment default or other default under the terms of the Bonds.
Ballot Initiatives
From time to time, initiative measures qualify for the State ballot pursuant to the State’s
constitutional initiative process and those measures could be adopted by California voters. The
adoption of any such initiative might place limitations on the ability of the State, the City, the
County or other local agencies to increase revenues or to increase appropriations or on the
ability of the landowners to complete the development of the vacant land within the City. See
“Factors Which May Affect Land Development and Property Value” above. See also
“Proposition 21 8” below.
Proposition 21 8
On November 5, 1996, the voters of the State approved Proposition 21 8, the so-called
“Right to Vote on Taxes Act.” Proposition 218 added Articles XlllC and XlllD to the State
Constitution, which contain a number of provisions affecting the ability to the City to levy and
collect both existing and future taxes, assessments and property related fees and charges.
On November 5, 1996, the voters of the State approved Proposition 218, the “Right to
Vote on Taxes Act.” Proposition 218 added Articles XlllC and XlllD to the State Constitution,
which contain a number of provisions affecting the ability of the City to levy and collect both
existing and future taxes, assessments, fees and charges.
Article XlllC removes limitations on the initiative power in matters of local taxes, special
taxes, assessments, fees and charges. In the case of the unpaid assessments which are
pledged as security for payment of the Bonds, the laws of the State provide a mandatory,
statutory duty of the City and the County Auditor to post installments on account of the unpaid
assessments to the property tax roll of the County each year while any of the Bonds are
outstanding, commencing with property tax year 2004/05, in amounts equal to the principal of
and interest on the Bonds coming due in the succeeding calendar year. The City believes that
the initiative power cannot be used to reduce or repeal the levy of the assessments which are
pledged as security for payment of the Bonds or to otherwise interfere with performance of the
mandatory, statutory duty of the City and the County Auditor with respect to the unpaid
assessment installments which are pledged as security for payment of the Bonds. The City
further believes that the administrative and substantive provisions of Proposition 21 8 do not
materially adversely affect the levy of the assessment.
The interpretation and application of Proposition 21 8 will ultimately be determined by the
courts with respect to a number of the matters discussed above, and it is not possible at this
time to predict with certainly the outcome of such determination.
Enforceability of Remedies
The remedies available to the Paying Agent, the City, or the Owners of the Bonds upon
any nonpayment of assessment installments are in many respects dependent upon judicial
actions, which are often subject to discretion and delay. Under existing constitutional and
-43-
statutory law and judicial decisions, including specifically Title 11 of the United States Code (the
federal bankruptcy code) and relevant banking and insurance law, the remedies provided in the
1915 Act and the 1913 Act may not be readily available or may be limited. 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 limitations imposed by bankruptcy, reorganization, insolvency, or 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.
Loss of Tax Exemption
As discussed in this Official Statement under the caption “TAX MATTERS,” interest on
the Bonds could become includable in gross income for purposes of federal income taxation
retroactive to the date the Bonds were issued, as a result of future acts or omissions of the City
in violation of its covenants in the Indenture. Should such an event of taxability occur, the
Bonds are not subject to a special redemption and will remain outstanding until maturity or until
redeemed under one of the other redemption provisions contained in the Indenture.
Absence of Market for the Bonds; No Rating
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 upon prevailing market
conditions, the financial condition or market position of firms who may make the secondary
market and the financial condition of the City and the Assessment District.
CONTINUING DISCLOSURE
The City has covenanted for the benefit of owners of the Bonds to provide certain
financial information and operating data relating to the City by not later than 270 days after the
end of the City’s fiscal year (which fiscal year presently ends June 30) in each year
commencing with its report for the 2003/04 Fiscal Year (the “Annual Report”) and to provide
notices of the occurrence of certain enumerated events. The Annual Report will be filed by the
City with each Nationally Recognized Municipal Securities Information Repository. The notices
of material events will be filed by the City with the Municipal Securities Rulemaking Board.
These covenants have been made in order to assist the Underwriter in complying with
Securities Exchange Commission Rule 15c2-12(b)(5). The specific nature of the information to
be contained in the Annual Report or the notices of material events by the City is summarized in
“APPENDIX G - FORM OF CONTINUING DISCLOSURE AGREEMENTS.” The City has never
failed to comply in any material respect with an undertaking under the Rule to provide annual
reports or notices of material events.*
* To be confirmed.
-44-
The Developers have covenanted in separate Developer Continuing Disclosure
Agreements, the form of which is set forth in APPENDIX G (collectively, the “Developer
Continuing Disclosure Agreements”), for the benefit of owners and beneficial owners of the
Bonds, to provide certain information relating to such owner and the parcels within the District
which it owns (each, a “Developer Semi-Annual Report”) by not later than May 15 and
November 15 of each applicable year, commencing November 15, 2004 and to provide notices
of the occurrence of certain enumerated events.
The Developer Semi-Annual Reports will be filed by the Developers, or the applicable
“Dissemination Agent” (as that term is defined in the Developer Continuing Disclosure
Agreement) on behalf of the Developers, with the Repositories, with a copy to the Underwriter,
the Paying Agent (if different than the Dissemination Agent) and the City. Any notice of a
material event will be filed by the Developers, or by the Dissemination Agent on behalf of the
Developers, with the Municipal Securities Rulemaking Board and the appropriate State
repository, if any, with a copy to the Underwriter, the Paying Agent (if different than the
Dissemination Agent) and the City. The specific nature of the information to be contained in the
Developer Semi-Annual Reports or the notices of material events is set forth in the Developer
Continuing Disclosure Agreements. The covenants of the Developers, in the respective
Developer Continuing Disclosure Agreement have been made in order to assist the Underwriter
in complying with the Rule; provided however a default under the Developer Continuing
Disclosure Agreement will not, in itself, constitute an Event of Default under the Indenture. The
sole remedy under the Developer Continuing Disclosure Agreements in the event of any failure
of the Developers or the Dissemination Agent to comply with the applicable Developer
Continuing Disclosure Agreement will be an action to compel specific performance. the
Developers’ continuing disclosure obligations will terminate upon the occurrence of certain
events, including when a Developer is subject to less than 20% of the assessment levy of the
Assessment District for the then current Fiscal Year. Based on the estimated absorption such
date is estimated to occur by the , and by the
quarter of 200- for , based on estimated sales of homes to
homeowners.
quarter of 200- for
The Developers have indicated that to their actual knowledge their Affiliates (as defined
in the Developer Continuing Disclosure Agreement) have never failed to comply in any material
respect with an undertaking under the Rule to provide annual or semi-annual reports or notices
of material events.*
ABSENCE OF MATERIAL LITIGATION
There is no controversy or litigation now pending against the City, or, to the knowledge
of its officers, threatened, restraining, or enjoining the formation of the Assessment District, the
levy of the assessment or the issuance, sale, execution, or delivery of the Bonds or in any way
contesting or affecting the validity of the Bonds.
* To be confirmed.
-45-
TAX MAlTERS
General
In the opinion of Best Best & Krieger LLP, San Diego, California, Bond Counsel, under
existing statutes, regulations, rulings and judicial decisions, interest on the Bonds is excluded
from gross income for federal income tax purposes and is not an item of tax preference for
purposes of the federal alternative minimum tax imposed on individuals and corporations. In
the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California
personal income tax. Bond Counsel notes that, with respect to corporations, interest on the
Bonds will be included as an adjustment in the calculation of the alternative minimum taxable
income, which may affect the alternative minimum tax liability of such corporations.
Bond Counsel’s opinion as to the exclusion from gross income of interest on the Bonds
is based upon certain representations of fact and certifications made by the City and others and
is subject to the condition that the City complies with all requirements of the Internal Revenue
Code of 1986, as amended, and United States Treasury Regulations proposed or in effect with
respect thereto (the “Code”) that must be satisfied subsequent to the issuance of the Bonds to
assure that interest on the Bonds will not become includable in gross income for federal income
tax purposes. Failure to comply with such requirements of the Code might cause interest on
the Bonds to be included in gross income for federal income tax purposes retroactive to the
date of issuance of the Bonds. The City has covenanted to comply with all such requirements.
Bond Counsel’s opinion may be affected by action taken (or not taken) or events
occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to
determine, or to inform any person, whether any such actions taken or events are taken or do
occur. Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded
from gross income for federal income tax purposes provided that the City continues to comply
with certain requirements of the Code, the ownership of the Bonds and the accrual or receipt of
interest on the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel
expresses no opinion regarding any such tax consequences. Accordingly, before purchasing
any of the Bonds all potential purchasers should consult their tax advisors with respect to
collateral tax consequences of the Bonds.
See APPENDIX F hereto for the form of Bond Counsel’s opinion.
APPROVAL OF LEGALITY
The validity of the Bonds and certain other legal matters are subject to the approving
opinion of Best Best & Krieger LLP, Bond Counsel. A complete copy of the proposed form of
Bond Counsel opinion is contained in APPENDIX F hereto and is attached to the Bonds. Bond
Counsel has undertaken no responsibility for the accuracy, completeness, or fairness of this
Official Statement. Certain matters will be passed upon for the City by the City Attorney, and by
Nossaman, Guthner, Knox & Elliott, LLP, as Disclosure Counsel.
-46-
NO RATING
The City has not made, and does not contemplate making, an application to any rating
agency for the assignment of a rating to the Bonds.
UNDERWRITING
Stone & Youngberg LLC (the “Underwriter”) has agreed to purchase the Bonds if and
when issued pursuant to a contract of purchase by and between the City and the Underwriter
for $ (representing the aggregate principal amount of the Bonds, less an
Underwriter’s discount of $ , and [less net original discount] of [plus net original
premium] $ ). The purchase contract pursuant to which the Underwriter is
purchasing the Bonds provides that the Underwriter will purchase all of the Bonds if any are
purchased. The obligation of the Underwriter to make such purchase is subject to certain terms
and conditions set forth in such contract of purchase.
The Underwriter may offer and sell the Bonds to certain dealers and others at prices
different from the prices stated on the cover page of this Official Statement. The offering prices
may be changed from time to time by the Underwriter.
MISCELLANEOUS
The foregoing summaries or descriptions of provisions of the 1915 Act, the 1913 Act,
the Bonds, the Indenture, and all references to other materials not purporting to be quoted in
full are only brief outlines of some of the provisions thereof and do not purport to summarize or
describe all of the provisions thereof, and reference is made to said documents for full and
complete statements of their provisions. The appendices hereto are a part of this Official
Statement.
Any statements in this Official Statement involving matters of opinion, whether or not
expressly so stated, are intended as such and not as representations of fact. The Official
Statement is not to be construed as a contract or agreement between the City and the
purchasers or Owners of any of the Bonds.
The execution and delivery of this Official Statement has been duly authorized by the
City.
CITY OF CARLSBAD
By:
Title:
-47-
APPENDIX A
EXCERPTS FROM ENGINEER’S REPORT
APPENDIX B
SUMMARY OF THE APPRAISAL
APPENDIX C
MARKET ABSORPTION REPORT
APPENDIX D
SUMMARY OF THE INDENTURE
APPENDIX E
GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION
The information in this section of the Official Statement is presented as
general background data. The Bonds are payable solely from the proceeds of the
assessments and other sources as described in the Official Statement. The taxing
power of the City, the State of California, or any political subdivision thereof is not
pledged to the payment of the Bonds.
History and Location
The City was incorporated in 1952, and currently serves an area of
approximately 42 square miles with an estimated 2004 population of 90,300. The City is
located on the Pacific Ocean in northern San Diego County (the “County”), approximately 35
miles north of the City of San Diego.
The City has, since incorporation, been governed and operated under the
Council-Manager form of government. The City Manager directs a work force of full
and part-time employees and appoints department heads on the basis of specialized
knowledge, experience and education in their area of responsibility. The City employees are
members of the State Public Employees Retirement System (the “System”). The contributions
to the System are current and no unfunded contractual liability exists for past services.*
To be confirmed. *
E- 1
Carlsbad Cannon Road POS (1 l).DOC
The following provides miscellaneous statistical data for the City, as of June 30,
2003:
Date of Incorporation
Type of City
Form of Government
Area
Population (CA Dept of Finance Report 01/01/03)
Net Assessed Valuation
CounciVManager
July 16, 1952
General Law
42.19 sq. miles
90,271
$1 3,009,711,56
2
Streets:
Number of Street Lights
Miles of Streets
Fire Protection:
Number of Stations
Number of Firefighters & Officers
Police Protection:
Number of Stations
Number of Sworn Police Officers
Municipal Water District:
Number of Customers
Number of Water Connections
Average Daily Consumption (in Millions of Gallons)
Miles of Lines and Mains
Miles of Sewers
Recreation and Culture:
Number of Parks
Acres of Parks (Improved Community & Special Use Areas)
Acres of Open Space (Special Resource Areas & General
Number of Pools
Number of Libraries
Number of Materials in Circulation
City-Owned Open Space)
Total Number of Authorized Full-Time City Employees
Source: City of Carlsbad, Finance Department
6,336
295
6
73
1
107
76,730
24,500
400
18.6
149
39
295
490
1
2
31 9,032,
646
E-2
Carlsbad Cannon Road POS (1 l).DOC
Population
the City’s current population is approximately 90,300, and expects to be built out
according to general plan estimates to a population of 120,000. Table 1 illustrates comparative
population figures through 2002, the last year figures are available from the State.
E-3
Carlsbad Cannon Road POS (1 l).DOC
F N-
N-
r
Assessed Valuation
The following Table set forth assessed valuation growth in the City. The City
receives only a portion of the total tax collections shown below. A portion of the basic 1%
property tax rate is received by other taxing entities.
CITY OF CARLSBAD
ASSESSED VALUATION(1) (Fiscal Year Ending June 30)
Total Percent
Fiscal Total Total Assessed Change From Year Secured Unsecured Previous Year
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
$5,858,987,695
5,ai I ,751,594
5,673,354,814
5,676,061,219
6,232,883,670
7,154,426,710
8,675,347,964
I 0,2ag,a95,123
I I ,586,003,633
I 2,a01,430,765
$270,120,519
31 0,402,764
348,706,124
352,854,173
424,962,226
41 9,824,253
422,862,440
519,294,090
487,682,538
288,206,831
$6,129,108,214
5,961,561,645
6,160,457,718
7,579,388,936
9,035,172,217
10,712,757,563
12,105,297,723
13,289,113,303
5,986,463,983
6,585,737,843
--
(2.7%)
0.4
2.9
6.9
15.1
19.2
18.6
13.0
9.8
Source: County of San Diego Assessor’s Office
(1) Excludes exemptions, unitary value and redevelopment incremental value.
CITY OF CARLSBAD
TEN LARGEST TAXPAYERS
(June 30,2003)
Taxpaver
Callaway Golf Company Aviara Resort Associates
La Costa Hotel & Spa Corporation Legoland California, Inc. Continuing Life
Real Estate Collateral Mgmt. Co. Prentiss Properties
Air Products 8, Chemicals
H.G. Fenton Company
Universe Institutional
SSR Western MultiFamily, LLC
Santa Fe Ranch LLC
TOTAL:
Tvpe of Business
Manufacturer Resort & Golf Course Hotel & Health Spa
Family Theme Park Senior Retirement Community Real Estate Real Estate
Manufacturer
Distribution Warehouse Residential Apartment Rentals
Real Estate
Residential Apartment Rentals
Valuation
$ 178,033,606 127,260,300
125,837,967
105,000,000
95,321,386
69,264,936
68,418,264 63,640,951 61,714,726
51,711,630 47,853,207 46,039,800
'
... Source: San Diego County Assessor's Office and City Finance DwlfteR-
$1,040,096,773 is 8.0% of the total assessed value in Fiscal Year 2002/03 of
$13,009,711,562.
Retail and Total Taxable Sales
Retail sales in the City increased over 66.7% in the period of 1997 to 2002.
Total sales in the City increased over 60.0% in the same period. The following table present
the retail taxable transactions of the City and San Diego County for the calendar years 1997
through 2002.
CITY OF CARLSBAD NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS
($ in thousands)
Retail Stores Total All Outlets
No. Of Taxable No of Taxable Year Permits Transactions % Chanqe Permits Transactions % Chanqe
1997 838 $ 920,206 -- 2,830 $I ,206,670 --
1998 91 1 1,077,897 17.1% 2,984 1,417,670 17.5%
1999 1,000 1,231,255 14.2 3,064 1,597,275 12.7
2000 1,166 1,381,409 12.2 3,249 1,790,215 12.1
2001 1,248 1,483,053 7.4 3,327 1,868,939 4.4
2002 1,328 1,534,421 3.4 3,512 1,930,892 3.3
Source: California State Board of Equalization
c-2
COUNTY OF SAN DIEGO
NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS ($ in thousands)
Retail Stores Total All Outlets
No. Of Taxable No of Taxable
Year Permits Transactions % Chanqe Permits Transactions Yo Chanqe
1997 32,381 $18,402,311 7.4% 77,192 $27,408,526 9.0%
1998 32,269 19,936,526 8.3 77,923 29,616,004 8.0
1999 34,095 22,235,683 11.5 79,120 32,752,405 10.6
2000 35,758 24,953,089 12.2 79,598 36,245,418 10.7
2001 36,753 26,263,338 5.2 80,248 37,699,333 4.0
2002 38,358 27,421,599 4.4 81,462 38,595,547 2.4
Source: California State Board of Equalization
Construction Activity
below.
Building permit values for fiscal years 1993/94 through 2002/03 are shown
CITY OF CARLSBAD
RESIDENTIAL AND COMMERCIAL CONSTRUCTION ACTIVITY
(Fiscal Year Ending June 30)
Value of Year
1993194
1994195
1995196
1996197
1997198
1998199
I999100
2000101
2001102
2002103
Est. Fiscal
Construction
$ 71,057,243
145,344,099
162,116,427
305,247,426
479,909,805
588,527,417
468,596,775
513,763,904
272,671,912
265,175,025
Source: City of Carlsbad Planning Department
Employment
the Metropolitan Statistical Area (MSA) comprised of San Diego County. The following table
sets forth information with respect to the labor force in general in the County of San Diego.
The City has, historically, been primarily a residential community, and is part of
c-3
- Year
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994 1995 1996 1997
COUNTY OF SAN DIEGO
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
(1985 - 2002)
Labor Force
967,200
1,010,900
1,059,400
1,126,300
1,172,100
1.201.800
1 ;189:900
1,201,000
1,226,300
1,235,100 1,226,200 1,245,700 1.281.600
Emploved
91 5,900
960,500
1,011,700
1,078,400
1 ,I 25,900
1,145,700
1,115,000
1,113,000
1,131,600
1,148,200 1,147,800
1 ,I 80,100 1.227.200
Unemployed
51,300
50,400 47,700
47,900
46,200
56,100
74,900
88,000
94,700
86,900 78,400 65,600 54.400
1998 1 :327:700 1 :287:700 40:OOO
I999
2000
I~~ . ~~ . ~~ 1,361,600 i :319,600 1,404,900 1,362,900
~. ,... 42,000 42,000 2001 1,424,900 1,379,200 45,700
2002* 1,473,100 1,410,700 62,400
* As of July 2002
(1) Unadjusted for season.
Source: State of California Employment Development Department
Unemployment
Ratio(1)
5.3%
5.0
4.5
4.3
3.9
4.7
6.3
7.3
7.7
7.0 6.4 5.3 4.2
3.0 3.1
3.0 3.2 4.2
C-4
APPENDIX F
FORM OF BOND COUNSEL OPINION
APPENDIX G
FORM OF CONTINUING DISCLOSURE AGREEMENTS
APPENDIX H
BOOK-ENTRY SYSTEM
The information concerning DTC set forth herein has been supplied by DTC, and the
City assumes no responsibility for the accuracy thereof.
Unless a successor securities depository is designated pursuant to the Indenture, DTC
will act as Securities Depository for the Bonds. The Bonds will be issued as fully-registered
securities, registered in the name of Cede & Co., DTC’s partnership nominee, or such other
name as may be requested by an authorized representative of DTC. One fully-registered Bond
will be issued for each maturity of the Bonds, each in the aggregate principal amount of such
maturity, and will be deposited with DTC.
DTC and Its Participants. DTC, the world’s largest depository, is a limited-purpose
trust company organized under the New York Banking Law, a “banking organization” within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing
corporation” within the meaning of the New York Uniform Commercial Code and a ”clearing
City” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. DTC holds and provides asset servicing for over 2 million issues of US. and non-U.S.
equity issues, corporate and municipal debt issues, and money market instruments from over
85 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also
facilitates the post-trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book-entry transfer and
pledges between Direct Participants’ accounts. This eliminates the need for physical
movement of securities certificates. Direct Participants include both US. and non-U.S.
securities brokers and dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing
Corporation (“DTCC). DTCC, in turn, is owned by a number of Direct Participants of DTC and
Members of the National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation. (NSCC,
GSCC, MBSCC, and EMCC, also subsidiaries of DTCC) as well as by the New York Stock
Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others, such as securities brokers
and dealers, banks and trust companies and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect
Participants”). DTC has Standard & Poor’s highest rating of “AAA.” The DTC Rules applicable
to its Participants are on file with the Securities Exchange Commission. More information about
DTC can be found at www.dtcc.com.
Purchase of Ownership Interests. Purchases of the Bonds under the DTC system
must be made by or through Direct Participants, which will receive a credit for the Bonds on
DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial
Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial
Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners
are, however, expected to receive written confirmations providing details of the transaction, as
well as periodic statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
F- 1
representing their ownership interests in the Bonds, except in the event that use of the book-
entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC
are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as
may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and
their registration in the name of Cede & Co. or such other DTC nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such
securities are credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
Notices and Other Communications. Conveyance of notices and other
communications by DTC to Direct Participants, by Direct Participants to Indirect Participants,
and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in
effect from time to time. THE AGENCY AND THE TRUSTEE WILL NOT HAVE ANY
RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS
FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE BONDS.
Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue
are being redeemed, DTC‘s practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
Voting Rights. Neither DTC nor Cede & Co. will consent or vote with respect to the
Bonds unless authorized by a Direct Participant in accordance with DTC’s procedures. Under
its usual procedures, DTC mails an Omnibus Proxy to an issuer as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those
Direct Participants to whose accounts the Bonds are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Redemption Proceeds. Payments of principal and interest with respect to the Bonds
will be made to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC. DTC‘s practice is to credit Direct Participants’ accounts on interest
payment dates in accordance with their respective holdings shown on DTC‘s records unless
DTC has reason to believe that it will not receive payment on the interest payment date.
Payments by Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of customers in bearer
form or registered in “street name,” and will be the responsibility of such Participant and not of
DTC nor its nominee, the Paying Agent, or the City, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of redemption proceeds, principal
and interest to Cede & Co., or such other nominee as may be requested by an authorized
representative of DTC is the responsibility of the Paying Agent, disbursement of such payments
to Direct Participants will be the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
THE TRUSTEE AND THE AGENCY SHALL NOT HAVE ANY RESPONSIBILITY OR
OBLIGATION TO ANY DTC PARTICIPANT, ANY BENEFICIAL OWNER OR ANY OTHER
PERSON CLAIMING A BENEFICIAL OWNERSHIP INTEREST IN THE BONDS UNDER OR
THROUGH DTC OR ANY DTC PARTICIPANT, OR ANY OTHER PERSON WHICH IS NOT
SHOWN ON THE REGISTRATION BOOKS OF THE TRUSTEE AS BEING AN OWNER OF
F-2
BONDS, WITH RESPECT TO THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC
OR ANY DTC PARTICIPANT; THE PAYMENT BY DTC OR ANY DTC PARTICIPANT OF ANY
AMOUNT IN RESPECT OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, OR INTEREST
WITH RESPECT TO THE BONDS; ANY NOTICE WHICH IS PERMITTED OR REQUIRED TO
BE GIVEN TO OWNER OF THE BONDS UNDER THE INDENTURE; THE SELECTION BY
DTC OR ANY DIRECT OR INDIRECT PARTICIPANT OF ANY PERSON TO RECEIVE
PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; ANY CONSENT
OR OTHER ACTION TAKEN BY DTC AS OWNER OF THE BONDS; OR ANY OTHER
PROCEDURES OR OBLIGATIONS OF DTC UNDER THE BOOK-ENTRY SYSTEM.
SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS
NOMINEE OF DTC, REFERENCES HEREIN TO THE REGISTERED OWNERS OF THE
BONDS SHALL MEAN CEDE & CO., AS AFORESAID, AND SHALL NOT MEAN THE
BENEFICIAL OWNERS OF THE BONDS (EXCEPT FOR THE MATTERS UNDER THE
CAPTION "TAX MATTERS HEREIN)
The foregoing description of the procedures and record keeping with respect to
beneficial ownership interests in the Bonds, payment of principal and interest with respect to the
Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial owner
interest in such Bonds and other related transactions by and between DTC, the DTC
Participants and the Beneficial Owner is based solely on information provided by DTC.
Accordingly, no representations can be made concerning these matters, and neither the DTC
Participants nor the Beneficial Owners should rely on the foregoing information with respect to
such matters, but should instead confirm the same with DTC or the DTC Participants, as the
case may be.
Discontinuance of Book-Entry System. DTC may discontinue providing its services
as securities depository with respect to the Bonds at any time by giving reasonable notice to the
City or the Paying Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Bonds are required to be printed and delivered as described in the
Indenture.
The City may decide to discontinue use of the system of book-entry transfers through
DTC (or a successor securities depository). In that event, Bonds will be printed and delivered
as described in the Indenture and payment of interest to each Owner who owns of record
$1,000,000 or more in aggregate principal amount of Bonds may be made to such Owner by
wire transfer to such wire address within the United States that such Owner may request in
writing for all Interest Payment Dates following the 15~'~ day after the Paying Agent's receipt of
such request.
F-3
Exhibit 4
BOND INDENTURE
by and between
THE CITY OF CARLSBAD
and
BNY WESTERN TRUST COMPANY
as Paying Agent
Dated as of May 1,2004
Relating to
$
City of Carlsbad
Assessment District No. 2003-01
(College Boulevard and Cannon Road East)
Benefit Area No. 1 Limited Obligation Improvement Bonds
(Property Secured Only - No Issuer Liability)
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01\Bond IndentureDond Indenture [4.9.04].doc
DRAFT 4/9/04
BOND INDENTURE
THIS AGREEMENT (the “Indenture”) is dated and entered into as of May 1,
2004, by and between the City of Carlsbad, California, a municipal corporation (the “City”), and
BNY Western Trust Company, a national banking association duly organized and existing under
the laws of the United States, as Paying Agent (the “Paying Agent”).
W ITNE S SETH:
WHEREAS, the City Council of the City (the “City Council”) has formed
Assessment District No. 2003-01 (College Boulevard and Cannon Road East), City of Carlsbad,
County of San Diego, State of California (the “Assessment District”), and has levied an
assessment on the property in the Assessment District pursuant to the provisions of the
Municipal Improvement Act of 1913, Division 12 (commencing with Section 10000) of the
California Streets and Highways Code, and provided for the issuance of bonds for the
Assessment District pursuant to the Improvement Bond Act of 19 15 (the “Bond Act”), Division
10 (commencing with Section 8500) of the California Streets and Highways Code, to be secured
by such assessment, to finance the design, construction and acquisition of public improvements
for the benefit of the property within the Assessment District; and
WHEREAS, pursuant to the Bond Act, the City Council adopted its Resolution
No. which resolution, among other matters, authorized the issuance of Benefit Area No. 1
Limited Obligation Improvement Bonds (the “Bonds”), in an aggregate principal amount of not
to exceed $ , the unpaid amount of the assessment levied on parcels of property
within Benefit Area No. 1 of the Assessment District, and provided that such issuance would be
in accordance with the Bond Act and this Indenture, and authorized the execution hereof; and
WHEREAS, it is in the public interest and for the benefit of the owners of the
property within Benefit Area No. 1 of the Assessment District and the owners of the Bonds that
the City enter into this Indenture to provide for the issuance of the Bonds, the disbursement of
proceeds of the Bonds, and the administration and payment of the Bonds; and
WHEREAS, the Bonds will be secured by and paid fi-om the assessments levied
on the parcels of property within Benefit Area No. 1 of the Assessment District and the annual
installments of such assessments collected with respect to such parcels; and
WHEREAS, all things necessary to cause the Bonds, when executed by the City
and authenticated by the Paying Agent and issued as in the Bond Act, the Resolution (as
hereinafter defined) and this Indenture provided, to be legal, valid and binding special
obligations of the City in accordance with their terms, and all things necessary to cause the
authorization, execution and delivery of this Indenture and the authorization, execution,
authentication and delivery of the Bonds, subject to the terms hereof, have in all respects been
duly authorized;
S:\Warren.Diven\Cities\City of Carlsbad\CannonCollege AD 2003-01 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4l9f 042
NOW, THEREFORE, in consideration of the covenants and provisions herein set
forth and for other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
AUTHORITY AND DEFINITIONS
Section 1.01. Authority for this Indenture. This Indenture is entered into
pursuant to the provisions of the Bond Act and the Resolution.
Section 1.02. Indenture for Benefit of Bond Owners. The provisions, covenants
and agreements herein set forth to be performed by or on behalf of the City shall be for the equal
benefit, protection and security of the Owners. All of the Bonds, without regard to the time or
times of their issuance or maturity, shall be of equal rank without preference, priority or
distinction of any of the Bonds over any other thereof, except as expressly provided in or
permitted by this Indenture. The Paying Agent may become the owner of any of the Bonds with
the same rights it would have if it were not Paying Agent.
Section 1.03. Definitions. Unless the context otherwise requires, the terms
defined in this Section 1.03 shall, for all purposes of this Indenture, of any Supplemental
Indenture, and of any certificate, opinion or other document herein mentioned, have the
meanings herein specified. All references herein to “Articles,” “Sections” and other subdivisions
are to the corresponding Articles, Sections or subdivisions of this Indenture, and the words
“herein,” “hereof,” “hereunder” and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or subdivision hereof.
“Acquisition Agreement” means the AcquisitiodFinancing Agreement, dated as
of December 11, 2002, by and between the City and Calavera Hills 11, LLC, as amended by the
First Amendment thereto and as such agreement may be further amended fi-om time to time.
“Annual Debt Service” means, for each Bond Year, the sum of (i) the interest due
on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as
scheduled, and (ii) the principal amount of the Outstanding Bonds scheduled to be paid.
“Assessment” or “Assessments” means the assessment levied on the lots and
parcels of property within Benefit Area No. 1 of the Assessment District by the adoption by the
City Council of Resolution No. 2003-244 on September 16, 2003 and the recording of the
assessment diagram and notice of assessment for the Assessment District with the County
Recorder of the County of San Diego pursuant to Section 3 114 of the California Streets and
Highways Code.
“Assessment District” means Assessment District No. 2003-01 (College
Boulevard and Cannon Road East), City of Carlsbad, County of San Diego, State of California.
“Assessment Prepayment” means an amount received by the City from a property
owner as a payment in full of the unpaid amount of the Assessment levied on his or her property.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01Wmd IndentureDond Indenture [4.9.04].doc
DRAFT 4/91 043
“Assessment Revenues” means the revenues received by the City in each Fiscal
Year from the collection of the annual installments of the unpaid Assessments, including
penalties and interest on delinquent installments of the unpaid Assessments and proceeds from
the sale of property for delinquent Assessment installments, but excluding the amounts of the
annual assessments collected by the City for the payment of administration costs pursuant to
Sections 8682, 8682.1 and 10204(f) of the California Streets and Highways Code and
Assessment Prepayments.
“Authorized Officer” means the Finance Director or any other officer or
employee of the City authorized by the City Council or by an Authorized Officer, in each case as
evidenced by a certificate delivered to the Paying Agent, to undertake the action referenced in
this Indenture as required to be undertaken by an Authorized Officer.
“Benefit Area No. 1” means the area within the District designated as Benefit
Area No. 1 thereof as shown on the Assessment Diagram of the District filed September 17,
2003 in Book 37 of Maps of Assessment and Community Facilities Districts at Page 69 as
Instrument Number 2003-1140382 in the office of the County Recorder of the County of San
Diego.
“Bond Act” means the Improvement Bond Act of 1915 being Division 10
(commencing with Section 8500) of the California Streets and Highways Code.
“Bond Counsel” means any attorney or firm of attorneys acceptable to the City
and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt
status of securities issued by public entities.
“Bond Year” means the period beginning on the Closing Date and ending on
September 2, 2005 and thereafter the period beginning on each September 3 and ending on the
following September 2.
“Bonds” means the Bonds at any time Outstanding under this Indenture.
‘‘Business Day” means any day other than (i) a Saturday or a Sunday or (ii) a day
on which banking institutions in the State of California, the State of New York, or in the state in
which the Paying Agent has its Principal Office are authorized or obligated by law or executive
order to be closed.
“City” means the City of Carlsbad, California, a municipal corporation.
“City Treasurer” means the City Treasurer of the City.
“Closing Date” means the date upon which there is an exchange of the Bonds for
the proceeds representing payment of the purchase price of the Bonds by the Original Purchaser.
“Code” means the Internal Revenue Code of 1986, as amended.
S:\Wmen.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 044
“Costs of Issuance” means items of expense payable or reimbursable directly or
indirectly by the City and related to the authorization, sale and issuance of the Bonds, which
items of expense shall include, but not be limited to, printing costs, costs of reproducing and
binding documents, including but not limited to the preliminary official statement and official
statement regarding the Bonds, closing costs, filing and recording fees, initial fees and charges of
the Paying Agent, including its first annual administration fee and the fees of its counsel,
expenses incurred by the City in connection with the issuance of the Bonds and the formation of
the Assessment District, bond (underwriter’s) discount, legal fees and charges, including the fees
of Bond Counsel and counsel to the underwriter, financial advisor’s fees, charges for
authentication, transportation and safekeeping of the Bonds and other costs, charges and fees in
connection with the foregoing.
“County” means the County of San Diego, California.
“Debt Service” means the amount of interest and principal payable on the Bonds
scheduled to be paid during the period of computation, excluding amounts payable during such
period which relate to principal of the Bonds which are scheduled to be retired and paid before
the beginning of such period.
“Depository” means The Depository Trust Company, New York, NY, or any
successor thereof, the depository for the Bonds.
“Federal Securities” means any of the following which at the time of investment
are legal investments under the laws of the State of California for the moneys proposed to be
invested therein:
(i) Cash; and
(ii) Direct general obligations of the United States (including obligations
issued or held in book entry form on the books of the Department of the Treasury of the United
States), or obligations, the payment of principal of and interest on which is unconditionally
guaranteed by the United States.
“Finance Director” means the Finance Director of the City or the designee
thereof, in each case as evidenced by a certificate delivered to the Paying Agent. Except where
expressly provided otherwise herein, the Finance Director shall act for and on behalf of the City
Treasurer in carrying out any duties and obligations of the “Treasurer” established pursuant to
the Bond Act related to the issuance and administration of the Bonds.
“Fiscal Year” means the twelve-month period extending from July 1 in a calendar
year to June 30 of the succeeding year, both dates inclusive.
“Improvement Fund” means the fund by that name established by Section 3.03(A)
hereof.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1Dond IndentureU3ond Indenture [4.9.04].doc
DRAFT 4/91 045
“Independent Financial Consultant” means a firm of certified public accountants,
a financial consulting firm, a consulting engineering firm or an engineer which is not an
employee of, or otherwise controlled by, the City.
“Indenture” means this Indenture, as it may be amended or supplemented from
time to time by any Supplemental Indenture entered into pursuant to the provisions hereof.
“Information Services” means Financial Information, Inc.’s “Daily Called Bond
Service,” 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor;
Kenny Information Services’ “Called Bond Service,” 55 Broad Street, 28th Floor, New York,
New York 10004; Moody’s Investors Service, Inc.’s “Municipal and Government,” 99 Church
Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; Standard &
Poor’s Corporation’s “Called Bond Record,” 25 Broadway, 3rd Floor, New York, New York
10004; and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other services providing information with respect to called bonds as the City
may designate in an Officer’s Certificate delivered to the Paying Agent.
“Interest Payment Dates” means March2 and September2 of each year,
commencing September 2,2004.
“Investment Agreement” means one or more agreements with respect to the
investment of the proceeds of the Bonds to be entered into between the Paying Agent and an
entity or entities whose long term unsecured obligations are rated in either of the two highest
categories by Standard & Poor’s.
“Investment Earnings” means all interest earned and any gains and losses on the
investment of moneys in any fund or account created by this Indenture excluding interest earned
and gains and losses on the investment of moneys in the Rebate Fund.
“Maximum Annual Debt Service” means the greatest amount of Annual Debt
Service for any Bond Year after calculation is made through the final maturity date of any
Outstanding Bonds.
“Moody’s” shall mean Moody’s Investors Service, Inc., a national rating service
with offices in New York, New York.
“Nominee” means CEDE & Co., the nominee of the Depository.
“Officer’s Certificate” means a written certificate of the City signed by an
Authorized Officer of the City.
“Original Purchaser” means Stone & Youngberg LLC, as the first purchaser of
the Bonds from the City.
“Outstanding,” when used as of any particular time with reference to the Bonds,
means (subject to the provisions of Section 8.04 hereof) all Bonds except:
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01\Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/91 046
(i) Bonds theretofore canceled by the Paying Agent or surrendered to the
Paying Agent for cancellation;
(ii) Bonds called for redemption which, for the reasons specified in Section
2.03 (G) hereof, are no longer entitled to any benefit under this Indenture other than the
right to receive payment of the redemption price therefor;
(iii) Bonds paid or deemed to have been paid within the meaning of
Section 9.03 hereof; and
(iv) Bonds in lieu of or in substitution for which other Bonds shall have been
authorized, executed, issued and delivered by the City and authenticated by the Paying
Agent pursuant to this Indenture or any Supplemental Indenture.
“Owner” means any person who shall be the registered owner of any Outstanding
Bond.
“Paying Agent” means BNY Western Trust Company, the Paying Agent
appointed by the City, acting as an independent Paying Agent with the duties and powers as
herein expressly provided, its successors and assigns, and any other corporation or association
which may at any time be substituted in its place, as provided in Section 7.01 hereof.
“Permitted Investments” means:
(i) Federal Securities;
(ii) any of the following obligations of federal agencies not guaranteed by the
United States: (a) debentures issued by the Federal Housing Administration; (b) participation
certificates or senior debt obligations of the Federal Home Loan Mortgage Corporation or Farm
Credit Banks (consisting of Federal Land Banks, Federal Intermediate Credit Bank or Banks for
Cooperatives); (c) bonds or debentures of the Federal Home Loan Bank Board established under
the Federal Home Loan Bank Act, bonds 6f any federal home loan bank established under said
act and stocks, bonds, debentures, participations or other obligations of or issued by the Federal
National Mortgage Association, the Student Loan Marketing Association, the Government
National Mortgage Association and the Federal Home Loan Mortgage Corporation; and
(d) bonds, notes or other obligations issued or assumed by the International Bank for
Reconstruction and Development;
(iii) interest-bearing demand or time deposits (including certificates of deposit)
in federal or State of California chartered savings and loan associations or banks (including the
Paying Agent and its affiliates), provided that (a) in the case of a savings and loan association,
such demand or time deposits shall be fully insured by the Federal Deposit Insurance
Corporation, or the unsecured obligations of such savings and loan association shall be rated in
one of the two highest rating categories by a nationally recognized rating service, and (b) in the
case of a bank, such demand or time deposits shall be fully insured by the Federal Deposit
Insurance Corporation, or the unsecured obligations of such bank (or the unsecured obligations
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 047
of the parent bank holding company of which such bank is the lead bank) shall be rated in one of
the two highest rating categories by a nationally recognized rating service;
(iv) repurchase agreements collateralized by Federal Securities with a
registered brokeddealer subject to Securities Investors Protection Corporation liquidation in the
event of insolvency, or any commercial bank provided that: (a) the unsecured obligations of
such bank shall be rated in one of the two highest rating categories by a nationally recognized
rating service, or such bank shall be the lead bank of a bank holding company whose unsecured
obligations are rated in one of the two highest rating categories by a nationally recognized rating
service; (b) the most recent reported combined capital, surplus and undivided profits of such
bank shall be not less than $100,000,000; and (c) the entity holding such repurchase agreement
shall have a perfected first security interest in the collateral securities for the benefit of the City
under the California Commercial Code or pursuant to the book entry procedures prescribed at
31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq.;
(v) clause (iv) above;
bankers acceptances endorsed and guaranteed by banks described in
(vi) obligations, the interest on which is exempt fi-om federal income taxation
under Section 103 of the Code and which are rated in one of the two highest rating categories by
a nationally recognized rating service;
(vii) money market funds registered under the Federal Investment Company
Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a
rating by Standard & Poor’s of “AAAm-G,” “AAA-m” or “AA-m” and, if rated by Moody’s,
rated “Aaa,” “Aal” or “Aa2” by Moody’s;
(viii) units of a taxable government money market portfolio (including
portfolios of the Paying Agent and its affiliates) comprised solely of obligations listed in
clause (i) or (ii) above;
(ix) Investment Agreements;
(x) commercial paper of “prime” quality of the highest ranking or of the
highest letter and numerical rating by Moody’s or Standard & Poor’s of issuing corporations that
are organized and operating within the United States and have total assets in excess of
$500,000,000 and have an “Aa,” “AA” or higher rating for the issuer’s debentures, other than
commercial paper, as provided by Moody’s or Standard & Poor’s, respectively, and provided
that purchases of eligible commercial paper may not exceed one-hundred eighty (1 80) days’
maturity nor represent more than ten (10) percent of the outstanding paper of an issuing
corporation;
(xi) any general obligation of a bank or insurance company whose long-term debt obligations are rated in one of the two highest rating categories of a nationally recognized
rating service; and
S:\Warren. Diven\Cities\City of Carlsbad\CannonCollege AD 2003-01 \Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/91 048
(xii) the Local Agency Investment Fund in the State Treasury of the State of
California as permitted by the State Treasurer pursuant to Section 16429.1 of the California
Government Code.
“Principal Office” means with respect to the payment, registration, surrender,
exchange or transfer of any Bond or Bonds, the principal corporate trust office of the Paying
Agent in Los Angeles, California; provided, however, that for purposes of administering this
Indenture, the principal office shall be the principal office at which the Paying Agent administers
its corporate trust business in California which, as of the date of this Indenture, is at the address
set forth in Section 9.06 hereof.
“Proceeds,” when used with reference to the Bonds, means the aggregate
principal amount of the Bonds, plus accrued interest and premium, if any, less original issue
discount, if any.
“Project” means the public improvements within and for the Assessment District
as described in the Resolution of Intention.
“Rebate Certificate” means the certificate delivered by the City upon the delivery
of the Bonds relating to Section 148 of the Code, or any functionally similar replacement
certificate.
“Rebate Fund” means the fund by that name established by Section 6.02 hereof.
“Record Date” means the fifteenth (15th) day of the month next preceding the
applicable Interest Payment Date whether or not such day is a Business Day.
“Redemption Fund” means the fund by that name established by Section 4.02(A)
hereof.
“Regulations” means the temporary and permanent regulations of the United
States Department of the Treasury promulgated under the Code.
“Reserve Fund” means the fund by that name established by Section4.03(A)
hereof.
“Reserve Requirement” means on any date in any Bond Year the lesser of
(i) 10 percent of the proceeds of the sale of the Bonds, (ii) Maximum Annual Debt Service, or
(iii) 125 percent of average Annual Debt Service.
“Resolution of Issuance” means Resolution No. 2004 - -, adopted by the City
Council on April 13,2004.
“Resolution of Intention” means Resolution No. 2003 - 197, adopted by the City
Council on July 15,2003.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1 \Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/9/ 049
“Securities Depositories” means The Depository Trust Company, 71 1 Stewart
Avenue, Garden City, New York 11530, Fax (516) 227-4039 or -4190; Midwest Securities Trust
Company, Capital Structures - Call Notification, 440 South LaSalle Street, Chicago, Illinois
60605, Fax (3 12) 663-2343; Philadelphia Depository Trust Company, Reorganization Division,
1900 Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax
(214) 496-5058; and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other securities depositories as the City may designate in an Officer’s
Certificate delivered to the Paying Agent.
“Standard & Poor’s’’ shall mean Standard & Poor’s Ratings Services, a division
of The McGraw-Hill Companies, Inc., a national rating service with offices in New York, New
York.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 04 10
ARTICLE I1
THE BONDS
Section 2.01. Principal Amount; Desimation. The Bonds in the aggregate
principal amount of $ are hereby authorized to be issued by the City for Benefit
Area No. 1 of the Assessment District under and subject to the terms of the Resolution, this
Indenture, the Bond Act and other applicable laws of the State of California. The Bonds shall be
designated “City of Carlsbad, Assessment District No. 2003-01 (College Boulevard and Cannon
Road East), Benefit Area No. 1 Limited Obligation Improvement Bonds (Property Secured Only - No Issuer Liability),” and shall be secured by the Assessments.
Section 2.02. Terms of Bonds.
(A) The Bonds. The Bonds shall be issued as fully registered bonds, without
coupons, in the denominations of $5,000 or any integral multiple thereof, except a Bond which
shall mature on September 2, 2005 and be issued in the principal amount of $ . TheBonds
shall be lettered and numbered in a customary manner as determined by the Paying Agent. The
Bonds shall be dated as of the Closing Date.
(B) Maturities. The Bonds shall mature and become payable on September 2
of each year, as follows:
Maturity Dates Principal Interest
[September 2) Amounts Rates
(C) Interest. The Bonds shall bear interest at the rates set forth in
subsection(B) above payable on the Interest Payment Dates in each year. Interest shall be
calculated on the basis of a 360-day year composed of twelve 30-day months. Each Bond shall
bear interest from the Interest Payment Date next preceding the date of authentication thereof
unless (i) it is authenticated after a Record Date and before the close of business on the next
Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or
(ii) it is authenticated on or before the Record Date preceding the first Interest Payment Date, in
which event it shall bear interest from the Closing Date; provided, however, that if at the time of
authentication of a Bond, interest is in default thereon, such Bond shall bear interest from the
Interest Payment Date to which interest has previously been paid or made available for payment
thereon or from the Closing Date, if no interest has previously been paid or made available for
payment thereon.
(D) Method of Payment. Interest on the Bonds is payable by check of the
Paying Agent mailed by first class mail, postage prepaid, on each Interest Payment Date, until
the principal amount of a Bond has been paid or made available for payment, to the registered
Owner thereof at such registered Owner’s address as it appears on the registration books
maintained by the Paying Agent at the close of business on the Record Date preceding the
Interest Payment Date. All Bonds paid by the Paying Agent pursuant to this subsection shall be
canceled by the Paying Agent. Principal of, redemption premium, if any, and interest payable to
any Owner of Bonds in aggregate principal amount of $1,000,000 or more will be paid, upon the
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01E3ond IndentureE3ond Indenture [4.9.04].doc
DRAFT 4/91 04 1 1
written request of any such Owner in form and substance satisfactory to the Paying Agent, by
wire transfer of immediately available funds to an account within the United States designated by
such Owner on or before a Record Date.
(E) CUSP Identification Numbers. “CUSP” identification numbers shall be
imprinted on the Bonds, but such numbers shall not constitute a part of the contract evidenced by
the Bonds. In addition, failure on the part of the City or the Paying Agent to use such CUSP
numbers in any notice to the Owners shall not constitute an event of default or any violation of
the City’s contract with the Owners and shall not impair the effectiveness of any such notice.
Section 2.03. Redemption.
(A) Optional Redemption. The Bonds maturing on and after September 2,
20 are subject to redemption prior to their stated maturity dates on September 2, 20- or on
anyhterest Payment Date thereafter, on a pro rata basis among maturities (and by lot within any
one maturity), in integral multiples of $5,000, at the option of the City from moneys derived by
the City from any source, at the following redemption prices (expressed as percentages of the
principal amount of the Bonds to be redeemed), together with accrued interest to the date of
redemption:
Redemption Dates Redemption Prices
September 2,20- and March 2,20-
September 2,20- and March 2,20-
September 2,20- and thereafter
%
100
(B) Mandatory Redemption From Assessment Prepayments. The Bonds are
subject to mandatory redemption prior to their stated maturity dates on any Interest Payment
Date, as selected by the City, in integral multiples of $5,000, from moneys derived by the City
from Assessment Prepayments, at the following redemption prices (expressed as percentages of
the principal amount of the Bonds to be redeemed), together with accrued interest to the date of
redemption:
Redemption Dates Redemption Prices
September 2,2004 through March 2,20-
September 2,20- and March 2,20-
September 2,20- and March 2,20-
September 2,20- and thereafter
103%
100%
In selecting Bonds for redemption pursuant to this subsection (B), the City shall
select such Bonds in such a way that the ratio of the principal amount of the Bonds in each
maturity of the Bonds that will remain Outstanding to the aggregate principal amount of the
Bonds that will remain Outstanding will be approximately the same as it was prior to the
redemption of such Bonds, insofar as possible.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01\Bond IndentureBmd Indenture [4.9.04].doc
DRAFT 4/91 04 1 2
(C) Sinkinn Fund Redemption. The Outstanding Bonds maturing on
September 2, 20-, are subject to mandatory sinking fund redemption, in part, on September 2,
20-, and on each September 2 thereafter prior to maturity, by lot, at a redemption price equal to
the principal amount thereof to be redeemed, together with accrued interest to the date of
redemption, without premium, from sinking fund payments as follows:
Redemption Dates
(September 2) Sinking Fund Payments
The amounts in the foregoing schedule shall be reduced pro rata among redemption dates, in
order to maintain substantially level Annual Debt Service, as directed in writing to the Paying
Agent by an Authorized Officer, as a result of any prior partial redemption of the Bonds pursuant
to subsection (A) or subsection (B) above.
(D) Purchase of Bonds. In lieu of payment at maturity or redemption under
this Section 2.03, moneys in the Redemption Fund may be used and withdrawn by the Paying
Agent for purchase of Outstanding Bonds, upon the filing with the Paying Agent of an Officer’s
Certificate requesting such purchase, at public or private sale as and when, and at such prices
(including brokerage and other charges) as such Officer’s Certificate may provide, but in no
event may Bonds be purchased at a price in excess of the principal amount thereof, plus interest
accrued to the date of purchase. The Paying Agent shall be absolutely protected and shall incur
no liability in relying on such an Officer’s Certificate.
(E) Notice to Payinn Anent. An Authorized Officer shall give the Paying
Agent written notice of the City’s intention to redeem Bonds not less than forty-five (45) days
prior to the applicable redemption date.
(F) Redemption Procedure bv Paving Anent. The Paying Agent shall cause
notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty(30)
days but not more than sixty (60) days prior to the date fixed for redemption, to the Securities
Depositories and to one or more Information Services selected by an Authorized Officer, and to
the respective registered Owners of any Bonds designated for redemption, at their addresses
appearing on the Bond registration books maintained by the Paying Agent at its Principal Office;
but such mailing shall not be a condition precedent to such redemption and failure to mail or to
receive any such notice, or any defect therein, shall not affect the validity of the proceedings for
the redemption of such Bonds.
Such notice shall state the date of such notice, the date of issue of the Bonds, the
place or places of redemption, the redemption date, the redemption price and, if less than all of
the then Outstanding Bonds are to be called for redemption, shall designate the CUSP numbers
and Bond numbers of the Bonds to be redeemed, by giving the individual CUSP number and
Bond number of each Bond to be redeemed, or shall state that all Bonds between two stated
Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more
maturities have been called for redemption, shall state as to any Bond called for redemption in
part the portion of the principal of the Bond to be redeemed, shall require that such Bonds be
then surrendered at the Principal Office of the Paying Agent for redemption at the said
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 200341U3ond IndentureU3ond Indenture [4.9.04].doc
DRAFT 4/91 04 1 3
redemption price, and shall state that further interest on such Bonds will not accrue from and
after the redemption date. The cost of the mailing of any such redemption notice shall be paid by
the City.
Upon the payment of the redemption price of Bonds being redeemed, each check
or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP
number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such
check or other transfer.
In the event of an optional redemption pursuant to Section 2.03 (A) hereof or a
mandatory redemption pursuant to Section 2.03(B) or a purchase of Bonds pursuant to Section
2.03(D) hereof, the City shall transfer or cause to be transferred to the Paying Agent for deposit
in the Redemption Fund moneys in an amount equal to the redemption price of the Bonds being
redeemed or the purchase price of the Bonds being purchased on or before the fifteenth (15th)
day of the month preceding the Interest Payment Date upon which such Bonds are to be
redeemed or the date upon which the Bonds are to be purchased, as the case may be.
Whenever provision is made in this Indenture for the redemption of less than all
of the Bonds, the Paying Agent shall select the Bonds for redemption in such a way that the ratio
of Outstanding Bonds to issued Bonds shall be approximately the same in each maturity of the
Bonds insofar as possible, and shall select Bonds for redemption within each maturity of the
Bonds by lot.
Upon surrender of Bonds redeemed in part only, the City shall execute and the
Paying Agent shall authenticate and deliver to the Owner, at the expense of the City, a new Bond
or Bonds, of the same maturity, of authorized denominations in aggregate principal amount equal
to the unredeemed portion of the Bond or Bonds.
(G) Effect of Redemption. From and after the date fixed for redemption, if
funds available for the payment of the redemption prices of the Bonds called for redemption,
together with accrued interest to the date of redemption, shall have been deposited in the
Redemption Fund, such Bonds shall cease to be entitled to any benefit under this Indenture other
than the right to receive payment of the redemption price, and interest shall cease to accrue on
the Bonds to be redeemed on the redemption date specified in the notice of redemption.
All Bonds redeemed and purchased by the Paying Agent pursuant to this Section
2.03 shall be canceled by the Paying Agent.
Section2.04. Form of Bonds. The Bonds, the Paying Agent’s certificate of
authentication and the assignment to appear thereon shall be substantially in the forms,
respectively, set forth in Exhibit A attached hereto and by this reference incorporated herein,
with necessary or appropriate variations, omissions and insertions as permitted or required by
this Indenture.
Section 2.05. Execution of Bonds. The Bonds shall be executed by the manual or
facsimile signatures of the City Treasurer and the City Clerk of the City, who are in office on the
S:\Warren.Diven\Cities\City of CarlsbadWannon-College AD 200341\Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/91 04 14
date of this Indenture or at any time thereafter. If any officer whose signature appears on any
Bond ceases to be such officer before delivery of the Bond to the Owner, such signature shall
nevertheless be as effective as if the officer had remained in office until the delivery of the Bond
to the Owner. Any Bond may be signed and attested by such persons as at the actual date of the
execution of such Bond shall be the proper officers of the City notwithstanding that on the
nominal date of such Bond any such person shall not have been such officer of the City.
Only such Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A hereto, executed and dated by the Paying Agent,
shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such
certificate of authentication of the Paying Agent shall be conclusive evidence that such Bonds
have been duly authenticated, registered and delivered hereunder, and are entitled to the benefits
of this Indenture.
Section 2.06. Transfer of Bonds. Any Bond may, in accordance with its terms,
be transferred, upon the books required to be kept pursuant to the provisions of Section2.08
hereof, by the person in whose name it is registered, in person or by his duly authorized attorney,
upon surrender of such Bond for cancellation, accompanied by delivery of a duly executed
written instrument of transfer in a form approved by the Paying Agent. The cost for any services
rendered or any expenses incurred by the Paying Agent in connection with any such transfer
shall be paid by the City. The Paying Agent shall collect from the Owner requesting transfer of a
Bond any tax or other governmental charge required to be paid with respect to such transfer.
Whenever any Bond or Bonds shall be surrendered for transfer, the City shall
execute and the Paying Agent shall authenticate and deliver a new Bond or Bonds of like
aggregate principal amount.
.
No transfers of Bonds shall be required to be made (i) during the fifteen (1 5) days
preceding the date established by the Paying Agent for selection of Bonds for redemption, or
(ii) with respect to Bonds which have been selected for redemption.
Section2.07. Exchange of Bonds. Bonds may be exchanged at the Principal
Office of the Paying Agent only for a like aggregate principal amount of Bonds of authorized
denominations and of the same maturity. The cost for any services rendered or any expense
incurred by the Paying Agent in connection with any such exchange shall be paid by the City.
The Paying Agent shall collect from the Owner requesting exchange of a Bond any tax or other
governmental charge required to be paid with respect to such exchange.
No exchanges of Bonds shall be required to be made (i) during the fifteen (15)
days preceding the date established by the Paying Agent for selection of Bonds for redemption,
or (ii) with respect to Bonds which have been selected for redemption.
Section 2.08. Bond Re~ster. The Paying Agent shall keep, or cause to be kept,
at its Principal Office sufficient books for the registration and transfer of the Bonds which books
shall show the series, number, CUSP identification number, date of issuance, amount, rate of
interest and Owner of each Bond and shall at all times be open to inspection by the City during
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/9/ 04 1 5
regular business hours upon reasonable notice; 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 books, the ownership of the Bonds as hereinbefore
provided.
Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary
form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be
printed, lithographed or typewritten, shall be of such denominations as may be determined by the
City, and may contain such reference to any of the provisions of this Indenture as may be
appropriate. Every temporary Bond shall be executed by the City upon the same conditions and
in substantially the same manner as the definitive Bonds. If the City issues temporary Bonds, it
will execute and furnish definitive Bonds without delay and thereupon the temporary Bonds shall
be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of
the Paying Agent or at such other location as the Paying Agent shall designate, and the Paying
Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate
principal amount of definitive Bonds of authorized denominations. Until so exchanged, the
temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds
authenticated and delivered hereunder.
Section 2.10. Bonds Mutilated,. Lost, Destroyed or Stolen. If any Bond shall
become mutilated, the City, at the expense of the Owner of said Bond, shall execute, and the
Paying Agent shall authenticate and deliver, a replacement Bond of like tenor and principal
amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the
Paying Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Paying
Agent shall be canceled and destroyed by the Paying Agent. If any Bond shall be lost, destroyed
or stolen, evidence of such loss, destruction or theft may be submitted to the Paying Agent and, if
such evidence be satisfactory to it and indemnity satisfactory to it shall be given, the City, at the
expense of the Owner, shall execute, and the Paying Agent shall authenticate and deliver, a
replacement Bond of like tenor and principal amount in lieu of and in substitution for the Bond
so lost, destroyed or stolen. The City or Paying Agent may require payment of a sum not
exceeding the actual cost of preparing each replacement Bond delivered under this Section 2.10
and of the expenses which may be incurred by the City and the Paying Agent for the preparation,
execution, authentication and delivery thereof. Any Bond delivered under the provisions of this
Section 2.10 in replacement of any Bond alleged to be lost, destroyed or stolen shall constitute an
original additional contractual obligation of the City whether or not the Bond so alleged to be
lost, destroyed or stolen is at any time enforceable by anyone, and shall be equally and
proportionately entitled to the benefits of this Indenture with all other Bonds issued pursuant to
this Indenture.
Section 2.1 1. Special Obligation. All obligations of the City under this Indenture
and the Bonds shall be special obligations of the City, payable solely from the Assessment
Revenues. Neither the faith and credit nor the taxing power of the City (except to the limited
extent set forth herein), the County or the State of California or any political subdivision thereof
is pledged to the payment of the Bonds.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 200341Bmd Indenturemond Indenture [4.9.04].doc
DRAFT 4/91 04 1 6
Pursuant to Section 8769 of the California Streets and Highways Code, the City
Council of the City has determined in the Resolution of Intention that the City will not obligate
itself to advance funds from the City treasury to cure any deficiency in the Redemption Fund.
Section 2.12. Refunding. The Bonds are subject to refunding pursuant to the
procedures of the Refunding Act of 1984 for 1915 Improvement Bond Act Bonds, Division 11.5
(commencing with Section 9500) of the California Streets and Highways Code.
ARTICLE I11
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS;
IMPROVEMENT FUND; COST OF ISSUANCE FUND
Section 3.01. Issuance and Delivery of Bonds. At any time after the execution of
this Indenture, the City may issue the Bonds in the aggregate principal amount set forth in
Section 2.01 hereof and deliver the Bonds to the Original Purchaser. The Authorized Officers of
the City are hereby authorized and directed to deliver any and all documents and instruments
necessary to cause the issuance of the Bonds in accordance with the provisions of the Bond Act,
the Resolution and this Indenture, to authorize the payment of Costs of Issuance and costs of the
Project by the Finance Director from the proceeds of Bonds, and to do and cause to be done any
and all acts and things necessary or convenient for delivery of the Bonds to the Original
Purchaser.
Section 3.02. Application of Proceeds of Sale of Bonds. The Proceeds of the sale
of the Bonds to the Original Purchaser shall be paid to the Finance Director, who shall forthwith
set aside, pay over and deposit such Proceeds on the Closing Date as follows:
(A) Deposit in the Debt Service Account of the Redemption Fund the amount
of $ , representing capitalized interest on the Bonds;
(B) Deposit in the Reserve Fund the amount of $ , the Reserve
Requirement as of the Closing Date; and
(C) Deposit in the Improvement Fund the amount of $ , being
the remaining Proceeds of the Bonds to be paid on the Closing Date by the Original Purchaser.
Section 3.03. Improvement Fund.
(A) Establishment of Improvement Fund. There is hereby established, as a
separate account to be held by the Finance Director, the “Assessment District No. 2003-01
(College Boulevard and Cannon Road East) Benefit Area No. 1 Limited Obligation
Improvement Bonds Improvement Fund,” to the credit of which a deposit shall be made as
required by paragraph (C) of Section 3.02 hereof. Moneys in the Improvement Fund shall be
held by the Finance Director for the benefit of the Owners of the Bonds, shall be disbursed,
except as otherwise provided in subsection(D) of this Section 3.03, for the payment or
reimbursement of Costs of Issuance and the costs of the design, acquisition and construction of
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/9/ 04 1 7
the Project and, pending such disbursement, shall be subject to a lien in favor of the Owners of
the Bonds.
(B) Procedure for Disbursement. Disbursements from the Improvement Fund
shall be made by the Finance Director for the payment or reimbursement of Costs of Issuance
and the costs of the design, acquisition and construction of the Project pursuant to such
procedures as the Finance Director may establish in conformity with the provisions of the
Acquisition Agreement.
(C) Investment. Moneys in the Improvement Fund shall be invested and
deposited in accordance with Section 6.01 hereof. Investment Earnings shall be retained by the
Finance Director in the Improvement Fund to be used for the purposes of such fund.
@) Closing of Fund. Upon the filing of an Officer’s Certificate stating that
the Project has been completed and that all costs of the Project have been paid or are not required
to be paid from the Improvement Fund, and further stating that moneys on deposit in the
Improvement Fund are not needed to complete the Project or reimburse the cost thereof, the City
shall apply such amount, if any, remaining in the Improvement Fund as provided in Section
10427.1 of the California Streets and Highways Code.
Section 3.04. Book-Entry System; Delivery of the Bonds to the Depository.
(A) Book-Entry System; Limited Obligation - of the City and the Paying Agent.
Notwithstanding any other provision of this Indenture, the Bonds shall be initially delivered to
the Depository in the form of a separate single fully registered Bond (which may be typewritten)
for each of the maturities of the Bonds. Upon such initial delivery, the ownership of each such
Bond shall be registered in the registration books kept by the Paying Agent in the name of the
Nominee, as nominee of the Depository. Except as provided in subsection (C) below, all of the
Outstanding Bonds shall be registered in the registration books kept by the Paying Agent in the
name of the Nominee.
With respect to Bonds registered in the registration books kept by the Paying
Agent in the name of the Nominee, the City and the Paying Agent shall have no responsibility or
obligation to any Participant of the Depository or to any person, corporation or firm on behalf of
which the Participant holds an interest in the Bonds. Without limiting the immediately preceding
sentence, the City and the Paying Agent shall have no responsibility or obligation with respect to
(1) the accuracy of the records of the Depository, the Nominee or any Participant with respect to
any ownership interest in the Bonds, (2) the delivery to any Participant or any other person, other
than an Owner as shown in the registration books kept by the Paying Agent, of any notice with
respect to the Bonds, (3) the selection by the Depository and its Participants of the beneficial
interest in the Bonds to be redeemed in the event the Bonds are redeemed in part, or (4) the
payment to any Participant or any other persons, other than an Owner as shown in the
registration books kept by the Paying Agent, of any amount with respect to principal of,
premium, if any, or interest due with respect to the Bonds. The City and the Paying Agent may
treat and consider the person in whose name each Bond is registered in the registration books
kept by the Paying Agent as the holder and absolute owner of such Bond for the purpose of
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01V3ond Indentureb3ond Indenture [4.9.04].doc
DRAFT 4/91 04 1 8
payment of principal, premium, if any, and interest with respect to such Bond, for the purpose of
giving notices with respect to such Bond, for the purpose of registering transfers with respect to
such Bond and for all other purposes whatsoever. The Paying Agent shall pay all principal of,
premium, if any, and interest due with respect to the Bonds only to or upon the order of the
Owners thereof, as shown in the registration books kept by the Paying Agent, or their respective
attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy
and discharge fully the City’s obligations with respect to payment of principal, premium, if any,
and interest due with respect to the Bonds to the extent of the sum or sums so paid. No person
other than an Owner, as shown in the registration books kept by the Paying Agent, shall receive a
Bond evidencing the obligation of the City to make payments of principal, premium, if any, and
interest pursuant to this Indenture. Upon delivery by the Depository to the Paying Agent and the
City of written notice to the effect that the Depository has determined to substitute a new
nominee in place of the Nominee, and subject to the provisions herein with respect to Record
Dates, the word Nominee in this Indenture shall refer to such new nominee of the Depository.
(B) Representation Letter. In order to qualify the Bonds for the Depository’s
book-entry system, an authorized representative of the Paying Agent is hereby authorized to
execute and deliver to such Depository a representation letter in the standard form prescribed by
the Depository (the “Representation Letter”). The execution and delivery of the Representation
Letter shall not in any way limit the provisions of subsection (A) above or impose upon the City
or the Paying Agent any obligation whatsoever with respect to persons having interests in the
Bonds other than the Owners, as shown on the registration books kept by the Paying Agent. The
Paying Agent agrees, to the extent not inconsistent with the provisions hereof, to take all action
necessary to continuously comply with all representations made by it in the Representation
Letter. In addition to the execution and delivery of the Representation Letter, the City Clerk, the
City Treasurer, the City Manager, the Finance Director, the Authorized Officers and all other
officers of the City, are hereby authorized to take any other actions, not inconsistent with this
Indenture, to qualify the Bonds for the Depository’s book-entry program.
(C) Transfers Outside Book-Entry System. In the event (1) the Depository
determines not to continue to act as securities depository for the Bonds or (2) the City determines
that the Depository shall no longer so act, then the Paying Agent shall discontinue the book-entry
system with the Depository. If the City fails to identify another qualified securities depository to
replace the Depository then the Bonds shall no longer be restricted to being registered in the
registration books kept by the Paying Agent in the name of the Nominee, but shall be registered
in whatever name or names persons transferring or exchanging Bonds shall designate, in
accordance with the provisions of this Indenture.
(D) Paments to the Nominee. Notwithstanding any other provisions of this
Indenture, so long as any Bond is registered in the name of the Nominee, all payments with
respect to principal, premium, if any, and interest due with respect to such Bond and all notices
with respect to such Bond shall be made and given, respectively, as provided in the
Representation Letter or as otherwise instructed by the Depository.
ARTICLE IV
ASSESSMENT REVENUES; REDEMPTION FUND; RESERVE FUND
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01W3ond IndentureDond Indenture [4.9.04].doc
DRAFT 4/9/ 04 1 9
Section 4.01. Pledge of Assessment Revenues; Transfers of Assessment
Revenues.
(A) Pledge of Assessment Revenues. The Bonds shall be secured by a pledge
(which pledge shall be effected in the manner and to the extent herein provided) of all of the
Assessment Revenues and all moneys deposited in the Redemption Fund and in the Reserve
Fund. The Assessment Revenues and all moneys deposited into such funds (except as otherwise
provided herein with respect to moneys disbursed from the Improvement Fund) are hereby
dedicated in their entirety to the payment of the principal of the Bonds, and interest and any
premium on, the Bonds, as provided herein and in the Bond Act, until all of the Bonds have been
paid and retired or until moneys or Federal Securities have been set aside irrevocably for that
purpose in accordance with Section 9.03 hereof.
(B) Deficiency. As provided in the form of the Bonds attached hereto as
Exhibit A, the City Council has determined in the Resolution of Intention that the City will not
obligate itself to advance funds from the City Treasury to cure any deficiency which may occur
in the Redemption Fund.
Section 4.02. Redemption Fund.
(A) Establishment. There is hereby established, as a separate fund to be held
by the Finance Director, the “Assessment District No. 2003-01 (College Boulevard and Cannon
Road East) Benefit Area No. 1 Limited Obligation Improvement Bonds Redemption Fund” and,
within the Redemption Fund, there are hereby established two accounts: the “Debt Service
Account” and the “Prepayment Account.” Moneys in the Redemption Fund shall be held by the
Finance Director for the benefit of the Owners of the Bonds, shall be disbursed for the payment
of the principal of, and interest and any premium on, the Bonds as provided below, and, pending
such disbursement, shall be subject to a lien in favor of the Owners of the Bonds.
(B) Debt Service Account
(1) Deposits. Deposits shall be made to the Debt Service Account as
required by paragraph (A) of Section 3.02, Section 4.01(B), Section 4.03(B) and
Section 4.03( D) hereof.
The Finance Director shall deposit to the Debt Service Account all
moneys transferred from the Reserve Fund pursuant to Section 4.03(B) and 4.03(D)
hereof.
(2) Disbursements. On or before the second (2nd) Business Day
preceding each Interest Payment Date, the Finance Director shall transfer to the Paying
Agent an amount of the Assessment Revenues which the Paying Agent has advised the
Finance Director will be needed to pay Debt Service on the Bonds on such Interest
Payment Date.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01U3ond Indenturemond Indenture [4.9.04].doc
DRAFT 4\91 0420
In the event that amounts on deposit in the Redemption Fund are
insufficient for the purpose set forth in the preceding paragraph, the Finance Director
shall transfer from the Reserve Fund, to the extent of any funds therein, to the
Redemption Fund the amount of such insufficiency.
On September 3 of each year, beginning on September 3, 2005, the
amount on deposit in the Debt Service Account shall not exceed the greater of (i) one
year’s earnings on such amount, or (ii) one-twelfth (1/12th) of Annual Debt Service for
the then current Bond Year. If on September 3 of any year the amount on deposit in the
Debt Service Account exceeds the maximum amount allowable pursuant to the preceding
sentence and if on such September 3, the excess shall be transferred by the Finance
Director to the Reserve Fund to the extent that the amount on deposit therein is less than
the Reserve Requirement, and, except as provided in the following paragraph, any such
excess remaining thereafter shall be transferred by the Finance Director to the
Prepayment Account. On September 3 of each year, after any such excess amount has
been transferred as hereinabove provided, the amount on deposit in the Debt Service
Account shall not exceed the greater of (i) one year’s earnings thereon, or (ii) one-twelfth
(1/12th) of Annual Debt Service for the then current Bond Year.
Amounts in the Debt Service Account shall also be withdrawn and
deposited in the Rebate Fund as provided in Section 6.02 hereof.
(3) Payment of the Principal of, Premium, if any, and Interest on the
Bonds. On each Interest Payment Date, the Paying Agent shall, from the fhds
transferred to the Paying Agent from the Finance Director, pay to the Owners of the
Bonds the principal of and interest and any premium then due and payable on the Bonds
on the Interest Payment Date.
If, on any Interest Payment Date, there are insufficient funds to make the
payments provided for in the first paragraph of this Section 4.02(B)(3), the Paying Agent
shall apply the available funds first to the payment of the principal of the Bonds, if any,
which mature on such Interest Payment Date (the “Maturing Bonds”), second to the
payment of the interest on the Maturing Bonds and && to the payment of the interest on
the Bonds which do not mature on such Interest Payment Date. If on such Interest
Payment Date there are insufficient funds to pay the full amount of the principal of all of
the Maturing Bonds, a pro rata portion of the principal of each of the Maturing Bonds
shall be paid and the portion of the principal of the Maturing Bonds which is not paid and
the interest on the Maturing Bonds and the interest on all other Bonds which are then
Outstanding which is due but is not paid on such Interest Payment Date shall bear interest
at the rates stated in the Bonds, without compounding, until paid. If none of the Bonds
mature on such Interest Payment Date, the Paying Agent shall apply the available funds
to the payment of a pro rata portion of the interest on all of the Outstanding Bonds, to the
full amount thereof, and any portion of such interest which is not paid shall bear interest,
without compounding, until paid.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/9/ 042 1
When funds become available for the payment of the portion of the
principal of and interest on any Maturing Bond which was not paid, the Finance Director
shall provide notice to the Owner of such Maturing Bond as provided in Section 8776 of
the California Streets and Highways Code.
(4) Determination of Ultimate Loss. Notwithstanding the provisions
of Section 4.02(B)(2), if the Finance Director determines, pursuant to Section 8770 of the
California Streets and Highways Code, that there is a danger of an ultimate loss accruing
to the Bond Owners, for any reason, the provisions of that section and Sections 8771,
8772 and 8773 of the California Streets and Highways Code shall govern with respect to
the procedures which shall be followed in paying the principal of and interest on the
Outstanding Bonds .
(5) Investment. Moneys in the Debt Service Account shall be invested
and deposited in accordance with Section 6.01 hereof. Investment Earnings shall be
retained in the Debt Service Account, except to the extent they are required to be
deposited by the Finance Director in the Rebate Fund in accordance with Section 6.02
hereof.
, (D) Prepayment Account.
(1) Deposits. Upon receipt of Assessment Revenues representing a
partial or a full prepayment of an Assessment, such revenues shall be deposited in the
Prepayment Account. Amounts transferred to the Prepayment Account pursuant to
Section 4.02B(2) shall also be deposited therein.
(2) Disbursements. The Finance Director shall make disbursements
from the Prepayment Account as follows:
(a) The portion of any prepayment deposited in the
Prepayment Account constituting the administrative fee due and payable to the
City shall be transferred to the general fund of the City.
(b) The portion of any prepayment deposited in the
Prepayment Account representing delinquent principal, interest and penalties shall
be transferred first to the Reserve Fund pursuant to Section 4.03@) and to the
extent that such delinquent principal, interest and penalties exceed the amount
necessary to replenish the Reserve Fund, the balance shall be transferred to the
Debt Service Account.
(c) The installment of principal due in the fiscal year within
which a prepayment is made shall be transferred to the Debt Service Account.
(d) The balance in the Prepayment Account shall be used to
advance the maturity of Bonds to the next available redemption date. The amount
of the Bonds to be redeemed shall be the maximum for which the principal and
S:\Warren.Diven\Cities\City of CarIsbad\Cannon-College AD 2003-0 1 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 0422
premium, if any, may be paid in full from the Prepayment Account. Accrued
interest on the Bonds to be redeemed shall be paid from the Debt Service
Account.
(3) Investment. Moneys in the Prepayment Account shall be invested
Investment Earnings shall be and deposited in accordance with Section 6.01 hereof.
retained in the Prepayment Account.
Section 4.03. Reserve Fund.
(A) Establishment of Fund. There is hereby established, as a separate fund to
be held by the Finance Director, the “Assessment District No. 2003-01 (College Boulevard and
Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement Bonds Reserve Fund”
to the credit of which a deposit shall be made as required by Section 3.02(B) hereof, which
deposit is equal to the Reserve Requirement as of the Closing Date, and to which deposits shall
be made as provided in Section 4.02(B) hereof. Moneys in the Reserve Fund shall be held by the
Finance Director for the benefit of the Owners of the Bonds as a reserve for the payment of the
principal of and interest and any premium on the Bonds and shall be subject to a lien in favor of
the Owners of the Bonds.
(B) Use of Fund. Except as otherwise provided in this Section, all amounts
deposited in the Reserve Fund shall be used and withdrawn by the Finance Director solely for the
purpose of making transfers to the Debt Service Account in the event of any deficiency at any
time in the Debt Service Account of the amount then required for payment of the principal of,
and interest and any premium on the Bonds or, in accordance with the provisions of subsection
(E) of this Section 4.03, or for the purpose of redeeming Bonds.
Amounts transferred from the Reserve Fund to the Debt Service Account pursuant
to this subsection shall be restored by the City fi-om the collection of delinquent installments on
the Assessments levied on parcels for which such installments are delinquent, and penalties and
interest thereon, whether by judicial foreclosure proceedings or otherwise, as soon as is
reasonably possible following the receipt by the ‘City of such delinquent installments, penalties
and interest.
(C) Transfers on Payment of Assessments. Whenever an Assessment is
prepaid in whole or in part, the Finance Director shall transfer from the Reserve Fund to the
Prepayment Account an amount equal to the reduction in such Assessment determined pursuant
to Section 8881 of the California Streets and Highways Code.
(D) Transfer of Excess of Reserve Requirement. Whenever, on any
September3, the amount in the Reserve Fund, less Investment Earnings resulting from the
investment of the funds therein which pursuant to Section 6.02 hereof must be rebated to the
United States (the “Rebate Amount”), exceeds the then applicable Reserve Requirement, the
Finance Director shall, subject to the requirements of Section 6.02 hereof, transfer an amount
equal to the excess from the Reserve Fund to the Debt Service Account to be used for (a) the
S:\Warren.Diven\Cities\City of Carlsbad\CannonCollege AD 200341U3ond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 0423
payment of Debt Service on the next succeeding Interest Payment Date in accordance with
Section 4.02 hereof or (b) the advance retirement of Bonds.
(E) Transfer When Balance Exceeds Outstanding Bonds. Whenever the
balance in the Reserve Fund exceeds the amount required to redeem or pay the Outstanding
Bonds, including interest accrued to the date of payment or redemption and premium, if any, due
upon redemption, the Finance Director shall transfer the amount in the Reserve Fund to the Debt
Service Account to be applied, on the next succeeding Interest Payment Date to the payment and
redemption, in accordance with Section 2.03 and Section 4.02 hereof, as applicable, of all of the
Outstanding Bonds. In the event that the amount so transferred from the Reserve Fund to the
Debt Service Account exceeds the amount required to pay and redeem the Outstanding Bonds,
the balance in the Reserve Fund shall be applied as provided in Section 8885 of the California
Streets and Highways Code.
(F) Investment. Moneys in the Reserve Fund shall, except as provided in
subsection (D) above, be invested and deposited in accordance with Section 6.01 hereof.
ARTICLE V
OTHER COVENANTS OF THE CITY
Section 5.01. Punctual Payment. The City will punctually pay or cause to be paid
the principal of and interest and any premium on the Bonds when and as due in strict conformity
with the terms of this Indenture and any Supplemental Indenture to the extent that the
Assessment Revenues are available therefor, and it will faithfully observe and perform all of the
conditions, covenants and requirements of this Indenture and all Supplemental Indentures and of
the Bonds.
Section 5.02. Special Oblination. The Bonds are special obligations of the City
and are payable solely from and secured solely by the Assessment Revenues and the amounts in
the Redemption Fund and the Reserve Fund.
Section5.03. Extension of Time for Payment. In order to prevent any
accumulation of claims for interest after maturity, the City shall not, directly or indirectly, extend
or consent to the extension of the time for the payment of any claim for interest on any of the
Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by
purchasing or funding said claims for interest or in any other manner. In case any such claim for
interest shall be extended or funded, whether or not with the consent of the City, such claim for
interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits
of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds
then Outstanding and of all claims for interest which shall not have been so extended or funded.
Section 5.04. Against Encumbrances. The City shall not encumber, pledge or
place any charge or lien upon any of the Assessment Revenues or other amounts pledged to the
Bonds superior to or on a parity with the pledge and lien herein created for the benefit of the
Bonds, except as permitted by this Indenture.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 \Bond IndentureDond Indenture [4.9.04].doc
DRAFT 4/91 0424
Section5.05. Protection of Security and Rights of Owners. The City will
preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and
defend their rights against all claims and demands of all persons. From and after the delivery of
any of the Bonds by the City, the Bonds shall be incontestable by the City.
Section 5.06. Compliance with Laws, Completion of Proiect. The City will
comply with all applicable provisions of the laws of the State of California in completing the
construction and acquisition of the Project.
Section 5.07. Collection of Assessment Revenues. The City shall comply with
all requirements of the Bond Act so as to assure the timely collection of Assessment Revenues,
including without limitation, the enforcement of the payment or collection of delinquent
Assessments.
Section 5.08. Further Assurances. The City will adopt, make, execute and deliver
any and all such further ordinances, resolutions, instruments and assurances as may be
reasonably necessary or proper to carry out the intention or to facilitate the performance of this
Indenture, and for better assuring and confirming unto the Owners of the Bonds of the rights and
benefits provided in this Indenture.
Section 5.09. Tax Covenants. The City hereby covenants that:
(A) It will not take any action or omit to take any action, which action or
omission, if reasonably expected on the date of the initial issuance and delivery of the Bonds,
would have caused any of the Bonds to be “arbitrage bonds” within the meaning of Section
103(b) and Section 148 of the Code;
(B) It will not take any action or omit to take any action, which action or
omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would
result in loss of exclusion from gross income for purposes of federal income taxation under
Section 103(a) of the Code of interest paid with respect to the Bonds;
(C) It will not take any action or omit to take any action, which action or
omission, if reasonably expected on the date of initial issuance and delivery of the Bonds, would
have caused any of the Bonds to be “private activity bonds” within the meaning of Section 141
of the Code;
(D) It will comply with the Rebate Certificate as a source of guidance for
achieving compliance with the Code; and
(E) In order to maintain the exclusion from gross income for purposes of
federal income taxation of interest paid with respect to the Bonds, it will comply with each
applicable requirement of Section 103 and Sections 141 through 150 of the Code.
The covenants of the City contained in this Section 5.09 shall survive the
payment, redemption or defeasance of Bonds pursuant to Section 9.03 hereof.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01Dond IndentureDond Indenture [4.9.04].doc
DRAFT 4/91 0425
Section 5.10. Covenant to Foreclose. The City hereby covenants with and for the
benefit of the Owners of the Bonds that it will order, and cause to be commenced, judicial
foreclosure proceedings against property or properties under common ownership with
cumulative aggregate delinquent Assessment installments in excess of $10,000 by the October 1
following the close of the Fiscal Year in which such delinquent installments first exceed such
amount, and will commence judicial foreclosure proceedings against all properties with
delinquent Assessment installments by the October 1 following the close of each Fiscal Year in
which it receives Assessment Revenues in an amount which is less than ninety-five percent
(95%) of the total Assessment Revenues which were to be received in such Fiscal Year and
diligently pursue to completion such foreclosure proceedings.
ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LIABILITY OF THE CITY
Section 6.01. Deposit and Investment of Moneys in Funds.
(A) General. Subject in all respects to the provisions of Section 6.02 hereof,
moneys in any fund or account created or established by this Indenture and held by the Finance
Director shall be invested by the Finance Director in Permitted Investments. The Finance
Director shall have no obligation to pay additional interest or maximize investment income on
any funds held by it. The Owners of the Bonds shall have no claim of any kind against the City
in connection with investments properly made pursuant to this Section 6.01. Obligations
purchased as an investment of moneys in any hnd or account shall be deemed to be part of such
fund or account, subject, however, to the requirements of this Indenture for transfer of
Investment Earnings in funds and accounts.
For purposes of determining the amount on deposit in any fund or account held
hereunder, all Permitted Investments or investments credited to such fund or account shall be
valued at the cost thereof (excluding accrued interest and brokerage commissions, if any).
Subject in all respects to the provisions of Section 6.02 hereof, investments in any
and all funds and accounts may be commingled in a single fund for purposes of making, holding
and disposing of investments, notwithstanding provisions herein for transfer to or holding in or
to the credit of particular funds or accounts of amounts received or held by the Finance Director
hereunder, provided that the Finance Director shall at all times account for such investments
strictly in accordance with the funds and accounts to which they are credited and otherwise as
provided in this Indenture.
The Finance Director shall sell at the highest price reasonably obtainable
(provided that the highest of any three bids received by the Finance Director shall be deemed the
highest price reasonably obtainable), or present for redemption, any investment security
whenever it shall be necessary to provide moneys to meet any required payment, transfer,
withdrawal or disbursement from the fund or account to which such investment security is
credited.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 0426
(B) Investment Agreements. Any Investment Agreement entered into for the
investment of moneys in any fhd or account established by this Indenture shall provide that the
entity providing the Investment Agreement (the “Provider”) shall notify the Finance Director in
writing within five (5) Business Days of the effective date of any change, including a
downgrade, withdrawal or suspension, in the rating by Standard & Poor’s and Moody’s of the
long-term unsecured obligations of the Provider. Any such Investment Agreement shall further
provide (i) that if at any time during the term of the Investment Agreement such rating is
downgraded below that required in Section 1.03 hereof, the Provider shall, within five (5)
Business Days following the effective date of such downgrading, at its sole expense, collateralize
the moneys invested in the Investment Agreement with obligations which are Federal Securities
and which shall at all times until such rating is restored to the rating required in Section 1.03
hereof have a market value, valued weekly by the Provider, marked-to-market at the current
market price plus accrued interest, which is equal to one hundred five percent (105%) of the
principal amount of such moneys; (ii) that such obligations shall be delivered to and registered in
the name of the City, or delivered to and registered in the name of a third party custodian,
approved by the Finance Director and giving the City a perfected first lien security interest in
such obligations; (iii) that if the market value of such obligations is at the time of any valuation
thereof less than one hundred five (105%) percent of the principal amount of such moneys the
Provider shall deposit additional collateralizing obligations with the Finance Director or such
custodian in a form which satisfies all of the requirements specified above and in a principal
amount which will bring the value of the obligations held by the Finance Director or such
custodian to the required amount within one (1) Business Day after the date of such valuation;
(iv) that such obligations, except to the extent that the market value thereof exceeds the amount
required above, shall be held by the Finance Director or such custodian until the Provider’s said
rating is restored to the rating required in Section 1.03 hereoc (v) that if at the time of any
valuation of such obligations, the market value thereof exceeds the market value required above,
the Finance Director or such custodian shall deliver from such obligations a portion thereof
having a market value equal to such excess to the Provider; and (vi) that if the Provider’s said
rating has been restored to the rating required in Section 1.03 hereof all such obligations shall
thereupon be released by the Finance Director or such custodian to the Provider. Any such
Investment Agreement shall also provide that if the Provider fails to collateralize the moneys
invested in the Investment Agreement as provided above within the time specified above or to
maintain the market value of the obligations comprising such collateral in the required amount
by depositing additional obligations with the Finance Director or such custodian within the time
and as otherwise specified above, or if the rating of the long-term unsecured obligations of the
Provider is downgraded below the three highest rating categories of Standard & Poor’s and
Moody’s, the Finance Director shall have the right, regardless of whether such moneys have
been collateralized as provided above, to immediately withdraw or cause the withdrawal of all
moneys invested in such Investment Agreement, without penalty or breakage fee, for
reinvestment in Permitted Investments. Before entering into any Investment Agreement, the
Finance Director shall have received an opinion from counsel to the Provider to the effect that
the Investment Agreement constitutes a valid, legal and binding obligation of the Provider
enforceable in accordance with its terms, in a form acceptable to the Finance Director.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 \Bond IndentureBond Indenture r4.9.04 ].doc
DRAFT 4/91 0427
Section 6.02. Rebate Fund; Rebate to the United States. There is hereby created,
to be held by the Finance Director, as a separate fund distinct from all other funds and accounts
held by the Finance Director under this Indenture, the Rebate Fund. The Rebate Fund shall be
held either uninvested or invested only in Federal Securities at the direction of the City. Moneys
on deposit in the Rebate Fund shall be applied only to payments made to the United States, to the
extent such payments are required by the Rebate Certificate.
The Finance Director shall transfer to Debt Service Account of the Redemption
Fund any moneys on deposit in the Rebate Fund in excess of the amount, if any, required to be
maintained or held therein in accordance with the Rebate Certificate.
Section 6.03. Liability of City. The City shall not incur any responsibility in
respect of the Bonds or this Indenture other than in connection with the duties or obligations
explicitly herein or in the Bonds assigned to or imposed upon it. The City shall not be liable in
connection with the performance of its duties hereunder, except for its own negligence or willful
misconduct. The City shall not be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements of the Paying Agent herein
or in any of the documents executed by the Paying Agent in connection with the Bonds.
In the absence of bad faith, the City may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon certificates or opinions
furnished to the City and conforming to the requirements of this Indenture. The City shall not be
liable for any error of judgment made in good faith unless it shall be proved that it was negligent
in ascertaining the pertinent facts.
No provision of this Indenture shall require the City to expend or risk its own
general funds or otherwise incur any financial liability (other than with respect to the Assessment
Revenues) in the performance of any of its obligations hereunder, or in the exercise of and of its
rights or powers, if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured to it.
The City may rely and shall be protected in acting or refraining from acting upon
any notice, resolution, request, consent, order, certificate, report, warrant, Bond or other paper or
document believed by it to be genuine and to have been signed or presented by the proper party
or proper parties. The City may consult with counsel, who may be counsel to the City, with
regard to legal questions, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it hereunder in good
faith and in accordance therewith.
Section 6.04. Employment of APents by City. In order to perform its duties and
obligations hereunder, the City may employ such persons or entities as it deems necessary or
advisable. The City shall not be liable for any of the acts or omissions of such persons or entities
employed by it in good faith hereunder, and shall be entitled to rely, and shall be fully protected
in doing so, upon the opinions, calculations, determinations and directions of such persons or
entities.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1Bond IndentureBond Indenture [4.9.04].doc
DRAFT 419t 0428
ARTICLE VI1
THE PAYING AGENT
Section 7.01. Appointment of Paving Agent. BNY Western Trust Company is
hereby appointed Paying Agent, registrar and paying agent for the Bonds. The Paying Agent
undertakes to perform such duties, and only such duties, as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into ths Indenture against the
Paying Agent.
Any company into which the Paying Agent may be merged or converted or with
which it may be consolidated or any company resulting from any merger, conversion or
consolidation to which it shall be a party or any company to which the Paying Agent may sell or
transfer all or substantially all of its corporate trust business, provided such company shall be
eligible under the following paragraph of this Section 7.01, shall be the successor to the Paying
Agent without the execution or filing of any paper or any further act, anything herein to the
contrary notwithstanding.
The City may remove the Paying Agent initially appointed, and any successor
thereto, and may appoint a successor or successors thereto, but any such successor shall be a
bank or trust company having a combined capital (exclusive of borrowed capital) and surplus of
at least $50,000,000, and subject to supervision or examination by federal or state authority. If
such bank or trust company publishes a report of condition at least annually, pursuant to law or
to the requirements of any supervising or examining authority above referred to, then for the
purposes of this Section 7.01, the combined capital and surplus of such bank or trust company
shall be deemed to be its combined capital and surplus as set forth in its most recent report of
condition so published.
The Paying Agent may at any time resign by giving written notice to the City and
by giving to the Owners notice by mail of such resignation. Upon receiving notice of such
resignation, the City shall promptly appoint a successor Paying Agent by an instrument in
writing. Any resignation or removal of the Paying Agent shall become effective upon
acceptance of appointment by the successor Paying Agent.
If no appointment of a successor Paying Agent shall be made pursuant to the
foregoing provisions of this Section 7.01 within forty-five (45) days after the Paying Agent shall
have given to the City written notice or after a vacancy in the office of the Paying Agent shall
have occurred by reason of its inability to act, the Paying Agent, at the expense of the City, or
any Owner may apply to any federal or state court to appoint a successor Paying Agent. Said
court may thereupon, after such notice, if any, as such court may deem proper, appoint a
successor Paying Agent.
Section 7.02. Liability of Paying Agent. The recitals of facts, covenants and
agreements herein and in the Bonds contained shall be taken as statements, covenants and
agreements of the City and the Paying Agent assumes no responsibility nor shall have any
liability for the correctness of the same, nor makes any representations as to the validity or
sufficiency of this Indenture or of the Bonds, nor shall the Paying Agent incur any responsibility
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01Dond IndentureDond Indenture [4.9.04].doc
DRAFT 4l9/ 0429
nor shall have any liability in respect thereof, other than in connection with the express duties or
obligations herein or in the Bonds assigned to or imposed upon it. The Paying Agent shall not be
liable in connection with the performance of its duties hereunder, except for its own negligence
or wilful misconduct. The Paying Agent assumes no responsibility or liability for any
information, statement or recital in any offering memorandum or other disclosure material
prepared or distributed with respect to the issuance of the Bonds.
In the absence of bad faith, the Paying Agent may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein, upon certificates,
written directions or opinions hished to the Paying Agent and conforming to the requirements
of this Indenture. Except as provided above in this paragraph, the Paying Agent shall be
protected and shall incur no liability in acting or proceeding, or in not acting or not proceeding,
in good faith, reasonably and in accordance with the terms of this Indenture, upon any resolution,
order, notice, request, consent or waiver, certificate, statement, affidavit, or other paper or
document which it shall in good faith reasonably believe to be genuine and to have been adopted
or signed by the proper person or to have been prepared and furnished pursuant to any provision
of this Indenture, and the Paying Agent shall not be under any duty to make any investigation or
inquiry as to any statements contained or matters referred to in any such instrument.
The Paying Agent shall not be bound to ascertain or inquire as to the performance
or observance of any of the terms, conditions, covenants or agreements of the City herein or in
any of the documents executed by the City in connection with the Bonds.
The Paying Agent shall not be liable for any error of judgment made in good faith
by a responsible officer of the Paying Agent unless it shall be proved that the Paying Agent was
negligent in ascertaining the pertinent facts.
No provision of this Indenture shall require the Paying Agent to expend or risk its
own funds or otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers.
The Paying Agent shall not be responsible for accounting for, or paying to, any
party to this Indenture, including, but not limited to the City and the Owners, any returns on or
benefit from funds held for payment of unredeemed Bonds or outstanding checks and no
calculation of the same shall affect, or result in any offset against, fees due to the Paying Agent
under this Indenture.
The Paying Agent shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the Owners pursuant to
this Indenture unless such Owners shall have offered to the Paying Agent reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction.
The Paying Agent may become the owner of the Bonds with the same rights it
would have if it were not the Paying Agent.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/9/ 0430
All indemnification and releases from liability granted herein to the Paying Agent
shall extend to the agents, consultants, directors, officers and employees of the Paying Agent
(including legal counsel).
Section 7.03. Information. The Paying Agent shall provide to the City such
information relating to the Bonds as the City shall reasonably request, including, but not limited
to, quarterly (or other frequency agreed to by the City and the Paying Agent) statements
reporting transactions by the Paying Agent.
Section 7.04. Notice to Paying Agent. The Paying Agent may rely and shall be
protected in acting or refraining from acting upon any notice, resolution, request, consent, order,
certificate, written direction, report, warrant, bond or other paper or document believed by it to
be genuine and to have been signed or presented by the proper party or proper parties. The
Paying Agent may consult with counsel, who may be counsel to the City, with regard to legal
questions, and the written opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken or suffered by the Paying Agent hereunder in good faith
and in accordance therewith.
Whenever in the administration of its duties under this Indenture the Paying
Agent shall deem it necessary or desirable that a matter be proved or established prior to taking
or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of willful misconduct on the part of the Paying
Agent, be deemed to be conclusively proved and established by a certificate of the City, and such
certificate shall be full warranty to the Paying Agent for any action taken or suffered under the
provisions of this Indenture or any Supplemental Indenture upon the faith thereof, but in its
discretion the Paying Agent may, in lieu thereof, accept other evidence of such matter or may
require such additional evidence as to it may seem reasonable.
Section 7.05. Compensation, Indemnification. In addition to any written fee
agreement, the City shall pay to the Paying Agent from time to time reasonable compensation for
all services rendered as Paying Agent under this Indenture, and also all reasonable expenses,
charges, fees and other disbursements, including those of its attorneys, agents and employees,
incurred in and about the performance of its powers and duties under this Indenture. The City
further agrees, to the extent permitted by applicable law, to indemnify and save the Paying
Agent, its officers, employees, directors and agents, harmless against any liabilities which it may
incur in the exercise and performance of its powers and duties hereunder which are not due to its
negligence or willful misconduct. The obligation of the City under this Section 7.05 shall
survive resignation or removal of the Paying Agent under this Indenture and payment of the
Bonds and discharge of this Indenture.
ARTICLE VI11
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Section 8.01. Amendments Permitted.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01\Bond Indenture\Bond Indenture [4.9.04].doc
DRAFT 4/9/ 043 1
(A) This Indenture and the rights and obligations of the City and of the
Owners of the Bonds may be modified or amended at any time by a Supplemental Indenture
pursuant to the affirmative vote at a meeting of the Owners, or with the written consent, without
a meeting, of the Owners of at least sixty percent (60%) in aggregate principal amount of the
Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04 hereof. No
such modification or amendment shall (i) extend the maturity of any Bond or the time for paying
interest thereon, or otherwise alter or impair the obligation of the City to pay the principal of, and
the interest and any premium on, any Bond, without the express consent of the Owner of such
Bond, or (ii) permit the creation of any pledge of or lien upon the Assessment Revenues, or the
moneys on deposit in the Redemption Fund, the Reserve Fund or the Improvement Fund,
superior to or on a parity with the pledge and lien created for the benefit of the Bonds (except as
otherwise permitted by the Bond Act, the laws of the State of California or this Indenture), or
(iii)reduce the percentage of Bonds required for the amendment hereof, or (iv)reduce the
principal amount of or redemption premium on any Bond or reduce the interest rate thereon.
Any such amendment may not modify any of the rights or obligations of the Paying Agent
without its written consent. The City shall provide to the Paying Agent an opinion of counsel
that any such Supplemental Indenture entered into by the City and the Paying Agent complies
with the provisions of this Section 8.01 and the Paying Agent may conclusively rely on such
opinion.
(B) This Indenture and the rights and obligations of the City and the Owners
may also be modified or amended at any time by a Supplemental Indenture, without the consent
of any Owners, only to the extent permitted by law and only for any one or more of the following
purposes:
(1) to add to the covenants and agreements of the City in this Indenture
contained, other covenants and agreements thereafter to be observed, or to limit or
surrender any right or power herein reserved to or conferred upon the City;
(2) to make modifications not adversely affecting any Outstanding series of
Bonds in any material respect;
(3) to make such provisions for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provisions of this Indenture, or in
regard to questions arising under this Indenture, as the City and the Paying Agent may
deem necessary or desirable and not inconsistent with this Indenture, and which shall not
adversely affect the rights of the Owners;
(4) to make such additions, deletions or modifications as may be necessary or
desirable to assure compliance with Section 148 of the Code relating to required rebate of
moneys to the United States or otherwise as may be necessary to assure exclusion from
gross income for federal income tax purposes of interest on the Bonds or to conform with
the Regulations.
Section 8.02. Owners’ Meetings. The City may at any time call a meeting of the
Owners. In such event the City is authorized to fix the time and place of any such meeting and
S:\Warren .Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 0432
to provide for the giving of notice thereof and to fix and adopt rules and regulations for the
conduct of the meeting.
Section 8.03. Procedure for Amendment with Written Consent of Owners. The
City and the Paying Agent may at any time adopt a Supplemental Indenture amending the
provisions of the Bonds or of this Indenture or any Supplemental Indenture, to the extent that
such amendment is permitted by Section 8.01(A) hereof, to take effect when and as provided in
this Section 8.03. A copy of the Supplemental Indenture, together with a request to Owners for
their consent thereto, shall be mailed by first class mail, postage prepaid, by the Paying Agent to
each Owner of Bonds Outstanding, but failure to mail copies of the Supplemental Indenture and
request shall not affect the validity of the Supplemental Indenture when assented to as in this
Section provided.
Such a Supplemental Indenture shall not become effective unless there shall be
filed with the Paying Agent the written consents of the Owners of at least sixty percent (60%) in
aggregate principal amount of the Bonds then Outstanding (exclusive of Bonds disqualified as
provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section
provided. Each such consent shall be effective only if accompanied by proof of ownership of the
Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04
hereof. Any such consent shall be binding upon the Owner of the Bonds giving such consent and
on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless
such consent is revoked in writing by the Owner giving such consent or a subsequent Owner by
filing such revocation with the Paying Agent prior to the date when the notice hereinafter in this
Section provided for has been mailed.
After the Owners of the required percentage of Bonds shall have filed their
consents to the Supplemental Indenture, the City shall mail a notice to the Owners in the manner
hereinbefore provided in this Section for the mailing of the Supplemental Indenture, stating in
substance that the Supplemental Indenture has been consented to by the Owners of the required
percentage of Bonds and will be effective as provided in this Section (but failure to mail copies
of said notice shall not affect the validity of the Supplemental Indenture or consents thereto).
Proof of the mailing of such notice shall be filed with the Paying Agent. A record, consisting of
the papers required by this Section 8.03 to be filed with the Paying Agent, shall be proof of the
matters therein stated until the contrary is proved. The Supplemental Indenture shall become
effective upon the filing with the Paying Agent of the proof of mailing of such notice, and the
Supplemental Indenture shall be deemed conclusively binding (except as otherwise hereinabove
specifically provided in this Article VIII) upon the City and the Owners of all Bonds then
Outstanding at the expiration of sixty(60) days after such filing, except in the event of a final
decree of a court of competent jurisdiction setting aside such consent in a legal action or
equitable proceeding for such purpose commenced within such sixty (60)-day period.
Section 8.04. Disqualified Bonds. Bonds owned or held for the account of the
City, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose
of any vote, consent or other action or any calculation of Outstanding Bonds provided for in this
ArticleVIII, and shall not be entitled to vote upon, consent to, or participate in any action
provided for in this Article VIII.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1 Bond IndentureUond Indenture [4.9.04].dcc
DRAFT 4/91 0433
Section 8.05. Effect of Supplemental Indenture. From and after the time any
Supplemental Indenture becomes effective pursuant to this Article VIII, this Indenture shall be
deemed to be modified and amended in accordance therewith, and the respective rights, duties
and obligations under this Indenture of the City and all Owners of Bonds Outstanding shall
thereafter be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such Supplemental
Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all
purposes.
Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments.
The City may determine that Bonds issued and delivered after the effective date of any action
taken as provided in this Article VI11 shall bear a notation, by endorsement or otherwise, in form
approved by the City, as to such action. In that case, upon demand of the Owner of any Bond
Outstanding at such effective date and upon presentation of his or her Bond for that purpose at
the Principal Office of the Paying Agent or at such other office as the City may select and
designate for that purpose, a suitable notation shall be made on such Bond. The City may
determine that new Bonds, so modified as in the opinion of the City is necessary to conform to
such action, shall be prepared, executed and delivered. In that case, upon demand of the Owner
of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of
the Paying Agent without cost to any Owner, for like Bonds then Outstanding, upon surrender of
such Bonds.
Section 8.07. Amendatory Endorsement of Bonds. The provisions of this
ArticleVIII shall not prevent any Owner from accepting any amendment as to the particular
Bonds held by him or her, provided that due notation thereof is made on such Bonds.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Benefits of Indenture Limited to Parties. Nothing in this Indenture,
expressed or implied, is intended to give to any person other than the City, the Paying Agent and
the Owners, any right, remedy or claim under or by reason of this Indenture. Any covenants,
stipulations, promises or agreements in this Indenture contained by and on behalf of the City
shall be for the sole and exclusive benefit of the Owners and the Paying Agent.
Section 9.02. Successor is Deemed Included in All References to Predecessor.
Whenever in this Indenture or any Supplemental Indenture either the City or the Paying Agent is
named or referred to, such reference shall be deemed to include the successors or assigns thereof,
and all the covenants and agreements in this Indenture contained by or on behalf of the City or
the Paying Agent shall bind and inure to the benefit of the respective successors and assigns
thereof whether so expressed or not.
Section 9.03. Discharge of Indenture.
If the City shall pay and discharge the entire indebtedness on all Bonds in any one
or more of the following ways:
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 200341lBond IndenturelBond Indenture [4.9.04].doc
DRAFT 4/91 0434
(A) by well and truly paying or causing to be paid the principal of and interest
and any premium on all Bonds, as and when the same become due and payable;
(B) by depositing with the Finance Director, in trust, at or before maturity, an
amount of money which, together with the amounts then on deposit in the Redemption
Fund and the Reserve Fund, is fully sufficient to pay all Bonds, including all principal,
interest and redemption premiums, if any; or
(C) by irrevocably depositing with the Finance Director, in trust, cash or non-
callable Federal Securities in such amount as the City shall determine, as confirmed by an
Independent Financial Consultant, will, together with the interest to accrue thereon and
amounts then on deposit in the Redemption Fund and Reserve Fund, be hlly sufficient to
pay and discharge the indebtedness on all Bonds (including all principal, interest and
redemption premiums) at or before their respective maturity dates;
and if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given as in this Indenture provided or provision satisfactory to the Paying Agent
shall have been made for the giving of such notice, then, at the election of the City, and
notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the
Assessment Revenues and other funds provided for in this Indenture and all other obligations of
the City under this Indenture with respect to all Bonds shall cease and terminate, except the
obligation of the City to pay or cause to be paid to the Owners of the Bonds not so surrendered
and paid all sums due thereon, the obligation of the City to pay all amounts owing to the Paying
Agent pursuant to Section 7.05 hereof, and the obligations of the City pursuant to the covenants
contained in Section 5.09 hereof. Notice of such election shall be filed with the Paying Agent.
The satisfaction and discharge of this Indenture shall be without prejudice to the rights of the
Paying Agent to charge and be reimbursed by the City for the expenses which it shall thereafter
incur in connection herewith.
Section 9.04. Execution of Documents and Proof of Ownership bv Owners. Any
request, declaration or other instrument which this Indenture may require or permit to be
executed by Owners may be in one or more instruments of similar tenor, and shall be executed
by Owners in person or by their attorneys appointed in writing.
Except as otherwise herein expressly provided, the,fact and date of the execution
by any Owner or his attorney of such a request, declaration or other instrument, or of a writing
appointing such an attorney, may be proved by the certificate of any notary public or other
officer authorized to take acknowledgments of deeds to be recorded in the state in which he
purports to act, that the person signing such request, declaration or other instrument or writing
acknowledged to him the execution thereof, or by an affidavit of a witness of such execution,
duly sworn to before such a notary public or other officer.
Except as otherwise herein expressly provided, the ownership of registered Bonds
date of holding the same shall be proved by the and the amount, maturity, number and
registration books maintained by the Paying Agent pursuant to Section 2.08 hereof.
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 200341\Bond IndentureDond Indenture [4.9.04].doc
DRAFT 4/91 0435
Any request, declaration or other instrument or writing of the Owner of any Bond
shall bind all future Owners of such Bond in respect of anything done or suffered to be done by
the City or the Paying Agent in good faith and in accordance therewith.
Section 9.05. Waiver of Personal Liability. No member, officer, agent or
employee of the City shall be individually or personally liable for the payment of the principal
of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such
member, officer, agent or employee from the performance of any official duty provided by law.
Section 9.06. Notices to and Demands on City and Paying Agent. Any notice or
demand which by any provision of this Indenture is required or permitted to be given or served
by the Paying Agent to or on the City may be given or served by being deposited postage prepaid
(first class, registered or certified) in a post office letter box addressed (until another address is
filed by the City with the Paying Agent) as follows:
City of Carlsbad
1635 Faraday Avenue
Carlsbad, California 92008-73 14
Attn: Finance Director
Any notice or demand which by any provision of this Indenture is required or
permitted to be given or served by the City to or on the Paying Agent may be given or served by
being deposited postage prepaid (first class, registered or certified) in a post office letter box
addressed (until another address is filed by the Paying Agent with the City) as follows:
BNY Western Trust Company
700 South Flower Street, Znd Floor
Los Angeles, California 9001 7
Attn: Corporate Trust Department
Section 9.07. Partial Invalidity. If any section, paragraph, sentence, clause or
phrase of this Indenture shall for any reason be held by a court of competent jurisdiction to be
illegal or unenforceable, such holding shall not affect the validity of the remaining portions of
this Indenture. The City hereby declares that it would have executed and delivered this Indenture
and each and every other section, paragraph, sentence, clause or phrase hereof and authorized the
issue of the Bonds pursuant thereto irrespective of the fact that any one or more sections,
paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or
unenforceable.
Section 9.08. Unclaimed Moneys. Anything contained herein to the contrary
notwithstanding, any moneys held by the Paying Agent in trust for the payment and discharge of
the principal of, and the interest and any premium on, the Bonds which remains unclaimed for
two (2) years after the date when the payment of such principal, interest and premium have
become payable, if such moneys were held by the Paying Agent at such date, shall be paid by the
Paying Agent to the City as its absolute property free from any trust, and the Paying Agent shall
thereupon be released and discharged with respect thereto and the Owners of such Bonds shall
DRAFT 4/91 0436 S:\Warren.Diven\Ci ties\City of Carlsbad\Cannon-College AD 2003-01Wond IndentureWond Indenture [4.9.04].doc
look only to the City for the payment of the principal of, and interest and any premium on, their
Bonds.
Section 9.09. Applicable Law. This Indenture shall be governed by and enforced
in accordance with the laws of the State of California applicable to contracts made and
perfonned in the State of California.
Section 9.10. Conflict with Act. In the event of a conflict between any provision
of this Indenture with any provision of the Bond Act as in effect on the Closing Date, the
provision of the Bond Act shall prevail over the conflicting provision of this Indenture.
Section 9.1 1. Conclusive Evidence of Regularity. Bonds issued pursuant to this
Indenture shall constitute conclusive evidence of the regularity of all proceedings under the Act
relative to their issuance.
Section 9.12. Payment on Business Day. In any case where the date of the
payment of interest or of principal (and premium, if any) of the Bonds or the date fixed for
redemption is other than a Business Day, the payment of interest or principal (and premium, if
any) need not be made on such date but may be made on the next succeeding day which is a
Business Day with the same force and effect as if made on the date required, and no interest shall
accrue for the period from and after such date.
Section 9.13. Counterparts.
each of which shall be deemed an original.
This Indenture may be executed in counterparts,
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01Dond IndentureDond Indenture [4.9.04].doc
DRAFT 4/91 043 7
IN WITNESS WHEREOF, the City has caused this Indenture to be executed in its
name and attested, and the Paying Agent, in acknowledgment of its acceptance of the obligations
created hereunder, has caused this Indenture to be executed in its name, all as of May 1 , 2004.
CITY OF CARLSBAD
By:
Debt Administrator
BNY Western Trust Company,
as Paying Agent
By:
Authorized Officer
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 20034lU3ond IndentureV3ond Indenture [4.9.04].doc
DRAFT 4/91 043 8
EXHIBIT “A”
[FORM OF BOND]
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY (AS DEFINED IN THE AGREEMENT) TO THE PAYING AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY BOND
AUTHENTICATED AND DELIVERED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF SAN DIEGO
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. 1 LIMITED OBLIGATION IMPROVEMENT BOND
(Property Secured Only - No Issuer Liability)
ASSESSMENT DISTRICT NO. 2003-01
Registered
Number
Interest
Rate
Maturity Original
Date Issue Date
Registered
Amount $
CUSIP
Registered Owner: CEDE & CO.
Principal Sum
Under and by virtue of the Improvement Bond Act of 1915, Division 10
(commencing with Section 8500) of the Streets and Highways Code of the State of California
(the “Act”), the City of Carlsbad (the “City”), will, out of the redemption fund for the payment of
the Bonds issued upon the unpaid portion of assessments levied within Benefit Area No. 1 of
Assessment District No. 2003-01 (College Boulevard and Cannon Road East), City of Carlsbad,
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/91 0439
County of San Diego, State of California (the “Assessment District”) made for the construction
and acquisition of certain public improvements in and for the Assessment District, which
improvements and the Assessment District, including Benefit Area No. 1, are more fully
described in proceedings taken pursuant to Resolution No. 2003-197, the Resolution of Intention
for the Assessment District, adopted by the City Council of the City on July 15,2003, pay to the
registered owner identified above, or registered assigns, on the maturity date specified above the
principal sum specified above in lawful money of the United States, and in like manner will pay
interest from the interest payment date next preceding the date on which this Bond is
authenticated, unless this Bond is authenticated after a Record Date (as hereinafter defined) and
before the close of business on the next interest payment date, in which event it shall bear
interest from such interest payment date, or unless this Bond is authenticated on or before the
Record Date preceding the first interest payment date, in which event it shall bear interest from
the original issue date specified above, until payment of such principal sum shall have been
discharged, at the rate of interest per annum specified above, payable semiannually on March 2
and September 2 in each year commencing on September 2,2004. Both the principal hereof and
redemption premium hereon are payable at the principal corporate trust office of BNY Western
Trust Company, the Paying Agent, Registrar and Transfer Agent (the “Paying Agent”) in Los
Angeles, California, and the interest hereon is payable by check mailed to the owner hereof at the
owner’s address as it appears on the records of the Paying Agent, or at such address as may have
been filed with the Paying Agent for that purpose, as of the fifteenth (15th) day of the month
preceding each interest payment date (the “Record Date”). Principal of, redemption premium, if
any, and interest payable to any Owner of Bonds in aggregate principal amount of $1,000,000 or
more will be paid, upon the written request of any such Owner in form and substance satisfactory
to the Paying Agent, by wire transfer of immediately available funds to an account within the
United States designated by such Owner on or before a Record Date.
This Bond will continue to bear interest after maturity at the rate above specified,
provided it is presented at maturity and payment thereof is refused upon the sole ground that
there are not sufficient moneys in said redemption fund with which to pay the same. If it is not
presented at maturity, and there are sufficient moneys in said redemption fund with which to pay
the same, interest on this Bond will run until maturity.
Pursuant to Section 8769 of the Streets and Highways Code of the State of
California, the City Council of the City has determined that the City will not obligate itself to
advance funds from the City treasury to cure any deficiency in the redemption fimd.
This Bond is one of several annual series of bonds of like date, tenor and effect,
but differing in amounts, maturities and interest rates, issued by the City pursuant to the Act and
a Bond Indenture dated as of May 1, 2004 by and between the City and the Paying Agent (the
“Bond Indenture”) in the aggregate principal amount of $ (the “Bonds”) for the
purpose of providing means for paying for the construction and acquisition of the improvements
which are to be constructed and acquired within and for the Assessment District, as described in
said proceedings, and is secured by the moneys in said redemption fund and by the unpaid
portion of the assessments levied on parcels of property within Benefit Area No. 1 of the
Assessment District for the payment of said improvements, and, including principal and interest,
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 200341U3ond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 0440
is payable exclusively out of said fund. Reference is hereby made to the Act and the Indenture,
and all amendments thereto, for a description of the rights, duties and obligations of the City and
the owners of the Bonds, the terms upon which the Bonds are issued and the terms and
conditions on which the Bonds will be deemed to be paid, at or prior to maturity or redemption
of the Bonds, to all the provisions of which agreement the owner of this Bond, by acceptance
hereof, assents and agrees.
The Bonds are issuable only as fully registered Bonds in denominations of
$5,000, or any integral multiple thereof, except a Bond which shall mature on September 2,2005
and be issued in the principal amount of $ .
This Bond is transferable by the registered owner hereof, in person or by the
owner’s attorney duly authorized in writing, at the office of the Paying Agent, subject to the
terms and conditions provided in the Bond Indenture, including the payment of certain charges,
if any, upon surrender and cancellation of this Bond. Upon such transfer, a new registered 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 for this Bond.
Bonds shall be registered only in the name of an individual (including joint
owners), a corporation, a partnership or a trust.
The Paying Agent shall not be required to make any exchange or registration of
transfer of Bonds during the fifteen (1 5) days immediately preceding any interest payment date,
or during the period selected by the Paying Agent for the selection of Bonds for redemption, or
with respect to any Bonds selected for redemption.
The Paying Agent may treat the owner hereof as the absolute owner for all
purposes, and the Paying Agent shall not be affected by any notice to the contrary.
The Bonds maturing on and after September 2, 20- are subject to redemption
prior to their stated maturity dates on September 2, 20- or on any Interest Payment Date
thereafter, on a pro rata basis among maturities (and by lot within any one maturity), in integral
multiples of $5,000, at the option of the City from moneys derived by the City from any source,
at the following redemption prices (expressed as percentages of the principal amount of the
Bonds to be redeemed), together with accrued interest to the date of redemption:
Redemption Dates Redemption Prices
September 2,20- and March 2,20-
September 2,20- and thereafter 100
-Yo September 2,20- and March 2,20- -
The Bonds are also subject to mandatory redemption on any Interest Payment
Date, as selected by the City, in integral multiples of $5,000, from moneys derived by the City
from Assessment Prepayments (as defined in the Bond Indenture), at the following redemption
S:\Warren .Diven\Ci ties\City of Carlsbad\Cannon-College AD 2003-0 lmond Indenturemond Indenture [4.9.04].doc
DRAFT 4/9/ 044 1
prices (expressed as percentages of the principal amount of the Bonds to be redeemed), together
with accrued interest to the date of redemption:
Redemption Dates Redemption Prices
September 2,2004 through March 2,20-
September 2,20- and March 2,20-
September 2,20- and March 2,20-
September 2,20- and thereafter
103%
The Bonds maturing on September 2,20-, are subject to mandatory sinking fund
redemption, in part, on September 2,20-, and on each September 2 thereafter prior to maturity,
by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with
accrued interest to the date of redemption, without premium, from sinking fund payments as
provided in the Bond Indenture.
This Bond is subject to refunding pursuant to the procedures of Division 11.5
(commencing with Section 9500) of the Streets and Highways Code of the State of California.
This Bond shall not be entitled to any benefit under the Act or the Bond
Indenture, or become valid or obligatory for any purpose, until the certificate of authentication
and registration hereon endorsed shall have been dated and signed by or on behalf of the Paying
Agent.
IN WITNESS WHEREOF, the City of Carlsbad, California, has caused this Bond
to be signed by its City Treasurer and City Clerk, all as of the day of 2004.
CITY OF CARLSBAD, CALIFORNIA
City Clerk City Treasurer
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/9/ 0442
CERTIFICATE OF AUTHENTICATION
This is one of the Bonds described in the within-defined Bond Indenture.
Dated:
BNY WESTERN TRUST COMPANY
Paying Agent
By:
Authorized Signatory
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-01\Bond Indenturemond Indenture [4.9.04].doc
DRAFT 4/91 0443
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
(Name, Address and Tax Identification or
Social Security Number of Assignee)
the within registered Bond and hereby irrevocably constitute(s) and appoint(s)
full power of substitution in the premises.
attorney, to transfer said Bond on the books of the Paying Agent, with
Dated:
NOTE: The signature(s) on this assignment must
correspond with the name(s) as written on the face
of the within Bond in every particular without
alteration or enlargement or any change whatsoever.
Signature Guaranteed:
NOTE: Signature(s) must be guaranteed
by an eligible guarantor.
S:\Warren .Diven\Cities\City of CarlsbadWannon-College AD 2003-01 Bond IndentureBond Indenture [4.9.04].doc
DRAFT 4/91 0444
TABLE OF CONTENTS Page(s)
3
3
ARTICLE I 3
Section 1.01. Authority for this Indenture
Section 1.02. Indenture for Benefit of Bondowners Section 1.03. Definitions 3
ARTICLE I1 11
Section 2.01. Principal Amount; Desimation 11
Section 2.02. Terms of Bonds 11
Section 2.03. Redemption 12
Section 2.04. Form of Bonds s 14
Section 2.05. Execution of Bonds 14
Section 2.06. Transfer of Bonds 15
Section 2.07. Exchange of Bonds 15
Section 2.08. Bond Register 15
Section 2.09. Temporary Bonds 16
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen 16
Section 2.1 1. Special Obligation 16
Section 2.12. Refunding 17
ARTICLE I11 17
Section 3.01. Issuance and Delivery of Bonds - 17
Section 3.02. Application of Proceeds of Sale of Bonds 17
Section 3.03. Improvement Fund 17
Section 3.04. Cost of Issuance Fund
Section 3.04. Book-Entry System; Delivery of the Bonds to the Depository 18
ARTICLE IV 19
20
Section 4.03. Reserve Fund 23
ARTICLE V 24
Section 5.01. Punctual Payment 24
Section 5.02. Special Obligation 24
Section 5.03. Extension of Time for Payment 24
Section 5.04. Against Encumbrances 24
Section 5.05. Protection of Security and Rinhts of Owners 25
Section 5.06. Compliance with Laws, Completion of Proiect 25
Section 5.07. Collection of Assessment Revenues 25
Section 5.08. Further Assurances 25
Section 5.09. Tax Covenants 25
Section 5.10. Covenant to Foreclose 26
ARTICLE VI 26
Section 6.01. Deposit and Investment of Moneys in Funds 26
Section 6.02. Rebate Fund; Rebate to the United States 28
Section 6.03. Liability of City 28
Section 6.04. Employment of Agents by City 28
ARTICLE VI1 29
Section 4.01. Pledge of Assessment Revenues; Transfers of Assessment Revenues
Section 4.02. Redemption Fund 20
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 2003-0 1 \Bond IndentureDond Indenture [4.9.04].doc
DRAFT 4/91 0444
Section 7.01.
Section 7.02.
Section 7.03.
Section 7.04.
Section 7.05.
Section 7.06.
ARTICLE VI11
Section 8.01
Section 8.02
Section 8.03
Section 8.04
Section 8.05
Section 8.06
Section 8.07
Section 9.01
Section 9.02
Section 9.03
Section 9.04
Section 9.05
Section 9.06
Section 9.07
Section 9.08.
Section 9.09.
Section 9.10.
Section 9.1 1.
Section 9.12.
Section 9.13.
ARTICLE IX
Appointment of Paying Agent
Liabilitv of Paying Agent
Information
Notice to Paying Agent
Compensation, Indemnification
Books and Accounts
Amendments Permitted
Owners’ Meetings
Procedure for Amendment with Written Consent of Owners
Disqualified Bonds
Effect of Supplemental Indenture
Endorsement or Replacement of Bonds Issued After Amendments
Amendatory Endorsement of Bonds
Benefits of Indenture Limited to Parties
Successor is Deemed Included in All References to Predecessor
Discharge of Indenture
Execution of Documents and Proof of Ownership bv Owners
Waiver of Personal Liability
Notices to and Demands on Citv and Paying Agent
Partial Invalidity
Unclaimed Moneys
Applicable Law
Conflict with Act
Conclusive Evidence of Rermlarity
Payment on Business Day
Counterparts
29
29
31
31
31
31
31
32
33
33
34
34
34
34
34
34
34
35
36
36
36
36
37
37
37
37
37
Exhibit A - Form of Bond ........................................................................................................... A-1
S:\Warren.Diven\Cities\City of Carlsbad\Cannon-College AD 200341D3ond IndentureDond Indenture [4.9.04].doc
DRAFT 4J9f 0445
Exhibit 5
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. 1
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 2003-01
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the “Disclosure Agreement”), dated as of May 1,
2004, is executed and delivered by the City of Carlsbad (“City”) and BNY Western Trust
Company (the “Paying Agent”), as Paying Agent and in connection
with the issuance of $ City of Carlsbad Assessment District No. 2003-01 (College
Boulevard and Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement Bonds
(the “Bonds”). 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 a Bond
Indenture, dated as of May 1, 2004 (the “Indenture”), between the City and the Paying Agent.
The City covenants and agrees as follows:
Section 1. Purpose of the Disclosure Aqeement. This Disclosure Agreement is being
executed and delivered by the City and the Paying Agent for the benefit of the holders and
beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying
with S.E.C. Rule 15c2-12(b)(5).
Section 2. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to,
and as described in, Sections 3 and 4 of this Disclosure Agreement.
“Dissemination Agent” shall mean the City, the Paying Agent, acting in its
capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in
writing by the City and which has filed with the City a written acceptance of such designation.
“Listed Events” shall mean any of the events listed in Section 5(a) of this
Disclosure Agreement.
“National Repository” means any Nationally Recognized Municipal Securities
Information Repository recognized by the Securities and Exchange Commission. The National
Repositories currently recognized by the Securities and Exchange Commission are set forth in
the SEC website located at http://www.sec.gov/consumer/nrmsir.htm.
“OfJiciaZ Statement” shall mean the official statement relating to the Bonds.
“Participating Underwriter” shall mean the original underwriter of the Bonds
required to comply with the Rule in connection with offering of the Bonds.
Carlsbad Cannon Road CDA -council- __ ,1 I
“Repository” shall mean each National Repository and each State Repository.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time
to time.
“State Repository” shaIl mean any public or private repository or entity designated
by the State of California as a state repository for the purpose of the Rule and recognized by the
Securities and Exchange Commission. As of the date of this Continuing Disclosure Agreement,
there is no State Repository.
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, annually not
later than 270 days after the end of the City’s fiscal year, commencing with the report for the
2003/04 fiscal year, provide to each Repository an Annual Report which is consistent with the
requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) Business
Days prior to said date, the City shall, by telecommunications or other reasonable means, provide
the Annual Report to the Dissemination Agent (if other than the City). The Annual Report may
be submitted as a single document or as separate documents comprising a package, and may
cross-reference other information as provided in Section 4 of this Disclosure Agreement;
provided that the audited financial statements of the City may be submitted separately from the
balance of the Annual Report, and later than the date required above for the filing of the Annual
Report if not available by that date.
(b) Not later than fifteen (15) Business Days prior to the date specified in
subsection (a) for the providing of the Annual Report to Repositories, the City shall provide the
Annual Report to the Dissemination Agent. If by such date, the Dissemination Agent has not
received a copy of the Annual Report, the Dissemination Agent shall contact the City to
determine if the City is in compliance with the first sentence of this subsection (b). If the
Dissemination Agent is unable to verify that an Annual Report has been provided to the
Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice
to the National Repository or the Municipal Securities Rulemaking Board and the State
Repository in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual
Report the name and address of each National Repository and each State
Repository, if any; and
(ii) file a report with the City certifjrlng that the Annual Report has
been provided pursuant to this Disclosure Agreement, stating the date it was
provided and listing all the Repositories to which it was provided.
Section 4. Content of Annual.Reports. The City’s Annual Report shall contain or
incorporate by reference the most recent audited financial statements of the City prepared in
2
accordance with generally accepted accounting principles promulgated to apply to governmental
entities from time to time by the Governmental Accounting Standards Board and the following
information regarding Assessment District No. 2003-01 (the “Assessment District”):
(a)
(b)
(c)
(d)
(e)
(f)
Principal amount of the Bonds outstanding as of June 30 and the
succeeding September 3;
Balances in the Redemption Fund and the Reserve Fund as of June 30 and
the succeeding September 3;
Amount of assessment prepayments in the prior fiscal year;
The amount of delinquencies in the prior fiscal year; and
Any action by the City to foreclose on property with delinquent
assessments.
The aggregate assessed value of property in the Assessment District with
unpaid assessments (in the same format as Table - of the Official
Statement).
Owners of property in the Assessment District with aggregate unpaid
assessments in excess of 5% of the total unpaid assessments. (g)
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the City or related public entities,
which have been submitted to each of the Repositories or the Securities and Exchange
Commission. If the document included by reference is a final official statement, it must be
available from the Municipal Securities Rulemaking Board. The City shall clearly identi@ each
such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to
be given, notice of the occurrence of any of the following events with respect to the Bonds, if
Principal and interest payment delinquencies.
Non-payment related defaults.
Unscheduled draws on debt service reserves reflecting financial
difficulties.
Unscheduled draws on credit enhancements reflecting financial
difficulties.
Substitution of credit or liquidity providers, or their failure to
perform.
Adverse tax opinions or events affecting the tax-exempt status of
the security.
Modifications to rights of security holders.
Bond calls.
Defeasances.
Release, substitution, or sale of property securing repayment of the
securities.
3
(1 1) Rating changes.
(b) Whenever the City obtains knowledge of the occurrences of a Listed
Event, the City shall as soon as possible determine if such event would be material under
applicable Federal Securities law.
(c) If the City determines that knowledge of the occurrence of a Listed Event
would be material under applicable Federal Securities law, the City shall promptly notify the
Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to file a
notice of such occurrence with the Municipal Securities Rulemaking Board and each State
Repository. Notwithstanding the foregoing, notice of Listed Events described in subsections
(a)@) and (9) need not be given under this subsection any earlier than the notice (if any) of the
underlying event is given to holders of affected Bonds pursuant to the Indenture.
(d) If the Dissemination Agent has been instructed by the City to report the
occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with
the Municipal Securities Rulemaking Board and each State Repository with a copy to the City.
Notwithstanding the foregoing notice of Listed Events described in subsections (a)@) and (9)
need not be given under this subsection any earlier than the notice (if any) of the underlying
event is given to the holders of affected Bonds pursuant to the Indenture.
Section 6. Termination of Reporting Oblination. The City’s obligations under this
Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds.
Section 7. Dissemination Anent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in canying out its obligations under this Disclosure Agreement,
and may discharge any such Dissemination Agent, with or without appointing a successor
Dissemination Agent. If at any time there is not any other designated dissemination Agent, the
Paying Agent shall be the Dissemination Agent. The initial Dissemination Agent shall be
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City and the Paying Agent may amend this Disclosure Agreement (and the
Paying Agent shall agree to any amendment so requested by the City to the extent that such
amendment does not adversely effect the Paying Agent) , and any provision of this Disclosure
Agreement may be waived, provided that the following conditions are satisfied:
(a) the amendment or waiver, if it relates to annual or event information to be
provided, is made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature, or status of the City, or type of
business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in
the opinion of nationally recognized bond counsel, have complied with the requirements of the
4
Rule at the time of the primary offering of the Bonds, after taking into account any amendments
or interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver (i) is approved by holders of the Bonds
in the manner provided in the Indenture for amendments to the Indenture with the consent of
holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair
the interests of holders.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Agreement. If the City chooses to include
any information in any Annual Report or notice of occurrence of a Listed Event in addition to
that which is specifically required by this Disclosure Agreement, the City shall have no
obligation under this Continuing Disclosure Agreement to update such information or include it
in any fbture Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the City or Dissemination Agent to
comply with any provision of this Disclosure Agreement any holder or beneficial owner of the
Bonds may take such actions as may be necessary and appropriate, including seeking mandate or
specific performance by court order, to cause the City or the Dissemination Agent to comply with
its obligations under this Disclosure Agreement. A default under this Disclosure Agreement
shall not be deemed an Event of Default under the Indenture, and the sole remedy under this
Disclosure Agreement in the event of any failure of the City or Dissemination Agent to comply
with this Disclosure Agreement shall be an action to compel performance.
Section 1 1. Duties, Immunities and Liabilities of Dissemination Anent. The
Dissemination Agent will receive reasonable compensation for its services provided pursuant to
this Disclosure Agreement. The Dissemination Agent shall not be liable or responsible in any
manner for the form or content of any report or notice provided by the City hereunder. The
Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Agreement, and the City agrees to indemnify and save the Dissemination Agent, its officers,
directors, employees and agents, harmless against any loss, expense and liabilities which it may
incur arising out of or in the exercise or performance of its powers and duties hereunder,
including the costs and expenses (including attorneys fees) of defending against any claim of
liability, but excluding liabilities due to the Dissemination Agent’s negligence or willful
misconduct. The obligations of the City under this Section shall survive resignation or removal
of the Dissemination Agent and payment of the Bonds.
Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of
the City, the Dissemination Agent (if such Dissemination Agent is not the City), the Participating
Underwriters and holders and beneficial owners, from time to time, of the Bonds, and shall create
no rights in any other person or entity.
5
Section 13. Countemarts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
CITY OF CARLSBAD
By:
Finance Director
BNY WESTERN TRUST COMPANY, as
Dissemination Agent
By:
Authorized Officer
6
EXHIBIT A
NOTICE OF MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Carlsbad
Name of Bond Issue: City of Carlsbad Assessment District No. 2003-01 (College Boulevard
and Cannon Road East) Benefit Area No. 1 Limited Obligation
Improvement Bonds
Date of Issuance: ,2004
NOTICE IS HEREBY GIVEN that the City has not provided an Annual Report with
respect to the above-named Bonds as required by the Indenture. The City anticipates that the
Annual Report will be filed by
Dated: BNY WESTERN TRUST COMPANY, as
Dissemination Agent
By:
Authorized Officer
cc: Issuer
Exhibit 6
CITY OF CARLSBAD
(COLLEGE BOULEVARD AND CANNON ROAD EAST)
BENEFIT AREA NO. 1
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 2003-01
BOND PURCHASE AGREEMENT
,2004
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Ladies and Gentlemen:
The undersigned, Stone & Youngberg LLC (the “Underwriter”), offers to enter into this
Bond Purchase Agreement (the “Purchase Agreement”) with the City of Carlsbad (the “City”)
which, upon acceptance by the City, will be binding upon the City and the Underwriter. This
offer is made subject to the City’s acceptance on the date hereof, and if not so accepted will be
subject to withdrawal by the Underwriter upon written notice delivered to the City at any time
prior to the acceptance hereof by the City.
1. Purchase, Sale and Delivery of the Bonds.
(a) Subject to the terms and conditions, and in reliance upon the
representations, warranties and agreements set forth herein, the Underwriter hereby agrees to
purchase from the City, in connection with Benefit Area No. 1 (“Benefit Area No. 1”) of the it’s
Assessment District No. 2003-01 (College Boulevard and Cannon Road East) (the “District”),
and the City hereby agrees to sell to the Underwriter, all (but not less than all) of the City of
Carlsbad Assessment District No. 2003-01 (College Boulevard and Cannon Road East) Benefit
Area No. 1 Limited Obligation Improvement Bonds (the “Bonds”), dated ,2004 in
the aggregate principal amount of $ , bearing interest (payable commencing
September 2,2004, and semiannually thereafter on March 2 and September 2 in each year) at the
rates of interest, and maturing on the dates and in the amounts, as set forth in Exhibit A attached
hereto and incorporated herein by this reference. The purchase price for the Bonds shall be
!$ , being of the principal amount of the Bonds, less an Underwriter’s discount of
!$ , and [less net original issue discount] [plus net original issue premium] of
!$
Carlsbad Cannon Road BPA (3).DOC
The Bonds are issued pursuant to the Improvement Bond Act of 19 15, being Division 10
of the California Streets and Highways Code (the “1915 Act”), and a Bond Indenture, dated as of
May 1, 2004 (the “Indenture”), between the City and , Los AngeIes,
California, as Paying Agent for the Bonds (the “Paying Agent”). All of the proceedings of the
City to form the District, and to levy the assessments for the construction and acquisition of the
improvements described herein and financed with the proceeds of the Bonds, have been
undertaken pursuant to the Municipal Improvement Act of 1913 (Division 12 of the California
Streets and Highways Code) (the “1913 Act” and, with the 1915 Act, the “Bond Law”). The
Bonds shall be as described in, shall be issued and secured under the provisions of and shall be
payable and subject to redemption as provided in the Indenture. The Bonds are issued upon and
secured by the unpaid assessments (the “Assessments”), together with interest thereon, levied on
parcels within Benefit Area No. 1.
Proceeds of the sale of the Bonds will be used (i) to finance the acquisition and
construction of certain public improvements specially benefiting properties located within the
boundaries of Benefit Area No. 1, (ii) to fund a Reserve Fund for the Bonds, (iii) to fund
capitalized interest on the Bonds until 2, 200-, and (iv) to pay the costs of issuing
the Bonds.
(b) The Preliminary Official Statement, dated , 2004 relating to
the Bonds, together with the cover page and all appendices thereto, is herein called the
“Preliminary Official Statement.” The City hereby ratifies the use by the Underwriter of the
Preliminary Official Statement and authorizes the Underwriter to use and distribute the
Preliminary Official Statement, the Official Statement (as defined below), the Indenture (as
hereinafter defined), the Resolution and this Purchase Agreement, and all information contained
therein, and all other documents, certificates and written statements furnished by the City to the
Underwriter in connection with the transactions contemplated by this Purchase Agreement, in
connection with the offer and sale of the Bonds by the Underwriter. The term “Official
Statement” shall mean the Preliminary Official Statement, as modified with the prior approval of
the Underwriter and the City, for use by the Underwriter in connection with the sale of the
Bonds.
(c) Subject to preparation of the Official Statement with the assistance of the
Underwriter, the City shall deliver or cause to be delivered to the Underwriter promptly after
acceptance hereof copies of the Official Statement. The City shall deliver sufficient copies of the
Official Statement to the Underwriter in order to comply with Rule 15~2-12 promulgated under
the Securities Exchange Act of 1934 (“Rule 15~2-12”). The City shall deliver these copies to the
Underwriter within seven (7) business days after the execution of this Purchase Agreement and
thereafter for such period of time ending on a date referred to herein as the “End Date,” which
date is the earlier of: (1) 90 days after the end of the underwriting period (as defined in
Rule 15~2-12); or (2) the time when the Official Statement becomes available from a “national
recognized municipal securities information repository” (NRMSIR), but in no event less than 25
days after the underwriting period (as defined in Rule 15~2-2) ends.
(d) At 8:OO o’clock A.M., Pacific Daylight Time, on ,2004, or
at such other time or date as shall be agreed upon by the Underwriter and the City (such time and
-2-
Carlsbad Cannon Road BPA (3).DOC
date being herein referred to as the “Closing Date”), the City will deliver to the Underwriter, at a
location or locations to be designated by the Underwriter, the Bonds, in book-entry form
registered in the name of Cede & Co., the nominee of The Depository Trust Company (“DTC”)
in New York, New York (all Bonds having had the CUSP numbers assigned to them thereon),
duly executed by the officers of the City as provided in the Indenture, and the other documents
herein mentioned; and the Underwriter will accept such delivery and pay the purchase price of
the Bonds as set forth in paragraph(a) of this section in immediately available funds (such
delivery and payment being herein referred to as the “Closing”).
2. Representations, Warranties and Agreements of the City. The City hereby
represents and warrants to and agrees with the Underwriter that:
(a) The City is a municipal corporation and is duly organized and validly
existing as a public body organized and existing under and by virtue of the Constitution and laws
of the State of California;
(b) The governing body of the City has duly authorized the formation of the
District;
(c) The governing body of the City has duly and validly adopted the Indenture,
this Purchase Agreement, the Continuing Disclosure Agreement, dated as of May 1, 2004 (the
“Continuing Disclosure Agreement”), and the Acquisitioflinancing Agreement, dated as of
December 11, 2002, as amended, between the City and Calavera Hills 11, LLC, a California
limited liability company (“Calavera”), the primary developer within the District (the
“Acquisition Agreement”) (collectively, the “City Documents”) and the Resolution and has duly
authorized and approved the delivery and use of the Preliminary Official Statement, the
execution, delivery and use of the Official Statement, the execution and delivery of the Bonds
and the City Documents and the performance by the City of its obligations contained therein, and
the taking of any and all action on its part as may be necessary to carry out, give effect to and
consummate the transactions on the part of the City contemplated by each of said documents;
(d) At the Closing Date the City will have, full legal right, power and
authority (i) to execute, deliver and perform its obligations under the City Documents and to
carry out all other transactions on its part contemplated thereby and hereby, (ii) to issue, sell and
deliver the Bonds to the Underwriter pursuant to the Indenture as provided herein, and (iii) to
carry out, give effect to and consummate the transactions on its part contemplated by the
Resolution and the City Documents;
(e) The City is, and at the Closing Date will be, in compliance, in all respects,
with its obligations under the Bond Law and the City Documents;
(f) The City is not in breach of or in default under any applicable law or
administrative rule or regulation of the State of California or the United States of America, or of
any department, division, agency or instrumentality of either thereof, or under any applicable
court or administrative decree or order, or under any loan agreement, note, resolution, indenture,
contract, agreement or other instrument to which the City is a party or is otherwise subject or
-3-
Carlsbad Cannon Road BPA (3).DOC
bound, a consequence of which could be to materially and adversely affect the performance by
the City of its obligations under the Bonds or the City Documents;
(8) The adoption by the governing body of the City of Resolution No. 2003-
197 (the “Resolution of Intention”), and the execution and delivery by the City of the Bonds or
the City Documents, and compliance by the City with the provisions hereof and 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 or the United States of America, or of any department,
division, agency or instrumentality of either thereof, or under any applicable court or
administrative decree or order, or under any loan agreement, note, resolution, indenture, contract,
agreement or other instrument to which the City is a party or is otherwise subject or bound, a
consequence of which could be to materially and adversely affect the performance by the City of
its obligations under the Bonds, the Resolution of Intention or the City Documents;
(h) All approvals, consents, authorizations, elections and orders of or 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, or under the
City Documents or the Bonds, have been obtained and are in full force and effect; provided that
no representation is made as to any necessary “blue sky” filings;
(i) The Bonds and the City Documents conform as to form and tenor to the
descriptions thereof contained in the Official Statement and when delivered to and paid for by the
Underwriter on the Closing Date as provided herein the Bonds will be validly issued and
outstanding and entitled to all the benefits of the Indenture;
Q) The City has deemed the Preliminary Official Statement to be near final as
of the date of the Preliminary Official Statement, as required by Rule 15~2-12. As of the date
thereof and at all times up to the Closing Date, the information contained in the Preliminary
Official Statement is true and correct in all material respects and does 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;
(k) If between the date of this Purchase Agreement and the End Date an event
occurs, of which the City has knowledge, which might or would cause the information relating to
the City, the District or the City’s functions, duties and responsibilities contained in the Official
Statement, as then supplemented or amended, to contain an untrue statement of a material fact or
to omit to state a material fact required to be stated therein or necessary to make such information
therein, in the light of the circumstances under which it was presented, not misleading, the City
wi€l notie the Underwriter, and if, in the opinion of the Underwriter, such event requires the
preparation and publication of a supplement or amendment to the Official Statement, the City
will cooperate with the Underwriter in the preparation of an amendment or supplement to the
Official Statement in a form and in a manner approved by the Underwriter, provided all expenses
thereby incurred for such publication will be paid for by the City;
-4-
Carlsbad Cannon Road BPA (3).DOC
(1) 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 the knowledge of
the officers of the City executing this Purchase Agreement, is threatened in any way, affecting the
existence of the City or the District or the titles of the City’s 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 Indenture, or the collection or application of the
Assessments or the proceeds thereof pledged or to be pledged 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 Resolution of Intention, the City Documents 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 or the Official Statement or the powers of the City or its authority with respect
to the Bonds, the Resolution of Intention, the City Documents or any action of the City
contemplated by any of said documents, nor to the knowledge of the officer of the City executing
this Purchase Agreement is there any basis therefor;
(m) 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
in order for the Underwriter 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, the City shall not be required to register as a
dealer or a broker of securities or consent to service of process or register as a foreign corporation
in any such state or jurisdiction;
(n) Any certificate signed by any authorized official of the City authorized to
do so and delivered by the City to the Underwriter shall be deemed a representation and warranty
by the City to the Underwriter as to the statements made therein;
(0) The City has received permission from Bruce W. Hull & Associates (the
“Appraiser”) to quote from, distribute and otherwise utilize in connection with the production
and distribution of the Preliminary Official Statement and the Official Statement, that certain
appraisal report of the Appraiser dated , 2004 (the “Appraisal Report”) and to
include a copy of a summary of such Appraisal Report as an appendix to the Preliminary Official
Statement and the Official Statement;
(p) The City has received permission from Empire Economics (the “Market
Absorption Consultant”) to quote from, distribute and otherwise utilize in connection with the
production and distribution of the Preliminary Official Statement and the Official Statement, that
certain market absorption report of the Market Absorption Consultant dated 9
2004 (the “Market Absorption Report”) and to include a copy of a summary of such Market
Absorption Report as an appendix to the Preliminary Official Statement and the Official
Statement;
(9) The City is not in default, nor has it been in default at any time, as to the
payment of principal or interest with respect to an obligation of the City or with respect to an
obligation guaranteed by the City as guarantor or successor of a guarantor, which default has or
-5-
Carlsbad Cannon Road BPA (3).DOC
could have a material adverse affect on the ability of the City to comply with its obligations
under the City Documents;
(r) The City has not been notified by any listing or proposed listing by the
Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may
not be relied upon; and
(s) The City will not knowingly take or omit to take any action, which action
or omission will in any way cause the proceeds from the sale of the Bonds to be applied in a
manner other than as provided in the Indenture or which would cause the interest on the Bonds to
be includable in gross income for federal income tax purposes.
3. Conditions to the Obligations 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 and other persons and entities 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
(any of which may be waived by the Underwriter):
(a) At the Closing Date, the Resolution and the City Documents shall be in
full force and effect according to their terms, and shall not have been otherwise amended,
modified or supplemented after the date hereof, 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 Purchase Agreement, all such
actions as, in the opinion of Best Best & Krieger LLP, Bond Counsel for the City, shall be
necessary and appropriate;
(b) Between the date hereof and the Closing Date, the market price or
marketability of the Bonds at the initial offering prices 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 shall have been enacted by the United States or the State
of California or shall have been reported out of committee or be pending in committee, or a
decision shall have been rendered by a court of the United States or the Tax Court of the United
States, or a ruling shall have been made or a regulation or a temporary regulation shall have been
proposed or made or any other release or announcement shall have been made by the Treasury
Department of the United States or the Internal Revenue Service, with respect to Federal or
California taxation upon interest received on obligations of the general character of the Bonds,
which in the reasonable opinion of the Underwriter materially adversely affects the market for
the Bonds;
-6-
Carlsbad Cannon Road BPA (3).DOC
(2) the occurrence of any outbreak of hostilities or other national or
international calamity or crisis, or the escalation of an existing national or international calamity
or crisis, the effect of such outbreak, calamity or crises on the financial markets of the United
States being such as would make it impracticable, in the reasonable opinion of the Underwriter,
for the Underwriter to sell the Bonds (it being acknowledged by the Underwriter that as of the
date hereof no such event is occurring);
(3) a general suspension of trading on the New York Stock Exchange
or other minimum or maximum prices for trading shall have been fixed and be in force, or
maximum ranges for prices for securities shall have been required and be in force on the New
York Stock Exchange or any other exchange, whether by virtue of a determination by the New
York Stock Exchange or such other exchange or by orders of the Securities and Exchange
Commission or any other govemmental authority;
(4) declaration of a general banking moratorium shall have been
declared by either Federal, California or New York authorities having jurisdiction and be in
force;
(5) establishment of any new restrictions in securities materially
affecting the free market for securities (including the imposition of any limitations on interest
rates) or the charge to the net capital requirements of the Underwriter established by the New
York Stock Exchange, the Securities and Exchange Commission, any other Federal or state
agency or the Congress of the United States, or by Executive Order;
(6) legislation enacted (or resolution passed) by the Congress of the
United States of America, 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 govemmental agency having jurisdiction of the subject matter, to the effect that
obligations of the general character of the Bonds, including any or all underlying arrangements,
are not exempt fiom registration under the Securities Act of 1933, as amended, or that the
Indenture is not exempt fiom qualification under 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, is or would be in violation of the federal securities laws as amended and then in
effect;
(7) . 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 or securities (or interest
thereon), the validity or enforceability of the Assessments or the ability of the City, to issue the
Bonds and levy the Assessments as contemplated by the Resolution, the City Documents and the
Official Statement; or
(8) any event occurring, or information becoming known which, in the
judgment of the Underwriter, makes untrue in any material respect any statement or information
-7-
Carlsbad Cannon Road BPA (3).DOC
contained in the Preliminary Official Statement or the Official Statement, or results in the
Preliminary Official Statement or the Official Statement containing any untrue statement of a
. material fact or omitting to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not
misleading.
[(9) [DISCUSSION OF CIRCULAR 230 TO COME AS NEEDED.]
(c) On or prior to the Closing Date, the Underwriter shall have received
counterpart originals, or certified copies, of the following documents, in each case satisfactory in
form and substance to the Underwriter:
(1) One counterpart original or copy certified by a duly authorized
officer of the City of a complete transcript of all proceedings of the City relating to the approval
of the City Documents, the Preliminary Official Statement and the Official Statement and the
authorization, issuance, sale and delivery of the Bonds, together with a certificate dated as of the
Closing Date of a duly authorized officer of the City to the effect that each included Resolution
and the City Documents is a true, correct and complete copy of the one duly adopted by the City
Council of the City and that none have been amended, modified or rescinded since adoption
(except as reflected in said transcript or as may have been agreed to in writing by the
Underwriter) and is in full force and effect as of the Closing Date;
(2) An approving opinion, dated the Closing Date and addressed to the
City, of Best Best & Krieger LLP, Bond Counsel for the City, in form and substance as attached
as APPENDIX E to the Official Statement;
(3) A supplemental opinion, dated the Closing Date and addressed to
the Underwriter, of Best Best & Krieger LLP, Bond Counsel for the City, to the effect that:
(i) The statements contained in the Official Statement under the
captions “THE BONDS,” “SECURITY FOR THE BONDS,” “TAX MATTERS”
and in “APPENDIX -” and “APPENDIX -,” insofar as such statements purport
to summarize certain provisions of the Bonds, the Resolution of Intention, the
City Documents or conclusions of law and legal opinions, present fair and
accurate summaries thereof.
(ii) The Bonds are exempt from registration pursuant to Section 3(a)(2)
of the Securities Act of 1933, as amended, and the Indenture is exempt from
qualification pursuant to the Trust Indenture Act of 1939, as amended.
(iii) The Purchase Agreement has been duly authorized, executed and
delivered by the City and (assuming due authorization, execution and delivery by
the Underwriter) constitutes a valid and binding agreement of the City enforceable
according to its terms, subject to any applicable bankruptcy, reorganization,
insolvency, moratorium or other law affecting the enforcement of creditors’ rights
generally.
-8-
Carlsbad Cannon Road BPA (3).DOC
(iv) The District has been validly formed, and the Assessments validly
levied on property within the District receiving special benefit fkom the
Improvements financed with the proceeds of the Bonds, pursuant to the provisions
of the 1913 Act.
(v) The Indenture creates a valid pledge of, lien upon and security
interest in the proceeds of the Bonds and the moneys in all funds and accounts
established pursuant to the Indenture, including the investment earnings thereon,
subject in all cases to the provisions of the Indenture permitting the application
thereof for the purposes and on the terms and conditions set forth therein.
(4) the opinion of Nossaman, Guthner, box & Elliott, LLP,
disclosure counsel to the City, dated the Closing Date and addressed to the City and the
Underwriter, to the effect that based upon their participation in the preparation of the Official
Statement as Disclosure Counsel to the City and without having undertaken to determine
independently the accuracy or completeness of the contents in the Official Statement, such
counsel has no reason to believe that the Official Statement, as of its date and as of the Closing
Date (except for the financial statements and the other financial and statistical data included
therein and the information included therein relating to The Depository Trust Company and the
book-entry system (as such terms are defined in the Official Statement), and in the Appendices
thereto as to all of which no opinion or belief need be expressed) contained or contains any
untrue statement of a material fact or omitted or omits to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading;
(5) an opinion of the City Attorney, dated the date of Closing and
addressed to the City and the Underwriter, in form and substance satisfactory to the Underwriter,
to the effect that:
(i) the City is a municipal corporation, duly organized and validly existing
under the laws of the State of California;
(ii) the Resolution of Intention, the resolution of the City approving and
authorizing the issuance of the Bonds and the execution and delivery of the City
Documents and approving the Official Statement was duly adopted at a meeting
of the governing body of the City which was called and held pursuant to law and
with all public notice required by law and at which a quorum was present and
acting throughout;
(iii) the City Documents have been validly authorized, executed and
delivered by the City, and, assuming due authorization, execution and delivery by
the other parties thereto, constitute the legal, valid and binding agreements of the
City, enforceable in accordance with their respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency or other laws affecting the
Carlsbad Cannon Road BPA (3).DOC
-9-
enforcement of creditors’ rights and by the application of equitable principles if
equitable remedies are sought;
(iv) there is no action, suit, proceeding or investigation at law or in equity
before or by any court, public board or body pending with respect to which the
City has been served or, to the best of such counsel’s knowledge, threatened
against or affecting the City, which would adversely impact the City’s ability to
complete the transactions contemplated by the City Documents and the Bonds, to
restrain or enjoin the collection of the Assessments, or in any way contesting or
affecting the validity of the Bonds or the City Documents or the transactions
described in and contemplated hereby wherein an unfavorable decision, ruling or
finding would adversely affect the validity and enforceability of the Bonds or the
City Documents or in which a final adverse decision could materially adversely
affect the operations of the City;
(v) the execution and delivery of the City Documents and the approval of
the Official Statement and compliance with the provisions of the City Documents
and hereof, under the circumstances contemplated thereby, do 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 law, regulation, court order or consent decree to which
the City is subject whch breach or default has or may have a material adverse
effect on the ability of the City to perform its obligations under the City
Documents; and
(vi) no authorization, approval, consent, or other order of any court or
governmental body is required for the valid authorization, execution and delivery
of the City Documents by the City and the approval by the City of the Official
Statement or the consummation by the City of the transactions on its part
contemplated herein and in the Official Statement, except such as have been
obtained and except such as may be required under state securities or blue sky
laws in connection with the purchase and distribution of the Bonds by the
Underwriter;
(vii) as of the Closing Date, the information contained in the Official
Statement under the captions “INTRODUCTION,” “THE IMPROVEMENT
PROJECT,’’ “THE ASSESSMENT DISTRICT,” “ABSENCE OF MATERIAL
LITIGATION” and “APPENDIX D’ (excluding therefrom statistical and financial
data) is true and correct and such information does not contain any untrue
statement of a material fact required to be stated in the Official Statement or omit
to state any fact necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading in any material respect.
(6) A certificate, dated the Closing Date and signed by an authorized
officer of the City, ratifying the use and distribution by the Underwriter of the Preliminary
Official Statement and the Official Statement in connection with the offering and sale of the
-10-
Carlsbad Cannon Road BPA (3).DOC
Bonds, and certifying 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 of his or her knowledge, no event has occurred since
the date of the Official Statement affecting the City which should be disclosed in the Official
Statement for the purposes for which it is to be used in order to make the statements and
information contained in the Official Statement not misleading in any material respect, and the
Bonds, the Resolution and the City Documents conform as to form and tenor to the descriptions
thereof contained in the Official Statement; and (iii) the City has complied with all the
agreements and has satisfied all the conditions on its part to be performed or satisfied under this
Purchase Agreement or the other City Documents at and prior to the Closing;
(7) A certificate dated the Closing Date from Galen N. Peterson,
addressed to the City and in substantially the form of Exhibit B hereto;
(8) A certificate dated the Closing Date from the Appraiser, addressed
to the City and in substantially in the form of Exhibit C hereto;
(9) A certificate dated the Closing Date from the Market Absorption
Consultant, addressed to the City and in substantially in the form of Exhibit D hereto;
(10) A certificate, dated the Closing Date, signed by an authorized
officer or representative of and (collectively, the
“Developers”) and addressed to the City and the Underwriter substantially in the form attached
hereto as Exhibit E;
(1 1) An opinion of Counsel to the Developers, addressed to the City and
the Underwriter substantially in the form attached hereto as Exhibit F;
(12) A certificate of Fieldman, Rolapp & Associates, the City’s
Financial Advisor, dated the date of the Closing, to the effect that while the Financial Advisor
has not independently verified or undertaken an independent investigation of the information in
the Preliminary Official Statement and the Official Statement, based on its participation in the
preparation and review of the Preliminary Official Statement and Official Statement, no
information has come to its attention which would lead it to believe that the information
contained in the Preliminary Official Statement and Oficial Statement is as of the date of
delivery of the Bonds, not true or correct in all material respects, or that the Preliminary Official
Statement and the Official Statement contains any untrue statement of a material fact or omits to
state a material fact where necessary to make a statement not misleading in light of the
circumstances under which it was made
(13) Tax certifications by the City in form and substance acceptable to
Bond Counsel and the Underwriter;
(14) A copy of the Report of Proposed Debt Issuance and the Report of
Final Sale required to be delivered to the California Debt and Investment Advisory Commission
pursuant to section 8855, subsection (g) of the Government Code;
-1 1-
Carlsbad Cannon Road BPA (3).DOC
(15) A copy of a completed Internal Revenue Service form 8038-G,
together with a certificate of mailing of the form to the Internal Revenue Service Center;
(16) A Continuing Disclosure Agreement of the City and of the
Developers in substantially the forms set forth in the Preliminary Official Statement.
(1 7) Such additional legal opinions, certificates, 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 statements and information contained in the
Official Statement, of the City’s representations and warranties contained herein and the due
performance or satisfaction by the City at or prior to the Closing Date of all agreements then to
be performed and all conditions then to be satisfied by the City and the District in connection
with the transactions contemplated on their part hereby and by the City Documents and the
Official Statement.
If any of the conditions to the obligations of the Underwriter contained in this section or
elsewhere in this 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. Conditions of the City’s Obligations. The City’s obligations hereunder are subject
to the Underwriter’ performance of its obligations hereunder, and are also subject to the
following conditions (any of which conditions may be waived by the City):
(a) As of the Closing Date, no litigation shall be pending or, to the knowledge
of the duly authorized officer of the City executing the certificate referred to in Section 3(c)(6)
hereof, threatened, to restrain or enjoin the issuance or sale of the Bonds or in any way affecting
any authority for or the validity of the Bonds, the Resolution of Intention, the City Documents or
the existence or powers of the City;
(b)
referred to herein;
As of the Closing Date, the City shall receive the approving opinions
(c) As of the Closing Date, the market price or marketability of the Bonds
shall not have been materially adversely affected, in the reasonable judgment of the City; and
(d) Receipt by the City of a certificate of the Underwriter addressed to the City
to the effect that the City has delivered to the Underwriter all of the documents required to be
delivered by the City under this Purchase Agreement.
5. Expenses.
(a) The Underwriter shall be under no obligation to pay, and the City shall pay
or cause to be paid out of the proceeds of the Bonds, all expenses incident to the performance of
the City’s obligations hereunder, including but not limited to: the cost of photocopying and
-12-
Carlsbad Cannon Road BPA (3).DOC
delivering the Bonds to the Underwriter; the cost of preparing, printing (andor word processing
and reproducing), distributing and delivering the City Documents, and the cost of printing,
distributing and delivering the Preliminary Official Statement and the Official Statement in such
reasonable quantities as requested by the Underwriter; and the fees and disbursements of Bond
Counsel and Disclosure Counsel and any accountants, financial advisors or other engineers or
experts or consultants the City has retained in connection with 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 City shall not pay expenses to qualify
the Bonds for sale under any “blue sky” or other state securities laws and all other expenses
incurred by the Underwriter in connection with its public offering and distribution of the Bonds
(except those specifically enumerated in paragraph (a) of this section), including any advertising
expenses.
6. Notices. Any notices, requests, directions, instruments or other communications
required or permitted to be given hereunder shall be in writing and shall be given when delivered,
against a receipt, or mailed certified or registered, postage prepaid, to the City and the
Underwriter at their respective addresses below.
If to the City: City of Carlsbad
Finance Department
1635 Faraday Avenue
Carlsbad, CA 92008
Attn: Finance Director
If to the Underwriter: Stone & Youngberg LLC
4350 La Jolla Drive, Suite 140
San Diego, CA 92122
provided, however, that all such notices, requests or other communications may be made by
telephone and promptly confirmed by writing. The City and the Underwriter may, by notice
given as aforesaid, specify a different address for any such notices, requests or other
communications.
7. Parties in Interest. This Purchase Agreement is made solely for the benefit of the
City and the Underwriter (including successors or assigns of the Underwriter) and no other
person shall acquire or have any right hereunder or by virtue hereof.
8. Survival of Representations and Warranties. The representations and warranties
of the City set forth in or made pursuant to this Purchase Agreement shall not be deemed to have
been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of
this 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 warranties of the City and regardless of delivery of and payment for the
Bonds.
Carlsbad Cannon Road BPA (3).DOC
-13-
9. Effective. This 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.
10. Applicable Law; Nonassimabilitv. This Purchase Agreement shall be governed
by the laws of the State of California. This Purchase Agreement shall not be assigned by the
City.
1 1. Execution of Counterparts. This Purchase Agreement may be executed in several
counterparts, each of which shall be regarded as an original and all of which shall constitute one
and the same.
12. No Prior Aaeements. This Purchase Agreement supersedes and replaces all prior
negotiations, agreements and understandings between the parties hereto in relation to the sale of
Bonds by the City and represents the entire agreement of the parties as to the subject matter
herein.
13. Partial Unenforceability. Any provision of this Purchase Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the remaining provisions of
this Purchase Agreement or affecting the validity or enforceability of such provision in any other
jurisdiction.
Very truly yours,
STONE & YOUNGBERG LLC
By:
Title:
ACCEPTED:
CITY OF CARLSBAD
By:
Finance Director
-14-
Carlsbad Cannon Road BPA (3).DOC
Maturity
[Sept 2)
EXHIBIT A
Description of the Bonds to be Purchased
Principal Interest
Amount Yield
A- 1
EXHIBIT B
CERTIFICATE OF ASSESSMENT ENGINEER
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Re: City of Carlsbad Assessment District No. 2003-01 (College Boulevard and
Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement Bonds
Ladies and Gentlemen:
We have acted as Assessment Engineer in connection with the $ aggregate
principal amount of City of Carlsbad Assessment District No. 2003-01 (College Boulevard and
Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement Bonds (the “Bonds”).
In connection with the purchase and sale of the Bonds, pursuant to a Bond Purchase Agreement
dated as of ,2004 (the “Purchase Agreement”) between Stone & Youngberg LLC,
as Underwriter of the Bonds, and the City of Carlsbad, California, we hereby certify that:
(i) I prepared the Engineer’s Report (the “Engineer’s Report”) attached as
, 2004 and the Official
, 2004 for the Bonds (collectively, the “Official Statement”),
APPENDIX A to the Preliminary Official Statement dated
Statement dated
and have authorized its inclusion in the Official Statement;
(ii) based upon the assumptions described in the Engineer’s Report, which I
believe are reasonable, I am of the opinion that the assessments have been validly levied on the
property in the Assessment District receiving special benefit from the improvements financed
with the proceeds of the Bonds, and will be sufficient to provide the timely payment of principal
of and interest on the Bonds; and
(iii) as of this date the statements and information contained in the Official
Statement under the headings “SECURITY FOR THE BONDS - Assessments,” “THE
IMPROVEMENT PROJECT,” “THE ASSESSMENT DISTRICT” and “OWNERSHIP AND
VALUE OF PROPERTY WITHIN THE DISTRICT” to the Official Statement, insofar as such
statements and information purport to summarize certain provisions of the Engineer’s Report
prepared with respect to the Assessment District, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not misleading.
Dated: ,2004
GALEN N. PETERSON
B- 1
EXHIBIT C
CERTIFICATE OF APPRAISER
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Re: City of Carlsbad Assessment District No. 2003-01 (College - Boulevard and
Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement Bonds
Ladies and Gentlemen:
I, the undersigned authorized representative of Bruce W. Hull & Associates (the
“Appraiser’ ’) , hereby certify as follows :
1. That the Appraisal Report (the “Appraisal Report”) contained in the
Preliminary Official Statement dated , 2004 and the Official Statement dated , 2004 for the Bonds (collectively, the “Official Statement”), relating to
$ aggregate principal amount of City of Carlsbad Assessment District No.
2003-01 (College Boulevard and Cannon Road East) Benefit Area No. 1 Limited Obligation
Improvement Bonds (the “Bonds”) fairly and accurately describes the market values of the
properties in the Assessment District which are subject to.the assessment, and are reproduced as
a part of the Official Statement with the consent of Appraiser;
2. In its opinion, the assumptions made in the Appraisal Report are
reasonable;
(3) In the Appraiser’s opinion, the Appraisal is consistent with the California
Debt and Investment Advisory Commission’s Appraisal Standards for Land-Secured Financings,
dated May 1994;
(4) It is not aware of any event or act which has occurred since the date of the
Appraisal Report which, in its opinion, would materially and adversely affect the conclusions as
to appraised value reached in the Appraisal Report; and
(5) it has reviewed the Official Statement and to the best of its knowledge the
statements concerning the value of the property in the Assessment District are true, correct and
complete in all material respects and 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
c- 1
Capitalized terms used in this Certificate which are not otherwise defined shall have the
meaning ascribed thereto in the Official Statement.
Dated: ,2004
BRUCE W. HULL & ASSOCIATES, as
Appraiser
By:
Name:
Title:
c-2
EXHIBIT D
CERTIFICATE OF MARKET ABSORPTION CONSULTANT
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Re: Citv of Carlsbad Assessment District No. 2003-01 (College Boulevard and
Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement
Bonds
Ladies and Gentlemen:
I, the undersigned authorized representative of Empire Economics (the “Market
Absorption Consultant”), hereby certify as follows:
1. That the Market Absorption Report (the “Market Absorption Report”)
contained in the Preliminary Official Statement dated , 2004 and the Official
Statement dated 2004 (collectively, the “Official Statement”), relating to
$ aggregate principal amount of City of Carlsbad Assessment District No.
2003-01 (College Boulevard and Cannon Road East) Benefit Area No. 1 Limited Obligation
Improvement Bonds (the “Bonds”) fairly and accurately describes the estimated absorption of the
residential property in the Assessment District which are subject to the assessment, and are
reproduced as a part of the Official Statement with the consent of Market Absorption Consultant;
2. In its opinion, the assumptions made in the Market Absorption Report are
reasonable;
(3) It is not aware of any event or act which has occurred since the date of the
Market Absorption Report which, in its opinion, would materially and adversely affect the
conclusions reached in the Market Absorption Report; and
(4) it has reviewed the Official Statement and to the best of its knowledge the
statements concerning the rate of absorption of the residential property in the Assessment District
are true, correct and complete in all material respects and 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
D- 1
Capitalized terms used in this Certificate which are not otherwise defined shall have the
meaning ascribed thereto in the Official Statement.
Dated: ,2004
EMPIRE ECONOMICS, as Market Absorption
Consultant
By:
Name:
Title:
D-2
EXHIBIT E
DEVELOPER’S CLOSING CERTIFICATE
The undersigned, as representative of , the owner of certain property
within the City of Carlsbad Assessment District No. 2003-01 (College Boulevard and Cannon
Road East) (the “Assessment District”), hereby certifies to the City of Carlsbad, and Stone &
Youngberg LLC, as the underwriter of the City of Carlsbad Assessment District No. 2003-01
(College Boulevard and Cannon Road East) Benefit Area No. 1 Limited Obligation Improvement
Bonds (the “Bonds”), as follows:
(i) any and all information submitted by the Developer to the Underwriter or the
City or its agents in connection with the preparation of the Preliminary Official Statement
and the Official Statement with respect to the Bonds is true and correct;
(ii) the statements with respect to the Developer and its ownership of property and
the proposed development of such property within the Assessment District contained in
the Preliminary Official Statement and the Official Statement, to the best of its
knowledge, 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
the light of the circumstances in which they were made, not misleading;
(iii) The Developer is fully qualified by all necessary permits, licenses, and
certifications, to conduct its business as it is presently being conducted and, except as
may be required under blue sky or other securities laws of any state, and except for such
licenses, certificates, approvals, variances, and permits which may be necessary for the
construction of improvements within the Assessment District, there is no consent,
approval, authorization, or other order of, or filing with, or certification by, any regulatory
authority having jurisdiction over the Developer except as such have been obtained and
are in full force and effect, for the consummation by the Developer of the actions
contemplated to be consummated by the Developer under the Official Statement.
(iv) no actions or proceedings are pending or threatened against the Developer in
which it may be adjudicated as bankrupt or discharged fiom any or all of its debts or
obligations or granted an extension of time to pay its debts or obligations or a
reorganization or readjustment of its debts;
(v) The Developer has never failed to comply with an obligation to file an annual
disclosure report with the appropriate information repositories as required under
Securities and Exchange Commission Rule 15c2-12;
(vi)None of the parcels of land within the Assessment District owned by the
Developer is delinquent in the payment of any taxes or assessments;
(vii) Other than as described in the Official Statement, to the knowledge of the
Developer, (a) no public debt secured by a special tax or assessment on the Developer’s
E- 1
land in the Assessment District exists or is in the process of being authorized, and (b) no
assessment district or community facilities district exists or is in the process of being
formed, in each case which would include any portion of the Developer’s land within the
Assessment District.
(viii) 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 threatened
in any way seeking to restrain or to enjoin the development of property within the
Assessment District, and
(ix) there are no claims, disputes, suits, actions or contingent liabilities amongst,
by and between such Developer and any other person which may materially or adversely
affect the facilities to be constructed with the proceeds of the Bonds or the development
of property within the Assessment District.
Dated: ,2004
[Developer]
By:
Title:
E-2
EXHIBIT F
FORM OF DEVELOPER COUNSEL OPINION
[TO COME]
F- 1
Assessment District No. 2003-01(College Boulevard and Cannon Road East)
College/Cannon AD 2003-01History¾Intent to form the assessment district¾Public hearing and formation of the district¾Authorize bonds
College/Cannon AD 2003-01Purpose of Tonight’s Meeting¾Authorize Bonds¾Approving the form of the following documents:Bond IndenturePreliminary Official StatementBond Purchase AgreementContinuing Disclosure Agreement
College/Cannon AD 2003-04Estimated Costs$21,772,858Construction Costs of Improvements1,361,536Basin BJB and Storm Drain Line BJA Improvements3,123,955Cannon Road, Reach 3, Frontage Improvements5,603,303Cannon Road, Reach 3, Core Improvements1,379,057College Blvd., Reach B, Frontage Improvements3,267,265 College Blvd., Reach B, Core Improvements4,523,233College Blvd., Reach C, Frontage Improvements$ 2,514,509College Blvd., Reach C, Core Improvements
College/Cannon AD 2003-04Developer Contribution$2,667,025Total Contribution to be Paid2,026,631Special benefit attributed to parcels not assessed$ 640,394General benefit portion of roads
College Blvd –Reaches B,CCannon Road –Reach 3Calavera Hills IIBenefit Area No. 1Robertson Ranch EastBenefit Area No. 2
College/Cannon AD 2003-04Benefit Areas¾Benefit Area 1 -$12.83 million in assessments¾Benefit Area 2 -$11.0 million in assessments¾Total cap on bonds for both benefit areas -$23.9 million
College/Cannon AD 2003-04Unique Provisions¾Property value to lien ratio¾Tax burden ratio¾Disclosure agreement
College/Cannon AD 2003-04Overall Value to Lien¾Policy 33 –overall ratio should be 4:1¾Can accept 3:1 ratio if Council chooses¾Overall value to lien is approximately 8.93:1
College/Cannon AD 2003-04Tax Burden Restriction¾Total tax burden for any single family home in the District should not exceed 1.8% of the estimated purchase price¾Anticipated tax burden will not exceed 1.7% for a single-family home¾Assessment liens range from $16,503 to $28,151¾Annual assessment amounts range from $1,200 to $2,046
College/Cannon AD 2003-04Disclosure Agreement¾Policy 33 requires full and complete disclosure of the assessment district¾Significant elementsTotal estimated financial burden on homeownerAbility to pay off the lienFull disclosure in all sales literature and sales office¾Disclosure agreement previously approved by Council
College/Cannon AD 2003-04Bond Documents¾Preliminary Official Statement¾Bond Indenture¾Continuing Disclosure Agreement¾Bond Purchase Agreement
College/Cannon AD 2003-04Recommended Action¾Authorize issuance of bonds¾Approve the form of the bond documents¾Authorizes negotiated sale of bonds to Stone & Youngberg
College/Cannon AD 2003-04Questions and Comments