HomeMy WebLinkAbout2005-01-11; City Council; 17942; Assessment District No. 2002-01 Poinsettia Ln East0 w 6 a s
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AB# 17,942
MTG.
DEPT.
1/11/05
FIN
TITLE:
CITY ATTY
CITY M
ASSESSMENT DISTRICT NO. 2002-01
(POINSETTIA LANE EAST)
FINANCING DOCUMENT APPROVAL
RECOMMENDED ACTION:
Adopt Resolution No. 2005-010 authorizing and providing for the issuance of limited obligation
improvement bonds for Assessment District No. 2002-01, approving the form of the following
documents and authorizing certain actions:
1. Bond Indenture by and between the City of Carlsbad and The Bank of New York 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 Certificate.
ITEM EXPLANATION:
On February 17, 2004, the City Council adopted a Resolution of Intention stating its intent to form an assessment district to fund certain public improvements of specific benefit to the Bressi Ranch and La Costa Green developments. On May 4, 2004, the City Council conducted a Public Hearing as
required by law, tabulated the results of the assessment ballots, and adopted a resolution forming Assessment District No. 2002-01.
The boundaries of the district generally consist of the area of the Bressi Ranch and the La Costa
Green developments as shown on the attached map (Exhibit 1). The improvements to be paid by the
assessment district include:
o Poinsettia Lane to full major arterial road standards from El Camino Real to the
existing westerly terminus of Poinsettia Lane located just east of the future El Fuerte
Street.
o El Fuerte Street to full secondary arterial road standards from Palomar Airport Road to the
existing northerly terminus of El Fuerte Street located just north of Rancho Pancho.
o El Camino Real northbound frontage lane including curb and gutter, sidewalk and
median improvements from Palomar Airport Road to just south of Camino Vida Roble,
from Poinsettia Lane to a few hundred feet north of Poinsettia Lane and along few
hundred feet of frontage at a location half way between Cassia Road and Camino
Vida Roble.
The improvements include certain sewer and water utilities and a portion of the citywide trail
system located within and/or adjacent to the dedicated rights-of-way for these roads. The
developers are conditioned to install the utility and trail improvements as a condition of their
project approvals. Since the sewer and water utility improvements are subject to
reimbursement from sewer and water connection fees, only those costs incurred by the
developers in excess of the sewer and water reimbursement will be eligible for
reimbursement .
The total estimated cost of the improvements is $34.9 million. This amount includes $968,360 of
improvement value that the Assessment Engineer has concluded is of “general benefit” to the
community. The developers will pay this amount in cash, along with an additional buy-down of $4.9
million to offset costs allocated to school, park and community parcels, affordable housing parcels
and homeowner association parcels. The addition of formation costs, bond issuance costs and a
debt service reserve fund will add approximately $4.9 million to the total, leaving an anticipated bond
17,942 PAGE 2 OF AGENDA BILL NO.
issue amount of approximately $33,970,000. The Resolution provides for a “not to exceed” threshold of
$35 million. The non-rated tax-exempt assessment bonds are scheduled for sale in January 2005.
The City is not responsible for the repayment of the bonds. The bonds will be secured by the property
within the Assessment District and repaid through the annual levy of assessment installments on the
subject property. The annual levy of assessments will be included on the property tax bill. However,
through the attached documents, the City is pledging to initiate foreclosure proceedings when the
cumulative aggregate delinquent assessment installments of one property owner exceed $1 0,000 or
when the total assessment receipts for the year are less than 95% of what was billed.
Although the bond Indenture allows for the sale of additional bonds, staff anticipates a single issuance
of bonds. Additional bonds would only be issued if required to fund the completion of necessary public
improvements in the Assessment District.
This agenda item contains the actions necessary to allow for the issuance of the bonds in an amount
not to exceed $35 million. Due to the restrictions of Council Policy 33 and previous Council guidance,
there are several provisions of this Assessment District and bond financing which are unique. These
provisions are further described 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 and/or the financial advisor recommend the ratio, and if the City
Council finds the reduced ratio to be within parameters acceptable to them. In addition, the City
Council may accept a form of credit enhancement or the escrow of bond proceeds to offset the
deficiency in the required value to lien ratio.
The overall value-to-lien based on the most recent preliminary bond sizing is approximately 12.1 for the
Assessment District. However, the value to lien for one parcel (comprising a future church site)
representing 3% of the total assessment lien is approximately 2.8:l. Consequently, a nominal amount
of bond proceeds will be escrowed (set aside in a trust fund) to bring the value-to-lien of this parcel up
to 4:l. Moneys will be released from the escrow and transferred to the Improvement Fund when a
future appraisal substantiates a sufficient increase in value for the parcel. Should the value of this
parcel fail to increase sufficiently, any remaining moneys in the escrow will be used to reduce the
assessment lien on the subject parcel and redeem a corresponding amount of bonds in 2008.
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 initial sales price.
At this time, it is anticipated that the total amount of tax burden will range from 1.26% to 1.44% of the
initial sales price of any single-family home.
9 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 1.75% 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 bond sale to ensure that the City is
receiving a fair price for the bonds.
a
PAGE 3 OF AGENDA BILL NO. 17,942
Reauested Actions
Staff is requesting that Council adopt the attached resolution which will:
1. Authorize issuance of bonds not to exceed $35,000,000 for Assessment District No. 2002-01.
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:
0 Preliminary Official Statement
0 Bond Indenture
0 Continuing Disclosure Certificate
Bond Purchase Agreement
FISCAL IMPACT:
The bonds will fund the acquisition of public improvements of benefit to Assessment District No. 2002-01. Together with formation and issuance costs and a debt service reserve fund, the total
issue amount should approximate $33,970,000 ‘although; staff is requesting authority to bond up to $35 million. 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 sale of bonds in January 2005.
The assessment lien amounts on individual single-family homeowners are estimated to range from
$1 3,000 to $29,013. The annual assessment amounts are estimated to range from $1,000 to $2,029.
EXHIBITS:
1. Location Map
2. Resolution No. 2005-010 authorizing and providing for the issuance of limited obligation
improvement bonds for Assessment District No. 2002-01 (Poinsettia Lane East), approving
the form of bond indenture, preliminary official statement, bond purchase agreement,
continuing disclosure certificate 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 Certificate (On file in the City Clerk’s Office)
6. Bond Purchase Agreement (On file in the City Clerk’s Office)
DEPARTMENT CONTACT: Lisa Hildabrand (760) 602-2430, Ihild@ci.carlsbad.ca.us
3
LOCATION MAP
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LEGEND
k/'//71 BOUNDARY OF ASSESSMENT - PROPOSED FUl L
DIS TRlC T
STREET IMPRO VEMEN TS
STREET IMPROVEMENTS
a PROPOSED HALF- WDTH
'ROXCT NAME:
ASSESSMENT DISIRICT NO. 2002-01 (POINSETTIA LANE EAST) I 1
'REPARED BY: PROKCT DESlCN CONSUL TAN= 4
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Exhibit 2
RESOLUTION NO. 2005-010
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CARLSBAD, CALIFORNIA, AUTHORIZING AND PROVIDING
FOR THE ISSUANCE OF LIMITED OBLIGATION
IMPROVEMENT BONDS FOR ASSESSMENT DISTRICT NO.
OF BOND INDENTURE, PRELIMINARY OFFICIAL STATEMENT,
BOND PURCHASE AGREEMENT, CONTINUING DISCLOSURE
CERTIFICATE AND OTHER DOCUMENTS AND AUTHORIZING
CERTAIN ACTIONS IN CONNECTION THEREWITH.
2002-01 (POINSETTIA LANE EAST), APPROVING THE FORM
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 191 3”, being Division 12 of the
Streets and Highways Code of the State of California, such assessment district known and
designated as ASSESSMENT DISTRICT NO. 2002-01 (POINSETTIA LANE 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 1915, 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 the Assessment District; and,
WHEREAS, on January 21, 2003, the City entered into an Acquisition and Financing
Agreement (the “Acquisition Agreement”) with Lennar Bressi Ranch Venture, LLC, a California
limited liability company (“Lennar”) and Real Estate Collateral Management Company, a
Delaware corporation to establish the terms and conditions pursuant to which, among other
things, such public improvements were to be constructed and acquired and bonds were to be
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Exhibit 2
issued for the Assessment District in conformity with the City Council’s adopted policy for the
use of assessment districts and the issuance of bonds therefore; and,
WHEREAS, the Acquisition Agreement provides that bonds to be secured by the
assessments levied within the Assessment District may be issued if (i) the aggregate appraised
value of all properties within the Assessment District shall be at least four (4) times the Land
Secured Debt (defined below) allocable to the properties within the Assessment District and (ii)
the aggregate appraised value of all properties within each discrete development area
designated by the Finance Director within the Assessment District shall also be at least four (4)
times the Land Secured Debt allocable to the properties within each such discrete development
area; and,
WHEREAS, the Acquisition Agreement defines “Land Secured Debt” to means as to any
taxable property, the principal amount of all outstanding bonds of the Assessment District
allocable to such property, together with the principal amount of any other indebtedness of any
community facilities district secured by the levy of special taxes which is allocable to such parcel
and the principal amount of any other fixed lien assessment levied against such property; and,
WHEREAS, an appraisal of the properties within the Assessment District (the
“Appraisal”), undertaken on behalf of the City by Bruce W. Hull 81 Associates, Inc., showed that
(a) the aggregate appraised value of all properties within the Assessment District is greater than
four (4) times the Land Secured Debt attributable to such properties and (b) the aggregate
appraised value of all properties within each discrete development area designated by the
Finance Director within the Assessment District is, with the exception of the property identified
as Assessment No. 13 in the Final Engineer’s Report for the Assessment District, is at least four
(4) times the Land Secured Debt allocable to the properties within each such discrete
development area; and,
WHEREAS, the appraised value of the property within Assessment No. 13 is
approximately 2.81 times the Land Secured Debt allocable to such property; and,
WHEREAS, the Acquisition Agreement provides that the City may, in its sole discretion,
accept a lower ratio of appraised value to Land Secured Debt or accept a form or forms of credit
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Exhibit 2
enhancement such as a letter of credit, cash deposit, bond insurance or the escrow of bond
proceeds to offset a deficiency in the required value-to-debt ratio; and,
WHEREAS, the City’s financing team has recommended that proceeds of the bonds
proposed to be issued be escrowed to offset the deficiency in the required value-to-debt ratio for
the property within Assessment No. 13 and such provisions have been incorporated into the
Bond Indenture (defined below); and
WHEREAS, there have been presented to and considered and ready for approval by
this City Council the forms of the following documents:
A. 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”);
B. Bond Purchase Agreement authorizing the sale of bonds to Stone & Youngberg
LLC, the designated underwriter (the “Bond Purchase Agreement”);
C. Preliminary Official Statement containing information including but not limited to
the Assessment District and the type of bonds, including terms and conditions thereof (the
“Preliminary Official Statement”); and
D. Continuing Disclosure Certificate 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 the bonds (the “Continuing Disclosure Certificate ”); 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 Certificate 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 preformed in due
time, form and manner as required by the laws of the State of California, including the Bond Act
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Exhibit 2
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.
2.
That the above recitations are true and correct.
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. 2002-01 (Poinsettia Lane East) Limited
Obligation Improvement Bonds, Series 2004A (the “Series 2004A Bonds”) in an aggregate
principal amount not to exceed $35,000,000 are hereby authorized to be issued. 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 Series 2004A Bonds in excess of $35,000,000, an
annual interest rate on the Series 2004A Bonds in excess of seven percent (7.00%) per year
and a purchase price for the Series 2004A Bonds not less than ninety eight and twenty five
hundredths percent (98.25%) of the par amount of the Series 2004A 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 Series 2004A
Bonds.
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Exhibit 2
4. BOND INDENTURE. The proposed form of Bond Indenture by and between the
City and the Paying Agent, with respect to the Series 2004A Bonds as presented to this City
Council and on file with the City Clerk is hereby approved.
5. SALE OF SERIES 2004A BONDS; BOND PURCHASE AGREEMENT. This City
Council hereby authorizes and approves the sale of the Series 2004A Bonds by negotiation to
Stone & Youngberg LLC (the "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 240.15c2-12(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 Series 2004A Bonds, true and correct in all material
respects and that the Final Official Statement did not, on the date of sale of the Series 2004A
Bonds, and does not, as of the date of delivery of the Series 2004A Bonds, contain any untrue
statement of a material fact with respect to the City, the Assessment District and/or the Series
2004A Bonds or omit to state material facts with respect to the City, the Assessment District
and/or the Series 2004A 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
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Exhibit 2
persons who may be interested in the purchase of the Series 2004A Bonds and is directed to
deliver copies of the Final Official Statement to all actual purchasers of the Series 2004A Bonds
from the Underwriter acting in such capacity.
7. CONTINUING DISCLOSURE CERTIFICATE. The form of the Continuing
Disclosure Certificate presented to this City Council and on file with the City Clerk is hereby
approved.
8. SERIES 2004A BONDS PREPARED AND DELIVERED. Upon the execution of
the Bond Purchase Agreement, the Series 2004A 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 Series 2004A Bonds
upon the receipt of the purchase price thereof from the Underwriter.
9. ADMINISTRATION OF ESCROW FUND; FUTURE APPRAISALS OF
PROPERTY WITHIN ASSESSMENT NO. 13. The proceeds of the Series 2004A Bonds
deposited in the Escrow Fund shall be administered and released pursuant to the provisions of
the Bond Indenture. Lennar or the owner of the property within Assessment No. 13 may, not
more than one (1) time during each consecutive twelve (12) month period following the date of
the issuance of the Series 2004A Bonds, file a written request with the Finance Director that the
City retain an Appraiser (as defined in the Bond Indenture) to undertake an Appraisal (as
defined in the Bond Indenture) of the such property to determine the then appraised value of
such property. The City shall have no obligation to cause any such Appraisal to be undertaken
unless and until such party shall have deposited with the Finance Director that sum deemed
necessary by the Finance Director to pay the costs of undertaking such Appraisal and
determining the Land Secured Debt allocable to such property and the value-to-debt ratio then
applicable to such property.
IO. ANNUAL ASSESSMENT INSTALLMENTS. A copy of the resolution confirming
the assessments levied within the Assessment District, which assessments shall constitute the
lo
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Exhibit 2
security for the Series 2004A 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 the Assessment District which are to be collected
each year during the term of the Series 2004A 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.
11. SUPERIOR COURT FORECLOSURE. This City Council does hereby specifically
covenant for the benefit of the holders of the Series 2004A Bonds to commence and prosecute
foreclosure actions regarding delinquent installments of the assessments levied within the
Assessment District in the manner, within the time limits and pursuant to the terms and
conditions as shall be set forth in the Bond Indenture.
12. NO CITY LIABILITY. This legislative body hereby reaffirms and ratifies its
previous declaration not to obligate itself to advance available funds from the Treasury to cure
any deficiency that may occur in the bond redemption fund. This determination was originally
made and is reaffirmed and ratified pursuant to the authority of Section 8769(b) of the Streets
and Highways Code of the State of California, and such determination shall further be set forth in
the text of the Series 2004A Bonds.
13. 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 Series
2004A 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
the Series 2004A Bonds in accordance with the Bond Act, this Resolution, the Bond indenture,
the Bond Purchase Agreement, the Continuing Disclosure Certificate, and any
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Exhibit 2
certificate, agreement, contract, and other document described in the documents herein
approved.
14. ISSUANCE OF PARITY BONDS. The City may, in its sole discretion, issue Parity
Bonds (as defined in the Bond Indenture) only pursuant to and in conformity with the provisions
of the Bond Indenture.
15.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad City
EFFECTIVE DATE. This resolution shall take effect upon its adoption.
Council held on the 11th day of JANUARY
AYES: Council Members Hall, Kulchin, Packard, Sigafoose
NOES: None
ABSENT: Council Member Lewis
, 2005 by the following vote, to wit:
ATTEST: 1 EWI .Mavor MATT HAtL, Mayor. Pro- Tem
(SEAL)
Exhibit 3
Assessment District No. 2002-01
Poinsettia Lane East
Financing Document Approval
AB # 17,942
Preliminary Official Statement
For:
City Clerk’s Office File
Exhibit 3
Draft of 12/20/04
PRELIMINARY OFFICIAL STATEMENT DATED ,2005
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 "CONCLUDING
INFORMATION - Tax Matters" herein.
STATE OF CALIFORNIA COUNTY OF SAN DIEGO
$33,970,000*
CITY OF CARLSBAD
(POINSETTIA LANE EAST)
LIMITED OBLIGATION IMPROVEMENT BONDS
SERIES 2005A
ASSESSMENT DISTRICT NO. 2002-01
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 public
improvements specially benefiting properties located within the boundaries of the City's
Assessment District No. 2002-01 (Poinsettia Lane East) (the "Assessment District"), (ii) to fund
a Reserve Fund for the Bonds, (iii) to fund capitalized interest on the Bonds until September 2,
2005, 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
"191 5 Act"), and a Bond Indenture, dated as of November I, 2004 (the "Indenture"), between
the City and The Bank of New York Trust Company, N.A., 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, 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 from their date of delivery
Preliminary, subject to change. *
Carlsbad Poinsettia POS (1 8).DOC
semiannually on September 2 and March 2, commencing March 2, 2005 (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, (See “THE BONDS - Redemption” herein) 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 THE ASSESSMENT DISTRICT.”
To provide funds for payment of the Bonds and related interest 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.’’ The City has covenanted, under
certain circumstances, 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, Imine, California, Disclosure
Counsel. It is expected that the Bonds in book-entry form will be available for delivery in New
York, New York, on ,2005.
Stone & Youngberg LLC
Dated:
MATURITY SCHEDULE* Base CUSIPO:
Maturity Principal Interest Price or
JSeptember 21 Amount - Rate Yield - CUSlP@
$ - % Term Bonds Due September 2, (CUSIP: ); Price or Yield: -%
* Preliminary, subject to change.
0 Copyright 2002, American Bankers Association. CUSIP data herein is provided by Standard
& Poor’s, CUSP Services Bureau, a division of The McGraw-Hill Companies, Inc.
THE CITY OF CARLSBAD
ELECTED OFFICIALS
Claude A. “Bud” Lewis, Mayor
Matt Hall, Mayor Pro Tern
Ann J. Kulchin, Councilmember
Mark Packard, Councilmember
Norine Sigafoose, Councilmember
Lorraine M. Wood, City Clerk
James M. Stanton, City Treasurer
CITY OFFICIALS
Raymond R. Patchett, City Manager
Frank Mannen, Assistant Cify Manager
Ronald Ball, Esq., Cdy Attorney
James F. Elliott, Administrative Services Director
Lloyd Hubbs, Public Works Director
Lisa Hildabrand, Finance Director
SPECIAL SERVICES
Bond Counsel
Best Best & Krieger LLP
San Diego, California
Financial Advisor
Fieldman Rolapp & Associates
- Irvine, California
Paying Agent, Registrar, and Transfer Agent
The Bank of New York Trust Company, N.A.
Los Angeles, California
Assessment Engineers
Galen N. Peterson
San Diego, California
and
Dick Jacobs Associates
Solana Beach, California
Appraiser
Bruce W. Hull & Associates
Ventura, 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
Undetwriter 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 in the Official Statement 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.
herein and may not be reproduced or used, in whole or in part, for any other purpose.
This Official Statement is submitted in connection with the sale of the Bonds referred to
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
Page
INTRODUCTION ...................................... 1
The Assessment District .................... 1 The Developers .................................. 2 The Bonds .......................................... 2
The City .............................................. 1
Other Information ............................... 4 THE FINANCING PLAN ........................... 4
Purpose of the Bonds ......................... 4
Estimated Sources and Uses of Funds ........................................... 4
Debt Service Schedule ....................... 6 THE BONDS ............................................. 7 Authority For Issuance ....................... 7
General .............................................. 7 Redemption ........................................ 8 Refunding Bonds ................................ 10
Book-Entry System ............................ 10 SECURITY FOR THE BONDS ................. 1 1
Limited Obligation .............................. 11 Assessments ...................................... 11 Limited Obligation Upon Delinquency ................................. 12
Establishment of Special Funds ......... 12 Covenant to Commence Superior Court Foreclosure ........................ 14
No Obligation of the City to Advance Funds ........................................... 15
Priority of Lien .................................... 15 THE IMPROVEMENT PROJECT ............. 16
The Improvements ............................. 16 Cost of the Improvements .................. 16 Environmental Compliance ................ 17 THE ASSESSMENT DISTRICT ............... 18
The City and the Assessment District .......................................... 18
Allocation of Assessments ................. 18 Prepayments ...................................... 19 Maps .................................................. 19
Availability of Public Utilities ............... 21 Description of the Property ................. 21
Overlapping Debt ............................... 21 Status of Development Within Assessment District ..................... 23
OWNERSHIP AND VALUE OF PROPERTY WITHIN THE ASSESSMENT DISTRICT ........................................................... 25
The Developers .................................. 25 Developer Representations ................ 31
Market Absorption Study .................... 31 Appraised Value of Property Within
the Assessment District ............... 32 SPECIAL RISK FACTORS ....................... 35
Paae
General .............................................. 35
Limited Obligation of the City Upon
Delinquency Resulting in Ultimate or
Temporary Default on Bonds Foreclosure ................................. 36
Bankruptcy and Foreclosure .............. 37 Concentration of Property
Failure to Develop Land ..................... 38
Future Land Use Regulations and
Growth Control ............................ 39 Land Development Costs .................. 39 Unavailability of City Funds ............... 39
Factors Which May Affect Land Development and Property
Value ........................................... 39 Land Value ......................................... 40 Endangered Species .......................... 41 Earthquakes and Natural Disasters ... 41
Hazardous Substances ...................... 42 Future Overlapping Indebtedness ..... 43 No Acceleration Provision .................. 43 Ballot Initiatives .................................. 44
Proposition 21 8 .................................. 44 Enforceability of Remedies ................ 44
Loss of Tax Exemption ...................... 45 Absence of Market for the Bonds;
No Rating .................................... 45 CONCLUDING INFORMATION ............... 45 Continuing Disclosure ........................ 45 Absence of Material Litigation ............ 46 Tax Matters ........................................ 46
Delinquency ................................. 36
Ownership ................................... 38
Approval of Legality ........................... 47 No Rating ........................................... 47
Underwriting ....................................... 47 Miscellaneous .................................... 47
APPENDIX A . EXCERPTS FROM ENGINEERS REPORT ........................... A-1
APPENDIX B . THE APPRAISAL ............ B-1 APPENDIX C -MARKET ABSORPTION REPORT .................................................. C-1
APPENDIX D - SUMMARY OF THE
INDENTURE ............................................ D-1 APPENDIX E - GENERAL ECONOMIC AND DEMOGRAPHIC INFORMATION ............ E-1
APPENDIX F - FORM OF BOND COUNSEL OPINION .................................................. F-1
APPENDIX G - FORM OF CONTINUING DISCLOSURE AGREEMENT .................. G-1 APPENDIX H- BOOK-ENTRY SYSTEM .. H-1
Draft of 12/20/04
REGIONAL LOCATION MAP
AERIAL PHOTO
Draft of 12/20/04
OFFICIAL STATEMENT
$33,970,000*
CITY OF CARLSBAD
(POINSETTIA LANE EAST)
LIMITED OBLIGATION IMPROVEMENT BONDS
SERIES 2005A
ASSESSMENT DISTRICT NO. 2002-01
I NTRO D U CTlO N
This Official Statement sets forth certain information concerning the issuance and sale
by the City of Carlsbad, California (the “City”) of $33,970,000* in principal amount of its
Assessment District No. 2002-01 (Poinsettia Lane East) Limited Obligation Improvement
Bonds, Series 2005A (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 November 1, 2004 (the “Indenture”), between the City and
The Bank of New York Trust Company, N.A., 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 92,995. 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
I N FORM AT I 0 N ’I.
The Assessment District
The Assessment District No. 2002-01 (Poinsettia Lane 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. The Assessment District includes two
master planned areas. The first area is known as “Bressi Ranch,” which consists of
approximately 334.27 net acres, is divided into seven residential neighborhoods proposed for
523 residential units, an approximate 135 acre business park, a church/school/day care site,
and two commercial parcels. The second development is known as “La Costa Greens,” a
379.56 net acre site proposed for 794 residential units and a business park. Additional
development in both master planned areas will not be subject to the assessments.
The Assessment District, as shown in the Engineer’s Report, was originally comprised of
54 assessment numbers corresponding to the original parcels. Since the Engineer’s Report
determined that a portion of the parcels were not receiving any special benefit, 43 of the original
“ Preliminary; subject to change.
-1 -
parcels were made subject to the levy of unpaid assessments. Subsequent to the confirmation
of assessments, the Developers (as defined below) have recorded final maps and the original
43 assessment numbers subject to the assessments have been subdivided into 926 separate
parcels, including sites for 91 6 single-family homes and 10 commercial/industriaI parcels.
While none of the assessments have been prepaid, upon issuance of the Bonds the
Developers (as defined below) will be contributing certain amounts to reduce or eliminate the
assessments levied on certain parcels (see “SITE IMPROVEMENT PROJECT - Cost of the I m prove men ts” he rein) .
The Developers
The property in the Assessment District is owned by (i) Bressi Gardenlane, LLC, a
Delaware limited liability company (“Bressi Gardenlane”), the original developer of the Bressi
Ranch Project, (ii) Real Estate Collateral Management Company, a Delaware corporation
(“RECMC”), the original developer of the La Costa Greens Project, (iii) Greystone Homes, Inc.,
a Delaware corporation (“Greystone”), (iv) LNR Bressi Commercial, Inc., a California
corporation (“LNR Bressi”), (v) Barratt American, Inc., a Delaware Corporation (“Barratt”), (vi)
Warmington LCG Associates, L.P., a California limited partnership (“Warmington”), (vii)
Western Pacific Housing, Inc., a Delaware corporation (“D.R. Horton”), (viii) Pulte Home
Corporation, a Michigan corporation (“Pulte”), (ix) WL La Costa 68 Associates, LLC, a Delaware
limited liability company (“La Costa 68”) and WL La Costa 61 Associates, LLC, a Delaware
limited liability company (“La Costa 61”) and, with La Costa 68 (“John Laing Homes”), and (x)
Bressi Ranch Development, LLC, a Delaware limited liability company (“Bressi Ranch”)
(collectively, the ”Developers”). As of the date of this Official Statement the Developers have
received final subdivision maps dividing the property subject to the Assessment District into 926
lots for 916 single-family detached units and 10 commerciaVindustriaI parcels. A total of I ,317
single-family units are currently planned to be developed in the Assessment District, which the
Developers anticipate selling to individual homeowners (see “OWNERSHIP AND VALUE OF
PROPERTY WITHIN THE ASSESSMENT DISTRICT” herein).
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
$3,766,362 principal amount of bonds to be secured by the assessments (in addition to the
$33,970,000* lien securing the Bonds). See “THE BONDS - Additional Bonds” herein. The
City currently has no plans to issue such additional bonds.
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 the Assessment District.
The Appraisal Report sets forth an estimated aggregate retail land value of $41 7,041,000 for
the lots subject to unpaid assessments as of August 15, 2004, assuming the lots are in their
* Preliminary; subject to change.
current condition. The resulting aggregaje appraised value-to-lien ratio reflecting the
assessments securing the Bonds is 12.28. See “THE ASSESSMENT DISTRICT” and
“OWNERSHIP AND VALUE OF PROPERTY WITHIN THE ASSESSMENT DISTRICT” herein
for a discussion of development of property in the Assessment District, 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 the Assessment District which, together with interest, constitute a trust fund for the
redemption and payment of the principal and interest due with respect to 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 the Assessment District 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 the Assessment District assessed under the
assessment 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, 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 Indenture defines Reserve Requirement to mean, on any date in any Bond
Year, the lesser of (i) 10% of the proceeds of the sale of the Bonds, (ii) Maximum Annual Debt
Service, or (iii) 125% of average Annual Debt Service. 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 moneys 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.
* Preliminary, subject to change.
Other Information
There follow brief descriptions of the Bonds, the City, the Improvements, the
Assessment District, the Indenture, and certain other matters. Such descriptions and the
discussions and information contained in this Official Statement 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. 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.
THE FINANCING PLAN
Purpose of the Bonds
Proceeds from the sale of the Bonds will be used to finance the acquisition and
construction of certain public improvements, to fund the Reserve Fund for the Bonds, to
capitalize interest on the Bonds and to pay incidental costs, including but not limited to costs of
issuance of the Bonds, as described in “THE IMPROVEMENT PROJECT-The
Improvements.”
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
Underwriters' Discount
TOTAL SOURCES:
$33,970,000*
Estimated Uses of Funds:
Deposit to Improvement Fund
Deposit to Redemption Fund'"
Deposit to Escrow Fund(*)
Deposit to Reserve Fund
Costs of ~ssuance'~)
TOTAL USES
(1)
(2)
(3)
Capitalized interest on the Bonds until September 2, 2005.
See "THE BONDS - The Escrowed Funds" herein.
Includes fees of Bond Counsel, Disclosure Counsel and Financial Advisor,
initial fees, expenses and charges of the Paying Agent, costs of printing
the Official Statement, reimbursements for advanced costs, administrative
fees of the City and other costs of issuance.
* Preliminary; subject to change.
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
201 2
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
jseptember 2) Principal Interest
TOTALS
* Interest on the Bonds capitalized until September 2, 2005.
THE BONDS
Authority For Issuance
The City proceedings were conducted pursuant to the 1913 Act and Resolution No.
2004-057 (the “Resolution of Intention”) adopted by the City Council of the City on February 17,
2004. The Bonds, which represent the unpaid assessments levied against privately owned
property in the Assessment District, are issued pursuant to the provisions of the 1915 Act and
the Indenture.
Galen N. Peterson of San Diego, California, the original assessment engineer, prepared
a written report (the “Engineer’s Report”) which contains, among other things, the proposed
assessment for each parcel of land in the Assessment District securing the Bonds. The
Engineer’s Report was filed and preliminarily approved by the City Council by the Resolution of
Intention. On May 4, 2004, 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. 78.9% of the assessment ballots were returned, and all the
returned ballots were in favor of the assessment. On May 4, 2004, the City Council adopted its
resolution confirming and levying the assessments. The City Council confirmed a total modified
assessment in the Assessment District of $41,766,342.97 and recorded such confirmed
assessment. After confirmation and recordation, the assessments became liens against the
various assessed parcels. Galen Peterson has subsequently retired, and Dick Jacobs
Associates has been designated by the City as the new assessment engineer (with Galen
Peterson, the “Assessment Engineer”).
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. While none of the
assessments were prepaid during the cash payment period, the Master Developers are
contributing certain amounts to reduce or eliminate the assessment on certain property. See
“Site Improvement Project - Cost of the Improvement” herein.
General
The Bonds will be issued in fully registered form, without coupons, in denominations of
$5,000. 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.
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 beneficial 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 March 2, 2005, and thereafter semiannually on
September 2 and March 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 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.
Additional Bonds
Following issuance of the Bonds, there will remain authorization to issue an additional
$3,766,362 principal amount of bonds secured by the assessments. The additional bonds may
only be issued if the City has determined that the proceeds of such bonds will be required by
the City to complete the construction of the Improvements after the City has terminated the
Acquisition Agreement due to the Master Developers failure to complete the Improvements and
the City has determined to proceed to advertise and bid the balance of the construction of the
Improvements. Such bonds shall be issued subject to the specific conditions, which are
conditions precedent set forth in the Indenture (see “APPENDIX D” hereto for a discussion of
such conditions). The City currently has no plans to issue such additional bonds.
Redemption*
Optional Redemption. The Bonds maturing on and after September 2, are
subject to redemption prior to their stated maturity dates on September 2, 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 a redemption price equal to the principal amount of the Bonds to be
redeemed, together with accrued interest to the date of redemption, without premium.
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
* Preliminary, subject to change.
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
September 2, through March 2,
September 2, and March 2,
September 2, and thereafter
Redemption Price
See “THE IMPROVEMENT PROJECT - The Escrowed Proceeds” for a discussion of
escrowed funds which could be used to prepay assessments under certain circumstances.
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, , are subject to mandatory sinking fund redemption, in part, on September 2,
, 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
Redemption Date to be
/September 2) Redeemed
The amounts in the foregoing schedules 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
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 1 I .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.
The Escrowed Funds
Planning Area 13, currently owned by Bressi Gardenlane, is in escrow to the Episcopal
Church and is expected to be developed as a church site, including school and daycare
facilities. The escrow is not scheduled to close until the spring of 2005. The Appraiser has
established the value of this parcel to be $3,035,000, which, based on the assessment lien of
$1,081,546*, results in a value-to-lien ratio of 2.81:1*. This level is below the City's policy
standards of 4: 1 lien-to-value ratios for assessment district financing. Therefore, LennadBressi
and the City have agreed that an amount of $350,000* which would otherwise be paid to
Lennar/Bressi under the Acquisition Agreement for its share of the Improvement costs shall be
deposited in the Escrow Fund estabkhed under the Indenture. Amounts on deposit in the
Escrow Fund shall be transferred to the Improvement Fund for payment to LennadBressi for
eligible Improvement costs if, prior to July 15, 2008, the Finance Director has received an
appraisal addressed to the City in the form required by the Indenture indicating that the
appraised value of the Planning Area 13 property is, as of the date of valuation of such
appraisal, at least four times the sum of (a) the unpaid assessment levied upon such parcel by
the City for the Assessment District, (b) the principal amount of any other indebtedness of any
community facilities district which is allocable to such parcel and is secured by the levy of
special taxes on such parcel, and (c) any other fixed lien assessment levied on such parcel.
Amounts on deposit in the Escrow Fund shall be used to prepay the assessment levied
on Planning Area 13 (resulting in a corresponding pro-rata redemption of Bonds) if (i) any
assessment installment due with respect to the Planning Area 13 parcel is delinquent on any
July 1, or (ii) On July 15, 2008, the funds on deposit in the Escrow Fund have not been
transferred to the Improvement Fund pursuant to the provisions of Indenture.
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 of this
Official Statement for a description of DTC and the book-entry system.
* Preliminary, subject to change.
SECURITY FOR THE BONDS
Limited Obligation
The obligation of the City relating to the Bonds is not a general obligation of the City, but
is a limited obligation, payable solely from the unpaid assessments within the Assessment
District and from the funds pledged therefor under the Indenture. Neither the faith and credit
nor the taxing power of the City, the County 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 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 the Assessment District, together with interest, and such unpaid assessments,
together with interest, 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.
Each installment of the assessments and any related interest and penalties constitute a
lien against the parcels of land within the Assessment District 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.
Upon issuance of the Bonds, there will remain authorization to issue an additional
$3,766,362 principal amount of bonds secured by the assessments, although the City currently
has no plans to issue such additional bonds. See “THE BONDS - Additional Bonds” above.
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. Neither the City, the County, the State
nor any political subdivision of the State has pledged its full faith and credit for the
payment of the Bonds.
Although the unpaid assessments constitute fixed liens on the parcels assessed, they
do not constitute the personal indebtedness of the owners of the parcels. Furthermore, there
can be no assurance as to the ability or the willingness of property owners to pay the unpaid
assessments. In addition, there can be no assurance that the present owners will continue to
own the 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 the Assessment District 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 the Assessment District, 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 THE ASSESSMENT
DISTRICT AND THE FUNDS PLEDGED THEREFOR UNDER THE RESOLUTION OF
ISSUANCE. THE CITY 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.
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. In addition, the Trustee will establish an Escrow Fund, to be used as
described in “THE BONDS - The Escrowed Funds” herein. See APPENDIX D hereto for a
summary of the provisions of the Indenture.
lmprovement 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
used, 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 $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,
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 1913 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 1913 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 or any interest
accrued 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 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 1913 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 ultimate 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.
Property securing delinquent assessment Installments which is not sold pursuant to the
judicial foreclosure proceedings described above may be sold, subject to redemption by the
property owner, in the same manner and to the same extent as real property sold for
nonpayment of general County property taxes, which generally follows a five year period during
which the property owner may redeem the property. At the end of the five year period the
property becomes subject to sale by the County. Except in certain circumstances, as provided
in the 1915 Act, the purchaser at any such sale takes such property subject to all unpaid
assessments, interest and penalties, costs, fees and other charges which are not satisfied by
application of the sales proceeds.
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) installment, and any accrued interest and
penalties, 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 I, 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 ( “CUSD”) and San Marcos Unified School District (“SMUSD”) with respect to certain
property within the Assessment District 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 roadway
improvements to Poinsettia Lane, El Fuerte Street and El Camino Real, including storm drain,
sewer, water, recycled water and dry utilities, 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 and Dick Jacobs Associates, Solana Beach,
California (collectively, the “Assessment Engineer”). Excerpts from the Engineer’s Report is
attached as APPENDIX A (specifically, see Part I of the Engineer’s Report for a more complete
description of the Improvements). The Master Developers (as defined below) are responsible
for the design and construction of the Improvements.
In connection with the construction of the Improvements, the City, Lennar Bressi Ranch
Venture, LLC, a California limited liability company (“Lennar/Bressi”) and RECMC (collectively,
Lennar/Bressi and RECMC shall be referred to herein as the “Master Developers”) have
entered into an Acquisition/Financing Agreement, dated as of January 21, 2003 (the
“Acquisition Agreement“). Upon the satisfaction of the conditions set forth in the Acquisition
Agreement, the City will purchase the Improvements with proceeds of the Bonds and take title
thereto. Prior to such purchase, the Master Developers will complete construction of such
Improvements for which each is responsible with their own funds. The levy of the assessments
is not conditioned upon the purchase of the Improvements. The Master Developers expect the
Improvements to be substantially completed by January, 2005, except for certain improvements
to El Camino Real, which is currently not anticipated to be completed until sometime in 2006.
Cost of the Improvements
The total cost of the Improvements is estimated (and is described below) to be
$34,869,815, which amount includes the value of the general benefit to property provided by
the Improvements, but excludes financing expenses relating to the issuance of the Bonds.
Pursuant to the Acquisition Agreement, $968,360 (the value of the general benefit to property
provided by the Improvements) is being contributed by the Master Developers. In addition, (i)
Lennar/Bressi will contribute $2,478,327 to offset special benefit costs (the amount of
assessments which would have been allocated to the affordable housing parcel, two community
facility parcels and homeowners association parcels), and (ii) RECMC will contribute
$2,392,766 to offset special benefit costs (the amount of assessments which would have been
allocated to the affordable housing parcel, a daycare parcel, a park parcel, an elementary
school parcel, community facility parks, homeowner association parcels and a portion of a
recreational vehicle parking parcel (identified as a church parcel in the Engineer’s Report). The
contributions by the Master Developers are in the form of reductions in the purchase price to be
paid by the City for the acquisition of the related Improvements being financed by each Master
Developer. The amount of Improvements financed by the Bonds is $29,030,361.
The proceeds of the assessments will be used to pay the remaining costs of the
Improvements, subject to amounts deposited in the Escrow Fund as described below. 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:
TABLE NO. 1
CITY OF CARLSBAD ASSESSMENT DISTRICT NO. 2002-01
(POINSETTIA LANE EAST)
SUMMARY OF IMPROVEMENT COSTS(1)
Total Cost of Less: General Net Assessed Cost
Improvement Improvement Benefit Contribution(2) of Improvement
Poinsettia Lane (Greens portion) $14,411,214 $41 3,000 $13,998,214 Poinsettia Lane (Bressi Ranch portion) 6,426,809 174,000 6,252,809
El Fuerte Street 11,034,447 381,360 10,653,087
El Camino Real (Bressi Ranch portion) 1,276,987 0 1,276,987
El Camino Real (Greens portion) 1,720,357 0 1.720.357
Total Project Cost $34,869,815 $968,360’ $33,901,455
Less Contribution by Master developer^'^' /$4,871.094)
Financed Improvement Cost‘4’ $29,030,361
Source: Galen N. Peterson and Dick Jacobs Associates. Totals may not add due to rounding. Represents the contribution of the Master Developers towards the costs of the Improvements of a
general benefit to property in the Assessment District. Improvement costs of special benefit to certain parcels to be paid by Master Developers. Improvement costs financed from proceeds of the Bonds (excluding financing and incidental
(1 ) (2)
(3)
(4) costs).
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
((IEIR”) 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 October 23, 2001, the City Council adopted Resolution No.
2001-318 which certified the Villages of La Costa EIR (which includes the La Costa Greens
project), CEQA findings of fact, statements of overriding considerations, a mitigation monitoring
and reporting program, and approving a general plan amendment, master plan amendment,
and Local Facilities Management Plans for Zones 10 and 1 I , a master tentative map and a
hillside development permit. On July 9, 2002, the City Council adopted Resolution No. 2002-
205 which certified the Bressi Ranch EIR, CEQA findings of fact, statements of overriding
considerations, a mitigation monitoring and reporting program, and approving a general plan
amendment, master plan amendment, and a Zone 17 Local Facilities Management Plan. The
EIR’s 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.
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 92,995. 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 I N F 0 RM AT I 0 N ” .
See “OWNERSHIP AND VALUE OF PROPERTY WITHIN THE ASSESSMENT
DISTRICT” herein for a description of certain development within the Assessment District.
Allocation of Assessments
In order to relate costs of the Improvements providing special benefit to the various
properties in the Assessment District, 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 the Master Developers, through a reduction in the purchase
price of the Improvements to be paid by the City to each Master Developer, 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 five 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
While none of the assessments have been prepaid, see “THE IMPROVEMENT
PROJECT - Cost of the Improvements” above for a description of contributions to be made by
the Master Developers towards the reduction of all or a portion of the assessments levied on
certain properties. Any future prepayments of assessments by property owners will be used to
redeem Bonds prior to maturity. See “THE BONDS - Redemption” herein.
A map showing the boundaries of the Assessment District and the assessed parcels is
included in the Engineer’s Report attached in APPENDIX A.
DISTRICT MAP
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/Leucadia Wastewater District
Description of the Property
The property in the Assessment District is currently owned by the Developers. As of the
date of this Official Statement the Developers have received approved final subdivision maps
dividing the property subject to the Assessment District into 926 lots for 916 single-family
detached units and IO commercial/industriaI lots. A total of 1,317 single-family units are
currently planned to be developed in the Assessment District which the Developers anticipate
selling to individual homeowners. All land on which assessments have been levied in the
Assessment District is fully entitled. See “OWNERSHIP AND VALUE OF PROPERTY WITHIN
THE ASSESSMENT DISTRICT” for a description of development within the Assessment
District.
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.” See also “SPECIAL RISK
FACTORS - Future Overlapping Indebtedness” for a discussion of the ability of other public
agencies to levy assessments and special taxes on property within the Assessment District.
Table 2 below sets forth estimated overall tax rates projected to be applicable to a single-family
residential units in the Assessment District based on the Fiscal Year 2003104 tax rate and the
estimated Fiscal Year 2004/05 annual assessment installments and other overlapping
indebted ness payments..
6 hi 0 0 hi
2 0
7777-7777
0000000
Draft of 12/20/04
Status of Development Within Assessment District
The following tables show a summary of property subject to the assessment within the
Assessment District, the amount of the assessment attributable to each development and the
status of development. 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. 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. 3
CITY OF CARLSBAD
(POINSETTIA LANE EAST)
ASSESSMENT BY PROJECT
ASSESSMENT DISTRICT NO. 2002-01
Residential Assessment Percent of
Owner Acres Proiect - Units Amount Assessment
Bressi Ranch
Greystone
Ba rra tt
Bressi Gardenlane
Bressi Gardenlane
LNR Bressi
Bressi Gardenlane
RECMC
RECMC
Warmington
Horton
Pulte
John Laing Homes
133.8
133.3
23.2
13.6
I .I
14.1
2.5
7.7
115.0
44.5
25.3
65.4
44.8
TOTALS 624.3
Industrial
Single-family
Single-family
Church
Commercial/lnd.
Commercial/lnd.
Asst. Living
Commercial/lnd.
Single-family
Single-family
Single-family
Single-family
Single-family
$7,830,349
498 11,315,602
25 725,350
1,081,546
66,352
1,993,859
376,250
343,118
408 5,109,530
82 1,125,230
75 1,029,174
100 1,298,532 - 129 1,675,107
23.1 %
33.3
2.1
3.2
0.2
5.9
1 .I
I .o
15.0
3.3
3.0
3.8 - 4.9
1,317 $33,970,000 100.0%
Source: Galen N. Peterson and Dick Jacobs Associates, Assessment Engineer; Bruce W. Hull
& Associates.
-23-
TABLE 4
DEVELOPER PROJECTS (As of November 1,2004)
ASSESSMENT DISTRICT NO. 2002-01
Bressi Ranch
Property Planning Number of Net
Owner Area LotslUnits Acres Status of Development
Bressi 1-5 40 industrial lots ranging in 133.8 Parcel map recorded May 21,2004 dividing Planning
Ranch size from 1.62 to 8.29 acres Areas into 5 parcels; final map is scheduled for
recordation in December 2004; property in mass graded condition
Greystone 6 79 sfd units; min. lot size of 22.5 Final maps recorded on all parcels in April 2004; property in finished condition; model homes currently 7 16.4 under construction; initial sales scheduled for the
fourth quarter of 2004 for all Planning Areas.
8 4,000 sq. ft. 18.1
9 95 sfd units; min. lot size of 26.6
10 27.1
12 7,100 sq. ft. 22.5
5,900 sq. ft.
95 sfd units; min. lot size of
5,100 sq. ft.
70 sfd units; min. lot size of
68 sfd units; min. lot size of
5,900 sq. ft.
91 sfd units; min. lot size of 4,200 sq. ft.
25 sfd units; rnin. lot size
25,000 sq. ft.
23.2 Final maps recorded in April 2004; property in finished
condition; models expected to commence in Jan.
2005; initial sales scheduled for the second quarter of
2005
11 Barratt
Bressi 13 Church/school/daycare 13.64 Tentative map recorded May 2003; final map is
Gardenlane scheduled for recordation in July 2005; currently in escrow to Episcopal Church, scheduled to close May 2005; property in mass graded condition
Bressi 14
Gardenlane
Proposed commercial site 1.13 (service station) Tentative map recorded May 2003; final map will be
recoreded when property is sold, currently expected to
occur in late 2005; property in mass graded condition
LNR Bressi 15(a) and 15(b) Proposed commerdalloffice 14.1 5 Tentative map recorded May 2003; final map is center scheduled for recordation in third or fourth quarter of 2005; property in mass graded condition
Bressi 15(c) Proposed assisted living 2.5 Tentative map recorded May 2003; final map Gardenlane project scheduled for recordation in November 2004 upon
sale to developer; property in mass graded condition.
La Costa Greens Ranch
Property Planning
Owner Area
RECMC 1.1
1.3
1.6
1.7
1.16
1.17
Warmington 1.8
D.R. Horton 1.9
Puke 1.10
1.12
John Laing 1.11, 1.13and
Homes 1.14
Number of
Lotdunits
Proposed industrial
development
Proposed 44 sfd units; min.
lot size of 3,500 sq. ft.
Proposed 92 sfd units; min. lot size of 6,000 sq. ft.
Proposed 70 sfd units; min.
lot size of 5,000 sq. ft.
Proposed 96 sfd units; min. lot size of 3.5000 sq. ft.
Proposed 106 sfd units; min. lot size of 4,500 sq. ft.
82 sfd units; min. lot size of
7,500 sq. ft.
75 sfd units; min. lot size of
6,000 sq. ft.
64 sfd units; min. lot size of
9,000 sq. ft.
11,000 sq. ft.
36 sfd units; min. lot size of
129 sfd units; min. lot size
Net
Acres
7.7
7.8 31.4
13.8
33.6
28.4
44.52
25.29
37.29
28.16
44.84
Status of Development
Tentative map on all parcels recorded February 2003;
sales to merchant builders expected to commence in third quarter, 2005; property in undeveloped condition
Final maps recorded in May 2004; property in finished
condition; models are currently under construction;
initial sales scheduled for the first quarter of 2005
Final maps recorded in May 2004; property in finished condition; construction of model homes to commence
by December 2004; initial sales scheduled for the
fourth quarter of 2004
Final maps recorded in May 2004; property in finished condition; model homes have not yet been
constructed; initial sales scheduled for the first quarter
of 2005 for Planning Area No. 1 .IO, and the first
quarter of 2006 for Planning Area No. 1.12
Final maps recorded in May 2004; property in finished
of 5,000 sq. ft. condition; 3 model homes are currently under
construction; initial sales scheduled for the third
quarter of 2005
Source: The Developers; Bruce W. Hull & Associates.
For a description of the Developers, see "OWNERSHIP AND VALUE OF PROPERTY
For a map of the property within the WITHIN THE ASSESSMENT DISTRICT" herein.
Assessment District, see APPENDIX A hereto.
OWNERSHIP AND VALUE OF PROPERTY WITHIN THE ASSESSMENT DISTRICT
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
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. The ownership of the parcels is subject to
change.
Bressi Gardenlane, LLC. Bressi Gardenlane, LLC, a Delaware limited liability
company (“Bressi Gardenlane”), is owned by Lennar/LNR Camino Palomar, LLC, a California
limited liability company (“Camino Palomar”) (25% ownership) and LBREP Bressi Holdings,
LLC, a Delaware limited liability company (I‘LBREP”) (75% ownership), and was formed to
develop Bressi/Lennar’s property in the Assessment District. LBREP is affiliated with Lehman
Brothers Real Estate Partners, a $1.6 billion closed-end real estate private equity fund which
invests in office, multifamily, retail, healthcare and technology assets in Europe and North
America. Camino Palomar is a 50150 venture between Lennar Homes of California, Inc., a
California corporation and wholly-owned subsidiary of Lennar (defined below), and LNR Bressi
Ranch, Inc., a California corporation affiliated with LNR Property (defined below).
Bressi Gardenlane’s current line of credit is secured by its real estate holdings, LBREP,
Lennar Corporation, a Delaware corporation (“Lennar“) and LNR Property Corporation, a
Delaware corporation (“LNR Property”). Lennar, through its subsidiaries, operates in 13 states,
and has been building homes in California since the 1995. Lennar formed LNR Property in
1997 to separate Lennar’s real estate investment, finance and management business from its
homebuilding business through a tax-free spin-off. See the discussion of LNR Property under
“LNR Bressi Commercial, Inc.” below. Lennar has no legal or contractual obligation to directly
contribute funds to Bressi Gardenlane either to complete construction of the development in the
Assessment District or to pay the assessments. Lennar, through its partnership interest in
Camino Palomar, contributes funds, if required, to pay all company obligations that are
contractual or non-contractual to complete construction. Lennar also contributes funds, if
required, to pay property taxes.
Lennar is listed on the NYSE under the ticker symbols “LEN” and LEN.B.” LNR Property
is listed on the NYSE under the ticker symbol “LNR.” Lennar and LNR Property are subject to
the informational requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and therefore file reports, proxy statements and other information with the
SEC. Financial information about Lennar and LNR Property is included in documents filed with
the SEC, particularly their respective Annual Reports on Form 10-K and their respective most
recent quarterly Reports on Form 10-Q. All documents subsequently filed by Lennar or LNR
Property 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.
Lennars’ Internet home page is located at www.lennar.com. Lennar Property’s Internet
home page is located at www.lnrproperty.com. These Internet addresses are included for
reference only and the information on such Internet sites is not a part of this Official Statement
or incorporated by reference into this Official Statement. No representation is made in this
Official Statement as to the accuracy or adequacy of the information contained on any lnternet
site.
Greystone Homes, Inc. Greystone Homes, Inc, a Delaware corporation (“Greystone”),
is a wholly-owned subsidiary of Lennar since its purchase in 1997. See the discussion of
Lennar in “Bressi Gardenlane, LLC above.
LNR Bressi Commercial, Inc. LNR Bressi Commercial, Inc., a California corporation
(“LNR Bressi”) is an indirect, wholly-owned subsidiary of LNR Property (defined above). LNR
Property is managing the development of LNR Bressi’s property in the Assessment District.
LNR Property has been acquiring, developing and managing commercial real estate for over 30
years. As of August 31, 2004, LNR held assets of approximately $3.1 billion, with its domestic
real estate portfolio, including properties held in unconsolidated partnerships, comprising
approximately 7.6 million square feet of office, industriaVwarehouse and retail space, 0.6 million
square feet of ground leases, 1,900 hotel rooms, and 9,500 apartments (8,700 in affordable
housing communities), either completed, under development or under management.
On August 29, 2004, a newly formed company, which will be majority owned by affiliates
of Cerberus Capital Management, L. P. and its real estate affiliate Blackacre Institutional Capital
Management, LLC, agreed to acquire LNR Property. Cerberus Capital Management, L.P. is a
New York-based global private investment firm which, together with its affiliates, manages in
excess of $14 billion of capital. Under the terms of the definitive merger agreement, the newly
formed company, Riley Property Holdings LLC, will acquire 100% of the LNR Property‘s
outstanding shares for $63.10 per share in cash. While the sale requires the consent of LNR
Property’s shareholders, it is currently expected thgat such approval will be obtained. The sale
is expected to conclude by the first quarter of 2005.
Lennar Property‘s lnternet home page is located at www.lnrproperty.com. This lnternet
address is included for reference only and the information on such lnternet site is not a pad of
this Official Statement or incorporated by reference into this Official Statement. No
representation is made in this Official Statement as to the accuracy or adequacy of the
information contained on any lnternet site.
Bressi Ranch. Bressi Ranch Development, LLC, a Delaware limitied liability company
(“Bressi Ranch”) is a special purpose entity formed specifically to acquire and assist in the
development of the property located within the Assessment District. Bressi Ranch is comprised
of two members, Bressi Ranch Member, LLC, an entity owned by the JP Morgan Special
Situation Property Fund, an investment fund of JPMorgan Fleming Asset Management (“JP
Morgan Fleming”), and SRG Bressi, L.P., an affiliate of SARES-REGIS Group. SARES-REGIS
Group has been hired to manage the project for Bressi Ranch. JPMorgan Fleming, a
subsidiary of JPMorgan Chase & Co., is a global asset management company with
approximately to $26 billion of assets under management with offices in over 38 locations
around the world. SARES-REGIS Group is a regional real estate company which provides
comprehensive services through its Commercial, Multifamily and Homebuilding Divisions.
Formed through the 1993 merger of the Sares Company and The Regis Group, the privately
held company manages approximately $2 billion in assets on behalf of its institutional partners
and clients. These assets include 10.5 million square feet of commercial property and more
than 12, 000 apartment units. The companies together have also purchased and/or developed
approximately 36 million square feet of commercial property and more than 19,000 residential
homes and apartments since their inception in 1975.
Bressi Ranch’s Internet home page is located at www.bressiranchcc.com. JP Morgan
Fleming’s Internet home page is located at www.im.jpmorgan.com. SARES-REGIS Group’s
Internet home page is located at wwwsares-reg iscorn. These lnternet addresses are included
for reference only and the information on such lnternet sites is not a part of this Official
Statement or incorporated by reference into this Official Statement. No representation is made
in this Official Statement as to the accuracy or adequacy of the information contained on any
lnternet site.
Barratt American, Inc. Barratt American, Inc., a Delaware Corporation (“Barratt”) was
established in 1980, and since that time has completed over 17,000 homes. In its fiscal year
ending June 30, 2004, Barratt sold 702 residential units and had $305 million in revenue. On
August 30, 2004, the management team at Barratt completed an agreement for the private
acquisition of the company from its British-based corporate parent, Barratt Developments PLC,
for a purchase price of $165 million.
Barratt’s Internet home page is located at www. barrattamerican.com, and contains
information on Barratt’s current projects. This lnternet address is included for reference only
and the information on such Internet site is not a part of this Official Statement or incorpora fed
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 lnternet site.
RECMC. Real Estate Collateral Management Company, a Delaware corporation
(“RECMC”), is a wholly-owned subsidiary of Household Commercial of California, Inc., a
Household International Company. HSBC Holdings PLC (“HSBC”) purchased Household
International, Inc. in 2003. Headquartered in London, HSBC is one of the largest banking and
financial services organizations in the world. HSBC’s international network comprises about
10,000 offices in 76 countries and territories in Europe, the Asia-Pacific region, the North and
South America, the Middle East and Africa. Shares of HSBC are listed on the London, Hong
Kong, New York, Paris and Bermuda stock exchanges. The shares are traded on the New York
Stock Exchange in the form of American Depositary Receipts under the ticker symbol “HBC.”
HSBC is subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and therefore files reports, proxy statements and
other information with the SEC. Financial information about HSBC is included in documents
filed with the SEC, particularly its Annual Reports on Form 10-K and its most recent quarterly
Reports on Form IO-Q. All documents subsequently filed by HSBC 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.
HSBCs’ Internet home page is located at www.hsbc.com. This lnternet address is
included for reference only and the information on such lnfernet site is not a part of this official
Statement or incorporated by reference into this Official Statement. No representation is made
in this Official Statement as to the accuracy or adequacy of the information contained on any
Internet site.
John Laing Homes. WL Homes LLC, a Delaware limited liability company doing
business as John Laing Homes (“WL Homes”), formed the Delaware limited liability companies
of WL La Costa 61 Associates, LLC (“La Costa 61”) and WL La Costa 68 Associates, LLC (“La
Costa 68”) to acquire and develop property in the Assessment District. WL Homes is both the
managing and operating member of La Costa 61 and La Costa 68 and is responsible for the
development, construction, marketing and sale of the homes to be built on the property.
WL Homes is a privately held homebuilding company that was formed in 1998 by the
merger of the United States operations of England based John Laing Homes, PLC and Watt
Homes, two companies with a long history and legacy of homebuilding. WL Homes currently
has eight (8) homebuilding divisions with operations in California (Los Angeles, Orange County,
Inland Empire, San Diego and Sacramento) and Colorado (Denver and Colorado Springs).
During Fiscal Year 2003, WL Homes had approximately 1,800 home closings and revenues of
approximately $750,000,000. For Fiscal Year 2004, WL Homes projects home closings to
exceed 2,000 units and revenues of approximately $1 billion.
WL Homes’ Internet homepage is located at www.johnlainghomes.com. This lnternet
address is included for reference only and the information on such lnternet site is nof a part of
this Official Stafemenf 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 lnternef site.
The development of the property in the Assessment District is being undertaken by the
South Coast (Orange County and San Diego) Division of WL Homes. Recent single-family
developments completed or under development by the South Coast Division include the
following:
No. of Square Footage Selling
Proiect Location - Units Ranae - Price - Status
The Tides
Seahouse
Potters Bend Reserve West Casalon St. Mays Road
Woodley’s Glen
Rosemary Lane
Carlsbad 108
Carlsbad 111
Ladera Ranch 108
San Clemente 110
lrvine 165 Ladera Ranch 141 San Marcos 86
San Diego County 133
1,987 - 2,468 2,366 - 2,736 1,419- 1,785 2,756 - 3,150
1,580 - 1,749
1,383 - 1,888 2,332 - 2,611 2,464 - 2,978
Mid $600~
Low $700~
Low $400~
Mid $800~
Mid $400~ Mid $300~ Low $700~
Mid $500~
Completed
Completed
Completed
Completed
Under Development Completed Under development
Under Development
Western Pacific Housing, Inc. Western Pacific Housing, Inc., a Delaware corporation,
is a wholly-owned subsidiary of D.R. Horton, Inc., a Delaware corporation (“D.R. Horton”). D.R.
Horton was founded in 1978, and currently operates in 51 divisions and in 21 states across the
United States.
D.R. Horton is listed on the NYSE under the ticker symbol “DHI.” D.R. Horton is subject
to the informational requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and therefore files reports, proxy statements and other information with the
SEC. Financial information about D.R. Horton is included in documents filed with the SEC,
particularly its Annual Reports on Form IO-K and its most recent quarterly Reports on Form 10-
Q. All documents subsequently filed by D.R. Horton 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.
D.R. Horton’s Internet home page is located at www.drhorton.com. This Internet
address 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 Official Statement. No
representation is made in this Official Statement as to the accuracy or adequacy of the
information contained on any Internet site.
Pulte. Pulte Home Corporation, a Michigan corporation (“Pulte”) is based in Bloomfield
Hills, Michigan, and has operations in 44 markets across the United States. Under its Del
Webb brand, Pulte is also the nation’s leading builder of active adult communities for people
age 55 and older. Over its history, the Company has constructed more than 370,000 homes
and has been named Builder of the Year for 2002 by Professional Builder magazine.
Pulte is listed on the NYSE under the ticker symbol “PHM.” Pulte is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and therefore files reports, proxy statements and other information with the
SEC. Financial information about Pulte is included in documents filed with the SEC, particularly
its Annual Reports on Form 10-K and its most recent quarterly Reports on Form 10-Q. All
documents subsequently filed by Pulte 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.
Puke’s Internet home page is located at www.pulte.com. This lnternet address 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 Official Statement. No representation is made
in this Official Statement as to the accuracy or adequacy of the information contained on any
Internet site.
Warmington. Warmington LCG Associates, L.P., a California limited partnership
(“Warmington”) is a special purpose entity formed specifically to acquire and assist in the
development of the property located within the Assessment District. The managing member of
Warmington, and the builder of the homes within the Assessment District, is Warmington
Homes California (“Warmington California”), a California corporation. Warmington California is
engaged in the business of owning, developing and selling residential properties in California
and Nevada. Warmington California has over 80 years of residential home building experience,
and has built over 50,000 homes. It expects to complete approximately 1,200 homes in 2004.
It is currently involved in two similar projects within the San Diego Division, an 81 unit single
family development at La Costa Oaks in Carlsbad and a 65 unit single family development at
Santaluz (east of Del Mar). Warmington Homes California also has divisions in the San
Francisco Bay Area, Sacramento, Los Angeles, Orange County and Las Vegas areas, and has
47 projects underway in those markets. Warmington California has no legal or contractual
obligation to contribute funds to Warmington either to complete construction of the project or to
pay the assessments.
The Internet home page of Warmington California, the managing member of
Warmington, is located at www. warmingtonhornesca.com. This Internet address 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 Official Statement. No representation is made in this Official
Statement as to the accuracy or adequacy of the information contained on any Internet site.
Developer Representations
In connection with the issuance of the Bonds, the Developers have made the following
representations:
0 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;
0 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;
e 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
0 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 the Assessment District in its
Market Absorption Study, dated June 14, 2004, as updated on September 30, 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 the Assessment District is expected to accommodate the
residential units at build-out by the end of 2008 (assuming closings commence in 2005). The
Market Absorption Consultant also confirmed the reasonableness of the minimum residential
pricing anticipated by the Developers. In addition, the Market Absorption Consultant estimated
that the industrial compounds components could be accommodated at build-out by the end of
201 0 (assuming occupancy commenced in mid-2005). 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 the Assessment District.
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 the Assessment District
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
September 27, 2004 (the “Appraisal”), indicating that the value of the land in the Assessment
District owned by the Developers and Subject to unpaid assessments (the “Appraisal Parcels”)
as of August 15, 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 $41 7,041,000.
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. 4 of the San Marcos
Unified School District, 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 August 15, 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 the Assessment District; 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 in this Section 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 Appraisal Parcels is at least
equal to $417,041,000 (see APPENDIX B hereto for a copy of the Appraisal). The
assessments allocated to these properties total $33,970,000*’. Consequently, the aggregate
appraised value of these properties is 12.28 times the assessments levied on such properties.
‘: Preliminary; subject to change.
The following is a summary of the property owned by the Developers within the
Assessment District, along with the allocation of assessments to such property and the
estimated value-to-lien ratios.
L E v) tn
v) (0
3
n
I- ;5
0 0
b 8
l!! a, a, C
0) c w
c
.-
CI
E
3 2
s 2
8
v) rn
ui a, m 0
c .-
v) n
([I T
rc 0 - .- ir
v) v) 3 0 v) 5
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.”
In comparing the appraised value of real property within the Assessment District 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 the Assessment District
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 191 5 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 the Assessment District 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 the Assessment District 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 the Assessment District. There is no assurance the owners will be able to
pay the assessment installments or that they will pay such installments even though financially
able to do so.
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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 DELINQUENT AMOUNT 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.
Delinquency Resulting in Ultimate or Temporary Default on Bonds
If a temporary deficiency occurs in the Redemption Fund to pay Bonds which have
matured, past due interest or the principal and interest on Bonds coming due during the current
tax year, but it does not appear to City that there will be an ultimate loss to the Bondholders, the
City shall, pursuant to the 1915 Act, direct the Paying Agent to pay the principal of Bonds which
have matured as presented and make interest payments on the Bonds when due as long as
there are available funds in the Redemption Fund, in the following order of priority:
(1) All matured interest payments shall be made before the principal of any
Bonds is paid;
(2) Interest on Bonds of earlier maturity shall be paid before interest on Bonds of
later maturity; and
(3) Within a single maturity, interest on lower numbered Bonds shall be paid
before interest on higher numbered Bonds.
The principal of Bonds shall be paid in the order in which the Bonds are presented for
Any Bond which is presented but not paid shall be assigned a serial number payment.
according to the order of presentment and shall be returned to the Bondholder.
When funds become available for the payment of any Bond which was not paid upon
presentment, the City shall notify the registered owner of such Bond by registered mail to
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present the Bond for payment. If the Bond is not presented for payment within ten (10) days
after the mailing of the notice, interest shall cease to run on the Bond.
If it appears to the City that there is a danger of an ultimate loss accruing to the
Bondholders for any reason, pursuant to the 1915 Act it shall withhold payment on all matured
Bonds and interest on all Bonds until the City Council may take proper action to equitably
protect all Bondholders. The City Council is required to fix a date for a hearing to determine
whether in its judgment there will ultimately be insufficient money in the Redemption Fund to
pay the principal of the unpaid Bonds and interest thereon. If the City Council determines that
in its judgment there will not be an Ultimate Default (as defined below), it shall pay matured
Bonds and interest as long as there is available money in the Redemption Fund. If the City
Council determines that in its judgment there will ultimately be a shortage in the Redemption
Fund to pay the principal of the unpaid Bonds and accrued interest (an “Ultimate Default”), the
City shall pay to the owners of all outstanding and unpaid Bonds such proportion thereof as the
amount of funds on hand in the Redemption Fund bears to the total amount of the unpaid
principal of the Bonds and interest which has accrued or will accrue thereon. Similar
proportionate payments shall thereafter be made periodically as moneys come into the
Redemption Fund.
Upon the determination by the City that an Ultimate Default will occur, the City shall
notify all Bondholders to surrender their Bonds for cancellation. The Finance Director shall then
pay by warrant the proportionate amount of principal and accrued interest due on the Bonds of
each Bondholder as may be available from time to time out of the money in the Redemption
Fund. Interest shall cease on principal payments made from the date of such payment, but
interest shall continue to accrue on the unpaid principal at the rate specified on the Bonds until
payment thereof is made. No premiums shall be paid on payments of principal on Bonds made
in advance of the maturity date thereon. If Bonds are not surrendered for registration and
payment, the City shall give notice to the Bondholder of the amount available for payment.
Interest on such amount shall cease as of ten days from the date of mailing of such notice.
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.
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Concentration of Property Ownership
The Developers are currently responsible for payment of 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 the Assessment District,
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 the Assessment District which constitute security for the Bonds is the Developers’
respective real property holdings located within the Assessment District 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 the Assessment District 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 the Assessment District 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
the Assessment District will not be diminished.
The development potential of the vacant land in the Assessment District 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 the Assessment District
may be adversely affected by existing or future governmental policies, or both, restricting or
controlling the development of land in the Assessment District. See also “Future Land Use
Regulations and Growth Control Initiatives” below. There can be no assurance that the owners
of the vacant land in the Assessment District 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
the Assessment District 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 in this Official Statement, 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
experience, 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
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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 the Assessment District
with the effect of negatively impacting the ability of the Owners of such land to complete the
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 the Assessment District 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 the Assessment District 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 the
Assessment District 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.
Factors Which May Affect Land Development and Property Value
Development in the Assessment District 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 the Assessment District,
the nature and extent of public improvements, land use, zoning and other matters, Failure to
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.. .
meet any such future regulations or obtain approvals in a timely manner could delay or
adversely affect development in the Assessment District.
Land Value
The value of land within the Assessment District 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 the Assessment District. 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 the
Assessment District could be sold for the appraised amount at a foreclosure sale for delinquent
assessments. The actual value of the property within the Assessment District is subject to
future events which might render invalid the basic assumptions of the Appraiser that the
property within the Assessment District can be sold or developed and absorbed. Many factors
could prevent or delay the development or sale of the property within the Assessment District.
While the property within the Assessment District has received final map approval 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 the Assessment District.
Additionally, development in the Assessment District 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 the Assessment District 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 the Assessment District 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
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 the Assessment District is currently owned by the
Developers, who are currently responsible for payment of 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
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development of the Assessment District might reduce the willingness of the Developers, or any
successor, to pay assessment installments on undeveloped property.
Endangered Species
To the extent property within the Assessment District 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 listlor new
species which may be added to the State and federal protected lists on a regular basis. Since
all the other parcels have been graded, only RECMC will need to obtain necessary permits
relating to the protection of wetlands and other biological resources necessary for. full
development of the Improvements and its property (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 the Assessment District 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 the Assessment District 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). Certain properties within the La Costa Greens Development Assessment District are
within a 1 00-year flood plain. Therefore, the proposed Assessment District improvements have
been designed to withstand or mitigate the impacts of the 100-year flood in accordance with
City and Federal Emergency Management Agency (FEMA) requirements.
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 located within
any designated California Fault Rupture Hazard Zone (formerly Alquist-Priolo Special Studies
Zone). These zones are designated by the California Division of Mines and Geology to identify
active faults and associated setback requirements for habitable structures. The nearest
potentially active fault is the Rose Canyon Fault Zone located approximately 8 miles to the
southeast. This fault zone has not been active during the past 11,000 years. The nearest
active fault is the Elsinore Fault Zone located approximately 20 miles to the northeast. Based
on current knowledge, the probability of the Carlsbad area experiencing a locally-generated
magnitude 6.5 or greater earthquake is low. Earthquakes less than magnitude 4.0 have been
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relatively common to the San Diego region. Lurching or cracking of the surface due to distant
seismic events is not considered a significant hazard, but is a possibility..
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
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.
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The Bressi Ranch EIR identified three areas of contamination or potential contamination
of hazardous materials within the Bressi Ranch property. The first of these areas was an
unpermitted landfill that was located in the northeast portion of the project site. While the landfill
site was remediated in 1989, portions of the landfill remain and must be properly removed in
accordance with the mitigation measures identified in the EIR if such property is to be
developed. The second area consisted of the old ranch house which may have been
constructed with asbestos containing materials. The EIR includes specific recommended
mitigation measures to clean-up and properly dispose of such materials to avoid release of
asbestos into the air. The third area of concern which contained hazardous materials included
portions of the site that were previously utilized for agriculture. Sampling of the soil done as
part of the EIR identified several different types of pesticide residues within the surface soils.
Most of the residues were at levels below the remediation goals established by the
Environmental Protection Agency (EPA). One of the pesticide residues, toxaphene, was
present in the upper 12 inches of the soil at levels exceeding the remediation goals established
by the EPA. The EIR report included mitigation measures to ensure that the pesticide levels
were remediated to levels deemed acceptable for residential uses in accordance with federal,
state and local guidelines and standards concurrent with the grading of the project. The
mitigation has been completed.
No hazardous materials were identified in the EIR as being within the La Costa Greens
project site.
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 co-equal 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.
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.
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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 218
On November 5, 1996, the voters of the State approved Proposition 218, 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.
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 2005/06, in amounts equal to the principal of
and interest on the Bonds coming due in the succeeding calendar year. 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 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
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.
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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.
CONCLUDING INFORMATION
Continuing Disclosure Agreements
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 15cZ-I2(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.
Bressi Ranch, Greystone and RECME (the “Obligated 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 semi-annually provide certain information
relating to such owner and the parcels within the Assessment District which it owns (each, a
“Developer Semi-Annual Report”), and to provide notices of the occurrence of certain
enumerated events.
The Developer Semi-Annual Reports will be filed by the Obligated Developers the
Master Developers, or the applicable “Dissemination Agent” (as that term is defined in the
Developer Continuing Disclosure Agreement) on behalf of such Obligated 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 Obligated
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Developers, or by the Dissemination Agent on behalf of such Obligated 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 such Obligated 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 Obligated Developers or the
Dissemination Agent to comply with the applicable Developer Continuing Disclosure Agreement
will be an action to compel specific performance. Such continuing disclosure obligations of the
Obligated Developers will terminate upon the occurrence of certain events, including when an
Obligated Developer is subject to less than 15% of the assessment levy in the Assessment
District for the then current Fiscal Year.
The Master 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.
Tax Matters
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.
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Carlsbad Poinsettia POS (1 8).DOC
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.
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 [plus net original premium] [less net original issue
discount] of $ ). The purchase contract pursuant to which the Underwriter is
purchasing the Bonds provides that the Underwriter will purchase all of the Bonds if any are
purchased. The obligation of the Underwriter to make such purchase is subject to certain terms
and conditions set forth in such contract of purchase.
The 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.
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Carlsbad Poinsettia POS (1 8).DOC
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:
Finance Director
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Carlsbad Poinsettia POS (1 8).DOC
APPENDIX A
EXCERPTS FROM ENGINEER’S REPORT
Appendix B
SUMMARY APPRAISAL REPORT - COMPLETE APPRAISAL
Assessment District No. 2002-1
City of Carlsbad
(Pointsettia Lane East)
SEC El Camino Real and Palomar Airport Road City of Carlsbad, San Diego County, California (File No. 2004-1 30)
PreDared For
City of Carlsbad
1635 Faraday Avenue
Carlsbad, California 92008
Prepared Bv
Bruce W. Hull & Associates, Inc.
1056 E. Meta Street, Suite 202
Ventura, California 9300 1
115 E. Second Street, Suite 100
Tustin, California 92780
September 27,2004
Ms. Lisa Hildabrand
Finance Director
City of Carlsbad
163 5 Faraday Avenue
Carlsbad, California 92008
Reference: Assessment District No 2002-0 1 of the City of Carlsbad
(Poinsettia Lane East)
SWC El Camino Real and Palomar Airport Road
City of Carlsbad, San Diego, California
Dear Ms. Hildabrand:
At your request and authorization we have prepared an appraisal of the property within
Assessment District No. 2002-01 of the City of Carlsbad known as Poinsettia Lane East (“AD
No. 2002-01”). AD No. 2002-01 encompasses two benefit areas. Benefit Area No. 1
encompasses the community known as Bressi Ranch which consists of 523 proposed single
family residential units in seven neighborhoods, a 133-acre business park proposed for 40
parcels, a church/school/daycare site, a boydgirls club site, and two commercial parcels on
approximately 335 net acres. Also included in Bressi Ranch are an affordable housing project,
two village centers, several parks, and a significant amount of open space that are not included in
this appraisal. Bressi Garden Lane LLC, a related entity to Lennar Homes, is developing Bressi
Ranch. Benefit Area No. 2 encompasses the community known as La Costa Greens covering
approximately 325 net acres. La Costa Greens is proposed for 794 residential units and a
business park. Also included in La Costa Greens are an affordable housing project, an RV
parking site, a daycare site, a clubhouse/pool facility, a community park, an elementary school
site, and a significant amount of open space that are not included in this appraisal. Morro
Development is the master developer for La Costa Greens.
We have valued the fee simple estate for the subject property subject to the AD No. 2002-01
special tax. This report is written based on the special limiting condition that the value of the
property is enhanced by the improvements that are to be funded by the bonds for AD No. 2002-
0 1. The concluded value estimates are as follows:
THE BRESSI RANCH VALUES
Bressi Ranch, LLC Ownership (Sares-Regis)
Greystone Homes, Inc. $149,425,000
Bressi Gardenlane / Barratt American, Inc. $ 10,170,000
Bressi Gardenlane / Episcopal Diocese $ 3,035,000
Bressi Gardenlane $ 635,000
$ 32,096,000
Ms. Lisa Hildabrand
City of Carlsbad
September 27,2004
Page Two
LNR Bressi Commercial, Inc.
Bressi Gardenlane / Health Care Group
Bressi Gardenlane / Boys and Girls Club
Total Value - Bressi Ranch
LA COSTA GREENS VALUES
RECMC Ownership
Warmington Ownership
D.R. Horton Ownership
John Laing Ownership
Pulte Homes Ownership
Total Value - La Costa Greens
$ 7,950,000
$ 1,505,000
$ 280,000
$205,096,000
$ 80,540,000
$ 27,570,000
$ 24,785,000
$ 42,200,000
$ 37,130.000
$212,225,000
AGGREGATE VALUE AD 2002-01 $41 7,32 1,000
The preceding values are stated subject to the Limiting Conditions and Appraiser’s Certification
as of August 15,2004.
This report is defined as a Summary Appraisal Report - Complete Appraisal, which is intended
to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Uniform
Standards of Professional Appraisal Practice (USPAP) effective January 1, 2004 for a Summary
Appraisal Report. As such, it presents only summary discussions of the data, reasoning, and
analyses that were used in the appraisal process to develop the appraiser’s opinion of value.
Supporting documentation concerning the data, reasoning, and analyses is retained in the
appraiser’s file. The depth of discussion contained in this report is specific to the needs of the
client. The appraiser is not responsible for unauthorized uses of this report.
’ The following narrative summary appraisal report sets forth the data and analyses upon which
our opinion of value is, in part, predicated.
Respectfully submitted,
BRUCE W. HULL & ASSOCIATES, INC.
Bruce W. Hull, MA1
State Certified General
Real Estate Appraiser (AG004964)
Kitty S. Siino, MAI
State Certified General
Real Estate Appraiser (AG004793)
Assumptions and Limiting Conditions ................................................................................ i
Purpose of the Appraisal ....................................................................................................... 1
The Subject Property ............................................................................................................ 1
Intended Use of the Report ................................................................................................... 2
Three Year Sales History ...................................................................................................... 2
Date of Report ....................................................................................................................... 5
Market Value Defined ......................................................................................................... 2
Effective Date of Value ....................................................................................................... 4
Property Rights Appraised ................................................................................................... 5
Appraisal Development and Reporting Process ................................................................... 5
Description of General and Immediate Areas ....................................................................... 9
Immediate Surroundings ...................................................................................................... 15
San Diego County Housing Market ..................................................................................... 16
San Diego County Commercial Market ............................................................................... 21
Bressi Ranch Master Plan .................................................................................................... 23
La Costa Greens Master Plan ............................................................................................... 24
Assessment District No . 2002-01 (Poinsettia Lane East) .................................................... 25
Subject Property Descriptions ............................................................................................. 27
Highest and Best Use Analysis ............................................................................................ 41
................................................................................................................ Valuation Process 46
Value Conclusions ............................................................................................................... 55
Marketing and Exposure Time ............................................................................................ 75
Appraisal Report Summary .................................................................................................. 76
Appraiser’s Certification ...................................................................................................... 77
ADDENDA
Market Data Sheets
Discounted Cash Flow Analyses
Appraisers’ Qualifications
ASSUMPTIONS AND LIMITING CONDITIONS
1. This Summary Appraisal Report is intended to comply with the reporting requirements
set forth under Standard Rule 2-2(b) of the Uniform Standards of Professional Appraisal
Practice for a Summary Appraisal Report. As such, it might not include full discussions
of the data, reasoning, and analyses that were used in the appraisal process to develop the
appraiser’s opinion of value. Supporting documentation concerning the data, reasoning,
and analyses is retained in the appraiser’s file. The information contained in this report is
specific to the needs to the client and for the intended use stated in this report. The
appraiser is not responsible for unauthorized use of this report. This report is also
intended to comply with the appraisal standards proposed by the California Debt and
Investment Advisory Commission.
2. No responsibility is assumed for legal or title considerations. Title to the property is
assumed to be good and marketable unless otherwise stated in this report.
3. The property is appraised subject to the easements of record and the special tax lien of
AD No. 2002-01 of the City of Carlsbad (Poinsettia Lane East), but is free and clear of
any other liens or encumbrances.
4. Responsible ownership and competent property management are assumed unless
otherwise stated in this report.
5. The information furnished by others is believed to be reliable. However, no warranty is
given for its accuracy.
6. All engineering is assumed to be correct. Any plot plans and illustrative material in this
report are included only to assist the reader in visualizing the property.
7. It is assumed that there are no hidden or unapparent conditions of the property, subsoil,
or structures that render it more or less valuable. No responsibility is assumed for such
conditions or for arranging for engineering studies that may be required to discover them.
8. It is assumed that there is full compliance with all applicable federal, state, and local
environmental regulations and laws unless otherwise stated in this report.
9. It is assumed that there is full compliance with all applicable zoning and use regulations
and restrictions, unless non-conformity has been stated, defined, and considered in this
appraisal report.
10. It is assumed that all required licenses, certificates of occupancy or other legislative or
administrative authority from any local, state, or national governmental or private entity
or organization have been or can be obtained or renewed for any use on which the value
estimates contained in this report are based.
~
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page i
11.
12.
13.
14.
15.
16.
17.
Any sketch in this report may show approximate dimensions and is included to assist the
reader in visualizing the property. Maps and exhibits found in this report are provided for
reader reference purposes only. No guarantee as to accuracy is expressed or implied
unless otherwise stated in this report. No survey has been made for the purpose of this
report.
It is assumed that the utilization of the land and improvements is within the boundaries or
property lines of the property described and that there is not encroachment or trespass
unless otherwise stated in this report.
The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any
comment by the appraiser that might suggest the possibility of the presence of such
substances should not be taken as confirmation of the presence of hazardous waste and/or
toxic materials. Such determination would require investigation by a qualified expert
relating to asbestos, urea-formaldehyde foam insulation, or other potentially hazardous
materials, which may affect the value of the property. The appraiser’s value estimate is
predicated on the assumption that there is not such material on or in the property that
would cause a loss in value unless otherwise stated in this report. No responsibility is
assumed for any environmental conditions, or for any expertise or engineering
knowledge required to discover them. The appraiser’s descriptions and resulting
comments are the result of the routine observations made during the appraisal process.
Any proposed improvements are assumed to be completed in a good workmanlike
manner in accordance with the submitted plans and specifications.
The distribution, if any, of the total valuation in this report between land and
improvements applies only under the stated program of utilization. The separate
allocations for land and buildings must not be used in conjunction with any other
appraisal and are invalid if so used.
If this report is placed in the hands of anyone but the client, the client shall make such
party aware of all assumptions and limiting conditions of the assignment.
The Americans with Disabilities Act (“ADA”) became effective on January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this property to
determine whether it is in conformity with the various detailed requirements of the ADA.
The appraiser is not a qualified expert as to the requirements of the ADA Act. It is
possible that a compliance survey of the property, together with a detailed analysis of the
requirements of the ADA, could reveal that the property is not in compliance with one or
more of the requirements of the Act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to this issue,
possible noncompliance with the requirements of ADA in estimating the value of the
property has not been considered.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page ii
18. All of the improvements and benefits to the subject property which are to be funded by
the special tax bonds of AD No. 2002-01 are completed and in place.
19. There are no environmental concerns that would slow or thwart development of the
subject properties, and the soils are adequate to support the highest use conclusion.
20. That all Conditions of Approval for both the Bressi Ranch and La Costa Greens are
completed in a timely manner so as to not slow or thwart development of the subject
property.
21. This appraisal may not be conveyed to any person other than the client without the
appraiser’s written consent. Permission is given for this summary appraisal report to be
published as a part of the Official Statement or similar document for AD No. 2002-01 of
the City of Carlsbad.
22. That the cost estimates received from the master developers and utilized in this appraisal
report are complete and accurate. The appraisers have relied upon these costs to help
determine the value.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page iii
PURPOSE OF THE APPRAISAL
AsseSsment- ~ Lot/ Owner No of
AredPA Tract No. (Builder or Project Name) Lownit Land Use
The purpose of this summary appraisal report is to provide the appraiser’s best estimate of
market value of the fee simple estate for the subject property, subject to the special tax lien of
AD No. 2002-01, which encompasses the two benefit areas known as Bressi Ranch and La Costa
Greens. The master developer of Bressi Ranch is Bressi Gardenlane, a related entity to Lennar
Homes. The master developer of La Costa Greens is Real Estate Collateral Management
Company (RECMC).
BRESSI RANCH
1-5 Lot 1-5/14600 Bressi Ranch, LLC N/A Industrial
(Sares-Regis)
1 O(p) Lots 380-420/14776 (Gardenside)
7 Lots 65-159/14778 (Wisteria)
(Heather)
6(P) Lots 26-63/14777 Greystone Homes, Inc. 79 SFD-5,900 sf
6(P) Greystone Homes, Inc. 95 SFD-4,000 sf
8 Lots 166-260/14774 Greystone Homes, Inc. 95 SFD-5,100 sf
9 70 Lots 263-332/14775 Greystone Homes, Inc.
THE SUBJECT PROPERTY
6(P)
1 O(p) 11
12
The subject property consists of two master planned areas. The first area is known as Benefit
Area No. 1 and encompasses the Bressi Ranch which and consists of approximately 335 net
acres divided into seven residential neighborhoods, an approximate 135 acre business park, a
church/school/daycare site and two commercial parcels. Benefit Area No. 2 encompasses La
Costa Greens, a 325 net acre site proposed for 794 residential units in 10 neighborhoods and a
business park. The neighborhoods are detailed below.
Lots 1-25/14777 Greystone Homes, Inc. 68 SFD-5,900 sf
Lots 337-397/14776 (Canterbury)
Lot 11/14600 Bressi Gardenlane,LLC/ 25 SFD-25,000 sf
(Barratt American, Inc.)
fPrimrose)
Lots 425-51 5/14779 Greystone Homes, Inc. 91 SFD-4,200 sf
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page I
13 Lot 13/14600 I Bressi Gardenlane, LLC NIA I ChurcWSchooV I
14
15(P)
15(P)
15@)
MARKET VALUE DEFINED
(Episcopal Diocese) Daycare
Lot 14114600 Bressi Gardenlane, LLC N/A Industrial
Pcl2114800 Bressi Gardenlane, LLC NIA Assisted Living
Pcl4/14800 Bressi Gardenlane, LLC NIA Community
Pcl5114800 LNR Bressi Commercial N/A CodOffice
(Health Care Group)
(Boys and Girls Club)
LLC
The
No.
Subtotal Bressi Ranch
term “market value” as used in this appraisal report is defined by Federal Register, Vol. 55,
165, Friday, August 4, 1990, rules and regulations, 12 C.F.R. part 34.42(f) as:
523
“The most probable price in terms of money which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the
buyer and seller, each acting prudently, knowledgeable and assuming the price is
not aflected by undue stimulus. Implicit in this dejnition is the consummation of a
sale as of a specified date and the passing
conditions whereby:
I)
2)
buyer and seller are typically motivated;
both parties are well informed or sell
consider their own best interest;
of title from seller to buyer under
advised, and acting in what they
3) a reasonable time is allowed for exposure in the open market;
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 2
4) payment is made in terms of cash in U.S. dollars or in terms offinancial
arrangements comparable thereto; and
5) the price represents the normal consideration for the property sold unaflected by special or creative financing or sales concessions granted by anyone
associated with the sale. ’I
INTENDED USE OF THE REPORT
It is the appraiser’s understanding that this summary appraisal report is intended to assist the
client, City of Carlsbad, in determining the feasibility of issuing the AD No. 2002-01 Bonds. It
is our understanding there are no other intended users of this report.
THREE YEAR SALES HISTORY
Bressi Ranch
Bressi Gardenlane LLC (or a related entity) has owned the southern portion of the property for
over 3 years. On April 30,2004 Bressi Gardenlane LLC sold Lots 6,7, 8, 9A, 9B, 10A, 10B and
12 to Greystone Homes for $132,000,000. On May 30, 2004 Bressi Gardenlane, LLC sold
Parcel 5 of Map 14800 consisting of 14.154 acres of commerciaVoffice lands to LNR Bressi
Commercial, Inc. for $3,348,800. Lot 13 is in escrow to the Episcopal Church for a worship
center and a school on the basis of $6.00 per square foot. The escrow is anticipated to close in
May 2005. Parcel 2 of Map 14800 is in escrow to Health Care Group, a California corporation
for an assisted living project on the basis of $5.05 per square foot of the gross parcel size subject
to AD 2002-1. This escrow is anticipated to close in November 2004. Parcel 4 of Map 14800 is
in escrow to the Boys and Girls Club to be deeded with no cost to the buyer. Escrow is
anticipated to close in 2006. Parcel 1 of Map 14800 is expected to transfer to Greystone Homes
for an affordable housing project at no charge in November 2004. It is the appraisers’
understanding that this planning area will pre-pay AD No. 2002-1, thus this planning area is not
included in this appraisal report.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 3
The northern portion of Bressi Ranch consists of the industrial business park. On May 28,2004
Bressi Ranch, LLC, a Delaware limited liability company purchased the entire 133 gross acres
from General American Life Insurance Company for $32,022,160. Negotiations to purchase the
property began in July 2003. The property was sold in a superpad condition of five separate
superpad lots.
La Costa Greens
La Costa Greens - Real Estate Collateral Management Company (RECMC) has owned the
property for over 3 years. On June 21, 2004 WL Homes, LLC (John Laing Homes) purchased
Planning Areas 1.1 1, 1.13 and 1.14 consisting of 129 single family detached lots with a
minimum lot size of 5,000 square feet. WL Homes, LLC took title to the property as WL La
Costa 61 Associates, LLC for Planning Area 1.14 and WL La Costa 68 Associates, LLC for
Planning Areas 1.1 1 and I. 13. On June 22, 2004 Pulte Homes Corporation purchased Planning
Areas 1.10 and 1.12 consisting of 100 single family detached lots with a minimum lot size of
9,000 and 11,000 square feet. On June 24, 2004 Western Pacific Housing, Inc. purchased
Planning Area 1.9 consisting of 75 single-family detached lots with a minimum lot size of 6,000
square feet. On June 24, 2004 Warmington Homes California purchased Planning Area 1.8
consisting of 82 lots with a minimum lot size of 7,500 square feet. At the request of the master
developer we have retained the sales prices in our files for confidentiality purposes. On April 3,
2003 Dove Family Housing Associates purchased Planning Area 1.5 consisting of 12.67 acres
for an affordable housing project. It is the appraiser’s understanding that this planning area will
pre-pay AD No. 2002-1, and this planning area is not included in this appraisal report. It is the
appraiser’s understanding that the school site will be transferred to the Carlsbad Unified School
District in mid-2005 at a price to be agreed upon. The school site is not included within this
appraisal report.
EFFECTIVE DATE OF VALUE
Opinions and matters expressed herein are stated as of August 15,2004.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 4
DATE OF REPORT
The date of this report is September 27,2004.
PROPERTY RIGHTS APPRAISED
The property rights appraised are the fee simple estate subject to easements of record and subject
to the special tax lien of bonds for AD No. 2002-01. The definition of “fee simple estate” is
stated as follows.
“Ownership of a title in fee establishes the interest in property known as the fee
simple estate - i.e., absolute ownership unencumbered by any other interest or
estate, subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat.
APPRAISAL DEVELOPMENT AND REPORTING PROCESS
The purpose of this summary appraisal is to report the appraiser’s best estimate of market value
for the property within AD No. 2002-01, which consists of two master planned communities
known as Bressi Ranch and La Costa Greens. Bressi Ranch has approvals for 523 single family
detached residential lots (plus 100 affordable income units which are not included in this
appraisal report), an approximate 150 acre business park, two commercial parcels, a day care site
and a churchhchool site. In addition there is over 200 acres of open space. La Costa Greens has
approvals for 858 residential units (plus an additional 180 affordable income units which are not
included in this appraisal), a business park, a church site, an elementary school site and over 200
acres of parks and open space. The valuation for the subject property will take into
consideration the improvementshenefits proposed to be fbnded by bonds for AD No. 2002-01.
’ Appraisal of Real Estate, 1 lth Edition
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates. Inc. Page 5
In appraising the subject property the value estimate will be based on the property’s highest and
best use conclusion and utilize the Sales Comparison Approach to value and Discounted Cash
Flow (“DCF”) Analyses. The property is in various stages of development. Bressi Ranch has
five sets of model homes under construction. The remainder of the lands have been mass graded
and are either in a superpad condition or in a blue-topped condition. There are still backbone
improvements that are being installed. La Costa Greens has five residential neighborhoods
currently installing underground utilities. The majority of the site has been mass graded.
Assessment Number 34 is in an undeveloped condition. There are still backbone improvements
that are being installed. In valuing the residential property the most appropriate unit of
comparison was considered to be a “finished lot”. As the subject property is vacant land and
land under construction, the income and cost approaches do not apply.
The summary appraisal will be presented in the following format.
General Area Description
Immediate Surroundings Description
San Diego County Housing Market Analysis
Assessment District Description
Subject Property Descriptions
Highest and Best Use Analysis
Valuation Process
Value Conclusions
Summary of Appraisal Report
As stated above, the Sales Comparison Approach will be utilized in valuing the subject property.
This approach compares similar properties that have recently sold or are currently listed to the
subject property. For the single-family residential lots, the market considers these units of
comparison on a “finished” condition. As the majority of the property is not yet completed, after
a “finished lot” value is determined for the property, the costs to develop the lands to a “finished
lot” condition need to be addressed. That is, if a tract is under development and only partially
finished and the most appropriate unit of comparison is on a finished lot basis (“retail” value),
the costs remaining to be spent on the property to bring the site to a finished condition need to be
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 6
considered. In addition, any remaining backbone improvement costs need to be allocated to each
of the planning areas.
Due to the number of lots under the ownership of Bressi Ranch, LLC (Sares Regis) and
RECMC, a DCF will be considered for each. That is, due to the single ownership of a
substantial amount of property, a DCF is needed in order to consider the costs to develop the
project, the absorption time needed to sell off the lands, a profit due to the developer, and a
discount rate that takes into account both the time value of money and the risk involved in the
development of the project. Within La Costa Greens there are four merchant builder owners of
five neighborhoods. In valuing these five neighborhoods a Discounted Cash Flow Analysis
(“DCF”) has not been considered due to distribution of ownership, or in the case of the six
neighborhoods currently owned by Greystone Homes, Inc. which have six model complexes
under construction.
The due diligence of this appraisal assignment included the following.
Compilation of certain demographic information and relating such data to the subject
property in order to determine a feasibility/demand analysis.
Interviews with the property owners in obtaining available information on the subject
property.
A review of the City of Carlsbad Growth Management Program Local Facilities
Management Plan for Zone 17 dated July 9, 2002 (covers Bressi Ranch) along with a
review of the Villages of La Costa Master Plan dated December 2000 and updated
February 2002 (which encompasses La Costa Greens).
A review of the Market Analysis and Absorption Report prepared by Empire Economics
of Capistrano Beach, California and dated June 14, 2004, that encompasses the subject
property. This report indicates an estimated absorption period for selling the homes
within the subject property.
A review of preliminary title reports.
A physical inspection of the subject property and its current status of development was
made.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 7
7) A review of the total cost estimates including backbone infiastructure costs and in-tract
development costs for each neighborhood (where applicable); the costs spent to date and
the remaining costs to develop each area to a finished lot condition.
9) An extensive search of the area for relevant comparable transactions, both sales and
offerings. Interviews with appropriate parties were then conducted to ascertain pertinent
information relating to each transaction.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane Easr)
Bruce Cy. Hull &Associates, Inc. Page 8
DESCRIPTION OF GENERAL AND IMMEDIATE AREAS
GENERAL SURROUNDINGS
The subject property is located in the northwestern portion of the County of San Diego (the
“County”). The County is located in the southwest comer of the State of California bordering
Mexico on the south, Imperial County to the east, and Riverside and Orange Counties to the
north. The Pacific Ocean is its western border. The County has approximately 4,250 square miles
and includes terrain from ocean beaches to foothills to mountains and deserts. The San Diego
region has experienced faster growth rates than most of California during the past several
decades. According to the California Department of Finance the January 2004 population count
for the County is estimated at 3,017,200.
The City of Carlsbad (the “City”) incorporated in 1952 and encompasses an estimated 42 square
miles. The City is located approximately 35 miles north from downtown San Diego. The City is
surrounded by San Marcos to the east, Encinitas to the south, Oceanside to the northwest, and
the Pacific Ocean to the west.
POPULATION
The County has experienced an increasing growth pattern for several decades. Between January
1990 and January 2000, county population grew from 2,480,072 to 2,813,833 or an annual
average of approximately 1.15 percent per year. The most recent estimates from the California
Department of Finance state the January 2004 population at 3,O 17,200 suggesting an average
annual increase of 1.76 percent for these four years. Current projections from San Diego
Regional Planning Agency (SANDAG) show average annual increases of 1.27 percent for the
next six years and then 1.06 percent annual increases for the following ten years.
The 2003 population estimated for the City (per the California Department of Finance) is 90,27 1 ,
which is an average annual increase of 3.3 percent per year for the past three years. Current
projections for 2010 are estimated at 102,739 per SANDAG suggesting a 2.0 percent average
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 9
annual increase for the balance of the decade. The estimated growth for the City is substantially
higher than the County’s projected.growth over the next five years.
Year
1991
ECONOMIC
The County boasts a growing economy with ten years of employment growth. The County
employment base saw increases of 40,000 to 50,000 new jobs per year in the 1997 thru 2000
period, with a 2.1% growth rate in 2001, equivalent to over 24,000 new jobs. Slower growth
occurred in 2002 with just over 10,000 new jobs in the County. As of July 2004, there were
20,700 new jobs in the County, when compared to July 2003 this represents an increase of 1.7
percent. Although this is a slowdown, it still indicates a growing economy. Below is a chart
showing employment growth in San Diego over the past 12 years.
Job Growth
( 4.000)
1992
1993
(14,900)
( 700) 8,300
23,200
1996 27.700
1997
1998
1999
2000
48,100
5 1,200
47,400
40.900
I 2001 I 24.600 I
2003
20042
1 1,200
26,600
Bureau of Labor Statistics, EDD
The County’s job growth in 2002 equaled 1.0 percent and in 2003 equaled 0.9 percent. This
compares to a 0.3 percent decrease in California and a 0.1 percent increase in the Nation during
2003. Per Empire Economics projections for employment growth for Southern California in
2004-5 are 3.7 percent annually while the years 2005-2010 are estimated to have a 1.5 percent
annual employment growth rate.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull h Associates, Inc. Page IO
Per the State of California Employment Development Department, the unemployment rate in the
County in July 2004 was 4.2 percent, down from a 4.6 percent July 2003 rate. This compares
to a 6.5 percent rate for California and 5.7 percent for the nation during the same period. Below
is a table showing unemployment rates for other relevant areas.
Source: State of California E.D.D.
As shown above, the County has a favorable unemployment rate compared to most surrounding
counties, the State of California, and the nation.
The City and its surrounding communities have a strong local and regional economy with low
unemployment. It is one of the fastest growth areas in the County. The top manufacturing
employers include Callaway Golf (2,500 employees), Taylor Made Golf (727), and Acushnet
Golf (540). The top non-manufacturing employers are Four Seasons Resort (1 , loo), Legoland
(l,lOO), Carlsbad Unified School District (875), La Costa Resort and Spa (650), and the City of
Carlsbad (603).
HOUSING
The recession of the 1990s had a drastic impact on construction starts in the County, along with
the majority of Southern California. The downturn was represented by lower housing starts and
higher unemployment rates. The resulting factors of lower growth, higher vacancies, and higher
unemployment had major impacts on real estate development. The 1990-94 recession had an
impact on construction starts. The downturn was represented by lower housing starts and higher
2004 annual average based on June actuals.
Summaly Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull h Associates, Inc. Page I I
unemployment rates. The resulting factors of lower growth, higher vacancies, and higher
unemployment had major impacts on real estate development. High vacancies in speculative
office buildings and a decline in both residential and industrial new projects caused a reduction
in the construction work force. However, the economy in the County rose back to levels
previous to the 1990s recession during the latter part of 1998 with current levels at all time
highs. Below is a table depicting housing growth in San Diego County.
Years
2001-2004*
1991 - 2000
New SFD Home Average
Building Permits Annual
37,084 9,27 1
94,909 9,409
1981 - 1990
1971 - 1980
1951 - 1970 -- I 94,065 I 1 1949orprior
236,049 23,604
258,234 25,823
299,055 14,952
*2004 is annualized based on first half data.
This table shows the slowdown from the early 1990s recession. However, in reviewing the
differences between the first five years and the last five years of the 199Os, the average annual
numbers differed greatly from 6,422 per year between 1991-1995, and 12,504 per year in 1996 -
2000, a 95 percent increase. The actual building permits for 2001, 2002 and 2003 and the
projections for 2004 suggest a 44 percent increase from the first half of the 1990s. The latter
part of the 1990s and the first three years of 2000s construction activity show positive growth in
the economy. The downturn in sales of new single family detached homes countywide from the
latter half of the 1990s is due to a more constrictive nature than an actual slowdown in sales.
The City has a diversified housing market containing master planned and award winning
communities. The communities contain a wide range of housing prices and designs. Home prices
have increased substantially in the past five years.
TRANSPORTATION
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page I2
Four major interstate freeways bisect the County of San Diego: Interstate 5, Interstate 15,
Interstate 8 and Interstate 805. Interstate 5 is the major northhouth arterial throughout the State
of California. It generally follows the coastal route in the San Diego County area. Interstate 15
is also a northhouth arterial; however, it is located inland in the more mountainous regions of the
County. Interstate 8 provides east/west access through the County of San Diego, while Interstate
805 generally parallels Interstate 5 beginning near Del Mar providing an inland route to near the
border of Mexico. The City has access to Interstate 5, State Route 78, and Interstate 15 via State
Route 78 (west). There are six interchanges from State Route 78 either existing, planned or
under construction. Interstate 5 has five major exits in Carlsbad; Palomar Airport Road, Cannon
Road, Poinsettia Lane, Tamarack Avenue and Carlsbad Village Drive.
The County is well served by Amtrak and Metrolink. In addition, downtown San Diego has a
trolley which provides access around the downtown area and across the Mexican Border. Air
service is provided by San Diego International Airport (35 miles), John Wayne Airport (Orange
County), and Palomar Airport in Carlsbad.
CONCLUSION
During the 1970s and 1980~~ the County experienced substantial population growth, resulting in
significant residential, industrial, and commercial development. The recession of the 1990s had
some dramatic impacts on the County as a whole; however, the long-term forecast is for
continued substantial growth for the County. As previously discussed, homebuilders have been
buying land and building homes at significant rates for the past seven to eight years. It is our
opinion that current primary concerns (national economic uncertainty, rising unemployment and
lower consumer confidence) relate to economic cycles that are typical for the nation since the
end of World War 11. Such growth and recession cycles have occurred at least six times in the
last 55 years, with both “boom” and “bust” portions of the cycle seeming longer in duration in
recent years. The year 2003 saw signs of economic recovery after a sluggish economy in 2001
and 2002, however the impact of the war in Iraq and hrther terrorist events does provide some
uncertainty. On a more micro level, most areas of the County, especially the housing market,
Summaty Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 13
have been strong, but the pace seems to have slowed from the extremely “hot” market of 2004.
The City has seen significant growth over the past few years and has projections for growth in
the future. This is partly due to the desirable location and partly due to the amount of land
remaining for development. In conclusion, the City is expected to continue to grow and develop
to a more prosperous and desirable community.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page I4
IMMEDIATE SURROUNDINGS
Bressi Ranch is located in the central portion of the City of Carlsbad, at the southeast quadrant of
El Camino Real and Palomar Airport Road approximately five miles east of the Pacific Ocean.
The topography is sloping to hilly which creates some valley and canyon views. Bressi Ranch
Master Plan includes four main arterial roadways, El Camino Real, Palomar Airport Road, El
Fuerte Road and Poinsettia Lane.
Bressi Ranch Master Plan includes approximately 530 acres of residential villages, hture
commercial development and open space. Overall, the Bressi Ranch will have 7 residential
neighborhoods approved for 532 residences, 1 church and private school site, an 150-acre
business park, a 14-acre officehusiness development, a gas station site, a community daycare
facility (boys/girls club site), an affordable housing component (not included in this appraisal)
and large areas of open space corridors.
La Costa Greens is located adjacent to Bressi Ranch to the south along the east side of El
Camino Real at Poinsettia Lane. The topography is hilly and surrounding a portion of the La
Costa Golf Course creating some excellent valley, canyon and golf course views. The Villages
of La Costa Master Plan (which includes La Costa Greens) is the governing land use document
on the property.
La Costa Greens includes approximately 620 acres of residential neighborhoods, future
commercial development, and open space. Overall La Costa Greens will have 10 residential
neighborhoods approved for 858 residences, 180 affordable housing units (not included in this
appraisal), a business park, a churcwday care site, an RV storage facility, an elementary school
site, a community park site, and large expansive corridors of open space.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page IS
SAN DIEGO COUNTY HOUSING MARKET
In determining the San Diego County housing market, economic conditions such as job and
population growth need to be further addressed. Current economic conditions in San Diego
County support the development of all types of residential housing. Although the regional
economy moderated in 2001-02 from the heated pace of the previous few years, the housing
market saw a strong increase in 2003 and thus far in 2004. Projections are for the housing
market in the County to remain strong in the near- to medium-term future. The nation’s
economy has been mixed. In early 2001, the national economy experienced slowing, but
aggressive interest rate cuts by the Federal Reserve in the later part of 2001, 2002, and 2003
appeared to “spark” the housing market. Recently the Federal Reserve has begun to increase
rates. The terrorist attacks of September 1 1 , 2001 provided downward pressure for the economy.
The year 2003 was steady although the fallout from the Iraq conflict and recent terrorists events
has yet to be determined. Growth predictions for the County are for 2 percent per year over the
next few years.
Although the unemployment rate in the nation began to increase in early 2004, the current
unemployment rate in the County is still near a record low. As of July 2004, unemployment in
the San Diego region was 4.2 percent, compared to 6.5 in California as a whole and 5.7 percent
for the nation for the same period. The County’s job rate exceeded 40,000 new jobs annually
during the period from 1997 to 2000, with 48,000 new non-agriculture jobs in 1997,51,000 new
jobs in 1998, 47,000 new jobs in 1999, and almost 41,000 new jobs in 2000. The year 2001
ended with an increase of almost 24,600 new jobs in the County while 2002 ended with an
increase of 12,300 new jobs. The year ended 2003 saw an increase of 11,200 new jobs in the
County. Near-term growth is estimated per the Regional Financial Associates at 20,000 new
jobs in 2004 (Meyers Group estimating 26,600), 37,000 new jobs in 2005, 35,000 new jobs in
2006, and 3 1,000 new jobs in 2007. Long-term growth is estimated per SANDAG at an average
increase of over 10,500 new jobs per year between 2005 and 2010 and over 15,500 annual new
jobs between 2010 and 2020. Although current year figures are lower than previous years, both
near term and long-term job growth estimates show a sign of a healthy growing economy.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page I6
According to the Center for the Continuing Study of the California Economy, “San Diego is
leading California’s job growth and is one of the fastest growing metropolitan areas in the
nation”.
The County is the second largest in the State of California, with a population of 3.017 million.
According to the California Department of Finance, the County population increased by 2.5
percent in 1998,2.1 percent in 1999, and 1.9 percent in 2000. This rate of growth is compared to
a 1.6% population growth rate in California overall. County population grew at an average of
46,350 new residents per year during the 1970s; 68,450 new residents per year during the 1980s;
and 43,137 new residents per year in the 1990s. The year 2001 saw a population increase in the
County of 40,583 and 2002 saw an additional 36,760 new residents while 2003 saw an increase
of 41,100 new residents. Current estimates are for the County to grow an average of 37,000+
new residents per year for the next five years.
The urban core of both San Diego City and La Jolla represent the major employment centers in
San Diego County. Per Empire Economics the expansion from these urban cores is along the
two major San Diego County freeways, Route 5 (coastal route) and Route 15 (inland route) and
future growth will be in the northerly direction towards northern San Diego County.
We have reviewed the Meyers Group San Diego County New Housing Market Report for the
first quarter 2004. Homebuilders sold 4,125 new homes in the County during the quarter, which
is up 53.8 percent from the first quarter 2003 overall sales. New home, detached sales in the
County in the quarter of 2004 totaled 2,009 compared to 1,792 during the same period in 2002
resulting in a 12.1 percent increase while attached units sales increased to 2,116 new units sold
during the first quarter of 2004 compared to 890 in the first quarter of 2003 for an increase of
137.8 percent. These numbers show the re-emergence of attached unit sales in the County.
Overall San Diego County prices have increased from the previous year by 15.6 percent for
detached new home average prices and attached prices have increased by 14.4 percent during the
same time period.
Summaly Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull (e Associates. Inc. Page I7
Interest rates have a significant effect on home sales. In an effort to stimulate the economy, the
Federal Reserve decreased interest rates several times in 2002 and 2003, creating historic lows.
Current mortgage rates are in the 5.5 to 6.5 percent range, however an increase has been
suggested in the next few weeks. The lower rates appear to be helping the residential market in
the County to remain strong. Lower interest rates create sales by making a higher mortgage
possible, enabling more people to purchase homes. Interest rates drastically affect the
affordability of new homes. The affordability index in the County as of late 2002 was 18
percent, compared to 32 percent in Southern California overall, and 56 percent in the nation. As
of the end of 2003 the affordability index was 10.3 percent for new homes with a fixed rate
mortgage and 15.5 percent for an adjustable rate mortgage. These County figures are below
2000, when the County had an affordability index of 24 percent, Southern California was at 33
percent, and the nation was at 53 percent. The similarity of the affordability indexes between
2000 and 2002 for the State and Nation while prices over that same time period rose
substantially in the County of San Diego appears to be a factor of the interest rate reductions.
First quarter 2004 sales in San Diego County totaled 4,125 with detached homes responsible for
2,009 of these sales (or 48.7 percent) while townhouse/condominium sales totaled 2,116 units (or
51.3 percent) for the same period. This indicates an increase in detached sales of 12.1 percent
over the same time period in 2003 and an increase of 137.8 percent in attached sales over the
same period. The substantial increase in attached sales shows new product entering the market.
The average sales price for a single-family detached new home within the County as of March
2004 per The Meyers Group is $616,890. This compares to the March 2003 average sales price
of a single-family detached new home in the County of $533,793. This suggests a 15.6 percent
increase in price over the past year. In the attached home market, the County average sales price
as of March 2004 was $404,631 for a 1,192 square foot home ($341 per square foot) while for
March 2003 the average sales price for an attached product was $353,694 for a 1,183 square foot
home ($278 per square foot) or for an increase of 22.3 percent on a per square foot price over
this period.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bnice W. Hull & Associates, Inc. Page I8
The Coastal North sub-market, which includes Carlsbad, had first quarter 2004 sales of 523 units
for a capture of 12.7 percent of the total San Diego market. This compares to 367 sales in this
sub-market during the first quarter 2003, however the capture rate of 12.7 percent is down from a
capture rate of 13.7 percent of the total County market in the first quarter of 2003. According to
The Meyers Group the decreasing capture rate in sales will continue as land supply in the
Coastal North sub-market is limited. This lack of supply bodes well for the developments of
Bressi Ranch and La Costa Greens. The Coastal North sub-market has an average sales price of
$634,907 for single-family detached homes as compared to overall County average single-family
detached sales price of $616,890. For average sales prices of all new homes (including both
detached and attached) the Coastal North sub-market has an average price of $595,418 while the
overall County has an average price of $508,007. None of the subject properties are being
marketed at this time. The subject sub-market had a 4.7 percent decrease over the past year in
detached prices and a 27.1 percent increase in attached prices. It is interesting to note that the
average square foot of a detached home also decreased 8.3 percent in size resulting in an actual
increase in a new detached home per square foot price. Below is a table showing the subject’s
Inland County sub-market sales by price range compared to the overall County for detached, new
home sales.
Up to - Greater
$375,000 - $450,000 - $550,000 - $650,000- than Market Area
Coastal North
Overall S.D. County
As the previous table indicates, the subject Coastal North sub-market has similar priced homes in
comparison to the overall County market.
$374,999 $449,999 $549,999 $649,999 $7491999 $750,000
0% 12.4% 46.4% 5.5% 11.5% 24.2%
0.3% 1 1.4% 3 1 .O% 2 1.2% 9.6% 26.6%
Standing inventory at the end of March 2004 in overall San Diego County for homes with 0 to
30 day delivery is extremely low at 8 units for single-family detached. There are 41 attached
units; however, the majority of these (37or 90 percent) are located in the Central sub-market.
For single-family detached homes there are 118 units now under construction or in planning for
a 1 to 6 month delivery and 233 attached units under the same planning forecast. Based on the
Summaly Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
Ciw of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 19
first quarter 2004 sales of 2,009 single-family detached homes and 2,116 attached units, there is
less than a one-week supply for detached homes and slightly less than a one-week supply for
attached units. Within the subject detached sub-market there is a 10 standing and speculative
(within a six-month delivery) unit inventory while detached sales for the quarter totaled 454
suggesting a less than one-week supply. Within the attached sub-market there is a standing and
speculative inventory of 18 units while sales during the first quarter of 2004 were 69 units
creating the need for additional attached units. There are 134 total unsold inventory (future
construction) attached units in the planning process. Inventory levels in both the overall San
Diego detached and attached market and within the subject sub-market are considered to be
extremely Iow.
In summary, the population and economic growth in both San Diego County and the Coastal
North sub-market are anticipated to be good to strong for the next few years. Therefore, housing
will need to meet these future demands. The Coastal North sub-market has proven over the past
year that higher prices have not yet slowed down sales of new homes in the area. The Coastal
North sub-market has inventory trends that are extremely low. The limited supply of land
available for development has constrained sales in the Coastal North sub-market. With strong
sales and a limited supply of land, new product is anticipated to be well received in the subject
marketplace.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 20
The San Diego County commercial market has remained level thus far during 2004 despite the
continued weakness in the commercial national economy. San Diego County has not been
affected as much as most parts of Southern California due to a very diversified work force.
According to Empire Economics during 1970 through 2003 the level of industrial construction
activity in San Diego County has had four major cycles with peak levels of activity occurring in
1974, 1978, 1984 and 1998 with the highest annual level occurring in 1998. It is interesting to
note that during these four cycles, San Diego County relative to Southern California has
demonstrated an increasing trend of capture, from 8 percent to 18 percent, although this has
moderated slightly to 15 percent in 2003. The current vacancy rate in the City of Carlsbad is
estimated at 12.5 percent while San Diego County has a vacancy rate of 7.4 percent. Per Empire
Economics this variance is due to a high level of recent construction activity in Carlsbad. It
should be noted that the lease rates in the city of Carlsbad average $1.00 (per square foot per
month) while the overall County average is $0.94.
During this same time period, office construction activity saw two major cycles with peak levels
in 1985 and 1999. The capture rate of San Diego County in comparison to Southern California
has also demonstrated an increasing trend during the 1980s and 1990s (from 13 to 21 percent)
however the current capture rate is near the 6 percent range. Office vacancy rates are estimated
at 12.8 percent in Carlsbad, 1 1 percent in San Diego County and 13.6 percent in all of Southern
California.
Retail construction activity in San Diego County has had three major cycles between 1980 and
2003 with the peak levels occurring in 1985, 1988 and 2000. The capture rate of retail
construction activity in San Diego County versus Southern California has shown a decreasing
rate from 16 percent in the early 1980s to 12 percent in the mid-1990s with the current rate back
up to 14 percent.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 21
The strong levels of employment growth during the mid 1990s through 2001 enabled the
industrial and retail sectors in San Diego County to establish their recoveries, however the
commercial office sector is still seeing a sluggish recovery. Rental rates are expected to remain
static for the near term, however the limited amount of remaining land for development in the
Carlsbad area creates a “pocket of growth” for the industrial, commercial and retail market.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull h Associates, Inc. Page 22
BRESSI RANCH
The Bressi Ranch is a master planned community in the City of Carlsbad covering 585 acres of
land. The property is located at the southeast corner of El Camino Real and Palomar Airport
Road, adjacent to the north of La Costa Greens. The vision for Bressi Ranch is to create a
diverse, mixed-use, pedestrian-friendly community where people live, work and play. Special
emphasis has been placed on fostering a strong sense of community by creating a variety of
homes, both in terms of size and design, within walking distance of recreation facilities,
shopping and employment. Bressi Ranch will also preserve a large amount of open space.
Prior to development the Bressi Ranch was a working ranch with hundreds of acres of rolling
hills and wetlands. There will be nearly 200 acres of open space and eight planned parks and
community gathering spots. Bressi Square is planned as the civic park, a place planned for
events and summer concerts next to a proposed Boys and Girls Club while Bressi Commons is
planned for the Village Club, a private facility for residents which includes a recreation center,
pool, wading pool, spa and barbecue area.
There are 623 proposed homes in Bressi Ranch, 100 of which are affordably priced multi-family
condominiums that are not included in this appraisal assignment. The remaining 523 homes are
all proposed to be detached on lots ranging in size from 3,500 square feet up to 14,000 square
feet.
Bressi Ranch will have a mixed-use campus style office park with an estimated two million
square feet of commercial and industrial space creating the need for an estimated 3,000
employees. In addition there will be over 130,000 square feet of office and commercial space in
Bressi Ranch.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 23
LA COSTA GREENS
La Costa Greens is a master planned community in Carlsbad consisting of 660 gross acres. The
property is located along the east side of El Camino Real both north and south of Poinsettia
Lane, adjacent to the south of the Bressi Ranch. The La Costa Greens Village Development Plan
provides for a maximum of 1,038 homes, a day care site, a business park, a private RV storage
facility and a place of worship along with 246 acres of open space and hiking /biking trails.
La Costa Greens is located along the northern boundary of the La Costa Resort Golf Course with
some golf frontage and view lots. Proposed community amenities include The Greens Club (a
clubhouse, workout facility and pool), a public community park and aquatic center, an affordable
housing component, an elementary school site and open space.
The original La Costa Master Plan was approved by the City Council in 1972 and has had
several amendments since that time. The current controlling document is the Villages of La
Costa Masterplan for The Ridge, The Oaks and The Greens, which was approved in December
2000 and updated in February 2002. Under this document La Costa Greens has approvals for
7 18 low-medium density residential units, 44 medium density residential units and 276 medium
to high density residential units. The master plan identified 17 planning areas with uses ranging
from industrial to community facilities to residential development. It should be noted that the
1,038 allowed units includes an affordable housing component that is not included in this
appraisal. This appraisal is for 794 proposed residential units, the commercial designated lands
and a community facilities designed parcel.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 24
ASSESSMENT DISTRICT NO. 2002-01
{POINSETTIA LANE EAST)
AD No. 2002-01 of the City of Carlsbad (Poinsettia Lane) was formed via Resolution No. 2004-
057 dated February 17, 2004 which ordered the acquisition or construction of certain public
improvements as defined in the Final Engineer’s Report dated March 29,2004.
Per the Final Engineer’s Report the estimated Construction cost of improvements are
summarized as follows:
Poinsettia Lane - Segment 1 (Greens portion)
Poinsettia Lane - Segment 2 (Bressi Ranch portion)
El Fuerte Street
El Camino Real (Bressi Ranch portion)
El Camino Real (Greens portion)
Subtotal - Construction Total
Cost of Formation and Issuance
Subtotal
Less: Special Benefit Contribution for public, non-profit and HOA parcels
Subtotal
Plus: Cap. Interest, bond discount and bond reserve
Total
$14,062,920.84
6,689,936.63
11,241,194.77
1,280,881.65
1,720.357.34
$34,995,291 .233
1,288.41 7.00
$36,283,708.23
(1,930,891.12)
$34,35233 17.1 1
7,4 1 3,525. 864
$41,766,342.97
In addition there is an AcquisitiodFinancing Agreement dated January 21, 2003 by and among
the City of Carlsbad (City), Lennar Bressi Ranch Venture, LLC (Lennar) and Real Estate
Collateral Management Company (RECMC). It is stated in the AcquisitiodFinancing
Agreement that the total of ad valorem property taxes, any voter approved ad valorem property
taxes, the estimated annual special taxes levied by all community facility districts under
consideration and the annual assessment installments of the existing or proposed assessment
districts will not be greater than 1.8 percent.
After the completion of the original engineer’s report, the two master developers have requested
to discharge the lien amounts on some of their parcels. It is the appraisers’ understanding that
the discharge amounts are as shown in the following table.
Maximum amount. Subject to change downward if actual costs are lower.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 25
Description
Poinsettia Lane
El Fuerte Street
El Camino Real
Engineer Report Totals
Less: Current Cost Savings
Subtotal
Less Cash Pavments:
PA 1-5 (partial)
PA 9b (full)
PA lob (full)
PA 12b (full)
Bressi Ranch La Costa Greens Total
$6,689,936.63 $14,062,920.84 $20,752,857.47
$1 1,241,194.77 -0- $1 1,241,194.77
$1,280.88 1.65 $1,720.357.34 $3,001,238.99
$19,212,013.05 $15,783,278.18 $34,995,291.23
[$1.645.199.00) ($1.446.978.00) ($3,092.1771
$17,566.814.05 $14,336,300.18 $31.903.1 14.23
$525,529.00 $525,529.00
$16,730.18 $16,730.18
$13,847.95 $1 3,862.88
$3,31637 $3,3 16.87
PA15a (partial) $585,318.00 1 $585,318.00
PA 15b (partial) $67,037.00 I $67,037.00
PA 1% (full)
PA 15e (full)
$1,238,145.74 $1,238,145.74
$26,572.65 $26,572.65
PA 17 (full) $48.496.71 $48,496.7 1
PA 22b (full)
PA 22c (full)
6 $98,127.03 $98,127.03
$190,524.17 $190,524.17
PA 24 (full)
Amount subject to change.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates. Inc.
$461,145.47 I $46 1,145.47
Page 26
PA25b (full)
PA 28 (full)
$443,330.83 $443,330.83
$12,379.32 $12,379.32
PA 32 (full)
PA 33 (full)
$4,521.60 $4,5 2 1.60
$1,18 1,994.64 $1,181,994.64
PA 37 (full) $3,165.34 I $3,165.34
PA 39 (full) $26,635.1 1 1 $26.635.1 1
Total Cash Payments ($2,524,994.10) I [$2.421,823.50) I ($4,946,8 17.60)
Totals $15,041.819.95 1 $11.914.476.68 I $26,956.296.63
SUBJECT PROPERTY DESCRIPTIONS
The subject property is within two masterplans. Each will be described separately.
THE BRESSI RANCH - (Benefit Area 1)
Location:
Assessor’s
Parcel No.:
SEC El Camino Real and Palomar Airport Road in City of Carlsbad,
County of San Diego and State of California.
Portions of APN 213-030-017 and APN 213-030-018.
Owner of Record: Bressi Ranch Development LLC, a Delaware Limited Liability Company
(Sares-Regis) as to Lots 1-5 of CT 00-06 Map 14600 containing 133.814
acres and shown as APN 2 13-030-01 7.
Greystone Homes, Inc., a Delaware Corporation as to CT 02-14, Unit 1
Map 14777; CT 02-14 Unit 2 Map 14778; CT 02-14 Unit 3 Map 14774;
CT 02-14, Unit 4 Map 14775; CT 02-14 Unit 5 Map 14776; CT 02-14
Unit 6 Map 14779, containing 532 proposed residential lots and shown as
a portion of APN 213-030-018.
LNR Bressi Commercial, Inc. a California corporation as to Lot 5 of Tract
CT 03-03 Map 14800 containing 14.154 acres proposed for a business
park (portion of APN 213-030-01 8).
Bressi Gardenlane, LLC, a Delaware limited liability company as to
Parcels 2 and 4 of CT 03-03 Map 14800 containing a 2.502-acre parcel
proposed for an assisted living project and a 1.168-acre parcel proposed
for boys/girls club, respectively; and Parcels 11 , 13 and 14 of Tract 14600
containing a 35.187-acre parcel proposed for 25 large residential lots, a
13.645-acre parcel proposed for a church/school/daycare use, and a 1.13 1 -
acre parcel designated for industrial land use, respectively (portion of
APN 2 13-030-0 18).
Property Taxes: Per North American Title Company the 2003/2004 tax amount for the
Bressi Ranch is $35 1,805.78.
Legal Description: Lots 1 through 16 of CT 00-06 Map No. 14600, City of Carlsbad, County
of San Diego, State of California.
Size and Shape: Per CT 00-06 Map 14600 the Bressi Ranch property is irregular in shape
and contains 524.89 gross acres. This includes 189.916 acres of open
space.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 27
Zoning:
Entitlements:
Topography:
Soils:
Per the City of Carlsbad, the property is designated as Zone 17, Bressi
Ranch. The General Plan indicates the property as RM (Residential
Medium Density), RLM (Residential Low Medium Density), RH
(Residential High Density), CF (Community Facilities), PI (Planned
Industrial), L (Local Shopping Center), P (Private School) and OS (Open
Space). The property is zoned PC (Planned Community) with the master
plan designating the following uses: R- 1 (Residential - Single Family)
RD-M (Residential - Multiple), C-2 (Community Commercial), CF
(Community Facilities), PM (Planned Industrial) and 0-S (Open Space.
The entire Bressi Ranch is covered by CT-00-06 Map No. 14600
(recorded May 29,2003), which indicates 22 lots totaling 527.30 acres. In
addition five final tract maps and one parcel map have been recorded. The
Tracts are all CT 02-14 and are Map Numbers 14775 (70 SFD lots 7,100
minimum square feet) 14776 (84 SFD lots 5,900 minimum square feet),
14777 (63 SFD lots 5,900 minimum square feet), 14778 (95 SFD lots
4,000 minimum square feet), 14779 (91 SFD lots 4,200 minimum lot
size). The tract maps were all recorded April 29, 2004. The Parcel Map
(CT 03-03 Map 14800) divides the commercial center into five parcels
was recorded May 2 1 , 2004.
The original overall topography was rolling hills. The subject property has
been mass graded into either blue-topped or superpad lots. All of the
residential neighborhoods have been further developed with lots terraced
and streets cut. Drainage is proposed into an engineered street drainage
system.
We have reviewed a Supplemental Geotechnical Investigation for Mass
Grading for the property prepared by Leighton and Associates
Geotechnical Consultants dated March 13, 2001. The report concludes
that the property is feasible for the proposed development from a
geotechnical standpoint as long as the recommendations summarized in
the report are implemented during the site grading operations. It should
be noted that the report was based on a 200-scale tentative tract
map/grading plans and that the report refers to the original preliminary
geotechnical report for the site (Leighton, 1997) and states that additional
geotechnical evaluation for the site will be needed after a more detailed
grading plans are available. We have not received any additional reports.
As noted the property has been graded to either blue-topped or superpad
lots.
It is an assumption of this appraisal report that the soils of the subject
property are suitable for the highest and best use conclusion.
Summaly Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 28
Environmental : We have reviewed the following documents on the subject property.
Planning Commission Resolution No. 5206 - Conditions of Approval
for Tract CT 00-06 subdividing the Bressi Ranch into 22 lots.
Planning Commission Resolution No. 5201, which approved
certification of a program environmental impact report, EIR 98-04 for
the Bressi Ranch.
Planning Commission Resolution No. 5202 approving an amendment
for the land use element of the general plan for the Bressi Ranch.
Planning Commission Resolution No. 5203 approving a zone change
on the Bressi Ranch and Ordinance No. NS-634, which was the actual
zone change.
Planning Commission Resolution No. 5204 approving the master plan
for Bressi Ranch and Ordinance No. NS-635, which was the actual
approval document.
Planning Commission Resolution No. 5205 approving the local
facilities management plan for the Bressi Ranch.
Planning Commission Resolution No. 5207 approving a hillside
development permit for the Bressi Ranch.
Planning Commission Resolution No. 5208 approving an El Camino
Real Corridor Special Use Permit for grading and subdividing the
Bressi Ranch.
Planning Commission Resolution No. 5209 approving a special use
permit to encroach into the 100-year floodplain. The planning
commission found that the project as proposed has been designed to
eliminate the potential of flood hazard to the habitable portions of any
structure.
10) Planning Commission Resolution No. 2002-205 certifying program
environmental impact report 98-04, approving candidate finding of
fact, the statement of overriding considerations and the mitigation
monitoring and reporting program.
11) Department of the Army Permit No. 200200590-SKB dated September
23,2002.
12) California Regional Water Quality Control Board 401 Permit.
13) California Department of Fish and Game Streambed Alteration
Agreement R5-2002-003 1.
14) United States Department of the Interior Fish and Wildlife Service 1-
6-00-F-9 15 dated August 16, 2001 biological opinion based on their
review of the proposed Bressi Ranch development.
15) Notice of Determination for EIR 98-04, a request for certification of a
Program Environmental Impact Report by the City of Carlsbad to the
Office of Planning and Research of the State of California.
16) Planning Commission Resolution No. 5461 approving Tract Number
02-14, subdividing 131 acres into 523 lots.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
Cit?, of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull h Associates, Inc. Page 29
17) Planning Commission Resolution No. 5564 approving CT 02- 15 to
subdivide 129.2 acres into 40 lots (Industrial Property).
18) Planning Commission Resolution No. 5462 approving 02- 19
subdividing 35.19 acres into 25 lots (Barratt property).
19) Planning Commission Resolution No. 5565 approving a special use
permit to subdivide the 129 acres into 40 industrial lots.
20) Planning Commission Resolution No. 5463 approving CF 03-03
subdividing 26.53 acres into five lots (community commercial center).
21) Planning Commission Resolution No. 5464 approving Planned Unit
Development 02-06 to subdivide the 13 1 acres into 523 lots.
22) Planning Commission Resolution 5465 approval of a condominium
permit on 03-03 to allow for the development of 100 affordable
condominiums.
23) Planning Commission Resolution No. 5466 approving a conditional
use permit for the recreation facility to be known as Village Green.
24)Planning Commission Resolution No. 5467 approving a site
development plan for the community facility known as Village Square.
25) Planning Commission Resolution No. 5460 approving a minor master
plan amendment to the Bressi Ranch allowing for adjustments to the
number of residential units within each planhing area (no more than 10
percent).
26) Bressi Ranch Environmental Impact Report prepared by
Cotton/Bridges/Associates Urban and Environmental Planning dated
December 2001 on the Bressi Ranch. The report identifies that.in the
initial study the environmental issues were land use and planning;
traffic/circulation; air quality; noise; geology/soils; biological
resources; cultural resources; agricultural resources; visual
aesthetidgrading; public services and utilities; water
qualitykydrology; and hazardous materials and hazards. The report
states that with the exception of air quality, implementation of the
proposed mitigation within the report would reduce the project-
specific and cumulative impacts to a level less than significant. With
regards to air quality the impact is a result of stationary non-point
source emissions and vehicular emissions. Mitigation measures are
proposed to reduce the impact to the extent feasible, however, the
impact will remain significant and unavoidable. The report states no
areas of controversy were identified.
Mass grading has occurred on the site. Upon our physical inspection, no
environmental issues were noted. However, we are not experts in the
environmental field. If the client has concerns relating to environmental
issues on the subject property, it is our recommendation that an expert in
this field be consulted. It is an assumption of this report that all mitigation
measures were adhered to, that all recommendations per the above reports
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 30
were completed and that that there are no environmental concerns, which
would slow or thwart development of the subject site.
We have received a preliminary title report prepared by North American
Title Company dated June 25, 2004, which covers the subject property.
The exceptions to the report are as follows.
Easements/
Encumbrances :
Item No. 1 pertains to water rights on the property. Item Nos. 2, 3,4, 8,9,
10, 12, 13, 15, 16, 17, 18, 19, 20, 21, 22, 28, 31, 32, 35, 36,41,42,43, 51
and 52 refer to easements on the property. Item Nos. 5 and 6 refer to
reservations for a period of 35 years and 50 years for oil, gas and mineral
rights over 100 feet below the surface. Item No. 7 is the privilege and
right to extend drainage structures. Item No. 11 is in regards to a
reservation in the deed for Mary Bressi to reserve from the easements and
rights to construct, maintain operate replace remove, review and enlarge
lines of pipe, conduits, cables, wires, poles and other structures,
equipment and fixtures for the operation of gas pipelines, telegraphic and
telephone lines. Data No. 14 is in regards to an agreement between the
San Marcos Water District and Mary Bressi for temporary right of entry.
Item No. 23 is for an easement agreement for El Fuerte. Item No. 24 is
between Lennar and the City of Carlsbad for the payment of a public
utilities fee. Item No. 25 pertains to an agreement between the current
property owner and the City of Carlsbad for payment of public facilities
fee. Item No. 26 pertains to CC & R’s on the property. Item No. 27 is in
regards to an agreement and covenants running with the land. Item No. 29
is a declaration of development covenants, conditions and restrictions.
Item No. 30 pertains to an encroachment permit. Item No. 33 pertains to a
conservation easement deed. Item No. 34 is in regards to the affordable
housing agreement. Item Nos. 37 and 38 pertain to hold harmless
agreements between General American Life Insurance Company (previous
owner of industrial lands) and the City of Carlsbad. Item No. 39 refers to
a notice and waiver concerning aircraft environmental impacts. Item No.
40 refers to a Notice of Restriction on Real Property for the industrial
property. Item No. 44 is in regards to a declaration of development CC &
R’s. Item Nos. 45 and 47 pertain to a grand deed from Bressi Gardenlane,
LLC to Greystone Homes, Inc. Item No. 46 is in regards to the CC & R’s
on the property. Item No. 48 refers to a deed of trust on the property.
Item No. 49 also pertains to CC & R’s on the property. Item No. 50 refers
to terns, conditions, provisions and easements contained in a grant deed
between Bressi Gardenlane and LNR Bressi Commercial on the
commercial parcel. Item Nos. 53 and 54 pertain to two deeds of trust on
the property for the industrial property.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 31
Utilities:
It is an assumption of this report that the subject property is free and clear
of any liens and or encumbrances with the exception of any existing CFDs
and AD No. 2002-0 1.
All normal utilities will be available to serve the subject site.
Electrical:
Natural Gas:
Sewer City of Carlsbad
Water: City of Carlsbad
Cable: Southwestern Cable
Telephone: SBC/Pacific Bell
San Diego Gas & Electric
San Diego Gas & Electric
StreetsIAccess: The subject property has access via Interstate 5 to Palomar Airport Road
or Poinsettia Lane, east to El Camino Real and the subject property.
Interstate 5 is the main nortldsouth freeway throughout the state of
California connecting to the Oregon border to the north (and on to the
Canadian border) and to the international Mexican border to the south.
Palomar Airport Road begins near 1-5 and runs in an easterly direction
providing access through Carlsbad.
Poinsettia Lane is also an eastlwest arterial providing access through
central Carlsbad with odoff ramps to 1-5. Poinsettia Lane is being
constructed through La Costa Greens providing access into the subject.
El Camino Real is a main commercial corridor through the cities of
Carlsbad, Encinitas and Oceanside. El Camino Real terminates at the 1-5
in Encinitas and into the San Luis Rey Mission Expressway in Oceanside.
Current Use: The subject property is under construction. The entire site has been mass
graded with residential lots graded to a blue-topped condition. Some lots
are in a partially finished condition with utilities stubbed to site and some
streets paved.
costs of
Development: We have received both offsite and in-tract costs of development for the
subject residential property. Per Doug Ford, Lennar and their consultants
and/or engineers prepared the costs. In addition we have received costs to
develop the industrial property into 40 small industrial lots. The costs are
to construct the property to a finished lot condition.
The total estimated costs for the project are listed below.
Bressi Gardenlane LLC - Overall Infrastructure
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City ofCarlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 32
Backbone
PA 15
PA 16 (Affordable Housing)
El Fuerte
Poinsettia Lane
Poinsettia Lane (Offsite - Incl. With Greens)
6,448 $3 8
El Camino Real
Carlsbad Municipal Water District
Met Life Parcel
Subtotal
Less: Billed to Date - Backbone (Not Inc. AD)
Billed to Date - PA 15
Billed to Date - PA 16
Billed to Date - Met Life Parcel
A.D. Costs - Billed to Date
El Fuerte AD - Billed to Date
Poinsettia Lane AD - Billed to Date
El Camino Real AD - Billed to Date
Carlsbad Municipal Water District - To Date
Poinsettia Lane Offsite (included in Greens)
Remaining AD Proceeds
Remaining Costs to Complete Bressi Gardenlane LLC
6,143,254)
Bressi Ranch Planning Area Finishing Costs:
PA 6
PA 7
PA 8
PA 9
PA 10
PA 11
PA 12
Subtotal
Less: Billed to Date - PA 6
Billed to Date - PA 7
Billed to Date - PA 8
Billed to Date - PA 9
Billed to Date - PA 10
Billed to Date - PA 11
Billed to Date - PA 12
Remaining Costs to Complete Finishing Costs
$44,7 13,438
4 1,800
738,150
9,853,072
5,382,671
1,276,638
1,054,433
22 1
$69,509.06 1
(29,949,094)
( 46,8 18)
( 5 3 7,5 8 8)
( 47,179)
( 1,532,205)
(
( 2,7 12,994)
( 929,192)
( 1,100,103)
( 6,448,638)
2,624.072Q
$17,437,924
1,246,438
1,471,958
1,558,402
2,263,863
2,087,18 1
1,548,787
2,169,860
$12,346,489
( 432,863)
( 566,984)
( 620,381)
( 981,831)
( 833,199)
( 61,768)
506,9971
$ 8,342,466
Based on total Bressi Ranch AD Proceeds of $15,041,820 less $12,417,748 included in billed to date.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 33
Industrial Portion
Finishing Costs A-Map $ 5,150,000
Finishing Costs B-Map 3.445000
Remaining Costs to Complete On-Site Industrial Portion $ 8,595,000
Allocation of Remaining Backbone $ 2,680,047
Total Remaining Costs to Complete $1 1,275,047
AD Funded
Improvements: It is an assumption of this report that the improvements to be funded by
AD No. 2002-01 bonds are in place. Per the engineer’s report, the AD
No. 2002-01 Construction Proceeds are estimated at $19,2 12,O 13;
however, per Lennar’s current estimates the costs are $17,566,814
suggesting a reduction of $1,645,199. In addition, $2,524,994 of
construction proceeds have been requested to be discharged from the lien
leaving total construction proceeds of $15,041,820. Of this amount,
$12,417,748 is included in the spent to date amounts leaving $2,624,072
of remaining AD construction proceeds.
LA COSTA GREENS - (Benefit Area 2)
Location:
Assessor’s
Parcel No.:
East side of El Camino Real at Poinsettia Lane in City of Carlsbad,
County of San Diego and State of California.
Portions of APN 213-030-01 1; 215-021-007; 215-030-006; 215-030-014;
215-03 101 3; 21 5-03 1-14; 215-052-01 5; 21 5-061-001; 215-061-009; 215-
480-002; 2 15-280-003.
Owner of Record: City of Carlsbad, a municipal corporation as to Lot 5 of Tract 99-03 Map
14543 (park site - not included in appraisal).
Dove Family Housing Associates, a California Limited partnership, as to
Lot 15 of Tract 99-03 Map 14543 (affordable housing project - not
included in appraisal).
Warmington Homes California as to Lot 8 of Tract 99-03 Map 14543.
Western Pacific Housing, Inc. as to Lot 9 of Tract 99-03 Map 14543.
Pulte Home Corporation as to Lots 10, 12 and 19 of Tract 99-03 Map
14543
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carisbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 34
WL La Costa 61 Associates, LLC as to Lot 14 of Tract 99-03 Map 14543
and WL La Costa 68 Associates, LLC as to Lots 11 and 13 of Tract 99-03
Map 14543.
Real Estate Collateral Management Company, a Delaware corporation as
to Lots 1-4,6-7, 16- 18 and 20-49 of Tract 99-03 Map 14543.
Property Taxes: Our research with the County of San Diego Tax Collector resulted in the
2003/04 property taxes for the entire property being $200,424. It should
be noted this amount does not include APN 215-031-14, which is not
included under public records.
Legal Description: Lots 1 through 49 of CT 99-03 Map No. 14543, City of Carlsbad, County
of San Diego, State of California.
Size and Shape: Per CT 99-03 Map 14543 the La Costa Greens property is irregular in
shape and'contains 660.15 gross acres. This includes 248.42 acres of open
space.
Zoning: Per the City of Carlsbad, the property is designated as La Costa Greens in
the Villages of La Costa Master Plan. The General Plan shows the
property as RLM (Residential Low Medium Density), RMH (Residential
Medium High Density), RM (Residential High Density), CF (Community
Facilities), PI (Planned Industrial) and OS (Open Space). The property is
zoned PC (Planned Community) with the master plan designating the
following uses: R-1 (Residential - Single Family) RD-M (Residential -
Multiple), CF (Community Facilities), PM (Planned Industrial) and 0-S
(Open Space).
Entitlements: The entire La Costa Greens is covered by CT-99-03 Map No. 14543
(recorded February 12, 2003) showing 49 lots totaling 660.15 acres. In
addition five final tract maps have been recorded. They are as follows:
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 35
Topography:
Map
02-21 /
Soils:
AD Number Lots Acres
1.12/ 36 28.159
I Tract / I Neighborhood / 1 No. of I
02-24 /
14807
02-20/
14805
02-221
14804
14803
02-23 /
1.11,1.13&1.14/ 129 44.845
29(p)
1.10/ 64 37.295
29(p) 1.09 / 75 25.294
26(p)
26(p) 82 44.525
1.08 /
14806 I 31 I I
9,000 sf I
6,000 sf I DR Horton
7,500sf I Warmington
All of the above maps were recorded on May 27,2004.
The original overall topography was rolling hills. The subject property has
been mass graded into either blue-topped or superpad lots. All of the
residential neighborhoods have been fbrther developed with lots terraced
and streets cut. Drainage is proposed into an engineered street drainage
system.
We have reviewed an Update Soil and Geologic Investigation for La Costa
Greens prepared by Geocon Incorporated of San Diego California dated
June 25, 2001. This report included an update to a supplemental
geotechnical investigation report of the subject which complements
previous soil and geologic investigations which were conducted on the
property between 1988 and 2001. The purpose of this study was to
compile all relevant previously generated data along with the results of the
current study into a single document. The report concludes that
significant geotechnical issues associated with the project include slope
stability, remedial grading of unsuitable soils, settlement of the alluvial
soils left in place and rock rippability, however the report further
concludes that the site may be developed as proposed, provided the
recommendations of the report are followed.
It is an assumption of this appraisal report that the soils of the subject
property are suitable for the highest and best use conclusion and that all
recommendations of the soils report are implemented.
Environmental: We have reviewed a Phase I Environmental Site Assessment prepared by
Alliance Environmental Services of Laguna Beach, California dated
February 17, 1995 which covers the subject La Costa Greens along with
additional property. Within the report the subject property is known as the
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-OI
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 36
Northwest property. The report concluded that Alliance Environmental
Services did not discover any significant issues of concern for the site
other than:
1.
2.
A 500-gallon above ground diesel storage tank (no spills or stains
were noted).
Limited quantities of pesticides were detected in the soils area,
however this did not propose any adverse health risk and no
additional soils cleanup was necessary.
There was a single-family house and barn and a small office
building. Based on the age of the buildings, there is the potential
for asbestos containing materials to be present in the buildings.
(The buildings have been demolished and removed at date of
appraisal).
3.
It should be noted that the Alliance report did not take into account any
possible endangered species involved on the site.
We also received a copy of the Implementation Agreement for the Habitat
Conservation Plan / Ongoing Multi-Species Plan to review. This
agreement was by and between the subject property owners, The City of
Carlsbad, The United States Fish and Wildlife Service and the California
Department of Fish and Game.
In addition, we have received a copy of the Department of the Army (U.S.
Army Corps of Engineers) Permit No. 992005400-TCD, which covers La
Costa Greens and additional property which states general conditions and
special conditions for developing the subject site.
Mass grading has occurred on the site. Upon our physical inspection, no
environmental issues were noted. However, we are not experts in the
environmental field. If the client has concerns relating to environmental
issues on the subject property, it is our recommendation that an expert in
this field be consulted. It is an assumption of this report that all mitigation
measures were adhered to, that all recommendations per the above reports
were completed and that that there are no environmental concerns, which
would slow or thwart development of the subject site.
We have received a preliminary title report prepared by Chicago Title
Company (Report No. 13066274-LJ50) dated March 11, 2004, which
covers the subject property. The exceptions to the report are as follows.
Easements/
Encumbrances :
Item No. 1 pertains to property taxes on the subject property. Per the
County Assessor’s office the taxes for the site are paid current. Item Nos.
2, 3, 4, 5, 6, 7, 8,-9, 10, 11, 13, 15, 16, 17, 20, 21, 23, 24, 28, 29, 30, 31,
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 37
Utilities:
34, 37, 41, 46, 53, 65, 66, 67, 68 and 69 refer to easements on the
property. Item Nos. 12, 18, 22 and 33 were intentionally omitted. Item
Nos. 14 and 19 refer to the privilege and right to extend drainage
structures for public road purposes. Item Nos. 25, 54, 56, 57 and 60 refer
to deeds of trust on the property. Item No. 26 is in regards to an
agreement between the City of Carlsbad and a previous property owner.
Item No. 27 states the property lies within CFD No. 1 of the City of
Carlsbad. Item No. 32 is in regards to a park agreement. Item No. 35
states the property lies within CFD No. 3 of Carlsbad Unified School
District. Item No. 36 refers to an affordable housing agreement with the
property owners and the City. Item No. 38 refers to a notice of restriction
recorded February 12,2003 on the property. Item Nos. 39 and 40 refer to
documents regarding the subject tract map. Item No. 42 refers to rights of
way. Item No. 43 refers to the recorded Map 14543. Item Nos. 44, 45,
47, 48, 49, 50, 51 and 52 refer to hold harmless agreements for drainage
and geological failure. Item Nos. 55 and 59 are in regards to a regulatory
agreement and declaration of restrictive covenants. Item No. 58 pertains
to an intercreditor agreement. Item No. 61 refers to a memorandum of
cost sharing agreement between RECMC and Bressi Gardenlane. Item
No. 62 pertains to a notice of restriction on real property. Item Nos. 63
and 64 are in regards to additional hold harmless agreements.
It is an assumption of this report that the subject property is free and clear
of any liens and or encumbrances with the exception of any existing CFDs
and AD No. 2002-01.
All normal utilities will be available to serve the subject site.
Electrical:
Natural Gas:
Sewer City of Carlsbad and
Water: City of Carlsbad
Cable: Southwestern Cable
Telephone: SBC/Pacific Bell
San Diego Gas & Electric
San Diego Gas & Electric
Lucadia Wastewater District
StreetdAccess: The subject property has access via Interstate 5 to Palomar Airport Road
or Poinsettia Lane, east to El Camino Real and the subject property.
Interstate 5 is the main north/south freeway throughout the state of
California connecting to the Oregon border to the north (and on to the
Canadian border) and to the international Mexican border to the south.
Palomar Airport Road begins near 1-5 and runs in an easterly direction
providing access through Carlsbad.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City ofCarIsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 38
Poinsettia Lane is also an eastlwest arterial providing access through
central Carlsbad with ordoff ramps to 1-5. Poinsettia Lane is being
constructed through La Costa Greens providing access into the subject.
El Camino Real is a main commercial corridor through the cities of
Carlsbad, Encinitas and Oceanside. El Camino Real terminates at the 1-5
in Encinitas and into the San Luis Rey Mission Expressway in Oceanside.
Current Use: The subject property is under construction. The entire site has been mass
graded with the majority of residential lots graded to a blue-topped
condition. The majority of the backbone streets are paved.
We have received cost of development for the subject property from
Morrow Development.
costs of
Development:
The total estimated costs for the project are listed below.
Morrow Development
Backbone:
Infrastructure
Phase I Grading, Common and Intracts
Phase I Entitlements
Phase I Other Costs
Phase 2 Grading, Common and Intracts
Phase 2 Entitlements
Phase 2 Other Costs
Subtotal - Total Costs
Less Allocation to sold PA’s
Subtotal - RECMC Costs
Less: Completed to Date RECMC only (8/1/04)
Less: AD Reimbursement RECMC Allocation
Subtotal Remaining Backbone Costs
In-Tract Finishing Costs:
In-Tract Development Fees (1.3, 1.6, 1.7, 1.16, 1.17)
In-Tract Construction ( 1.3, 1.6, 1.7, 1.16, 1.17)
Remaining Costs to Complete La Costa Greens
Warmington:
In-Tract Costs ($56,945 x 82)
Allocated Backbone to PA 1.8
Subtotal - Total Costs
Less Spent to Date (8/1/04)
Less: Remaining AD Allocated Reimbursement
$27,011,953
27,143,04 1
1,670,547
2,350,408
8,200,000
1,525,000
2.125.052
$ 70,026,001
( 44,814.341)
$25,211,660
(1 1,363,457)
( 1.772.533)
$ 12,075,670
$ 7,309,806
$ 13,137,600
$32,523,076
$ 4,669,490
1 1,660.487
$16,329,977
( 9,400,754)
[ 468,392)
Remaining Costs Planning Area 1.8 $ 6,460,831
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 39
D.R. Horton:
In-Tract Costs ($55,545 x 75)
Allocated Backbone to PA 1.9
Subtotal - Total Costs
Less: Spent to Date (8/1/04)
Less: Remaining AD Allocated Reimbursement
Remaining Costs Planning Area 1.9
John Laing:
In-Tract Costs ($50,445 x 129)
Allocated Backbone to PA 1.1 1, 1.13, 1.14
Subtotal - Total Costs
Less: Spent to Date (8/1/04)
Less: Remaining AD Allocated Reimbursement
Remaining Costs Planning Area 1.1 1, 1.13, 1.14
$ 4,165,875
6,901,789
$ 11,067,664
( 5,059,287)
( 418,084)
$ 5,590,293
$ 6,507,405
12,137,154
$18,644,559
( 8,532,174)
( 710,226)
$ 9,402,159
Pulte:
In-Tract Costs ($55,418 x 100) $ 5,541,800
Allocated Backbone to PA 1.10, 1.12 14.1 14.91 1
Subtotal - Total Costs $19,656,7 1 1
Less: Spent to Date (8/1/04) ( 8,266,795)
Less: Remaining AD Allocated Reimbursement ( 658,749)
Remaining Costs Planning Area 1.10, 1.12 $10.73 1.1 67
It is an assumption of this report that the improvements to be fhded by
AD No. 2002-01 bonds are in place. The AD No. 2002-01 Construction
Proceeds have are estimated at $15,783,278 per the engineers report,
however current cost estimates are slightly lower at $14,336,300. From
this amount $2,421,823 has been discharged from the lien leaving total
proceeds of $1 1,914,476. In addition, according to Morrow Development
$7,886,492 has been included in the Completed to Date amount.
Therefore, there is $4,027,984 remaining of AD proceeds.
AD Funded
Improvements:
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 40
HIGHEST AND BEST USE ANALYSIS
The highest and best use is a basic concept in real estate valuation due to the fact it represents the
underlying premise (i.e. land use) upon which the estimate of value is based. In this report the
highest and best use is defined as:
“the reasonably probable and legal use of vacant land or an improved properq,
which is physically possible, appropriately supported, Jinancially feasible, and that
results in the highest value. 94
Proper application of this analysis requires the subject property to first be considered as if vacant
in order to identify the “ideal” improvements in terms of use, size and timing of development.
Secondly, the existing improvements (if any) are compared to the “ideal” improvements to
determine if the use should be continued, altered or demolished preparatory to redevelopment of
the site with a more productive or ideal use. In the case at hand the subject property is not yet
improved’with structures, thus only the As Vacant analysis is relevant.
In the following analysis we have considered the site’s probable use, or those uses which are
physically possible; the legality of use, or those uses which are allowed by zoning or deed
restrictions; the financially feasible use, or those uses which generate a positive return on
investment; and the maximally productive use, or those probable permissible uses which
combine to give the owner of the land the highest net return on value in the foreseeable future.
PHYSICALLY POSSIBLE USES
The subject sites are irregular in shape and total over 660 acres while being divided into separate
parcels ranging in size from 1 to 44 acres. The property originally had a hilly topography and is
at street grade. Mass grading has occurred on the majority of the site. As the subject property is
within two master planned communities, engineered drainage systems are being constructed to
alleviate any potential flooding problems. We have reviewed soils reports on the subject
properties. It is an assumption of this report that the soils are adequate to support the highest and
Appraisal of real Estate, 10” Edition, 1992
Summaiy Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 41
best use conclusion. This is evidenced by structures on surrounding lands in the area. There is an
additional assumption that there are no environmental issues that would slow or thwart
development of the subject site.
All normal utilities are or will be available to serve the subject sites. The properties have good
access with future road improvements proposed to increase circulation in the area. The Palomar
Airport is located near the subject property.
Surrounding land uses include existing industrial development, rural residential development,
some vacant lands and new housing developments. This appraisal assumes that the
improvements to be funded by AD No. 2002-01 are completed and installed.
The size, access, and topography of the subject properties make them physically suited for
numerous types of development; however, the grading and development that has occurred on
portions of the site suggests residential use. Surrounding uses of industrial and residential
development appear to make the subject property more suitable for these types of uses.
LEGALITY OF USE
The City of Carlsbad is the entity responsible for regulating land use through the implementation
of a general plan and zoning ordinance. Per the City of Carlsbad, the property is designated for
two master planned communities. One is The Bressi Ranch and the other is La Costa Greens.
The Bressi Ranch is encompassed by the Bressi Ranch Master Plan, a detailed land use
document allowing for 623 proposed homes, an estimated 2,000,000 square feet of commercial
and industrial space, and a proposed 130,000 square feet of commercial and office space plus a
churcldprivate school, a boys and girls club and open space. Of the 623 proposed homes, 100
are designated as affordable housing units and are not included in this appraisal report leaving
523 proposed homes. In addition to the master plan the entire Bressi Ranch is covered by CT-
00-06 Map No. 14600, which divides the property into 22 parcels. The property has been hrther
entitled by seven recorded tract maps allowing for five large industrial parcels and 523
residential lots. The five large industrial parcels are currently in the process of being subdivided
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 42
___-
into 40 industrial lots. It should be noted that the Bressi Ranch portion of this appraisal is for the
523 residential units, 133 acres of industrial designated lands, the church site, an industrial
parcel, a boydgirls club site, and an assisted living site. The open space areas, community areas
and affordable housing parcel are not included in this appraisal.
La Costa Greens and other communities are within the Villages of La Costa Master Plan. La
Cost Greens is entitled for a maximum of 1,038 homes, a day care site, a business park, a private
RV storage facility and a place of worship along with 246 acres of open space and hikinghiking
trails. A portion of La Costa Golf Course is adjacent to La Costa Greens allowing for some golf
views and orientation for the residential units. The 1,038 allowed residential units are for 718
low-medium density residential units, 44 medium density residential units and 276 medium-to
high-density residential units. Included in the high-density units is an affordable housing
component, which is not included in this appraisal report. In addition to the master plan
document, La Costa Greens is covered by CT 99-03 Map 14543, which divided the property into
49 lots. The property was fbrther entitled by the recording of five tract maps. This appraisal is
for 794 proposed residential units and a 7.69-acre industrial site only and does not include the
school site, affordable housing site, the RV storage facility or community or open space lands.
The current entitlements are consistent with the current zoning and general plan. Based on the
legality of use analysis, the types of development for which the subject property can be utilized
is narrowed to residential, industrial and commercial use. This is consistent with the findings of
the physically possible uses.
FEASIBILITY OF DEVELOPMENT
The third and fourth considerations in the highest and best use analysis are economic in nature,
i.e. the use that can be expected to be most profitable. After the early 1990s recession,
residential subdivisions have re-emerged in the subject marketplace. The late 1980s were
characterized by rapidly escalating prices, good pre-sale activity, and a strong resale market
providing move-up buyers. The housing market began to deteriorate in early to mid-1990, with
home sale prices falling from previous highs. Sale volumes also dropped dramatically, due to
Summaly Appraisal Report - Complete Appraisal
Assessment District No. 2002-OI
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 43
the inability of potential buyers to sell their existing residences. The slowdown was due in part
to a credit crunch, resulting from lack of residential lenders to replace the faltering savings and
loan industry. The later half of the 1990s saw sales increasing in the County. As described
earlier within the “San Diego County Housing Market” section, the national economy had a mild
recession in 200 1 ; however, the Southern California housing market was not significantly
affected. San Diego housing is strong with single-family detached homes having an extremely
low inventory. The current new home market in the subject area is extremely strong with no
standing inventory and limited land available for development. Prices have been appreciating
pricing first time buyers out of the market for detached single-family homes. Attached housing
has reemerged as being in strong demand.
The subject property has approvals for 1’3 17 single-family homes on detached lots, 140 acres of
industrial designated lands, two commercialhetail parcels, a boys/girl club site and an assisted
living site. We have reviewed a marketing and absorption report on the subject property
prepared by Empire Economics of Capistrano Beach, California. The absorption study was
completed on 1,322 residential units and 133.3 acres of business park lands. Per Empire
Economics’ absorption analysis, the 1,322 units can be absorbed in approximately four years or
by the end of 2008. Empire Economics’ report addresses sales of completed homes to new
homebuyers and is detailed by varying price ranges within each master plan. The Bressi Ranch
residential units (523) are projected to sell out within a three year period while it is proposed to
take an addition year to absorb the 794 units in La Costa Greens. There have been few new
residential master plans in the City of Carlsbad over the past three years creating a pent-up
demand with little to no supply.
In reviewing the Empire Economics absorption for the business parklands, the 133 acres (Bressi
Ranch included in absorption report only) is proposed to be absorbed within 6 years with an
average sales rate of over 22 acres per year. According to Sares-Regis (developer for business
park), there has been a great deal of activity on the business park lands. They are in the process
of marketing the 40 small lots that are currently being mapped. Reportedly they have received
Summaty Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 44
several letters of intent, however, due to confidentiality purposes we have not been able to
review these interest letters.
MAXIMALLY PRODUCTIVE
In light of the limited amount of supply for new homes in the subject marketplace coupled with
the current strong residential market suggests the subject property is feasible for the proposed
residential development and a community commercial center, with an adequate profit level to
entice experienced builders.
The business park is reportedly receiving good marketing activity. As Bressi Ranch, LLC
(Sares-Regis) has recently purchased the property, is developing the property to 40 small lots
and having reported success in their marketing. It appears the property is viable for a business
park with an adequate profit level to entice an experienced builder.
HIGHEST AND BEST USE CONCLUSION
The final determinant of highest and best use is the interaction of the previously discussed
factors (i.e. physical, legal, financial feasibility, and maximum productivity considerations).
Based upon the foregoing analysis, it is our opinion that the highest and best use for the subject
property is for the proposed Bressi Ranch Master Plan and the La Costa Greens Master Plan.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-02
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 45
VALUATION PROCESS
The valuation of the subject property will be presented as follows. First, a discussion of each of
the market data utilized in the valuation of the subject properties will be presented. The valuation
will utilize the Sales Comparison Approach to Value, which is defined as:
“The process in which a market value estimate is derived by analyzing the market
for similar properties and comparing these properties to the subject property’”
Each ownership will be valued separately. In the case of the Greystone Homes, Inc. owned
properties, a bulk valuation DCF will not be conducted. Greystone currently has six sets of
model homes under construction and is planning on marketing each neighborhood separately. In
the case of the model homes under construction, we will value the lots on the basis of a finished
lot rather than attribute value to a partially complete improvement. In the valuation for the lots,
we will conclude on a finished lot and then consider the remaining costs to improve the lands to
a true “finished lot” condition.
In the case of the Sares-Regis and RECMC ownerships, a separate DCF will be conducted for
each. Due to the single ownership of 1) 133 acres of industrial lands (Sares-Regis); and 2) five
residential neighborhoods and an industrial parcel (RECMC), a discounting is needed. A DCF
takes into consideration the retail or finished lot value of the property, the costs to develop the
property to a saleable or finished lot condition, administrative and carrying costs over the
absorption period for the property and a discount rate which considers the risk of the project, the
time value of money, and a profit for the developer for development of the project. In the case of
the Bressi Gardenlane owned property, all except one parcel are in escrow to end users; thus it is
the appraisers’ opinion a DCF is not needed.
It is a special assumption of this report that the benefits andor improvements to be fbnded by
AD No. 2002-01 have accrued to the subject property or are in place.
’The Appraisal of Real Estate, Eleventh Edition
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 46
In determining the finished lot or retail value utilized in the valuation for the subject properties,
we will utilize the Sales Comparison Approach. In the Sales Comparison Approach the market
value is estimated by comparing properties similar to the subject property that have recently been
sold, are listed for sale, or are under contract @.e. for which purchase offers and a deposit have
been recently submitted). Next, the costs associated with the subject development (to bring each
neighborhood from its current condition to the finished lot or “retail” condition) need to be
determined along with a construction schedule. These costs then need to be deducted from the
finished lot values. In addition, the administration and carrying costs during the absorption
period need to be considered along with an appropriate discount rate. It is important to note that
it is assumed that the improvements, which are to be funded by the bonds of AD No. 2002-01 are
installed.
Market Data DiscussiodConclusion - Sinele-Family Detached Lots
We have searched the area and found the thirteen transactions summarized on the facing and
following facing pages to be most comparable to the subject property.
Data No. 1 pertains to a recent sale within the master planned community of Arrowood in
Oceanside. This sale refers to 10,000 square foot lots, mostly with golf course frontage, which
were purchased by Richmond American on the basis of a $400,000 finished lot. Arrowood has
an estimated overall tax rate in the range of 1.8 percent. When this property was offered on the
market there were four immediate offers in the actual sales price range. This property’s location
in Oceanside is considered to be inferior to the subject’s Carlsbad location.
Data Nos. 2, 3 and 4 refer to three of the subject properties. Warmington Homes, Western
Pacific Housing (aka D.R.Horton) and John Laing Homes purchased 82 lots with a minimum
square footage of 7,500 square feet; 75 lots with a minimum square footage of 6,000 square feet;
and 129 lots with a minimum square footage of 5,000 square footage respectively. The seller has
asked that we keep the actual transaction and estimated finished lot pricing confidential. All of
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 47
the lots sold for more than a $400,000 finished lot. All of the transactions were negotiated in
December 2003, prior to a substantial amount of appreciation in the subject marketplace.
Data Nos. 5 and 6 refer to two transactions in the master planned community of San Elijo Hills
in San Marcos. Pulte Homes purchased 105 single-family detached lots with a minimum square
footage of 5,100 square feet and 94 single-family detached lots with a minimum lot size of 5,500
square feet. The 5,100 square foot minimum lots sold on the basis of a $295,819 finished lot
after taking the CFD credits in consideration. The 5,500 square foot lots were purchased based
on a $307,276 finished lot after taking into consideration the CFD on the site. Both
neighborhoods lots have good to excellent views on a portion of the lots. In comparison to the
subject property the location in San Marcos is considered to be slightly inferior to the subject
Carlsbad location. These two sales occurred approximately nine months ago, prior to a
substantial amount of appreciation in the subject marketplace.
Data No. 7 refers to the sale of Villages E and G, also within Arrowood in Oceanside. This
property closed in September 2003 on the basis of $216,268 for a 6,000 minimum lot in a
finished condition. Fieldstone Communities purchased the site and then internally transferred
the property to Fieldstone Spyglass LLC. Included in the reported price, Fieldstone paid an
additional $25,000 for each of the 20 golf course frontage lots in Village E. This purchase
included price participation, which sets a base price beyond which there is price participation to
the seller. The agreements are tied to the land, thus if a parcel is resold, the price participation
agreement passes to the new property owners. In comparison to the subject Carlsbad location,
this property in Oceanside is considered to be inferior. This sale occurred over 12 months ago,
prior to a substantial amount of appreciation in the subject marketplace.
Data Nos. 8 through 13 refer to some additional 2003 sales within San Elijo Hills in San Marcos.
The six sales are summarized as follows.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 48
I Planning Area 1 Date of Sale I No. of Lots I Lot Size I Finished I Views 1
The view potential is taken into account in the average lot price. As previously stated San Elijo
Hills is located in San Marcos, which is considered inferior in location to the subject’s Carlsbad
location. San Elijo Hills has similar overall tax rates in comparison to the subject property. All
of the sales are over 12 months ago, prior to a substantial amount of appreciation in the subject
marketplace.
The market data ranges from a low of $214,980 per finished lot for the smallest lots (4,150
square feet sold in May 2003) to a high of $400,000 per finished lot (September 2004 sale in
Oceanside of 10,000 square foot lots with golf frontage). In reviewing only the 2003 sales, the
market data range narrows to a low of $214,980 to $307,276.
Ten of the subject residential neighborhoods have been transferred to merchant builders. Within
Bressi Ranch six neighborhoods were transferred to Greystone Homes, a related entity to the
master developer. It is the appraisers’ understanding that the lots were not transferred on the
basis of a market value, but rather an internal transaction. Within La Costa Greens the
appraisers’ have received the sales prices for the neighborhoods by the seller, however at the
sellers request the information is being kept confidential. All four neighborhoods were sold
higher than $400,000 for a finished lot.
Each property’s valuation will be concluded under the valuation conclusion sections later within
this report using the aforementioned data.
Taking into consideration the CFD.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 49
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 50
Market Data DiscussiodConclusion - SuDerDad Sales - Attached Residential Units
We have searched the area and found the eight transactions summarized on the facing page to be
most comparable to the subject property.
Data No. A-1 refers to the purchase of a multi-family residential site within San Elijo Hills in
San Marcos in January 2004, prior to a substantial amount of appreciation in the subject
marketplace. This parcel was purchased in a superpad condition on the basis of $95,000 per
unit. However, there is also the benefit of the CFD reimbursement on the property of $893,092.
Taking this into account, the actual price per unit is $75,153. The density for this project is
20.45 dwelling units per acre. San Elijo Hills has an estimated overall tax rate of 1.75 percent.
In comparison to the subject property this site is considered to be inferior due to its higher
density, its location and its inferior date of sale.
Data No. A-2 is in regards to the sale of Neighborhood B within the master planned community
of San Miguel Ranch in Chula Vista in December 2003. Lyon Homes purchased the 195 units
from TriMark Pacific, the master developer of San Miguel Ranch in December 2003. The
property was sold in a superpad condition based on $102,564 per unit. The site has a density of
19.12 dwelling units per acre. The San Miguel Ranch has an overall tax rate in the 1.7 to 1.9
percent range. In comparison to the subject property this site is considered inferior in date of
value, location, and density.
Data Nos. A-3 and A-4 pertain to two sales within the master planned community of the 4-S
Ranch in Rancho Bernardo. Data No. 3 is for 348 units with a density of 13.98 that were sold in
a superpad condition for $1 12,069 per unit. Data No. 4 refers to 172 units with a density of
1 1.94 dwelling units per acre, which sold in a superpad condition on the basis of $1 16,000 per
unit. The 4-S Ranch has an estimated overall tax rate in the 1.8 to 1.9 percent range. In
comparison to the subject property these sales are considered to be inferior due to date of sale
and location.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-OI
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 51
Data No. A-5 refers to the purchase of an attached neighborhood located in Rolling Hills Ranch,
also located in Chula Vista. Shea Homes purchased the 10.0-acre site for 166 units from
McMillin Companies in November 2003 based on $103,3 13 per unit. The property was sold in a
superpad condition. The Rolling Hills ranch is not located within a CFD with lower overall
taxes than the subject property. The density on this project is 16.6 dwelling units per acre. In
comparison to the subject property this sale is considered to be inferior due to date of sale and
location and superior due to lower overall tax rates.
Data Nos. A-6 thru A-9 refers to four sales within the master planned community of EastLake in
Chula Vista. Data No. A-6 pertains to KB Home purchase of 76 units with a density of 9.3 units
per acre for $187,223 per unit in October 2003. This parcel was constructed into small, detached
lots. Data No. A-7 also was purchased by IU3 Home, however this data is for 134 units with a
density of 17.8 units per acre. This superpad was purchased for $102,985 per unit also in
October 2003. Data No. A-8 refers to a purchase by Cornerstone for 135 units with an overall
density of 11.7 units per acre for $153,007 per unit. This site was constructed into small,
detached lots in September 2003. In addition, Cornerstone purchased 126 units with a density of
15.8 dwelling units per acre for $11 1,905 per unit in September 2003. All of these prices
included all fees (approximately $14,000 per unit). EastLake has an overall tax rate in the 1.7 to
1.9 percent tax range. In comparison to the subject property these sales are considered to be
inferior in date of sale, inferior in location and superior due to the fees being included as
typically superpad sites are not sold with development fees included.
Data No. A-10 refers to an October 2003 sale in University Commons, an adjacent master
planned community to San Elijo Hills in San Marcos. Shea Homes purchased the 156 units with
a density of 17.3 dwelling units per acre from Brookfield Homes for $105,000 per unit. The
overall tax rate is anticipated to be in the 1.75 percent range. In comparison to the subject
property this sale is considered to be inferior due to date of sale and location.
The market data ranges from $75,163 to $187,223 on a per unit basis. Data Nos. A-6 and A-8
pertain to two transactions that were developed into small, detached lots while the remaining
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 52
market data was developed into attached product. All of the market data is 9 to 12 months old,
which was prior to a substantial amount of appreciation in the subject residential marketplace.
The neighborhood subject property value conclusions will be presented later within this report.
Market Data Discussion - Industrial, Commercial and Church Sales
We searched the area for commercial sales within the subject area. The market data was limited,
and we expanded our search to other master planned communities within San Diego County.
The results of our search are shown on the facing page.
Data No. C-1 refers to a recent (June 2004) sale of a business park parcel located on Wright
Place near the subject lands. This parcel sold on the basis of $19.25 per square foot; however,
the buyer intends to pursue the development of retail buildings. The parcel was sold in a
finished condition.
Data No. C-2 pertains to the sale of another finished lot within a business park. Western
DevCon purchased the property on the basis of $17.73 per square foot and plans on building
industrial small industrial condominiums on the site.
Data No. C-3 refers to the sale of a raw parcel located along El Camino Real in Carlsbad. The
total acreage is estimated at 53.66 acres, however only 24.6 is usable per the approved tentative
map. The property was purchased for $7.00 per square foot with finishing costs estimated at
$7.00 per square foot bringing the finished price to $14.00 per square foot. The buyer is a
user/developer.
Data No. C-4 refers to the sale of a finished business park parcel sold on for $14.30 per square
foot. The buyer is planning on building four small industrial buildings on the site. The property
was purchased in a finished condition.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 53
Data No. C-5 pertains to the sale of a small office site proposed for a 2-story medical office
building. The parcel, consisting of 0.97 acres sold on the basis of $20.71 per square foot and
was in a finished condition at time of sale.
Data No. C-6 refers to the sale of a parcel within the Palomar Airport Business Park near the
subject properties. This parcel sold for $14.30 per square foot in October 2002. The industrial
market has not seen the appreciation that the residential market has over the past three years.
The buyer is building out five small office buildings on the site. The site was purchased in a
finished condition.
Data No. C-7 refers to the purchase of a mixed-use parcel located in the master planned
community of Lomas Verdes in Chula Vista. The site was sold by McMillin to Cornerstone. At
time of sale the property was required by a development agreement to include 10,000 square feet
of retail space and some high density residential. The buyer remapped after the sale to a
condominium map with no retail.
Data No. C-8 refers to future asking prices for a commercial finished lot within the master
planned community of San Elijo Hills in San Marcos. According to the owner’s representatives,
the commercial property is not on the market at this time as they anticipate developing the site.
According to the owner, if the property were on the market, they would be asking in the $12.00
to $15.00 per square foot range.
Data No. C-9 refers to the sale of a gas station site within Carlsbad on El Camino Real. The site
sold in August 2003 based on $41.85 per square foot. The property was graded with all offsites
complete at time of sale and approvals for a service station. The buyer, Carlsbad Fuels proposed
a gas station and mini-mart on the site.
Data No. C-10 through C-15 pertain to church land sales within San Diego County. The church
sites sold within a range of $2.90 to $6.00 per square foot. The sales dates range from August
1998 thru to a current escrow. Data No. C-12 was for over 14 acres, which is substantially larger
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull h Associates, Inc. Page 54
than a typical church site. This is lowest price on a per square foot basis. The remainder of the
market data ranges from $4.7 1 to $6.00 per square foot. These sales are all over 18 months old.
The market data will be discussed under the valuation sections later within this report.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 55
VALUE CONCLUSIONS
Assessment Owner/
Area/PA Project or Buyer Description
BRESSI RANC
1-5
1.1,1.3,1.6,1.7,
1.16, 1.17
11
RECMC 7.69-acre industrial parcel; 44 SFD 3,500 sf lots; 92
SFD 6,000 sf lots; 70 SFD 5,000 sf lots; 96 SFD
3.500 sf lots: 106 SFD 4.500 sf lots.
13
1.8
1.9
1.10, 1.12
14
Warmington Homes
D.R. Horton
Pulte Homes
82 single-family detached lots 7,500 sf minimum
75 single-family detached lots 6,000 sf minimum
64 single-family detached lots 9,000 sf minimum;
15a, 15b
1.11, 1.13, 1.14
15d
36 single-family detached lots 1 1,000 sf minimum
129 single-family detached lots 5,000 sf minimum John LaingHomes
15f
LA COSTA GI
Bressi Ranch, LLC
(Sares-Regis)
Greystone Homes, Inc
Bressi Gardenlane/
Barratt American, Inc.
Bressi Gardenlane/
(Episcopal Diocese)
Bressi Gardenlane
LNR Bressi
Commercial, Inc.
Bressi Gardenlane/
(Health Care Group)
Bressi Gardenland /
(BoydGirls Club)
{ENS
40 industrial lots ranging in size from 1.62 to 8.29
acres.
79 SFD 5,900 sf lots (Gardenside); 95 SFD 4,000 sf
lots (Wisteria); 95 SFD 5,100 sf lots (Heather); 70
SFD 7,100 sf lots (Cassia); 68 SFD 5,900 sf lots
(Canterbury); 91 SFD 4,200 sf lots (Primrose).
25 single family detached lots with a minimum lot
size of 25,000 square feet.
13.645 acres proposed for worship center, private
school and daycare.
1.13 1 acre commercial Darcel and
14.154 acres proposed for a commercial/office center.
2.502-acre parcel in escrow for assisted living project.
1.168-acre parcel proposed for boydgirls club.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 56
BRESSI RANCH, LLC (SARES-REGIS) OWNERSHIP
Gross Revenue (Retail Value)
In determining the market value for the subject 40 industrial lots, the most relevant comparables
are Commercial Market Data Nos. 1 thru 6. These market data have a range from $14.00 to
$20.71 per square foot on a finished lot basis. Data Nos. 1 and 5 refer to parcels, which are
being developed into retail and a medical office building. The remaining market data range from
$14.00 to $17.73 per square foot. We have concluded that the retail value for the subject
industrial designated parcels is $14.00 per square foot.
Absorption Period
In determining an absorption period for the subject property, we have reviewed the Market
Analysis and Absorption Analysis prepared by Empire Economics on the property. Empire
Economics analyzed the end user occupying the property whereas this analysis is for the land
being purchased by the ownerher or developer for the property. We have also reviewed and
taken into consideration the master developer’s projections regarding their pro-forma on the
sellout of the subject lots and the proposed construction schedule. We have concluded the
absorption for the subject planning areas as shown on the facing page. The periods consist of
annual time periods. The concluded absorption schedule is consistent with Empire Economics
conclusions.
Appreciationhflation Rates
Based on historical information (both long term and short term) as well as considering Empire
Economics report, we have concluded hture annual appreciation on the subject industrial lots to
be estimated at 2 percent annually. It is estimated that costs will increase at 2 percent annually
for this analysis.
Remaining Costs of Development
The remaining costs of development need to be considered in this analysis. The costs include
developing the property from its current condition (five large mass graded lots) to a finished lot
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 57
condition for the proposed 40 lots. The costs have been discussed previously within this report
(under Property Description section) and are reported as $8,595,000. In addition, there are
overall infrastructure costs, which need to be allocated to this ownership. These costs have been
estimated at $2,680,047. This brings the total remaining costs for the business parklands to be
$11,275,047. In determining the spread of the remaining costs, we have reviewed the
developer's projections along with our absorption estimates of the selling of the subject property.
It is assumed that all of the costs will be expended within the first year.
- Taxes
For purposes of this analysis, taxes have been estimated based on current market value of the
lands taxed at an overall tax rate of 1.5 percent. It is the appraiser's understanding that original
estimates were for overall taxes to be in the 1.4 to 1.6 percent range, however these estimates
were done over one year ago, prior to substantial appreciation in the residential subject
marketplace which would lower this overall tax range. It is assumed that the tax obligation to
the master developer will be reduced as the property sells off.
Indirect Costs
Indirect costs include administration and contingency, and sales and marketing costs for the
portion of the property owned by the developer. We have estimated administration and
contingency costs to be 3.0 percent of gross revenues, while sales and marketing costs are
estimated at 6.0 percent. Taxes have been considered separately. In determining these amounts,
we have considered historical costs on similar sized projects.
Discount Rate
The discount rate involves several factors, including the time value of money, the variety and
magnitude of different risks associated with the project, and profit that any developer would
expect in developing the project. It should be noted that discount rates (particularly in the case
of land development projects) are not easily derived from real estate market data. Indeed, if one
could abstract a discount rate from a previous land development project, in all probability, it
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce K'Hull &Associates, Inc. Page 58
would not be relevant in today’s marketplace. That is, the historical perspective of a master-
planned project that began 5 to 10 years ago and sold out last year would, in all likelihood, not
be relevant. Market conditions, as well as market expectations, change frequently, and as a
result, what the market anticipates today is more important than what has occurred in the past.
The appraiser needs to make subjective decisions on the future profit expectations during the
anticipated time frame for the income stream generated by such a large project.
Another perspective on discount rates appears in an article written for The Appraisal Journal
(January 1989, Page 85) entitled Discount Rate Derivation. The author (Robert Mason) states
that “over the past decade improved real estate investments have had a discount rate between
1.25 and 2.5 times the safe rate, while vacant or subdivision lands have had a discount rate
between 3 and 5 times the safe rate”. The safe rate is the compensation paid to a lender or
investor for the use of money. Assume for the moment that the lender is the U.S. government
and a benchmark 10-year treasury bond is utilized for analysis. As of October 2003, the
benchmark 10-year bill was quoted at 4.0f percent, which will be assumed as the “safe rate” for
the purpose of analysis. The major elements of a discount rate are risk rate and safe rate. Based
on our scenario, a discount rate would be “built-up” under the following variables:
1)
2)
As previously discussed, a safe rate of 4.0 percent
Risks associated not only with this project, but a rate that reflects the burdens and
benefits to real estate investment
We have observed in the marketplace that the typical merchant builder buying fully entitled
finished lots who is planning a housing development of 50 to 100 houses (the total in a given
tract) expects a minimum 10 to 12 percent profit based on the sales price of the house. Utilizing
this 12 percent factor, the following discount rate is “built-up”:
Safe Rate - 4.00%
RisWProfit - 12.00%
Total - 16.00%
Summaly Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 59
Note that 16 percent is only 4 times the safe rate. A factor of 5 would equate to a 20 percent
discount rate. Although this analysis is helpful in determining an appropriate discount rate, the
market perspective is as important as the theoretical build-up of the rate.
The Economic Research Associate (ERA) was asked by the Metropolitan Water District of
Southern California for its opinion regarding the appropriate discount rates for discounting cash
flows to a present value for large landholdings planned for development. Its conclusions were
drawn from its own experience in feasibility analysis and valuation of planned community
development projects over the past 15 years, including several current assignments. The ERA
states “the appropriate discount rate must reflect the rate of return that a typical buyer expects.
Discount rates vary depending upon the cash flow methodology and market expectation as to the
following:
1)
2)
3)
4)
5)
6)
The availability and cost of capital
The degree of uncertainty in cost estimates
The degree of uncertainty in market forecasts
The degree of uncertainty in entitlements
The overall perceived risk in the development
The expected rate of appreciation in product prices, in relation to the inflation rates
employed in the cash flow forecast
An interesting article in the April 16, 1992 Wall Street Journal dealt with the concept of a
discount rate. The article, which focused on an artist’s estate, discussed what an appropriate
discount rate would be for the artist’s work. The sum of the individual values at the time of the
artist’s death was estimated at $72.8 million. A dispute occurred between the IRS, who
discounted the total between 10 and 37 percent, and the expert for the estate who proposed a 75
percent discount. The judge stated that the opinion of the estate’s expert “defies common sense”,
yet the IRS opinion was also determined to be unjustified. “Frustrated ... by the lack of a
reliable expert opinion”, the judge valued the art at a 50 percent discount. Obviously, this is not
considered as a reliable discount rate in the subject case. However, we point it out for two
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 60
reasons: 1) the $72.8 million would take time to sell off; and 2) the judge indicated that the rate
must reflect what the history and prospects of the sales are, the art market’s general state, and the
works themselves. In a way, this is similar to what must be considered in determining a discount
rate for this project. That is, we must consider the future of the real estate market in San Diego
County, the general real estate market as a whole, and the product itself. It is worth noting that
even the IRS proposed a 10 to 37 percent range discount rate.
In determining an appropriate discount rate, the appraiser’s have taken into consideration (1) the
entitlements which cover the subject property @e., including mapping); (2) current market
conditions involving the capital markets, (3) the current development status of the subject
property, and (4) the risks associated with the remaining development of the subject property.
Taking all factors into consideration, we have concluded at a discount rate of 25.0 percent for the
subject property.
Discounted Cash Flow Analvsis Conclusion
The above information has been input into a DCF. The analysis (see facing page for
assumptions and conclusions) for the subject master developer-owned property results in a
present value of $32,096,000. The resulting cash flow data is located in the Addenda of this
report.
GREYSTONE HOMES, INC. OWNERSHIP
The six neighborhoods that are currently owned by Greystone Homes are all under construction.
All lots are in a partially finished condition and there are six model complexes under
construction. The valuation for each neighborhood is shown below.
Gardenside
~____~~ ~ Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 61
The neighborhood known as Gardenside consists of 79 single-family detached lots with a
minimum lot size of 5,900 square feet. The lots are in a partially finished condition. Remaining
costs to complete this neighborhood for the backbone allocation and the AD reimbursement are
estimated at $2,107,044. In addition there are an estimated $8 13,575 of in-tract finishing costs
bringing the remaining costs to complete the neighborhood to $2,920,619. Based on the market
data, we have concluded that the subject 5,900 square foot lots have a finished lot value of
$350,000. The final value conclusion is as follows:
79 lots x $350,000 =
Less: Remaining costs ( 2,920.619)
As Is Value Conclusion - Gardenside
$27,650,000
$24,729,38 1
(say) $24,730,000
Wisteria
The neighborhood known as Wisteria consists of 95 single-family detached lots with a minimum
lot size of 4,000 square feet. The lots are in a partially finished condition. Remaining costs to
complete this neighborhood for the backbone allocation and the AD reimbursement are
estimated at $2,264,026. In addition there are an estimated $904,974 of in-tract finishing costs
bringing the remaining costs to complete the neighborhood to $3,169,000. Based on the market
data we have concluded that the subject 4,000 square foot lots have a finished lot value of
$3 15,000. The final value conclusion is as follows:
95 lots x $3 15,000 =
Less: Remaining costs 3,169,000)
As Is Value Conclusion - Wisteria
$29,925,000
$26,756,000
(say) $26,755,000
Heather
The neighborhood known as Heather consists of 95 single-family detached lots with a minimum
lot size of 5,100 square feet. The lots are in a partially finished condition. Remaining costs to
complete this neighborhood for the backbone allocation and the AD reimbursement are
estimated at $2,472,249. In addition there are an estimated $938,021 of in-tract finishing costs
bringing the remaining costs to complete the neighborhood to $3,410,270. Based on the market
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 62
data we have
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carisbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 63
concluded that the subject 5,100 square foot lots have a finished lot value of $340,000. The final
value conclusion is as follows:
95 lots x $340,000 = $32,300,000
Less: Remaining costs ( 3.410.270)
As Is Value Conclusion - Heather $28,889,730
(say) $28,890,000
Cassia
The neighborhood known as Cassia consists of 70 single-family detached lots with a minimum
lot size of 7,100 square feet. The lots are in a partially finished condition. Remaining costs to
complete this neighborhood for the backbone allocation and the AD reimbursement are
estimated at $1,969,022. In addition there are an estimated $1,282,032 of in-tract costs bringing
the total remaining costs to complete to $3,251,054. Based on the market data we have
concluded that the subject 7,100 square foot lots have a finished lot value of $375,000. The final
value conclusion is as follows:
70 lots x $375,000 = $26,250,000
Less: Remaining costs ( 3,251,054)
As Is Value Conclusion - Cassia $22,998,946
(say) $23,000,000
canterbury
The neighborhood known as Canterbury consists of 68 single-family detached lots with a
minimum lot size of 5,900 square feet. The lots are in a partially finished condition. Remaining
costs to complete this neighborhood for the backbone allocation and the AD reimbursement are
estimated at $1,776,947. In addition there are an estimated $1,253,982 of in-tract costs bringing
the total remaining costs to complete to $3,030,929. Based on the market data we have
concluded that the subject 5,900 square foot lots have a finished lot value of $350,000. The final
value conclusion is as follows:
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 64
68 lots x $350,000 =
Less: Remaining costs I 3.030.929)
As Is Value Conclusion - Canterbury
$23,800,000
$20,769,071
(say) $20,770,000
Primrose
The neighborhood known as Primrose consists of 91 single-family detached lots with a minimum
lot size of 4,200 square feet. The lots are in a partially finished condition. Remaining costs to
complete this neighborhood for the backbone allocation and the AD reimbursement are
estimated at $2,179,778. In addition there are an estimated $1,662,863 of in-tract costs bringing
the total remaining costs to complete the neighborhood to $3,842,641. Based on the market data
we have concluded that the subject 4,200 square foot lots have a finished lot value of $320,000.
The final value conclusion is as follows:
91 lots x $320,000 = $29,120,000 Less: Remaining costs 3,842,6411
As Is Value Conclusion - Primrose $25,277,359
(say) $25,280,000
GREYSTONE HOMES, INC. OWNERSHIP SUMMARY
The total value for the Greystone Homes owned neighborhoods is as follows:
Gardenside $ 24,730,000
Wisteria 26,755,000
Heather 28,890,000
Cassia 23,000,000
Canterbury 20,770,000
Primrose 25,280,000
Total Aggregate Value $ 149,425,000
BRESSI GARDENLANE / BARRATT AMERICAN, INC. OWNERSHIP
Planning Area 11 is in escrow to Barratt American with closings estimated in September 2004
thru January 2005. This neighborhood consists of 25 single-family detached lots with a
minimum lot size of 25,000 square feet. Based on the market data we have concluded that the
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 65
lots have a finished lot value of $500,000. The remaining costs to complete the property to a
finished condition for an allocation of backbone infrastructure and a reimbursement for the
subject assessment district are estimated to be $840,53 1. In addition the in-tract remaining costs
are estimated at $1,487,019 bringing the total remaining costs for the neighborhood to
$2,327,550. The valuation is calculated as follows:
25 lots x $500,000 = $12,500,000
Less: Remaining Costs 2,327.550)
As Is Value $10,172,450
(say) $10,170,000
BRESSI GARDENLANE / EPISCOPAL DIOCESE OWNERSHIP
Planning Area 13 is in escrow to the Episcopal Diocese for a proposed worship center, private
school and day care facility. The parcel totals an estimated 12.6 net acres. In valuing this parcel
we have utilized Commercial Market Data Nos. C-10 through C-14. We have concluded that the
subject property has a current value of $6.00 per square foot in a finished lot condition. There
are remaining costs to complete the property to a finished condition for the allocated backbone
infrastructure of $25933 10. The value is calculated as follows:
12.6 Acres (548,856 square feet) x $6.00/s.f. =
Less: Remaining Costs to Complete
As Is Value Planning Area 13
$3,293,136
259,810)
$3,033,326
(say) $3,035,000
BRESSI GARDENLANE OWNERSHIP
Planning Area 14 is owned by Bressi Gardenlane and is proposed for a future industrial site. The
1.13 1-acre parcel is designated for industrial land use. In valuing this parcel we have utilized
Commercial Market Data Nos. C-I through C-5. We have concluded that the subject property
has a current value of $14.00 per square foot in a finished lot condition. There are remaining
costs to complete the property to a finished condition for the allocated backbone infrastructure of
$54,4 15. The value is calculated as follows:
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
{Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 66
1.13 1 Acres (49,266 square feet) x $14.00/s.f. =
Less: Remaining Costs to Complete [ 54,415)
As Is Value Planning Area 14
$689,724
$635,309
(say) $635,000
LNR BRESSI COMMERCIAL, INC. OWNERSHIP
Planning Area 15(a/b) is owned by LNR Bressi Commercial, Inc. In valuing this parcel we have
utilized Commercial Market Data Nos. C-5 through C-9. We have concluded that the subject
property has a current value of $14.00 per square foot in a finished lot condition. There are
remaining costs to complete the property to a finished condition for the allocated backbone
infrastructure of $680,992. The value is calculated as follows:
14.154 Acres (616,548 square feet) x $14.00/s.f. = $8,63 1,672
Less: Remaining Costs to Complete [ 680,992)
As Is Value Planning Area 15(f) $7,950,680
(say) $7,950,000
BRESSI GARDENLANE / HEALTH CARE GROUP OWNERSHIP
Planning Area 15(d) is owned by Bressi Gardenlane and is in escrow to Health Care Group for
an assisted living site. This escrow is subject to the AD 2002-1 lien. In valuing this parcel we
have utilized Commercial Market Data Nos. C-5 through C-9. We have concluded that the
subject property has a current value of $15.00 per square foot in a finished lot condition. There
are remaining costs to complete the property to a finished condition for the allocated backbone
infrastructure of $128,977. The value is calculated as follows:
2.502 Acres (108,987 square feet) x $15.00/s.f. =
Less: Remaining Costs to Complete
As Is Value Planning Area 15(d)
$1,634,805
128,977)
$1,505,828
(say) $1,505,000
BRESSI GARDENLANE / BOYS AND GIRLS CLUB OWNERSHIP
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates. Inc. Page 67
Planning Area 15(f) is owned by Bressi Gardenlane and is in escrow to The Boys and Girls Club
for a community center. In valuing this parcel we have utilized Commercial Market Data Nos.
C-10 through C-14. We have concluded that the subject property has a current value of $6.00
per square foot in a finished lot condition. There are remaining costs to complete the property to
a finished condition for the allocated backbone infrastructure of $24,084. The value is calculated
as follows:
1.168 Acres (50,878 square feet) x $6.00/s.f. =
Less: Remaining Costs to Complete
$305,268
I( 24,084)
(say) $280,000
As Is Value Planning Area 15(f) $28 1 ,i a4
BRESSI RANCH SUMMARY
The Bressi Ranch valuations are summarized as follows.
AD 1-5
32,096,000
AD 6,7,8,9,10,12 Greystone Homes, Inc.
AD 11
AD 13
AD 14 Bressi Gardenlane
AD 15db
AD 15e
AD 15f
7
Aggregate Value - Bressi Ranch
Bressi Ranch, LLC Ownership (Sares-Regis)
Bressi Gardenlane / Barratt American, Inc.
Bressi Gardenlane / Episcopal Diocese
LNR Bressi Commercial, Inc.
Bressi Gardenlane / Health Care Group
Bressi Gardenlane / Boys and Girls Club
$
$149,425,000
$ 10,170,000
$ 3,035,000
$ 635,000
$ 7,950,000
$ 1,505,000
$ 280,000
$205,096,000
LA COSTA GREENS
La Costa Greens currently has five ownerships; RECMC, the master developer and four
merchant builders. Each ownership will be valued.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 68
RECMC
RECMC currently owns one industrial lot and five residential neighborhoods.
No. Lots
44
Gross Revenue (Retail Value)
In determining the market value for the subject industrial lot, the most relevant comparables are
Commercial Market Data Nos. 1 thru 6. These market data have a range from $14.00 to $20.71
per square foot on a finished lot basis. Data Nos. 1 and 5 refer to parcels, which are being
developed into retail and a medical office building. The remaining market data range from
$14.00 to $17.73 per square foot. We have concluded that the retail value for the subject parcel
is $14.00 per square foot. The value is calculation is as follows:
Finished Lot Value Total
$220,000 $ 9,680,000
7.69 acres (334,976 sf) x $14.00/sf = $4,689,664
92
70
In determining the value for the residential lands, we have utilized both the residential lot sales
summary chart and the superpad sales market data, in particular Data Nos. A-6 and A-8 which
were superpads that were constructed to small detached lots. The subject lots range in size from
3,500 square foot minimum lots to 6,000 square foot minimum lots. After analyzing the market
data comparables, we have concluded at the following values for the subject lots.
$3 60,000 $ 33,120,000
$340,000 $23,800,000
3,500 sf
96
6,000 sf
5,000 sf
$240,000 1 $23,040,000
I
1.16 1 3,500 sf
106 1.17 I 4,500 sf $325,000 I $34,450,000
Total Retail Value RECMC Ownership $128,779,664
I Industrial Parcel I $ 4,689,664
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 69
Absorption Period
In determining an absorption period for the subject property, we have reviewed the Market
Analysis and Absorption Analysis prepared by Empire Economics on the property. Empire
Economics analyzed the end user occupying the property whereas this analysis is for the land
being purchased by the merchant builder or developer for the property. We have concluded the
absorption for the subject planning areas as shown on the facing page. The periods consist of
semi-annual time periods. The concluded absorption schedule is consistent with Empire
Economics conclusions.
ADpreciationnnflation Rates
Based on historical information (both long term and short term) as well as considering Empire
Economics report, we have concluded future annual appreciation on the subject industrial lots to
be estimated at 3 percent annually. It is estimated that costs will increase at 3 percent annually
for this analysis.
Remaininp Costs of Development
The remaining costs of development need to be considered in this analysis. The costs include
developing the property from its current condition (mostly mass graded, some raw lands) to a
finished lot condition. The costs have been discussed previously within this report (under
Property Description section) and are reported as $32,523,076. In determining the spread of the
remaining costs, we have used an average over the next four semi-annual periods.
Taxes
For purposes of this analysis, taxes have been estimated based on current market value of the
lands taxed at an overall tax rate of 1.5 percent. It is the appraisers’ understanding that original
estimates were for overall taxes to be in the 1.4 to 1.6 percent range, however these estimates
were done over one year ago, prior to substantial appreciation in the residential subject
marketplace which would lower this overall tax range. It is assumed that the tax obligation to
the master developer will be reduced as the property sells off.
-
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City oJCarIsbad
(Poinsettia Lane East)
Bruce W. HUN & Associates, Inc. Page 70
Indirect Costs
Indirect costs include administration and contingency, and sales and marketing costs for the
portion of the property owned by the developer. We have estimated administration and
contingency costs to be 1.5 percent of gross revenues, while sales and marketing costs are
estimated at 3.0 percent. Taxes have been considered separately. In determining these amounts,
we have considered historical costs on similar sized projects.
Discount Rate
The discount rate involves several factors, including the time value of money, the variety and
magnitude of different risks associated with the project, and profit that any developer would
expect in developing the project. It should be noted that discount rates (particularly in the case
of land development projects) are not easily derived from real estate market data. Indeed, if one
could abstract a discount rate from a previous land development project, in all probability, it
would not be relevant in today’s marketplace. That is, the historical perspective of a master-
planned project that began 5 to 10 years ago and sold out last year would, in all likelihood, not
be relevant. Market conditions, as well as market expectations, change frequently, and as a
result, what the market anticipates today is more important than what has occurred in the past.
The appraiser needs to make subjective decisions on the hture profit expectations during the
anticipated time frame for the income stream generated by such a large project.
Another perspective on discount rates appears in an article written for The Appraisal Journal
(January 1989, Page 85) entitled’ Discount Rate Derivation. The author (Robert Mason) states
that “over the past decade improved real estate investments have had a discount rate between
1.25 and 2.5 times the safe rate, while vacant or subdivision lands have had a discount rate
between 3 and 5 times the safe rate”. The safe rate is the compensation paid to a lender or
investor for the use of money. Assume for the moment that the lender is the U.S. government
and a benchmark 10-year treasury bond is utilized for analysis. As of October 2003, the
benchmark 10-year bill was quoted at 4.02 percent, which will be assumed as the “safe rate” for
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 71
the purpose of analysis. The major elements of a discount rate are risk rate and safe rate. Based
on our scenario, a discount rate would be “built-up” under the following variables:
1)
2)
As previously discussed, a safe rate of 4.0 percent
Risks associated not only with this project, but a rate that reflects the burdens and
benefits to real estate investment
The capital markets for financing any type of land development are virtually non-existent and
real estate residential values are stable at best. We have observed in the marketplace that the
typical merchant builder buying fully entitled finished lots who is planning a housing
development of 50 to 100 houses (the total in a given tract) expects a minimum 10 to 12 percent
profit based on the sales price of the house. Utilizing this 12 percent factor, the following
discount rate is “built-up”:
Safe Rate - 4.00%
RisWProfit - 12.00%
Total - 16.00%
Note that 16 percent is only 4 times the safe rate. A factor of 5 would equate to a 20 percent
discount rate. Although this analysis is helpful in determining an appropriate discount rate, the
market perspective is as important as the theoretical build-up of the rate.
The Economic Research Associate (ERA) was asked by the Metropolitan Water District of
Southern California for its opinion regarding the appropriate discount rates for discounting cash
flows to a present value for large landholdings planned for development. Its conclusions were
drawn from its own experience in feasibility analysis and valuation of planned community
development projects over the past 15 years, including several current assignments. The ERA
states “the appropriate discount rate must reflect the rate of return that a typical buyer expects.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 72
Discount rates vary depending upon the cash flow methodology and market expectation as to the
following:
1) The availability and cost of capital
2) The degree of uncertainty in cost estimates
3) The degree of uncertainty in market forecasts
4) The degree of uncertainty in entitlements
5) The overall perceived risk in the development
6) The expected rate of appreciation in product prices, in relation to the inflation rates
employed in the cash flow forecast
An interesting article in the April 16, 1992 Wall Street Journal dealt with the concept of a
discount rate. The article, which focused on an artist’s estate, discussed what an appropriate
discount rate would be for the artist’s work. The sum of the individual values at the time of the
artist’s death was estimated at $72.8 million. A dispute occurred between the IRS, who
discounted the total between 10 and 37 percent, and the expert for the estate who proposed a 75
percent discount. The judge stated that the opinion of the estate’s expert “defies common sense”,
yet the IRS opinion was also determined to be unjustified. “Frustrated ... by the lack of a
reliable expert opinion”, the judge valued the art at a 50 percent discount. Obviously, this is not
considered as a reliable discount rate in the subject case. However, we point it out for two
reasons: (1) the $72.8 million would take time to sell off and (2) the judge indicated that the rate
must reflect what the history and prospects of the sales are, the art market’s general state, and the
works themselves. In a way, this is similar to what must be considered in determining a discount
rate for this project. That is, we must consider the future of the real estate market in San Diego
County, the general real estate market as a whole, and the product itself. It is worth noting that
even the IRS proposed a 10 to 37 percent range discount rate.
In determining an appropriate discount rate, the appraiser’s have taken into consideration (1) the
entitlements which cover the subject property (i.e., including mapping); (2) current market
conditions involving the capital markets, (3) the current development status of the subject
property, and (4) the risks associated with the remaining development of the subject property.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 73
Taking all factors into consideration, we have concluded at a discount rate of 20.0 percent for the
subject property.
Discounted Cash Flow Analvsis Conclusion
The above information has been input into a DCF. The analysis (see facing page for
assumptions and conclusions) for the subject master developer-owned property results in a
present value of $80,541,000, say, $80,540,000. The resulting cash flow data is located in the
Addenda of this report.
WARMINGTON HOMES OWNERSHIP
The neighborhood owned by Warmington Homes consists of 82 single-family detached lots with
a minimum lot size of 7,500 square feet. The lots are in a partially finished condition.
Remaining costs to complete this neighborhood to a finished condition have been discussed
previously within this report under the property description section. The remaining costs to
complete to a finished lot are $6,460,831. Based on the market data we have concluded that the
subject 7,500 square foot lots have a finished lot value of $415,000. The final value conclusion
is as follows:
82 lots x $415,000 = $34,030,000
Less: Remaining costs 6,460.831)
As Is Value Conclusion - Warmington $27,569,169
(say) $27,570,000
D.R. HORTON OWNERSHIP
The neighborhood owned by D.R. Horton consists of 75 single-family detached lots with a
minimum lot size of 6,000 square feet. The lots are in a partially finished condition. Remaining
costs to complete this neighborhood to a finished condition have been discussed previously
within this report under the property description section. The remaining costs to complete to a
finished lot are $5,590,293. Based on the market data we have concluded that the subject 6,000
square foot lots have a finished lot value of $405,000. The final value conclusion is as follows:
75 lots x $405,000 = $30,375,000
Less: Remaining costs 5,590.293)
As Is Value Conclusion - D.R. Horton $24,784,707
(say) $24,785,000
JOHN LAING HOMES OWNERSHIP
Siimmary Appraisnl Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates. Inc. Page 74
The neighborhoods owned by John Laing Homes consists of 129 single-family detached lots
with a minimum lot size of 5,000 square feet. The lots are in a partially finished condition.
Remaining costs to complete this neighborhood to a finished condition have been discussed
previously within this report under the property description section. The remaining costs to
complete to a finished lot are $9,402,159. Based on the market data we have concluded that the
subject 5,000 square foot lots have a finished lot value of $400,000. The final value conclusion
is as follows:
129 lots x $400,000 = $5 1,600,000
Less: Remaining costs { 9,402,159)
As Is Value Conclusion - John Laing
(say) $42,200,000
$42,197,841
PULTE HOMES OWNERSHIP
The neighborhoods owned by Pulte Homes consist of 64 single-family detached lots with a
minimum lot size of 9,000 square feet and 36 single-family detached lots with a minimum lot
size of 11,000 square feet. The lots are in a partially finished condition. Remaining costs to
complete these two neighborhoods to a finished condition have been discussed previously within
this report under the property description section. The remaining costs to complete to a finished
lot are $10,731,167. Based on the market data we have concluded that the subject 9,000 square
foot lots have a finished lot value of $475,000 and the 11,000 sf lots have a finished lot value of
$485,000. The final value conclusion is as follows:
64 lots x $475,000 = $30,400,000
36 lots x 4485,000 = 17,460,000
Subtotal $47,860,000
Less: Remaining costs { 10.731.167)
As Is Value Conclusion - Pulte Homes $37,128,833
(say) $37,130,000
LA COSTA GREENS SUMMARY VALUES
RECMC Ownership
Warmington Ownership
$ 80,540,000
$ 27,570,000
D.R. Horton Ownership $ 24,785,000
John Laing Ownership $ 42,200,000
Summaly Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 75
Pulte Homes Ownership $ 37,130,000
Total Aggregate Value - La Costa Greens $212,225,000
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
Cit-v of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull & Associates, Inc. Page 76
MARKETING AND EXPOSURE TIME
It is the appraiser’s estimation that both the marketing and exposure time for the subject
properties would be under 12 months7 if placed on the open market in today’s market conditions
at the concluded market value, assuming the subject AD is in place.
’ This assumes a sale in bulk or one transaction, which is reflected in the value of the DCF. While components of
the DCF include absorption over a period of time that exceeds one year, the net present value assumes the
acquisition of all the lands in one transaction.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 77
APPRAISAL REPORT SUMMARY
This appraisal assignment was to estimate the fair market value of the subject property, which
consists of two master planned communities known as Bressi Ranch and La Costa Greens, both
located in the City of Carlsbad. Bressi Ranch encompasses a proposed 523 residential units and
approximately 130 acres of industrial designated lands along with a church site, an assisted
living site, a boys and girls club site and a small commercial parcel. La Costa Greens
encompasses a proposed 794 residential units and an industrial parcel. The valuations are based
on the assumption that the improvements and/or benefits, which are to be financed by the bonds
for AD No. 2002-01 are completed and in place. The final value conclusions for each
community in an aggregate value are as follows.
THE BRESSI RANCH VALUES
Bressi Ranch, LLC Ownership (Sares-Regis)
Greystone Homes, Inc.
Bressi Gardenlane / Barratt American, Inc.
Bressi Gardenlane / Episcopal Diocese
Bressi Gardenlane
LNR Bressi Commercial, Inc.
Bressi Gardenlane / Health Care Group
Bressi Gardenlane / Boys and Girls Club
Aggregate Value - Bressi Ranch
LA COSTA GREENS VALUES
RECMC Ownership
Warmington Ownership
D.R. Horton Ownership
John Laing Ownership
Pulte Homes Ownership
Aggregate Value - La Costa Greens
AGGREGATE VALUE AD 2002-01
$ 32,096,000
$149,425,000
$ 10,170,000
$ 3,035,000
$ 635,000
$ 7,950,000
$ 1,505,000
$ 280,000
$205,096,000
$ 80,540,000
$ 27,570,000
$ 24,785,000
$ 42,200,000
$ 37.130.000
$2 12,225,000
$417,321,000
The above values are stated subject to the Assumptions and Limiting Conditions and Appraiser's
Certification as of the 1 5'h day of August 2004.
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull h Associates, Inc. Page 78
APPRAISER’S CERTIFICATION
We certify to the best of our knowledge and belief:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
The statements of fact contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and is our personal, unbiased professional analyses,
opinions, and conclusions.
We have no present or prospective interest in the property that is the subject of this report
and we have no personal interest or bias with respect to the parties involved.
Our compensation is not contingent upon the reporting of a predetermined value or
direction in value that favors the cause of the client, the amount of the value estimate, the
attainment of a stipulated result, or the occurrence of a subsequent event.
This appraisal was not based on a requested minimum valuation, a specific valuation, or
the approval of any specified amount.
Our analyses, opinions, and conclusions were developed, and this report has been
prepared in conformity with the Uniform Standards of Professional Appraisal Practice.
We have made a personal inspection of the property that is the subject of this report.
No one provided significant professional assistance to the persons signing this report.
The reported analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the requirements of the Code of Professional Ethics
and the Standards of Professional Appraisal Practice of the Appraisal Institute.
The use of this report is subject to the requirements of the Appraisal Institute relating to
review by its duly authorized representatives.
As of the date of this report, Bruce W. Hull and Kitty S. Siino have completed the
requirements of the continuing education program of the Appraisal Institute.
Bruce W. Hull, MA1
State Certified General
Real Estate Appraiser (AG004964)
Kitty S. Siino, MA1
State Certified General
Real Estate Appraiser (AG004793)
Summary Appraisal Report - Complete Appraisal
Assessment District No. 2002-01
City of Carlsbad
(Poinsettia Lane East)
Bruce W. Hull &Associates, Inc. Page 79
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Appendix C
MARKET ABSORPTION STUDY
SUMMARY AND CONCLUSIONS
ASSESSMENT DISTRICT NO. 2002-01
(POINSETTIA LANE EAST)
CITY OF CARLSBAD
SAN DIEGO COUNTY, CALIFORNIA
PORTION OF THE PROPERTY IN THE ASSESSMENT DISTRICT
BY EMPIRE ECONOMICS, INC.
SEPTEMBER 30,2004
PRODUCT MIX/ABSORPTION UPDATE PAGES 1-5 & 32-36
*** ORIGINAL STUDY: JUNE 14,2004 ***
\
Empire Economics i Release Date: June 14,2004
CERTIFICATION OF INDEPENDENCE
The Securities & Exchange Commission has recently taken action against Wall Street firms that have
utilized their research analysts to promote companies that they conduct business with, citing this as a
potential conflict of interest. Accordingly, Empire Economics (Empire), in order to ensure that its
clients are not placed in a situation that could cause such conflicts of interest, provides a Certification
of Independence. Specifically, this states that Empire performs consulting services for public entities
only in order to avoid potential conflicts of interest that could occur if it also provided consulting
services for developershuilders. For example, if a research firm for a specific Assessment District and
Community Facilities District, were to provide consulting services to both the public entity as well as
the property owners/developershuilder, then a potential conflict of interest could be created, given the
different objectives of the public entity versus the property owners/developers.
I
Accordingly, Empire Economics (Empire) certifies that the Market Absorption Study for the City of
Carlsbad AD No.2002-0 1 (Poinsettia Lane East) was performed in an independent professional
manner, as represented by the following statements:
9 Empire was retained to perform the Market Absorption Study by the City of Carlsbad, not
the District’s property owners or the developershuilders.
> Empire has not performed any consulting services for the District’s property owners nor the
developershuilders during at least the past five years.
> Empire will not perform any consulting services for the District’s property owners nor the
developershuilders during at least the next three years.
9 Empire’s compensation for performing the Market Absorption Study for the District is not
contingent upon the issuance of Bonds; Empire’s fees are paid on a non-contingency basis.
Therefore, based upon the statements set-forth above, Empire hereby certifies that the Market
Absorption Study for the City of Carlsbad AD No.2002-01 was performed in an independent
professional manner.
Empire Economics, Inc.
Joseph T. Janczyk, President
Empire Economics 11 Release Date: June 14,2004
INTRODUCTION TO THE BOND FINANCING PROGRAM
The City of Carlsbad has formed Assessment District No. 2002-01 (Poinsettia Lane East) to assist
with the financing of a portion of the “public” infrastructure that is required to support the
development of the forthcoming residentialhusiness projects in Bressi Ranch and La Costa Greens;
these are hereafter referred to as AD No.2002-01. The Bond Issue will be utilized to provide hnds for
various infrastructure components, including road, water, sewer and drainage improvements, among
others. The specific size of the Bond Issue and the particular improvements included will depend upon
various factors, such as interest rates, and these will be finalized when these bonds are actually sold.
Based upon representations from Morrow Development and Lennar Development, the owners of the
properties in AD No.2002-01 , there is expected to be 1,3 17 housing units as well as and 133 acres for
industrial-office use:
Bressi Ranch by Lennar Development: 523 single-family detached homes and a Business Park
with 133 acres.
La Costa Greens by Morrow Development: 654 single-family detached homes and 140
townhomes.
Furthermore, AD No.2002-0 1 also has some affordable apartments and condominiums; however, they
are not included in the Market Study since, as affordable units, they are not subjects to Special
Assessments.
The City of Carlsbad has retained Empire Economics, an economic and real estate consulting firm
specializing in land-secured financings, to perform a Market Absorption Study for the forthcoming
residentialhusiness projects that are within AD No.2002-01. The purpose of the Market Study for AD
No.2002-01 is to provide an estimate of the probable absorption schedules for the forthcoming
residentialhusiness projects/products in AD No.2002-0 1.
Specifically, from the viewpoint of prospective Bond Purchasers, the particular components of the
infrastructure should be time-phased and location-phased in a manner that approximately coincides
with the expected marketability/absorption of the forthcoming residential projects/products in AD
No.2002-01. Otherwise, to the extent that the infrastructure is not appropriately phased, then the
following types of market inefficiencies may occur:
On the one hand, if certain projects do not have the infrastructure that is required to
support their development in a timely manner, then they would not be able to respond to the
demand in the marketplace, resulting in a market shortage.
On the other hand, if too much infrastructure is built, then projects for which there is not
presently a market demand would incur high carrying costs due to the market surplus, and
this could adversely impact their financial feasibility.
Thus, the Market Absorption Study formulates guidelines on the appropriate or optimal time-phasing
and location-phasing of the infrastructure for the properties/projects located in the AD No.2002-01, as
a means of providing the Bond Purchasers with a reasonable amount of security from a market
absorption perspective.
Empire Economics 1 Release Date: June 14,2004
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EXPECTED CHARACTERISTICS OF THE 1 FORTHCOMING RESIDENTIAL PROJECTS IN AD N0.2002-01
The properties in AD No.2002-01, based upon their planning approvals as well as representations from
Morrow Development and Lennar Development, the developers, are expected to have some 1,317
residential housing units and 133 acres for business-industrial, and these are situated in the Planned
Communities of Bressi Ranch and La Costa Greens; accordingly, their characteristics are now
discussed.
Bressi Ranch - Lennar Development
Bressi Ranch by Lennar Development is expected to have a total of 523 single-family homes
as well as 133 acres for business-industrial uses; accordingly, their characteristics by market
segments are as follows:
9
9
9
9
P
Detached $600,000-700,000: There are two planning areas that have projects in this market
segment (Planning Areas 7 and 12) with some 186 homes that are expected to be priced at
$635,000 to $705,000 for some 2,231 to 2,662 sq.ft. of living area, for a value ratio (pricehing
area) of $274, on the average; these homes are expected to commence escrow closings in the 1"-
2005.
Detached $700,000-800,000: There are two planning areas that have projects in this market
segment (Planning Areas 8 and 6) with some 174 homes that are expected to be priced at
$707,500 to $798,750 for some 2,678 to 3,248 sq.ft. of living area, for a value ratio of $254, on
the average; these homes are expected to commence escrow closings in the lSt-2005.
Detached $800,000-999,999: There are two planning areas that have projects in this market
segment (Planning Areas 9 and 10) with some 138 homes that are expected to be priced at
$871,700 to $978,500 for some 3,372 to 4,345 sq.ft. of living area, for a value ratio of $240, on
the average; these homes are expected to commence escrow closings in the lSf-2005.
Detached $1,000,000+: There is one planning area that has a project in this market segment
(Planning Areas 11) with some 25 homes that are expected to be priced at $1,300,000 to
$1,500,000 for some 4,900 to 6,200 sq.ft. of living area, for a value ratio of $252, on the
average; these homes are expected to commence escrow closings in the 1"-2005.
Business-Industrial: There are six planning areas that have these business-industrial land-uses
(Planning Areas 1, 2, 3, 4, ,5 and 14B) with some 133 acres that are expected to be developed
as business-industrial uses by the Sares-Regis Group; some of these buildings are expected to
commence their construction/occupancy by mid-2005. The Business Park, upon build-out, is
expected to have some 2 million sq.Et. of buildings with about 3,000 employees.
Empire Economics 3 Release Date: June 14,2004
La Costa Greens - Morrow Development
9
9
9
9
La Costa Greens by Morrow Development is expected to have a total of 794 homes;
accordingly, their characteristics by market segments are as follows:
Attached: There are three planning areas that have projects in this market segment (Planning
Areas 3, 16 and 18) with some 140 homes that are expected to be priced at $450,000 for some
1,400 sq.ft. of living area, for a value ratio (price/living area) of $321, on the average; these
homes are expected to commence escrow closings in the 2"d-2006.
Detached $500-600,000: There is one planning area that has a project in this market segment
(Planning Area 17) with some 106 homes that are expected to be priced at $585,000 for some
2,200 sq.ft. of living area, for a value ratio (price/living area) of $266, on the average; these
homes are expected to commence escrow closings in the 2"d-2006.
Detached $700-900,000: There are six planning areas that have projects in this market segment
(Planning Areas 6, 7, 11, 13, 14, 8, and 9) with some 512 homes that are expected to be priced
at $800,754 for some 3,383 sq.ft. of living area, for a value ratio (price/living area) of $237, on
the average; these homes are expected to commence escrow closings in the 2nd-2005 for four of
the areas and the 2"d-2006 for two of the areas (6 and 7).
Detached $900,000+: There are two planning areas that have projects in this market segment
(Planning Areas 10 and 12) with some 36 homes that are expected to be priced at $946,000 for
some 4,375 sq.ft. of living area, for a value ratio (price/living area) of $216, on the average;
these homes are expected to commence escrow closings in the 2nd-2005.
Therefore, based upon the planning approvals as well as the representations from the developers,
Lennar Development and Morrow Development, there are expected to be 1,3 17 residential units for
development, and these have been partitioned into a diversified product mix, based upon their product
types, price ranges and sizes of living areas. Additionally, there are also expected to be 133 acres for
business-industrial uses by the Sares-Regis Group.
For additional information on the forthcoming products and their characteristics, please refer to the
following graphs.
Empire Economics 4 Release Date: June 14,2004
AD NO. 2002-01
DEVELOPMENT STATUS AND PRODUCT MIX
600
500
400
300
200
100
0
Escrows Closed $1 Forthcomina:
$1,600,000
$1,400,000
$1,200.000
$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
AD NO. 2002-01:
EXPECTED HOUSING PRICES
$670.000
$925.100
$753,125
$1,400,000
$800.754
$450.000
Price - Average
$946.000
Empire Economics 5 Release Date: June 14,2004
ROLE OF THE MARKET STUDY IN THE BOND FINANCING I
The Market Absorption Study for AD No.2002-01 has a multiplicity of roles with regards to the Bond
Financing; accordingly, these are now discussed.
Marketing Prospects for the
Various Products Types
Official Statement
Prosuective Bond Purchasers
Aggregate Levels of
Suecial Assessment Revenues
Maximum Special Assessments
for the Residential Products
Conforming to the Issuer’s Policies
Appraisal of Property
Discounted Cash Flow - Present Value
Absomtion Schedules
The Issuing Agency for the Bond Issue, the City of Carlsbad, along with the Financial Advisor can
utilize the Market Absorption Study, Appraisal, and Special Assessment Revenue to structure the
Bond Issue for AD No.2002-01.
Empire Economics 6 Release Date: June 14,2004
I METHODOLOGY UNDERLYING THE MARKET STUDY I
To perform a comprehensive analysis of the macroeconomic and microeconomic factors that are
expected to influence the absorption of the residential single-family detached and attached as well as
business-industrial products in AD No.2002-0 1, Empire Economics' Market
conducts a systematic analysis of the following factors:
Absorption Study
MACROECONOMIC FACTORS
FOR AD N0.2002-01
* Market Supply
Planning Projections * Market Demand
Economic Conditions * Reconciliation * Growth Potential for the * Market Area
MICROECONOMIC FACTORS
FOR AD N0.2002-01
Regional Development Patterns
Competitive Market Analysis - Product Types
Residential and Business-Industrial
*Location
*Product Types * PricedRents
*Special AssessmentdTaxes
*Feature s/Ameni ties
ABSORPTION SCHEDULES
Each Product Type
*Residential
Single-Family : * Detached * Attached
Townhomes * Business-Industrial
*Market Entry to Build-Out
Therefore, the Market Absorption Study systematically proceeds from the macroeconomic
analysis of the Market Region's future housing, industrial and commercial growth to the
microeconomic analysis of the estimated absorption schedules for the residential single-family
detached and attached as well as the business-industrial products in the City of Carlsbad AD
N0.2002-01.
Empire Economics 7 Release Date: June 14,2004
I RECENTEXPECTED ECONOMIC TRENDSFATTERNS I
The purpose of this section is to discuss the recenuexpected economic trends and patterns for the
United States, California, and San Diego County, including employment, mortgage rates and oil/gas
prices.
Recent Expected GDP Trendsmatterns
With regards to the recenuexpected growth rates for GDP for the United States economy, these are
discussed first for GDP in the aggregate, and then for each of its components. During 1999 and 2000,
real GDP increased by annualized rates of 4.1% and 3.8%, respectively. Then, in 2001, real GDP
increased by only 0.3%, as the economy slowed. In 2002 and 2003 real GDP rebounded, increasing by
2.4% and 3.1% respectively. For 2004, the expectation is that real GDP will rise by some 3.85%.
With respect to the rates of change in the various components of GDP for 2004, consumption is
expected to increase by 3.8%, higher than the 2003 increase of 3.3%. Business investment in 2004 is
expected to rise by some 9.75%, an increase from its 2003 level of some 3.4%. Finally, with respect to
government purchases for 2004, these are expected to amount to some 2.33%, somewhat lower than
their 2003 rise of some 3.3%. Therefore, for 2004, the rate of growth for investment spending, and
consumer spending, are expected to be stronger than their 2003 levels, while government spending is
expected to decline slightly
UNITED STATES: REAL GDP AND ITS COMPONENTS: ANNUALLY
I999 2000
lpppJUS: Overall ' 4.10% 3.80??
-Consumption 4.90% 4.300/.
-.+-Investment 6.20% 1.20%
3.10%
~
'Government 3.70% UMI ~ ~
2003 1 2004
0.30% 2.40% 3.10% 3.85%
2.50% 3.30% 3.80%
-11.000? 6.00% 3.40% 9.75%
3.10% 4.40.. 3.30% 2.33%
Empire Economics 8 Release Date: June 14,2004
Recentmxpected Employment Trendsmatterns
1999 2000 2001 ' 2002 2003
2.44% 2. I 7% 0.03% I -1.13% -0.31%
2.90?4 3.50% 0.80% I 5.99% -0.33%
4.2% 3.55% 2.06% ~ 1.01% 0.91%
With regards to the recenuexpected growth rates for employment, these are now discussed for the
United States, California, and the San Diego County economies, both on an annual as well as a
quarterly basis. For the United States, employment growth in 1999 and 2000 amounted to some 2.44%
and 2.17%, respectively. Then in 2001, due to the economic slowdown, employment was virtually
stable. For 2002, employment declined by -1.13% followed by a smaller decline of -0.3 1% in 2003.
For 2004, employment in the United States is expected to rise by +0.80%. California followed a
generally similar pattern, with strong rates of growth in 1999 and 2000, a slower rate of growth in
2001, and then declines in 2002 ands also 2003. The expectation is that for 2004, employment in
California will grow by some 1.05Y0, a significant improvement from the decline of 2003. San Diego
County experienced strong rates of employment growth during 1999-2001, but then the rate of growth
moderated to 1.01% in 2002 and then 0.91% in 2003. For 2004, employment in San Diego County is
expected to grow by some 1.55%. Therefore, during 2004, the United States, California, and San
Diego County are expected to experienced significantly higher rates of employment growth, as
compared to their 2003 levels.
2004
0.80%
1.05%
1.55%
With respect to the rate of employment growth on a quarterly basis, during 2003 to 2004, the
recenuexpected patterns are as follows: During 2003, the first through the fourth quarters, the United
States and California economies generally experienced employment losses. During 2004, the rate of
employment growth is expected to accelerate for the United States, California, and San Diego
County. Specifically by the fourth quarter of 2004 the United States is expected have employment
growth of some 1 .OO%, California by 1.60%, and San Diego County by 2.25%.
5.00%
4.00% 4 4
3.00% 2
3
4 3
2.00%
1 .00%
5 3 u 0.00%
-2.00%
LZZi United States
California
UNITED STATES, CALIFORNIA & SAN DIEGO COUNTY
RECENTEXPECTED EMPLOYMENT TRENDS: ANNUALLY
Empire Economics 9 Release Date: June 14,2004
2.50% I
2003-IS
4.31%
-0.24%
0.96%
2.Wh
W 2 1.50% 4 s
I .W%
0.50%
E 8 8 O.CQ% W
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-I .W% 2003-2nd 2003-3rd 20034th 2W-lst 2504-2nd 2W-3rd i 2W4-4ih
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0.52% 145% ! 0.74% 0.93% 1.25% 1.75% 2.25%
-California
UNITED STATES, CALIFORNIA & SAN DIEGO COUNTY
RECENTEXPECTED EMPLOYMENT TRENDS: QUARTERLY
Recent Trends in Mortgage Rates
The above discussion of housing starts revealed that the changes in the levels of housing starts are
dependent upon not only economic factors, such as changes in employment, but also financial factors,
particularly mortgage rates. With regards to the levels of mortgage rates, they have recently attained
record low levels in 2003, some 5.8%, a very substantial decline from their levels in 2000 when they
were some 8.1%. With respect to 2004 the expectation is that as a result of the economic recovery and
employment growth, mortgage rates are expected to attain a level of some 6.78%. With respect to the
quarterly trends in mortgage rates they have risen from their record low level of 5.3% in the second
quarter of 2003 to 6.5% in the first quarter of 2004. Their upward path is expected to continue during
2004, as the economy continues to recover, reaching a level of some 6.9% in the third and fourth
quarters of 2004.
9.w.
8.w.
7.w.
6.Wh
5.oo.h
4.WA
3.w.
2.w.
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0.W.
UNITED STATES: MORTGAGE RATES: ANNUALLY
1999
7.50% I 7Wh I 6.40% ! 5.8oy.
ZOOI
6.78% -~
Empire Economics 10 Release Date: June 14,2004
UNITED STATES: MORTGAGE RATES: QUARTERLY
2003-Irl 2W2nd
6.80% I 6.90% I 6.Wh
Recent/Expected Trends for Crude Oil Prices
Since the Southern California economy has a substantial amount of commuting, between employment
centers in San Diego County to the residential centers in Riverside County, it is usehl to review the
recenvexpected trends in crude oil prices. With respect to recent crude oil prices, they amounted to
$31.4 a barrel in the ls'-2O03, declined to $29.0 per barrel in the 4'h-2003. However, prices have
recently increased to $35 per barrel in the ls'-2O04, and they are expected to rise further to $38 per
barrel in the 2"d-2004. Then, during 3rd-2004 and 4'h-2004, prices are expected to moderate, to some
$36 and $34 per barrel, respectively.
540.0
$35.0
S30.0
S25.0
$20.0
$15.0
910.0
S5.0
so.0
I CRUDE OIL PRICES: QUARTERLY
2W3-lst I 2W3-2nd 1 2003-3rd 1 2W3-4th I 2004-1st
531.4 516.6 530.5 1 1629.0 I 5352-
YWI LWY 2004-2nd 2004-3rd 2W44fh
S38.0 $36.0 934.0 .-
Empire Economics 11 Release Date: June 14,2004
COMPETITIVENESS OF AD N0.2002-01
FROM A REGIONAL PERSPECTIVE
From a regional perspective, the competitiveness of the projects in AD No.2002-01 is influenced by
the development patterns for employment and housing within San Diego County and its
interrelationships with the AD No.2002-0 1 Market Area. Specifically, Business Parks generate
industrial-ofice development while Planned Communities generate residential development;
additionally, the flow of traffic between them is facilitated by the freeways and highways.
Expansion of Employment Centers and Business Parks
The currently established major employment centers in San Diego County are the Urban
Cores of San Diego CityLa Jolla; these represent the primary employment centers.
Furthermore, there has been some expansion from these Urban Cores: Business Parks and
Office Complexes located along the two major San Diego County freeways, Route 5, north-
south along the coast, and Route 15, north-south in the inland area.
Although future employment growth will continue to be in the established Urban Core, the
continuing development of Business Parks and Office Complexes along Routes 5 and 15
will continue to expand in a northerly direction, towards northern San Diego County.
* The recent expansion of Route 78, the major west-east freeway in northern San Diego
County will facilitate the future expansion of Business Parks and Office Complexes into
the AD No.2002-01 Market Area.
Commuting Patterns: Employment Centers to Residential Areas
Some of the households employed in the San Diego Urban Core as well as the Business
Parks and Office Complexes located along Routes 5 and 15 come to the AD No.2002-01
Market Area, since it offers moderately priced housing. Specifically, these commuting
patterns are based upon the freeways, highways and roads that link the employment centers
to the AD No.2002-01 Market Area, with the most significant being as follows:
* Route 5 to Carlsbad, with exits at
Palomar Airport Road
Cannon Road
Tamarack Avenue
Carlsbad Village Dr.
For additional information on the regional development patterns, please refer to the following exhibit.
Empire Economics 12 Release Date: June 14,2004
I SOCIOECONOMICS CHARACTERISTICS:
CRIME LEVELS AND THE OUALITY OF SCHOOLS I
When households consider the purchase of a home, the primary factors are the location (relative
to their place of employment) and price (within their income/affordability levels). Furthermore,
secondary socioeconomic factors that are significant are the safety of the neighborhood as well as
the quality of the schools; accordingly, these are now discussed
Crime Levels and Neighborhood Safety
To gauge the safety of San Diego County and the AD No.2002-01 Neighborhood Area, information on
crime levels was obtained utilizing the Federal Bureau of Investigation (FBI) Index.
For California, as a whole, the average crime rate is approximately 41.4 per 1,000 people per year. For
Southern California the rate is 38.0, which is lower than the state average. While for San Diego
County, the rate is 38.3, similar to the rate for Southern California and below the rate for California.
According to the FBI index, San Diego County has a crime rate of about 38 per 1,000 people per year.
With respect to the City of Carlsbad in particular, the crime rate is 28, substantially below the county
average.
SAN DIEGO COUNTY CRIME RATES BY CITY
(* DESIGNATES CITY IN THE CFD MARKET AREA)
60
w 50- -I n
n n 40- a z
v) 3 p 30-
W z 0
20-
v) w B 0" 10-
Empire Economics 14 Release Date: June 14,2004
Oualitv of Schools and Education
To gauge the quality of schools in San Diego and the AD No.2002-01 Market Area, information was
compiled on various measures of educational achievement, based upon their SAT I Scores.
For California, as a whole, the SAT I Score (with 1600 being the highest) was at a level of 1,012.
While for San Diego County, in particular, the SAT Score amounted to 1,028 higher than the overall
average for California as a whole.
The SAT I Scores were also compiled for the School Districts within San Diego County. For the
Carlsbad School District, the SAT I score amounted to 1,086, and so it is above the California and
San Diego County levels.
SAT I TEST SCORES: MATH AND VERBAL AVERAGE t; ( * SCHOOL DISTRICT IN THE CFD MARKET AREA) -3 z 1600, n
1,028
$ s
.- z
B CI
VI
Therefore, from a socioeconomic perspective, San Diego County has a lower crime rate and a
higher educational achievement level than California, as a whole. Within San Diego County, the
City of Carlsbad has a lower crime rate (more desirable) and higher educational achievement
level (more desirable). So, comparing the AD No.2002-01 Market Area with San Diego County as
a whole reveals that the City of Carlsbad is regarded as being very desirable from a
socioeconomic perspective.
Empire Economics 15 Release Date: June 14,2004
I RECENT TRENDS IN MONTHLY HOUSING PAYMENTS FOR
HOUSEHOLDS IN SAN DIEGO COUNTY
The trends in monthly payment levels for households that purchase homes in San Diego County are
now analyzed, based upon a consideration of housing prices and mortgage rates during the 1988-2003
time period; accordingly, the primary factors underlying this analysis are as follows:
> The prices for homes in San Diego County during 1988-2003 were estimated by using value
ratios, the price per sq.ft. of living area, since this automatically adjusts for price changes due
to changes in the size of a home. For San Diego County, the value ratio rose from $98 in 1988
to a peak level of $261 in 2003.
>
To calculate the price of a home using the value ratio, it is first necessary to specify the size of
a typical home, and the assumption made herein is that the home size is 1,600 sq.ft. of living
area, and this remains constant during the entire time period.
Accordingly, based upon the value ratios as well as the size of the home, the price of such a
1,600 sq.ft. home started at some $156,200 in 1988 and rose to a record level of some $41 8,400
in 2003.
The down payment that the household makes is presumed to be 20%, and this remains constant
during the entire time period.
The mortgage rate is based upon the interest rate for households in the Los Angeles-Long
Beach area: mortgage rates amounted to some 9.93% in 1989, declined to 6.52% in 1994,
increased slightly during 1993-1999, and then declined to their lowest level of some 5.72% in
2003.
During the 1988-2003 time period, the rate of inflation amounted to some 46.3% on a
cumulative basis. Inflation rates were in the 4.1%-5.4% range from 1988-1991, and then they
declined to the 1.6%-3.4% range for 1992-2003. The inflation rate also serves as a general
proxy of household income increases during this time period. Based upon these inflations
rates, the real price of housing in San Diego County (in 2003 dollars) amounted to some
$228,600 in 1988 and some $418,400 in 2003.
The monthly housing payments are adjusted for the rates of inflation, on a year by year basis,
so that they can be compared in real 2003 dollars for the entire time period.
Therefore, based upon a consideration of the above factors, the monthly housing payment for the
purchaser of a home in San Diego County has exhibited the following pattern:
> The monthly housing payment amounted to some $1,937 in 1990 (real 2003 dollars), due to the
combination of high housing prices along with high mortgage rates.
> The monthly housing payment declined to the $1,200-$1,300 range during 1993-1997, due to
the combination of lower housing prices and lower mortgage rates.
> Since 2000 the monthly housing payments rose, attaining a level of some $2,100 in 2003; this
can be attributed primarily to higher housing prices, since mortgage rates actually declined
during this time period.
Therefore, San Diego County households have recently experienced substantial increases in the levels
of monthly housing payments; however the level of the monthly housing payments in real dollars for
2003, is some 8.4% above the prior peak that occurred in 1990.
Empire Economics 16 Release Date: June 14,2004
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RECENT HOUSING PRICE APPRECIATION RATES AND
POTENTIAL ADJUSTMENT FACTORS
The purpose of this section is to perform an analysis of the factors underlying the changes in housing
prices that have occurred during the two economic cycles that span the 1984 to 2003 time period in the
Southern California Market Region as well as San Diego County. Furthermore, the recent acceleration
in the rate of housing price appreciation is discussed, along with the potential scenarios that may
evolve during the foreseeable future as the housing market re-establishes an equilibrium.
Factors Underlying Housing Demand and Price Changes
The most significant factor underlying changes in housing priceshales is the rate of employment
growth. Specifically, employment growth is regarded as being a “fundamental” factor because the
creation of job growth drives the demand for housing: when employment growth is robust, housing
pricedsales are also strong, and, conversely, when employment losses occur, then housing pricedsales
are weak.
The next most significant factors underlying housing price changes would be the mortgage financing
that is available to households. This includes the effective mortgage rate on a loan as well as the credit
criteria utilized by lending institutions, such as the loan to value ratio and the mortgage to income
ratio. This is regarded as a “financial” factor, since it is not, by itself, a direct determinant of the
amount of housing demand; instead, it impacts the price of a home that a household can afford. More
favorable financial factors, such as declining mortgage rates and/or easier qualifying terms, typically
result in stronger rates of housing price appreciation.
Another factor that reinforces housing price trends is the level of new homes being constructed/sold.
If the supply of new homes is below the amount required to fulfill the demand generated by the
employment growth, then there is further upwards pressure on housing prices.
Interrelationships of Employment Growth, Mortgage Rates
and Housing Price Changes
This specific impacts of employment growth and mortgage rates on housing prices for the Southern
California Market Region during the two recent economic cycles that span the 1984-2003 time period
are now discussed.
Prior Economic Cycle: 1984-1993
9
9
9
During 1984-1988, employment growth in SC was strong (+3.9%/yr.) but housing appreciation
was only moderate (+8.6%/yr) because mortgage rates were relatively high (10.3%).
During 1989-1990, as the rate of employment growth for SC continued to be strong
(+2.24%/yr.) and mortgage rates declined (from 10.3% to 9.9%), there was an acceleration in
the rate of housing price appreciation (+9.8%/yr.).
Then, during 1991-1993, when the SC economy experienced an economic recession with
employment losses (-2.3%/yr.), housing prices declined (-1.4%/yr.) despite a significant
decrease in mortgage rates (9.9% to 7.8%).
Empire Economics 18 Release Date: June 14,2004
Current Economic Cycle: 1994 to 2003
> During 1994-1995, the SC economy started to recover, with increasing employment growth
(1.2%) but housing prices continued to decline (-4.7%) hrther despite lower mortgage rates
(7.8% to 6.9%); this can be attributed to the time lags between the employment and housing
markets, as households required additional time to gain their confidence as they recovered from
the economic recession.
> Then, during 1996-1998, as the economic recovery gained momentum with stronger
employment growth (+2.8%/yr.), prices started to rise (+4.7%) despite slightly higher mortgage
rates (6.9% to 7.4%).
> During 1999-2001, the rate of employment growth continued at a strong level (+2.44%/yr.) and
mortgage rates remained stable (7.4%-7.0%), resulting in a strong rate of price appreciation
(9.6%).
> For 2002, SC’s employment declined (-0.1 1%) yet price appreciation accelerated (+13.0%),
primarily as a result of dramatically lower levels of mortgage rates (7.0% to 6.3%), reflecting a
disequilibrium between weak employment growth and very strong price appreciation.
> For 2003, SC’s employment continued to was stable (+0.28%) yet price appreciation
primarily as a result of dramatically lower levels of
(6.34% in 2002 to 5.72% in 2003), reflecting a continuation of the
continued to be strong
mortgage rates
disequilibrium between weak employment growth and very strong price appreciation.
(+12.9%),
> The San Diego County economy and real estate markets followed a pattern that was similar to
that of Southern California, as a whole; San Diego County employment growth has recently
moderated (+1.01% in 2002 to +0.91% in 2003) but housing price appreciation was high for
2002 and also 2003 (14.5% in 2002 to 14.1% in 2003).
Therefore, a comparison of the prior and the recent economic conditions reveals that the strong
rates of price appreciation that occurred during January 2002 through December 2003 are a
result of primarily financial market conditions, low mortgage rates and easy qualifying terms,
rather than fundamental economic factors, employment growth.
The next section discusses other factors which are important to consider, such as the mortgage
rate structure (fixed vs. variable rate loans).
Empire Economics 19 Release Date: June 14,2004
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I MITIGATION OF THE POTENTIAL IMPACTS OF MORTGAGE RATE
INCREASES: FIXED VS. VARIABLE RATE MORTGAGE LOANS I
If mortgage rates rise, then there are two ways in which housing prices may be impacted, depending
upon whether the mortgage loan structure is “static” or “dynamic”; accordingly, the characteristics of
these scenarios are as follows:
Static Mortgage Loan Structure Analysis: If mortgage rates were to suddenly increase by 1%, and the
financing structure remained constant (purchasers continued to use fixed-rate loans), then for a household
to maintain the same level of monthly payments, the price of the home would need to decline by some
-1 1%. Specifically, for a household’s monthly mortgage payment to remain the same, then an increase in
mortgage rates by 1 % (1 00 basis points) would require a reduction in the price of a home by some -1 1 %.
Dynamic Mortgage Loan Structure Analysis: If mortgage rates were to suddenly increase by I%, as
above, but, instead, the financing structure could be changed (the purchaser could shift to a variable rate
loan rather than continue to use a fixed-rate loan), then the household could maintain the same level of
monthly payments, due to a lower interest rate.
However, the use of variable rate loans by purchasers comes with the additional financial risk, that, in the
event of another subsequent increase in mortgage rates, then monthly mortgage payment of the
households would rise substantially, thereby placing financial stress on the households. This, in turn,
could effectively “squeeze” the finances of the household to the point where they may have difficulty
making their mortgage payment as well as covering other expenses, such as the ad Valorem and Special
Taxes.
Recent Economic and Real Estate Conditions
Since Summer-200 1, and continuing through March 2004, the Southern California residential housing
market has experienced strong and even escalating rates of housing prices appreciation. However, during
this same time period, the Southern California economy has actually suffered losses in its employment
base, and so the “fundamental” historical factor underlying price appreciation, employment growth, has
not been present. Specifically, these strong rates of housing price appreciation can be explained by
declines in the mortgage rates for housing loans, which attained their record low levels in June 2003.
The analysis in the above section revealed that if mortgage rates were to increase, given the absence of
employment growth, then the most probable outcome would be that housing prices would decline. This is
because without employment growth, households would not be in a financial position to purchase homes
at higher prices, since they would not be able to accommodate the increase in their monthly payments
due to the higher mortgage rates.
However, even though mortgage rates have recently risen from their record low levels that occurred in
June 2003, housing price appreciation has continued at a strong level. Although this appears to contradict
the historical relationships presented above, it can be explained by utilizing the “dynamic” mortgage loan
structure framework of households shifting from fixed variable loans; according this is now discussed.
Empire Economics Page 21 Release Date: June 14,2004
Mortgage Loan Structures and Monthly Payments
Variable
Based on Prime Rate
The purchasers of homes have the option of selecting either a fixed rate loan structure (typically 15 or 30
years) or variable rate loan structure (fixed for 3, 5, 7 years with monthly adjustments thereafter). The
fixed rate loan has the advantage of locking in the current interest rate for 15 to 30 years but the rate is
higher than for a variable rate loan. On the other hand, the variable rate loan has the advantage of a lower
interest rate but the homeowner bears the risk that the rate may rise substantially over time.
3.25% Annually $1,625 -53%
When mortgage rates are at relatively low levels, then home purchasers typically utilize fixed rate
mortgages as compared to variable rate structures, since they desire to lock-in such rates for the long-run.
However, when mortgage rates start to rise, then some of the potential purchasers that can no longer
afford the home at the fixed rates (a typically higher mortgage payment) shift to a variable rate structure
(typically lower mortgage payment). Consequently, the market demand often continues to be strong as
mortgage rates start to rise, as purchasers shift from fixed to variable.
The monthly mortgage payment for a household with a $600,000 loan depends, to a significant degree,
upon the type of mortgage structure that is utilized; accordingly, some of the scenarios are as follows:
Mortgage Structure Options
Mortgage Loan: $600,000
So, for a 30 year fixed rate loan, the mortgage payment on a $600,000 loan amounts to some $3,452 per
month, with the principle being amortized over the thirty years. For a variable rate loan with interest
payments only (fixed for five years - then variable), the payment is $2,125 per month, a reduction of
38% but the homeowner does not realize any principal reduction. Finally, for a variable rate loan
indexed to the prime rate (which may have a high degree of volatility), the payment is $1,625 per month,
a reduction of some 53% as compared to the 30 year fixed rate loan but again the homeowner again does
not realize any principal reduction.
Therefore, the variable rate loans offer significantly lower monthly payments than the fixed rate loan;
however, the homeowner bears the risk of significantly higher mortgage payments if mortgage rates
increase and, additionally, the homeowner does not realize any reduction in the amount of the principal.
Empire Economics Page 22 Release Date: June 14,2004
Conclusions on Housing Prices
The above analysis reveals that the recent rates of housing price appreciation will need to come to terms with
the weak underlying fundamental factors, low levels of employment growth. There are two primary
scenarios for the resolution of the current employment/price appreciation disequilibrium, and each of these,
in turn depends upon the extent to which there is a re-emergence of the fundamental factors, the economic
recovery along with its employment growth.
Scenario A: Smooth Transition
This scenario is characterized by the Southern California and San Diego County economies entering their
recovery phases during the foreseeable future, thereby generating employment growth and providing
“fundamental” support for the housing market. Under this scenario, such employment growth would provide
support for the recent rates of housing appreciation, and allow the market to return to an equilibrium, even if
mortgage rates rise moderately.
Scenario B: Abrupt Transition
This scenario is characterized by the Southern California and San Diego County economies experiencing
only minimal amounts of employment growth during the foreseeable future, and so the recovery phase would
be delayed. Consequently, there would not be sufficient employment growth to provide the “fundamental”
support for the housing market. Under this scenario, without substantial employment growth, the rate of
housing appreciation could stabilize, and there may even be a potential for actual declines in housing prices,
if mortgage rates should rise substantially.
The most probable scenario for San Diego County is for the rate of housing price appreciation to moderate
during 2004, as compared to the relatively strong rates that were experienced during 2001-2003, based upon
a consideration of the following factors:
Factors which will tend to bolster price appreciation are as follows:
9 Economic recovery, with stronger rates of employment growth.
9 Severely limited supply, due to planning/environmental approvals required to bring new projects to
the marketplace.
9 Willingness of households to utilize variable rate and interest-rate only loans.
Factors that may tend to mitigate price appreciation are as follows:
9 The strong rates of price appreciation in recent years and record levels of prices have caused housing
affordability to be relatively low.
9 Upward pressure on mortgage rates as the economy recovers.
9 Upward pressure as a result of the large federal budget deficits.
9 Risk of short-term variable rate loan rates rising as the economy recovers.
Therefore, based upon a consideration of the factors discussed above, the rate of housing prices
appreciation for San Diego County during 2004 is expected to moderate.
Empire Economics Page 23 Release Date: June 14 ,2004
COMPETITIVE MARKET ANALYSIS OF THE PROJECTS
COMPETITIVE HOUSING MARKET AREA
IN THE AD N0.2002-01
The purpose of this section is to provide an overview of the currently active Planned Communities
with for-sale housing in the AD No.2002-01 Competitive Housing Market Area, the cities of Carlsbad
and San Marcos, and to compare these with the characteristics of the currently active for-sale projects
in AD No.2002-01.
Competitive Market Area for AD No.2002-01
The AD No.2002-0 1 Competitive Housing Market Area currently has various projects in several Planned
Communities that have active projects with for-sale housing in Carlsbad as well as San Elijo Hills in San
Marcos.
The Housing Market Area has a total of 32 projects, 18 currently active and 14 forthcoming projects in AD
No.2002-01, which have a total of some 3,150 housing units of which 327 have had their escrows closed and
so they are considered to be occupied; the distribution of these projects among the various areas is as
follows:
Empire Economics Page 24 Release Date: June 14,2004
9
P
P
9
9
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P
AD No.2002-01 Greens-Attached: 2 forthcoming with 140 forthcoming units.
Carlsbad- Attached: 1 active project 252 units of which none are occupied.
San Elijo - Attached: 3 projects with 361 homes of which 11 1 are occupied.
AD No.2002-01 Bressi-Detached: 7 projects with 523 forthcoming homes.
AD No. 2002-01 Green-Detached: 5 projects with 650 forthcoming homes.
Carlsbad-Detached: 8 projects with 693 homes of which 168 are occupied.
San Elijo-Detached: 6 projects with 522 homes of which 48 are occupied.
AD NO. 2002-01 HOUSING MARKET AREA
DEVELOPMENTSTATUSOFTHEPROJECTS
800
700
H Occuoied €3 Future
The prices of homes in these project areas are some $729,561 on the average, for some 2,816, on the
average; their characteristics by the various market segments are as follows:
9 AD No.2002-01 Greens-Attached has a price of $450,000 for some 1,400 sq.ft. of living area.
P Carlsbad- Attached has a price of $407,500 for some 1,449 sq.ft. of living area.
P San Elijo - Attached has a price of $452,660 for some 1,398 sq3. of living area.
P AD No.2002-01 Bressi-Detached has a price of $937,056 for some 3,704 sq.ft. of living area.
P AD No. 2002-01 Green-Detached: has a price of $777,251 for some 3,319 sq.ft. of living area.
9 Carlsbad-Detached has a price of $82 1,296 for some 3,168 sq.ft. of living area.
9 San Elijo-Detached: has a price of $683,793 for some 2,676 sq.ft. of living area.
Empire Economics Page 25 Release Date: June 14 ,2004
AD N0.2002-01 HOUSING MARKET AREA
HOUSING PRICES AND LIVING AREAS
$1,000,000
$900,000 --
$800,000 ~~
u) $700,000 -- t
$600.000 -- z
$ $500,000 --
b 1 Y
n
San El(o
DslarAsd
$503.793 1
1.398 3.701 3,319 3.168 2.676 2.816
4,000
3.500
3.000 !i
3
2*ooo Fi
1,500 f
IL W 2,500 LL
'1
0
b
1,000 P
500
0
To compare the prices of the homes in these project areas, their value ratios are utilized, the price per sq. ft.
of living area, since this effectively makes adjustments for differences in their sizes of living areas.
Accordingly, the value ratios for all of the project areas amounts to $270 per sq. ft. of living area and their
Special Assessments/Taxes amounts to some $2,576/yr. (0.39% as a ratio to the housing prices);
accordingly, the value ratios and Special Assessments/Taxes characteristics for each of the project areas are
as follows:
P AD No.2002-01 Greens-Attached has a value ratio of $321 and its Special Assessments amount to
$1,770 (0.39%).
P Carlsbad-Attached has a value ratio of $281 and its Special Assessments amount to $2,266 (0.56%).
P San Elijo-Attached has a value ratio of $324 and its Special Assessments amount to $2,726 (0.60%).
P AD No.2002-01 Bressi-Detached has a value ratio of $255 and its Special Assessments amount to
$3,150 (0.36%).
P AD No. 2002-01 Green-Detached has a value ratio of $240 and its Special Assessments amount to
$2,533 (0.33%).
P Carlsbad-Detached has a value ratio of $269 and its Special Assessments amount to $1,115 (0.15%).
P San Elijo-Detached has a value ratio of $260 and its Special Assessments amount to $4,220 (0.62%).
Empire Economics Page 26 Release Date: June 14 ,2004
AD NO. 200241 HOUSING MARKET AREA
VALUE wnos AND SPECIAL TAXES
woo
$350
+
~~
A0 NO. I mz-01 AD NO. 20M41
Gme"s-
$240 ~
- i i I I*RffiHT.W ASSmVfar/ 11.770 1 $2.286 I $2.726 ! 13.150 I 12.533 1 11.155 1 yl.Zz0 I $2.576
These project areas, with their 18 active projects, have experienced a sales rate (escrow closings of homes of
some 720 homes per year, for an average of some 40 units per project per year; the distribution of these sales
among the various project areas as follows:
9 Carlsbad-Attached 1 project with a sales rate of 55 homes per year.
9 San Elijo-Attached has three projects with sales of 165 per year, for an average of 55 per project, on
the average.
9 Carlsbad-Detached has eight projects with sales of 280 per year, for an average of 35 per project, on
the average.
9 San Elijo-Detached has six projects with sales of 220 per year, for an average of 37 per project, on
the average.
AD NO. 200241 HOUSING MARKET AREA
SALESRATES
500 60 55 55
450 ~~ + +
-- 50 400 --
35 31
Sari E*: Detached
220
55 55 35 37 _I
For additional information on the forthcoming projects in AD No.2002-01 and also the currently active
projects in the Competitive Housing Market Area, please refer to the following table and exhibit.
Empire Economics Page 27 Release Date: June 14,2004
I
Submarket Names
INDUSTRIAL MARKET CONDITIONS
Square Footage Vacancy Lease Rate
Amount I Share Rate PSF/MTH
WITHIN SAN DIEGO COUNTY
Central San Diego
I
~~~
6,332,424 3.7% 4.6% $0.81
To provide an overview of the recent/current conditions for the industrial market within San Diego
County, Empire Economics utilized information from a report prepared by CB Richard Ellis, a major
industrial-commercial real estate brokerage firm in Southern California. Accordingly, for the various
cities within San Diego County, the characteristics of the markets for the various cities, including the
amounts of their square footage, market shares, vacancy rates and lease rates are as follows:
South Bay
Otay Mesa
Torrev Pines
12,622,269 7.4% 3.3% $0.63
9,787,333 5.7% 12.2% $0.55
4.720.863 2.8% 4.8% $2.48
UTC
Rose CynlMorena
Kearny Mesa
3,733,136 2.2% 9.6% $1.63
2,697,023 1.6% 1.6% $1.46
18,270,899 10.7% 4.5% $1.12
Carlsbad
Escondido
12,533,623 7.4% 12.5% $1 .oo
6,855,158 4.0% 3.6% $0.82
Rancho Bernard0
Sorrento Mesa
11,208,129 6.6% 12.0% $0.97
14.01 8.761 8.2% 11 .O% $1.26
Therefore, the City of Carlsbad has some 12.5 million sq.ft. of industrial space, and this represents
7.4% of all the industrial space in San Diego County. With regards to its vacancy rate, it is currently
12.5%, and this is slightly above the vacancy rate for San Diego County as a whole of 7.4%; this can
be attributed to the high level of construction activity in recent years. With respect to the lease rates
for industrial buildings, the City of Carlsbad has a rate of $ 1 .OO which is slightly higher than the rate
of $0.94 for San Diego County as a whole. The higher lease rate can be attributed to the more recent
development for most of these buildings as compared to those in the urban core.
Poway
Market Totals/Averages
Empire Economics Page 28 Release Date: June 14,2004
7,787,573 4.6% 7.2% $0.91
170,346,833 100.0% 7.39% $0.94
OFFICE MARKET CONDITIONS
WITHIN SAN DIEGO COUNTY
Submarket Names
To provide an overview of the recentlcurrent conditions for the office market within San Diego
County, Empire Economics utilized information from a report prepared by CB Richard Ellis, a major
industrial-commercial real estate brokerage firm in Southern California. Accordingly, for the various
cities within San Diego County, the characteristics of the markets for the various cities, including the
amounts of their square footage, market shares, vacancy rates and lease rates are as follows:
Square Footage Vacancy Lease Rate
Amount I Share Rate Monthly
IMarket Totals/Averagesl 47,487,560 I 100.0% I 10.98% I $2.1 0 I
Therefore, the City of Carlsbad has some 3.0 million sq.ft. of office space, and this represents about
6.3% of all the office space in San Diego County. With regards to its vacancy rate, it is currently
12.80%, and this is slightly higher than the vacancy rate for San Diego County as a whole of 10.98%.
With respect to the lease rates for office buildings, the City of Carlsbad has a rate of $ 1.97 which is
slightly lower than the rate of $2.10 for San Diego County. The lower lease rate can be attributed to its
location being fiuther away from the urban core.
Empire Economics Page 29 Release Date: June 14,2004
CHARACTERISTICS OF THE BUSINESS PARKS IN THE
VICINITY OF AD NO. 2002-01 I
Empire Economics compiled information on the characteristics of the Business Parks located in the
vicinity of AD No.2002-0 1 and also compiled information on their characteristics. Specifically, the
market surveys revealed that there are a conglomeration of Business Parks located to the north of AD
No.2002-01, and that this can be attributed to the McClellan Palomar Airport which preclude
residential development in its flight path.
To facilitate the analysis, the various Business Parks have been placed into three categories, based
upon their location relative to AD No.2002-01: Airport, Northerly and North-Easterly; their
characteristics are summarized in the following table:
These Business Parks have some 3,533,178 sq.ft. of industrial-office space, and its distribution among
the three geographical areas is as follows:
9
9
9
The Airport Area has some 1,829,423 sq.ft. of industrial space (51.8%) and also 728,636 sq.ft.
of office space (20.6%)
The Northerly Area has some 534,004 sq.ft. of industrial space (15.1%) and 81,347 sq.ft. of
office space (2.3%).
The North-Easterly area has some 359,768 sq.ft. of industrial space (10.2%) and no office
space.
With regards to the absorption of the 3,533,178 sq.ft. industrial-office space during the 1981-2001+
time period, it has been as follows:
9 During 1981-1985, some 461,445 sq.ft. (13.1%) was absorbed.
9 During 1986-1990, absorption rose to some 698,500 sq.ft. (19.8%).
9 Then during 1991-1995, when there was an economic recession, there was no absorption.
9 For 1996-2000, absorption rose dramatically, to some 1,724,826 (48.8%).
9 Since 2001, absorption has amounted to some 648,407 sq.ft. (18.4%).
Furthermore, it is also worthwhile to note that the mix of industrial-office products has changed in
recent years, with office attaining a higher share.
Empire Economics Page 30 Release Date: June 14 ,2004
2,000,000
1,600,000
U a 8 1,400,000 2 3 1,200,000 a a
l,OoO,000
w U 2 800,Ooo v1 c7
600,000
d
400,000
200,000
0
INDUSTRIAL-OFFICE DEVELOPMENT ACTIVITY
IN THE VICINITY OF CFD NO. 2002-01
-r--
2001+ 1996-2000 1981-1985 1986-1990 1991-lW5
Airport BNortherly 8 North-Easterly
2,000,000
1,800,000
1,600,000 r:
E 1,400,000
8 1,200,000 a 3
1,o00,000
w
800,000 3
600,000
B 400,000
2
200,000
0
INDUSTRIAGOFFICE DEVELOPMENT ACTIVITY
IN THE VICINITY OF CFD NO. 2002-01
I
I981 -1 985 1986-1990 I991 -1995 1996-2000 2001-1
Industrial [B Office
Empire Economics Page 31 Release Date: June 14 ,2004
ESTIMATED ABSORPTION SCHEDULES FOR THE
PRODUCTSD'ROJECTS IN AD N0.2002-01
The purpose of this section is to estimate the absorption schedules for the residential and
business-industrial products/projects in AD No.2002-0 1 ; accordingly, this is based upon a
consideration of the following:
First, the potential demand schedules for the residential products/projects for AD No.2002-0 1 were
derived, based upon a consideration of the following:
> The growth prospects for the Southern California Market Region, in general, and San Diego
County, in particular.
> How much of this growth the AD No.2002-01 Market Area, is expected to capture, in
particular.
> The proportion of the Market Area demand that is expected to be captured by the projects in
AD No.2002-01 , based upon an evaluation of their competitiveness in the marketplace.
Thus, the result of this analysis is the POTENTIAL demand for the residential products/projects in AD
N0.2002-01.
Next, the ability of the residential productdprojects in AD No.2002-01 to respond to this demand is
estimated. Accordingly, the infrastructure development schedule for the residential productdprojects
was obtained from Morrow Development and Lennar Development, the developers. Specifically, this
represents, from a time perspective, when the products will have the infrastructure in place that is
required to support their development. So, the result of this analysis is the INFRASTRUCTURE
DEVELOPMENT of the properties in AD No.2002-01, and this reflects their ability to respond to the
demand in the marketplace.
Then, based upon a consideration of the POTENTIAL demand and the INFRASTRUCTURE
DEVELOPMENT, the absorption rate for the residential products/projects in the various market
segments are calculated, from the year in which the products/projects are expected to enter the
marketplace, and continuing thereafter on an annualized basis, until all of the units/acres are
occupiedutilized.
The application of this algorithm results in the absorption schedules for the products/projects in AD
No.2002-0 1 (Poinsettia Lane East); absorption represents the structure being constructed as well
as being occupied by a final-user.
Accordingly, the estimated absorption schedules for the 1,317 homes and 133 acres of business-
industrial property in AD No.2002-01 are as follows:
Empire Economics Page 32 Release Date: June 14,2004
Bressi Ranch - Lennar Development
Bressi Ranch by Lennar Development is expected to have a total of 523 single-family homes
as well as 133 acres for business-industrial uses; accordingly, their characteristics by market
segments are as follows:
Detached $600,000-700,000: There are two planning areas that have projects in this market
segment (Planning Areas 7 and 12) with some 186 homes that are expected to be priced at
$635,000 to $705,000 for some 2,23 1 to 2,662 sq.ft. of living area, for a value ratio (pricehiving
area) of $274, on the average; these homes are expected to commence escrow closings in the lst-
2005. These homes are expected to be absorbed at a rate of 60 homes in 2005,80 homes in 2006
and the remaining 46 homes in 2007.
Detached $700,000-800,000: There are two planning areas that have projects in this market
segment (Planning Areas 8 and 6) with some 174 homes that are expected to be priced at
$707,500 to $798,750 for some 2,678 to 3,248 sq.ft. of living area, for a value ratio of $254, on
the average; these homes are expected to commence escrow closings in the 1"-2005. These
homes are expected to be absorbed at a rate of 60 homes in 2005, 80 homes in 2006 and the
remaining 34 homes in 2007.
Detached $800,000-999,999: There are two planning areas that have projects in this market
segment (Planning Areas 9 and 10) with some 138 homes that are expected to be priced at
$871,700 to $978,500 for some 3,372 to 4,345 sq.ft. of living area, for a value ratio of $240, on
the average; these homes are expected to commence escrow closings in the 1"-2005. These
homes are expected to be absorbed at a rate of 40 homes in 2005, 50 homes in 2006 and the
remaining 48 homes in 2007.
Detached $1,000,000+: There is one planning areas that has a project in this market segment
(Planning Area 11) with some 25 homes that are expected to be priced at $1,300,000 to
$1,500,000 for some 4,900 to 6,200 sq.ft. of living area, for a value ratio of $252, on the
average; these homes are expected to commence escrow closings in the 1"-2005. These homes
are expected to be absorbed at a rate of 8 homes in 2005, 12 homes in 2006 and the remaining 5
homes in 2007.
Business-Industrial: There are six planning areas that have these business-industrial land-uses
(Planning Areas 1, 2, 3, 4, ,5 and 14B) with some 133 acres that are expected to be developed
as business-industrial uses by the Sares-Regis Group; some of these buildings are expected to
commence their constructiodoccupancy by mid-2005. The Business Park, upon build-out, is
expected to have some 2 million sq.ft. of buildings with about 3,000 employees. The business-
industrial property is expected to be absorbed at a rate of 15 acres in 2005,20-25 acres per year
during 2006-2009 and the remaining 23.3 acres in 2010.
Empire Economics Page 33 Release Date: June 14 ,2004
La Costa Greens - Morrow Development
La Costa Greens by Morrow Development is expected to have a total of 794 homes;
accordingly, their characteristics by market segments are as follows:
P Attached: There are three planning areas that have projects in this market segment (Planning
Areas 3, 16 and 18) with some 140 homes that are expected to be priced at $450,000 for some
1,400 sq.ft. of living area, for a value ratio (price/living area) of $321, on the average; these
homes are expected to commence escrow closings in the 2"d-2006. These homes are expected to
be absorbed at a rate of 60 homes in 2006 and the remaining 80 homes in 2007.
P Detached $500-600,000: There is one planning area that has a project in this market segment
(Planning Area 17) with some 106 homes that are expected to be priced at $585,000 for some
2,200 sq.ft. of living area, for a value ratio (price/living area) of $266, on the average; these
homes are expected to commence escrow closings in the 2"d-2006. These homes are expected to
be absorbed at a rate of 35 homes in 2006, another 50 homes in 2007 and the remaining 21
homes in 2007.
> Detached $700-900,000: There are six planning areas that have projects in this market segment
(Planning Areas 6, 7, 11, 13, 14, 8, and 9) with some 512 homes that are expected to be priced
at $800,754 for some 3,383 sq.ft. of living area, for a value ratio (price/living area) of $237, on
the average; these homes are expected to commence escrow closings in the 2nd-2005 for four of
the areas and 2"d-2006 for two of the areas (6 and 7). These homes are expected to be absorbed
at a rate of 90 homes in 2005, another 140 homes in 2006, 160 homes in 2007, and the
remaining 122 homes in 2008.
P Detached $900,000+: There are two planning areas that have projects in this market segment
(Planning Areas 10 and 12) with some 36 homes that are expected to be priced at $946,000 for
some 4,375 sq.ft. of living area, for a value ratio (price/living area) of $216, on the average;
these homes are expected to commence escrow closings in the 2"d-2005. These homes are
expected to be absorbed at a rate of 10 homes in 2005, 20 homes in 2006 and the remaining 6
homes in 2007.
Therefore, the 1,317 housing units in AD No. 2002-01 are expected to be absorbed during 2nd-2005 to
2008 time period: the absorption rate starts at 268 homes in 2005 as the projects enter the marketplace,
rises to 477 homes in 2006 as most of the projects are on the marketplace, remains at a strong level of
429 homes in 2007, and then declines thereafter, as various projects are sold out, to 143 homes in
2008. The 133 acres for business-industrial uses are expected to be absorbed (builtloccupied) at a rate
of 15 acres in 2005,20 to 25 acres per year during 2006-2009 and the remaining 23.3 acres in 2010.
The estimated absorption schedule for the forthcoming residential and
business-industrial products/projects in the AD No. 2002-01 is subject to
change due to potential shifts in economic/real estate market conditions
and/or the development strategy by the developershuilders, Lennar
Development, Morrow Development and the Sares-Regis Group.
For additional information on the estimated absorption schedules for the residential and also the
business-industrial products in AD No.2002-01, please refer to the following table and graphs.
Empire Economics Page 34 Release Date: June 14 ,2004
T
wn
ax zw
10
I
0 0 0 0 0 0 0 0 0 0 0 0 0 ca LD d- c9 cv 7
AllVflNNV - S9NIS013 MOt13S3 40 t1338VVflN
00 0 0 cv
b 0 0 cv
co 0 0 N
LD 0 0 N
>~&00000
0 m
t
0 v) N 0 N v)
7
0 v) -
0
0 N
F
m 0 0 hl
co 0 0 N
b 0 0 N
CD 0 0 N
Ln 0 0 N
I ASSUMPTIONS AND LIMITING CONDITIONS I
The Market Absorption Study for AD No.2002-01 is based upon various
assumptions and limiting conditions; accordingly, these are as follows:
Title to Property
Property Boundaries
Accuracy of Information from Others
Date of Study
Hidden or Unapparent Conditions
Opinions of a LegalKpecialized Nature
Right of Publication of Report
Soil and Geological Studies
Earthquakes and Seismic Hazards
Testimony or Court Attendance
Maps and Exhibits
Environmental and Other Regulations
Required Permits and Other Governmental Authority
Liability of Market Analyst
Presence and Impact of Hazardous Material
Structural Deficiencies of Improvements
Presence of Asbestos
Acreage of Property
Designated Economic Scenario
Provision of the Infrastructure; Role of Coordinator
DeveloperBuilders Responsiveness to Market Conditions
Financial Strength of the Project Developer/Builder
Market Absorption Study Timeliness of Results
For additional information on the various assumptions and limiting conditions, please
refer to the comprehensive Market Absorption Study.
Empire Economics Page 38 Release Date: June 14 ,2004
APPENDIX D
SUMMARY OF THE INDENTURE
The following is a summary of certain provisions of the Bond lndenture not otherwise
summarized in the text of this Official Statement. This summary is not intended to be definitive,
and reference is made to the complete text of each of such documents for the complete terms
thereof.
DEFINITIONS
Except as otherwise defined in this summary, the terms previously defined in this Official
Statement have the respective meanings ascribed to such terms in the body of this Official
Statement
In addition to the preceding definitions, the following terms defined in the Bond lndenture
have, except where specified otherwise, the following meanings.
"Acquisition Agreement" means the Acquisition/Financing Agreement, dated as
of January 21,2003, by and between the City and Lennar Bressi Ranch Venture, LLC and Real
Estate Collateral Management Company and as such agreement may be further amended from
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.
"Appraisal" means an Appraisal prepared by the Appraiser or an MA1 Appraiser
who is also a State Certified Appraiser as defined in California Business and Professions Code
Section 11 34O(c) appointed and retained by the City. Such Appraisal shall be substantially
based upon the then applicable assumptions of and subject to the qualifications and limitations
contained in the Appraisal of the Property within the Assessment District prepared by the
Appraiser and dated September 27, 2007.
"Appraiser" means Bruce W. Hull & Associates, Inc.
UAssessment" or "Assessments" means the assessment levied on the lots and
parcels of property within the Assessment District by the adoption by the City Council of
Resolution No. 2004-150 on May 4, 2004 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 31 14 of the California Streets and Highways Code.
uAssessment District" means Assessment District No. 2002-01 (Poinsettia Lane
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.
"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.
D-1
“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
the Indenture as required to be undertaken by an Authorized Officer.
“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, as to each series of the Bonds, the period beginning on the
applicable Closing Date and ending on the following September 2, and thereafter the period
beginning on each September 3 and ending on the following September 2. The first Bond Year
for the 2004A Bonds shall begin on the Closing Date related thereto and end on September 2,
2005.
“Bonds” means, unless otherwise expressly provided, the Series 2004A Bonds and any Panty Bonds authorized by and at any time Outstanding pursuant to the Bond Act and
the 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.
“Costs of Issuance” means, as to each Series of the Bonds, items of expense
payable or reimbursable directly or indirectly by the City and related to the authorization, sale
and issuance of such 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 such 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
such 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 such 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.
D-2
“Escrow Fund” means the fund by the name established by Section 3.03(A)
hereof.
“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 in the Indenture, 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 pursuant to the
provisions of the Indenture.
“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 the 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 March 2 and September 2 of each year,
commencing March 2,2005, for the Series 2004A Bonds.
“Investment Agreement” means one or more agreements with respect to the
investment of the proceeds of the Bonds to be entered into between the City 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 the Indenture excluding interest earned
and gains and losses on the investment of moneys in the Rebate Fund.
“Land Secured Debt” means as to any parcel within the Assessment District, the
sum of (a) the unpaid assessment levied upon such parcel by the City for the Assessment
District, (b) the Principal amount of any other indebtedness of any Community Facilities District
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which is allocable to such parcel and is secured by the levy of special taxes on such parcel and
(c) any other fixed lien assessment levied on such parcel.
“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
‘‘Official Statement” means the Official Statement dated as of ,
“Original Purchaser” means the first purchaser of any series of the Bonds from
“Outstanding,” when used as of any particular time with reference to the Bonds,
Bonds theretofore canceled by the Paying Agent or surrendered
Authorized Officer of the City.
200---, related to the Series 2004A Bonds.
the City and, as to the Series 2004A Bonds, Stone & Youngberg, LLC.
means all Bonds except:
(i) to the Paying Agent for cancellation;
(ii) Bonds called for redemption which, for the reasons specified in
the Indenture, are no longer entitled to any benefit under the Indenture other than the
right to receive payment of the redemption price therefor;
(iii) the meaning of the Indenture; and
Bonds paid or deemed to have been paid and discharged within
(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 the Indenture or any Supplemental Indenture.
“Owner” means any person who shall be the registered owner of any
Outstanding Bond.
“Parity Bonds” means the Bonds hereinafter issued which are secured by a
pledge of the Assessment Revenues and on the monies in the funds and accounts (with the
exception of the Improvement Fund) established for such Bonds in this Indenture and any
applicable Supplemental Indentures (including the investment earnings thereon) which pledge is
on a parity with the lien securing the Series 2004A Bonds.
“Paying Agent” means The Bank of New York Trust Company, N.A., the Paying
Agent appointed by the City, acting as an independent Paying Agent with the duties and powers
as expressly provided in the Indenture, its successors and assigns, and any other corporation or
association which may at any time be substituted in its place.
“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
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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 of 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 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) bankers acceptances endorsed and guaranteed by banks described in clause (iv) above;
(vi) obligations, the interest on which is exempt from 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;
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;
(vii)
(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
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$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 (IO) 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
(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 the
Indenture, the principal office shall be the principal office at which the Paying Agent administers
its corporate trust business in California.
“Proceeds,” when used with reference to each series of 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 each series 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 pursuant to the
provisions of the Indenture.
“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 pursuant to the
provisions of the Indenture.
“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 pursuant to the
provisions of the Indenture.
“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 the resolution of the City Council of the City
authorizing the issuance of any series of the Bonds. The Resolution of Issuance for the Series
2004A Bonds shall be Resolution No. 2004 - --, adopted by the City Council on November -,
2004.
“Resolution of Intention” means Resolution No. 2003-057, adopted by the City
Council on February 17,2004.
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“Securities Depositories” means The Depository Trust Company, Water Street,
New York, New York 10041-0099, Attention: call Notification Department, Fax (212) 855-7232;
and, in accordance with then current guidelines of the Securities and Exchange Commission,
such other securities depositories as the City may designate in an Officer‘s Certificate delivered
to the Paying Agent.
“Series 2004A Bonds” shall mean the $ City of Carlsbad
Assessment District No. 2002-1 (Poinsettia Lane East) Limited Obligation Improvement Bonds,
Series 2004A.
“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.
“Supplemental Indenture” means any indenture agreement or other instrument
then in full force and effect which has been duly approved by a resolution of the City Council of
the City at a meeting of the City Council duly convened and held, at which a quorum was
present and acted thereon, amendatory thereof or supplemental hereto; but only to the extent
that such Supplemental Indenture is specifically authorized hereunder.
“Value Deficient Parcel” means that property identified as Assessment No. 13
shown on the Assessment Diagram filed in the Office of the County Recorder of the County of
San Diego in Book of Assessment and Community Facilities District Maps, Book 38, Page 37 on
May 5,2004, as Document No. 2004-0404503.
FUNDS AND ACCOUNTS
Improvement Fund. 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
the Indenture, for the payment or reimbursement of Costs of Issuance and the costs of the
design, acquisition and construction of the Project and, pending such disbursement, shall be
subject to a lien in favor of the Owners of the Bonds.
Disbursements from the Improvement Fund shall be made by the Finance
Director pursuant to such procedures as the Finance Director may establish in conformity with
the provisions of the Acquisition Agreement.
The Finance Director shall withhold payment to Lennar Bressi Ranch Venture,
LLC of an amount equal to the amount deposited in the Escrow Fund pursuant to the Indenture
(the “Holdback Amount”) that would otherwise be payable to such entity pursuant to the terms of
the Acquisition Agreement until such time as the funds are on deposit in the Escrow Fund have
been transferred to and deposited in the Improvement Fund pursuant to the provisions of the
Indenture.
Moneys in the Improvement Fund shall be invested and deposited in accordance
with the provisions of the Indenture. Investment Earnings shall be retained by the Finance Director in the Improvement Fund to be used for the purposes of such 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.
Escrow Fund. Moneys in the Escrow Fund shall be held by the Finance Director for the benefit
of the Owners of the Bonds, shall be disbursed pursuant to Indenture and, pending such
disbursement, shall be subject to a lien in favor of the Owners of the Bonds.
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Prior to July 15, 2008, the Finance Director shall transfer the funds on deposit in
the Escrow Fund to the Improvement Fund in whole upon receipt of an Appraisal addressed to
the City indicating that the appraised value of the Value Deficient Property is, as of the date of
valuation of such Appraisal, at least four (4) times the amount of the Land Secured Debt
applicable to such property.
If on July 1"of any Fiscal Year the payment of any assessment installment which
was placed on the tax roll for the Value Deficient Property and was due and payable during the
preceding Fiscal Year is delinquent, the Finance Director shall transfer all funds then on deposit
in the Escrow Fund to the Prepayment Account of the Redemption Fund and such funds shall
be used to redeem Series 2004A Bonds on the following September 2"d pursuant to the
Indenture.
On July 15, 2008, if the funds on deposit in the Escrow Fund have not been
transferred to the Improvement Fund pursuant to the provisions of the Indenture, the Finance
Director shall transfer such funds to the Prepayment Account of the Redemption Fund and such
funds shall be used to redeem Series 2004A Bonds on September 2, 2008, pursuant to the
Indenture.
Upon transfer pursuant to the Indenture the Finance Director shall reduce the
principal amount of the unpaid assessment applicable to the Value Deficient Property by an
amount equal to the principal amount of the Series 2004A Bonds redeemed from such funds and the funds transferred to the Prepayment Account from the Reserve Fund pursuant to the
Indenture.
Moneys in the Escrow Fund shall be invested in accordance with the Indenture.
Investment Earnings on the investment of moneys on deposit in the Escrow Fund will be
deposited in the Improvement Fund.
Redemption Fund. Moneys in the Redemption Fund, and the Debt Service Account and Prepayment Account therein, 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, and, pending such disbursement, shall be subject to a lien in favor of
the Owners of the Bonds.
Debt Service Account
Deposits of Bond proceeds representing capitalized interest on the Bonds,
Assessment Revenues (excluding Assessment Prepayments) and moneys transferred from the
Reserve Fund shall be made to the Debt Service Account as required by the Indenture.
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.
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,
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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, 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 for in the Indenture.
Moneys in the Debt Service Account shall be invested and deposited in
accordance with the provisions of the Indenture. 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.
Prepayment Account .
The following amounts shall be deposited in the Prepayment Account:
Assessment Revenues representing a partial or a full prepayment of an Assessment; 1.
2. Amounts transferred to the Redemption Fund from the Reserve Fund upon the
prepayment of an Assessment; and
3. Amounts transferred from the Reserve Fund to the Redemption Fund representing
amounts in excess of the Reserve Requirement and designated for the advance retirement of
the Bonds.
The Finance Director shall make disbursements from the Prepayment Account
as follows:
(a) The portion of any Assessment Prepayment constituting the
administrative fee due and payable to the City shall be transferred to the general fund of the
City.
The portion of any Assessment Prepayment representing delinquent
principal, interest and penalties shall be transferred first to the Reserve Fund 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.
The installment of principal due in the fiscal year within which an
Assessment Prepayment is made shall be transferred to the Debt Service Account.
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 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.
Moneys in the Prepayment Account shall be invested and deposited in
accordance the provisions of the Indenture. Investment Earnings shall be retained in the
Prepayment Account.
Reserve Fund. 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)
(c)
(d)
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Except as described below, 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.
Amounts transferred from the Reserve Fund to the Debt Service Account shall be
restored by the City from 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.
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.
Whenever, on any September3, the amount in the Reserve Fund, less
Investment Earnings resulting from the investment of the funds therein which must be rebated to
the United States, exceeds the then applicable Reserve Requirement, the Finance Director shall transfer an amount equal to the excess from the Reserve Fund to the Debt Service Account to be used for (a) the payment of Debt Service on the next succeeding Interest Payment Date or
(b) the advance retirement of 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 of all of the Outstanding Bonds.
Rebate Fund. The Rebate Fund is to be held by the Finance Director as a separate fund
distinct from all other funds and accounts held by the Finance Director under the Indenture. 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 applicable 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.
DEPOSIT AND INVESTMENT OF MONEYS IN FUNDS
General. Moneys in any fund or account created or established by the 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 the Indenture.
Obligations purchased as an investment of moneys in any fund or account shall be deemed to be part of such fund or account, subject, however, to the requirements of the Indenture for
transfer of Investment Earnings in funds and accounts.
For purposes of determining the amount on deposit in any fund or account held
under the Indenture, all Permitted Investments or investments credited to such fund or account
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shall be valued at the cost thereof (excluding accrued interest and brokerage commissions, if
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
in the Indenture for transfer to or holding in or to the credit of particular funds or accounts of
amounts received or held by the Finance Director under the Indenture, 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 the 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.
Investment Aareements. Any Investment Agreement entered into for the investment of
moneys in any fund or account established by the 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 the definition of the term Investment Agreement, 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 required rating
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 required rating; (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
required rating 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
any).
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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.
PLEDGE OF ASSESSMENT REVENUES; PAYMENT ON THE BONDS
Pledae of Assessment Revenues.
The Bonds shall be secured by a pledge (which pledge shall be effected in the
manner and to the extent provided in the Indenture) 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 in the
Indenture 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 in the Indenture 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 the provisions of the Indenture.
The Finance Director shall deposit all Assessment Revenues in the Redemption
Fund. That amount of Assessment Revenues which will be needed to pay Debt Service on the
Bonds on the next Interest Payment Date shall be deposited in the Debt Service Fund
Assessment Revenues which will be needed to pay Debt Service. Assessment Revenues
representing Assessment Prepayments shall be deposited in the Prepayment Account.
Pavment on the Bonds. On each Interest Payment Date, the Paying Agent shall, from the
funds 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.
Temporaw Deficiency.
If, on any Interest Payment Date, there are insufficient funds to make such
payments, the Paying Agent shall apply the available funds fd 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.
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.
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Determination of Ultimate Loss. 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.
TRANSFER OR EXCHANGE OF BONDS
Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred 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 (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.
Exchanne 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.
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. 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 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 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 the
Indenture with all other Bonds issued pursuant to the Indenture.
D- 13
COVENANTS OF THE CITY
Punctual Pavment. 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
the 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 the Indenture and all Supplemental Indentures and of the Bonds.
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.
Extension of Time for Pavment. 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 under the Indenture, to the benefits of the
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.
Asainst 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 created under the Indenture for the benefit of the Bonds, except as permitted by the Indenture.
Protection of Securitv 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.
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.
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.
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 the Indenture, and for better
assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the
Indenture.
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;
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;
(B)
D- 14
(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;
It will comply with the Rebate Certificate as a source of guidance for
achieving compliance with the Code; and
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.
These covenants of the City shall survive the payment, redemption or
defeasance of Bonds.
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.
LIABILITY OF CITY
The City shall not incur any responsibility in respect of the Bonds or the Indenture
other than in connection with the duties or obligations explicitly therein or in the Bonds assigned
to or imposed upon it. The City shall not be liable in connection with the performance of its
duties under the Indenture, 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 in the Indenture 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 the 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 the 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 under the Indenture, 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
(D)
(E)
D-15
authorization and protection in respect of any action taken or suffered by it under the Indenture
in good faith and in accordance therewith.
In order to perform its duties and obligations under the Indenture, 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 under
the Indenture, 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.
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Amendments Permitted. The 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 described below. 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 the Indenture), or
(iii) reduce the percentage of Bonds required for the amendment of the Indenture, 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 the Indenture and the Paying Agent may conclusively rely on such
opinion.
The 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:
to add to the covenants and agreements of the City in the
Indenture contained, other covenants and agreements thereafter to be observed, or to
limit or surrender any right or power reserved in the Indenture to or conferred upon the
City;
(1)
(2)
(3)
to make modifications not adversely affecting any Outstanding
series of Bonds in any material respect;
to make such provisions for the purpose of curing any ambiguity,
or of curing, correcting or supplementing any defective provisions of the Indenture, or in
regard to questions arising under the Indenture, as the City and the Paying Agent may
deem necessary or desirable and not inconsistent with the 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
D- 16
assure exclusion from gross income for federal income tax purposes of interest on the
Bonds or to conform with the Regulations;
(5) to provide for the issuance of Parity Bonds pursuant to the
provisions of the Indenture.
Owners' Meetinas. 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 to provide for the giving of
notice thereof and to fix and adopt rules and regulations for the conduct of the meeting.
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 the
Indenture or any Supplemental Indenture, to the extent that such amendment is permitted by
the provision of the Indenture, to take effect when and as provided in the Indenture. 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 disqualified Bonds) and
a notice shall have been mailed as described below. Each such consent shall be effective only
if accompanied by proof of ownership of the Bonds for which such consent is given. 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 described below 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 provided 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 the Indenture (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
described above 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 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.
Disaualified 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, and shall not be entitled to vote upon,
consent to, or participate in any action related to the modification or amendment of the
Indenture.
Effect of Sumlemental Indenture. From and after the time any Supplemental Indenture
becomes effective, the Indenture shall be deemed to be modified and amended in accordance
D-17
therewith, and the respective rights, duties and obligations under the Indenture of the City and
all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced under
the Indenture 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 the Indenture for any and all purposes.
Endorsement or Replacement of Bonds Issued After Amendments. The City may
determine that Bonds delivered after the effective date of any modification or amendment of the
Indenture 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.
Amendatorv Endorsement of Bonds. The provisions of the Indenture 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.
ISSUANCE OF PARITY BONDS
The City may at any time after the issuance and delivery of the Series 2004A
Bonds issue Parity Bonds in one or more series payable from Assessment Revenues and other
amounts deposited in the funds and accounts created under the Indenture (other than in the
Improvement Fund and the Rebate Fund) and secured by a lien and charge upon such amounts
equal to the lien and charge securing the Outstanding Improvement Bonds and any other Parity
Bonds theretofore issued under the Indenture or under any Supplemental Indenture; provided,
however, that Parity Bonds may only be if the City has determined that the proceeds of such
Parity Bonds will be required by the City to complete the construction of the Project after the
City has terminated the Acquisition Agreement and the City has determined to proceed to
advertise and bid the balance of the construction of the Project. Parity Bonds may be issued
subject to the following additional specific conditions, which are conditions precedent to the
issuance of any such Parity Bonds:
The City shall be in compliance with all covenants set forth in the
Indenture and any Supplemental Indenture then in effect; provided, however, that Parity
Bonds may be issued notwithstanding that the City is not in compliance with all such
covenants so long as immediately following the issuance of such Parity Bonds the City
will be in compliance with all such covenants.
(a)
(b) The issuance of such Parity Bonds shall have been duly
authorized pursuant to the Bond Act and all applicable laws, and the issuance of such
Parity Bonds shall have been provided for by a Supplemental Indenture duly adopted by
the City which shall specify the following:
1. The purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited,
including a provision requiring the proceeds of such Parity Bonds to be applied
solely for the purposes specified hereunder, including payment of all costs
D-18
incidental to or connected therewith and funding a reserve fund for such Parity
Bonds;
2. The authorized principal amount of such Parity Bonds;
3. The date and the maturity date or dates of such Parity
Bonds; provided that (i) each maturity date shall fall on a September 2, (ii) all
such Parity Bonds of like maturity shall be identical in all respects, except as to
number, and (iii) fixed serial maturities or mandatory sinking fund payments, or
any combination thereof, shall be established to provide for the retirement of all
such Parity Bonds on or before their respective maturity dates;
thereof and the procedure for execution and authentication;
4. The description of the Parity Bonds, the place of payment
5. The denominations and method of numbering of such
Parity Bonds;
payment, if any, for such Parity Bonds;
6. The amount and due date of each mandatory sinking fund
7. The form of such Parity Bonds;
8. Such other provisions as are necessary or appropriate and
not inconsistent with this Indenture.
(c) There shall have been received by the Finance Director the following
documents or money or securities, all of such documents dated or certified, as the case may be,
as of the date of delivery of such Parity Bonds (unless the Finance Director shall accept any of
such documents bearing a prior date):
A certified copy of the Supplemental Indenture authorizing 1.
the issuance of such Parity Bonds;
2.
Parity Bonds;
3.
has the right and
Indentures relating
A written request of the City as to the delivery of such
An opinion of Bond Counsel to the effect that (a) the City
power under the Bond Act to adopt the Supplemental
to such Parity Bonds, and the Indenture and all such
Supplemental Indentures have been duly and lawfully adopted by the City, are in
full force and effect and are valid and binding upon the City and enforceable in
accordance with their terms (except as enforcement may be limited by
bankruptcy, insolvency, reorganization and other similar laws relating to the
enforcement of creditors’ rights); (b) the Indenture creates the valid pledge which
it purports to create of the Assessment Revenues and other amounts as provided
in the Indenture, subject to the application thereof to the purposes and on the
conditions permitted by the Indenture; and (c) such Parity Bonds are valid and
binding special obligations of the City, enforceable in accordance with their terms
(except as enforcement may be limited by bankruptcy, insolvency, reorganization
and other similar laws relating to the enforcement of creditors’ rights) and the
terms of the Indenture and all Supplemental Indentures thereto and entitled to
D-19
the benefits of the Indenture and all such Supplemental Indentures, and such
Parity Bonds have been duly and validly authorized and issued in accordance
with the Act (or other applicable laws) and the Indenture and all such Supplemental Indentures; and a further opinion of Bond counsel to the effect
that, assuming compliance by the City with certain tax covenants, the issuance of
the Parity Bonds will not adversely affect the exclusion from gross income for
federal income tax purposes of interest on the Bonds previously issued or the
exemption from State of California personal income taxation of interest on the
Bonds previously issued;
4. A certificate of an Authorized Officer containing such
statements as may be reasonably necessary to show compliance with the
requirements of the Indenture;
5. A certificate of an Authorized Officer certifying that the City
has received as to such Parity Bonds a certificate from one or more Independent
Assessment District Consultants which, when taken together, certify that:
(A) (i) the aggregate appraised value of all properties within
the Assessment District shall be at least four (4) times the Land Secured
Debt allocable to the properties within the Assessment District and (ii) the
aggregate appraised value of each discrete property identified in Table 6
of the Official Statement shall also be at least four (4) times the Land
Secured Debt allocable to each such discrete property; and
the aggregate principal amount of all Bonds following the
issuance of such Parity Bonds shall not exceed the aggregate amount of
the unpaid Assessments.
6. Such further documents, money and securities as are
required by the provisions of the Indenture and the Supplemental Indenture
providing for the issuance of such Parity Bonds.
(B)
DISCHARGE OF INDENTURE.
If the City shall pay and discharge the entire indebtedness on all Bonds in any
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;
one or more of the following ways:
(A)
(B) by depositing, 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, 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 fully sufficient to pay and
discharge the indebtedness on all Bonds (including all principal, interest and redemption
premiums) at or before their respective maturity dates;
D - 20
and if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given as in the 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 the Indenture and all other obligations of
the City under the 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, and the obligations of the City pursuant to the tax covenants contained in the Indenture.
Notice of such election shall be filed with the Paying Agent. The satisfaction and discharge of
the 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.
MISCELLANEOUS
Unclaimed Monevs. Anything contained in the Indenture 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 look only to
the City for the payment of the principal of, and interest and any premium on, their Bonds.
Pavment 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.
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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 92,995. 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 984 full and
part-time employees. The City employees are members of the State Public. Employees
Retirement System (the “System”). The contributions to the System are current, and as of June
30, 2002 (the last date information is available from the System) the funded status of the safety
plan was 90% while the funded status of the miscellaneous plan was 108.7%.
E- 1
The following provides miscellaneous statistical data for the City, as of June 30,
2004:
Total Net Assessed Valuation
Streets:
Number of Street Lights
Miles of Streets
Number of Stations
Number of Firefighters & Officers
Fire Protection:
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
$1 4,303,050,347
6,432
293
6
73
1
107
79,050
24,600
431
18.4
232
Recreation and Culture:
Number of Parks 39
Acres of Parks (Improved Community & Special Use Areas) 295
Acres of Open Space (Special Resource Areas & General
City-Owned Open Space) 490
Number of Pools 1
Number of Libraries 2
Number of Materials in Circulation 353,339
Total Number of Authorized Full-Time City Employees 646
Source: City of Carlsbad, Finance Department.
Population
The City’s current population is approximately 92,995, and expects to be built out
in 2020 according to its general plan estimates to a population of 108,500. Table 1 illustrates
comparative population figures through 2004, the last year figures are available from the State.
E-2
T N
- ..
3 W
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
ASSESS ED VAL U AT1 0 N (1 )
(As of June 30)
Total
Fiscal Total Total Assessed
Year Secured Unsecured Value
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
$5,858,987,695
5,673,354,814
5,676,061,219
5,811,751,594
6,232,883,670
7,154,426,710
8,675,347,964
10,289,895,123
11,586,003,633
12,801,430,765
$270,120,519
288,206,831
31 0,402,764
348,706,124
352,854,173
424,962,226 41 9,824,253
422,862,440
51 9,294,090
487,682,538
$6,129,108,214
5,961,561,645
5,986,463,983
6,160,457,718
6,585,737,843
7,579,388,936
9,035,172,217
10,712,757,563
12,105,297,723
13,289,113,303
Percent
Change From
Previous Year
--
(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 30,2004)
Taxpaver
Callaway Golf Company
Aviara Resort Associates
La Costa Hotel & Spa Corporation
Continuing Life
Legoland California, Inc.
Bressi Gardenlane LLC
Prentiss Properties
Borders, Inc.
H. G. Fenton Company
Real Estate Collateral Mgmt. Co.
Gemological Institute
Universe Institutional
TOTAL:
TvDe of Business
Manufacturer
Resort & Golf Course Hotel & Health Spa
Senior Retirement Community Family Theme Park Real Estate Real Estate Retail Sales Distribution Warehouse Real Estate Gemological School Residential Apartment Rentals
Valuation
$1 59,353,837
138,722,821
132,292,486
125,451,962
105,000,000
76,495,927
71,845,631
68,001,543
63,028,919
62,465,278
55,520,616
52,549.61 5
$1 ,I 10,728,635
Source: San Diego County Assessor’s Office and City Finance Division.
$1,110,728,635 is 7.8% of the total assessed value in Fiscal Year
2003/04 of $14,303,050,347.
Retail and Total Taxable Sales
Retail sales in the City increased over 66.7% in the period of 1997 to
2002. Total sales in the City increased over 60.0% in the same period. The following
table presents the taxable transactions of the City and San Diego County for the
calendar years 1997 through second quarter of 2003.
CITY OF CARLSBAD
NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS ($ in thousands)
Year
1997
1998
1999
2000
2001
2002
2003*
No. Of
Permits
838
91 1
1,000
1,166
1,248
1,328
1,394
Retail Stores
Taxable
Transactions
$ 920,206
1,077,897
1,231,255
1,381,409
1,483,053
1,534,421
776,512
No of
-- 2,830
17.1% 2,984
14.2 3,064
12.2 3,249
7.4 3,327
3.4 331 2
N/A 3,660
Oh Chanqe Permits
Total All Outlets
Taxable
Transactions % Chanqe
$I ,206,670 --
1,417,670 17.5%
1,597,275 12.7
1,790,215 12.1
1,868,939 4.4
1,930,892 3.3
987,547 N/A
Source: California State Board of Equalization. * Through Second Quarter of 2003 only.
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COUNTY OF SAN DIEGO
NUMBER OF PERMITS AND VALUATION OF TAXABLE TRANSACTIONS
($ in thousands)
Retail Stores Total All Outlets
No. Of Taxable No of Taxable - Year Permits Transactions % Chanqe Permits Transactions % Chanqe
1998 32,269 19,936,526 8.3 77,923 29 , 6 1 6,004 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
2003* 41,456 13,845,667 N/A 84,829 19,340,953 NIA
1997 32,381 $18,402,311 7.4% 77,192 $27,408,526 9.0%
Source: California State Board of Equalization. * Through Second Quarter of 2003 only.
Construction Activity
Building permit values for fiscal years 1993194 through 2002/03 are
shown below.
CITY OF CARLSBAD
RESIDENTIAL AND COMMERCIAL CONSTRUCTION ACTIVITY
(As of June 30)
Fiscal Estimated Value Year of Construction
1993194
1994195
1995196
1996197
1997198
1998199
1999100
2000/01
2001 102
2002103
$ 71,057,243
145,344,099
162,116,427
305,247,426
479,909,805
588,527,417
468,596,775
51 3,763,904
272,671,912
265,175,025
Source: City of Carlsbad Comprehensive Annual Financial Reports.
Employment
Industries in the City of Carlsbad include: a regional shopping center; a
major family theme park; a specialty outlet center; an auto mall; 30 hotels offering 3,500
rooms for tourist lodging; high-technology, multimedia, communication and biomedical
businesses; electronics; golf apparel and equipment manufacturers; several business
and light industry parks; and numerous land developers.
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The City has, historically, been primarily a residential community, and is
part of 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.
COUNTY OF SAN DIEGO
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
ANNUAL AVERAGES (1985 - 2004)
- Year Labor Force Em Dloved UnemDloved
1985 967,200 91 5,900 51,300 1986 1,010,900 960,500 50,400
1987 1,059,400 1.01 1,700 47,700
1988 1 ,I 26,300 1,078,400 47,900
1989 1 ,I 72,100 1,125,900 46,200
1990 1,201,800 1,145,700 56,100
1991 1 , 189,900 1,115,000 74,900
1992 1,201,000 1 ,I 13,000 88,000
1993 1,226,300 1 , 131,600 94,700
1994 1,235,100 1,148,200 86,900
1995 1,226,200 1,147,800 78,400
1996 1,245,700 1 ,I 80,100 65,600
1997 1,281,600 1,227,200 54,400
1998 1,327,700 1,287,700 40,000
1999 1,361,600 1,319,600 42,000
2000 1,404,900 1,362,900 42,000
2001 1,424,900 1,379,200 45,700
2002 1,458,000 1,395,600 62,400
2003 1,482,200 1,419,100 63,100
2004* 1,521,600 1,464,400 57,200
* As of September 2004.
(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
4.3
4.3
3.8
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The following are the principal employers in the City in Fiscal Year
2003/04.
CITY OF CARLSBAD
PRINCIPAL EMPLOYERS
(Fiscal Year 2003/04)
- FIRM Manufacturing
Callaway Golf lnvitrogen
Taylor Made Golf - Adidas Golf Company Acushnet Golf
Tyco-Healthcare
Seasilver USA ViaSat Ashworth
Non-Manufacturing
Carlsbad Unified School District
Four Seasons Resort - Aviara La Costa Resort & Spa
City of Carlsbad Gemological Institute of America
lSlS Pharmaceuticals 24-Hour Fitness
SOMC Group, Inc. LEGOLAN D, California
San Diego Gas & Electric Hoehn Motors
Upper Deck
PRODUCTEERVICE
Golf Equipment Research Supplies
Golf Equipment Golf Equipment
Respiratory Products Nutritional Supplements
Data Communications Golf Apparel
Education
Resort HoteVHealth Spa
Municipal Government Gemological School
Research and Development Health Club Headquarters
Software Distributor Family Theme Park
Utilities Car Dealership
Trading Cards
EMPLOYEES
1,785
900
645 535
500
500 450 400
950
900 604
603 600
506 450
41 0 372
325 300
300
Source: City of Carlsbad Comprehensive Annual Financial Reports.
Median Effective Buying Income
“Effective Buying Income” is defined as personal income less personal tax
and nontax payments, a number often referred to as “disposable” or “after-tax” income.
Personal income is the aggregate of wages and salaries, other labor-related income
(such as employer contributions to private pension funds), proprietor’s income, rental
income (which includes imputed rental income of owner-occupants of non-farm
dwellings), dividends paid by corporations, interest income from all sources, and transfer
payments (such as pensions and welfare assistance). Deducted from this total are
personal taxes (federal, state and local), nontax payments (fines, fees, penalties, etc.)
and personal contributions to social insurance. According to U.S. government
definitions, the resultant figure is commonly known as “disposable personal income.’’
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The following table summarizes the total effective buying income for the
City, the County of San Diego, the State of California and the United States for the
period 1999 through 2003.
EFFECTIVE BUYING INCOME
(Calendar Years 1999 Through 2003)
Year and Area
I999
Carlsbad
County of San Diego
State of California
United States
2000
Carlsbad
County of San Diego
State of California
United States
2001
Carls bad
County of San Diego
State of California
United States
2002
Carlsbad
County of San Diego
State of California
United States
2003
Carlsbad
County of San Diego
State of California
United States
Total Effective
Buying Income I$ in thousands1
$ 1,829,749
49,907,828
590,376,663
4,877,786,658
2,121,433
54,337,662
652,190,282
5,230,824,904
2,122,186
55,210,119
650,521,407
5,303,481,498
2,426,533
54,831,958
647,879,427
5,340,682,818
2,809,885
57,680,880
674,721,020
5,466,880,008
Median Household
Effective Buying
Income
$48,785
39,213
39,492
37,233
55,094
44,292
44,464
39,129
54,601
44,146
43,532
38,365
55,753
42,315
42,484
38,035
56,291
43,346
42,924
38,201
Source: Sales and Marketing Management, Survey of Buying Power.
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APPENDIX F
FORM OF BOND COUNSEL OPINION
Mayor and City Council
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, California
$ City of Carlsbad
Assessment District No. 2002-01
(Poinsettia Lane East)
Limited Obligation Improvement Bonds,
Series 2004A
FINAL OPINION
Ladies and Gentlemen:
In our capacity as bond counsel to the City of Carlsbad (the “City”) , and for the purposes of
the opinions expressed below, we have examined the record of the proceedings taken for the
levy of assessments and the authorization and issuance of bonds for Assessment District No.
2002-01 (Poinsettia Lane East) (the “Assessment District”) of the City of Carlsbad. The bonds
which have been issued for the Assessment District are designated “City of Carlsbad
Assessment District No. 2002-01 (Poinsettia Lane East) Limited Obligation Bonds” (the “Series
2004A Bonds”). The proceedings taken for the levy of assessments within the Assessment
District have been conducted pursuant to the Municipal Improvement Act of 1913 (Division 12
of the California Streets and Highways Code). The Series 2004A Bonds were issued pursuant
to the Improvement Bond Act of 1915 (Division 10 of the California Streets and Highways
Code) (the “Bond Act”).
The Series 2004A Bonds have been issued pursuant to the Bond Act, a resolution adopted by
the City Counsel of the City on , 2004, and the Bond Indenture dated as of
November 1, 2004 between the City and The Bank of New York Trust Company, N.A., as
Paying Agent (the ”Bond Indenture”). The Series 2004A Bonds were issued in fully registered
form in the denomination of $5,000 or any integral multiple thereof. The Series 2004A Bonds
bear interest from their date to their respective dates of maturity, payable semiannually
beginning March 2, 2005 and thereafter on the second day of March and September of each
year.
As to questions of act material to our opinion, we have relied upon representations of the City
contained in the Bond Indenture and in the certified proceedings and other certificates of
public officials furnished to us, without undertaking to verify such facts by independent
investigation.
Based upon our examination, we are of the opinion that the proceedings with respect to the
levy of assessments on land in the Assessment District and the issuance of the Series 2004A Bonds have been taken in accordance with the law and Constitution of the State of California,
and Series 2004A Bonds, having been duly issued, executed and delivered in the manner
provided by law, are regularly issued bonds, and are secured by the monies in the
Redemption Fund and the Reserve Fund established pursuant to the Bond Indenture and by
the unpaid assessments levied on the land within the Assessment District.
The City has covenanted in the Bond Indenture to comply with certain requirements of the
Internal Revenue Code of 1986, as amended (the “Code”), which must be satisfied for the
interest on the Series 2004A Bonds to be and remain excluded from gross income for the
purposes of federal income taxation. Noncompliance with such requirements could cause the
interest on the Series 2004A Bonds to be included in gross income for purposes of federal
income taxation retroactive to the date of the issuance of the Series 2004A Bonds.
We are of the opinion that, assuming compliance by the City with the aforementioned
covenants, the interest on the Series 2004A Bonds is excluded from gross income for
purposes of federal income taxation under existing statutes, regulations, rulings and court
decisions. We are further of the opinion that the interest on the Series 2004A Bonds is exempt
from personal income taxes imposed by the State of California under present state income tax
laws.
Although the interest on the Series 2004A Bonds is excluded from gross income for purposes of federal income taxation, the accrual or receipt of such interest may otherwise affect the total income tax liability of the recipient. The extent of these tax consequences will depend upon
the recipient‘s particular tax status or other items of income or deduction. We express no
opinion regarding any such tax consequences.
The opinions expressed herein may be affected by actions which may be taken (or not taken) or events which may occur (or not occur) after the date hereof. We have not undertaken to
determine, or to inform any person, whether any such actions or events are taken or occur or
are not taken or do not occur.
The rights of owners of the Series 2004A Bonds and enforceability of the Series 2004A Bonds
and-the Bond Indenture may be subject to bankruptcy, insolvency, moratorium and other laws
affecting creditors’ rights heretofore or hereafter enacted, and their enforcement may be subject to the exercise of judicial discretion in accordance with general principles of equity.
Respectfully submitted,
BEST BEST & KRIEGER LLP
APPENDIX G
FORM OF CITY CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure certificate”), dated as of
November I, 2004, is executed and delivered by the City of Carlsbad (“City”) as Dissemination
Agent in connection with the issuance of $ City of Carlsbad Assessment District No.
2002-01 (Poinsettia Lane East) 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
November 1, 2004 (the “Indenture”), between the City and BNY Western Trust Company, as
paying agent (the “Paying Agent”). The City covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate 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 Certificate unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
“Annual Report“ shall mean any Annual Report provided by the City pursuant to,
and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Dissemination Agenf“ shall mean the City, 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 Certificate.
“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.
“Official Statemenf“ 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.
“Repository” shall mean each National Repository and each State Repository.
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from
time to time.
“State Repository“ shall mean any public or private repository or entity
designated by the State of California as a state repository for the purpose of the Rule and
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recognized by the Securities and Exchange Commission. As of the date of this Continuing
Disclosure Certificate, 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 Certificate. 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
Certificate; 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 other than the City). If by such date, the Dissemination Agent (if other than the City) 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 (if other than the City) 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 certifying that the Annual Report has
been provided pursuant to this Disclosure Certificate, stating the date it was
provided and listing all the Repositories to which it was provided.
Section 4. 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
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. 2002-01 (the “Assessment District”):
(a) Principal amount of the Bonds outstanding as of June 30 and the
succeeding September 3;
(b) Balances in the Redemption Fund and the Reserve Fund as of June 30 and the succeeding September 3;
(c) Amount of assessment prepayments in the prior fiscal year;
(d) The amount of delinquencies in the prior fiscal year; (e) Any action by the City to foreclose on property with delinquent
assessments;
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(9 The aggregate assessed value of property in the Assessment District with
unpaid assessments and the unpaid assessments levied on such
property; and
Owners of property in the Assessment District with aggregate unpaid
assessments in excess of 5% of the total unpaid assessments. (9)
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 identify each
such other document so included by reference.
Section 5. Reportina of Sianificant 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.
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 (if other than the City) 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)(8) 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.
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Section 6. Termination of Reportina Oblisation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds.
Section 7. Dissemination Aqent. The City may, from time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate,
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 the
City.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate 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 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 Certificate shall be deemed
to prevent the City from disseminating any other information, using the means of dissemination
set forth in this Disclosure Certificate or any other means of communication, or including any
other information in any Annual Report or notice of occurrence of a Listed Event, in addition to
that which is required by this Disclosure Certificate. If the 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 Certificate, the City shall have no obligation under this Continuing Disclosure Certificate to update such information or include it in any future
Annual Report or notice of occurrence of a Listed Event.
Section IO. Default. In the event of a failure of the City or Dissemination Agent to
comply with any provision of this Disclosure Certificate 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 Certificate. A default under this Disclosure Certificate
shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City or Dissemination Agent to comply
with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Aaent (if other than the
Citv). The Dissemination Agent will receive reasonable compensation for its services provided
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pursuant to this Disclosure Certificate. 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 Certificate, 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 Certificate 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.
CITY OF CARLSBAD
By: _____- - Finance Director
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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. 2002-01 (Poinsettia Lane
East) Limited Obligation Improvement Bonds
Date of Issuance: -------I 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 .
, as Dissemination Agent Dated: _______________
By:
Authorized Officer
cc: Issuer
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FORM OF DEVELOPER CONTINUING DISCLOSURE AGREEMENT
This CONTINUING DISCLOSURE AGREEMENT (this “Disclosure Agreement”) is
executed and entered into as of November 1, 2004, by and between BNY Western Trust
Company (the “Bank), in its capacity as dissemination agent (the “Dissemination Agent”) and in its capacity as Paying Agent with respect to the Assessment District No. 2002-01 (Poinsettia Lane East) Limited Obligation Improvement Bonds (the “Bonds”) of the City of Carlsbad, California (the “City”), and , a (the “Property Owner”);
Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is
being executed and delivered by the Property Owner for the benefit of the owners and beneficial owners of the Bonds.
Section 2. Definitions. In addition to the definitions set forth above and in the Bond Indenture, dated as of November 1, 2004 (the “Indenture”), between the City and the Paying Agent, 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:
“Affiliate” of another Person means (a) a Person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other
Person, (b) any Person, 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, and (c) any
Person directly or indirectly controlling, controlled by, or under common control with, such other Person. For purposes hereof, control means the power to exercise a controlling influence over
the management or policies of a Person, unless such power is solely the result of an official
position with such Person.
“Assessment District” means Assessment District No. 2002-01 (Poinsettia Lane East) of
the City.
“Assessments” means the assessments levied on property within the Assessment
District in connection with formation of the Assessment District and used to pay debt service on the Bonds.
“Assumption Agreement” means an undertaking of a Major Developer, or an Affiliate
thereof, and the Dissemination Agent, for the benefit of the owners and beneficial owners of the Bonds containing terms substantially similar to this Disclosure Agreement (as modified for such
Major Developer’s development and financing plans with respect to the Assessment District), whereby such Major Developer or Affiliate agrees to provide semi-annual reports and notices of
significant events, setting forth the information described in sections 4 and 5 hereof,
respectively, with respect to the portion of the property in the Assessment District owned by such Major Developer and its Affiliates and, at the option of the Property Owner or such Major
Developer, agrees to indemnify the Dissemination Agent pursuant to a provision substantially in the form of Section 11 hereof.
“City” means the City of Carlsbad, California.
“Development Plan” means, with respect to a Major Developer, the specific
improvements such Major Developer intends to make, or cause to be made, to the portion of the property owned by such Major Developer in the Assessment District in order for such portion of
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the property to reach the Planned Development Stage, the time frame in which such
improvements are intended to be made and the estimated costs of such improvements. As of the date hereof, the Development Plan for the property owned by the Property Owner and its
Affiliates is described in the Official Statement under the caption “OWNERSHIP AND VALUE
OF PROPERTY WITHIN THE ASSESSMENT DISTRICT -Plan of Development - .”
“Dissemination Agent” means BNY Western Trust Company, or any successor
Dissemination Agent designated in writing by the Property Owner, and which has filed with the Property Owner, the City and the Paying Agent a written acceptance of such designation, and
which is experienced in providing dissemination agent services such as those required under this Disclosure Agreement.
“Financing Plan” means, with respect to a Major Developer, the method by which such
Major Developer intends to finance its Development Plan, including specific sources of funding for such Development Plan. As of the date hereof, the Financing Plan for the Developer and its
Affiliates is described in the Official Statement under the caption “OWNERSHIP AND VALUE OF PROPERTY WITHIN THE ASSESSMENT DISTRICT -Plan of Development - .”
“Listed Events” means any of the events listed in Section 5(a) of this Disclosure
Agreement.
“Major Developer” means, as of any Report Date, the Property Owner and any Affiliate
so long as such Property Owner and/or Affiliate is responsible in the aggregate for 15% or more
of the Assessments in the Assessment District actually levied at any time during the then- current fiscal year.
“National Repository” means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. Information on the National Repositories as of a particular date is available on the Securities and Exchange Commission’s Internet site at
www.sec.gov/info/munici palhrmsir. htm.
“Official Statement” means the final official statement executed by the City in connection with the issuance of the Bonds.
“Participating Underwriter” means Stone & Youngberg LLC, the original underwriter of
the Bonds required to comply with the Rule in connection with offering of the Bonds.
”Person” means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government
or political subdivision thereof.
“Planned Development Stage” means the stage of development of the land in the Assessment District owned by the Property Owner and its Affiliates that the Property Owner
intends to achieve with respect thereto. As of the date hereof, the Planned Development stage of the Property Owner is the construction of approximately [attached] [detached] single-
family homes.
“Property” means the property owned by the Property Owner in the Assessment District.
“Report Date” means 15 and -- 15 of each calendar year.
“Repository” means each National Repository and each State Repository, if any.
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“Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
“Semi-Annual Report” means any Semi-Annual Report provided by the Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement.
“State Repository” means any public or private repository or entity designated by the
State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Agreement, there is
no State Repository.
Section 3. Provision of Semi-Annual Reports.
(a) The Property Owner shall, or upon written direction shall cause the Dissemination Agent to, not later than the Report Date, commencing 15, 2005,
provide to each Repository a Semi-Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement with a copy to the Paying Agent (if different from the
Dissemination Agent), the Participating Underwriter and the City. Not later than 15 Business Days prior to the Report Date, the Property Owner shall provide the Semi-Annual Report to the
Dissemination Agent. The Property Owner shall provide a written certification with (or included as a part of) each Semi-Annual Report furnished to the Dissemination Agent, the Paying Agent
(if different from the Dissemination Agent), the Participating Underwriter and the City to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be
furnished by it under this Disclosure Agreement. The Dissemination Agent, the Paying Agent, the Participating Underwriter and the City may conclusively rely upon such certification of the
Property Owner and shall have no duty or obligation to review the Semi-Annual Report. The
Semi-Annual Report may be submitted as a single document or as separate documents comprising a package, and may incorporate by reference other information as provided in
Section 4 of this Disclosure Agreement.
(b) If the Dissemination Agent does not receive a Semi-Annual Report by 15 days prior to the Report Date, the Dissemination Agent shall send a reminder notice to the Property
Owner that the Semi-Annual Report has not been provided as required under Section 3(a) above. The reminder notice shall instruct the Property Owner to determine whether its
obligations under this Disclosure Agreement have terminated (pursuant to Section 6 below) and, if so, to provide the Dissemination Agent with a notice of such termination in the same manner
as for a Listed Event (pursuant to Section 5 below). If the Property Owner does not provide, or cause the Dissemination Agent to provide, a Semi-Annual Report to the Repositories by the
Report Date as required in subsection (a) above, the Dissemination Agent shall send a notice to the Municipal Securities Rulemaking Board and appropriate State Repository, if any, in
substantially the form attached hereto as Exhibit A, with a copy to the Paying Agent (if other than the Dissemination Agent), the City, the Participating Underwriter and the Property Owner.
(c) The Dissemination Agent shall:
(i) determine prior to each Report Date the name and address of each
National Repository and each State Repository, if any;
(ii) to the extent the Semi-Annual Report has been furnished to it, file a report
with the Property Owner (if the Dissemination Agent is other than the Property Owner), the City and the Participating Underwriter certifying that the Semi-Annual Report has
been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided.
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Section 4. Content of Semi-Annual Reports. (a) The Property Owner’s Semi-Annual Report shall contain or incorporate by reference the information set forth in Exhibit B attached
hereto, any or all of which may be included by specific reference to other documents, including official statements of debt issues of the Property Owner 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 Property Owner shall clearly identify each such
other document so included by reference. With respect only to the Semi-Annual Report that is required to be provided no later than 15 of each Fiscal Year, if audited financial
statements of the Property Owner or its parent company (the “Financial Statements”) are prepared, attach the audited Financial Statements. If such audited Financial Statements are not available by the time such Semi-Annual Report is required to be filed, the audited Financial
Statements shall be filed as a supplement or amendment to the Semi-Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year
for the entity covered thereby. If the financial information or operating data to be provided in a Semi-Annual Report is amended pursuant to the provisions hereof, the first Semi-Annual Report
containing the operating data or financial information in accordance with such amendment shall explain, in narrative form, the reasons for the amendment and the impact of the change in the
type of operating data or financial information being provided.
(b) In addition to any of the information expressly required to be provided in Exhibit B hereto, the Property Owner’s Semi-Annual Report shall include such further information, if any,
as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
Section 5. Reporting of Sinnificant Events.
(a) The Property Owner shall give, or cause to be given, notice of the
occurrence of any of the following Listed Events with respect to the Bonds, if material:
(i) bankruptcy or insolvency proceedings commenced by or against
the Property Owner and, if known, any bankruptcy or insolvency proceedings commenced by or against any Affiliate of the Property Owner;
(ii) failure to pay any taxes, special taxes (including the Assessments)
or assessments due with respect to the Property;
(iii) filing of a lawsuit against the Property Owner or, if known, an
Affiliate of the Property Owner, seeking damages which could have a significant impact on the Property Owner’s ability to pay Assessments or to sell or develop
the Property;
(iv) material damage to or destruction of any of the improvements on
the Property;
(v) any payment default or other material default by the Property Owner on any loan with respect to the construction of improvements on the Property ;
Any denial or termination of credit, any denial or termination of, or
default under, any line of credit or loan or any other loss of a source of funds that could have a material adverse affect on such Property Owner’s most recently disclosed Financing Plan or development plan or on the ability of such Property
(vi)
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Owner, or any Affiliate of such Property Owner that owns any portion of the
Property, to pay Assessments when due;
(vii) Any materially adverse significant amendments to land use
entitlements for such Property Owner’s Property;
(viii) Any previously undisclosed governmentally-imposed preconditions to commencement or continuation of development on such Property Owner’s
Property;
(ix) Any previously undisclosed legislative, administrative or judicial challenges to development on such Property Owner’s Property, if material to the
Development Plan;
(x) Any changes, if materially adverse to the Development Plan, in the alignment, design or likelihood of completion of significant public
improvements affecting such Property Owner’s Property, including major thoroughfares, sewers, water conveyance systems and similar facilities, and
(b) Whenever the Property Owner obtains knowledge of the occurrence of a Listed Event, the Property Owner shall as soon as possible determine if such event
would be material under applicable Federal securities law; and
(c) If the Property Owner determines that knowledge of the occurrence of a
Listed Event would be material under applicable Federal securities law, the Property Owner shall, or shall cause the Dissemination Agent to, promptly file a notice of such
occurrence with the Municipal Securities Rulemaking Board and each State Repository,
if any, with a copy to the Paying Agent, the City and the Participating Underwriter.
Section 6. Duration of Reportina Obliaation.
(a) All of the Property Owner‘s obligations hereunder shall commence on the date hereof and shall terminate (except as provided in Section 11) on the earliest to occur of the
following:
(i) upon the legal defeasance, prior redemption or payment in full of all the Bonds, or
(ii) at such time as property owned by the Property Owner is no longer
responsible for payment of 15% or more of the Assessments, or
(iii) the date on which the Property Owner prepays in full all of the Assessments attributable to the Property;
provided, however, that notwithstanding that the property owned by the Property Owner is no longer responsible for payment of 15% or more of the Assessments, in the event the Property
Owner shall transfer any portion of its property to another property owner which, taking into account such transfer shall be a Major Developer, the Property Owner’s obligations hereunder shall continue with respect to the property transferred and the other property owned by such
Major Owner until such time as the transferee shall have assumed the obligations of the Property Owner hereunder or such transferee shall have the disclosure obligations set forth
herein with respect to such property pursuant to a Major Developer Continuing Disclosure Agreement executed in connection with issuance of the Bonds or an Assumption Agreement.
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The Property Owner shall give notice of the termination of its obligations under this Disclosure Agreement in the same manner as for a Listed Event under Section 5.
(b) If a portion of the property in the Assessment District owned by the Property Owner, or any Affiliate of the Property Owner, is conveyed to a Person that, upon such
conveyance, will be a Major Developer, the obligations of the Property Owner hereunder with respect to the property in the Assessment District owned by such Major Developer and its
Affiliates may be assumed by such Major Developer or by an Affiliate thereof and the Property Owner’s obligations hereunder will be terminated. In order to effect such assumption, such Major Developer or Affiliate shall enter into an Assumption Agreement in form and substance
satisfactory to the City and the Participating Underwriter.
Section 7. Dissemination Anent. The Property Owner may, from time to time, appoint or engage a Dissemination Agent to assist the Property Owner in carrying out its obligations
under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be
BNY Western Trust Company. The Dissemination Agent may resign by providing thirty days’ written notice to the City, the Property Owner and the Paying Agent.
Section 8. Amendment: Waiver. Notwithstanding any other provision of this
Disclosure Agreement, the Property Owner may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived, provided that the following conditions
are satisfied (provided, however, that the Dissemination Agent shall not be obligated under any such amendment that modifies or increases its duties or obligations hereunder without its
written consent thereto):
if the amendment or waiver relates to the provisions of sections 3(a), 4 or 5(a), it may only be made in connection with a change in circumstances that arises from
a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted;
the undertakings herein, as proposed to be amended or waived, would, in
the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any
amendments or interpretations of the Rule, as well as any change in circumstances; and
(a)
(b)
(c) the proposed amendment or waiver either (i) is approved by owners of
the Bonds in the manner provided in the Indenture with the consent of, owners, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the
interests of the owners or beneficial owners of the Bonds.
If an amendment is made to the accounting principles followed in preparing the Financial
Statements, the financial information for the year in which the change is made shall present a comparison between the Financial Statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The
comparison shall include a qualitative discussion of the differences in the accounting principles
and the impact of the change in the accounting principles on the presentation of the Financial Statements or information, in order to provide information to investors to enable them to evaluate the ability of the Major Developer to generally meet its obligations. To the extent
reasonably feasible, the comparison shall be quantitative. A qualitative analysis in accordance with Generally Accepted Accounting Principles (GAAP) shall be deemed to satisfy this requirement. A notice of the change in the accounting principles shall be sent to the
Repositories in the same manner as for a Listed Event under Section 5 hereof.
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Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Property Owner from disseminating any other information, using the
means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Semi-Annual Report or notice of
occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement.
If the Property Owner chooses to include any information in any Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this
Disclosure Agreement, the Property Owner shall have no obligation under this Agreement to update such information or include it in any future Semi-Annual Report or notice of occurrence
of a Listed Event.
Section IO. Default. In the event of a failure of the Property Owner to comply with any provision of this Disclosure Agreement, the Paying Agent shall (upon written direction and only
to the extent indemnified to its satisfaction from any liability, cost or expense, including fees and expenses of its attorneys), and the Participating Underwriter and any owner or beneficial owner of the Bonds may, take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the Property Owner 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 Property Owner to comply with this
Disclosure Agreement shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Anent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Agreement, and the Property Owner agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents (each, an "Indemnified Party"), 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 reasonable costs and expenses (including
attorneys' fees) of defending against any such claim of liability, but excluding liabilities, costs
and expenses due to such Indemnified Party's negligence or willful misconduct or failure to perform its duties hereunder. The Dissemination Agent shall be paid compensation for its
services provided hereunder in accordance with its schedule of fees as amended from time to time, which schedule, as amended, shall be reasonably acceptable, and all reasonable
expenses, reasonable legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or
obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, the Property Owner, the Paying Agent, the Bond
owners, or any other party. The obligations of the Property Owner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
Section 12. Notices. Any notice or communications to be among any of the parties to
this Disclosure Agreement may be given as follows:
If to the City:, City of Carlsbad City of Carlsbad
1635 Faraday Avenue Carlsbad, CA 92008 Attention: Finance Director
If to the Dissemination Agent:
BNY Western Trust Company
550 South Hope Street, Suite 2650 Los Angeles, California 90071
Telephone: 21 3/593-3152 Telecopier: 213/593-3160
G-I 3
Attention:
If to the Paying Agent: BNY Western Trust Company 700 South Flower St., Ste. 500
Los Angeles, CA 90017-4104
Attention :
If to the Participating
Underwriter: San Diego, CA 92122
Stone & Youngberg LLC 4350 La Jolla Drive, Suite 140
Attention: Municipal Research Department
If to the Property Owner:
Attention:
Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be
sent.
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit
of the City, the Property Owner (its successors and assigns), the Paying Agent, the
Dissemination Agent, the Participating Underwriter and owners and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. All obligations of
the Property Owner hereunder shall be assumed by any legal successor to the obligations of the Property Owner as a result of a sale, merger, consolidation or other reorganization.
Section 14. Counterparts. This Disclosure 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 instrument.
[PROPERTY OWNER SIGNATURE BLOCK]
AGREED AND ACCEPTED: BNY WESTERN TRUST COMPANY,
as Dissemination Agent
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EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE SEMI-ANNUAL REPORT
Name of Issuer: City of Carlsbad
Name of Bond Issue: Assessment District No. 2002-01 (Poinsettia Lane East) Limited Obligation Improvement Bonds
Date of Issuance: ________-I 2004
NOTICE IS HEREBY GIVEN that (the “Property Owner”) has not provided a Semi-
Annual Report with respect to the above-named bonds as required by that certain Major Developer
Continuing Disclosure Agreement, dated November 1, 2004. The Property Owner anticipates that the
Semi-Annual Report will be filed by .
Dated:
BNY WESTERN TRUST COMPANY
cc: Stone & Youngberg LLC
City of Carlsbad
[PROPERTY OWNER]
G-I 5
EXHIBIT B
SEMI-ANNUAL REPORT
CITY OF CARLSBAD
(POINSETTIA LANE EAST)
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 2002-01
This Semi-Annual Report is hereby submitted under Section 4 of the Continuing
Disclosure Agreement (the “Disclosure Agreement”) entered into as of November 1, 2004 by
and between the undersigned (the “Property Owner”) and BNY Western Trust Company, as
Dissemination Agent and Paying Agent, in connection with the issuance of the above-captioned
bonds by the City of Carlsbad in connection with its Assessment District No. 2002-01 (Poinsettia
Lane East) (the “District”).
Capitalized terms used in this Semi-Annual Report but not otherwise defined have the
meanings given to them in the Disclosure Agreement.
This Semi-Annual Report shall contain or incorporate by reference the following
information with respect to each Major Developer:
I. Development Plan.
Unless information regarding such Major Developer has previously been included in a Semi-Annual Report or the Official Statement, a description of the Development Plan of such Major Developer; or, if information regarding such Major Developer has previously been
included in a Semi-Annual Report or the Official Statement, a description of the progress made in the implementation of the Development Plan of such Major Developer since the date of such
information and a description of any significant changes in such Development Plan and the
causes or rationale for such changes.
G-I 6
II. Financing Plan.
Home
Building Permits Construction
Issued Completed
Current Six-Month
Reporting Period
Ended -, 20-
Total
- ___
- _I
Unless information regarding such Major Developer has previously been included
in a Semi-Annual Report or the Official Statement, a description of the Financing Plan of such Major Developer; or, if information regarding such Major Developer has previously been
included in a Semi-Annual Report or the Official Statement, a description of any significant
changes in the Financing Plan of such Major Developer and the causes or rationale for such changes.
Homes Sold
(Closed Escrow)
-
---
~~ --
Ill. Assessment District). Home Construction Status (Property being Developed by Property Owner in the
Development Name: --___-- -~ Total Homes to be ConstructeT- units/ lots
IV. Property Conveyances to Non-Individual Homebuyers.
A description of any sales of portions of such Major Developer’s property in the
Assessment District (other than sales to individual homebuyers) during the six-month period ending on the last day of the period covered by such Semi-Annual Report, including the
identification of each such buyer and the number of residential lots or other acres sold; provided, however, that sales of five or fewer acres may be aggregated for the purpose of such
description..
G-I 7
__
--
V. Status of Tax Payments.
With respect to any portion of the property owned by such Major Developer and any of its Affiliates in the Assessment District, a statement as to whether any taxes or
assessment installments applicable to such portion of the property are delinquent.
VI. Ownership StructurelFinancial Condition Changes.
A description of any change in the ownership structure of the Major Developer
and/or the financial condition of the Major Developer or any of its Affiliates if such change in ownership structure and/or financial condition could materially interfere with the Major
Developer’s ability to complete its Development Plan.
__
VII. Amendments to Land Use Entitlements.
G-18
A discussion of any amendments to land use entitlements for any portion of the property owned by a Major Developer in the Assessment District that could have a material
adverse affect on such Major Developer’s most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major
Developer, to pay Assessments when due.
Development Conditions.
A discussion of any Precondition to commencement or continuation of
development on any portion of the property owned by a Major Developer in the Assessment District imposed by a governmental entity after the date of issuance of the Bonds which has not
been previously disclosed and which could have a material adverse affect, or any change in the status of any such precondition that was previously disclosed in the Official Statement, a Semi-
Annual Report or notice of Listed Event, which could have a material adverse affect, on such Major Developer’s most recently disclosed Financing Plan or Development Plan or on the ability
of such Major Developer, or any Affiliate of such Major Developer, to pay Assessments when due.
IX. Legislative/Administrative/Judicial Challenges.
A discussion of any previously undisclosed legislative, administrative or judicial challenges to development on any portion of the property owned by such Major Developer in the
Assessment District, or any material change in the status of any such challenge that was
previously disclosed in the Official Statement, a Semi-Annual Report or notice of Listed Event, that could have a material adverse affect on such Major Developer’s most recently disclosed
G-I 9
Financing Plan or Development Plan or on the ability of such Major Developer, or any Affiliate of such Major Developer, to pay Assessments when due.
X. Status of Previously Reported Listed Events.
An update of the status of any previously reported Section 5 of the Disclosure Agreement. Listed Event described in
XI. Other Material Information.
In addition to any of the information expressly required to be provided above,
provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made, not misleading.
G-20
Certification
The undersigned Property Owner hereby certifies that this Semi-Annual Report
constitutes the Semi-Annual Report required to be furnished by the Property Owner under the
Disclosure Agreement.
ANY OTHER STATEMENTS REGARDING THE PROPERTY OWNER, THE
DEVELOPMENT OF THE PROPERTY IN THE ASSESSMENT DISTRICT, THE PROPERTY
OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS, OTHER THAN
STATEMENTS MADE BY THE PROPERTY OWNER IN AN OFFICIAL RELEASE OR
NEWSPAPER OF GENERAL CIRCULATION, OR FILED WITH THE MUNICIPAL SECURITIES
RULEMAKING BOARD OR A NATIONALLY RECOGNIZED MUNICIPAL SECURITIES
INFORMATION REPOSITORY, ARE NOT AUTHORIZED BY THE PROPERTY OWNER. THE PROPERTY OWNER IS NOT RESPONSIBLE FOR THE ACCURACY, COMPLETENESS OR
FAIRNESS OF ANY SUCH UNAUTHORIZED STATEMENTS.
THIS SEMI-ANNUAL REPORT IS BEING FILED PURSUANT TO THE ABOVE-
REFERENCED DISCLOSURE AGREEMENT AND DOES NOT PURPORT TO CONTAIN ALL
MATERIAL INFORMATION WITH RESPECT TO THE PROPERTY OWNER, THE
DEVELOPMENT OF THE PROPERTY IN THE ASSESSMENT DISTRICT, THE PROPERTY
OWNER’S FINANCING PLAN OR FINANCIAL CONDITION, OR THE BONDS. THE
PROPERTY OWNER HAS NO OBLIGATION TO UPDATE THIS SEMI-ANNUAL REPORT
OTHER THAN AS EXPRESSLY PROVIDED IN THE ABOVE-REFERENCED DISCLOSURE
AGREEMENT.
Dated: __
By:
By: -
Name: ---- Title:
G-2 1
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 U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85
countries that DTC’s participants (“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 U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations. DTC is a wholly-
owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC). DTCC, 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 representing their
ownership interests in the Bonds, except in the event that use of the book-entry system for the
Bonds is discontinued.
H-I
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
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
H-2
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
$1,000,000 or more in aggregate principal amount of Bonds may be made to such Owner by
wire transfer to such wire address within the United States that such Owner may request in
writing for all Interest Payment Dates following the day after the Paying Agent’s receipt of
such request.
H-3
Exhibit 4
Assessment District No. 2002=01
Poinsettia Lane East
Financing Document Approval
AB # 17,942
Bond Indenture
For:
City Clerk’s Office File
Exhibit 4
CarlsbadAD 2002-01 Bond1ndenturev211-10-04.doc
BOND INDENTURE
by and between
THE CITY OF CARLSBAD
and
BNY WESTERN TRUST COMPANY
as Paying Agent
Dated as of November 1,2004
Relating to
!$
City of Carlsbad
Assessment District No. 2002-01
(Poinsettia Lane East)
Limited Obligation Improvement Bonds, Series 2004A
CarlsbadAD 2002-01 BondIndenturev2l1-10-04.doc
BOND INDENTURE
THIS AGREEMENT (the “Indenture”) is dated and entered into as of November
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”).
WITNESSETH:
WHEREAS, the City Council of the City (the “City Council”) has formed
Assessment District No. 2002-01 (Poinsettia Lane 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,
Division 12 (commencing with Section 10000) of the California Streets and Highways Code, the
Special Assessment Investigation, Limitation and Majority Protest Act of 193 1 (Division 4 of the
Streets and Highways Code) (the “Investigations Act”), Article XIIID of the Constitution of the
State of California (“Article XIIID”) and the Proposition 218 Implementation Act (Government
Code Section 53750 and following) (the Improvement Act, the Investigation Act, Article XIIID
and the Implementation Act are referred to herein collectively as the “Assessment Law”), and
provided for the issuance of bonds for the Assessment District pursuant to the Improvement
Bond Act of 1915 (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 (defined below as the “Project”); and
WHEREAS, following the completion of the cash collection period as required
pursuant to the provisions of the Assessment Law, $ of the assessment remains
unpaid and the City Council desires to provide for the issuance of limited obligation
improvement bonds pursuant to the Bond Act representing a portion of the unpaid assessment to
finance the design, construction and acquisition of the Project; and
WHEREAS, the City Council desires to make provision for the issuance, if and
when necessary, of additional limited obligation improvement bonds pursuant to the Bond Act
representing up to the remainder of the unpaid assessment on a parity with the initial series of
such bonds described in the preceding paragraph (defined below as “Parity Bonds”) to finance
the completion of the construction of the Project if, as a result of the failure of the Developers
(defined below) to complete the timely construction of the Project, the City elects, pursuant to
the terms and conditions of the Acquisition Agreement (defined below), to terminate such
agreement and to proceed to advertise and bid the balance of the construction of the Project; and
WHEREAS, pursuant to the Bond Act, the City Council adopted its Resolution
No. 2004-- which resolution, among other matters, authorized the issuance of the City of
Carlsbad Assessment District No. 2002-1 (Poinsettia Lane East) Limited Obligation
Improvement Bonds, Series 2004A (the “Series 2004A Bonds”), in an aggregate principal
CarlsbadAD 2002-01 BondIndenturev2 1 1-1 0-04.doc
amount of not to exceed $ , representing a portion of the unpaid amount of the
assessment levied on parcels of property within the Assessment District, and provided that such
issuance would be in accordance with the Bond Act and this Indenture, and authorized the
execution hereoc and
WHEREAS, it is in the public interest and for the benefit of the owners of the
property within the Assessment District and the owners of the Series 2004A Bonds that the City
enter into this Indenture to provide for the issuance of the Series 2004A Bonds, the disbursement
of proceeds of the Series 2004A Bonds, the administration and payment of the Series 2004A
Bonds and to establish the terms and conditions pursuant to which Parity Bonds may be issued;
and
WHEREAS, the Series 2004A Bonds and any Parity Bonds will be secured by
and paid from the assessments levied on the parcels of property within the Assessment District
and the annual installments of such assessments collected with respect to such parcels; and
WHEREAS, all things necessary to cause the Series 2004A 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 Series 2004A Bonds, subject to the terms hereof, have in all
respects been duly authorized;
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:
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CarlsbadAD 2002-01 BondIndenturev211-10-04.doc
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 Acquisitioflinancing Agreement, dated as
of January 2 1,2003, by and between the City and Lennar Bressi Ranch Venture, LLC and Real
Estate Collateral Management Company and as such agreement may be further amended from
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.
“Appraisal” means an appraisal prepared by the Appraiser or an MAI appraiser
who is also a state certified appraiser as defined in California Business and Professions Code
Section 1134O(c) appointed and retained by the City. Such appraisal shall be substantially based
upon the then applicable assumptions of and subject to the then applicable qualifications and
limitations contained in the appraisal of the property within the Assessment District prepared by
the Appraiser and dated September 27,2004.
“Appraiser” means Bruce W. Hull & Associates, Inc.
“Assessment” or “Assessments” means the assessment levied on the lots and
parcels of property within the Assessment District by the adoption by the City Council of
Resolution No. 2004-150 on May 4, 2004 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 1 14 of the California Streets and Highways Code.
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“Assessment District” means Assessment District No. 2002-01 (Poinsettia Lane
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.
“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
ths Indenture as required to be undertaken by an Authorized Officer.
“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, as to each series of the Bonds, the period beginning on the
applicable Closing Date and ending on the following September2 and thereafter the period
beginning on each September 3 and ending on the following September 2. The first Bond Year
for the Series 2004A Bonds shall begin on the Closing Date related thereto and end on
September 2,2005.
“Bonds” means, unless otherwise expressly provided, the Series 2004A Bonds
and any Improvement Bonds, authorized by and at any time Outstanding pursuant to the Bond
Act and 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.
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“Code” means the Internal Revenue Code of 1986, as amended.
“Costs of Issuance” means, as to each series of the Bonds, items of expense
payable or reimbursable directly or indirectly by the City and related to the authorization, sale
and issuance of such 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 such 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 such
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 such 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.
“Escrow Fund” means the fund by that name established by Section 3.03(A)
hereof.
“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.
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“Improvement Fund” means the fund by that name established by Section 3.03(A)
hereof.
“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 ii-om
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 March 2,2005 for the Series 2004A Bonds.
“Investment Agreement” means one or more agreements with respect to the
investment of the proceeds of the Bonds to be entered into between the City 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.
“Land Secured Debt” means as to any parcel within the Assessment District, the
sum of (a) the unpaid assessment levied upon such parcel by the City for the Assessment
District, (b) the principal amount of any other indebtedness of any community facilities district
which is allocable to such parcel and is secured by the levy of special taxes on such parcel and
(c) any other fixed lien assessment levied on such parcel.
“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.
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CarlsbadAD 2002-01 BondIndenturev2l1-10-04.doc
“Officer’s Certificate” means a written certificate of the City signed by an
Authorized Officer of the City.
“Official Statement” means the OfEcial Statement dated as of , 20-
related to the Series 2004A Bonds.
“Original Purchaser” means the first purchaser of any series of the Bonds from
the City and, as to the Series 2004A Bonds, Stone & Youngberg LLC.
“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:
(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 10.03 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 th~s Indenture or any Supplemental Indenture.
“Owner” means any person who shall be the registered owner of any Outstanding
Bond.
“Parity Bonds” means Bonds hereafter issued which are secured by a pledge of
the Assessment Revenues and on the monies in the funds and accounts (with the exception of the
Improvement Fund) established for such Bonds in this Indenture and in any applicable
Supplemental Indenture (including the investment earnings thereon) which pledge is on a parity
with the lien securing the Series 2004A Bonds.
“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
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CarlsbadAD 2002-01 BondIndenturev211-10-04.doc
Cooperatives); (c) bonds or debentures of the Federal Home Loan Bank Board established under
the Federal Home Loan Bank Act, bonds of 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
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 from 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 “Ad” 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;
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(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
(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 10.06 hereof.
“Proceeds,” when used with reference to each series of the Bonds, means the
aggregate principal amount of such 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 each series of the Bonds relating to Section 148 of the Code, or any functionally similar
replacement certificate.
“Rebate Fund” means the fhd 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.
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“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 the resolution of the City Council of the City
authorizing the issuance of any series of the Bonds. The Resolution of Issuance for the Series
2004A Bonds shall be Resolution No. 2004 - -, adopted by the City Council on ,
2004.
“Resolution of Intention” means Resolution No. 2004 - 057, adopted by the City
Council on February 17,2004.
“Securities Depositories” means The Depository Trust Company, 55 Water Street,
New York, New York 10041-0099, Attention: Call Notification Department, Fax (212) 855-
7232; and, in accordance with then current guidelines of the Securities and Exchange
Commission, such other securities depositories as the City may designate in an Officer’s
Certificate delivered to the Paying Agent.
“Series 2004A Bonds” shall mean the $ City of Carlsbad Assessment
District No. 2002-01 (Poinsettia Lane East) Limited Obligation Improvement Bonds, Series
2004A.
“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.
“Supplemental Indenture” means any indenture, agreement or other instrument
then in full force and effect which has been duly approved by a resolution of the City Council of
the City at a meeting of the City Council duly convened and held, at which a quorum was
present and acted thereon, amendatory hereof or supplemental hereto; but only to the extent that
such Supplemental Indenture is specifically authorized hereunder.
“Value Deficient Parcel” means that property identified as Assessment No. 13 as
shown on the Assessment Diagram filed in the Office of the County Recorder of the County of
San Diego in Book of Assessment and Community Facilities District Maps, Book 38, Page 37 on
May 5,2004 as Document No. 2004-0404503.
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Maturity Dates
[September 2)
ARTICLE I1
THE BONDS
Principal Amounts Interest Rates
Section 2.01. Principal Amount and Designation of the Series 2004A Bonds. The
Series 2004A Bonds in the aggregate principal amount of $ are hereby authorized to
be issued by the City for the Assessment District under and subject to the terms of the Resolution
of Issuance applicable to such Bonds, this Indenture, the Bond Act and other applicable laws of
the State of California. The Series 2004A Bonds shall be designated “City of Carlsbad
Assessment District No. 2002-01 (Poinsettia Lane East) Limited Obligation Improvement Bonds
(Property Secured Only - No Issuer Liability),” and shall be secured by a pledge of the
Assessment Revenues.
Section 2.02. Terms of Bonds.
(A) The Bonds. Each series of the Bonds shall be issued as fully registered
bonds, without coupons, in the denominations of $5,000 or any integral multiple thereof. The
Bonds shall be lettered and numbered in a customary manner as determined by the Paying Agent.
Each series of the Bonds shall be dated as of the applicable Closing Date.
(B) Maturities. Each series of the Bonds shall mature and become payable on
September 2 of each year
The Series 2004A Bonds shall mature as follows:
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(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. The Series 2004A
Bonds shall bear interest in the rates set forth in subsection (B) above. 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 applicable 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 applicable 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
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) CUSIP Identification Numbers. “CUSIP” 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 CUSIP
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 of Series 2004A Bonds. The Series 2004A 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&t 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 a redemption price equal
to the principal amount of the Bonds to be redeemed, together with accrued interest to the date of
redemption.
(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 redemption prices (expressed as percentages of the
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(September 2)
principal amount of the Bonds to be redeemed) as shall be specified in this Indenture or the
applicable Supplemental Indenture, together with accrued interest to the date of redemption.
Sinking Fund Payments
The Series 2004A Bonds are subject to such mandatory redemption prior to their
stated maturity dates at the following redemption prices:
Redemption Dates Redemption Prices
March 2,2005 through March 2,20-
September 2,20- and March 2,20-
September 2,20- and March 2,20-
September 2,20- and thereafter
103%
102%
101%
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.
(C) Sinking Fund Redemption of Series 2004A Bonds. The Outstanding
Series 2004A Bonds maturing on September2, 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, li-om sinking fimd payments as
follows:
The Outstanding Series 2004A 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:
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Redemption Dates I (September 2) I Sinkinn Fund Payments
I
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 Series 2004A
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 Paying Agent. 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.
0;) Redemption Procedure by Payinn 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
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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
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 CUSP
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 whch 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
hds 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. Each series of the Bonds, the Paying Agent’s
certificate of authentication and the assignment to appear thereon shall be substantially in the
form, respectively, set forth in this Indenture or in the applicable Supplemental Indenture, with
necessary or appropriate variations, omissions and insertions as permitted or required by this
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Indenture or the applicable Supplemental Indenture. The form of the Series 2004A Bonds is set
forth in Exhibit A attached hereto and by this reference incorporated herein
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
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 or the applicable Supplemental Indenture,
executed and dated by the Paying Agent, shall be valid or obligatory for any purpose or entitled
to the benefits of this Indenture or the applicable Supplemental 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 or the applicable Supplemental 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.
Section 2.07. 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 the same
series and 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.
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Section 2.08. Bond Renister. 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
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 series, 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
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extent set forth herein), the County or the State of California or any political subdivision thereof
is pledged to the payment of the Bonds.
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 1 1.5
(commencing with Section 9500) of the California Streets and Highways Code.
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ARTICLE I11
ISSUANCE OF BONDS; APPLICATION OF PROCEEDS; IMPROVEMENT FUND AND
ESCROW FUND
Section 3.01. Issuance and Deliverv of Series 2004A Bonds. At any time after
the execution of this Indenture, the City may issue the Series 2004A Bonds in the aggregate
principal amount set forth in Section2.01 hereof and deliver the Series 2004A 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 Series
2004A Bonds in accordance with the provisions of the Bond Act, the applicable Resolution of
Issuance and this Indenture, to authorize the payment of Costs of Issuance and costs of the
Project by the Finance Director from the proceeds of Series 2004A Bonds, and to do and cause to
be done any and all acts and things necessary or convenient for delivery of the Series 2004A
Bonds to the Original Purchaser.
Section3.02. Application of Proceeds of Sale of Series 2004A Bonds. The
Proceeds of the sale of the Series 2004A Bonds to the Original Purchaser of $
(representing the par amount of the Series 2004A Bonds of $ minus underwriter’s
discount of $ ) 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 Series 2004A Bonds;
(B) Deposit in the Reserve Fund the amount of $ , the Reserve
Requirement as of the Closing Date;
(C) Deposit in the Escrow Fund the amount of $ ; and
(D) Deposit in the Improvement Fund the amount of $ , being
the remaining Proceeds of the Series 2004A 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. 2002-01
(Poinsettia Lane East) Limited Obligation Improvement Bonds Improvement Fund,” to the credit
of which a deposit shall be made as required by paragraph (D) of Section3.02 hereof and . 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 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
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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.
The Finance Director shall withhold payment to Lennar Bressi Ranch Venture, LLC of an
amount equal to the amount deposited in Escrow Fund pursuant to Section 3.02(C) (the
“Holdback Amount”) that would otherwise be payable to such entity pursuant to the terms of the
Acquisition Agreement until such time as the fimds on deposit in the Escrow Fund have been
transferred to and deposited in the Improvement Fund pursuant to the provisions of Section
3.04(B)( 1).
(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.
(D) 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. Escrow Fund.
(A) Establishment of Escrow Fund. There is hereby established, as a separate
account to be held by the Finance Director, the “Assessment District No. 2002-01 (Poinsettia
Lane East) Limited Obligation Improvement Bonds Escrow Fund,” to the credit of which a
deposit shall be made as required by paragraph (C) of Section 3.02 hereof. Moneys in the
Escrow Fund shall be held by the Finance Director for the benefit of the Owners of the Bonds,
shall be disbursed pursuant to subsection (B) of this Section 3.04 and, pending such
disbursement, shall be subject to a lien in favor of the Owners of the Bonds.
(B) Procedure for Disbursement.
(1) Transfer to Improvement Fund. Prior to July 15, 2008, the Finance
Director shall transfer the hnds on deposit in the Escrow Fund to the Improvement Fund in
whole upon receipt of an Appraisal addressed to the City indicating that the appraised value of
the Value Deficient Property is, as of the date of valuation of such Appraisal, at least four (4)
times the amount of the Land Secured Debt applicable to such property.
(2) Transfer to Prepayment Account of Redemption Fund.
(a) If on July 1st of any Fiscal Year the payment of any
assessment installment which was placed on the tax roll for the Value Deficient Property and
was due and payable during the preceding Fiscal Year is delinquent, the Finance Director shall
transfer all funds then on deposit in the Escrow Fund to the Prepayment Account of the
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Redemption Fund and such funds shall be used to redeem Series 2004A Bonds on the following
September 2nd pursuant to Section 2.03(B) hereof.
(b) On July 15, 2008, if the funds on deposit in the Escrow
Fund have not been transferred to the Improvement Fund pursuant to the provisions of
subsection (B)(l) above, the Finance Director shall transfer such fimds to the Prepayment
Account of the Redemption Fund and such funds shall be used to redeem Series 2004A Bonds on
September 2,2008 pursuant to Section 2.03(B) hereof.
(c) Upon transfer pursuant to subsection (2)(a) or (b) above the
Finance Director shall reduce the principal amount of the unpaid assessment applicable to the
Value Deficient Property by an amount equal to the principal amount of the Series 2004A Bonds
redeemed from such funds and the funds transferred to the Prepayment Account from the
Reserve Fund pursuant to Section 4.03(C).
(C) Investment. Moneys in the Escrow Fund shall be invested in accordance
with Section 6.01 hereof. Investment Earnings on the investment of moneys on deposit in the
Escrow Fund will be deposited in the Improvement Fund.
Section 3.05. 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
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
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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. If necessary to qualify the Bonds for the
Depository’s book-entry system, an Authorized Officer 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) Payments 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.
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ARTICLE IV
ASSESSMENT REVENUES; REDEMPTION FUND; RESERVE FUND
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 10.03 hereof.
(B) Transfer of Assessment Revenues. The Finance Director shall deposit all
Assessment Revenues in the Redemption Fund. That amount of Assessment Revenues which
will be needed to pay Debt Service on the Bonds on the next Interest Payment Date shall be
deposited in the Debt Service Fund. Assessment Revenues representing Assessment
Prepayments shall be deposited in the Prepayment Account.
(C) Deficiency. 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. 2002-01 (Poinsettia Lane East) 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.
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(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.
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 (142th) 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 funds
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
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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.
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) or 3.04(B)(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(B) 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.
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(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
premium, if any, may be paid in fill 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
and deposited in accordance with Section6.01 hereof. Investment Earnings shall be
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. 2002-01 (Poinsettia Lane East)
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 from 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
September 3, 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
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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.
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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.
Section 5.05. 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
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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 10.03 hereof.
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 $1 0,000 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.
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ARTICLE VI
INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LLABILITY 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 fund 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.
(B) Investment Agreements. Any Investment Agreement entered into for the
investment of moneys in any fund 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
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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 hereof; (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-tern 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.
Section 6.02. Rebate Fund; Rebate to the United States. There is hereby created,
to be held by the Finance Director, as a separate hnd distinct from all other funds and accounts
held by the Finance Director under this Indenture, the “Assessment District No. 2002-01
(Poinsettia Lane East) Limited Obligation Improvement Bonds 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 applicable 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.
Section6.03. 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
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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 Agents 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.
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ARTICLE VI1
THE PAYING AGENT
Section 7.01. ADpointment of Payinn Anent. 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 this 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 Paving 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
nor shall have any liability in respect thereof, other than in connection with the express duties or
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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 willful 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 Mshed 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 ofjudgment 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 fimds 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.
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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).
Section7.03. 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 Paving 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.
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ARTICLE VI11
MODIFICATION OR AMENDMENT OF THIS AGREEMENT
Section 8.01. Amendments Permitted.
(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 money to the United States or otherwise as may be necessary
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to assure exclusion fi-om gross income for federal income tax purposes of interest
on the Bonds or to conform with the Regulations; and
(5) to provide for the issuance of Parity Bonds pursuant to the
provisions of this Indenture.
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
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 10.04 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
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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.
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.
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ARTICLE IX
ISSUANCE OF PARITY BONDS
Section 9.01 Conditions for the Issuance of Parity Bonds. The City may at any
time after the issuance and delivery of the Series 2004A Bonds issue Parity Bonds in one or
more series payable from Assessment Revenues and other amounts deposited in the funds and
accounts created under the Indenture (other than in the Improvement Fund and the Rebate Fund)
and secured by a lien and charge upon such amounts equal to the lien and charge securing the
Outstanding Improvement Bonds and any other Parity Bonds theretofore issued under the
Indenture or under any Supplemental Indenture; provided, however, that Parity Bonds may only
be if the City has determined that the proceeds of such Parity Bonds will be required by the City
to complete the construction of the Project after the City has terminated the Acquisition pursuant
to the provisions of Section 11 thereof and the City has determined to proceed to advertise and
bid the balance of the construction of the Project. Parity Bonds may be issued subject to the
following additional specific conditions, which are conditions precedent to the issuance of any
such Parity Bonds:
(a) The City shall be in compliance with all covenants set forth in the Indenture and
any Supplemental Indenture then in effect; provided, however, that Parity Bonds may be issued
notwithstanding that the City is not in compliance with all such covenants so long as
immediately following the issuance of such Parity Bonds the City will be in compliance with all
such covenants.
(b) The issuance of such Parity Bonds shall have been duly authorized pursuant to the
Bond Act and all applicable laws, and the issuance of such Parity Bonds shall have been
provided for by a Supplemental Indenture duly adopted by the City which shall specify the
following:
1. The purpose for which such Parity Bonds are to be issued and the fund or
funds into which the proceeds thereof are to be deposited, including a provision requiring
the proceeds of such Parity Bonds to be applied solely for the purposes specified
hereunder, including payment of all costs incidental to or connected therewith and
funding a reserve bd for such Parity Bonds;
2. The authorized principal amount of such Parity Bonds;
3. The date and the maturity date or dates of such Parity Bonds; provided
that (i) each maturity date shall fall on a September 2, (ii) all such Parity Bonds of like
maturity shall be identical in all respects, except as to number, and (iii) fixed serial
maturities or mandatory sinking fwnd payments, or any combination thereof, shall be
established to provide for the retirement of all such Parity Bonds on or before their
respective maturity dates;
4. The description of the Parity Bonds, the place of payment thereof and the
procedure for execution and authentication;
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5. The denominations and method of numbering of such Parity Bonds;
6. The amount and due date of each mandatory sinking fund payment, if any,
for such Parity Bonds;
7. The form of such Parity Bonds;
8. Such other provisions as are necessary or appropriate and not inconsistent
with this Indenture.
(c) There shall have been received by the Finance Director the following documents
or money or securities, all of such documents dated or certified, as the case may be, as of the date
of delivery of such Parity Bonds (unless the Finance Director shall accept any of such documents
bearing a prior date):
1. A certified copy of the Supplemental Indenture authorizing the issuance of
such Parity Bonds;
2. A written request of the City as to the delivery of such Parity Bonds;
3. An opinion of Bond Counsel to the effect that (a) the City has the right
and power under the Bond Act to adopt the Supplemental Indentures relating to such
Parity Bonds, and the Indenture and all such Supplemental Indentures have been duly and
lawfully adopted by the City, are in full force and effect and are valid and binding upon
the City and enforceable in accordance with their terms (except as enforcement may be
limited by bankruptcy, insolvency, reorganization and other similar laws relating to the
enforcement of creditors' rights); (b) the Indenture creates the valid pledge which it
purports to create of the Assessment Revenues and other amounts as provided in the
Indenture, subject to the application thereof to the purposes and on the conditions
permitted by the Indenture; and (c) such Parity Bonds are valid and binding special
obligations of the City, enforceable in accordance with their terms (except as
enforcement may be limited by bankruptcy, insolvency, reorganization and other similar
laws relating to the enforcement of creditors' rights) and the terms of the Indenture and all
Supplemental Indentures thereto and entitled to the benefits of the Indenture and all such
Supplemental Indentures, and such Parity Bonds have been duly and validly authorized
and issued in accordance with the Act (or other applicable laws) and the Indenture and all
such Supplemental Indentures; and a further opinion of Bond Counsel to the effect that,
assuming compliance by the City with certain tax covenants, the issuance of the Parity
Bonds will not adversely affect the exclusion from gross income for federal income tax
purposes of interest on the Bonds previously issued or the exemption from State of
California personal income taxation of interest on the Bonds previously issued;
4. A certificate of an Authorized Officer containing such statements as may
be reasonably necessary to show compliance with the requirements of the Indenture;
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5. A certificate of an Authorized Officer certifying that the City has received
as to such Parity Bonds a certificate fi-om one or more Independent Assessment District
Consultants which, when taken together, certify that:
(A). (i ) the aggregate appraised value of all properties within
the Assessment District shall be at least four (4) times the Land Secured
Debt allocable to the properties within the Assessment District and (ii) the
aggregate appraised value of each discrete property identified in Table 6
of the Official Statement shall also be at least four (4) times the Land
Secured Debt allocable to each such discrete property; and
(B). The aggregate principal amount of all Bonds following the
issuance of such Parity Bonds shall not exceed the aggregate amount of
the unpaid Assessments.
6. Such further documents, money and securities as are required by the
provisions of the Indenture and the Supplemental Indenture providing for the issuance of such
Parity Bonds.
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ARTICLE X
MISCELLANEOUS
Section 10.01. 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 10.02. 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 10.03. 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:
(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 fully 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
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Paying Agent to charge and be reimbursed by the City for the expenses which it shall thereafter
incur in connection herewith.
Section 10.04. Execution of Documents and Proof of Ownership by 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.
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 10.05. 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 fi-om the performance of any official duty provided by law.
Section 10.06. 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
163 5 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:
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BNY Western Trust Company
700 South Flower Street, 2nd Floor
Los Angeles, California 9001 7
Attn: Corporate Trust Department
Section 10.07. 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 10.08. 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 fiom any trust, and the Paying Agent shall
thereupon be released and discharged with respect thereto and the Owners of such Bonds shall
look only to the City for the payment of the principal of, and interest and any premium on, their
Bonds.
Section 10.09. 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
performed in the State of California.
Section 10.10. 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 10.1 1. Conclusive Evidence of Regularitv. Bonds issued pursuant to this
Indenture shall constitute conclusive evidence of the regularity of all proceedings under the Act
relative to their issuance.
Section 10.12. Payment on Business Dav. 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 10.13. Counterparts. This Indenture may be executed in counterparts,
each of which shall be deemed an original.
[The next page is the signature page]
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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 November 1,
2004.
CITY OF CARLSBAD
By:
Finance Director
BNY Western Trust Company,
as Paying Agent
Authorized Officer
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EXHIBIT “A”
[FORM OF BOND]
UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED OFFICER 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 OFFICER OF
THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED OFFICER 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
(POINSETTIA LANE EAST)
ASSESSMENT DISTRICT NO. 2002-01
LIMITED OBLIGATION IMPROVEMENT BOND, SERIES 2004A
(Property Secured Only - No Issuer Liability)
Registered
Number
Interest Maturity Original
Rate Date Issue Date
9 20-
Registered Owner: CEDE & CO.
Principal Sum
Registered
Amount $
CUSP
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 Series 2004A Bonds issued upon the unpaid portion of assessments levied within Assessment
District No. 2002-01 (Poinsettia Lane East), City of Carlsbad, County of San Diego, State of
California (the “Assessment District”) made for the construction and acquisition of certain public
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improvements in and for the Assessment District, which improvements and the Assessment
District are more fully described in proceedings taken pursuant to Resolution No. 2004-057, the
Resolution of Intention for the Assessment District, adopted by the City Council of the City on
February 17, 2004, 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 Series 2004A Bond is authenticated, unless this Series 2004A 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 Series 2004A 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 March 2,2005. 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 (1 5th) 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 Series 2004A 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 Series 2004A 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 money in the 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 Series 2004A 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 find.
This Series 2004A 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 November 1,2004 by and between the City
and the Paying Agent (the “Indenture”) in the aggregate principal amount of $ (the
“Series 2004A 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 money in the
Redemption Fund and by the unpaid portion of the assessments levied on parcels of property
within the Assessment District for the payment of said improvements, and, including principal
and interest, is payable exclusively out of said fund. The Series 2004A Bonds, together with any
Parity Bonds, shall be special obligations of the City, payable solely from and secured solely by
the Assessment Revenues and certain amounts on deposit in the Redemption Fund and the
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CarlsbadAD 2002-01 BondIndenturev2l1-10-04.doc
Reserve 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
Series 2004A Bonds, the terms upon which the Series 2004A Bonds are issued and the terms and
conditions on which the Series 2004A Bonds will be deemed to be paid, at or prior to maturity or
redemption of the Series 2004A Bonds, to all the provisions of which agreement the owner of
this Series 2004A Bond, by acceptance hereof, assents and agrees.
The Series 2004A Bonds are issuable only as fully registered bonds in
denominations of $5,000, or any integral multiple thereof.
This Series 2004A 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 Indenture, including the payment of certain charges,
if any, upon surrender and cancellation of this Series 2004A Bond. Upon such transfer, a new
registered Series 2004A Bond or Series 2004A 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 Series 2004A Bond.
Series 2004A 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 Series 2004A 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 Series
2004A Bonds for redemption, or with respect to any Series 2004A 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 Series 2004A 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 a redemption price equal to the principal amount of the Series 2004A Bonds to be
redeemed), together with accrued interest to the date of redemption, and the premium, if any, as
provided for in the Indenture.
The Series 2004A 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 Indenture) including funds transferred
to the Prepayment Account of the Redemption Fund from the Escrow Fund pursuant to the
provisions of the Indenture, at the following redemption prices (expressed as percentages of the
principal amount of the Series 2004A Bonds to be redeemed), together with accrued interest to
the date of redemption:
Redemption Dates Redemption Prices
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CarlsbadAD 2002-01 BondIndenturev2l1-10-04.doc
March 2,2005 through March 2,20-
September 2,20- and March 2,20-
September 2,20- and March 2,20-
September 2,20- and thereafter
103%
102%
101%
100%
The Series 2004A Bonds maturing on September 2, 20- and on September 2,
20-, are subject to mandatory sinking fund redemption, in part, on September 2, 20 and
September 1,20-, respectively, and on each September 2 thereafter prior to maturity, bylot, 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 Indenture.
This Series 2004A 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 Series 2004A Bond shall not be entitled to any benefit under the Act or the
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
Series 2004A Bond to be signed by its City Treasurer and City Clerk, all as of the - day of
20-.
CITY OF CARLSBAD, CALIFORNIA
City Clerk
A-4
City Treasurer
CarlsbadAD 2002-0 1 BondIndenturev2 1 1-1 0-04.doc
CERTIFICATE OF AUTHENTICATION
This is one of the Series 2004A Bonds described in the within-defined Indenture.
Dated:
BNY WESTERN TRUST COMPANY
Paying Agent
By:
Authorized Signatory
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CarlsbadAD 2002-01 BondIndenturevZll-10-04.doc
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.
A-6
TABLE OF CONTENTS
ARTICLE I AUTHORITY AND DEFINITIONS ......................................................................... 4
Section 1.01. Authority for this Indenture ...................................................................................... 4
Section 1.02. Indenture for Benefit of Bondowners ....................................................................... 4
Section 1.03. Definitions ................................................................................................................. 4 ..
ARTICLE I1 THE BONDS ............................................................................................................ 12
Section 2.01. Principal Amount; Designation ............................................................................... 12
Section 2.02. Terms of Bonds ....................................................................................................... 12
Section 2.03. Redemption ............................................................................................................. 13
Section 2.04. Form of Bonds ........................................................................................................ 15
Section 2.05. Execution of Bonds ................................................................................................. 16
Section 2.06. Transfer of Bonds ................................................................................................... 16
Section 2.07. Exchange of Bonds ................................................................................................. 16
Section 2.08. Bond Register .......................................................................................................... 16
Section 2.09. Temporary Bonds .................................................................................................... 17
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen ........................................................... 17
Section 2.1 1 . Special Obligation ................................................................................................... 17
Section 2.12. Refunding ................................................................................................................ 18
..
ARTICLE I11 ISSUANCE OF BONDS; APPLICATION OF PROCEEDS;
IMPROVEMENT FUND ...................................................................................... 19
Section 3.01. Issuance and Delivery of Bonds ............................................................................. 19
Section 3.02. Application of Proceeds of Sale of Bonds .............................................................. 19
Section 3.03. Improvement Fund .................................................................................................. 19
Section 3.05. Book-Entry System; Delivery of the Bonds to the Depository ............................... 20
ARTICLE IV ASSESSMENT REVENUES; REDEMPTION FUND; RESERVE FUND ........ 22
Section 4.01. Pledge of Assessment Revenues; Transfers of Assessment Revenues. .................. 22
Section 4.02. Redemption Fund .................................................................................................... 22
Section 4.03. Reserve Fund .......................................................................................................... 25
ARTICLE V OTHER COVENANTS OF THE CITY ................................................................. 27
Section 5.01. Punctual Payment .................................................................................................... 27
Section 5.02. Special Obligation ................................................................................................... 27
Section 5.03. Extension of Time for Payment .............................................................................. 27
Section 5.04. Against Encumbrances ............................................................................................ 27
Section 5.05. Protection of Security and Rights of Owners ......................................................... 27
..
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TABLE OF CONTENTS
Section 5.06. Compliance with Laws. Completion of Project ...................................................... 27
Section 5.07. Collection of Assessment Revenues ....................................................................... 27
Section 5.08. Further Assurances .................................................................................................. 27
Section 5.09. Tax Covenants ........................................................................................................ 28
Section 5.10. Covenant to Foreclose ............................................................................................. 28
ARTICLE VI INVESTMENTS; DISPOSITION OF INVESTMENT PROCEEDS;
LIABILITY OF THE CITY ................................................................................... 29
Section 6.01. Deposit and Investment of Moneys in Funds ......................................................... 29
Section 6.02. Rebate Fund; Rebate to the United States ............................................................... 30 ... Section 6.03. Liability of City ....................................................................................................... 31
Section 6.04. Employment of Agents by City .............................................................................. 31
ARTICLE VI1 THE PAYING AGENT ........................................................................................ 32
Section 7.0 1 . Appointment of Paying Agent ................................................................................ 32
Section 7.02. Liability of Paying Agent ........................................................................................ 32
Section 7.03. Information ............................................................................................................. 34
Section 7.04. Notice to Paying Agent ........................................................................................... 34
Section 7.05. Compensation, Indemnification .............................................................................. 34
..
ARTICLE VI11 MODIFICATION OR AMENDMENT OF THIS AGREEMENT .................... 35
Section 8.01. Amendments Permitted ........................................................................................... 35
Section 8.02. Owners’ Meetings ................................................................................................... 36
Section 8.03. Procedure for Amendment with Written Consent of Owners ................................. 36
Section 8.04. Disqualified Bonds .................................................................................................. 37
Section 8.05. Effect of Supplemental Indenture ........................................................................... 37
Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments ....................... 37
Section 8.07. Amendatory Endorsement of Bonds ....................................................................... 37
ARTICLE IX MISCELLANEOUS .............................................................................................. 38
Section 10.01. Benefits of Indenture Limited to Parties ............................................................... 38
Section 10.02. Successor is Deemed Included in All References to Predecessor ........................ 38
Section 1 0.03. Discharge of Indenture .......................................................................................... 38
Section 10.04. Execution of Documents and Proof of Ownership by Owners ............................. 39
Section 10.05. Waiver of Personal Liability ................................................................................. 39
Section 10.06. Notices to and Demands on City and Paying Agent ............................................. 39
Section 10.07. Partial Invalidity .................................................................................................... 40 ..
Section 10.08. Unclaimed Moneys ............................................................................................... 40
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TABLE OF CONTENTS
Section 10.09. Applicable Law ..................................................................................................... 40
Section 10.10. Conflict with Act ................................................................................................... 40
Section 10.1 1 . Conclusive Evidence of Regularity ...................................................................... 40
Section 10.12. Payment on Business Day ..................................................................................... 40
Section 10.13. Counterparts .......................................................................................................... 40
EXHIBIT “A” . FORM OF BOND ............................................................................................ A- 1
... -111-
....
Exhibit 5
Assessment District No. 2002-01
Poinsettia Lane East
Financing Document Approval
AB# 17.942
Continuing Disclosure Certificate
For:
City Clerk’s Office File
Exhibit 5
CITY OF CARLSBAD
(POINSETTIA LANE EAST)
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 2002-01
CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the “Disclosure Certificate”), dated as of
November 1, 2004, is executed and delivered by the City of Carlsbad (“City”) as Dissemination
Agent in connection with the issuance of $ City of Carlsbad Assessment District No.
2002-01 (Poinsettia Lane East) 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
November 1, 2004 (the “Indenture”), between the City and BNY Western Trust Company, as
paying agent (the “Paying Agent”). The City covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate 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 Certificate unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
“Annual Report” shall mean any Annual Report provided by the City pursuant to,
and as described in, Sections 3 and 4 of this Disclosure Certificate.
“Dissemination Agent” shall mean the City, 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 Certificate.
“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.
“Official 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.
“Repository” shall mean each National Repository and each State Repository.
Carlsbad Poinsettia City CDA (2).DOC 1
“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from time
to time.
“State Repository” shall mean any public or private repository or entity designated
by the State of California as a state repository for the purpose of the Rule and recognized by the
Securities and Exchange Commission. As of the date of this Continuing Disclosure Certificate,
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 Certificate. 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 Certificate;
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 other than the City). If by such date, the
Dissemination Agent (if other than the City) 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 (if other than the City) 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 certifylng that the Annual Report has
been provided pursuant to this Disclosure Certificate, stating the date it was
provided and listing all the Repositories to which it was provided.
Section 4. 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
accordance with generally accepted accounting principles promulgated to apply to governmental
2
entities fi-om time to time by the Governmental Accounting Standards Board and the following
information regarding Assessment District No. 2002-0 1 (the “Assessment District”):
(a) Principal amount of the Bonds outstanding as of June 30 and the
succeeding September 3;
(b) Balances in the Redemption Fund and the Reserve Fund as of June 30 and
the succeeding September 3;
(c) Amount of assessment prepayments in the prior fiscal year;
(d) The amount of delinquencies in the prior fiscal year;
(e) Any action by the City to foreclose on property with delinquent
assessments;
(f) The aggregate assessed value of property in the Assessment District with
unpaid assessments and the unpaid assessments levied on such property;
and
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 identify each
such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the 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.
Rating changes.
3
(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 (if other than the City) 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.
Section 6. Termination of Reporting Obligation. The City’s obligations under this
Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds.
Section 7. Dissemination Anent. The City may, fiom time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate,
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 the
City.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure
Certificate 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
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 Certificate shall be
deemed to prevent the City fiom disseminating any other information, using the means of
dissemination set forth in this Disclosure Certificate or any other means of communication, or
4
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Certificate. If the 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 Certificate, the City shall have no obligation
under this Continuing Disclosure Certificate to update such information or include it in any
hture 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 Certificate 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 Certificate. A default under this Disclosure Certificate shall
not be deemed an Event of Default under the Indenture, and the sole remedy under this
Disclosure Certificate in the event of any failure of the City or Dissemination Agent to comply
with this Disclosure Certificate shall be an action to compel performance.
Section 1 1. Duties, Immunities and Liabilities of Dissemination Anent (if other than the
City). The Dissemination Agent will receive reasonable compensation for its services provided
pursuant to this Disclosure Certificate. 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 Certificate, 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 Certificate 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.
CITY OF CARLSBAD
By:
Finance Director
5
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. 2002-01 (Poinsettia Lane East)
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: , as Dissemination Agent
By:
Authorized Officer
cc: Issuer
Exhibit 6
Assessment District No. 2002=01
Poinsettia Lane East
Financing Document Approval
AB# 17.942
Bond Purchase Agreement
For:
City Clerk’s Office File
CITY OF CARLSBAD
(POINSETTIA LANE EAST)
LIMITED OBLIGATION IMPROVEMENT BONDS
ASSESSMENT DISTRICT NO. 2002-01
BOND PURCHASE AGREEMENT
A 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 “hchase 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 Delivew 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 it’s Assessment District No. 2002-01 (Poinsettia Lane
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. 2002-01 (Poinsettia Lane East) Limited
Obligation Improvement Bonds (the “Bonds”), dated , 2004 in the aggregate
principal amount of $ , bearing interest (payable commencing March 2,2005, and
semiannually thereafter on September 2 and March2 in each year) at the rates of interest, and
maturing on the dates and in the amounts, as set forth in ExhibitA 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 !x
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
November 1, 2004 (the “Indenture”), between the City and BNY Western Trust Company, Los
Angeles, California, as Paying Agent for the Bonds (the “Paying Agent”). All of the proceedings
Carlsbad Poinsettia BPA.DOC
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 the District.
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 the District, (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 Indenture 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 15c2-12”). 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 15c2-12); 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 15c2-2) 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 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),
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Carlsbad Poinsettia BPA.DOC
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 November 1, 2004
(the “Continuing Disclosure Agreement”), and the AcquisitiodFinancing Agreement, dated as of
January 21, 2002, among the City, ) Lennar Bressi Ranch Venture, LLC, a California limited
liability company (“Lennar”) and Real Estate Collateral Management Company, a Delaware
corporation (“RECMC” and, with Lennar, the “Master Developers”), the primary developers
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
cany 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
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;
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Carlsbad Poinsettia BPA.DOC
(g) The adoption by the governing body of the City of Resolution No. 2004-
057 (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;
(i) 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 15c2-12. 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
will notify 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;
(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
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Carlsbad Poinsettia BPA.DOC
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 fi-om 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 June 14, 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
could have a material adverse affect on the ability of the City to comply with its obligations
under the City Documents;
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(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 Obliaations 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 hished
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;
(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
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Carlsbad Poinsettia BPA.DOC
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 governmental 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 governmental 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 from registration under the Securities Act of 1933, as amended, or that the
Indenture is not exempt from 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
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
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Carlsbad Poinsettia BPA.DOC
the statements therein, in the light of the circumstances under which they were made, not
misleading.
(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 fill 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 D” and “APPENDIX F,” 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.
(iv) The District has been validly formed, and the Assessments validly
levied on property within the District receiving special benefit from the
Improvements financed with the proceeds of the Bonds, pursuant to the provisions
of the 1913 Act.
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Carlsbad Poinsettia BPA.DOC
(v) The Indenture creates a valid pledge of, lien upon and security
interest in the proceeds of the Bonds and the moneys in all fhds 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, Knox & 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 its 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
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
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Carlsbad Poinsettia BPA.DOC
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 which 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
Undenvri ter;
(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
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
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Carlsbad Poinsettia BPA.DOC
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 fiom [Galen N. Peterson]
[Dick Jacobs Associates] (the “Assessment Engineer”) addressed to the City and in substantially
the form of Exhibit B hereto;
(8) A certificate dated the Closing Date fiom the Appraiser, addressed
to the City and in substantially in the form of Exhibit C hereto;
(9) A certificate dated the Closing Date fiom 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 the Master Developers and [TO COME] (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 Mater Developers, addressed to the
City and the Underwriter, to the effect that (i) each of the Master Developers is a
duly formed, validly existing and in good standing as a limited liability company under the laws
of the State of , and is authorized to transact business and is in good
standing in the State of California; (ii) the Master Developers have the power to enter into and
perform their obligations under the Disclosure Agreement and to own and develop the properties,
as described in the Official Statement (the “Developments”); (iii) the execution, delivery and
performance of the Disclosure Agreement has been duly authorized by all necessary action on the
part of the Master Developers and the Disclosure Agreement has been executed and delivered by
the Master Developers and, assuming due authorization, execution and delivery by the other
parties thereto, constitutes the legally valid and binding obligation of the Master Developers
enforceable against the Master Developers in accordance with its terms; (iv) To their actual
knowledge, the Master Developers are not in violation of any provision of, or in default under,
the Master Developer Organization Documents, or any other agreement or other instrument, the
violation or default which would materially and adversely affect the ability of the Master
Developers to complete the proposed Development; (v) To their actual knowledge, without
conducting any independent inquiry or investigation, there are no legal or governmental actions,
proceedings, inquiries or investigations pending or threatened by governmental authorities or to
which the Master Developers is a party, which, if determined adversely to the Master Developers,
would, except as described in the Official Statement, individually or in the aggregate (x) have a
material adverse effect on the financial position or results of operations of the Master
Developers, (y) otherwise materially or adversely affect the ability of the Master Developers to
comply with their obligations under the Disclosure Agreement, or (z) which would materially
and adversely affect the ability of the Master Developers to complete the proposed Development;
and (vi) Without having undertaken to determine independently the accuracy, completeness, or
fairness of the statements contained in the Official Statement, but based upon (a) their limited
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Carlsbad Poinsettia BPA.DOC
capacity as special counsel to the Master Developers, and (b) their review of the Official
Statement, to their actual knowledge, no facts have come to the attention of the attorneys in their
firm during the course of the firm’s representation of the Master Developers which caused them
to believe that the statements relating to the Master Developers and the properties contained in
the Official Statement under the captions “INTRODUCTION - The Master Developers,” “THE
ASSESSMENT DISTRTCT - Description of the Property,” “ - Status of Development Within
Assessment District,” and “ - Ownership of Property Within the District,” “OWNERSHIP AND
VALUE OF PROPERTY WITHIN THE DISTRICT - The Master Developers,” “ - Plan of
Development” and “ - Master Developer Representations,” and “SPECIAL RISK FACTORS -
Endangered Species” (excluding therefrom (x) any financial, statistical, or engineering
information, data, or forecasts, numbers, charts, estimates, projections, assumptions, or
expressions of opinion, (y) any information about valuation, appraisals, absorption, or
environmental matters included or referenced therein, including, without limitation, any
information describing or summarizing all or any part of the Appraisal and Market Absorption
Report (as such terms are defined in the Official Statement), and (z) information which is
identified as having been provided by a source other than the Master Developers or any Affiliate
thereof), as of the date thereof did, and as of the date hereof does, 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 under which they were made, not
misleading.;
(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 Official 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 (8) of the Government Code;
(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 Master
Developers in substantially the forms set forth in the Preliminary Official Statement.
Carlsbad Poinsettia BPA.DOC
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(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
delivering the Bonds to the Underwriter; the cost of preparing, printing (and/or 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.
Carlsbad Poinsettia BPA.DOC
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(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:
If to the Underwriter:
City of Carlsbad
Finance Department
1635 Faraday Avenue
Carlsbad, CA 92008
Attn: Finance Director
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.
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; Nonassimability. This Purchase Agreement shall be governed
by the laws of the State of California. This Purchase Agreement shall not be assigned by the
City.
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Carlsbad Poinsettia BPA.DOC
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 Agreements. 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:
Title:
Carlsbad Poinsettia BPA.DOC
-15-
Maturity
JSept 2)
EXHIBIT A
Description of the Bonds to be Purchased
Principal Interest
Amount Price
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. 2002-01 (Poinsettia Lane East) 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. 2002-01 (Poinsettia Lane East)
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”), excerpts of
9 , 2004 for the Bonds (collectively, the
which are attached as APPENDIX A to the Preliminary Official Statement dated
2004 and the Official Statement dated
“Official Statement”), 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 ASSESSMENT 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
[ASSESSMENT ENGINEER]
B-1
EXHIBIT C
CERTIFICATE OF APPRAISER
City of Carlsbad
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Re: City of Carlsbad Assessment District No. 2002-01 (Poinsettia Lane East) 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”) attached as
APPENDIX B to 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. 2002-01 (Poinsettia Lane East) 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 is reproduced as a part of the Official Statement with the consent
of Appraiser;
2. In the Appraiser’s 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) The Appraiser 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) The Appraiser 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: City of Carlsbad Assessment District No. 2002-01 (Poinsettia Lane East)
Limited Obligation hprovement Bonds
Ladies and Gentlemen:
I, the undersigned authorized representative of Empire Economics (the “Market
Absorption Consultant”), hereby certifL as follows:
1. That the Market Absorption Report (the “Market Absorption Report”)
attached as APPENDIX C to 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.
2002-01 (Poinsettia Lane East) 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 is reproduced as a part of the Official Statement
with the consent of Market Absorption Consultant;
2. In the Market Absorption Consultant’s opinion, the assumptions made in
the Market Absorption Report are reasonable;
(3) The Market Absorption Consultant 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) The Market Absorption Consultant 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. 2002-01 (Poinsettia Lane 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. 2002-01 (Poinsettia Lane East)
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 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) The Developer is not 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
land in the District exists or is in the process of being authorized, and (b) no assessment
E- 1
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 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
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 District.
Dated: ,2004
[Developer]
By:
Title:
E-2
Assessment District No. 2002-01Poinsettia Lane EastBond Issue
HistoryAuthorized to begin work Acquisition Agreement•Acquire the road improvements•Reimburse the developer from the DistrictFormed the DistrictApprove bond issue¾Dec 2001: ¾Jan 2003:¾May 2004:¾Jan 2005:
Poinsettia Lane East AD ¾City has no obligation to pay debt; paid by property owners¾City’s Obligation•Administer District•Annual Disclosure•Initiate Foreclosure, if necessary
Boundaries and Roads
The DevelopmentsDevelopmentTypesSFD: 523 MF: 100NR: 148 acres
The DevelopmentsDevelopmentTypesSF/Town-homes: 794MF: 180NR: 14 acres
Cost Estimate for the DistrictConstruction$ 34.9 millionLess General Benefit <1.0 million>Less Contribution by Developers <4.9 million >Net Costs to be financed29.0 millionCapitalized Interest 1.4 millionBond Discount and other costs 1.1 millionBond Reserve Fund2.4 millionExpected Bond Amount $ 33,970,000Requested Bond Authorization$ 35,000,000
Assessment per Future Unit$960908684$13,72212,9859,778La Costa Greens DevelopmentSingle Family Homes in lots 6-9 Single Family Homes in lots 3, 10-14Townhomes/SFD in lots 16, 18$4,1436,0033,137$59,24385,837 44,852BressiRanch Industrial (per acre) Church Site (per acre)La Costa Greens Industrial(per acre) $2,0291,589$29,014 22,722 BressiRanch DevelopmentSingle Family Homes in PA 11 Single Family Homes, remainingAnnual Cost(per Unit)Approx Assessment (per Unit)Area
Compliance with Special District Financing Policy¾What is Policy 33?•Improvements authorized •Pass-through of assessments•Total tax burden•Value to lien of the properties•Disclosure of the assessments•Other guidelines
Compliance with Policy 33Formation¾Pass-through of the Assessments•Not to exceed 1.8% of total tax burden¾Disclosure Program•Written disclosure of lien•Provide option to pay-off or pass-through (in writing)•Show assessment lien in sales literature•Post “Notice of Assessment” in sales offices
Compliance with Policy 33Bond Issuance¾Total Tax Burden•No greater than 1.8%•Tax burden on the single family homes range from 1.3% to 1.5%
Compliance with Policy 33Bond Issuance¾Value to Lien•4:1 is required•Overall value to lien is 12.3•One planning area is at 2.8•Request Council approval to issue bonds and escrow the difference
Compliance with Policy 33Escrowed Funds¾Shortfall estimated at $350,000¾Funds released at the earlier of:•Value to lien reaches 4:1 (used to reimburse developer)•July 2008 (used to reduce assessment)
Poinsettia Lane East AD Requested Action:¾Authorize up to $35 million in Bonds ¾Approve the form of certain documents
Poinsettia Lane East ADBond Documents¾Preliminary Official Statement¾Bond Indenture¾Bond Purchase Agreement¾Continuing Disclosure Agreement
Poinsettia Lane East ADSchedule¾Council ApprovalTonight¾Pricing of the BondsJan. 27¾Closing Feb. 9
Poinsettia Lane EastAssessment DistrictConclusion