HomeMy WebLinkAbout2006-04-04; City Council; 18512; Community Facilities District No. 3 Faraday-Melrose Issuance Special Tax Bonds Approving Related DocumentsCITY OF CARLSBAD - AGENDA BILL
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MTG.
DEPT.
18,512
4-4-06
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TITLE:
COMMUNITY FACILITIES DISTRICT NO. 3 (FARADAY-MELROSE)
AUTHORIZING THE ISSUANCE OF SPECIAL TAX BONDS AND
APPROVING THE FORM OF VARIOUS RELATED DOCUMENTS
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RECOMMENDED ACTION:
Adopt Resolution No. 2006-084 authorizing and providing for the issuance of special tax bonds
for Improvement Area 1 of Community Facilities District No. 3 (Faraday-Melrose), approving the
form of the Fiscal Agent Agreement, Purchase Contract, Preliminary Official Statement and
other documents related thereto and authorizing certain actions in connection with the issuance
of such bonds.
Adopt Resolution No. 2006-085 approving the form of a Community Facilities District
Disclosure Agreement for Community Facilities District No. 3 and approving the pass
through of the special tax obligation to the purchasers of property within such district.
ITEM EXPLANATION:
A CFD is a mechanism to finance the acquisition or construction of public improvements and to
spread the cost of such public improvements among properties that will benefit from the
improvements. Council Policy 33 sets forth the policies and procedures to be followed in using
Community Facilities Districts (CFD) financing.
In previous Council meetings, the City Council adopted resolutions forming Community Facilities
District No. 3 (CFD #3) to fund certain public improvements necessary to serve the Palomar
Forum, Raceway and Carlsbad Oaks North developments. The City Council also adopted a
map of the proposed CFD boundaries, approved the acquisition agreement, approved the use
of tax-exempt debt, and set the maximum tax for the parcels of land within the CFD boundaries.
The adoption of the resolutions in this agenda item will be the final actions necessary to issue
bonds for Improvement Area No. 1 of CFD #3. Bonds for Improvement Area No. 2 will be
issued at a later date when the related road improvements are closer to completion.
The boundaries of CFD #3 are shown on the location map in Exhibit 1 and are divided into two
improvement areas. Improvement Area 1 includes the Palomar Forum (Zone A) and the Raceway
property (Zone B) while Improvement Area 2 contains the Carlsbad Oaks North property.
Improvement Area 1 contains two separate tax rate zones. These distinctions are necessary to
properly spread the cost of the improvements to the properties that are benefiting from them. The
developable acreage, lots and maximum tax rates for each of the properties are shown below.
Property Name
Area 1 , Zone A -
Palomar Forum
Area 1 , Zone B -
Raceway
Area 2 -
Carlsbad Oaks North
Developable
Acreage
51.50
86.10
167.30
Number of
Developable Lots
8
25
23
Annual Maximum
Tax Rate
$15,241 per acre
$7,265 per acre
$12,600 per acre
The total estimated cost of the improvements to be acquired by the City from the proceeds of
bonds issued for CFD #3 is $25 million. The improvements include the following:
• The widening of Palomar Airport Road from west of Melrose Drive Intersection to the Vista
City Limits;
• Faraday Avenue from Orion Street to Melrose Drive; /
• Melrose Drive from Palomar Airport Road to the Vista City Limits;
• Melrose Drive construction of right turn lane south of Palomar Airport Road;
• El Fuerte from northerly terminus to the future extension of Faraday Avenue; and
• Palomar Airport Road construction of eastbound right turn lane onto Melrose Drive south of
Palomar Airport.
Related costs for environmental, acquisition and creation of mitigation lands, engineering, and
inspection are included in the cost of acquiring such improvements in addition to the actual cost of
construction.
Of the total $25 million cost, $10 million will be funded from Improvement Area 1(Area 1) and $15
million from Improvement Area 2. Since only the bonds for Area 1 are being issued at this time, the
remainder of the discussion will focus only on that Improvement Area.
The addition of formation costs, bond issuance costs and a debt service reserve fund will add
approximately $1.5 million to the improvement costs for Area 1, leaving an anticipated bond issue
amount of approximately $11.5 million. The Resolution provides for a "not to exceed" threshold of
$13 million. The additional bonding authority is a "cushion" in case of changes to the financing
assumptions. The non-rated tax-exempt bonds are scheduled for sale in April/May 2006.
The City is not responsible for the repayment of the bonds. The bonds will be secured by the
property within the CFD and repaid through the annual taxes collected from the subject property.
The annual tax levy 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 $10,000 or when the total
assessment receipts for the year are less than 95% of what was billed.
Compliance with Council Policy 33
In compliance with City Policy Statement No. 33, the City's Special District Review Committee has
reviewed this CFD, finds that it complies with the terms and conditions of the Council's policy.
Some of the more specialized conditions are noted below. Due to the restrictions of Council Policy
33 and previous Council guidance, there are several provisions of this CFD and bond financing
which are unique to Carlsbad and/or this bond issue. 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.
• Pass-through of the Special Tax:
The property owners have requested that they be authorized to pass through the special taxes
to new property owners as the lots are sold. Since the boundaries of the proposed District
consist of only non-residential properties, Policy 33 does allow the pass-through of the taxes at
the discretion of the City Council. Adoption of the previous resolutions and the attached
resolutions provide Council's approval of the developer's request.
• Overall Value-to-lien:
According to Council Policy 33, the project property value-to-lien ratio should be 4:1 after the
installation of the improvements to be financed. The overall value-to-lien based on the most
recent preliminary bond sizing of $11.5 million is 7.05:1 for Improvement Area 1. In addition, no
single developments under common ownership are less than a 5.12:1 value to lien.
• Disclosure:
Council Policy 33 requires certain disclosures to potential purchasers of property within a CFD
which is in addition to that required by State law. Specifically, it requires that the property owner
include information about the CFD in their sales documentation and that the prospective buyers
are given a chance to pay off their CFD obligation. Adoption of the attached resolution approves
the form of the agreement between the City and the current and future property owners in CFD
#3 to provide such disclosure.
• Sale of the Bonds:
The attached resolution authorizes the sale of the bonds to Stone & Youngberg on a negotiated
basis. Council previously authorized Stone & Youngberg to act as the underwriter on this bond
issue. The resolution sets the total amount of the underwriter's discount at an amount not to
exceed 2% of the bond issue. It also states that the interest rate on the bonds cannot exceed
6.2% per annum. The actual amount of the discount and the interest rate will be set when the
bonds are priced. The City's special tax consultant, Special District Financing and
Administration, will participate in the bond sale to ensure that the City is receiving a fair price for
the bonds.
Requested Actions
Staff is requesting that Council adopt the attached resolutions which will:
1. Authorize issuance of bonds not to exceed $13,000,000 for CFD #3.
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 and/or
Disclosure Counsel. These documents are on file with the City Clerk and include the
following:
• Preliminary Official Statement
• Fiscal Agent Agreement
• Continuing Disclosure Certificate
• Bond Purchase Contract
3. Approve the disclosure program and the pass-through of the taxes to future property owners.
ENVIRONMENTAL REVIEW:
The Carlsbad Oaks North (CT 97-13), Carlsbad Raceway Business Park (CT98-10), and Palomar
Forum (CT99-06) projects have all processed environmental review per CEQA requirements. A
Program Environmental Impact Report and the associated Candidate Findings of Fact, Statement
of Overriding Considerations and Mitigation Monitoring and Reporting Program was certified on
October 8, 2002 for the Carlsbad Oaks North project. Mitigated Negative Declarations dated July
15, 2001 were issued for the Carlsbad Raceway Business Park and Palomar Forum projects.
FISCAL IMPACT:
The bonds will fund the acquisition of public improvements of benefit to the areas within the
boundaries of Improvement Area 1 of CFD #3. Together with formation and issuance costs and
a debt service reserve fund, the total issue amount should approximate $11,500,000; although
staff is requesting authority to bond up to $13 million. The calendar calls for the sale of bonds in
April/May 2006. The City will receive reimbursement for certain administrative costs related to
the formation of the CFD as well as to cover ongoing costs. The City is not responsible for the
funding of any of the improvements included with the District. All payments will be made by the
property owners.
The maximum annual special taxes that can be levied on the properties are $15,241 per acre in
Zone A of Area 1 and $7,265 per acre in Zone B of Area 1. The maximum special taxes will
escalate based on the change in the Engineering News Record index annually. The actual tax rate
will be set annually by the City Council based upon the needs of the CFD similar to the City's CFD
#1.
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EXHIBITS:
1. Boundary Map Community Facilities District No. 3.
2. Resolution No. 2006-084 authorizing and providing for the issuance of special tax bonds for
Improvement Area 1 of Community Facilities District No. 3 (Faraday-Melrose), approving the
form of the Fiscal Agent Agreement, Purchase Contract, Preliminary Official Statement and
other documents related thereto and authorizing certain actions in connection with the
issuance of such bonds.
3. Resolution No. 2006-085 approving the form of a Community Facilities District Disclosure
Agreement for Community Facilities District No. 3 and approving the pass through of the
special tax obligation to the purchasers of property within such district.
4. Preliminary Official Statement (without exhibits)
5. Documents on file with the City Clerk:
a. Fiscal Agent Agreement by and between the City of Carlsbad and The Bank of
New York Trust Company;
b. Preliminary Official Statement (with all exhibits);
c. Bond Purchase Contract between Stone & Youngberg as the underwriter and the
City of Carlsbad;
d. Continuing Disclosure Certificate.
e. Community Facilities District Disclosure Agreement
DEPARTMENT CONTACT: Lisa Hildabrand, (760) 434-2823, lhild@ci.carlsbad.ca.us
Exhibit 1
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2 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA,
AUTHORIZING AND PROVIDING FOR THE ISSUANCE OF SPECIAL TAX BONDS
FOR IMPROVEMENT AREA 1 OF COMMUNITY FACILITIES DISTRICT NO. 3,
3 APPROVING THE FORM OF FISCAL AGENT AGREEMENT, PURCHASE
CONTRACT, PRELIMINARY OFFICIAL STATEMENT AND OTHER DOCUMENTS
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RELATED THERETO AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION4
WITH THE ISSUANCE OF SUCH BONDS
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Exhibit 2
RESOLUTION NO. 2006 -084
WHEREAS, the CITY COUNCIL of the CITY OF CARLSBAD, CALIFORNIA (this "City Council"),
did previously conduct proceedings to form and did form a community facilities district and designate two
improvement areas therein pursuant to the terms and provisions of the "Mello-Roos Community Facilities
Act of 1982", being Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California9
(the "Act"), such community facilities district designated as Community Facilities No. 3 (the "Community10
Facilities District") and such improvement areas designated as Improvement Area 1 and Improvement Area
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2, respectively, for the purpose of financing the acquisition or construction of certain public improvements;
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and,
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WHEREAS, this City Council has previously declared its intention to issue bonds for each
14 Improvement Area of the Community Facilities District to finance the acquisition or construction of such
15 improvements, such bonds be issued pursuant to the terms and provisions of the Act and Policy 33 of the
City Council pertaining to the use of Assessment Districts, Community Facilities Districts and Bridge and
Thoroughfare Districts, as amended to date (the "Policy 33"); 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 the Bonds (defined below) for Improvement
20 Area 1; and,
WHEREAS, the forms of the following documents have been presented to and considered for
approval by this City Council:
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A. Fiscal Agent Agreement by and between the Community Facilities District and The Bank of
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New York Trust Company, N.A., as fiscal agent (the "Fiscal Agent") setting forth the terms
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and conditions relating to the issuance and sale of the Bonds (the "Fiscal Agent
25 Agreement");
B. Purchase Contract authorizing the sale of the Bonds to Stone & Youngberg LLC, the
27 designated underwriter (the "Purchase Contract");
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1 u. Preliminary Official Statement containing information including but not limited to the
2 Community Facilities District, Improvement Area 1 and the Bonds, including the terms and
conditions thereof (the "Preliminary Official Statement"); and
Continuing Disclosure Certificate to be executed by the City pursuant to which the City will4
be obligated to provide ongoing annual disclosure relating to the Bonds (the "Continuing
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Disclosure Certificate"); and
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WHEREAS, this City Council, with the aid of City staff, has reviewed and considered the Fiscal
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Agent Agreement, the Purchase Contract, the Continuing Disclosure Certificate and the Preliminary Official
8 Statement and finds those documents suitable for approval, subject to the conditions set forth in this
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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 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 Act and Policy 33.
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NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CARLSBAD HEREBY RESOLVES AS16
FOLLOWS:
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1. Recitals. The above recitals are true and correct.
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2. Determinations. This legislative body hereby makes the following determinations pertaining
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to the proposed issuance of the Bonds:
20 (a) Policy 33 generally requires that the full cash value of the properties within Improvement
21 Area 1 subject to the levy of the special taxes securing the Bonds must be at least 4 times
the principal amount of the Bonds, plus any prior or anticipated fixed assessment liens
and/or special tax liens (collectively, "Land Secured Indebtedness"). The Act authorizes the
City Council to sell the Bonds only if the City Council has determined prior to the award of
the sale of the Bonds that the value of such properties within Improvement Area 1 will be at
26 least 3 times the amount of such Land Secured Indebtedness.
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I he value of the property within Improvement Area 1 which will be subject to the special tax
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to pay debt service on the Bonds will be at least 4 times the amount of the Land Secured
Indebtedness.1
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state certified real estate appraiser, as defined in Business and Professions Code Section<j
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The foregoing determination is based upon the full cash value of such properties as shown
upon an appraisal of the subject properties prepared by Bruce W. Hull & Associates, a
11340(c). Such determination was made in a manner consistent with Policy 33.
(b) The terms and conditions of the Bonds as contained in the Fiscal Agent Agreement are
consistent with and conform to Policy 33.
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(c) As a result of the current status of development of the property within Improvement Area 1
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and the relative overall lack of diversity of ownership of property therein, the private sale of
g the Bonds will result in a lower overall cost to the owners of the taxable properties within
10 Improvement Area 1.
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3. Bonds Authorized. Pursuant to the Act, this Resolution and the Fiscal Agent Agreement,
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limited obligation bonds of the City designated as "City of Carlsbad Community Facilities District No. 3 2006
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Special Tax Bonds (Improvement Area 1)" (the "Bonds") in an aggregate principal amount not to exceed
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$13,000,000 are hereby authorized to be issued for and on behalf of Improvement Area 1. The date,
15 manner of payment, interest rate or rates, interest payment dates, denominations, form, registration
"tfi 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 Fiscal Agent Agreement as finally executed.
4. Authorization and Conditions. The City Manager, the Assistant City Manager, the Director
of Finance and such other official or officials of the City as may be designated in writing by this City Council,
the City Manager or the Assistant City Manager (each, an "Authorized Officer") are each hereby authorized
21 and directed to execute and deliver the final form of the various documents and instruments described in
this Resolution, with such additions thereto or changes therein as such Authorized Officer may deem
necessary and advisable provided that no additions or changes shall authorize an aggregate principal
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amount of Bonds in excess of $13,000,000, an annual interest rate on the Bonds in excess of six and
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twenty five hundredths percent (6.25%) per year and underwriter's discount on the Bonds in excess of two
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percent (2.00%) of the par amount of the Bonds (excluding original issue discount, if any). The approval of
26 such additions or changes shall be conclusively evidenced by the execution and delivery of such documents
27 or instruments by an Authorized Officer, upon consultation with and review by the City Attorney, Best Best &
OQ Krieger LLP, bond counsel, and/or Jones Hall, A Professional Corporation, disclosure counsel, as
applicable.
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completed and executed on behalf of the City, subject to the provisions of Section 3 above.4
6. Official Statement and Continuing Disclosure Certificate. The City Council hereby approves
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the form of the Preliminary Official Statement as presented to this City Council and on file with the City
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Clerk, together with any changes therein or additions thereto deemed advisable by the Assistant City
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Manager or, in the absence of the Assistant City Manager, another Authorized Officer. Pursuant to Rule
8 15c2-12 under the Securities Exchange Act of 1934 (the "Rule") the Assistant City Manager or, in the
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absence of the Assistant City Manager, another Authorized Officer is authorized to determine when the
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5. Fiscal Agent Agreement. The form of Fiscal Agent Agreement by and between the City and
the Fiscal Agent, with respect to the Bonds as presented to this City Council and on file with the City Clerk is
hereby approved. An Authorized Officer is hereby authorized and directed to cause the same to be
Preliminary Official Statement is deemed final, and the Assistant City Manager or such other Authorized
Official is hereby authorized and directed to provide written certification thereof. The execution of the final
Official Statement, which shall include such changes and additions thereto deemed advisable by the
Assistant City Manager or, in the absence of the Assistant City Manager, another Authorized Officer
pursuant to the Rule, shall be conclusive evidence of the approval of the final Official Statement by the
Community Facilities District. The City Council hereby authorizes the distribution of the final Official
i O
Statement by the Underwriter as the initial purchaser of the Bonds.16
The form of Continuing Disclosure Certificate by and between the Community Facilities District and
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the Dissemination Agent as presented to this City Council and on file with the City Clerk is hereby approved.
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An Authorized Officer is hereby authorized and directed to cause the same to be completed and executed
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on behalf of the Community Facilities District, subject to the provisions of Section 3 above.
20 7. Sale of Bonds. This City Council hereby authorizes and approves the negotiated sale of
21 the Bonds to the Underwriter. The form of the Purchase Contract is hereby approved and an Authorized
Officer is hereby authorized and directed to execute the Purchase Contract on behalf of the Community
Facilities District upon the execution thereof by the Underwriter, subject to the provisions of Section 3
above.
8. Bonds Prepared and Delivered. Upon the execution of the Purchase Contract, the Bonds
shall be prepared, authenticated and delivered, all in accordance with the applicable terms of the Act and
the Fiscal Agent Agreement, and any Authorized Officer and other responsible City officials, acting for and
on behalf of the Community Facilities District, are hereby authorized and directed to take such actions as
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are required under the Purchase Contract and the Fiscal Agent Agreement to complete all actions required
to evidence the delivery of the Bonds upon the receipt of the purchase price thereof from the Underwriter.
9. Actions. All actions heretofore taken by the officers and agents of the City with respect to
the establishment of the Community Facilities District and the sale and issuance of the Bonds are hereby
approved, confirmed and ratified, and the proper officers of the City, acting for and on behalf of the
Community Facilities District, 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 Bonds in accordance with the Act, this Resolution, the Fiscal Agent Agreement, the Purchase Contract,
the Continuing Disclosure Certificate, and any certificate, agreement, contract, and other document
described in the documents herein approved.
10. Effective Date. This resolution shall take effect from and after its adoption.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on
the 4th day of April , 2006 by the following vote, to wit:
AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose
NOES: None
ABSENT: None
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WDIVENN327398.2 'K,*,X JRRATNEJ\/I.WOOD, City Clerk
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A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, APPROVING A FORM OF COMMUNITY FACILITIES
DISTRICT DISCLOSURE AGREEMENT FOR COMMUNITY FACILITIES
DISTRICT NO. 3 AND APPROVING THE PASS THROUGH OF THE
SPECIAL TAX OBLIGATION TO THE PURCHASERS OF PROPERTY
5 WITHIN SUCH DISTRICT
6
WHEREAS, the City Council of the City of Carlsbad, California, pursuant to the
7
provisions of the Mello-Roos Community Facilities Act of 1982 (Government Code
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Exhibit 3
RESOLUTION NO. 2006 -085
Section 53311 and following) (the "Act") has undertaken proceedings to form and has
formed a community facilities district and designated two improvement areas therein for
the purpose of financing the acquisition or construction of certain public improvements,
together with appurtenances, such community facilities district known and designated as
Community Facilities District No. 3 (the "Community Facilities District") and such
14 improvement areas known and designated as Improvement Area 1 and Improvement
15
Area 2; and
16
WHEREAS, paragraph 14 of Policy 33 of the City Council states that it is the
City's desire that any special tax obligation be discharged prior to the sale of individual
19 lots; provided, however, such policy states further that for commercial or industrial
20 property within a community facilities district, the City Council may, at its sole discretion,
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approve a pass through of the special tax obligation to prospective purchasers of
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commercial or industrial property; and
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24 WHEREAS, paragraph 16 of Policy 33 requires that in any community facilities
25 district in which the special tax obligation is to be passed through to prospective
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purchasers, the developers of the property within such district will be required to
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establish a disclosure program to provide for full and complete disclosure of the special
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tax obligation to prospective purchasers; and
1
2 be subject to approval by the City Council; and
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WHEREAS, Palomar Forum Associates L.P., a California limited partnership4
("Forum") and Fenton Raceway LLC, a California limited liability company ("Raceway") as5
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Cort., a California corporation ("Techbilt" and together with Forum, Raceway and Oaks
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North, the "Developers") as the developers of the property within Improvement Area 2
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have requested that the special taxes be permitted to pass through to the purchasers of
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individual lots within the Community Facilities District; and
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WHEREAS, paragraph 16 of Policy 33 requires that any such disclosure program
the developers of the property within Improvement Area 1 and Carlsbad Oaks North
Partners, L.P., a California limited partnership ("Oaks North") and Techbilt Construction
WHEREAS, all of the property within the Community Facilities District is
commercial or industrial; and
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WHEREAS, the City and the Developers desire to enter into separate Community
Facilities District Disclosure Agreements, the common form of which has been presented
to the City Council (the "Disclosure Agreement"), to establish disclosure programs for
each of the Developers.
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NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Carlsbad, California, as follows:
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1. The above recitals are all true and correct.
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2. The form of the Disclosure Agreement, herewith submitted, is approved
26 substantially in the form submitted. The Mayor is hereby authorized to execute the final
27 form of each such agreement on behalf of the City. The City Manager, subject to the
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review of the City Attorney and Bond Counsel, is authorized to approve changes in such
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agreement deemed to be in the best interests of the City, approval of such changes to be
evidenced by the execution of such agreement.
3. Subject to the execution of the applicable Disclosure Agreements by the
Developers, this City Council hereby approves the pass through of the special tax
obligation to prospective purchasers of individual lots within the Community Facilities
District.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council
of the City of Carlsbad on the 4th day of April 2006 by the following vote, to
wit:
AYES: Council Members Lewis, Hall, Kulchin, Packard, Sigafoose
NOES: None
ABSENT: None
- -C •mA^laaS^: g:,
LORRAINE Ms-WOOD, City Clerk
WDIVEN\327640.I
Exhibit 4
13061-12 JH:CKL 12-29-05
2-12-06
3-1-06
3-14-06
PRELIMINARY OFFICIAL STATEMENT DATED MARCH , 2006
NEW ISSUE NOT RATED
In the opinion of Best Best & Krieger LIP, Bond Counsel, based on an analysis of existing laws, regulations, rulings
and court decisions, and assuming, among other matters, compliance with certain covenants, interest on the Bonds is
excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986 and is
exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not a
specific preference item for purposes of federal individual or corporate alternative minimum taxes, although Bond Counsel
observes that such interest is included in adjusted current earnings in calculating federal corporate alternative minimum
taxable income. Bond Counsel expresses no opinion regarding any other federal or state income tax consequences relating to
the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See "LEGAL MATTERS - Tax Matters."
$11,500,000*
CITY OF CARLSBAD
COMMUNITY FACILITIES DISTRICT NO. 3
2006 SPECIAL TAX BONDS
(IMPROVEMENT AREA 1)
Dated: Date of Delivery Due: September 1, as shown below
Authority for Issuance. The bonds captioned above (the "Bonds") are being issued under the Mello-Roos
Community Facilities Act of 1982 (the "Act"), the Resolution of Issuance (as defined herein), and a Fiscal Agent Agreement,
dated as of March 1, 2006, by and between the City of Carlsbad (the "City"), for and on behalf of City of Carlsbad Community
Facilities District No. 3, County of San Diego, State of California (the "Community Facilities District" or "District") with respect to
its Improvement Area 1 and The Bank of New York Trust Company, N.A., as fiscal agent (the "Fiscal Agent"). Improvement
Area 1 is one of two improvement areas within the Community Facilities District. The City Council (the "City Council") of the
City, acting as the legislative body of the Community Facilities District, and the eligible landowner voters in Improvement Area
1, have authorized the issuance of bonds in an aggregate principal amount not to exceed $14 million. See "THE BONDS -
Authority for Issuance."
Security and Sources of Payment. The Bonds are payable from (i) Special Tax Revenues (as defined herein)
derived from the levy of special taxes (the "Special Taxes") on property within Improvement Area 1 according to the rate and
method of apportionment of special tax approved by the City Council and the eligible landowner voters in Improvement Area 1,
and (ii) moneys deposited in certain funds held under the Fiscal Agent Agreement. See "SECURITY FOR THE BONDS."
Revenues derived from the levy of special taxes in Improvement Area 2 of the Community Facilities District are not
available to pay debt service on the Bonds.
No Additional Obligations Secured by Special Tax Revenues. The Fiscal Agent Agreement authorizes the
issuance of additional bonds secured by a pledge of Special Tax Revenues solely for the purpose of refunding all or a part of
the outstanding Bonds.
Use of Proceeds. The Bonds are being issued to (i) to finance acquisition and construction of certain public capital
improvements, (ii) fund a reserve fund for the Bonds, (iii) pay certain administrative expenses of the Community Facilities
District, and (iv) pay the costs of issuing the Bonds. See "FINANCING PLAN - Facilities to be Financed with Proceeds of the
Bonds" and "Estimated Sources and Uses of Funds".
Bond Terms. Interest on the Bonds is payable on September 1, 2006 and semiannually thereafter on each March 1
and September 1. The Bonds will be issued in denominations of $5,000 or integral multiples of $5,000. The Bonds, when
delivered, will be initially registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), New
York, New York. DTC will act as securities depository for the Bonds. See "THE BONDS - General Bond Terms" and
"APPENDIX F - DTC and the Book-Entry Only System."
Redemption. The Bonds are subject to optional redemption, mandatory sinking fund redemption, and special
mandatory redemption from prepaid Special Taxes prior to their respective maturities. See "THE BONDS - Redemption."
THE BONDS ARE LIMITED OBLIGATIONS OF THE CITY FOR AND ON BEHALF OF THE COMMUNITY
FACILITIES DISTRICT, AND THE PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, ARE PAYABLE SOLELY FROM,
AND SECURED IN ACCORDANCE WITH THEIR TERMS AND THE PROVISIONS OF THE FISCAL AGENT AGREEMENT
SOLELY BY, THE SPECIAL TAX REVENUES AND THE OTHER AMOUNTS PLEDGED THEREFOR UNDER THE FISCAL
Preliminary; subject to change.
AGENT AGREEMENT. NEITHER THE CITY, THE STATE, NOR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT THE
CITY, TO THE LIMITED EXTENT SET FORTH IN THE FISCAL AGENT AGREEMENT) WILL IN ANY EVENT BE LIABLE
FOR THE PAYMENT OF THE PRINCIPAL OF, OR PREMIUM (IF ANY) OR INTEREST ON THE BONDS OR FOR THE
PERFORMANCE OF ANY PLEDGE, OBLIGATION OR AGREEMENT OF ANY KIND WHATSOEVER, AND NONE OF THE
BONDS OR ANY OF THE CITY'S AGREEMENTS OR OBLIGATIONS WILL BE CONSTRUED TO CONSTITUTE AN
INDEBTEDNESS OF OR A PLEDGE OF THE FAITH AND CREDIT OF OR A LOAN OF THE CREDIT OF THE CITY, THE
STATE OR ANY POLITICAL SUBDIVISION THEREOF (EXCEPT THE CITY, TO THE LIMITED EXTENT SET FORTH IN
THE FISCAL AGENT AGREEMENT) WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION
WHATSOEVER.
MATURITY SCHEDULE
(see inside cover)
This cover page contains certain information for quick reference only. It is not a summary of the issue.
Potential investors must read the entire Official Statement to obtain information essential to the making of an
informed investment decision with respect to the Bonds. Investment in the Bonds involves risks which may not be
appropriate for some investors. See "BONDOWNERS" RISKS" for a discussion of special risk factors that should be
considered in evaluating the investment quality of the Bonds.
The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality
by Best Best & Krieger LLP, San Diego, California, Bond Counsel, and subject to certain other conditions. Jones Hall, A
Professional Law Corporation, San Francisco, California, is acting as disclosure counsel to the City. Certain legal matters will
be passed on for the City and the Community Facilities District by the City Attorney. It is anticipated that the Bonds, in book-
entry form, will be available for delivery on or about May , 2006.
Stone & Youngberg LLC
The date of this Official Statement is: April , 2006.
MATURITY SCHEDULE
(BaseCUSIP:t )
$ Serial Bonds
Maturity Principal Interest Maturity Principal Interest
(September 11 Amount Rate Price CUSIP^ (September 1) Amount Rate Price CUSIpt
$ % Term Bond due September 1 Price: _% CUSIpt No. _
$ % Term Bond due September 1 Price: _% CUSIpt No. _
t Copyright 2006, American Bankers Association. CUSIP data herein is provided by Standard & Poor's CUSIP Service Bureau, a
division of The McGraw-Hill Companies, Inc.
I If
CITY OF CARLSBAD
CITY COUNCIL
Claude A. "Bud" Lewis, Mayor
Matt Hall, Mayor Pro Tern, Council Member
Ann J. Kulchin, Council Member
Mark Packard, Council Member
Norine Sigafoose, Council Member
CITY STAFF
Raymond R. Patchett, City Manager
Lisa Mildabrand, Assistant City Manager
James F. Elliott, Administrative Services Director
Glenn Pruim, Public Works Director
James M. Stanton, City Treasurer
Lisa Irvine, Finance Director
Lorraine Wood, City Clerk
Ronald R. Ball, City Attorney
PROFESSIONAL SERVICES
BOND COUNSEL
Best Best & Krieger LLP
San Diego, California
DISCLOSURE COUNSEL
Jones Hall, A Professional Law Corporation
San Francisco, California
SPECIAL TAX CONSULTANT
Special District Finance and Administration
Escondido, California
FISCAL AGENT
The Bank of New York Trust Company, N.A.
Los Angeles, California
APPRAISER
Bruce W. Hull & Associates, Inc.
Ventura, California
MARKET ABSORPTION ANALYST
Empire Economics
Capistrano Beach, California
GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT
No Offering May Be Made Except by this Official Statement. No dealer, broker, salesperson or other
person has been authorized by the City or the Underwriter to give any information or to make any representations with
respect to the Bonds other than as contained in this Official Statement, and if given or made, such other information or
representation must not be relied upon as having been authorized by the City or the Underwriter.
No Unlawful Offers or Solicitations. This Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or
solicitation.
Effective Date. This Official Statement speaks only as of its date, and the information and expressions of
opinion contained in this Official Statement are subject to change without notice. Neither the delivery of this Official
Statement nor any sale of the Bonds will, under any circumstances, create any implication that there has been no
change in the affairs of the City, the Community Facilities District, or any other parties described in this Official
Statement, or in the condition of property within Improvement Area 1 of the Community Facilities District since the date
of this Official Statement.
Use of this Official Statement. This Official Statement is submitted in connection with the sale of the Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. This Official
Statement is not a contract with the purchasers of the Bonds.
Preparation of this Official Statement. The information contained in this Official Statement has been
obtained from sources that are believed to be reliable, but this information is not guaranteed as to accuracy or
completeness.
The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter
has reviewed the information in this Official Statement in accordance with, and as part of, its responsibilities to investors
under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does
not guarantee the accuracy or completeness of such information.
Document References and Summaries. All references to and summaries of the Fiscal Agent Agreement or
other documents contained in this Official Statement are subject to the provisions of those documents and do not
purport to be complete statements of those documents.
Stabilization of and Changes to Offering Prices. The Underwriter may overallot or take other steps that
stabilize or maintain the market price of the Bonds at a level above that which might otherwise prevail in the open
market. If commenced, the Underwriter may discontinue such market stabilization at any time. The Underwriter may
offer and sell the Bonds to certain dealers, dealer banks and banks acting as agent at prices lower than the public
offering prices stated on the cover page of this Official Statement, and those public offering prices may be changed from
time to time by the Underwriter.
Bonds are Exempt from Securities Laws Registration. The issuance and sale of the Bonds have not been
registered under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, in
reliance upon exemptions for the issuance and sale of municipal securities provided under Section 3(a}(2) of the
Securities Act of 1933 and Section 3(a)(12) of the Securities Exchange Act of 1934.
Estimates and Projections. Certain statements included or incorporated by reference in this Official
Statement constitute 'forward-looking statements" within the meaning of the United States Private Securities Litigation
Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A
of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology
used such as "plan," "expect," "estimate," "budget" or other similar words.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-
LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES NOT PLAN TO ISSUE ANY UPDATES OR
REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN ANY EXPECTATIONS, OR EVENTS,
CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.
{Deleted: 5
''/(Deleted; 39
Deleted: 6
TABLE OF CONTENTS (Deleted: 42
(Deleted: 6
Page Deleted: 44
Deleted: 8
INTRODUCTION 1, Proposed Development by Pajpmar. Forum /::;<'''V:VY^err9""
Continuing Disclosure 5, Associates, L.P. and Greyhawk Associates .. 3§, .;//;''/,4
FINANCING PLAN §, Proposed Development by Concourse .One,: • l£eleted: 47
Facilities to be Financed with Proceeds of the |_LC 41, [Deleted: 9
Bonds §, Proposed Development by. Fenton .Raceway, .4^ ..',•', .[Deleted: 51
Estimated Sources and Uses of Funds 7, .. Proposed Development by Opus West
THE BONDS §, Corporation . . ^.^^/
General Bond Terms §, _BOM> OWNERS' RISKS „..„ _..^V/.
Authority for Issuance & LimJted .Obligation of the Cily to Pay naht iDeleted: 51
Redemption 1CJ, Service.™ .,„.._ _..... 50,^ {Deleted: 12
Registration, Transfer and Exchange U, Levy .and .Collection of the Special Tax, §£- - "Deleted: si
Debt Service Schedule 1£ Payment of SpecJal.Tax Is not a.. Personal'...
SECURITY FOR THE BONDS & Obligation ofProperty.Owners-..^ ™ §1.-
General H Apprised .Values™..- _. §£
Special Taxes 14 Property.Values and Property Development, 51,
Additional Obligations Secured by Special Concentration of Property Ownership 53, Deleted: is
Taxes IS Other Possible -Claims Upon, the- Value of 1 Deleted:52
Rate and Method 15, Taxable Property „ 54, fge,eted. 15Covenant to Foreclose 1£ Exempt Properties ., 55. }-°_—
Special Tax Fund 1&. Depletion-of .Reserve Fund 55, Deleted:52
Bond Fund !§, Bankruptcy and Foreclosure Delays „,§§, I Deleted: 55
Reserve Fund !£, Disclosurelo.Future Purchasers™ .,.52, (Deleted: 16
Limited Obligation 13, No-Acceleration-Provisions , „ m.5Z,
No Acceleration 13, Loss-otTaxExemptlon , „ 5J ieieted- ssTLJC OITV -10 —* ueietea. 30THE CITY 13, Voter Initiatives 58.
IMPROVEMENT AREA 1 |i.........Umftations-ortRemedies^,,,:,,^,..,;;:; §
r?e«fra 1 4f Absenceof Secondary Market for the Bonds §§,Entitlements 24 tEGAL-^TTERS.,-,,-,,,,-.,,,,-,.,-,,-,,-,,,-,,-,.-,-. §a | Deleted: 19
Environmental Conditions 2§, .Legal-Opinions 59, r
Infrastructure Development 2§, . ..-jSiaSs^ '- ------- "--'"--- 2
Direct and Overlapping Governmental No Litigation———'———————^ IDeleted: 20 J
Obligations 3^ CONCLUDING-lNFO^ATibN--'™!---'-'----.™.' 60, | Deleted: 56 jMarket Absorption Study 33, No-Ratings , .., 6Q, (Deleted: 20 )
Appraised Property Value 3J, Underwriting , 61, [DeietedTsr™™" """"""""" 1
Appraised Value to Burden Ratio 37, Professional Fees ...SI, Dieted- 20 i
PROPERTY OWNERSHIP AND PROPOSED Fypnitinn fit I Deleted. 20DEVELOPMENT sa .^^ :::::v:\7.v:.\':::v:>:::v:.\"::v:::::v:::::>"::§1
Property Ownership 3§,
APPENDIX A - General Information About the City of Carlsbad ' LDeleted: 58
APPENDIX B - Rate and Method of Apportionment of Special Tax L?*l!^i,?l
APPENDIX C - Appraisal [Deleted: 59
APPENDIX D - Market Absorption Study Summary and Conclusions I Deleted-23
APPENDIX E - Summary of Fiscal Agent Agreement >- '
APPENDIX F - DTC and the Book-Entry Only System I Dell!?£;,!?
APPENDIX G - Form of Issuer Continuing Disclosure Certificate [Deleted: 23
APPENDIX H - Form of Property Owner Continuing Disclosure Certificate foeleted: 59
APPENDIX I - Form of Opinion of Bond Counsel ;
APPENDIX J - Boundary Map of Improvement Area 1 and Community Facilities District L?el,_.:,?i
(Deleted: 60
[Deleted: 27
[Deleted: 60
(Deleted: 31
[ Deleted: 60
[Deleted: 61
[INSERT REGIONAL MAP]
OFFICIAL STATEMENT
$11,500,000*
CITY OF CARLSBAD
COMMUNITY FACILITIES DISTRICT NO. 3
2006 SPECIAL TAX BONDS
(IMPROVEMENT AREA 1)
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description of and
guide to, and is qualified by, more complete and detailed information contained in the entire Official
Statement, including the cover page and attached appendices, and the documents summarized or
described in this Official Statement. A full review should be made of the entire Official Statement.
This Official Statement, including the cover page and attached appendices, is provided to
furnish information regarding the bonds captioned above (the "Bonds") to be issued by the City of
Carlsbad (the "City") for and on behalf of the City of Carlsbad Community Facilities District No. 3,
County of San Diego (the "County"), State of California (the "Community Facilities District") with
respect to its Improvement Area 1 ("Improvement Area 1"). Improvement Area 1 is one of two
improvement areas within the Community Facilities District.
The City. The City of Carlsbad (the "City") is located approximately 35 miles north of the City of
San Diego on the southern California coast. The City is a general law city incorporated in 1952. The
City covers approximately 42 square miles. The City has a current estimated population of 95,146. See
APPENDIX A - "GENERAL INFORMATION ABOUT THE CITY OF CARLSBAD".
The Community Facilities District and Improvement Area 1. The Community Facilities
District (including Improvement Area 1 and Improvement Area 2 within the Community Facilities
District) was established by the City Council of the City (the "City Council"), acting as legislative body
of the Community Facilities District, under the Mello-Roos Community Facilities Act of 1982, as
amended (the "Act"), pursuant to a resolution adopted on November 8, 2005 by the City Council
following a public hearing, and a landowner election held on November 8, 2005 at which the then-
qualified electors of the Community Facilities District authorized the Community Facilities District to
incur bonded indebtedness and approved the levy of special taxes. See "THE BONDS - Authority for
Issuance."
The Community Facilities District was formed to finance the acquisition and construction of
certain public capital improvements necessary for the proposed developments within its boundaries.
Improvement Area 1 consists of 217.09 gross acres of which approximately 137.82 acres are
designated for development and approximately 79.3 acres are set aside for open space and public
area. Improvement Area 1 has two tax zones under the Rate and Method, Zone A and Zone B.
' Preliminary, subject to change.
The Bonds are payable from and secured by Special Tax Revenues (defined below),
which are derived from the levy of Special Taxes (defined below) in Improvement Area 1 only;
special taxes that may be levied in Improvement Area 2 of the Community Facilities District, and
proceeds of any foreclosure sales of property in Improvement Area 2, will not be available to
pay debt service on the Bonds. See "Security and Sources of Payment for the Bonds" below.
Similarly, revenues derived from the levy of special taxes in Improvement Area 1 and proceeds
of any foreclosure sales of property in Improvement Area 1 will not be available to pay debt
service on any bonds issued for Improvement Area 2.
Authority for Issuance of the Bonds. The Bonds are issued pursuant to the following (see
"THE BONDS - Authority for Issuance"):
• The Act.
• Certain resolutions adopted by the City Council, acting as the legislative body of the Community
Facilities District, including the Resolution of Issuance adopted on , 2006 (the "Resolution
of Issuance").
• A Fiscal Agent Agreement, dated as of March 1, 2006 (the "Fiscal Agent Agreement"), by and
between the City, for and on behalf of the Community Facilities District, and The Bank of New
York Trust Company, N.A., as fiscal agent (the "Fiscal Agent").
The City Council, acting as the legislative body of the Community Facilities District and the
eligible landowner voters in Improvement Area 1 have authorized the issuance of not to exceed $14
million of bonded indebtedness in Improvement Area 1.
Purpose of the Bonds. Proceeds of the Bonds will be used primarily to finance the acquisition
and construction of certain public capital improvements to be owned and operated by the City that are
necessary for the development of Improvement Area 1. Bond proceeds will also be used to fund a
reserve fund for the Bonds, pay certain costs of administering the Bonds, and pay the costs of issuing
the Bonds. See "FINANCING PLAN - Facilities to be Financed with Proceeds of the Bonds" and
"Estimated Sources and Uses of Funds".
Security and Sources of Payment for the Bonds. Pursuant to the Fiscal Agent Agreement,
the Bonds are secured by and payable from the following:
• Funds Established Under the Fiscal Agent Agreement. Moneys in the Bond Fund, the
Reserve Fund and the Special Tax Fund are pledged to the repayment of the Bonds.
Moneys in the Administrative Expense Fund, the Improvement Fund (including any
accounts therein) and the Costs of Issuance Fund are not pledged to the repayment of
the Bonds.
• Special Tax Revenues. The Fiscal Agent Agreement defines "Special Tax Revenues"
as proceeds of the special taxes levied within Improvement Area 1 ("Special Taxes"),
including any scheduled payments and any prepayments, related interest and penalties,
and proceeds of the redemption or sale of property sold as a result of foreclosure of the
lien of the Special Taxes to the amount of the Special Tax lien, interest and penalties.
The Special Taxes will be levied within Improvement Area 1 in accordance with the City of
Carlsbad Community Facilities District No. 3 Improvement Area No. 1 Rate and Method of
Apportionment of Special Tax (the "Rate and Method"). See "SECURITY FOR THE BONDS." Special
Tax Revenues do not include proceeds of special taxes that may be levied within Improvement Area 2,
nor may real property within Improvement Area 2 be foreclosed upon in the event property owners in
Improvement Area 1 are delinquent in the payment of Special Taxes.
The Facilities (defined in " See "FINANCING PLAN - Facilities to be Financed with Proceeds of
the Bonds"") financed with proceeds of the Bonds are not in any way pledged as security for the Bonds.
The City has covenanted in the Fiscal Agent Agreement to cause foreclosure proceedings to be
commenced and prosecuted against certain parcels with delinquent installments of the Special Tax.
For a more detailed description of the foreclosure covenant, see "SECURITY FOR THE BONDS -
Covenant to Foreclose." See also "- Additional Obligations Payable From Special Tax Revenues".
Additional Obligations Payable From Special Tax Revenues. The Fiscal Agent Agreement
authorizes the City to issue bonds secured by a pledge of Special Tax Revenues solely for the purpose
of refunding all or a portion of the outstanding Bonds (see "SECURITY FOR THE BONDS - Additional
Obligations Secured by Special Taxes").
Property Ownership and Proposed Development. As of March 1, 2006, the following net
acreage within Improvement Area 1 was owned by the following property owners (collectively, the
"Property Owners"):
Property Owner
Palomar Forum Assoc., L.P.
("Palomar")
Greyhawk Associates
("Greyhawk") (2)
Concourse One LLC
("Concourse")
Fenton Raceway, LLC
("Fenton Raceway")
Opus West Corporation
("Opus West")
Tax Zone
Zone A
Zone A
Zone A
Zone B
Zone B
Net Acreage'"
26.4 net acres
19.93 net acres
5.24 net acres
37.77 net acres*
Lots 1-4, 12-15*
* Excludes property in
escrow for sale to Opus West
(see below)
Phase 1: 26.76 net acres
Lots 5-6, 18-25
Phase // (in escrow): 21 .67
net acres
Lots 7-11, 16-17
Proposed Development
Lots 1, 2, 8: Approximately
278,627 sq. ft. of buildings for
business park uses.
Lot 3: Finished lot for sale or
possible 80,000 sq. ft.
expansion of business park.
Lots 5, 6, 7: Approximately
286,592 sq. ft. of buildings for
business park uses.
Lot 4: Approximately 77,648
sq. ft. of building for office
use.
Portion of Carlsbad Raceway
Business Park: 419,073 sq.
ft. of office, R&D and
manufacturing space.
583,500 sq. ft. portion of
Carlsbad Raceway Business
Park - "Opus Point".
Phase 1 : approximately
328,000 sq. ft. of office, R&D
and manufacturing space.
Phase 2: 255,500 sq. ft. of
office, R&D and
manufacturing space.(1)"Net acreage", as that term is used in this Official Statement is defined as total acreage less acreage set aside for
open space and streets. Although the area of a particular lot that is actually developable may be smaller than the
"net acreage", "net acreage" as used in this Official Statement is the acreage that will be used to calculate Special
Taxes on a specific parcel. The Appraisal values the price per square foot of the "net saleable area" (which the
Appraiser also refers to as "net acres"), which the Appraisal defines as the pad area plus the required setback.
(2) Palomar Forum is developing Greyhawk's property pursuant to an agreement between the parties. Although they are
separate legal entities, Palomar Forum and Greyhawk are affiliated as a result of common ownership.
The Property Owners generally intend to construct buildings intended for industrial, research
and development and office use in a number of separate business parks. For detailed information
about the Property Owners, and current land uses and proposed development plans for the property in
Improvement Area 1, see "PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT." Wo
assurance can be given that development will occur as and when expected or under the current
ownership.
Redemption of Bonds Before Maturity. The Bonds are subject to optional redemption,
mandatory sinking fund redemption, and special mandatory redemption from prepaid Special Taxes
prior to maturity. See "THE BONDS - Redemption."
Appraisal. An appraisal of the Taxable Property (as defined in the Rate and Method) within
Improvement Area 1 dated January 10, 2006 (the "Appraisal") was prepared by Bruce Hull &
Associates, Inc., Ventura, California (the "Appraiser") in connection with issuance of the Bonds. The
purpose of the appraisal was to ascertain the market value of the fee simple estate of the Taxable
Property in Improvement Area 1 as of January 2, 2006.
See "IMPROVEMENT AREA 1 - Appraised Property Value" and "APPENDIX C -Appraisal" for
further information about the Appraisal. The City makes no representation as to the accuracy or
completeness of the Appraisal.
Market Absorption Study. Empire Economics, Inc., Capistrano Beach, California (the "Market
Consultant"), prepared a report entitled "Market Absorption Study" (the "Market Absorption Study")
dated December 19, 2005 to estimate the projected market absorption of the industrial, research and
development and office space proposed to be constructed in Improvement Area 1.
The Market Absorption Study's conclusions are summarized in "IMPROVEMENT AREA 1-
Market Absorption Study" and in Appendix D - "Market Absorption Study Summary and Conclusions". It
should be noted that the Market Consultant's absorption schedule anticipates build-out at the end of
2009 while the property owners project reaching approximately 92% of build-out at the end of 2008.
The Market Consultant concludes the difference can be attributed to the Market Consultant (i)
forecasting slightly lower economic growth and hence lower demand and (ii) considering all of the
various forthcoming products in the aggregate, as they compete with each other in the marketplace.
The Appraisal considered the conclusions of the Market Absorption Study; however, the
Appraisal values the taxable property in Improvement Area 1 as finished lots, while the Market
Consultant estimated the absorption period to occupancy. See "IMPROVEMENT AREA 1 - Market
Absorption Study" and "APPENDIX D - Market Absorption Study Summary and Conclusions" for further
information about the Market Absorption Study. The City makes no representation as to the accuracy or
completeness of the Market Absorption Study.
Risk Factors Associated with Purchasing the Bonds. Investment in the Bonds involves
risks that may not be appropriate for some investors. See "BOND OWNERS' RISKS" for a discussion
of certain risk factors which should be considered, in addition to the other matters set forth in this
Official Statement, in considering the investment quality of the Bonds.
Professionals Involved in the Offering. The following professionals are participating in this
financing:
• Best Best & Krieger LLP, San Diego, California, is serving as Bond Counsel to the City.
• Jones Hall, A Professional Law Corporation, San Francisco, California, is acting as
Disclosure Counsel to the City.
• The Bank of New York Trust Company, N.A., Los Angeles, California, will serve as the
paying agent, registrar, authentication and transfer agent for the Bonds and will perform
the functions required of it under the Fiscal Agent Agreement.
• Bruce Hull & Associates, Inc., Ventura, California, prepared the Appraisal.
• Empire Economics, Inc., Capistrano Beach, California, prepared the Market Absorption
Study.
• Special District Finance and Administration, of Escondido, California, acted as special
tax consultant to the City and will act as initial administrator to the City in connection with
annual Special Tax levies, and as dissemination agent for the City under the Issuer
Continuing Disclosure Certificate described below.
Continuing Disclosure
The City, for and on behalf of the Community Facilities District. The City will covenant, for
and on behalf of the Community Facilities District, in a continuing disclosure certificate, the form of
which is set forth in "APPENDIX G - Form of Issuer Disclosure Certificate" (the "Issuer Continuing
Disclosure Certificate"), for the benefit of holders and beneficial owners of the Bonds, to provide
certain financial information and operating data relating to Improvement Area 1 and the Bonds (the
"Issuer Annual Report") by not later than nine months after the end of the City's Fiscal Year, resulting
in a deadline of March 31 of each year, beginning with an initial deadline of March 31, 2007. The
Issuer Continuing Disclosure Certificate also requires the City to provide notices of the occurrence of
certain enumerated events, if material. The initial Dissemination Agent under the Issuer Continuing
Disclosure Certificate will be Special District Finance and Administration.
The covenants of the City in the Issuer Continuing Disclosure Certificate will be made in order to
assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the
"Rule").
A default under the Issuer Continuing Disclosure Certificate will not, in itself, constitute an Event
of Default under the Fiscal Agent Agreement, and the sole remedy under the Issuer Continuing
Disclosure Certificate in the event of any failure of the City or the Dissemination Agent to comply will be
an action to compel specific performance.
The City has never failed to comply, in any material respect, with an undertaking under the
Rule.
Property Owners. Certain Property Owners will each covenant in separate continuing
disclosure certificates, the form of which is set forth in "APPENDIX H - Form of Property Owner
Continuing Disclosure Certificate" (the "Property Owner Continuing Disclosure Certificate"), for the
benefit of holders and beneficial owners of the Bonds, to provide certain information relating to itself
and the parcels it owns within Improvement Area 1 on a periodic basis (each a "Property Owner
Periodic Report"), and to provide notices of the occurrence of certain enumerated events. Each
Property Owner may serve as dissemination agent under its own Property Owner Continuing
Disclosure Certificate, although Special District Finance and Administration will act as the initial
dissemination agent.
The obligations of each Property Owner executing a Property Owner Continuing Disclosure
Certificate under its respective Property Owner Continuing Disclosure Certificate will terminate on the
earlier of (i) legal defeasance, prior redemption or payment in full of all the Bonds, (ii) the date on which
that Property Owner's property in Improvement Area 1 is no longer responsible for 10% or more of the
annual Special Tax levy, (iii) the date on which that Property Owner prepays in full all of the Special
Taxes attributable to its property in Improvement Area 1 or (iv) the date on which (A) that Property
Owner's property in Improvement Area 1 is responsible for between 10% and 25% of the annual
Special Tax levy, (B) that Property Owner completes construction of all buildings expected to be
constructed within property it owns in Improvement Area 1 and (C) each such building constructed by
that Property Owner and intended for lease by that Property Owner has been, since completion of
construction, at least 80% occupied at one time or another..
A default under any Property Owner Continuing Disclosure Certificate will not, in itself,
constitute an Event of Default under the Fiscal Agent Agreement, and the sole remedy under a
Property Owner Continuing Disclosure Certificate in the event of any failure of the respective Property
Owner or the Dissemination Agent to comply will be an action to compel specific performance. The City
has no obligation to enforce the continuing disclosure undertaking of any Property Owner.
Authorized representatives of each of the Property Owners have represented, to their actual
knowledge, that they are not aware of any material failures by their respective Property Owner to
comply with previous undertakings to provide periodic continuing disclosure reports or notices of
material events with respect to community facilities districts or assessment districts in California within
the last five years.
FINANCING PLAN
Facilities to be Financed with Proceeds of the Bonds
Pursuant to the Resolution of Formation adopted by the City Council of the City, acting as
legislative body for the Community Facilities District, on November 8, 2005, the Community Facilities
District is authorized to finance a variety of public capital improvements (the "Project"), including the
following, all of which will be acquired by the City upon completion of construction:
1. Improvement A: widening of Palomar Airport Road from West of Melrose Drive
Intersection to City of Vista limits (to be financed with the proceeds of bonds issued for
Improvement Area 1 only).
2. Improvement B: improvement of Faraday Avenue from Orion Street to Melrose Drive.
3. Improvement C: improvement of Melrose Drive from Palomar Airport Road to City of
Vista limits.
4. Improvement D: construction of Melrose Drive right turn lane south of Palomar Airport
Road. Palomar and Fenton Raceway is each responsible for paying 25% of the cost of
Improvement D from proceeds of the Bonds. The City anticipates the remaining 50% will
be paid from proceeds of bonds expected to be issued for Improvement Area 2 (see
below) and from the contribution of an adjoining property owner. The City expects either
Palomar or Fenton Raceway to construct Improvement D.
5. Improvement E: improvement of El Fuerte from northerly terminus to the future
extension of Faraday Avenue (to be financed with the proceeds of bonds issued for
Improvement Area 2 only (see below)).
6. Improvement F: construction of eastbound right turn lane on Palomar Airport Road onto
Melrose Drive south of Palomar Airport Road (to be financed with the proceeds of bonds
issued for Improvement Area 1 only). Improvement F will be built by the City with
proceeds of the Bonds, proceeds of bonds expected to be issued for Improvement Area
2 (see below) and other available moneys.
The City expects the Facilities described above as Improvements B, C and D will be financed, in
part, by proceeds of the Bonds and, in part, by proceeds of bonds issued for Improvement Area 2 of the
Community Facilities District. The bonds for Improvement Area 2 are expected to be issued in late-
2006. Proceeds of the Improvement Area 2 bonds will be used to acquire the improvements described
above after they are built by the property owner(s) in Improvement Area 2. Techbilt Construction Corp.,
the owner of property in Improvement Area 2 responsible for construction of public infrastructure in
Improvement Area 2, reports that Improvement B and Improvement E will be completed in the fourth
quarter of 2006. The City does not expect the financing schedule for Improvement Area 2 to affect
development in Improvement Area 1.
Estimated Sources and Uses of Funds
The estimated proceeds from the sale of the Bonds, as indicated below, will be deposited into
the following funds established under the Fiscal Agent Agreement, as described below:'
SOURCES
Principal Amount of Bonds
Less: Original Issue Discount
Less: Underwriter's Discount
Total Sources
USES
Deposit into Reserve Fund (1)
Deposit into Costs of Issuance Fund (2)
Deposit into Administrative Expense Fund (3)
Deposit into Improvement Fund
Deposit into Capitalized Interest Sub-account (4)
Total Uses
(1) Equal to the Reserve Requirement with respect to the Bonds as of their date of delivery.
(2) Includes, among other things, the fees and expenses of Bond Counsel and Disclosure Counsel, the cost of printing the Preliminary and
final Official Statements, fees and expenses of the Fiscal Agent, the cost of the Appraisal and the Market Absorption Study, and the
fees of the Special Tax Consultant.
(3) To pay initial costs of administering the Bond program.
(4) Amounts deposited into the Capitalized Interest Sub-account of the Interest Account of the Bond Fund will be used to pay interest on
the Bonds through September 1, 2006.
Preliminary; subject to change.
THE BONDS
General Bond Terms
Dated Date, Maturity and Authorized Denominations. The Bonds will be dated their date of
delivery and will mature in the amounts and on the dates set forth on the inside of the cover page of this
Official Statement. The Bonds will be issued in fully registered, book-entry only form, in denominations
of $5,000 each or any integral multiple of $5,000.
Interest. The Bonds will bear interest at the annual rates set forth on the cover page of this
Official Statement, payable semiannually on each March 1 and September 1, commencing September
1, 2006 (each, an "Interest Payment Date"). Interest will be calculated on the basis of a 360-day year
composed of twelve 30-day months.
DTC and Book-Entry Only System. DTC will act as securities depository for the Bonds. The
Bonds will be issued as fully-registered securities registered initially in the name of Cede & Co. (DTC's
partnership nominee). See APPENDIX F - "DTC and the Book-Entry Only System." References in this
Official Statement to the owners or holders of the Bonds means DTC, and not the beneficial owners of
the Bonds.
Payments of Interest and Principal. For so long as DTC is used as depository for the Bonds,
principal, premium, if any, and interest payments on the Bonds will be made solely to DTC or its
nominee, Cede & Co., as registered owner of the Bonds, for distribution to the beneficial owners of the
Bonds in accordance with the procedures adopted by DTC.
Each Bond will bear interest from the Interest Payment Date next preceding the date of
authentication unless (i) it is authenticated on an Interest Payment Date, in which event it will bear
interest from the date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and
after the close of business on the Record Date preceding such Interest Payment Date, in which event it
will bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the Record Date
preceding the first Interest Payment Date, in which event it will bear interest from the Closing Date;
provided, however, that if at the time of authentication of a Bond, interest is in default thereon, such
Bond will bear interest from the Interest Payment Date to which interest has previously been paid or
made available for payment thereon.
During any period in which the Bonds are not subject to DTC's book-entry system, interest on
the Bonds (including the final interest payment upon maturity or earlier redemption) will be payable by
check of the Fiscal Agent mailed on the Interest Payment Dates by first class mail to the registered
Owners thereof at the registered Owners' address as they appear on the registration books maintained
by the Fiscal Agent at the close of business on the Record Date preceding the Interest Payment Date,
or by wire transfer to an account within the United States made on such Interest Payment Date upon
written instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds
received before the applicable Record Date. The principal of the Bonds and any premium on the
Bonds will be payable by check in lawful money of the United States of America upon surrender of the
Bonds at the principal office of the Fiscal Agent.
Authority for Issuance
Community Facilities District Proceedings. The Bonds are issued pursuant to the Act, the
Resolution of Issuance and the Fiscal Agent Agreement. As required by the Act, the City Council of the
City has taken the following actions with respect to establishing the Community Facilities District and
authorizing issuance of the Bonds:
Resolutions of Intention: On October 4, 2005 the City Council adopted Resolution No.
2005-301 stating its intention to establish the Community Facilities District, including
Improvement Area 1, and to authorize the levy of a special tax in the Community Facilities
District, including Improvement Area 1 (the "Resolution of Intention"). On October 4, 2005,
the City Council adopted Resolution No. 2005-302 stating its intention to incur bonded
indebtedness in the Community Facilities District, including an amount not to exceed $14 million
in Improvement Area 1.
Resolution of Formation: Following a noticed public hearing on November 8, 2005, the
City Council, acting as legislative body of the Community Facilities District, adopted on
November 8, 2005 Resolution No. 2005-329 (the "Resolution of Formation"), which
established the Community Facilities District, including Improvement Area 1, and authorized the
levy of a special tax within the Community Facilities District.
Resolution of Necessity: On November 8, 2005, the City Council adopted Resolution
No. 2005-330, declaring the necessity to incur bonded indebtedness in an aggregate amount
not to exceed $14 million within Improvement Area 1.
Landowner Election and Declaration of Results: On November 8, 2005, an election was
held within each improvement area of the Community Facilities District in which the then-
qualified electors within Improvement Area 1 approved a ballot proposition authorizing the
improvement area to incur bonded indebtedness, including an amount not to exceed $14 million
in Improvement Area 1, to finance the acquisition and construction of the Project, the levy of a
special tax and the establishment of an appropriations limit for the improvement area. On
November 8, 2005, the City Council adopted Resolution No. 2005-331 pursuant to which the
City Council, acting as the legislative body of the Community Facilities District, approved the
canvass of the votes and declared each improvement area to be fully formed with the authority
to levy Special Taxes, to incur bonded indebtedness and to have its respective appropriations
limit.
Special Tax Lien and Lew: A Notice of Special Tax Lien encumbering property in
Improvement Area 1 was recorded in the real property records of the County on November 17,
2005 as Document No. 2005-0998003.
Ordinance Levying Special Taxes: On November 15, 2005, the City Council, acting as
legislative body for the Community Facilities District, adopted Ordinance No. NS-777 levying the
Special Tax within Improvement Area 1 beginning with the 2006-07 Fiscal Year (the
"Ordinance").
Resolution Authorizing Issuance of the Bonds: On , the City Council, acting
as legislative body for the Community Facilities District, adopted Resolution No.
approving issuance of the Bonds.
City's Goals and Policies. As required by the Act, the City adopted a "local goals and policies"
pursuant to Council Policy Statement No. 33 ("Policy Statement 33"), effective December 17, 2002.
The City has determined that issuance of the Bonds conforms with Policy Statement 33.
Redemption
Optional Redemption*. The Bonds maturing on or after September 1, 2016, are subject to
optional redemption prior to their stated maturities from any source of available funds, on September 1,
2015 and on any Interest Payment Date thereafter, in whole, or in part among maturities so as to
maintain substantially the same debt service profile for the Bonds (and any Parity Bonds) as in effect
prior to such redemption and by lot within a maturity, at a redemption price (expressed as a percentage
of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest
thereon to the date fixed for redemption:
Redemption Dates Redemption Prices
Septemberl, and March 1, 101%
September 1, and any Interest Payment Date thereafter 100
Mandatory Sinking Payment Redemption. The Bonds maturing on September 1, , are
subject to mandatory sinking payment redemption in part on September 1, , and on each
September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to
be redeemed, together with accrued interest to the date fixed for redemption, without premium, from
sinking payments as follows:
Redemption Date
(September 1) Sinking Payments
The Bonds maturing on September 1, , are subject to mandatory sinking payment
redemption in part on September 1, , and on each September 1 thereafter to maturity, by lot, at a
redemption price equal to the principal amount thereof to be redeemed, together with accrued interest
to the date fixed for redemption, without premium, from sinking payments as follows:
Redemption Date
(September 1) Sinking Payments
The amounts in the foregoing table(s) will be reduced to the extent practicable so as to maintain
the same debt service profile for the Bonds (and any Parity Bonds) as in effect prior to such
redemption, as a result of any prior partial redemption of the Bonds as described in "Optional
Redemption" above or "Redemption from Special Tax Prepayments" below.
* Preliminary; subject to change.
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Redemption from Special Tax Prepayments*. Special Tax Prepayments and any
corresponding transfers from the Reserve Fund will be used to redeem Bonds on the next Interest
Payment Date for which notice of redemption can timely be given, among maturities so as to maintain
substantially the same debt service profile for the Bonds (and any Parity Bonds) as in effect prior to
such redemption and by lot within a maturity, at a redemption price (expressed as a percentage of the
principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest to the
date fixed for redemption:
Redemption Dates Redemption Prices
Any Interest Payment Date from September 1, to 102%
and including March 1,
September 1, and March 1, 101
September 1, and any Interest Payment Date 100
thereafter
Purchase In Lieu of Redemption. In lieu of any redemption as described above, at the
direction of an Authorized Officer, moneys in the Bond Fund may be used and withdrawn by the Fiscal
Agent for purchase of Outstanding Bonds, at public or private sale, 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 and any premium which would otherwise be due if such Bonds were to be redeemed in
accordance with the Fiscal Agent Agreement.
Notfce of Redemption. The Fiscal Agent will 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 Securities Depositories, to one or more Information Services, and to the respective
registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond
registration books in the Principal Office of the Fiscal Agent; however, mailing of the notice by the
Fiscal Agent is not a condition precedent to redemption and failure to mail or to receive any such
notice, or any defect in the notice, will not affect the validity of the proceedings for the redemption of the
Bonds.
Effect of Redemption. From and after the date fixed for redemption, if funds available for the
payment of the principal of, and interest and any premium on, the Bonds so called for redemption are
deposited in the Bond Fund, the Bonds called for redemption will cease to be entitled to any benefit
under the Fiscal Agent Agreement other than the right to receive payment of the redemption price, and
no interest will accrue thereon on or after the redemption date specified in the redemption notice.
Registration, Transfer and Exchange
Registration. The Fiscal Agent will keep or cause to be kept, at its Principal Office sufficient
books for the registration and transfer of the Bonds, which books will show the series number, date,
amount, rate of interest and last known Owner of each Bond. The City and the Fiscal Agent will treat
the Owner of any Bond whose name appears on the Bond register as the absolute Owner of such Bond
for any and all purposes, and the City and the Fiscal Agent shall not be affected by any notice to the
contrary. The City and the Fiscal Agent may rely on the address of the Bondowner as it appears in the
Bond register for any and all purposes.
1 Preliminary; subject to change.
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39.
The following provisions regarding the exchange and transfer of the Bonds apply only during
any period in which the Bonds are not subject to DTC's book-entry system. While the Bonds are
subject to DTC's book-entry system, their exchange and transfer will be effected through DTC and the
Participants and will be subject to the procedures, rules and requirements established by DTC. See
"APPENDIX F - DTC and the Book-Entry Only System."
Transfers of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the
Bond register by the person in whose name it is registered, in person or by his duly authorized attorney,
upon surrender of such Bond for cancellation, accompanied by delivery of a duly written instrument of
transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses
incurred by the Fiscal Agent in connection with any such transfer shall be paid by the City. The Fiscal
Agent shall collect from the Owner requesting such transfer any tax or other governmental charge
required to be paid with respect to such transfer.
Whenever any Bond or Bonds is surrendered for transfer, the City will execute and the Fiscal
Agent will authenticate and deliver a new Bond or Bonds, for like aggregate principal amount of
authorized denomination(s).
No transfers of Bonds will be required to be made (i) fifteen days prior to the date established by
the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has
been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment
Date.
Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent for a
like aggregate principal amount of Bonds of authorized denominations and of the same series and
maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in
connection with any such exchange shall be paid by the City. The Fiscal Agent will collect from the
Owner requesting such exchange any tax or other governmental charge required to be paid with
respect to such exchange.
No exchanges of Bonds may be required to be made (i) fifteen days prior to the date
established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after
such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding
Interest Payment Date.
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Debt Service Schedule
The following table presents the annual debt service on the Bonds (including sinking fund
redemptions), assuming there are no optional redemptions or special mandatory redemptions from
Special Tax prepayments.
Year Ending
September 1
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
Total
Principal Interest
Total
Debt Service
Preliminary; subject to change.
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SECURITY FOR THE BONDS
General
The City's obligation to pay the principal of, and interest and any premium on, the Bonds is
secured by a first pledge of the following:
• Funds Established Under the Fiscal Agent Agreement. Moneys in the Bond Fund
(including the Special Tax Prepayments Account), the Reserve Fund and the Special
Tax Fund. Moneys in the Administrative Expense Fund, the Improvement Fund, the
Rebate Fund and the Costs of Issuance Fund are not pledged to the repayment of the
Bonds.
• Special Tax Revenues. The Fiscal Agent Agreement defines "Special Tax Revenues"
as proceeds of the Special Taxes levied within Improvement Area 1 ("Special Taxes"),
including any scheduled payments and any prepayments thereof, interest and penalties
thereon and proceeds of the redemption or sale of property sold as a result of
foreclosure of the lien of the Special Taxes to the amount of said lien, interest and
penalties thereon.
The Facilities to be financed with the proceeds of the Bonds are not in any way pledged to pay
debt service on the Bonds. Any proceeds of condemnation or destruction of the Facilities are not
pledged to pay debt service on the Bonds and are free and clear of any lien or obligation imposed
under the Fiscal Agent Agreement.
Special Taxes
Levy of Special Taxes. The City has covenanted in the Fiscal Agent Agreement to comply with
all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including
without limitation, the enforcement of the payment or collection of delinquent Special Taxes.
Under the Fiscal Agent Agreement, the City is obligated to effect the levy of the Special Taxes
each Fiscal Year in accordance with the Ordinance by each August 1 (or a later date authorized by the
Act or any amendment of the Act) that the Bonds are outstanding, such that the computation of the levy
and the transmission of the amounts to the County is complete before the final date on which the
County will accept the transmission of the Special Tax amounts for the parcels within Improvement
Area 1 for inclusion on the next real property tax roll.
An authorized officer of the City will fix and levy the amount of Special Taxes within
Improvement Area 1 required for the payment of principal of and interest on any outstanding Bonds
becoming due and payable during the ensuing calendar year, including any necessary replenishment or
expenditure of the Reserve Fund for the Bonds and an amount estimated to be sufficient to pay the
Administrative Expenses (including any rebate requirement imposed by federal tax law) during such
year, taking into account the balances in such funds and in the Special Tax Fund.
Reduction of Special Taxes. The City covenants in the Fiscal Agent Agreement not to initiate,
consent or conduct proceedings to reduce the maximum Special Taxes that may be levied in
Improvement Area 1 below an amount which is necessary to provide Special Tax Revenues in any
Fiscal Year in an amount equal to 110 percent of the maximum annual debt service on the Bonds plus
a reasonable estimate of Administrative Expenses for such Fiscal Year.
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Manner of Collection. The Fiscal Agent Agreement provides that the Special Taxes may be
collected either on the County tax roll or directly from the owners or lessees of the parcels of taxable
property. The City expects to collect the Special Taxes levied in Improvement Area 1 in fiscal year
2006-07 through the County tax roll.
Because the Special Tax levy is limited to the maximum Special Tax rates set forth in the Rate
and Method, no assurance can be given that, in the event of Special Tax delinquencies, the receipts of
Special Taxes will, in fact, be collected in sufficient amounts in any given year to pay debt service on
the Bonds. See "BOND OWNERS' RISKS," including the subsection entitled "Other Possible Claims
Upon the Value of Taxable Property," for a discussion of factors that could impact the amount of
Special Taxes collected by the City and the amount, if any, to be realized by Bond owners as a result of
a foreclosure sale in respect of delinquent Special Taxes.
Additional Obligations Secured by Special Taxes
The Fiscal Agent Agreement authorizes the City to incur additional obligations secured by
Special Tax Revenues solely for the purpose of refunding the outstanding Bonds.
Rate and Method
General. The Special Tax will be levied and collected according to the Rate and Method, which
provides the means by which the City, or its designee, may annually levy the Special Taxes within
Improvement Area 1, up to the Maximum Special Tax. In addition, the Rate and Method provides the
formula to determine the amount of the Special Tax that will need to be collected each Fiscal Year from
the "Taxable Property" within Improvement Area 1.
The following is a summary of the provisions of the Rate and Method, which should be read in
conjunction with the complete text of the Rate and Method which is attached to this Official Statement
as "Appendix B - Rate and Method of Apportionment of Special Tax." The meaning of the defined
terms used in this section are as set forth in Appendix B. This section provides only a summary of the
Rate and Method, and is qualified by more complete and detailed information contained in the entire
Rate and Method attached to this Official Statement as Appendix B.
Assignment to Land Use Categories. Prior to the beginning of each Fiscal Year, all property
within Improvement Area 1 will be classified as either Taxable Property or Exempt Property. Taxable
Property shall be further classified as Final Map Property or Developable Property.
Maximum Special Tax. The Annual Maximum Special Tax per Acre for Fiscal Year 2005-06 for
all Taxable Property is shown in Rate and Method Table 1 below:
Rate and Method Table 1
Annual Maximum Special Tax per Acre
For Fiscal Year 2005-2006
Zone A $15,241
Zone B 7,265
Each Fiscal Year beginning Fiscal Year 2006-07, the Annual Maximum Special Tax will escalate
at the applicable Index, i.e., the lesser of (a) the annual percentage increase, if any, in the
"Construction Cost Index for ENR 20 Cities" for the City of Los Angeles as published in the
15
"Engineering News Record" for the twelve-month period ending with the month of March preceding
each Fiscal Year or (b) 3%
The escalation will cease in the Fiscal Year following the earlier of (1) the completion of the
construction and acquisition of all of the Improvements pursuant to the Acquisition Agreement or (2) the
sale of the final series of Bonds.
Method of Apportionment of the Special Tax. Commencing with Fiscal Year 2006-07 and for
each following Fiscal Year, the CFD Administrator will determine the Special Tax Requirement. After
the issuance of Bonds, the Special Tax will be levied on each Assessor's Parcel of Taxable Property to
fund the Special Tax Requirement as follows:
First: The Special Tax will be levied in equal percentages on each Assessor's Parcel of
Taxable Property, exclusive of Open Space Property and Public Property, up to 100% of the
applicable Annual Maximum Special Tax.
Second: If additional Special Taxes are needed after the first step, the Special Tax shall
be levied in equal percentages on each remaining Assessor's Parcel of Taxable Property (i.e.,
Open Space Property and Public Property which is not exempt from the Special Tax), up to
100% of the applicable Annual Maximum Special Tax.
Exemptions. The CFD Administrator will classify the following as Exempt Property:
(i) Public Property,
(ii) Open Space and
(iii) Assessor Parcels with public or utility easements making impractical their utilization for
other than the purposes set forth in the easement;
provided however, that no such classification will reduce the sum of all Taxable Property to less than
46.35 Acres for Zone A and 77.49 Acres for Zone B. Assessor's Parcels which cannot be classified as
Exempt Property because such classification would reduce the Acreage of all Taxable Property to less
than the amounts stated above will be classified as Taxable Property and will be taxed.
The Annual Maximum Special Tax obligation for any property which would be classified as
Public Property upon its transfer or dedication to a public agency but which is classified as Taxable
Property pursuant to the preceding paragraph will be prepaid in full by the seller prior to the
transfer/dedication of such property to such public agency. Until the Annual Maximum Special Tax
obligation for any such Public Property is prepaid, the property will continue to be subject to the levy of
the Special Tax as Taxable Property.
If the use of an Assessor's Parcel of previously classified Exempt Property changes so that
such Assessor Parcel is no longer classified as Exempt Property, such Assessor Parcel will cease to be
classified as Exempt Property and will be deemed to be Taxable Property.
Manner of Collection of Special Taxes. The Special Tax will be collected in the same manner
and at the same time as ordinary ad valorem property taxes; provided, however, that the CFD
Administrator may directly bill the Special Tax, or may collect Special Taxes at a different time or in a
different manner if necessary to meet the financial obligation of the Community Facilities District for
Improvement Area 1 or as otherwise determined appropriate by the CFD Administrator.
16
Prepayment of Special Taxes. The Rate and Method permits prepayment of Special Taxes.
See APPENDIX B - "Rate and Method of Apportionment of Special Tax" for more detailed information
about the manner in which the amount of Special Tax prepayments will be calculated.
Duration of the Special Tax Levy. The Special Tax may not be levied (a) longer than the 10th
Fiscal Year following the final maturity of the last series of Bonds or (b) longer than is needed to pay the
cost and incidental expenses of the construction of the Improvements, whichever is later.
Covenant to Foreclose
Foreclosure Under the Act. Under Section 53356.1 of the Act, if any delinquency occurs in
the payment of the Special Tax, the City may order the institution of a Superior Court action to foreclose
the lien therefor within specified time limits. In such an action, the real property subject to the
delinquent Special Tax levy may be sold at judicial foreclosure sale.
City's Foreclosure Covenant. The City has covenanted in the Fiscal Agent Agreement, with
and for the benefit of the owners of the Bonds, that it will order, and cause to be commenced as
described in the following paragraph, and thereafter diligently prosecute to judgment (unless the
delinquency is brought current), an action in the superior court to foreclose the lien of any Special Tax
or installment thereof not paid when due.
The City covenants to order, cause to be commenced and diligently pursue to completion,
judicial foreclosure proceedings against property or properties under common ownership with
cumulative aggregate delinquent Special Taxes in excess of $10,000 by the October 1 following the
close of the Fiscal Year in which such delinquent Special Taxes first exceed such amount, and will
commence judicial foreclosure proceedings against all properties with delinquent Special Taxes by the
October 1 following the close of each Fiscal Year in which it receives Special Tax Revenues in an
amount which is less than 95% of the total Special Tax Revenues which were to be received in such
Fiscal Year.
Sufficiency of Foreclosure Sale Proceeds; Foreclosure Limitations and Delays. No
assurances can be given that the real property subject to a judicial foreclosure sale will be sold or, if
sold, that the proceeds of sale will be sufficient to pay any delinquent Special Tax installment. The Act
does not require the City to purchase or otherwise acquire any lot or parcel of property foreclosed upon
if there is no other purchaser at such sale. See "BOND OWNERS' RISKS," including the subsection
entitled "Other Possible Claims Upon the Value of Taxable Property," for a discussion of factors that
could impact amounts, if any, to be realized by Bond owners as a result of a foreclosure sale.
Section 53356.6 of the Act requires that property sold pursuant to foreclosure under the Act be
sold for not less than the amount of judgment in the foreclosure action, plus post-judgment interest and
authorized costs, unless the consent of the owners of 75 percent of the outstanding Bonds is obtained.
However, under Section 53356.6 of the Act, the City, as judgment creditor, is entitled to purchase any
property sold at foreclosure using a "credit bid," where the City could submit a bid crediting all or part of
the amount required to satisfy the judgment for the delinquent amount of the Special Tax. If the City
becomes the purchaser under a credit bid, the City must pay the amount of its credit bid into the
redemption fund established for the Bonds, but this payment may be made up to 24 months after the
date of the foreclosure sale. The City has no obligation whatsoever to make any credit bid or purchase
any property subject to delinquent Special Taxes and has no intention to do so.
Foreclosure by court action is subject to normal litigation delays, the nature and extent of which
are largely dependent on the nature of the defense, if any, put forth by the debtor and the Superior
Court calendar. In addition, the ability of the City to foreclose the lien of delinquent unpaid Special
17
Taxes may be substantially delayed by bankruptcy court proceedings, may be limited in certain other
circumstances and may require prior consent of the property owner if the property is owned by or in
receivership of the Federal Deposit Insurance Corporation (the "FDIC"). See "BOND OWNERS' RISKS
- Bankruptcy and Foreclosure Delays."
Wo Teeter Plan. Because the County has not elected to follow the procedures of the "Teeter
Plan" (which is the County's Alternative Method of Distribution of Tax Levies and Collections and of Tax
Sale Proceeds, as provided for in Section 4701 et seq. of the California Revenue and Taxation Code)
with respect to special taxes, collections of Special Taxes will reflect actual delinquencies.
Special Tax Fund
Deposits. The Fiscal Agent Agreement obligates the City to (i) not later than January 15 or July
15, deliver all Special Tax prepayments to the Fiscal Agent for deposit in the Special Tax Prepayments
Account of the Bond Fund (moneys in the Special Tax Prepayments Account will be used to redeem
Bonds on the next date for which notice of redemption can be given) and (ii) deposit all other Special
Tax Revenues received by it, within 5 Business Days after receipt, into the Special Tax Fund held by
the City's Director of Finance.
Special Tax Fund Held in Trust. Moneys in the Special Tax Fund will be held in trust by the
Director of Finance for the benefit of the owners of the Bonds and the City.
Disbursements. From time to time as needed to pay the obligations of the District, but no later
than the Business Day prior to each Interest Payment Date, the Director of Finance will withdraw from
the Special Tax Fund and transfer the following amounts in the following order of priority:
Administrative Expense Fund: To the Administrative Expense Fund in an amount not to
exceed the Priority Administrative Expense Amount ($35,000).
Bond Fund: To the Fiscal Agent for deposit in the Bond Fund, an amount, taking into
account any amounts then on deposit in the Bond Fund and any expected transfers to the Bond
Fund from the Improvement Fund, the Reserve Fund, and the Special Tax Prepayments
Account, such that the amount in the Bond Fund equals the principal (including any sinking
payment), premium, if any, and interest due on the Bonds on the next Interest Payment Date.
Reserve Fund: To the Fiscal Agent for deposit in the Reserve Fund, an amount, taking
into account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve
Fund is equal to the Reserve Requirement.
Additional Administrative Expenses: Amounts then in the Special Tax Fund remaining
after disbursements described above will be transferred from time to time by the Director of
Finance to the Administrative Expense Fund, to pay additional Administrative Expenses in
excess of the amount deposited above, so long as any such transfers do not exceed, in any
Fiscal Year, the amount included in the Special Tax levy for such Fiscal Year for Administrative
Expenses.
Bond Fund
The Fiscal Agent Agreement establishes the Bond Fund, and within the Bond Fund, an Interest
Account (and a Capitalized Interest Sub-account within the Interest Account), a Principal Account and a
Special Tax Prepayments Account. Moneys in the Bond Fund and the accounts therein will be held in
18
trust by the Fiscal Agent for the benefit of the Owners of the Bonds, will be disbursed for the payment of
the principal of, and interest and any premium on, the Bonds, and, pending such disbursement, will be
subject to a lien in favor of the Owners of the Bonds. See Appendix E for a summary of the provisions
of the Fiscal Agent Agreement relating to deposits into and disbursements from the Bond Fund.
Reserve Fund
In order to further secure the payment of principal of and interest on the Bonds, certain
proceeds of the Bonds will be deposited into the Reserve Fund in an amount equal to the Reserve
Requirement (see See "FINANCING PLAN - Estimated Sources and Uses of Funds"). "Reserve
Requirement" is defined in the Fiscal Agent Agreement to mean, as of any date of calculation, an
amount equal to the least of the following:
(i) maximum annual debt service on the outstanding Bonds,
125% of average annual debt service on the outstanding Bonds, or
10% of the outstanding principal amount of the Bonds.
If Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such
prepayment, a proportionate amount in the Reserve Fund (determined on the basis of the principal
amount of the Bonds to remain outstanding) will be applied to the redemption of the Bonds.
See "APPENDIX E - Summary of Fiscal Agent Agreement" for a description of the timing,
purpose and manner of disbursements from the Reserve Fund.
Limited Obligation
All obligations of the City under the Fiscal Agent Agreement and the Bonds are special
obligations of the City, payable solely from Special Tax Revenues and other moneys identified in the
Fiscal Agent Agreement.
No Acceleration
The principal of the Bonds are not subject to acceleration under the Fiscal Agent Agreement as
a result of a default relating to the Fiscal Agent Agreement or the Bonds.
THE CITY
For general information on the City see APPENDIX A - "General Information About the City of
Carlsbad".
19
1. INSERT 1/4/06 AERIAL PHOTO FROM APPRAISAL
2. INSERT CARLSBAD RACEWAY BUSINESS PARK MAP FROM APPRAISAL
3. INSERT PALOMAR FORUM TENTATIVE MAP FROM APPRAISAL
20
IMPROVEMENT AREA 1
General
The Community Facilities District. The Community Facilities District includes Improvement
Area 1 and Improvement Area 2. The Bonds are secured by Special Tax Revenues derived from levy of
Special Taxes in Improvement Area 1 only.
The boundary map showing the boundaries of Improvement Area 1 and the Community
Facilities District is attached as APPENDIX J.
Improvement Area 1. Improvement Area 1 consists of 217.09 gross acres, of which 137.82 net
acres are intended for development with 1.6 million square feet of industrial, research and
development, and office space. More specifically, Improvement Area 1 includes two tax zones (Zone A
and Zone B as defined in the Rate and Method), which consist of the following:
• Zone A: Property in Zone A of Improvement Area 1 consists of 69.93 acres and
approximately 51.62 net acres. As of March 1, 2006, the taxable property in Zone A was
owned by three property owners - Palomar, Greyhawk and Concourse. A total of
approximately 722,876 building square feet is expected to be constructed within Zone A.
The Greyhawk property is under construction and will be developed as a 205,462 square
foot, 28-unit industrial/research and development condominium project and an 81,130
square foot, 9-unit industrial/research and development condominium project. The
Palomar property is expected to be developed with approximately 278,627 square feet of
building for business park uses. An additional lot owned by Palomar within Zone A is
expected to be developed as an approximately 80,000 square foot building for
expansion of the business park or sold to a third party as an improved lot. Concourse
expects to develop the lot it owns within Zone A as a 77,648 square foot office building.
The table below provides a summary of ownership and acreage within Zone A of
Improvement Area 1. Although Greyhawk and Palomar are separate legal entities, they
are affiliated as a result of common ownership. The Rate and Method establishes a tax
on a per-"Acre" basis, with "Acre" defined as the acreage shown on or determined from
the applicable Final Subdivision Map for each assessor's parcel. Accordingly, the "net
acres" for each parcel in the following table and throughout this Official Statement is the
number that will be used to levy the Special Taxes and "pad area" is the buildable area.
However, neither number corresponds to the "net acreage" or "net saleable area" used
by the Appraiser, which the Appraiser defines as the pad area plus the required setback.
21
Lot Number
(Property Owner)
1 (Palomar)
2 (Palomar)
3 (Palomar)
4 (Concourse)
5 (Greyhawk)
6 (Greyhawk)
7 (Greyhawk)
8 (Palomar)
9 (Open Space)
10 (Open Space)
Public Streets
Total
Net Acres
7.41
4.51
7.75
5.24
13.99
2.09
3.85
6.78
1.71
1.70
14.90
69.93
Pad Area
(Acres)
6.8
3.6
6.3
4.2
11.9
2.0
3.5
6.2
0.0
0.0
0.0
44.5
22
Zone B: Property owned by Fenton Raceway and Opus West is proposed for
development as Carlsbad Raceway Business Park, a master-planned business
community that will accommodate up to 1.5 million square feet of industrial, office and
support space in phased development over several years. The 147.1 gross-acre project
is being built on the site of the former Carlsbad Raceway at the northeast intersection of
Palomar Airport Road and Melrose Drive. Approximately 41% - or 61.0 acres - of the
Carlsbad Raceway site is slated for open space and public streets. The remaining 86.1
acres will be developed as a low-rise, campus-like environment that includes a
combination of speculative and build-to-suit industrial and office space and public areas.
The table below provides a summary of ownership and acreage within Zone B of
Improvement Area 1. As previously explained, the Rate and Method establishes a tax on
a per-"Acre" basis, with "Acre" defined as the acreage shown on or determined from the
applicable Final Subdivision Map for each assessor's parcel. Accordingly, the "net acres"
for each parcel in the following table and throughout this Official Statement is the
number that will be used to levy the Special Taxes and "pad area" is the buildable area.
However, neither number corresponds to the "net acreage" or "net saleable area" used
by the Appraiser, which the Appraiser defines as the pad area plus the required setback.
Lot Number (Property Owner)
1 (Fenton Raceway)
2 (Fenton Raceway)
3 (Fenton Raceway)
4 (Fenton Raceway)
5 (Opus West)
6 (Opus West)
7 (Fenton Raceway) (1)
8 (Fenton Raceway) (1)
9 (Fenton Raceway) (1)
10 (Fenton Raceway) (1)
11 (Fenton Raceway) (1)
12 (Fenton Raceway)
1 3 (Fenton Raceway)
14 (Fenton Raceway)
15 (Fenton Raceway)
16 (Fenton Raceway) (1)
17 (Fenton Raceway) (1)
18 (Opus West)
19 (Opus West)
20 (Opus West)
21 (Opus West)
22 (Opus West)
23 (Opus West)
24 (Opus West)
25 (Opus West)
26 (Open Space)
27 (Open Space)
28 (Open Space)
Public Streets
Total
Net
Acres
6.37
5.49
2.97
4.52
3.33
2.12
1.83
2.17
2.18
2.31
4.62
6.93
1.81
4.01
5.67
3.74
4.82
1.34
1.48
1.13
1.41
1.87
3.34
1.97
8.77
1.56
42.58
4.72
12.10
147.16
Pad Area
(Acres)
4.5
4.2
2.3
3.8
2.7
1.6
1.4
1.7
1.8
1.8
3.5
5.6
1.6
3.9
5.7
3.6
4.7
1.3
1.4
1.1
1.3
1.9
3.3
2.0
6.3
0.0
0.0
0.0
0.0
73.0
23
Entitlements
Wo assurances can be made that the Property Owners or any other current or future owner of
property within Improvement Area 1 will have the resources, willingness and ability to successfully
complete development activities on the property within Improvement Area 1. No representation is
made by the City as to the ability (financial or otherwise) of the Property Owner, the Merchant Builders
or any other owner of property within Improvement Area 1 to complete the property development as
currently planned.
Entitlement Status.
Zone A. In 2004, the City approved and recorded a final tract map for all of the property
within Zone A. As of February 9, 2006 building permits had been issued for the construction of
14 buildings totaling approximately 205,000 square feet on the Greyhawk property and a
building permit had been issued for the construction of one building totaling approximately
77,000 square feet on the Concourse property. The approval of condominium plans by the City
are required prior to the sale of condominium units proposed for the Greyhawk property.
In addition, the City has granted Planned Industrial Permits ("PIP"), which are design
approvals, for Lots 4, 5, 6 and 8 and Palomar expects to receive PIP approval by March 2006
for Lots 1,2 and 8.
Zone B. With respect to the Carlsbad Raceway Business Park, Fenton Raceway reports
that all applicable entitlements (with the exception of building permits and related design
approvals, notably the City's PIP permits) are in hand, including final subdivision maps
(approved May 3, 2005) and a Section 404 (wetlands) permit (approved February 13, 2004).
The City has granted PIP permits to Opus West for Phase 1 [confirm prior to printing POS].
Utilities. It is expected that utility services for the property in Improvement Area 1 will be
provided by the entities listed below.
• Water. The City provides water service for both Palomar Forum and Carlsbad Raceway
Business Park. The tentative maps for Palomar Forum and Carlsbad Raceway provide
that a building permit will not be issued until the City determines that water facilities are
available. It is the City's practice to make such a determination at the time a building
permit is pulled for a lot.
• Sanitary sewer. The City will provide sewer service for Palomar Forum (although
the City of Vista will provide service on a interim basis while additional facilities are being
constructed) and Carlsbad Raceway. The tentative maps for Palomar Forum and
Carlsbad Raceway provide that a building permit will not be issued until the applicable
provider determines that sewer facilities are available. It is the City's practice to make
such a determination at the time a building permit is pulled for a lot.
• Stormwater drainage: The City operates and maintains the stormwater drainage
facilities serving Zone A and Zone B. The tentative maps for Palomar Forum and
Carlsbad Raceway provide that a building permit will not be issued until the City
determines that stormwater drainage capacity is available. It is the City's practice to
make such a determination at the time a building permit is pulled for a lot.
24
• Electricity and Gas: San Diego Gas & Electric.
• Telephone: SBC and Cox Communications.
Environmental Conditions
Set forth in the following paragraphs are summaries of environmental issues applicable to of
Zone A (Palomar Forum) and Zone B (Carlsbad Raceway Business Park).
CEQA Review.
Zone A: Following public hearing, on October 17, 2001 the Planning Commission of the City
recommended adoption of a Mitigated Negative Declaration and Addendum dated July 15, 2001 (the
"Palomar Forum Mitigated Negative Declaration") subject to the developer of Palomar Forum
implementing or causing implementation of the Palomar Forum Mitigation Monitoring and Reporting
Program and Addendum. The Palomar Forum Mitigated Negative Declaration concluded the project
could have potentially significant effects on the environment but that revisions in the plans would avoid
or mitigate the effects to a point where no significant effect on the environment would occur. The
development entitlements for Zone A were the responsibility of Palomar. Palomar reports it has
completed all required one-time mitigation measures, and that it is in compliance with ongoing
mitigation measures, including habitat monitoring where required.
Zone B: Following public hearing, on October 17, 2001, the Planning Commission of the City
recommended adoption of a Recirculated Mitigated Negative Declaration and Mitigation Monitoring and
Reporting Program (the "Raceway Mitigated Negative Declaration") dated September 6, 2001
subject to the developer of Carlsbad Raceway Business Park implementing or causing implementation
of the Mitigation Monitoring and Reporting Program. Pursuant to Resolution No. 2001-351, the City
Council of the City adopted the Raceway Recirculated Mitigated Negative Declaration on December 4,
2001. The Raceway Recirculated Mitigated Negative Declaration concluded the project could have
potentially significant effects on the environment but that revisions in the plans would avoid or mitigate
the effects to a point where no significant effect on the environment would occur.
The development entitlements for Zone B were the responsibility of Fenton Raceway. Fenton
Raceway reports it has completed all of the required one-time mitigation measures, and that it is in
compliance with ongoing mitigation measures, including habitat monitoring with respect to Lots 26-28
and compliance with water quality measures.
Phase I Environmental Site Assessments.
Zone A: RBF Consulting, Irvine, California, prepared a Phase I Environmental Assessment
dated September 5, 2000 for the property within Zone A. The RBF Consulting Phase I concluded no
sampling/testing was warranted at the time, but did recommend removal of concrete debris.
The Palomar Forum Mitigated Negative Declaration required grading, trenching, drilling or other
construction activities to be conducted in a manner that protects human health and the environment,
including exposure to pesticide-contaminated soil, which Palomar reports it has done.
Zone B: Opus West commissioned two Phase 1 environmental site assessments:
(i) LFR Levine-Fricke prepared a Phase I Environmental Site Assessment dated
May 19, 2005 with respect to a 7.4-acre site adjacent parcel to the Carlsbad Raceway property
25
i/c
because soil from that parcel was being imported as fill material onto Carlsbad Raceway
property. The Phase I reported no evidence of a recognized environmental condition in
connection with the site and that no further investigation was necessary for the site.
(ii) LFR Levine-Fricke also prepared a Phase I Environmental Assessment for
proposed lots 5-11 and 16-25 (48.3 acres) of Carlsbad Raceway dated May 13, 2005. This
Phase I concluded there was no evidence of recognized environmental conditions in connection
with the site.
The following environmental assessments were performed with respect to the Carlsbad
Raceway property:
(i) MV Environmental prepared a Modified Phase I Environmental Site Assessment
dated August 18, 1997 for the Carlsbad Raceway property. The report concluded there were
several areas of potential environmental concern associated with fuel hydrocarbon use onsite,
and that adjacent agricultural sites drain onto the site. Following testing, MVE concluded that
no further assessment of soil conditions was warranted.
(ii) URS Corporation prepared a Phase I Environmental Assessment/Limited Phase
II Environmental Investigation dated April 5, 2005 for Carlsbad Raceway. In light of the
property's history as a race course, the limited Phase II investigation consisted of a soil vapor
survey for volatile organic compounds in addition to soil sampling and testing for both VOCs and
extended-range total petroleum hydrocarbons. URS concluded that recognized environmental
conditions were not identified at the site and no further investigations were recommended.
Geologic Conditions.
Zone A: A geotechnical report by Vinje & Middleton, Inc. dated February 6, 2002 concluded the
development of Palomar Forum was feasible from a geotechnical standpoint provided the
recommendations for remedial grading and site development were followed. Palomar reports that the
recommendations set forth in the Vinje & Middleton report have been followed or will be followed. The
City has not verified Pa/Omar's compliance with these recommendations.
Zone B:
Vinje & Middleton Engineering, Inc. prepared a "Grading Plan Review and Update Geotechnical
Report" dated February 12, 2003 (the "2003 Vinje Report") with respect to the Carlsbad Raceway
property. The report concluded that the planned development was feasible provided the
recommendations presented in the report were incorporated into the design and reconstruction of the
project.
Geocon Incorporated prepared a "Preliminary Geotechnical Report" dated March 7, 2005 (the
"Opus West Preliminary Report") and an "Update Geotechnical Report" dated November 10, 2005
(the"Opus West Update Report") relating to property owned or to be owned by Opus West in
Improvement Area 1 for the purpose of presenting conclusions for redevelopment of the lots after mass
grading had been completed based on geotechnical aspects of constructing high-end manufacturing,
industrial and office buildings. Geocon's recommendations assumed that Fenton Company would
perform mass grading of the property and that adverse geotechnical conditions noted in Geocon's
"Update Geotechnical Investigation, Carlsbad Raceway Business Park" dated August 17, 2004 (the
"Raceway Update Report") were mitigated.
26
The Opus West Preliminary Report identified a potentially active fault on site and recommended
that structures be designed in accordance with seismic design criteria of the current Uniform Building
Code and/or local ordinances. The Opus West Preliminary Report concluded the site is suitable for
development of high-end manufacturing, industrial and office buildings as planned subject to
compliance with the conditions summarized in the report.
In the Opus West Update Report, Geocon reported that mass grading was essentially complete
and that observation and test results conducted during the grading indicate properly compacted fills and
overall grading conforming to the recommendations of the Raceway Update Report. Geocon concluded
that the lots are considered suitable for support of additional fill and/or structural loads and future
development and it provided grading recommendations and foundation design criteria for the proposed
new development.
Opus West reports that it has retained MTGL as geotechnical consultant for its development in
Improvement Area 1. By letter dated January 10, 2006, MTGL informed Opus West that it agrees with
the conclusions and recommendations contained in the Opus West Update Report and that MTGL will
provide supplemental geotechnical recommendations during construction based upon actual soil
conditions to be encountered. Opus West Reports that it will develop its property in Improvement Area
1 in compliance with the recommendations of MTGL. The City has not verified Opus West's compliance
with these recommendations.
The Raceway Update Report concludes that no soil or geologic conditions were encountered
that would preclude development of the Carlsbad Raceway Business Park as proposed provided the
recommendations in the Raceway Update Report were followed. Fenton Raceway reports that the
recommendations set forth in the Raceway Update Report have been followed or will be followed with
one exception: in a portion of the property characterized by deep alluvial soil, Geocon subsequently
approved use of excavation and backfill rather than surcharge. Fenton Raceway reports it is not
following the recommendations set forth in the 2003 Vinje Report. The City has not verified Fenton
Raceway's compliance with these recommendations.
Wetlands/Jurisdictional Waters.
Zone A. With respect to Palomar Forum, an Agreement Regarding Proposed Stream or
Lake Alteration (Notification No. R5-2002-0009) between Davis Partners and the State of
California, Department of Fish and Game was approved on February 7, 2003. The Agreement
relates to the proposed diversion of four unnamed drainages to Agua Hedionda Creek and the
potential impact on fish and wildlife resources in connection with development of Palomar
Forum. Palomar reports that all work and required mitigation has been completed and that no
404 permit was required for Zone A.
Zone B. A Final Riparian Mitigation Plan dated September 10, 2004 prepared by Helix
Environmental Planning, Inc. presents a program for mitigation of wetlands and non-wetland
waters of the United States for the Carlsbad Raceway site in order to comply with an Army
Corps of Engineers Section 404 Permit No.982020500-RJL (approved February 13, 2004) and
a California Department of Fish & Game Streambed Alteration Agreement No. R5-2002-0088
(approved June 10, 2004).
The Final Riparian Mitigation Plan reports there are two types of Army Corps of
Engineers jurisdictional areas that would be impacted on site, including wetlands (0.12 acres)
and non-wetland waters of the United States (0.17 acres). California Department of Fish &
Game jurisdictional areas to be impacted (0.89 acres) include wetland habitats and streambed.
27
The mitigation plan compensates for the loss of these habitats and streambed by increasing the
amount of these habitats on site and providing improved flood conveyance, flood storage,
control of water quality, and sediment control, and providing additional habitat for invertebrates,
fish, amphibians, reptiles, birds and mammals. The proposed riparian mitigation site is on 33
acres of open space on the Carlsbad Raceway site subject to a mitigation easement.
Fenton Raceway, not Opus West, is the party responsible for wetlands-related mitigation
measures in Zone B. Fenton Raceway reports that most of the wetlands have been preserved
on lots 26-28, that the physical mitigation work is complete, and that it has bonded for 120% of
the mitigation measures required by the Army Corps of Engineers.
Biological Resources.
Zone A. With respect to Palomar Forum, the "PAR 62 Property Biological Technical
Report" prepared by Barry Jones, Helix Environmental Planning, Inc., concluded that the
Palomar Forum property supports three vegetation communities, but that a large portion of the
property already exists as disturbed land. Sensitive plant species observed on the property are
not required to be preserved. A total of 21 animal species were observed or detected during
site surveys; however, the only sensitive species observed on site was the white tailed kite. No
gnatcatchers or burrowing owl were observed. The City has adopted a Habitat Management
Plan ("HMP") and mitigation requirements imposed on Palomar Forum (including construction of
a wildlife corridor, on-site and off-site habitat restoration, on-and off-site riparian restoration) are
consistent with the HMP. Palomar is the party responsible for biological mitigation measures in
Zone A. According to Palomar, it has completed installation of the required mitigation measures
and is in compliance with ongoing monitoring requirements.
Zone B. According to the Recirculated Mitigated Negative Declaration for the Carlsbad
Raceway Business Park, the site supports six vegetation communities, most of which are
partially or heavily disturbed. Some sensitive plant species and some sensitive animal species
were observed on the site, although only the Cooper's hawk is an HMP target species, there is
a low potential for burrowing owl to occur on the site and no California gnatcatchers were
observed or detected during three protocol surveys. The most significant resources on site are
the wetland habitats and the coastal sage scrub.
Mitigation requirements imposed on Carlsbad Raceway (including construction of a
wildlife corridor, on-site and off-site habitat restoration, on-and off-site riparian restoration,
creation of wetland habitat, planting of sensitive plant species, etc.) are consistent with the
HMP.
Fenton Raceway, not Opus West, is the party responsible for biological mitigation
measures in Zone B. According to Fenton Raceway, it has completed installation of the
required mitigation measures, with most of the habitat restoration occurring on Lots 26-28.
Infrastructure Development
Zone A. Other than Melrose Drive, the on-site, backbone public infrastructure required for the
proposed development within Zone A has been completed. Melrose Drive is under construction and is
expected to be completed in March 2006.
28
Bond-Financed Infrastructure: Palomar expects the following public infrastructure
improvements, which will be acquired by the City with proceeds of the Bonds, to cost as follows:
Improvement Final Map Approval Status Cost
Palomar Airport Road 6/29/04 Completed 10/05 $2,800,000
widening and
Improvements to
intersection of Palomar
Airport Road and Melrose
Drive (Improvement A;
see "FINANCING PLAN"
above)
Construct portion of 6/29/04 Scheduled for 700,000
Melrose Drive completion in 3/06
(Improvement C)
Pending their acquisition with Bond proceeds, Palomar is currently financing
construction of the public infrastructure listed above with the Wells Fargo loan described below
Privately-Financed Infrastructure: Palomar spent approximately $5 million on subdivision
improvements, all of which were complete as of October 2005. Palomar is financing
construction of these subdivision improvements with an unsecured $18 million land
development loan from Wells Fargo. The outstanding principal amount of the Wells Fargo loan
as of February 9, 2006 was $10,209,422. To date, the Wells Fargo loan has been paid down
with the proceeds of a construction loan described below and the proceeds of the sale of Lot 4
to Concourse. Palomar expects the remainder of the loan will be repaid with proceeds of the
Bonds used to acquire the Facilities from Palomar and amounts received by Palomar from
Greyhawk pursuant to a purchase money note in the amount of $19,209,960. [describe
resources of Greyhawk to finance note]
Zone B. Fenton Raceway will develop the following public infrastructure as part of its
development of the Carlsbad Raceway Business Park:
Bond-Financed Infrastructure: Fenton Raceway expects improvement of Melrose Drive
(Improvement C; see "FINANCING PLAN" above), which will be acquired by the City with
proceeds of the Bonds, to cost $3.55 million. Fenton Raceway received final map approval for
Melrose Drive in May 2005 and expects to complete it in April 2006. Once completed, the
Melrose Drive improvements will be purchased by the City with Bond proceeds; Fenton
Raceway is financing construction of Melrose Drive with funds loaned to Fenton Raceway by
Fenton Company, [update at POS printing in March]
Privately-Financed Infrastructure: In addition, Fenton Raceway expects grading, utility
installation and street improvements that are not being financed with Bond proceeds to cost
approximately $21.5 million. With respect to these improvements, Fenton Raceway received
final map approval in May 2005, completed grading in December 2005, and expects to complete
remaining infrastructure improvements in March 2006. Fenton Raceway is financing
construction of these infrastructure improvements with funds loaned to Fenton Raceway by
Fenton Company, [update at POS printing in March]
Infrastructure Development as of March 1, 2006.
29
Zone A: Other than Melrose Drive, all infrastructure improvements in Zone A are complete as of
February 1, 2006.
Zone B: As of February 1, 2006, Fenton Raceway reported it had completed approximately $18
million of infrastructure development and other off-site infrastructure improvements for the Carlsbad
Raceway Business Park and that approximately $7 million of infrastructure development and other off-
site infrastructure development remained, with completion expected in April 2006.
Direct and Overlapping Governmental Obligations
Taxes, Charges and Assessments. The base tax rate on property in Improvement Area 1 is
1.0%. However, property in Improvement Area 1 is also subject, or will be subject, to the following
annual charges and assessments (which are billed to property owners on a semi-annual basis):
Zone A
Description: Fixed Charge Special Amount per
Assessment Parcel '1)-
County Water Authority, Water Availability121 $64.52
Metropolitan Water District Water Standby
Charge13' 74.27
City of Carlsbad, Lighting and Landscaping
District No. 2 Zone 5'41 490.91
Mosquito Disease Control151 141.08
County Mosquito Control161 3.00
City of Carlsbad CFD No. 1 ^ 11,118.78
City of Carlsbad CFD No. 3<8) 98,342.55
Total $110,235.11
(1) Example of charges is based on an average lot size of 6.4525 acres. The charges are based on
data provided for the 2005-06 tax roll year and may be subject to annual increase.
(2) Equal to $10 per acre or portion thereof for the 2005-06 tax roll year.
(3) Equal to $11.51 per acre or portion thereof for the 2005-06 tax roll year.
(4) Charges cover lighting and median landscaping. Equal to 6 EDU per acre at $12.68 per EDU for
the 2005-06 tax roll year.
(5) Equal to one half the residential single-family rate of $8.55 per one fifth of an acre for tax roll year
2005-06.
(6) Equal to a flat rate of $3.00 per parcel for the 2005-06 tax roll year.
(7) Based on the maximum annual special tax that could be levied on an assumed building permit of
95,000 square feet for a commercial industrial business park issued in fiscal year 2005-06 which
the property owner elects to pay for a maximum term of 25 years (as opposed to prepaying at
building permit issuance).
(8) Zone A maximum special tax.
30
ZoneB
Description: Fixed Charge Special Amount per
Assessment Parcel '1)-
County Water Authority, Water Availability121 $34.48
Metropolitan Water District Water Standby 39.69
Charge'3'
City of Carlsbad, Lighting and Landscaping 169.66
District No. 2 Zone 5'4)
Mosquito Disease Control'6' 76.95
County Mosquito Control'61 3.00
City of Carlsbad CFD No. 1<7) 5,922.21
City of Carlsbad CFD No. 3(8) £5^049.7.2.
Total $31,295.71
(1) Example of charges is based on an average lot size of 3.448 acres. The charges are based on
data provided for the 2005-06 tax roll year and may be subject to annual increase.
(2) Equal to $10 per acre or portion thereof for the 2005-06 tax roll year.
(3) Equal to $11.51 per acre or portion thereof for the 2005-06 tax roll year.
(4) Charges cover lighting and median landscaping. Equal to 5.9 EDU per acre at $8.34 per EDU for
the 2005-06 tax roll year.
(5) Equal to one half the residential single-family rate of $8.55 per one fifth of an acre for tax roll year
2005-06.
(6) Equal to a flat rate of $3.00 per parcel for the 2005-06 tax roll year.
(7) Based on the maximum annual special tax that could be levied on an assumed building permit of
50,600 square feet for a commercial industrial business park issued in fiscal year 2005-06 which
the property owner elects to pay for a maximum term of 25 years (as opposed to prepaying at
building permit issuance).
(8) Zone B maximum special tax.
31
Overlapping Debt. The direct and overlapping debt obligations of local agencies affecting the
property in Improvement Area 1 as of March 1, 2006 are shown in the following table. The table was
prepared by California Municipal Statistics, Inc., and is included for general information purposes only.
The City has not reviewed this report for completeness or accuracy and makes no representation in
connection therewith.
Direct and Overlapping Governmental Obligations
2005-06 Local Secured Assessed Valuation: $27,698,070
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:
Metropolitan Water District
Carlsbad Unified School District
San Marcos Unified School District School Facilities Improvement District
Vista Unified School District
City of Carlsbad Community Facilities District No. 3,1.A. No. 1
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
OVERLAPPING GENERAL FUND DEBT:
San Diego County General Fund Obligations
San Diego County Pension Obligations
San Diego County Superintendent of Schools
Mira Costa Community College District Certificates of Participation
Palomar Community College District General Fund Obligations
Carlsbad Unified School District Certificates of Participation
San Marcos Unified School District General Fund Obligations
Vista Unified School District Certificates of Participation
City of Carlsbad Certificates of Participation
TOTAL OVERLAPPING GENERAL FUND DEBT
COMBINED TOTAL DEBT
% Applicable
0.002%
0.083
0.039
0.108
100.
Debt 3/1/06
$ 7,791
16,627
7,152
117,952
- (1)
0.010%
0.010
0.010
0.018
0.026
0.085
0.063
0.115
0.155
$149,522
$ 43,063
123,128
1,250
857
2,206
48,191
3,723
9,959
3,263
$235,640
$385,162 (2)
(1) Excludes Mello-Roos Act bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax
allocation bonds and non-bonded capital lease obligations.
Ratios to 2005-06 Assessed Valuation:
Direct Debt
Total Direct and Overlapping Tax and Assessment Debt.
Combined Total Debt
- 0.0-%
0.54%
1.39%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/05: $0
Source: California Municipal Statistics.
32
Market Absorption Study
The following is a summary of certain provisions of the Market Absorption Study, which should
be read in conjunction with the Market Absorption Study Summary and Conclusions prepared by the
Market Consultant attached as Appendix D. The City makes no representation as to the accuracy or
completeness of the Market Absorption Study.
Empire Economics, Inc., Capistrano Beach, California (the "Market Consultant"), prepared a
report entitled "Market Absorption Study" dated December 19, 2005 to estimate the projected market
absorption of industrial, research and development and office space proposed to be constructed in
Improvement Area 1 (the "Market Absorption Study").
With respect to the two tax zones in Improvement Area 1, the Market Absorption Study
summarized the following characteristics of the parcels, their market orientations, their acreage,
expected development size and anticipated development time schedule (based on information provided
by the property owners), and reached the following absorption conclusions. The Appraisal considered
the conclusions of the Market Absorption Study; however, the Appraisal values the taxable property in
Improvement Area 1 as finished lots, while the Market Consultant estimated the absorption period to
occupancy.
The Market Consultant's absorption schedule anticipates build-out at the end of 2009 while the
Property Owners project reaching approximately 92% of build-out at the end of 2008. The Market
Consultant concludes the difference can be attributed to the Market Consultant (i) forecasting slightly
lower economic growth and hence lower demand and (ii) considering all of the various forthcoming
products in the aggregate, as they compete with each other in the marketplace.
Zone A
Development Description. The Absorption Study summarizes proposed development in Zone
A and the Property Owners' proposed development schedule as follows: [update acreage]
Developer
Time
Schedule
3-2007
Industrial Condos - For Sale
Bldg. Sq.Ft.
Lot/ 286,592
Bldq. # 16.7%
5
6-7
205,462
81,130
Acres
19.4
15.2%
13.5
5.9
Developer
Time
Schedule
4m - 2007
Multi-Tenant Business
Bldg. Sq.Ft.
Lot/ 412,627
Bldg. # 24.0%
1-2-8
1-2-8
1-2-8
278,627
278,627
278,627
Acres
31.2
24.5%
7.4
4.4
6.7
Future
Future
80,000
54,000
7.6
5.1
33
Absorption Conclusions. Subject to the assumptions and conditions set forth in the Market
Absorption Study, the Market Absorption Study outlines the following absorption conclusions for Zone
A:
Product Type
Industrial
Condominiums
Multi-tenant business
Absorption (sq. ft.)
in 2007
143,296
55,725
Absorption (so. ft.) Absorption (so. ft.) Absorption (so. ft.) Absorption (sa. ft.)
in 2008 in 2009 in 2010 in 2011
143,296
111,451
Zone B
111,451 80,000 54,000
Development Description. The Absorption Study summarizes the proposed development in
Zone B and the Property Owners' proposed development schedule as follows:
Industrial R&D Products
Developer Bldg. Sq.Ft.
Time Lot/ 610,109
Schedule Bldg. # 35.5%
Fenton Raceway, LLC
2nd 2008 1-4 194,072
(Industrial Condos)
OPUS West Corporation Phase I
3rd - 2006 5-6 59,567
3'"-2006 18 17,770
3rd-2006 19 20,323
3'"-2006 20 16,244
3rd-2006 21 19,814
3rd-2006 22 26,819
OPUS West Corporation Phase II
2nd - 2007
2nd - 2007
2nd - 2008
7
8
9-11
16&17
22,500
25,500
107,500
100,000
47.0
36.8%
15.6
4.9
1.3
1.5
1.1
1.4
1.9
1.5
1.8
7.5
8.5
Developer
Time
2nd - 2008
3rd - 2006
Office/Corporate/Retail
Bldg. Sg.Ft. Acres
Lot/ 409,684 30.0
Bldg. # 23.8% 23.5%
Fenton Raceway. LLC
12 80,000 5.9
13-14 60,000 5.7
15 102,000 5.7
Opus West Corporation
23-24 62,562 5.3
25 105,122 7.4
Absorption Conclusions. Subject to the assumptions and conditions set forth in the Market
Absorption Study, the Market Absorption Study outlines the following absorption conclusions for Zone
B:
Product Type Absorption in 2006 Absorption in 2007 Absorption in 2008 Absorption in 2009 Absorption in 2010
Industrial/R&D 64,215 108,322 212,786 212,786 12,000
Office/corporate/retail 67,074 100,610 121,000 121,000
Appraised Property Value
34
The following is a summary of certain provisions of the Appraisal, which should be read in
conjunction with the full text of the Appraisal attached as Appendix C. The City makes no
representation as to the accuracy or completeness of the Appraisal.
The Appraisal. An appraisal of the Taxable Property within Improvement Area 1 dated January
10, 2006 (the "Appraisal"), was prepared by Bruce Hull & Associates, Inc., Ventura, California (the
"Appraiser") in connection with issuance of the Bonds. The purpose of the Appraisal was to estimate
the market value the fee simple estate of the property within Improvement Area 1 that is subject to the
Special Tax, i.e., the "Taxable Property" as defined in the Rate and Method, as of January 2, 2006.
Conditions and Assumptions. The Appraisal was based on certain assumptions and limiting
conditions set forth in APPENDIX C, including the following:
1. The Appraisal assumes the property is subject to the lien of the Special Taxes.
2. The Appraisal assumes that there is full compliance with all applicable federal, state and
local environmental regulations and laws (unless otherwise stated in the Appraisal), and
that there are no environmental concerns that would slow or thwart development of the
subject properties.
3. The Appraiser assumes there is no hazardous waste or toxic materials on or in the
subject property that would cause a loss in value.
4. The Appraisal assumes that all of the improvements to be funded by the Community
Facilities District are completed and in place.
5. The Appraisal assumes that all conditions for approval are completed in a timely manner
so as not to slow or thwart development.
6. The Appraisal uses cost estimates from the master developers of the property in
Improvement Area 1 and assumes they are complete and accurate.
7. The highest and best use of the subject property is development of the proposed
Carlsbad Raceway Business Park and Palomar Forum Business Park.
8. The marketing and exposure time for the subject properties would be 12 months if
placed on the open market in today's market conditions at the concluded market value,
assuming the lien of the Special Taxes and assuming a sale in bulk or one transaction
on a property owner-by-property owner basis.
Valuation Methods. The Appraisal determined the price per square foot of the "net acreage" or
"net saleable area" (i.e., the pad area plus the required setback) of the subject property in a finished lot
condition. In that regard, the Appraisal assumed property owned by Palomar and Greyhawk is in
finished condition, but that property owned by Fenton Raceway is not.
In general, the Appraisal incorporates two different methods for estimating the market value of
Taxable Property in Improvement Area 1:
• Sales Comparison Approach: this approach compares the subject property to similar
properties that have recently sold, are currently listed or are under contract. To the
extent the subject property is not in finished lot condition, the sales comparison
approach considers the costs required to develop the property to finished lot condition
and subtracts the total of those costs from the finished lot value. The Appraisal
concludes the comparable sales were sufficient to form a reasonable value conclusion.
• Discounted Cash Flow Analysis: for property owned by Fenton Raceway, Opus West
and Palomar/Greyhawk (the Appraisal aggregated the property owned by Palomar and
Greyhawk for valuation purposes), the Appraisal used a discounted cash flow analysis
35
as well. A discounted cash flow analysis considers the finished lot value of the property
(using the sales comparison approach), the costs to develop the property to finished lot
condition, the absorption time needed to sell the property in a finished lot condition and
the administrative and carrying costs over that period of time, the profit due to the
developer, and a discount rate that takes into account both the time value of money and
the risk of the project. Because it is a single parcel, the Appraisal does not utilize a
discounted cash flow analysis to value the Concourse property.
Value Estimate. Subject to the various assumptions and conditions set forth in the Appraisal,
the Appraiser estimated that, as of the January 2, 2006 date of value, the fee simple interest in the
property within Improvement Area 1 owned by the Property Owners had the following value:
Appraised Values
Sales Discounted
Comparison Cash Appraised
Property Owner Approach Flow Value
Fenton Raceway $32,300,000 $30,260,000 $31,000,000
Opus West 16,200,000 16,027,000 16,100,000
Palomar(1) 29,730,000 29,281,000 29,500,000
Concourse One 4.440.000 N/A (2) 4,440.000
Total $82,670,000 $75,568,000 $81,040,000
(1) The Appraisal aggregates the property owned by Palomar and Greyhawk. Although they are separate legal
entities, they are affiliated as a result of common ownership.
(2) Because it is a single parcel, the Appraisal does not utilize a discounted cash flow analysis to value the
Concourse property.
36
Appraised Value to Burden Ratio
The table below shows the projected value to burden ratio for the property in Improvement Area
1 based on the appraised values set forth in the Appraisal and the principal amount of the Bonds.
Wo assurance can be given that the amounts shown in this table will conform to those ultimately
realized in the event of a foreclosure action following delinquency in the payment of the Special Taxes.
See "BOND HOLDERS' RISKS - Property Values and Property Development".
Appraised Values and Value to Burden Ratios*
Property
Owner
Palomar(5)
Greyhawk(5>
Subtotal
Palomar/Greyhawk
Concourse
Fenton Raceway
OPUS West
TOTAL
Number
Tax of
Zone Lots
A
A
A
B
B
4
2
7
1
15
10
33
Maximum
Special
Tax Levy
2005-2006 (1>
$402,362.40
304.620.00
707,182.40
77,729.10
431,541.00
193.975.50
$1,410,428.00
% of Max.
Special
Tax Levy
2005-2006
28.53%
21.61
50.14
5.51
30.60
13.75
100.00%
Allocable Share
of Bonds'|2)
$3,280,683.31
2.485,366.14
5,766,049.45
633,768.37
3,518,592.58
1.581.589.60
$11,500,000.00
Appraised
Value" (3)
$29,500,000
4,440,000
31,000,000
16.100.000
$81,040,000
Value to
Burden
Ratio*141
(1) Source: Rate and Method (assuming all lots classified as Developed).
(2) Reflects each Property Owner's share, based on the Maximum Special Taxes for fiscal year 2005-2006, of indebtedness of $11.5
million.
(3) Source: Appraisal.
(4) Appraised value divided by allocable share of Bonds. Does not include other liens and charges described in "Overlapping Taxes,
Charges and Assessments".
(5) Although they are separate legal entities, Palomar and Greyhawk are affiliated as a result of common ownership. Palomar is
developing Greyhawk's property pursuant to an agreement between the two entities.
Source: Special District Financing & Administration.
1 Preliminary; subject to change.
37
PROPERTY OWNERSHIP AND PROPOSED DEVELOPMENT
The information about the Property Owners and their respective properties and proposed
development contained in this Official Statement has been provided by representatives of the
respective entities and has not been independently confirmed or verified by the Underwriter or the City.
Neither the Underwriter nor the City makes any representation as to the accuracy or adequacy of the
information contained in this section. No assurance can be given that the ownership of such properties
will not change or that the proposed development will occur at all, will occur in a timely manner or will
occur as presently anticipated and described below. There may be material adverse changes in this
information after the date of this Official Statement.
Property Ownership
The table below shows, for Improvement Area 1, a summary of current ownership.
Property Ownership
and Share of Maximum Special Tax Levy
Property
Owner
Palomar(2)
Greyhawk<2)
Concourse
Fenton Raceway
Total
Tax
Zone
Zone A
Zone A
Zone A
ZoneB
ZoneB
Number of
Lots
4
3
1
15
IS33
26.40
20.00
5.10
59.40
26.70
137.60
Maximum
Special Tax
Lew 2005-2006(1)
$402,362.40
304,820.00
77,729.10
431,541.00
$1,410^428.00
% of Max.
Special
Tax Levy
2005-2006
28.53%
21.61
5.51
30.60
13.75
100.00%
(1) Source: Rate and Method of Apportionment (assuming all lots classified as Developed).
(2) Although they are separate legal entities, Palomar and Greyhawk are affiliated as a result of common ownership. Palomar is
developing Greyhawk's property pursuant to an agreement between the two entities.
Source:Special District Financing & Administration.
Proposed Development by Palomar Forum Associates, LP. and Greyhawk Associates
General. Palomar Forum Associates, L.P. ("Palomar") is a California limited partnership. The
general partner of Palomar is Davis Carlsbad Partners, a California limited partnership. The limited
partner of Palomar is Carlsbad Palomar Associates LLC, a Delaware limited liability company. The
general partners of Davis Carlsbad Partners are various individuals, including the two principals in
Davis Realty Partners LLC, Bill Davis and Bob Thiergartner.
Davis Realty Partners LLC ("Davis Partners") was established over twenty years ago by Bill
Davis and now owns and operates institutional-quality industrial buildings, multi-tenant business parks
and office properties throughout Southern California. Davis Partners manages more than 75
commercial properties totaling nearly 14 million square feet and valued at more than $1 billion.
Davis Partners manages the development of both the Palomar and Greyhawk property. Davis
Partners' internet site is located at www.davis-partners.com. This Internet address is included for
reference only, and the information on this Internet site is not a part of this Official Statement or
incorporated by reference into this Official Statement.
38
Greyhawk Associates, a California corporation, is a privately-held corporation established to
own, develop and sell the property it owns in Zone A. Greyhawk and Palomar Forum are affiliated as a
result of common ownership.
Proposed Development. Property owned by Palomar in Zone A of Improvement Area 1 (Lots
1, 2, 3 and 8) is proposed for development as the Palomar Forum Business Park, with approximately
278,627 building square feet of multi-tenant business park uses.
Property owned by Greyhawk in Zone A (Lots 5, 6 and 7) is proposed to be developed by Davis
Carlsbad Partners pursuant to a project management agreement with Greyhawk with 37 research and
development condominiums and approximately 289,592 building square feet of research and
development space for lease. Lot No. 5 will be developed with 28 condominium units totaling
approximately 205,462 building square feet among 14 buildings. Lots No. 6 and 7 are anticipated to be
developed with 9 condominium units totaling approximately 81,130 building square feet.
The current and anticipated construction schedule and product mix for the Palomar Business
Park and the Greyhawk property to be developed by Palomar is set forth below. Wo assurance can be
given that construction will be carried out on the schedule and according to the plans outlined below, or
that Palomar's and Greyhawk's construction and sale plans will not change after the date of this Official
Statement.
Proposed Product Mix and Construction and Sales Schedule
Palomar Forum Associates, L.P. and Greyhawk
Lot
#
1,2,
8
3
5
6&7
Proposed
Use
Multi-tenant
business park
Not determined
R&D condo units
R&D condo units
Total
Net
Land
Area
(acres)
18.7
7.75
13.99
5.94
46.4
Building
Area
(sg. n.)
278,627
80,000
205,462
81,130
645,219
Intended for
Lease or
Sale
Lease
Not
determined
Sale
Sale
Expected/
Actual
Begin
Construction
5/06
Not determined
9/05
6/06
Expected/
Actual
Complete
Construction
12/07
Not determined
8/06
3/07
Expected
Lease-Up
Dale
12/08
Not determined
N/A
N/A
Expected Final
Sale
Date
n/a
Not determined
12/06
9/07
Financing Plan. There are no costs remaining to be incurred by Palomar or Greyhawk to create
finished lots within their respective properties.
Palomar financed its land development activities in Improvement Area 1 with an existing $18
million loan from Wells Fargo Bank described above. Greyhawk is financing its construction on Lot No.
5 within Zone A with a $25.5 million loan from Wrightwood Capital secured by a deed of trust on Lot 5.
As of January 1, 2006 the outstanding amount of the Wrightwood Capital loan was $6,872,303.
Greyhawk expects to repay the loan with the proceeds of sales of the condominium units under
construction on Lot 5. Greyhawk projects gross proceeds of approximately $42 million for the sales of
the condominium units under construction on Lot 5. Greyhawk expects to obtain a construction loan for
the construction of buildings on Lots 6 and 7 as well. Wo assurance can be given that these sources of
financing will continue to be available and, if available, will be sufficient to complete property
development and project construction as currently anticipated.
39
Development Experience. During calendar year 2005, Davis Partners developed the following
approximately 435,000 square feet of commercial/industrial space, including the following similar
projects in California:
Development
Pioneer Industrial Center
Grapevine Business Center
Location
Redlands
Mira Loma
Number
of Lots
1
5
1
Square
Feet
[to come]
[to
come]
[to
come]
Status
[to come]
[to
come]
[to
come]
Jersey Commerce Center Rancho Cucamonga
History of Property Tax Payments; Loan Defaults; Bankruptcy. Palomar has represented as
follows:
Palomar and Davis Partners have never defaulted to any material extent in the payment
of special taxes or assessments in connection with the Community Facilities District or any other
community facilities districts or assessment districts in California within the past five years.
Palomar and Davis Partners are not currently in default on any loans, lines of credit or
other obligation, the result of which could materially adversely affect the development of property
owned by Palomar in Improvement Area 1.
Palomar and Davis Partners are solvent and no proceedings are pending or, to the
actual knowledge of Palomar and Davis Partners, threatened in which Palomar or Davis Partners may
be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from all of
its respective debts or obligations, or granted an extension of time to pay its respective debts or a
reorganization or readjustment of its respective debts.
Except as described herein, there is no litigation or administrative proceeding of any
nature in which Palomar or Davis Partners has been served, or is pending or threatened against
Palomar or Davis Partners which, if successful, would materially adversely affect the ability of Palomar
to complete the development and sale of its property within Improvement Area 1, or to pay the Special
Taxes or ordinary ad valorem property tax obligations when due on its property within Improvement
Area 1, or which challenges or questions the validity or enforceability of the Bonds, the Resolution of
Issuance, the Fiscal Agent Agreement, Palomar's Property Owner Continuing Disclosure Certificate or
the Bond Purchase Contract.
Greyhawk has represented as follows:
Greyhawk has never defaulted to any material extent in the payment of special taxes or
assessments in connection with the Community Facilities District or any other community facilities
districts or assessment districts in California within the past five years.
Greyhawk is not currently in default on any loans, lines of credit or other obligation, the
result of which could materially adversely affect the development of property owned by Greyhawk in
Improvement Area 1.
Greyhawk is solvent and no proceedings are pending or, to the actual knowledge of
Greyhawk, threatened in which Greyhawk may be adjudicated as bankrupt or become the debtor in a
40
bankruptcy proceeding, or discharged from all of its respective debts or obligations, or granted an
extension of time to pay its respective debts or a reorganization or readjustment of its respective debts.
Except as described herein, there is no litigation or administrative proceeding of any
nature in which Greyhawk has been served, or is pending or threatened against Greyhawk which, if
successful, would materially adversely affect the ability of Greyhawk to complete the development and
sale of its property within Improvement Area 1, or to pay the Special Taxes or ordinary ad valorem
property tax obligations when due on its property within Improvement Area 1, or which challenges or
questions the validity or enforceability of the Bonds, the Resolution of Issuance, the Fiscal Agent
Agreement, Greyhawk Property Owner Continuing Disclosure Certificate or the Bond Purchase
Contract.
Proposed Development by Concourse One, LLC
General. Concourse One, LLC ("Concourse One"), a Delaware limited liability company, is a
joint venture between LW Concourse, LLC ("LW Concourse"), a Delaware limited liability company and
Somera Realty Value Fund, L.P. ("SRVF"), a Delaware limited partnership. The operating member of
Concourse One is LW Concourse, which is a joint venture between multiple individual investors and LW
Properties, LLC ("LW Properties"), a California limited liability company. The managing member of LW
Properties is Lawrence A. Woodward, an individual and long-time Southern California commercial
developer.
Lawrence A. Woodward has over 25 years' experience in commercial real estate development,
including strategic planning development, acquisition, project financing and marketing. Mr. Woodward
has managed the development process from land acquisition through entitlements, design, permitting,
construction and marketing for several high-profile development projects such as Scripps Ranch
Business Park, Wateridge Corporate Center and Rio San Diego Plazas I and II, all located in San
Diego, CA., and has been actively involved in the development of over 1.5 million square feet of
commercial property.
Proposed Development. Concourse One owns Lot 4, a 5.24-acre site within Zone A.
Concourse One has commenced construction of a 77,660-square-foot, two-story, Class "A" office
building called "Concourse One at the Palomar Forum." Construction is expected to be completed in
October 2006. The project is being marketed for lease to professional office tenants and will be
managed and held as an investment by Concourse One.
Financing Plan. Concourse One is financing its development of Lot 4 through a $12,780,000
construction loan from Guaranty Bank of Dallas, Texas, secured by a deed of trust on Lot 4.
Concourse One estimates total development costs for Lot 4 will be $17,359,000. Equity contributions
totaling $4,570,000 have been contributed by members LW Concourse and SRVF [this leaves a $10K
shortfall]. Upon completion of construction and operational stabilization of the project, Concourse One
plans to replace the construction loan with permanent financing from a major, national institutional
lender.
Development Experience. During calendar year 2005, Lawrence Woodward completed the
development of two office projects in San Diego County:
Number Square
Development Location of Lots Feet Status
41
Rio San Diego Plaza, Mission Valley (San [to come] 70,000 Sold
Phase 2 (3-story office Dieg, California)
building)
Balfour Corporate Center Carlsbad, California [to come] 50,000 92% sold
(2-story office condo)
Prior relevant projects in San Diego County Experience include:
Development Location
Number
of Lots
Square
Feet Status
Rio San Diego Plaza, Mission Valley (San [to come]
Phase 1 (6-story office Dieg, California)
bldg)
197,000 98%
leased
Carlsbad Crest Corporate
Center (R&D/Corp. HQ)
[to come] 66,000 Sold
Scripps Hilbert Office Plaza Scripps Ranch (San [to come] 40,000
(Office bldg. Diego, California)
redevelopment)
Sold
History of Property Tax Payments; Loan Defaults; Bankruptcy. Concourse One and
Lawrence Woodward have represented as follows:
Concourse One and Lawrence Woodward have never defaulted to any material extent in
the payment of special taxes or assessments in connection with the Community Facilities District or any
other community facilities districts or assessment districts in California within the past five years.
Concourse One and Lawrence Woodward are not currently in default on any loans, lines
of credit or other obligation, the result of which could materially adversely affect the development of
property owned by Concourse One in Improvement Area 1.
Concourse One and Lawrence Woodward are solvent and no proceedings are pending
or, to the actual knowledge of Concourse One and Lawrence Woodward, threatened in which
Concourse One and Lawrence Woodward may be adjudicated as bankrupt or become the debtor in a
bankruptcy proceeding, or discharged from all of its respective debts or obligations, or granted an
extension of time to pay its respective debts or a reorganization or readjustment of its respective debts.
There is no litigation or administrative proceeding of any nature in which Concourse One
or Lawrence Woodward has been served, or is pending or threatened against Concourse One or
Lawrence Woodward which, if successful, would materially adversely affect the ability of Concourse
One to complete the development and sale of its property within Improvement Area 1, or to pay the
Special Taxes or ordinary ad valorem property tax obligations when due on its property within
Improvement Area 1, or which challenges or questions the validity or enforceability of the Bonds, the
Resolution of Issuance, the Fiscal Agent Agreement, or the Bond Purchase Contract.
42
Proposed Development by Fenton Raceway LLC
General. Fenton Raceway LLC ("Fenton Raceway") is a California limited liability company, of
which H.G. Fenton Company ("Fenton Company") is the managing member and owns 60%, and five
Fenton Company-related trusts own the remaining 40%.
Fenton Company was founded in 1906 and is one of San Diego's oldest locally-owned
companies. Fenton Company is involved in commercial and residential management and development
and construction of industrial, warehouse and R&D properties for lease or as build-to-suit. Fenton
Company currently owns and manages an industrial portfolio with over 3 million square feet of existing
space and owns and manages 2,800 apartment units throughout San Diego County.
Fenton Company is privately owned. Fenton Company's internet site is located at
www.hgfenton.com. This Internet address is included for reference only, and the information on this
Internet site is not a part of this Official Statement or incorporated by reference into this Official
Statement.
Proposed Development. Property owned by Fenton Raceway in Improvement Area 1 is
proposed for development as a portion of the Carlsbad Raceway, a master-planned business
community that will accommodate up to 1.5 million square feet of industrial, office and support space in
phased development over several years. The 147.16 gross acre project is being built on the site of the
former Carlsbad Raceway at the northeast intersection of Palomar Airport Road and Melrose Drive.
Approximately 41% - or 60.96 acres - of the Carlsbad Raceway site is slated for open space and public
area. The remaining 86.2 net acres will be developed as a low-rise, landscaped campus-like
environment that includes a combination of speculative and build-to-suit industrial and office space.
Fenton Raceway sold 10 lots totaling 26.76 net acres in the Carlsbad Raceway to Opus West
on November 3, 2005 for $16,253,978 (see "Proposed Development by Opus West Corporation"
below). Fenton Raceway is in contract with Opus West to sell an additional 7 lots totaling
approximately 21.67 acres in the Carlsbad Raceway Business Park in May 2006. Consequently,
Fenton Raceway expects to ultimately develop 8 lots totaling approximately 37.77 acres in Carlsbad
Raceway Business Park, of which it expects to sell approximately 18.42 acres of office condominiums
and hold approximately 19.35 acres for construction and leasing of commercial and industrial product.
The current and anticipated construction schedule and product mix for the 8 lot which Fenton
Raceway expects to develop is set forth below. No assurance can be given that construction will be
carried out on the schedule and according to the plans outlined below, or Fenton Raceway's
construction and sale plans will not change after the date of this Official Statement.
43
It)
Proposed Product Mix and Construction and Sales Schedule
Fenton Raceway LLC
Lot
#
1-4
13-
15
12
Proposed
Use
Multi-tenant industrial
Multi-tenant industrial
condominium
Corporate
headquarters
Total
Net
Land
Area
(acres)
19.35
11.49
6.93
37.77
Building
Area
(sg. ft.)
194,072
162,000
80.000
436,072
Intended
for
Lease or
Sale
Lease
Sale
Sale or
Lease
Begin
Construction
January 2008
January 2007
January 2008
Complete
Construction
April 2009
December 2007
December 2008
Expected
Lease-Up
Date
December
2011
n/a
n/a
Expected
Final Sale
Date
n/a
December
2007
December
2008
Financing Plan. Based on information provided by Fenton Raceway, the Appraisal assumes
that the remaining costs as of February 1, 2006 to be borne by Fenton Raceway in order to construct its
proposed development totaled $77.6 million, including $19.8 million of public and private infrastructure
and $57.8 million of building construction costs.
44
Fenton Raceway provided the following projected schedule of sources and uses for its
development activities in Improvement Area 1:
2006 2007 2008 2009
Sources:
Current Cash
Borrowing on Fenton Company's Line of Credit(1)
Opus Land Sale
Melrose Portion Reimbursement (Bond proceeds)
Sale of Lot 13-15 Industrial Condominiums
Lot 1-4 NOI
Sale of Lot 12
Proceeds from Refinancing Lots 1-4
$2,975,000
2,800,000 $21,100,000
12,600,000
3,500,000
$36,100,000 $3,900,000
2,360,000
21,500,000
26,000,000
Total Sources 21,875,000 21,100,000 36,100,000 53,760,000
Uses:
Repayment of Fenton Company Line of Credit
Land Infrastructure Costs (Grading/Utilities)
Melrose Portion Cost
Cost of Lot 13-15 Industrial Condominiums
Cost of Lot 1-4 For Lease Product
Cost of Lot 12
Interest Expense
23,900,000
6,000,000
2,200,000
13,500,000 13,500,000 8,000,000 900,000
6,650,000 19,950,000
3,575,000 10,725,000
84,000 801,000 1,434,000 717,000
Total Uses 21,784.000 20,951,000 32,959,000 36,242.000
Net Cash Flow 91,000 149,000 3.141,000 17,518,000
(1) The Fenton Company line of credit is provided by Union Bank of California. Fenton Company reports that, as of February 15, 2006,
there was $50 million of borrowing capacity under the line of credit. Fenton Company also uses the line of credit to finance projects outside
Improvement Area 1, but believes the line of credit, along with the other sources described above, will be sufficient to finance Fenton
Raceway's development activities in Improvement Area 1. The line of credit is secured by properties owned by Fenton Company outside
Improvement Area 1.
No assurance can be given that the sources of financing available to Fenton Raceway will be
sufficient to complete property development and project construction as currently anticipated.
45
Development Experience. During calendar year 2005, the Fenton Company developed
approximately 100,000 square feet for commercial/industrial use. Prior relevant experience includes:
Development
Fenton Technology Park
Location
San
Diego
Carlsbad Corporate Carlsbad
Center
Fenton Carlsbad Carlsbad
Research Center
Number
of Lots
9
Status
Sold 3 lots developed with 396,000 sq. ft. of buildings;
developed and own 1 lot with 40,000 sq. ft of building; 3 lots
under construction (with 83,000 sq. ft. of buildings); 2 lots are
vacant
Buildings under construction
Grading and infrastructure installation
History of Property Tax Payments; Loan Defaults; Bankruptcy. Fenton Raceway and
Fenton Company have represented as follows:
Fenton Raceway and Fenton Company have never defaulted to any material extent in
the payment of special taxes or assessments in connection with the Community Facilities District or any
other community facilities districts or assessment districts in California within the past five years.
Fenton Raceway and Fenton Company are not currently in default on any loans, lines of
credit or other obligation, the result of which could materially adversely affect the development of
property owned by Fenton Raceway in Improvement Area 1.
Fenton Raceway and Fenton Company are solvent and no proceedings are pending or,
to the actual knowledge of Fenton Raceway and Fenton Company, threatened in which Fenton
Raceway or Fenton Company may be adjudicated as bankrupt or become the debtor in a bankruptcy
proceeding, or discharged from all of its respective debts or obligations, or granted an extension of time
to pay its respective debts or a reorganization or readjustment of its respective debts.
There is no litigation or administrative proceeding of any nature in which Fenton
Raceway or Fenton Company has been served, or is pending or threatened against Fenton Raceway
or Fenton Company which, if successful, would materially adversely affect the ability of Fenton
Raceway to complete the development and sale of its property within Improvement Area 1, or to pay
the Special Taxes or ordinary ad valorem property tax obligations when due on its property within
Improvement Area 1, or which challenges or questions the validity or enforceability of the Bonds, the
Resolution of Issuance, the Fiscal Agent Agreement, Fenton Raceway's Property Owner Continuing
Disclosure Certificate or the Bond Purchase Contract.
Proposed Development by Opus West Corporation
General. Opus West Corporation ("Opus West"), a Minnesota corporation, is a full-service
design-build development firm serving the western portion of the United States. Headquartered in
Phoenix, the company has additional offices in Los Angeles, Orange County, Sacramento, San Diego,
San Francisco, Austin, Dallas, and Houston. With in-house expertise in office, industrial, retail,
multifamily, government, and institutional projects, Opus West has developed more than 45 million
square feet of space since starting operations in 1979.
Opus West is a member of The Opus Group ("Opus Group"). The Opus Group, a real estate
development company with 2004 gross revenue of $1.4 billion, has been operating for more than 50
46
years. Specializing in office, industrial, retail, multifamily, government and institutional development, the
Opus Group has completed 218 million square feet of space in more than 2,200 projects and currently
has 24 million square feet in planning or development.
The Opus Group is privately owned. The Opus Group's internet site is located at
www.opuscorp.com. This Internet address is included for reference only, and the information on this
Internet site is not a part of this Official Statement or incorporated by reference into this Official
Statement.
Proposed Development. Property owned by Opus West in Improvement Area 1 is proposed
for development as a portion of the Carlsbad Raceway Business Park (see "Proposed Development by
Fenton Raceway LLC" above).
Opus West currently owns 10 lots totaling 26.76 net acres which it purchased from Fenton
Raceway on November 3, 2005 for $16,253,978, and is in contract with Fenton Raceway to purchase 7
additional lots totaling approximately 21.67 acres in the Carlsbad Raceway Business Park in May 2006
for $11.76 million. In both cases, Opus West purchased or will purchase, as applicable, finished pads
with a recorded final map. Although there can be no assurances that the proposed sale of Phase 2 will
take place, Opus West reports there are no remaining conditions to close of the purchase of the 7
additional lots other than development as finished lots.
Opus West expects to build approximately 580,000 square feet in two phases for sale/lease to
end users. Phase I will consist of 328,000 square feet of space on 26.76 acres. Phase II will consist of
55,500 square feet of space on 21.67 net acres. The current and anticipated construction schedule and
product mix for the 17 lots which Opus West expects to develop is set forth below. Wo assurance can
be given that construction will be carried out on the schedule and according to the plans outlined below,
or Opus West's construction and sale plans will not change after the date of this Official Statement.
Proposed Product Mix and Construction and Sales Schedule
Opus West Corporation
Phase 1
Lot
#
25
23-24
18-
22(2>
5-6
Proposed
Use
Office/Corporate HQ
(1 building)
Office (7 office condominiums
with 1 3 units)
Corporate HQ/R&D
(5 buildings)
Corporate HQ/R&D
(1 building)
Total
Net
Land
Area
(acres)
8.77
5.31
7.23
5.45
26.76
Building
Area
(sg. ft.)
105,122
62,562
100,970
59,567
328,221
Begin
Construction
January 2006
February 2006
January 2006
February 2006
Complete
Construction
August 2006
August 2006
September 2006
September 2006
Expected
Lease-Up
Date1"
August 2007
March 2007
January 2007
May 2007
Expected Final
Sale
Date'1'
September
2007
April 2007
February 2007
June 2007
(1) In general, Opus West is willing to either sell or lease property. If Opus West leases a property, the table assumes Opus West will
sell the property to an investor one month after occupancy. In addition, Opus West may sell vacant land to merchant builders and
buildings to occupants.
(2) Opus West is in escrow to sell Lot 21 to an investor. The investor has completed due diligence and escrow is scheduled to close 1
month after completion of construction.
47
,f>
U"'
Phase 2
Lot
#
7-8(2)
9-11
16-17
Proposed
Use
Light Industrial (2 buildings)
Corporate Headquarter/R&D
(2 buildingsl
Office (13 office condominiums with
22-25 units)
Total
Net
Land
Area
(acres)
4.00
9.11
8.56
21.67
Building
Area
(so. ft.)
48,000
107,500
100,000
255,500
Begin
Construction
September
2006
September
2006
November
2006
Complete
Construction
March 2007
April 2007
June 2007
Expected
Lease-Up
Date m
June 2007
February
2008
March 2008
Expected
Final Sale
Date'1'
July 2007
March 2008
April 2008
(1) In general, Opus West is willing to either sell or lease property. If Opus West leases a property, the table assumes Opus West will
sell the property to an investor one month after occupancy. In addition, Opus West may sell vacant land to merchant builders and
buildings to occupants.
(2) Opus West is in escrow to sell a 25,500 square foot light industrial building on lot 8 to an investor. The investor has completed due
diligence and escrow is scheduled to close 1 month after completion of construction.
Financing Plan. Based on information provided by Opus West, the estimated total development
costs for Phases 1 and 2 is $105 million (of which approximately 65% is attributable to Phase 1 and
35% is attributable to Phase 2). Opus West financed Phase 1 of its purchase of property in
Improvement Area 1 with proceeds of a $10.5 million loan from Bank of America (of which the full
principal amount remains outstanding) and internal cash; Opus West has not determined the source of
financing for its Phase 2 purchase. Opus West expects to finance construction with a $50.4 million
construction loan from a national banking institution and equity; proceeds of the construction loan will
also repay the Bank of America loan. Opus West expects the construction loan to close in April 2006;
the construction loan will be secured by a deed of trust on property owned by Opus West in
Improvement Area 1.
No assurance can be given that the sources of financing described above will be available to
Opus West or that such sources of financing, if available, will be sufficient to complete property
development and project construction as currently anticipated.
48
Development (type)
Opus Crossing
Opus Center I
Opus Center II
Westlake Village
Center
Chino South
Chino North
Foothill Business
Center
Campus Center
Apts
The Plaza Irvine
Type
Industrial
Office Tower
Office Tower
Office Building
Industrial
Industrial
Industrial
Residential
condo.
Residential
condo.
Location
San Diego
Irvine
Irvine
Westlake
Village
Chino
Chino
Foothill
Ranch
Irvine
Irvine
Square
Feet
320,000
268,000
307,000
127,500
498,000
269,000
246,072
341
units
202
units
Development Experience. During calendar year 2005, the Opus West sold $519 million of
product in Texas, New Mexico, Arizona, Nevada, Utah and California. Opus West's construction
budget for calendar year 2005 was $405 million. Prior relevant experience in California includes:
Status
Sold in February 2005
Leased and sold by Opus West
Leased and sold by Opus West
Leased and sold by Opus West
Leased and sold by Opus West
Leased and sold by Opus West
Leased and sold by Opus West
Under construction; portion sold as
condominiums to K. Hovnanian
Under construction; approximately 90% of
units in escrow
Opus West has over 6.7 million square feet of space planned or under development for 2006.
History of Property Tax Payments; Loan Defaults; Bankruptcy. Opus West and Opus
Group have represented as follows:
Opus West and Opus Group have never defaulted to any material extent in the payment
of special taxes or assessments in connection with the Community Facilities District or any other
community facilities districts or assessment districts in California within the past five years.
Opus West and Opus Group are not currently in default on any loans, lines of credit or
other obligation, the result of which could materially adversely affect the development of property
owned by Opus West in Improvement Area 1.
Opus West and Opus Group are solvent and no proceedings are pending or, to the
actual knowledge of Opus West and Opus Group, threatened in which Opus West and Opus Group
may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from
all of its respective debts or obligations, or granted an extension of time to pay its respective debts or a
reorganization or readjustment of its respective debts.
There is no litigation or administrative proceeding of any nature in which Opus West or
Opus Group has been served, or is pending or threatened against Opus West or Opus Group which, if
successful, would materially adversely affect the ability of Opus West to complete the development and
sale of its property within Improvement Area 1, or to pay the Special Taxes or ordinary ad valorem
property tax obligations when due on its property within Improvement Area 1, or which challenges or
questions the validity or enforceability of the Bonds, the Resolution of Issuance, the Fiscal Agent
Agreement, Opus West's Property Owner Continuing Disclosure Certificate or the Bond Purchase
Contract.
BOND OWNERS' RISKS
49
:O
The purchase of the Bonds described in this Official Statement involves a degree of risk that
may not be appropriate for some investors. The following includes a discussion of some of the risks, in
no particular order of importance, which should be considered before making an investment decision.
Limited Obligation of the City to Pay Debt Service
The City has no obligation to pay principal of and interest on the Bonds if Special Tax
collections are insufficient for that purpose, other than from amounts, if any, on deposit in the Reserve
Fund. The City is not obligated to advance its own funds to pay debt service on the Bonds.
Levy and Collection of the Special Tax
The principal source of payment of principal of and interest on the Bonds is the proceeds of the
annual levy and collection of the Special Tax against property within Improvement Area 1. The annual
levy of the Special Tax is subject to the Maximum Annual Special Tax rate authorized in the Rate and
Method. The levy cannot be made at a higher rate even if the failure to do so means that the estimated
proceeds of the levy and collection of the Special Tax, together with other available funds, will not be
sufficient to pay debt service on the Bonds.
Because the Special Tax formula set forth in the Rate and Method is not based on property
value, the levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of
particular parcels of Taxable Property and the amount of the levy of the Special Tax against those
parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of the parcels of
Taxable Property and their proportionate share of debt service on the Bonds, and certainly not a direct
relationship.
The following are some of the factors that might cause the levy of the Special Tax on any
particular parcel of Taxable Property to vary from the Special Tax that might otherwise be expected:
Reduction in the number of parcels of Taxable Property for such reasons as acquisition
of Taxable Property by a governmental entity and failure of the government to pay the Special Tax
based upon a claim of exemption or, in the case of the federal government or federal agency, immunity
from taxation, thereby resulting in an increased tax burden on the remaining taxed parcels.
Failure of the owners of Taxable Property to pay the Special Tax and delays in the
collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent
parcels, thereby resulting in an increased tax burden on the remaining parcels.
Development of other parcels of Taxable Property less rapidly than expected, thereby
resulting in delay in application of development factors in the Special Tax formula to the other parcels of
Taxable Property and resulting in an increased tax burden on the parcel of Taxable Property.
Except as set forth above under "SECURITY FOR THE BONDS - Special Taxes" and " - Rate
and Method," the Fiscal Agent Agreement provides that the Special Tax is to be collected in the same
manner as ordinary ad valorem property taxes are collected and, except as provided in the special
covenant for foreclosure described in "SECURITY FOR THE BONDS - Covenant to Foreclose" and in
the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of
delinquency as is provided for ordinary ad valorem property taxes. Under these procedures, if taxes
are unpaid for a period of five years or more, the property is subject to sale by the County.
50
If sales or foreclosures of property are necessary, there could be a delay in payments to owners
of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the City
of the proceeds of sale if the Reserve Fund is depleted. See "SECURITY FOR THE BONDS -
Covenant to Foreclose."
Payment of Special Tax is not a Personal Obligation of Property Owners
An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the
Special Tax is an obligation only against the parcels of Taxable Property. If, after a default in the
payment of the Special Tax and a foreclosure sale by the City, the resulting proceeds are insufficient to
pay the delinquent Special Taxes, taking into account other obligations also constituting a lien against
the parcels of Taxable Property, the City has no recourse against the owner.
Appraised Values
The Appraisal attached in APPENDIX C estimates the market value of the taxable property
within Improvement Area 1. This market value is merely the present opinion of the Appraiser, and is
subject to the assumptions and limiting conditions stated in the Appraisal. The City has not sought the
present opinion of any other appraiser of the value of the taxed parcels. A different present opinion of
value might be rendered by a different appraiser.
The opinion of value relates to sale by a willing seller to a willing buyer, each having similar
information and neither being forced by other circumstances to sell or to buy. Consequently, the
opinion is of limited use in predicting the selling price at a foreclosure sale, because the sale is forced
and the buyer may not have the benefit of full information.
In addition, the opinion is a present opinion, based upon present facts and circumstances.
Differing facts and circumstances may lead to differing opinions of value. The appraised value is not
evidence of future value because future facts and circumstances may differ significantly from the
present.
No assurance can be given that any of the Taxable Property in Improvement Area 1 could be
sold for the estimated market value contained in the Appraisal if that property should become
delinquent in the payment of Special Taxes and be foreclosed upon.
Property Values and Property Development
The value of Taxable Property within Improvement Area 1 is a critical factor in determining the
investment quality of the Bonds. If a property owner defaults in the payment of the Special Tax, the
City's only remedy is to foreclose on the delinquent property in an attempt to obtain funds with which to
pay the delinquent Special Tax. Land development and land values could be adversely affected by
economic and other factors beyond the City's control, such as a general economic downturn, adverse
judgments in future litigation that could affect the scope, timing or viability of development, relocation of
employers out of the area, stricter land use regulations, shortages of water, electricity, natural gas or
other utilities, destruction of property caused by earthquake, flood or other natural disasters,
environmental pollution or contamination, or unfavorable economic conditions.
The City has not evaluated development risks. Since these are largely business risks of the
type that property owners customarily evaluate individually, and inasmuch as changes in land
ownership may well mean changes in the evaluation with respect to any particular parcel, the City is
issuing the Bonds without regard to any such evaluation. Thus, the creation of Improvement Area 1
51
12-
and the issuance of the Bonds in no way implies that the City has evaluated these risks or the
reasonableness of these risks.
The following is a discussion of specific risk factors that could affect the timing or scope of
property development in Improvement Area 1 or the value of property in Improvement Area 1.
Land Development. Land values are influenced by the level of development in the area in
many respects.
First, undeveloped or partially developed land is generally less valuable than developed land
and provides less security to the owners of the Bonds should it be necessary for the City to foreclose
on undeveloped or partially developed property due to the nonpayment of Special Taxes.
Second, failure to complete development on a timely basis could adversely affect the land
values of those parcels that have been completed. Lower land values would result in less security for
the payment of principal of and interest on the Bonds and lower proceeds from any foreclosure sale
necessitated by delinquencies in the payment of the Special Tax. See "IMPROVEMENT AREA 1 -
Appraised Value to Burden Ratios." No assurance can be given that the proposed development within
Improvement Area 1 will be completed, and in assessing the investment quality of the Bonds,
prospective purchasers should evaluate the risks of noncompletion.
Risks of Real Estate Investment Generally. Continuing development of land within
Improvement Area 1 may be adversely affected by changes in general or local economic conditions,
fluctuations in or a deterioration of the real estate market, increased construction costs, development,
financing and marketing capabilities of individual property owners, water or electricity shortages, and
other similar factors. Development in Improvement Area 1 may also be affected by development in
surrounding areas, which may compete with Improvement Area 1. In addition, land development
operations are subject to comprehensive federal, state and local regulations, including environmental,
land use, zoning and building requirements. There can be no assurance that proposed land
development operations within Improvement Area 1 will not be adversely affected by future government
policies, including, but not limited to, governmental policies to restrict or control development, or future
growth control initiatives. There can be no assurance that land development operations within
Improvement Area 1 will not be adversely affected by these risks.
Disasters. The value of the Taxable Property in the future can be adversely affected by a
variety of natural occurrences, particularly those that may affect infrastructure and other public
improvements and private improvements on the Taxable Property and the continued habitability and
enjoyment of such private improvements. The areas in and surrounding Improvement Area 1, like
those in much of California, may be subject to unpredictable seismic activity. See "IMPROVEMENT
AREA 1 - Environmental Conditions."
Other natural disasters could include, without limitation, landslides, floods, droughts or
tornadoes. One or more natural disasters could occur and could result in damage to improvements of
varying seriousness. 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 there could be significant delinquencies in the payment of Special
Taxes, and the value of the Taxable Property may well depreciate or disappear.
52
In addition, Improvement Area 1 is in the flight plan for McClellan-Palomar Airport, and an
airplane accident could result in damage to improvements, reduce occupancy rates and adversely
impact the value of Taxable Property.
Legal Requirements. Other events that may affect the value of Taxable Property include
changes in the law or application of the law. Such changes may include, without limitation, local growth
control initiatives, local utility connection moratoriums and local application of statewide tax and
governmental spending limitation measures.
Hazardous Substances. One of the most serious risks in terms of the potential reduction in
the value of Taxable Property is a claim with regard to a hazardous substance. In general, the owners
and operators of Taxable Property may be required by law to remedy conditions of the parcel relating to
releases or threatened releases of hazardous substances. The federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the
"Superfund Act," is the most well-known and widely applicable of these laws, 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 Taxable Property 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 purchaser,
upon becoming owner, will become obligated to remedy the condition just as is the seller.
As described in "IMPROVEMENT AREA 1 - Appraised Property Value," the Appraisal assumes
that no toxic waste or groundwater contamination problems exist on the property. Accordingly, the
Appraisal does not take into account the possible reduction in marketability and value of any of the
Taxable Property by reason of the possible liability of the owner or operator for the remedy of a
hazardous substance condition of the parcel. Although the City is not aware that the owner or operator
of any of the Taxable Property has such a current liability with respect to any of the Taxable Property, it
is possible that such liabilities do currently exist and that the City is not aware of them.
Further, it is possible that liabilities may arise in the future with respect to any of the Taxable
Property resulting from the existence, currently, on the parcel of a substance presently classified as
hazardous but that has not been released or the release of which is not presently threatened, or may
arise in the future resulting from the existence, currently on the parcel of a substance not presently
classified as hazardous but that may in the future be so classified. Further, such liabilities may arise
not simply from the existence of a hazardous substance but from the method of handling it. All of these
possibilities could significantly affect the value of Taxable Property that is realizable upon a
delinquency. See "IMPROVEMENT AREA 1 - Environmental Conditions."
Endangered and Threatened Species. It is illegal to harm or disturb any plants or animals in
their habitat that have been listed as endangered species by the United States Fish & Wildlife Service
under the Federal Endangered Species Act or by the California Fish & Game Commission under the
California Endangered Species Act without a permit. Although the Property Owners believe that no
federally listed endangered or threatened species would be affected by the proposed development
within Improvement Area 1 without a permit, the discovery of an endangered plant or animal could
delay development of vacant property in Improvement Area 1 or reduce the value of undeveloped
property. See "IMPROVEMENT AREA 1 - Environmental Conditions."
Concentration of Property Ownership
53
As of the date of issuance of the Bonds, five entities own all of the Taxable Property in
Improvement Area 1, although two (Palomar and Greyhawk) are affiliated as a result of common
ownership and, consequently, the Appraisal aggregates their property for valuation purposes. Failure of
these Property Owners to pay installments of the Special Tax when due could result in the depletion of
the Reserve Fund prior to reimbursement from the resale of foreclosed property or payment of the
delinquent Special Tax and, consequently, an insufficiency of Special Tax proceeds to meet obligations
under the Fiscal Agent Agreement. In that event, there could be a delay or failure in payments of the
principal of and interest on the Bonds. Failure of the Property Owners to complete development as
proposed on their property in Improvement Area 1 for any reason could increase the chances that they
would not pay installments of Special Taxes when due (see "- Property Values and Property
Development" above.
Other Possible Claims Upon the Value of Taxable Property
While the Special Taxes are secured by the Taxable Property, the security only extends to the
value of such Taxable Property that is not subject to priority and parity liens and similar claims.
The table in the section entitled "IMPROVEMENT AREA 1 - Direct and Overlapping
Governmental Obligations" shows the presently outstanding amount of governmental obligations (with
stated exclusions), the tax or assessment for which is or may become an obligation of one or more of
the parcels of Taxable Property. The table also states the additional amount of general obligation
bonds the tax for which, if and when issued, may become an obligation of one or more of the parcels of
Taxable Property. The table does not specifically identify which of the governmental obligations are
secured by liens on one or more of the parcels of Taxable Property.
In addition, other governmental obligations may be authorized and undertaken or issued in the
future, the tax, assessment or charge for which may become an obligation of one or more of the parcels
of Taxable Property and may be secured by a lien on a parity with the lien of the Special Tax securing
the Bonds.
In general, as long as the Special Tax is collected on the County tax roll, the Special Tax and all
other taxes, assessments and charges also collected on the tax roll are on a parity, that is, are of equal
priority. Questions of priority become significant when collection of one or more of the taxes,
assessments or charges is sought by some other procedure, such as foreclosure and sale. In the
event of proceedings to foreclose for delinquency of Special Taxes securing the Bonds, the Special Tax
will be subordinate only to existing prior governmental liens, if any. Otherwise, in the event of such
foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes,
assessments and charges, and will share the proceeds of such foreclosure proceedings on a pro-rata
basis. Although the Special Taxes will generally have priority over non-governmental liens on a parcel
of Taxable Property, regardless of whether the non-governmental liens were in existence at the time of
the levy of the Special Tax or not, this result may not apply in the case of bankruptcy. See "-
Bankruptcy and Foreclosure Delays" below.
Special Tax Revenues include proceeds of a foreclosure sale and, therefore, if amounts held
under the Fiscal Agent Agreement are not sufficient to pay debt service on the Bonds and
delinquencies in Special Tax payments by property owners have occurred, owners of the Bonds will be
paid following foreclosure of the lien in respect of the delinquent Special Taxes from Special Tax
Revenues, if any, collected in any such foreclosure action.
54
Exempt Properties
Certain properties are exempt from the Special Tax in accordance with the Rate and Method
and the Act, which provides that properties or entities of the state, federal or local government are
exempt from the Special Tax; provided, however, that property within Improvement Area 1 acquired by
a public entity through a negotiated transaction or by gift or devise, which is not otherwise exempt from
the Special Tax, will continue to be subject to the Special Tax. See "SECURITY FOR THE BONDS -
Rate and Method." In addition, although the Act provides that if property subject to the Special Tax is
acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax
with respect to that property is to be treated as if it were a special assessment, the constitutionality and
operation of these provisions of the Act have not been tested, meaning that such property could
become exempt from the Special Tax.
The Act further provides that no other properties or entities are exempt from the Special Tax
unless the properties or entities are expressly exempted in a resolution of consideration to levy a new
special tax or to alter the rate or method of apportionment of an existing special tax.
Depletion of Reserve Fund
The Reserve Fund is to be maintained at an amount equal to the Reserve Requirement. See
"SECURITY FOR THE BONDS - Reserve Fund." Funds in the Reserve Fund may be used to pay
principal of and interest on the Bonds if insufficient funds are available from the proceeds of the levy
and collection of the Special Tax against property within Improvement Area 1. If funds in the Reserve
Fund for the Bonds are depleted, the funds can be replenished from the proceeds of the levy and
collection of the Special Tax that are in excess of the amount required to pay all amounts to be paid to
the Bond holders pursuant to the Fiscal Agent Agreement. However, no replenishment from the
proceeds of a Special Tax levy can occur as long as the proceeds that are collected from the levy of the
Special Tax against property within Improvement Area 1 at the maximum Special Tax rates, together
with other available funds, remains insufficient to pay all such amounts. Thus it is possible that the
Reserve Fund will be depleted and not be replenished by the levy of the Special Tax.
Bankruptcy and Foreclosure Delays
Bankruptcy. The payment of the Special Tax and the ability of the City to foreclose the lien of
a delinquent unpaid tax, as discussed in "SECURITY FOR THE BONDS," may be limited by
bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State of
California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with
the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the
enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium
and other similar laws affecting creditors' rights, by the application of equitable principles and by the
exercise of judicial discretion in appropriate cases.
Although bankruptcy proceedings would not cause the Special Taxes to become extinguished,
bankruptcy of a property owner or any other person claiming an interest in property subject to the
Special Taxes could result in a delay in superior court foreclosure proceedings and could result in the
possibility of Special Tax installments not being paid in part or in full. Such a delay would increase the
likelihood of a delay or default in payment of the principal of and interest on the Bonds. To the extent
that property in Improvement Area 1 continues to be owned by a limited number of property owners, the
chances are increased that the Reserve Fund established for the Bonds could be fully depleted during
any such delay in obtaining payment of delinquent Special Taxes. As a result, sufficient moneys would
not be available in the Reserve Fund for transfer to the Bond Fund to make up shortfalls resulting from
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delinquent payments of the Special Tax and thereby to pay principal of and interest on the Bonds on a
timely basis.
Property Owned by FDIC. In addition, the ability of the City to foreclose upon the lien on
property for delinquent Special Taxes may be limited for properties in which the Federal Deposit
Insurance Corporation (the "FDIC") has an interest. On November 26, 1996, the FDIC adopted a
Statement of Policy Regarding the Payment of State and Local Property Taxes (the "Policy
Statement") (which superseded a prior statement issued by the FDIC and the Resolution Trust
Corporation in 1991). The Policy Statement applies to the FDIC when it is liquidating assets in its
corporate and receivership capacities. The Policy Statement provides, in part, that real property of the
FDIC is subject to state and local real property taxes if those taxes are assessed according to the
property's value, and that the FDIC is immune from ad valorem real property taxes assessed on other
bases. The Policy Statement also provides that the FDIC will pay its proper tax obligations when they
become due and will pay claims for delinquencies as promptly as is consistent with sound business
practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC
interest in the property is appropriate. It further provides that the FDIC will pay claims for interest on
delinquent property taxes owned at the rate provided under state law, but only to the extent the interest
payment obligation is secured by a valid lien. The FDIC will not pay for any fines or penalties and will
not pay nor recognize liens for such amounts. The Policy Statement also provides that if any property
taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the
property became owned by the FDIC), the FDIC will pay those claims. No property of the FDIC is
subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, a
lien for taxes and interest may attach, but the FDIC will not permit a lien or security interest held by the
FDIC to be eliminated by foreclosure without the FDIC's consent.
With respect to challenges to assessments, the Policy Statement provides: "The (FDIC) is only
liable for state and local taxes which are based on the value of the property during the period for which
the tax is imposed, notwithstanding the failure of any person, including prior record owners, to
challenge an assessment under the procedures available under state law. In the exercise of its
business judgment, the (FDIC) may challenge assessments which do not conform with the statutory
provisions, and during the challenge may pay tax claims based on the assessment level deemed
appropriate, provided such payment will not prejudice the challenge. The (FDIC) will generally limit
challenges to the current and immediately preceding taxable year and to the pursuit of previously filed
tax protests. However, the (FDIC) may, in the exercise of its business judgment, challenge any prior
taxes and assessments provided that (1) the (FDIC's) records (including appraisals, offers or bids
received for the purchase of the property, etc.) indicate that the assessed value is clearly excessive, (2)
a successful challenge will result in a substantial savings to the (FDIC), (3) the challenge will not unduly
delay the sale of the property, and (4) there is a reasonable likelihood of a successful challenge."
The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes,
including special assessments, on property in which it has a fee simple interest unless the amount of
tax is fixed at the time the FDIC acquires its fee simple interest in the property, nor will the FDIC
recognize the validity of any lien to the extent it purports to secure the payment of any such amounts.
Because the Special Taxes are neither ad valorem taxes nor special assessments, and because they
are levied under a special tax formula under which the amount of the Special Tax is determined each
year, the Special Taxes appear to fall within the category of taxes the FDIC generally will not pay under
the Policy Statement.
Following the County of Orange bankruptcy proceedings filed in December 1994, the FDIC filed
claims against the County of Orange in the U.S. Bankruptcy Court and the Federal District Court which
challenged special taxes that Orange County had levied on FDIC-owned property (and which the FDIC
56
11
had paid) under the Act. The FDIC took a position similar to that outlined in the Policy Statement, to
the effect that the FDIC, as a governmental entity, is exempt from special taxes under the Act. The
Bankruptcy Court agreed, finding that the FDIC was not liable for post-receivership Mello-Roos taxes,
and the Bankruptcy Appellate Panel affirmed. On appeal, the U.S. Court of Appeals for the Ninth
Circuit, while not specifically asked to decide on the issue, stated in its decision filed on August 28,
2001, that "the FDIC, as a federal agency, is exempt from the Mello-Roos tax," and quoted Section
53340(c) of the Act in stating that "'properties or entities' of the federal government are exempt from the
tax."
The City is unable to predict what effect the application of the Policy Statement, or the ultimate
outcome of the County of Orange case, would have in case of a Special Tax delinquency on a parcel in
which the FDIC has an interest. However, prohibiting the judicial foreclosure sale of a FDIC-owned
parcel would likely reduce the number of or eliminate the persons willing to purchase a parcel at a
foreclosure sale. Owners of the Bonds should assume that the City will be unable to foreclose on
parcels of land in Improvement Area 1 owned by the FDIC. Such an outcome would cause a draw on
the Reserve Fund and perhaps, ultimately, a default in payment of the Bonds.
Disclosure to Future Purchasers
The City has recorded a notice of the Special Tax lien in the Office of the County Recorder.
While title companies normally refer to such notices in title reports, there can be no guarantee that such
reference will be made or, if made, that a prospective purchaser or lender will consider such special tax
obligation in the purchase of a parcel of land or a home in Improvement Area 1 or the lending of money
secured by property in Improvement Area 1. The Act and the Goals and Policies require the subdivider
of a subdivision (or its agent or representative) to notify a prospective purchaser or long-term lessor of
any lot, parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of
such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that
in the case of transfers other than those covered by the above requirement, the seller must at least
make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed
by statute. Failure by an owner of the property to comply with these requirements, or failure by a
purchaser or lessor to consider or understand the nature and existence of the Special Tax, could
adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due.
No Acceleration Provisions
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 or the Fiscal Agent Agreement. Under
the Fiscal Agent Agreement, a Bond holder is given the right for the equal benefit and protection of all
Bond holders similarly situated to pursue certain remedies. See "APPENDIX E - Summary of Fiscal
Agent Agreement." So long as the Bonds are in book-entry form, DTC will be the sole Bond holder and
will be entitled to exercise all rights and remedies of Bond holders.
Loss of Tax Exemption
As discussed under the caption "LEGAL MATTERS - Tax Matters," interest on the Bonds might
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
Fiscal Agent Agreement. The Fiscal Agent Agreement does not contain a special redemption feature
triggered by the occurrence of an event of taxability. As a result, if interest on the Bonds were to be
includable in gross income for purposes of federal income taxation, the Bonds would continue to remain
57
'>£>
outstanding until maturity unless earlier redeemed pursuant to optional or mandatory redemption or
redemption upon prepayment of the Special Tax. See "THE BONDS - Redemption."
Voter Initiatives
Under the California Constitution, the power of initiative is reserved to the voters for the purpose
of enacting statutes and constitutional amendments. Since 1978, the voters have exercised this power
through the adoption of Proposition 13 and similar measures, the most recent of which was approved
as Proposition 218 in the general election held on November 5, 1996.
Any such initiative may affect the collection of fees, taxes and other types of revenue by local
agencies such as the Community Facilities District. Subject to overriding federal constitutional
principles, such collection may be materially and adversely affected by voter-approved initiatives,
possibly to the extent of creating cash-flow problems in the payment of outstanding obligations such as
the Bonds.
Proposition 218—Voter Approval for Local Government Taxes—Limitation on Fees,
Assessments, and Charges—Initiative Constitutional Amendment, added Articles XIIIC and XIIID to the
California Constitution, imposing certain vote requirements and other limitations on the imposition of
new or increased taxes, assessments and property-related fees and charges.
The Special Taxes and the Bonds were each authorized by not less than a two-thirds vote of the
landowners within Improvement Area 1 who constituted the qualified electors of Improvement Area 1 at
the time of such voted authorization. The City believes, therefore, that issuance of the Bonds does not
require the conduct of further proceedings under the Act or Proposition 218.
Like its antecedents, Proposition 218 is likely to undergo both judicial and legislative scrutiny
before its impact on Improvement Area 1 and the City's related obligations can be determined. Certain
provisions of Proposition 218 may be examined by the courts for their constitutionality under both State
and federal constitutional law, the outcome of which cannot be predicted.
Limitations on Remedies
Remedies available to the owners of the Bonds may be limited by a variety of factors and may
be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the
tax-exempt status of the Bonds.
Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Fiscal
Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium, or other similar laws affecting generally
the enforcement of creditors' rights, by equitable principles and by the exercise of judicial discretion.
The lack of availability of certain remedies or the limitation of remedies may entail risks of delay,
limitation or modification of the rights of the owners of the Bonds.
Absence of Secondary Market for the Bonds
No application has been made for a credit rating on the Bonds, and it is not known whether a
credit rating could be secured for the Bonds either now or in the future. There can be no assurance that
there will ever be a secondary market for purchase or sale of the Bonds. 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, the financial condition and results of operations
58
of the owners of property located within the boundaries of Improvement Area 1, and the extent of the
proposed development of parcels within Improvement Area 1. The Bonds should, therefore, be
considered long-term investments in which funds are committed to maturity, subject to redemption prior
to maturity as described herein.
LEGAL MATTERS
Legal Opinions
The legal opinion of Best Best & Krieger LLP, San Diego, California, Bond Counsel, approving
the validity of the Bonds will be made available to purchasers at the time of original delivery and is
attached as APPENDIX I.
Jones Hall, A Professional Law Corporation, San Francisco, California is serving as Disclosure
Counsel to the City.
Tax Matters
In the opinion of Best Best & Krieger LLP, ("Bond Counsel"), based upon analysis of existing
laws, regulations, rulings and court decisions, and assuming, among other matters, compliance with
certain covenants, interest on the Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from
State of California personal income taxes. Bond Counsel is of the further opinion that interest on the
bonds is not a specific preference item for purposes of the federal individual or corporate alternative
minimum taxes, although Bond Counsel observes that such interest is included in adjusted current
earnings when calculating federal corporate alternative minimum taxable income. A complete copy of
the proposed form of opinion of Bond Counsel is set forth in Appendix H hereto.
The Code imposes various restrictions, conditions and requirements relating to the exclusion
from gross income for federal income tax purposes of interest on obligations such as the Bonds. The
District has covenanted to comply with certain restrictions designed to insure that interest on the Bonds
will not be included in federal gross income. Failure to comply with these covenants may result in
interest on the Bonds being included in federal gross income, possibly from the date of original
issuance of the Bonds. The opinion of Bond Counsel assumes compliance with these covenants.
Bond Counsel has not undertaken to determine (or to inform any person) whether any actions taken (or
not taken) or events occurring (or not occurring) after the date of issuance of the bonds may adversely
affect the value of, or the tax status of interest on, the Bonds. Prospective Bondholders are urged to
consult their own tax advisors with respect to proposals to restructure the federal income tax.
Certain requirements and procedures contained or referred to in the Indenture, the Tax
Certificate, and other relevant documents may be changed and certain actions (including, without
limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to
the terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any
bond or the interest thereon if any such changes occurs or action is taken or omitted upon the advice or
approval of counsel other than Best, Best & Krieger LLP.
Although Bond Counsel is of the opinion that interest on the bonds is excluded from gross
income for federal income tax purposes and is exempt from State of California personal income taxes,
the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect
a Bondholder's federal or state tax liability. The nature and extent of these other tax consequences will
59
depend upon the particular tax status of the Bondholder or the Bondholder's other items of income or
deduction, and Bond Counsel expresses no opinion regarding any such other tax consequences.
No Litigation
At the time of delivery of the Bonds, the City will certify that there is no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, public agency or body, pending with
respect to which the City has been served with process or known to be threatened, which:
in any way questions the powers of the City Council or the Community Facilities
District, or
in any way questions the validity of any proceeding taken by the City Council in
connection with the issuance of the Bonds, or
if there is an unfavorable decision, ruling or finding, could materially adversely
affect the transactions contemplated by the Bond Purchase Contract, or
in any way, could adversely affect the validity or enforceability of the resolutions
of the City Council adopted in connection with the formation of the Community Facilities District
or the issuance of the Bonds, the Bonds, the Fiscal Agent Agreement, the Issuer Continuing
Disclosure Certificate or the Bond Purchase Contract, or
in any way questions the exclusion from gross income of the recipients thereof of
the interest on the Bonds for federal income tax purposes, or
in any other way questions the status of the Bonds under State tax laws or
regulations.
CONCLUDING INFORMATION
No Ratings
The Bonds have not been rated by any securities rating agency.
60
Underwriting
The Bonds are being purchased by the Stone & Youngberg LLC (the "Underwriter") at a
purchase price of $ (which represents the aggregate principal amount of the Bonds
($ ' ), less an original issue discount of $ , and less an Underwriter
discount of $ ).
The purchase agreement relating to the Bonds provides that the Underwriter will purchase all of
the Bonds, if any are purchased, the obligation to make such purchase being subject to certain terms
and conditions set forth in such purchase agreement.
The Underwriter may offer and sell Bonds to certain dealers and others at prices lower than the
offering price stated on the cover page hereof. The offering prices may be changed from time to time
by the Underwriter.
Professional Fees
In connection with the issuance of the Bonds, fees or compensation payable to certain
professionals are contingent upon the issuance and delivery of the Bonds. Those professionals
include:
• Best Best & Krieger LLP, as Bond Counsel;
• Jones Hall, A Professional Law Corporation, as Disclosure Counsel; and
• Stone & Youngberg LLC, the Underwriter.
Execution
The execution and delivery of the Official Statement by the City has been duly authorized by the
City Council, acting as the legislative body of Improvement Area 1.
CITY OF CARLSBAD, for and on behalf of the City of
Carlsbad Community Facilities District No. 3, County of
San Diego, State of California
By:.
Assistant City Manager
61
charles f. adams
thomas a. downey
david t. fama
scott r. ferguson
andrew c. hall, jr.
Courtney I. Jones
william j. kadi
Christopher k lynch
william h. madison
Stephen g. melikian
david a walton
julie a. wunderlich
Jones Hall
a professional law corporation
attorneys at law
ALL RECEIVE
For Information of City Council
CA vS CM
Date Asst. City
To:
650 California street
eighteenth floor
san francisco, ca 94108
telephone
(415)391-5780
facsimile
(415) 391-5714
kenneth i. jones, retired
homepage: http://www.joneshall.com
March 23,2006
BY EMAIL
To: Lisa Hildabrand
Re: Responsibilities of City Council Members Relating to Disclosure
The Securities and Exchange Commission ("SEC") has made it clear that City
Council members have certain obligations under the federal securities laws when they
approve a public issuance of securities, specifically: "A public official who approves the
issuance of securities and related disclosure documents may not authorize disclosure
that the public official knows to be materially false or misleading; nor may the public
official authorize disclosure while recklessly disregarding facts that indicate that there is
a risk that the disclosure may be misleading."
In the wake of the Orange County bankruptcy filing, the SEC found that the
Orange County Supervisors had been aware of facts about the County's finances and its
investment pools which called into question the ability of the County to repay the bond
issues being authorized, yet the Board failed to take steps to assure that the County's
financial situation was being adequately disclosed to potential investors.
Note that it is not the SEC's position that public officials must read and
understand every word of the Preliminary Official Statement or other bond documents.
Governing body members may rely on their staff and hired professionals. However,
that reliance must be reasonable. One aspect of reasonable reliance involves hiring
experienced professionals with an understanding of the disclosure requirements under
the Federal securities laws ("Because they are ultimately liable for the content of their
disclosure, issuers should insist that any persons retained to assist in the preparation of
their disclosure documents have a professional understanding of the disclosure
requirements under the federal securities laws"). Other factors required for reasonable
reliance include the official's having made staff or consultants aware of facts or events
known to him or her which may bear upon the financing and a basic familiarity with,
and understanding of, the financing process.
In sum, although members of the City Council have obligations under the federal
securities laws, these obligations do not include having a detailed knowledge of all of
the intricacies of a financing. That is the responsibility of staff and consultants, such as
the bond underwriter, bond counsel and disclosure counsel. However, if a City Council
member has knowledge of any facts or circumstances that an investor would want to
know about prior to investing in the Bonds, whether relating to their repayment, tax-
exempt status, undisclosed conflicts of interest with interested parties, or otherwise, he
or she should endeavor to discover whether such facts are adequately disclosed to
investors in the Preliminary Official Statement.
Community Facilities District #3Faraday-MelroseBond IssuanceImprovement Area 1
•Dec. 2001:•Mid 2004: •Nov. 2005:Authorized to begin workWaiver and Consent Agreements approved•Allowed development to proceed while District was being formedDistrict Formed•Boundaries set•Maximum taxes and taxing formulas approvedHistory
Tonight’s Purpose•Authorize issuance of bonds for Improvement Area 1–Set maximum debt authorization–Approve the sale of bonds to Stone & Youngberg, Underwriters–Approve the form of documents–Approve the disclosure policy
Financing Team¾Special Tax ConsultantSpecial District Financing and Admin¾Bond CounselBest, Best and Krieger¾Disclosure CounselJones Hall¾UnderwriterStone and Youngberg¾Pricing ConsultantFieldman Rolapp
Location Map
CFD #3Streets Total Development # of LotsGross AcresPad/Net Acres# of Lots Acres Acres AcresCarlsbad Oaks North23 167.2 129.8 4 220.2 26.6 414.0Raceway 25 86.1 73.0 3 48.9 12.1 147.1Forum 8 51.5 44.5 2 3.4 14.9 69.8Open Space LotsBuilding LotsImprovement Area 1Improvement Area 2
CFD #3CFD #3CFD #3CFD #3CFD #3CFD #3CFD #3
Project Cost SplitTotal Project Costs $25 millionArea 1$10 millionArea 2$15 million
Construction$10,000,000Formation and Bond Issuance495,000Capitalized Interest 230,000Bond Reserve Fund775,000Estimated Debt Needed$11,500,000Contingent Debt Allowance1,500,000Total Debt Authorization $13,000,000RequestedBond Estimate for Area 1
Improvement AreaPer AcreForum (Area 1A)Raceway (Area 1B)$ 15,241$7,265Maximum Special Taxes per Improvement AreaFiscal Year 2004-05
Compliance with Policy 33•Pass-through of special tax–All non-residential properties•Value to Lien•Disclosure•Sale of bonds
Policy 33Value to Lien4:1 Required By PolicyProperty owner Share of bondsAppraised ValueValue to LienPalomar/Greyhawk $5.8 $29.5 5.12 : 1Concourse$0.6 $4.4 7.01 : 1Fenton Raceway$3.5 $31.0 8.81 : 1Opus West$1.6 $16.1 10.17 : 1Total$11.5 $81.0 7.05 : 1
Policy 33 - Disclosure•Disclosure Agreements Require–Include in sales documentation–Provide for opportunity to pay-off•Agreements to be executed by all property owners prior to bond sale
Other Terms and Conditions•Underwriter’s Discount not to exceed 2% of the issue•Interest rate not to exceed 6.2% per year
CFD #3Faraday-MelroseRequested Actions:1.Authorize up to $13 million in bonds 2.Approve pass-through of taxes3.Approve the form of certain documents
CFD #3Faraday-Melrose9Preliminary Official Statement9Fiscal Agent Agreement9Continuing Disclosure Agreement9Bond Purchase Contract
Community Facilities District #3Faraday-MelroseConclusion