HomeMy WebLinkAboutStaff Report 5.C 05/15/2017Agenda Item #5.0
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DATE: May 15, 2017
TO: Honorable Mayor and Members of the City Council Manager acting in their
capacity as the Governing Board of the Petaluma Community Development
Successor Agency
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FROM: William Mushallo, Finance Director, through City Manager
SUBJECT: Resolution of the Petaluma Community Development Successor Agency for the
issuance of Tax Allocation Refunding Bonds to refinance outstanding Bonds of
the former Petaluma Community Development Commission, authorizing the
issuance of the Refunding Bonds, approving the form of and execution and
delivery of a Supplement to Indenture and other documents, and providing other
matters relating to the issuance of the Bonds.
RECOMMENDATION
It is recommended that the Petaluma Community Development Successor Agency adopt the
Resolution of the Petaluma Community Development Successor Agency for the issuance of Tax
Allocation Refunding Bonds to refinance outstanding Bonds of the of the former Petaluma
Community Development Commission, authorizing the issuance of the Refunding Bonds,
approving the form of and execution and delivery of a Supplement to Indenture and other
documents, and providing other matters relating to the issuance of the Bonds.
BACKGROUND
The Petaluma Community Development Commission previously issued tax allocation bonds in
April 2007 ($31,825,000) and March 2011 ($11,369,000) to finance and refinance
redevelopment activities within the Merged Project Area. Tax allocation bonds were a very
common type of long -term debt issued by redevelopment agencies prior to Dissolution, secured
by and payable from a portion of the property taxes levied and collected from within a project
area. Currently, $36,538,000 of the 2007/2011 bonds remain outstanding.
An opportunity now exists for the Successor Agency to issue refunding bonds for the purpose of
refinancing the 2007 and 2011 bonds at lower interest rates, in order to realize significant debt
service savings. At today's relatively low interest rates, the `all- inclusive' interest rate on the
proposed refunding bonds would equal approximately 3.75 %, as compared to an average rate of
4.47% on the outstanding 2007 and 2011 bonds being refinanced.
In California, the issuance of refunding bonds by successor agencies is very common. Since
Dissolution, approximately $8.0 billion of successor agency refunding bonds have been issued
by over 150 successor agencies, resulting in total debt service savings of more than $1 billion.
DISCUSSION
Refinancing tax allocation bonds does not result in lower property taxes for homeowners or any
direct savings for local property taxpayers. Rather, under State law the savings that result from
this refinancing will be shared among all of the local taxing entities, whose territory lies within
the Project Area, including the City, roughly in proportion to each local taxing entity's share of
the 1% general property tax that is levied and collections from within the Project Area
Pursuant to State Law, the issuance of these refunding bonds must be approved by the Successor
Agency Board, the Oversight Board and the State Department of Finance. The Oversight Board
met on April 26, 2017 and approved Resolution No. 2017 -03, authorizing the issuance of the
refunding bonds. Shortly thereafter on April 27, the Successor Agency submitted a Request for
Approval to the State Department of Finance. By law, DOF has 60 -days to act; however, staff
expects DOF to grant its approval by May 19.
If the financing proceeds according to schedule, then closing will occur on or about June 15.
The attached resolution authorizes the execution and delivery of various Financing Documents
including a Preliminary Official Statement, Supplemental Indenture and Escrow Agreement.
Attached to this report are drafts of each such Financing Document, which drafts may be
modified prior to execution by authorized Successor Agency staff, as necessary, in consultation
with the Agency's financial advisor and bond counsel.
FINANCIAL IMPACTS
Based on bond market conditions and prevailing interest rates as of April 24, 2017, this
refinancing is expected to yield debt service savings of approximately $175,000 per year from
2018 -2039, for total savings of $3.85 million. The City's share of these savings is estimated at
$27,000 per year. These savings are net of all issuance costs.
Another common measure of the savings that result from the issuance of refunding bonds is `net
present value savings', commonly referred to as "NPV Savings ". NPV Savings equals total debt
service savings (e.g. $3.85 million) adjusted for the time value of money, the costs of issuance,
and any up -front cash contribution of funds. NPV Savings is generally considered a better
measure of the true "economic benefit" of issuing refunding bonds.
Based on market conditions as of April 24, 2017, this transaction will generate NPV Savings of
approximately $3.0 million or 8.33% of the amount of bonds being refunded. Within the public
finance industry, NPV Savings of 5% or more is typically considered good.
The actual amount of savings will not be determined until the refunding bonds are sold.
Moreover, if interest rates increase appreciably between now and then, it is possible the savings
may be lower than expected, or even insufficient to warrant proceeding, in which case the
refinancing may be cancelled, or delayed until a later date.
The costs of issuance for the refinancing including fees for bond and disclosure counsel,
financial advisor, rating agency and other related costs and expenses equal approximately
$325,000. In addition, it is expected the Agency will `insure' the bonds at a cost of
approximately $280,000. All such costs are payable from proceeds of the refunding bonds
contingent upon closing. In other words, if the refinancing fails to close then all costs will be
waived and the Agency will not be billed, with one possible exception. A portion of the rating
agency fee estimated at not -to- exceed $10,000 is non - contingent.
No General Fund expense will be incurred in connection with this refinancing.
ATTACHMENTS
1. Resolution of the Successor Agency
2. Debt Service Savings Analysis
3. Preliminary Official Statement
4. Fourth Supplemental Indenture
5. Escrow Agreement Refinancing Analysis
ATTACHMENT 1
RESOLUTION OF THE PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY FOR THE ISSSUANCE OF TAX ALLOCATION
REFUNDING BONDS TO REFINANCE OUTSTANDING BONDS OF THE
FORMER PETALUMA COMMUNITY DEVELOPMENT COMMISSION,
AUTHORIZING THE ISSUANCE OF THE REFUNDING BONDS,
APPROVING THE FORM OF AND EXECUTION AND DELIVERY OF A
SUPPLEMENT TO INDENTURE AND OTHER DOCUMENTS, AND
PROVIDING OTHER MATTERS RELATING TO THE ISSUANCE OF THE
BONDS
WHEREAS, the Petaluma Community Development Commission (the "Former
Commission ") was a public body, corporate and politic, duly established and authorized to
transact business and exercise powers under and pursuant to the provisions of the Community
Redevelopment Law of the State of California, constituting Part 1 of Division 24 of the Health
and Safety Code of the State (the "Law ");
WHEREAS, the Former Commission issued its $31,825,000 aggregate principal amount of
Petaluma Community Development Commission Merged Project Area Subordinate Tax
Allocation Bonds, Series 2007 (the "2007 Bonds ") pursuant to an Indenture dated as of April 1,
2007 by and between the Former Commission and U.S. Bank National Association (the "Master
Indenture ") for the purpose of financing and refinancing portions of projects in the Merged
Project Area;
WHEREAS, the Former Commission issued its $11,369,000 aggregate principal amount of
Petaluma Community Development Commission Merged Project Area Subordinate Tax
Allocation Bonds, Series 2011 (the "2011 Bonds ") pursuant to the Master Indenture, as
supplemented, for the purpose of financing portions of projects in the Merged Project Area;
WHEREAS, Assembly Bill X1 26, effective June 29, 2011, together with AB 1484,
effective June 27, 2012 ( "AB 1484 ") resulted in the dissolution of the Former Commission as of
February 1, 2012, and the vesting in this Petaluma Community Development Successor Agency
(the "Successor Agency ") of all of the authority, rights, powers, duties and obligations of the
Former Commission;
WHEREAS, AB 1484, among other things, amended the Law to authorize the Successor
Agency to issue bonds pursuant to Article 11 (commencing with Section 53580) of Chapter 3 of
Part 1 of Division 2 of Title 5 of the Government Code (the "Refunding Law ") for the purpose of
achieving debt service savings within the parameters set forth in Section 34177.5(a)(1) of the
Health and Safety Code (the "Savings Parameters ");
WHEREAS, pursuant to Section 34179, an oversight board (the "Oversight Board ") has
been established for the Successor Agency;
WHEREAS, the Successor Agency has caused an independent registered municipal advisor
to prepare an analysis of the potential debt service savings that demonstrates the following:
(i) total principal plus interest payments to maturity on the Refunding Bonds will not
exceed total remaining principal plus interest payments to maturity on the 2007
Bonds and 2011 Bonds;
(ii) the principal amount of the Refunding Bonds will not exceed the amount required
to defease the 2007 Bonds and 2011 Bonds, to establish customary debt service
reserves, and to pay related costs of issuance; and
(iii) based on estimated interest rates as of the date of the Debt Service Savings
Analysis, the Debt Service Savings Analysis concludes that potential debt service
savings satisfies the savings requirements of Section 34177.5(a).
WHEREAS, the Successor Agency desires to refund the 2007 Bonds and the 2011 Bonds
by the issuance of the "Petaluma Community Development Successor Agency Merged Project
Area Tax Allocation Refunding Bonds, Series 2017" (the "Refunding Bonds ");
WHEREAS, Sections 34177.5(f) and 34180(b) require the Oversight Board to approve
issuance of the Refunding Bonds, and the Oversight Board has heretofore granted such approval
and thereby directed and authorized the Successor Agency to undertake issuance of the
Refunding Bonds in its Resolution No. 2017 -03 adopted April 26, 2017.
WHEREAS, following approval by the Oversight Board of the issuance of the Refunding
Bonds by the Successor Agency the Oversight Board Resolution was submitted to the California
Department of Finance.
WHEREAS, the Successor Agency wishes to approve the forms of and authorize the
execution and delivery of (i) a Fourth Supplement to Indenture (the "Fourth Supplement ")
supplementing the Master Indenture and providing for the issuance of the Refunding Bonds and
prescribing the terms and provisions of the Refunding Bonds, and (ii) an Escrow Agreement by
and between the Successor Agency and U.S. Bank National Association, as trustee for the 2007
c
Bonds and 2011 Bonds, to be dated as of the date of the issuance and delivery of the Refunding
Bonds (the "Escrow Agreement ") with such changes, deletions therefrom and additions thereto
as any Authorized Officer shall approve;
WHEREAS, the Successor Agency wishes to sell the Refunding Bonds as either a (i)
direct private placement, or (ii) a negotiated public sale, the final determination to be made at the
time of sale based on the Successor Agency's determination which method of sale will maximize
savings; and
WHEREAS, the Successor Agency wishes to approve the forms of and authorize the
execution and delivery of the Fourth Supplement, the Escrow Agreement, and to delegate to any
Authorized Officer the authority to execute a Bond Purchase Agreement and Official Statement
as and if needed, with such execution and delivery of such documents and issuance of the
Refunding Bonds being subject to obtaining approval of the financing by the California
Department of Finance;
WHEREAS, the Oversight Board has made certain determinations described below, upon
which the Successor Agency may rely in undertaking the refunding proceedings and the issuance
of the Refunding Bonds, as authorized by Sections 34177.5(g) and 34180(b) of the Health and
Safety Code;
NOW, THEREFORE, BE IT RESOLVED by the Petaluma Community Development
Successor Agency, as follows:
Section 1. Findings. The Successor Agency Board finds that all the above recitals are true and
correct and such recitals are hereby incorporated herein.
Section 2. Determination That Savings will be achieved through Refunding. Based on the
conclusions set forth in the Debt Service Savings Analysis, the Successor Agency has
determined that it will achieve debt service savings that will meet the Savings Parameters. The
refunding of the 2007 Bonds and the 2011 Bonds will be accomplished through the issuance
pursuant to the Law and the Refunding Law of its "Petaluma Community Development
Successor Agency Merged Project Area Tax Allocation Refunding Bonds, Series 2017 ". The
Successor Agency determines and directs that the 2007 Bonds and the 2011 Bonds will be
refunded with the proceeds of the Refunding Bonds only if the Savings Parameters attributable
thereto are met.
Section 3. Approval of Issuance of the Bonds. The Successor Agency hereby authorizes and
approves the issuance of the Refunding Bonds under the Law and the Refunding Law, in
accordance with the authorization to proceed from the Oversight Board, provided that the
Savings Parameters are satisfied and provided the issuance of the Refunding Bonds is first
approved by the California Department of Finance.
Section 4. Supplement to Master Indenture. The Successor Agency hereby approves the
Fourth Supplement prescribing the terms and provisions of the Refunding Bonds. Each of the
Mayor, as the Chair and presiding officer of the Successor Agency, the City Manager of the City
of Petaluma, as the chief administrative officer of the Successor Agency, and the Finance
Director of the City of Petaluma (each, an "Authorized Officer "), is hereby authorized and
directed to execute and deliver, and the City Clerk, as the secretary of the Successor Agency, is
hereby authorized and directed to attest to, the Fourth Supplement for and in the name and on
behalf of the Successor Agency, in substantially the form thereof on file with the Secretary, with
such changes therein, deletions therefrom and additions thereto as the Authorized Officer shall
approve and within the requirements of Section 34177.5, such approval to be conclusively
evidenced by the execution and delivery of the Fourth Supplement. The Successor Agency
hereby authorizes the delivery and performance of the Fourth Supplement.
Section 5. Issuance of Refunding Bonds in Whole or in Part. It is the intent of the Successor
Agency to sell and deliver the Refunding Bonds in whole, provided that there is compliance with
the Savings Parameters. However, the Successor Agency will initially authorize the sale and
delivery of the Refunding Bonds in whole or, if such Savings Parameters cannot be met with
respect to the whole, then in part; provided that the Refunding Bonds so sold and delivered in
part are in compliance with the Savings Parameters. The sale and delivery of the Refunding
Bonds in part will in each instance provide sufficient funds only for the refunding of that portion
of the 2007 Bonds and /or 2011 Bonds that meet the Savings Parameters. In the event the
Refunding Bonds are initially sold in part, the Successor Agency intends to sell and deliver
additional parts of the Refunding Bonds without the further approval of the Successor Agency or
the Oversight Board, provided that in each such instance the Refunding Bonds so sold and
delivered in part are in compliance with the Savings Parameters.
Section 6. Municipal Bond Insurance and Surety Bond. The Authorized Officers, each acting
alone, are hereby authorized and directed, but not required, to take all actions necessary to obtain
a municipal bond insurance policy and /or a debt service reserve fund surety policy for the
Refunding Bonds from a municipal bond insurance company if it is determined, upon
consultation with the financial advisor, that such municipal bond insurance policy and /or debt
service reserve fund surety policy will reduce the true interest costs with respect to the
Refunding Bonds.
Section 7. Sale of Refunding Bonds via Negotiated Public Sale or Direct Private Placement.
The Successor Agency Board hereby authorizes the sale of the Refunding Bonds through either a
negotiated public sale or a direct private placement, the final determination to be made by an
Authorized Officer at the time of sale.
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If the Refunding Bonds are sold via a negotiated public sale, the Successor Agency Board hereby
delegates to each Authorized Officer the authority to approve and execute a bond purchase
agreement with an underwriter selected by an Authorized Officer, in such form as approved by
an Authorized Officer. If the Refunding Bonds are sold via a negotiated public sale, the
underwriter's discount shall not exceed 0.75% of the original principal amount of the Refunding
Bonds.
If the Refunding Bonds are sold via a direct private placement, such private placement shall be
undertaken pursuant to and in accordance with a process for the solicitation of bids from banks,
lenders and /or other financial institutions as determined and administered by the placement
agent, in consultation with the municipal advisor and approved by an Authorized Officer.
Section 8. Approval of Official Statement. In the event necessary for a public sale of the
Refunding Bonds, the Successor Agency hereby approves the preliminary Official Statement in
substantially the form on file with the Secretary. Distribution of the preliminary Official
Statement by the Successor Agency and an underwriter is hereby approved, and, prior to the
distribution of the preliminary Official Statement, an Authorized Officer is authorized and
directed, on behalf of the Successor Agency, to deem the preliminary Official Statement "final"
pursuant to Rule 15c2 -12 under the Securities Exchange Act of 1934, as amended (the "Rule ").
The execution of the final Official Statement, which shall include such changes and additions
thereto deemed advisable by the Authorized Officer executing the same, and such information
permitted to be excluded from the preliminary Official Statement pursuant to the Rule, is hereby
approved for delivery to the purchasers of the Refunding Bonds, and each Authorized Officer,
acting alone, is authorized and directed to execute and deliver the final Official Statement for and
on behalf of the Successor Agency, to deliver to the Underwriter a certificate with respect to the
information set forth therein and to deliver to the Underwriter a continuing disclosure
undertaking substantially in the form appended to the final Official Statement.
Section 9. Approval of Escrow Agreement. The Successor Agency hereby approves the
Escrow Agreement and each Authorized Officer is hereby authorized and directed to execute and
deliver the Escrow Agreement for and in the name and on behalf of the Successor Agency, in
substantially the form on file with the Secretary, with such changes therein, deletions therefrom
and additions thereto as the Authorized Officer shall approve, such approval to be conclusively
evidenced by the execution and delivery of the Escrow Agreement. The Successor Agency
hereby authorizes the delivery and performance of the Escrow Agreement.
Section 10. Agreement with Financial Advisor, Bond Counsel and Placement Agent. The
Successor Agency approves the engagement of Steven Gortler as independent registered
municipal advisor, approves the engagement of Jones Hall, A Professional Law Corporation, as
i
bond and disclosure counsel, approves the engagement of Hilltop Securities Inc., as placement
agent, and approves execution and performance of agreements with said firms, in the respective
forms as deemed necessary and approved by an Authorized Officer.
Section 11. Oversight Board Approval of the Issuance of the Bonds; Certain
Determinations. The Successor Agency hereby acknowledges that the Oversight Board has
approved the issuance of the Refunding Bonds and made certain determinations and no further
approval of the Oversight Board is needed to carry out the actions approved therein and herein
and that the approval of the Department of Finance is required as a condition precedent to
issuance of the Refunding Bonds.
Section 12. Filing of this Resolution. The Secretary of the Successor Agency is hereby
authorized and directed to file a certified copy of this Resolution and the Debt Service Savings
Analysis, with the Oversight Board, and, as provided in §341800) of the Health and Safety
Code, with the Sonoma County Administrative Officer, the Sonoma County Auditor - Controller
and the California Department of Finance.
Section 13. Official Actions. The Authorized Officers and any and all other officers of the
Successor Agency are hereby authorized and directed, for and in the name and on behalf of the
Successor Agency, to do any and all things and take any and all actions, which they, or any of
them, may deem necessary or advisable in obtaining the requested approvals by the Oversight
Board and the California Department of Finance. The Authorized Officers and any and all other
officers of the Successor Agency are authorized and directed, on behalf of the Successor Agency,
to execute and deliver any and all documents, assignments, certificates, requisitions, agreements,
notices, consents, instruments of conveyance, warrants and documents, which they, or any of
them, may deem necessary or advisable in order to consummate the lawful issuance and sale of
the Refunding Bonds, the refunding of the 2007 Bonds and the 2011 Bonds, and the
consummation of the transactions as described herein. Whenever in this Resolution any officer of
the Successor Agency is directed to execute or countersign any document or take any action,
such execution, countersigning or action may be taken on behalf of such officer by any person
designated by such officer to act on his or her behalf in the case such officer is absent or
unavailable.
Section 14. Effective Date. This Resolution shall take effect fiom and after the date of its
passage and adoption.
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Attachment3
Jones Hall Draft 4.20.17
PRELIMINARY OFFICIAL STATEMENT DATED , 2017
NEW ISSUE — BOOK -ENTRY
RATINGS: Insured Rating: S &P: "
Underlying Rating: S &P: " "
See "CONCLUDING INFORMATION – Ratings"
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain
qualifications described in this Official Statement, under existing law, the interest on the Bonds is excluded from gross income for federal income
tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and
corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into
account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest on the Bonds is exempt from
California personal income taxes. See "TAX MATTERS."
PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR AGENCY
TAX ALLOCATION REFUNDING BONDS
SERIES 2017
Dated: Delivery Date Due: November 1, as shown on the inside front cover
Purpose of the Bonds. The above captioned bonds (the "Bonds ") are being issued by the Petaluma Community Development Successor
Agency (the "Successor Agency "), as successor agency to the former Petaluma Community Development Commission (the "Former Agency ") to
refund two outstanding series of bonds issued by the Former Agency (the "Refunded Bonds ") payable from tax increment revenue generated in
the Former Agency's Merged Project Area (the "Project Area "), and to pay costs of issuance.
Book -Entry. The Bonds will be delivered as fully registered bonds, registered in the name of Cede & Co. as nominee of The Depository
Trust Company, New York, New York ( "DTC "), and will be available to ultimate purchasers ( "Beneficial Owners ") in the denomination of $5,000
or any integral multiple thereof, under the book -entry system maintained by DTC. Beneficial Owners will not be entitled to receive delivery of
bonds representing their ownership interest in the Bonds.
Payments. Annual principal of, premium if any, and semiannual interest on the Bonds due May 1 and November 1 of each year,
commencing November 1, 2017 will be payable by U.S. Bank National Association, as Trustee (the "Trustee "), to DTC for subsequent
disbursement to DTC participants, so long as DTC or its nominee remains the registered owner of the Bonds. See "THE BONDS."
Redemption`. The Bonds are subject to optional redemption and mandatory sinking account redemption prior to maturity. See "THE
BONDS — Redemption."
Security for the Bonds. The Bonds are payable from and secured by a first lien and pledge of Tax Revenues (as described herein)
allocable to the Successor Agency under the Dissolution Act (described herein) to be derived from parcels in the Project Area, and from moneys
in certain funds and accounts established under the Indenture of Trust, dated as of 1, 2017 (the "Indenture "), by and between the
Successor Agency and the Trustee, as further described in this Official Statement. See "SECURITY FOR THE BONDS."
The Successor Agency will initially fund a reserve account for the Bonds with a debt service reserve fund surety policy. See "SECURITY
FOR THE BONDS — Debt Service Reserve Account."
Limited Obligations. The Bonds are special obligations of the Successor Agency and are secured by an irrevocable pledge of, and are
payable as to principal, interest and premium, if any, from Tax Revenues and other funds described in this Official Statement. The Bonds,
interest and premium, if any, thereon are not a debt of the City of Petaluma (the "City "), the County of Sonoma (the "County "), the State of
California (the "State ") or any of their political subdivisions except the Successor Agency, and none of the City, the County, the State nor any of
their political subdivisions except the Successor Agency is liable thereon. The Bonds, interest thereon and premium, if any, are not payable out
of any funds or properties other than those set forth in the Indenture. Neither the members of the Successor Agency, the Oversight Board of the
Successor Agency, the County Board of Supervisors nor any persons executing the Bonds are liable personally on the Bonds.
Bond Insurance. The Successor Agency has applied for an insurance policy for the Bonds. The Successor Agency may purchase such
insurance to be delivered concurrently with the delivery of the Bonds for some or all maturities. Any such decision will be made at the time of
pricing.
This cover page of the Official Statement contains information for quick reference only. It is not a complete summary of the Bonds. Investors
must read the entire Official Statement to obtain information essential to making an informed investment decision. Attention is hereby directed to
certain risk factors more fully described in this Official Statement. See "RISK FACTORS."
The Bonds are offered, when, as and if issued, subject to the approval of Jones Hall, A Professional Law Corporation, San Francisco, Bond
Counsel to the Successor Agency. Jones Hall, A Professional Law Corporation, is also serving as Disclosure Counsel to the Successor Agency.
In addition, certain legal matters will be passed upon for the Successor Agency by the City Attorney of the City, as Successor Agency general
counsel. Certain legal matters will be passed on for the Underwriter by , Underwriter's Counsel. It is anticipated that the Bonds will
be available for delivery through the book -entry facilities of DTC in New York, New York, on or about , 2017.
900M
The date of this Official Statement is 2017.
Preliminary, subject to change.
94)
MATURITY SCHEDULE*
Maturity Date Principal
(November 1) Amount*
Interest CUSIP,
Rate Yield Price (Base )
*Preliminary; subject to change.
t Copyright 2017, CUSIP Global Services, and a registered trademark of the American Bankers Association. CUSIP data is
provided by CUSIP Global Services, which is managed on behalf of American Bankers Association by S &P Capital IQ. Neither the
Successor Agency nor the Underwriter assumes any responsibility for the accuracy of the CUSIP data.
0
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT AGENCY
CITY COUNCIL /SUCCESSOR AGENCY BOARD
David Glass, Mayor
Teresa Barrett, Council Member
Chris Albertson, Council Member
Dave King, Council Member
Mike Healy, Council Member
Gabe Kearny, Council Member
Kathy Miller, Council Member
CITY /SUCCESSOR AGENCY STAFF
John Brown, City Manager
Bill Mushallo, Finance Director
Eric Danly, City Clerk
Claire Cooper, City Attorney
SPECIAL SERVICES
Financial Advisor
Steven Gortler
San Francisco, California
Bond & Disclosure Counsel
Jones Hall, A Professional Law Corporation
San Francisco, California
Trustee
U.S. Bank National Association
San Francisco, California
Redevelopment Consultant
Fraser & Associates
Roseville, California
Verification Agent
Causey Demgen & Moore
Denver, Colorado
--,.
TABLE OF CONTENTS
Page
INTRODUCTION
The Redevelopment Plan for the Project
Authority and Use of Proceeds ..........................
1
The City and the Successor Agency .................
2
The Project Area ................ ...............................
3
Security for the Bonds - Tax Allocation
Summary of Assessed Value History in the
Financing....................... ...............................
3
Bond Insurance .................. ...............................
5
Limited Obligation ............... ...............................
5
Debt Service Reserve Account .........................
5
Professionals Involved in the Offering ...............
5
Further Information ............. ...............................
6
REFUNDING PLAN ................ ...............................
7
Redemption of Refunded Bonds .......................
7
Estimated Sources and Uses of Funds .............
9
Debt Service Schedule ....... ...............................
9
THEBONDS ......................... ...............................
10
Authority for Issuance ....... ...............................
10
Description of the Bonds .. ...............................
10
Redemption...................... ...............................
11
Additional Bonds .............. ...............................
13
TAX INCREMENT FINANCING GENERALLY....
14
Property Tax Allocation Procedures and
Levy and Collection of Taxes ..........................
Collection Procedures .. ...............................
14
Future Initiatives ............... ...............................
19
Appeals of Assessed Values ...........................
19
Low and Moderate Income Housing ................
20
Adjustments to Revenue .. ...............................
20
THE DISSOLUTION ACT ..... ...............................
21
SECURITY FOR THE BONDS ............................
22
Limited Obligation ............. ...............................
22
Tax Revenues .................. ...............................
23
Pledge Under the Indenture ............................
23
Flow of Funds Under the Indenture .................
24
Debt Service Reserve Account .......................
25
Recognized Obligation Payment Schedules ...
26
Adjustments to Revenue .. ...............................
29
THE PETALUMA COMMUNITY
Audited Financial Statements ..........................
DEVELOPMENT SUCCESSOR AGENCY
Miscellaneous ................... ...............................
OF THE CITY OF PETALUMA ........................
30
Successor Agency Powers ..............................
30
Paqe
Status of Compliance with Dissolution Act...... 30
THE PROJECT AREA .......... ...............................
31
The Redevelopment Plan for the Project
Area............................. ...............................
31
Description of Project Area ..............................
32
LandUse .......................... ...............................
32
Summary of Assessed Value History in the
Project Area ................. ...............................
33
Unitary Property ............... ...............................
34
TaxRates ......................... ...............................
34
Appeals of Assessed Values; Proposition 8
Reductions ................... ...............................
34
Tax Sharing Payments ..... ...............................
38
Housing Set - Aside ............ ...............................
38
Historical Available Tax Increment ..................
39
Projected Tax Revenues and Estimated Debt
Service Coverage ........ ...............................
40
RISK FACTORS ................... ...............................
42
Recognized Obligation Payment Schedule.....
42
No Validation Proceedings Undertaken ..........
43
Reduction in Taxable Value ............................
43
Risks to Real Estate Market ............................
44
Reduction in Inflationary Rate .........................
44
Levy and Collection of Taxes ..........................
45
Bankruptcy and Foreclosure ...........................
45
Estimated Revenues ........ ...............................
45
Hazardous Substances .... ...............................
46
Natural Disasters ................ .............................46
Changes in the Redevelopment Law ..............
46
Loss of Tax - Exemption ..... ...............................
47
Secondary Market ............ ...............................
47
TAX MATTERS .................... ...............................
47
CONCLUDING INFORMATION ..........................
49
Underwriting ..................... ...............................
49
Legal Opinion ................... ...............................
49
Litigation........................... ...............................
49
Ratings............................. ...............................
49
Continuing Disclosure ...... ...............................
50
Audited Financial Statements ..........................
50
Miscellaneous ................... ...............................
51
APPENDIX A — SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
APPENDIX B — FORM OF BOND COUNSEL OPINION
APPENDIX C — BOOK -ENTRY ONLY SYSTEM
APPENDIX D — FORM OF SUCCESSOR AGENCY CONTINUING DISCLOSURE CERTIFICATE
APPENDIX E — SUCCESSOR AGENCY FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30,
2016
APPENDIX F — STATE DEPARTMENT OF FINANCE APPROVAL LETTER
APPENDIX G — CITY OF PETALUMA AND SONOMA COUNTY GENERAL INFORMATION
N
r, F
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 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.
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
Successor Agency or the Project Area 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 in this Official Statement 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 Indenture 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.
Application for Insurance. The Successor Agency has applied for a municipal bond insurance policy for the Bonds.
The Successor Agency may purchase such insurance to be delivered concurrently with the delivery of the Bonds for some or all
maturities. Any such decision will be made at the time of pricing.
Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement
constitute "forward- looking statements" as described in the United States Private Securities Litigation Reform Act of 1995,
Section 21 E 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 SUCCESSOR AGENCY DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO
THOSE FORWARD- LOOKING STATEMENTS IF OR WHEN ITS EXPECTATIONS, OR EVENTS, CONDITIONS OR
CIRCUMSTANCES ON WHICH SUCH STATEMENTS ARE BASED OCCUR.
Website. The City maintains an Internet website, but the information on the website is not incorporated in this Official
Statement.
OFFICIAL STATEMENT
PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR AGENCY
TAX ALLOCATION REFUNDING BONDS SERIES 2017
This Official Statement, including the cover page, is provided to furnish information in
connection with the sale by the Petaluma Community Development Successor Agency (the
"Successor Agency ") of the above - captioned bonds (the "Bonds ").
INTRODUCTION
This introduction is not a summary of this Official Statement. It is only a brief description
and guide to, and is qualified by, the more complete and detailed information contained in the
entire Official Statement including the cover page and the appendices hereto, and the
documents summarized or described herein. Investors must read the entire Official Statement to
obtain information essential to making an informed investment decision. The offering of the
Bonds to potential investors is made only by means of the entire Official Statement.
Authority and Use of Proceeds
The Successor Agency is issuing the Bonds pursuant to authority granted by Part 1
(commencing with Section 33000) and Part 1.85 of Division 24 (commencing with Section
34170) of the California Health and Safety Code (the "Redevelopment Law "), Article 11
(commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the
Government Code of the State of California (the "Refunding Law "), including the Dissolution
Act described herein, and an Indenture, dated as of April 1, 2007, by and between the Petaluma
Community Development Commission and U.S. Bank National Association, San Francisco,
California, as trustee (the "Trustee "), as supplemented, including by a Fourth Supplement to
Indenture dated as of 1, 2017 providing for the issuance of the Bonds (as
supplemented, the "Indenture"). See "THE BONDS — Authority for Issuance."
* Preliminary, subject to change.
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The Successor Agency is issuing the Bonds in order to redeem and defease the
following bonds issued by the Petaluma Community Development Commission (the "Former
Agency ") (i) $31,825,000 aggregate original principal amount of Petaluma Community
Development Commission Merged Project Area Subordinate Tax Allocation Bonds, Series 2007
(the "2007 Bonds ") and (ii) $11,369,000 aggregate original principal amount of Petaluma
Community Development Commission Merged Project Area Subordinate Tax Allocation Bonds,
Series 2011 (the "2011 Bonds "; together with the 2007 Bonds, the "Refunded Bonds "). The
proceeds of the Refunded Bonds were used to finance or refinance redevelopment activities in
the Successor Agency's Merged Project Area (the "Project Area ").
Proceeds of the Bonds will also be used to pay the costs of issuing the Bonds, including
the premium for a municipal bond insurance policy (if applicable) and the cost of a reserve fund
surety policy.
The City and the Successor Agency
The City of Petaluma (the "City ") is located in Sonoma County (the "County "). The
City is a municipal corporation and general law city, duly organized and existing under the
Constitution and the laws of the State of California (the "State "). The City was incorporated in
1858, and operates as a general law city. It maintains a council- manager form of government,
with the Mayor elected at -large for a two - year -term and the Council Members elected at -large
for four -year terms. For certain information regarding the City, see "APPENDIX G - City of
Petaluma and Sonoma County General Information."
Former Agency. The Successor Agency is the successor entity to the Former Agency,
which was dissolved under the Dissolution Act (described herein). The Former Agency was
activated on , by Ordinance No. of the City Council, at which time the
City Council declared itself to be the governing board of the Agency.
Dissolution Act. On June 29, 2011, Assembly Bill No. 26 ( "AB 1X 26 ") was enacted
together with a companion bill, Assembly Bill No. 27 ( "AB 1X 27 "). The provisions of AB 1X 26
provided for the dissolution of all redevelopment agencies statewide as of November 1, 2012.
The provisions�of AB 1X 27 permitted redevelopment agencies to avoid such dissolution by the
payment of certain amounts. A lawsuit was brought in the California Supreme Court, California
Redevelopment Association, et al., v. Matosantos, et al., 53 Cal. 4th 231 (Cal. Dec. 29, 2011),
challenging the constitutionality of AB 1X 26 and AB 1X 27. On December 19, 2012, the
California Supreme Court largely upheld AB 1X 26, invalidated AB 1X 27, and held that AB 1X
26 may be severed from AB 1X 27 and enforced independently. As a result of AB 1X 26 and
the decision of the California Supreme Court in the California Redevelopment Association case,
as of November 1, 2012, all redevelopment agencies in the State were dissolved, including the
Former Agency, and successor agencies were designated as successor entities to the former
redevelopment agencies to expeditiously wind down the affairs of the former redevelopment
agencies.
The primary provisions enacted by AB 1X 26 relating to the dissolution and wind down of
former redevelopment agency affairs are found in Parts 1.8 (commencing with Section 34161)
and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the
State, as amended on June 27, 2012 by Assembly Bill No. 1484 ( "AB 1484 ") and on September
22, 2015 by Senate Bill 107 (as further amended from time to time, the "Dissolution Act ").
WA
Successor Agency. Pursuant to Section 34173 of the Dissolution Act, the City acts as
the Successor Agency to the Former Agency. Subdivision (g) of Section 34173 of the
Dissolution Act, added by AB 1484, expressly affirms that the Successor Agency is a separate
public and legal entity from the City, that the two entities shall not merge, and that the liabilities
of the Former Agency will not be transferred to the City nor will the assets of the Former Agency
become assets of the City.
The Project Area
The Project Area comprises the merger of two previous project areas of the Former
Agency. The City Council adopted the Redevelopment Plans with respect to the two pre- merger
Project Areas in 1976 and 1988 respectively. The current "Merged Project Area ", which is
currently the sole project area of the Successor Agency, encompasses approximately 2,965
acres, covering approximately 32% of the land area within the City. The Project Area includes
low density and medium density residential, hotel /motel, commercial, industrial and public land
uses, but is primarily residential in character. The assessed value of the Project Area in the
Base Year was $399,073,367 compared to its 2016 -17 assessed value of $2,224,295,436.
See "THE PROJECT AREA" for additional information on land use and property
ownership within the Project Area.
Security for the Bonds - Tax Allocation Financing
The Bonds are secured by Tax Revenues with respect to the Project Area (as defined in
the Indenture) deposited from time to time in the Redevelopment Property Tax Trust Fund (the
"Redevelopment Property Tax Trust Fund ") established and held by the Sonoma County
Auditor - Controller (the "County Auditor - Controller "). See "SECURITY FOR THE BONDS —
Section 34177.5(a)(1) authorizes the issuance of such refunding bonds to provide
savings to the Successor Agency, provided that (i) the total interest cost to maturity on the
refunding bonds or other indebtedness plus the principal amount of the refunding bonds or other
indebtedness does not exceed the total remaining interest cost to maturity on the bonds or other
indebtedness to be refunded plus the remaining principal of the bonds or other indebtedness to
be refunded, and (ii) the principal amount of the refunding bonds or other indebtedness does not
exceed the amount required to defease the refunded bonds or other indebtedness, to establish
customary debt service reserves, and to pay related costs of issuance. See "SECURITY FOR
THE BONDS."
Prior to the enactment of AB 1 X 26, the Redevelopment Law authorized the financing of
redevelopment projects through the use of tax increment revenues. This method provided that
the taxable valuation of the property within a redevelopment project area on the property tax roll
last equalized prior to the effective date of the ordinance which adopted the redevelopment plan
became the base year valuation. Assuming the taxable valuation never dropped below the
base year level, the taxing agencies receiving property taxes thereafter received only that
portion of the taxes produced by applying then current tax rates to the base year valuation, and
the redevelopment agency was allocated the remaining portion of property taxes produced by
applying then current tax rates to the increase in valuation over the base year. Such
incremental tax revenues allocated to a redevelopment agency were authorized to be pledged
to the payment of redevelopment agency obligations.
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As a consequence of the dissolution of redevelopment agencies, all property tax
revenues that would have been allocated to redevelopment agencies are now allocated to the
applicable redevelopment property tax trust fund created by the county auditor - controller for the
"successor agency." Such funds are to be used for payments on indebtedness and other
"enforceable obligations" (as defined in the Dissolution Act), and to pay certain administrative
costs, with amounts in excess of those to be considered property taxes that will be distributed to
taxing agencies. In addition, under the Dissolution Act tax increment is no longer deemed to
flow directly to the successor agency. Further, the Dissolution Act no longer requires successor
agencies to deposit a portion of the tax increment into a low and moderate income housing
fund. Rather, all funds are considered property taxes.
The Dissolution Act requires the County Auditor - Controller to determine the amount of
property taxes that would have been allocated to the Former Agency from the Project Area had
the Former Agency not been dissolved pursuant to the operation of AB 1X 26, using current
assessed values on the last equalized roll on August 20, and to deposit that amount in the
Redevelopment Property Tax Trust Fund. The Dissolution Act provides that any bonds
authorized thereunder to be issued by the Successor Agency will be considered indebtedness
incurred by the dissolved Former Agency, with the same lien priority and legal effect as if the
Bonds had been issued prior to the effective date of AB 1X 26, in full conformity with the
applicable provisions of the Redevelopment Law that existed prior to that date, and will be
included in the Successor Agency's Recognized Obligation Payment Schedules. See
"SECURITY FOR THE BONDS — Recognized Obligation Payment Schedules."
The Dissolution Act further provides that property tax revenues pledged to any bonds
authorized under the Dissolution Act, such as the Bonds, are taxes allocated to the successor
agency pursuant to the provisions of the Redevelopment Law and the State Constitution.
Property tax revenues will be allocated to the Successor Agency on a semi - annual basis
based on a Recognized Obligation Payment Schedule submitted by the Successor Agency to
an oversight board established for the Successor Agency (the "Oversight Board ") and the
State Department of Finance (the "DOF "). The County Auditor - Controller will distribute funds
from the Redevelopment Property Tax Trust Fund for each six -month period in the order
specified in the Dissolution Act. See "SECURITY FOR THE BONDS — Recognized Obligation
Payment Schedules."
Successor agencies have no power to levy property taxes and must rely on the
allocation of taxes as described above. See "RISK FACTORS."
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Bond Insurance
The Successor Agency has applied for an insurance policy for the Bonds. The
Successor Agency may purchase such insurance to be delivered concurrently with the delivery
of the Bonds for some or all maturities. Any such decision will be made at the time of pricing.
Limited Obligation
The Bonds are special obligations of the Successor Agency and are secured by an
irrevocable pledge of and lien on, and are payable as to principal, interest and premium, if any,
from Tax Revenues and other funds. The Bonds, interest and premium, if any, are not a debt of
the City, the County, the State or any of their political subdivisions except the Successor
Agency, and none of the City, the County, the State nor any of their political subdivisions
(except the Successor Agency) are liable thereon. The Bonds, interest thereon and premium, if
any, are not payable out of any funds or properties other than those set forth in the Indenture.
No member, officer, agent, or employee of the Successor Agency, the Oversight Board, the
County Board of Supervisors or any person executing the Bonds is liable personally on the
Bonds by reason of their issuance.
Debt Service Reserve Account
In order to further secure the payment of the principal and interest on the Bonds, a debt
service reserve account (the "Reserve Account ") will be funded from proceeds of the Bonds
via a "Qualified Reserve Account Credit* Instrument" (as defined in the Indenture) in the form
of a debt service reserve fund surety policy (the "Reserve Policy ") in an amount equal to the
"Reserve Requirement" (as defined herein) to be issued by the Bond Insurer. See "SECURITY
FOR THE BONDS — Debt Service Reserve Account."
Professionals Involved in the Offering
The Successor Agency has retained Steven Gortler, San Francisco, California, as
independent registered municipal advisor (the "Municipal Advisor ") in connection with the
structuring, marketing and pricing of the Refunding Bonds. Payment of the fees and expenses
of the Municipal Advisor is contingent upon the sale and delivery of the Bonds.
All proceedings in connection with the issuance of the Bonds are subject to the approval
of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel to the
Successor Agency. Jones Hall is also acting as Disclosure Counsel. Certain legal matters will
be passed on for the Underwriter by . In addition, certain legal matters will
be passed upon for the Agency by the City Attorney of the City. Payment of the fees and
expenses of Bond Counsel, Disclosure Counsel and Underwriter's Counsel is contingent upon
the sale and delivery of the Bonds.
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,1
Further Information
Brief descriptions of the Redevelopment Law, the Dissolution Act, the Refunding Law,
the Bonds, the Indenture, the Successor Agency, the Former Agency and the City are included
in this Official Statement. Such descriptions and information do not purport to be comprehensive
or definitive. All references in this Official Statement to the Redevelopment Law, the Dissolution
Act, the Refunding Law, the Bonds, the Indenture, the Constitution and the laws of the State as
well as the proceedings of the Former Agency, the Successor Agency, the County and the City
are qualified in their entirety by reference to such documents and laws. References in this
Official Statement to the Bonds are qualified in their entirety by the form included in the
Indenture and by the provisions of the Indenture. Capitalized terms used in this Official
Statement and not otherwise defined shall have the meanings given to such terms as set forth
in the Indenture.
During the period of the initial offering of the Bonds, copies of the draft forms of all
documents are available from the Underwriter or from the City of Petaluma City Clerk, 11
English Street, Petaluma, CA 94952.
[End of Introduction]
REFUNDING PLAN
The Successor Agency is issuing the Bonds in order to refund the following bonds
issued by the Petaluma Community Development Commission (the "Former Agency ") (i)
$31,825,000 aggregate original principal amount of Merged Project Area Subordinate Tax
Allocation Bonds, Series 2007 ( "2007 Bonds "), which are currently outstanding in the par
amount of $29,570,000, and (ii) $11,369,000 aggregate original principal amount of Petaluma
Community Development Commission Merged Project Area Subordinate Tax Allocation Bonds,
Series 2011, which are currently outstanding in the par amount of $6,968,000 ( "2011 Bonds ";
together with the 2007 Bonds, the "Refunded Bonds "). The proceeds of the Refunded Bonds
were used to finance or refinance redevelopment activities in the Successor Agency's Merged
Project Area (the "Project Area ").
Redemption of the Refunded Bonds
At the time of issuance of the Bonds the Successor Agency will enter into an Escrow
Agreement wiith U.S. Bank National Association, as the escrow agent for the Refunded Bonds
(the "Escrow Agent "), for the purpose of providing the terms and conditions relating to the
deposit and application of proceeds of the Bonds and other moneys to provide for the payment
and redemption of all of the outstanding Refunded Bonds pursuant to the Indenture, and for (i)
redemption of the 2007 Bonds on , 2017; and (ii) redemption of the 2011 Bonds
on May 1, 2018, pursuant to the requirements of the Indenture under which each such prior
series of bonds were issued.
Proceeds of the Bonds in the amount needed to redeem the Refunded Bonds will be
deposited in an Escrow Fund established under the Escrow Agreement, to be applied pursuant
to the Escrow Agreement for redemption of the Refunded Bonds on the optional redemption
date. None of the amounts transferred to or on deposit in the Escrow Fund will be applied for
any purpose other than as provided in the Escrow Agreement.
Pending disbursement, most of the moneys deposited into the Escrow Fund will be
invested in escrow securities (in the form of non - callable direct obligations of the United States
of America), with the remaining amounts to be held uninvested. The escrow securities will bear
interest rates such that, upon their maturity, the principal and interest paid on the escrow
securities, together with the uninvested cash in the Escrow Fund, will provide the Escrow Agent
sufficient funds for the payment and redemption of all of the outstanding Refunded Bonds, plus
unpaid accrued interest thereon, on the respective optional redemption dates.
Verification of Mathematical Accuracy. Causey Demgen & Moore, Denver, Colorado,
certified public accountants (the "Verification Agent "), will verify the mathematical accuracy of
certain computations included in the schedules provided on behalf of the Successor Agency
relating to the computation of forecasted receipts of principal and interest earnings (if any) on
the moneys and escrow securities deposited in the Escrow Fund and the forecasted payments
of principal and interest in connection with the defeasance of the refunded Refunded Bonds.
The report of the Verification Agent will include the statement that the scope of its engagement
was limited to verifying the mathematical accuracy of computations contained in the schedules
provided to the Verification Agent and the Verification Agent has no obligation to update its
report because of events occurring, or data or information coming to the Verification Agent's
attention, subsequent to the date of its report.
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r
Following redemption of the outstanding principal amount of all of the Refunded Bonds,
any monies remaining in each respective Redemption Account will be transferred to the Trustee
for deposit into the Revenue Fund established under the Indenture to be used to pay interest on
the Bonds.
The amounts held by the Refunded Bonds Trustee in the respective Redemption
Account are pledged solely to the amounts due and payable by the Successor Agency with
respect to the Refunded Bonds. Neither the funds deposited in the respective Redemption
Account nor interest on the invested funds, if any, will be available for the payment of debt
service with respect to the Bonds.
11-11
Estimated Sources and Uses of Funds
The estimated sources and uses of funds are summarized below.
Sources:
Principal Amount of Bonds
Plus: Refunded Bonds - Available Funds
Plus: Net Original Issue Premium /Less: Net Original Issue
Discount
Total Sources
Uses:
Deposit to Redemption Fund
Deposit to Costs of Issuance Fund
Total Uses
(1) Costs of Issuance include fees and expenses for Bond Counsel, Disclosure Counsel, Underwriter,
Municipal Advisor, Trustee, Verification Agent, [premium for bond insurance], a Reserve Policy,
administrative costs, Successor Agency Counsel, printing expenses, rating fee, and other costs related
to the issuance of the Bonds.
Debt Service Schedule
The Bonds are secured on parity with bonds issued by the Successor Agency in 2015.
The following table shows the annual debt service schedule for the 2015 bonds and the Bonds,
assuming no optional redemption of the Bonds.
so
THE BONDS
Authority for Issuance
The issuance of the Bonds and the execution and delivery of the Fourth Supplement
were directed and approved by the Oversight Board pursuant to Resolution No.
adopted on , 2017 (the "Oversight Board Resolution ") and were authorized by
the Successor Agency pursuant to Resolution No. adopted on , 2017
(the "Resolution ").
Pursuant to the Dissolution Act, written notice of the Oversight Board Resolution was
provided to the DOF. On , the DOF provided a letter to the Successor
Agency stating that based on the DOF's review and application of the law, the Oversight Board
Resolution approving the Bonds is approved by the DOF. See "APPENDIX F — State
Department of Finance Approval Letter."
Section 34177.5(f) of the Dissolution Act provides that when, as here, a successor
agency issues refunding bonds with the approval of the oversight board and the DOF, the
oversight board may not unilaterally approve any amendments to or early termination of the
bonds, and the scheduled payments on the bonds shall be listed in the Recognized Obligation
Payment Schedule and are not subject to further review and approval by the DOF or the
California State Controller.
Description of the Bonds
The Bonds will be issued and delivered in fully- registered form without coupons in the
denomination of $5,000 or any integral multiple thereof for each maturity, initially in the name of
Cede & Co., as nominee for The Depository Trust Company ( "DTC "), New York, New York, as
registered owner of all Bonds. The initially executed and delivered Bonds will be dated the date
of delivery (the "Closing Date ") and mature on November 1 in the years and in the amounts
shown on the inside cover page of this Official Statement.
Interest on the Bonds (including the final interest payment upon maturity or earlier
redemption) will be calculated on the basis of a 360 -day year of twelve 30 -day months at the
rates shown on the inside cover page of this Official Statement, payable semiannually on May 1
and November 1 in each year, commencing on November 1, 2017 (each an "Interest Payment
Date "), by check mailed to the registered owners thereof or upon the request of the Owners of
$1,000,000 or more in principal amount of Bonds, by wire transfer to an account in the United
States which shall be designated in written instructions by such Owner to the Trustee on or
before the Record Date preceding the Interest Payment Date. "Record Date" as defined in the
Indenture means, with respect to any Interest Payment Date, the close of business on the
fifteenth (15th) calendar day of the month preceding such Interest Payment Date, whether or not
such fifteenth (15th) calendar day is a Business Day.
One fully- registered bond will be issued for each maturity of the Bonds, each in the
aggregate principal amount of such maturity, and will be deposited with DTC. See "APPENDIX
C — Book -Entry Only System."
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Redemption
Optional Redemption. The Bonds maturing on or before November 1, are not
subject to optional redemption prior to maturity. The Bonds maturing on and after November 1,
, are subject to redemption, at the option of the Successor Agency on any date on or
after November 1, , as a whole or in part, by such maturities as shall be determined by
the Successor Agency, and by lot within a maturity, from any available source of funds, at a
redemption price equal to the principal amount of the Bonds to be redeemed, together with
accrued interest thereon to the date fixed for redemption, without premium.
Mandatory Sinking Account Redemption. The Bonds that are Term Bonds maturing
November 1, 20 shall be subject to mandatory redemption in whole, or in part by lot, on
November 1 in each year, commencing November 1, 20_, as set forth below, from sinking fund
payments made by the Successor Agency, at a redemption price equal to the principal amount
thereof to be redeemed, without premium, in the aggregate respective principal amounts and on
November 1 in the respective years as set forth in the following table; provided however, that (i)
in lieu of redemption thereof such Term Bonds may be purchased by the Successor Agency
pursuant to the Indenture, and (ii) if some but not all of such Term Bonds have been optionally
redeemed, the total amount of all future sinking fund payments shall be reduced by the
aggregate principal amount of such Term Bonds so redeemed, to be allocated among such
sinking fund payments in integral multiples of $5,000 as determined by the Successor Agency.
Term Bonds Maturing November 1, 20_
Sinking Account
Redemption Date Principal Amount
(November 1) To Be Redeemed
In lieu of such redemption of the Bonds, amounts on deposit in the Revenue Fund or in
the Principal Account or Sinking Account may also be used and withdrawn by the Successor
Agency and the Trustee, respectively, at any time, upon the Written Request of the Successor
Agency, for the purchase of the Term Bonds at public or private sale as and when and at such
prices (including brokerage and other charges, but excluding accrued interest, which is payable
from the Interest Account) as the Successor Agency may in its discretion determine. The par
amount of any Term Bonds so purchased by the Successor Agency in any twelve -month period
ending on July 1 in any year shall be credited towards and shall reduce the par amount of the
Term Bonds required to be redeemed pursuant to subsection (d) on November 1 in each year;
provided that evidence satisfactory to the Trustee of such purchase has been delivered to the
Trustee by said July 1. In no event shall the Successor Agency purchase any Term Bonds in
lieu of redemption without canceling such Term Bonds.
Preliminary, subject to change.
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Notice of Redemption. The Trustee on behalf and at the expense of the Successor
Agency shall mail (by first class mail, postage prepaid) notice of any redemption at least twenty
(20) but not more than sixty (60) days prior to the redemption date, to (i) to the Owners of any
Bonds designated for redemption at their respective addresses appearing on the Registration
Books, and (ii) the Securities Depositories and to the Information Services; but such mailing
shall not be a condition precedent to such redemption and neither failure to receive any such
notice nor any defect therein shall affect the validity of the proceedings for the redemption of
such Bonds or the cessation of the accrual of interest thereon. Such notice shall state the
redemption date and the redemption price, shall state that optional redemption is conditioned
upon the timely delivery of the redemption price by the Successor Agency to the Trustee for
deposit in the Redemption Account, shall designate the CUSIP number of the Bonds to be
redeemed, shall state the individual number of each Bond to be redeemed or shall state that all
Bonds between two stated numbers (both inclusive) or all of the Bonds Outstanding are to be
redeemed, and shall require that such Bonds be then surrendered at the Principal Corporate
Trust Office of the Trustee for redemption at the redemption price, giving notice also that further
interest on such Bonds will not accrue from and after the redemption date.
Right to Rescind Notice. The Successor Agency has the right to rescind any notice of
the optional redemption of Bonds by written notice to the Trustee on or prior to the date fixed for
redemption. Any notice of optional redemption will be cancelled and annulled if for any reason
funds will not be or are not available on the date fixed for redemption for the payment in full of
the Bonds then called for redemption, and such cancellation will not constitute an Event of
Default. The Successor Agency and the Trustee have no liability to the Owners or any other
party related to or arising from such rescission of redemption. The Trustee will mail notice of
such rescission of redemption in the same manner as the original notice of redemption was
sent.
Upon the payment of the redemption price of Bonds being redeemed, each check or
other transfer of funds issued for such purpose will, to the extent practicable, bear the CUSIP
number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such
check or other transfer.
Partial Redemption of Bonds. In the event only a portion of any Bond is called for
redemption, then upon surrender of such Bond the Successor Agency will execute and the
Trustee will authenticate and deliver to the Owner thereof, at the expense of the Successor
Agency, a new Bond or Bonds of the same interest rate and maturity, of authorized
denominations, in aggregate principal amount equal to the unredeemed portion of the Bond to
be redeemed.
Effect of Redemption. From and after the date fixed for redemption, if funds available
for the payment of the redemption price of and interest on the Bonds so called for redemption
have been duly deposited with the Trustee, the Bonds so called will cease to be entitled to any
benefit under the Indenture other than the right to receive payment of the redemption price and
accrued interest to the redemption date, and no interest will accrue thereon from and after the
redemption date specified in such notice.
Manner of Redemption. Whenever any Bonds or portions thereof are to be selected for
redemption by lot within a maturity, the Trustee will make the selection, in such manner as the
Trustee deems appropriate.
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Additional Bonds
Additional Bonds. In the Indenture, the Successor Agency covenants that it will not
issue any bonds, notes or other obligations that are payable from or secured by a lien on Tax
Revenues that is superior to the lien under the Indenture. The Successor Agency may issue
bonds, notes or other obligations that are payable from and secured by a lien on Tax Revenues
that is on parity with the lien under the Indenture ( "Additional Bonds ") to refund all or a portion
of the Outstanding Bonds provided that with respect to any such refunding (i) annual debt
service on such Additional Bonds, as applicable, is lower than annual debt service on the
obligations being refunded during every year the obligations would otherwise be outstanding (ii)
the final maturity of any such Additional Bonds does not exceed the final maturity of the
obligations being refunded, (iii) the interest rate on the Additional Bonds shall be fixed on the
date of issuance of the Additional Bonds, (iv) principal payments shall be on November 1 and
interest payments on May 1 and November 1, and (v) prior to the issuance of any Additional
Bonds, the Successor Agency shall use commercially reasonable efforts, to the extent permitted
by law, to subordinate all amounts, if any, payable to a taxing entity pursuant to Section 33607.5
and 33607.7 to the payment of debt service on such Additional Bonds.
After the defeasance of the Refunded Bonds, there will be no other outstanding bonds of
the Successor Agency with a senior or parity pledge and lien on Tax Revenues.
Subordinate Debt. The Indenture permits the Successor Agency to issue subordinated
obligations which are either: (a) payable from, but not secured by a pledge of or lien upon, the
Tax Revenues, including revenue bonds and other debts and obligations scheduled for payment
pursuant to Section 34183(a)(2) of the Redevelopment Law; or (b) secured by a pledge of or
lien upon the Tax Revenues which is subordinate to the pledge of and lien upon the Tax
Revenues under the Indenture for the security of the Bonds and any Additional Bonds
( "Subordinate Debt "). Any Subordinate Debt shall be payable on the same dates as the Bonds
and shall be in all respect, including security and payments, subordinate and junior to the
Bonds.
(Remainder of page intentionally left blank)
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TAX INCREMENT FINANCING GENERALLY
Property Tax Allocation and Collection Procedures
Tax Revenues to be used for payment of the Bonds are generated from increases in the
total assessed value above the base year value. See "SECURITY FOR THE BONDS." The
method by which a county allocates property taxes and tax increment revenues can have a
significant impact on the receipt of such revenues. The County calculates tax increment to the
Project Area by applying the one percent tax rate and certain overrides to incremental taxable
value. Tax rates in excess of one percent are not levied in the Project Area. The County also
allocates supplemental property tax revenues to the Project Area.
The County Auditor - Controller reduces the total amount of tax increment revenue by
administrative expenses and the amount of property tax revenue to be distributed to those
taxing entities which have elected to receive additional property tax allocations pursuant to
former Health and Safety Code Section 33676, and also pursuant to Section 33401 tax sharing
agreements. The County annually reports the tax increment levy due the Project Area to the
Successor Agency.
Tax increment is allocated based on 100% of the County calculated levy, under the
Teeter Plan. See "Delinquencies" below.
Classification. In California, property which is subject to ad valorem taxes is classified
as "secured" or "unsecured." Secured and unsecured property are entered on separate parts of
the assessment roll maintained by the County assessor. The secured classification includes
property on which any property tax levied by a county becomes a lien on that property. A tax
levied on unsecured property does not become a lien against the taxed unsecured property, but
may become a lien on certain other property owned by the taxpayer. Every tax which becomes
a lien on secured property has priority over all other liens on the secured property arising
pursuant to State law, regardless of the time of the creation of other liens.
Generally, ad valorem taxes are collected by a county (the "Taxing Authority ") for the
benefit of the various entities (e.g., cities, schools and special districts) that share in the ad
valorem tax (each a taxing entity) and successor agencies eligible to receive distributions from
the respective Redevelopment Property Tax Trust Funds.
Collections. The method of collecting delinquent taxes is substantially different for
secured and unsecured property. Counties have four ways of collecting unsecured personal
property taxes: (a) initiating a civil action against the taxpayer; (b) filing a certificate in the office
of the county clerk specifying certain facts in order to obtain a judgment lien on certain property
of the taxpayer; (c) filing a certificate of delinquency for record in the county recorder's office to
obtain a lien on certain property of the taxpayer; and (d) seizing and selling personal property,
improvements or possessory interests belonging or assessed to the assessee. The exclusive
means of enforcing the payment of delinquent taxes with respect to property on the secured roll
is the sale of the property securing the taxes to the State for the amount of taxes which are
delinquent.
Penalty. A 10% penalty is added to delinquent taxes which have been levied with
respect to property on the secured roll. In addition, property on the secured roll on which taxes
are delinquent is declared in default by operation of law and declaration of the tax collector on or
about June 30 of each fiscal year. Such property may thereafter be redeemed by payment of
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the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5% per month to
the time of redemption. If taxes are unpaid for a period of five years or more, the property is
deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also
applies to delinquent taxes with respect to property on the unsecured roll, and further, an
additional penalty of 1.5% per month accrues with respect to such taxes beginning on varying
dates related to the tax bill mailing date.
Delinquencies. The valuation of property is determined as of the January 1 lien date as
equalized in August of each year and equal installments of taxes levied upon secured property
become delinquent on the following December 10 and April 10. Taxes on unsecured property
are due January 1 and become delinquent August 31. Under the Alternative Method of
Distribution of Tax Levies and Collections and of Tax Sale Proceeds (known as the Teeter
Plan), as provided for in Section 4701 et seq. of the Revenue and Taxation Code of the State,
tax increment revenues are allocated to each taxing agency in a county without regard to
delinquencies in the payment of property taxes. The County uses the Teeter Plan and the
Agency participates in the County's Teeter Plan. As a result of this allocation method, the
Agency receives no adjustments for redemption payments on delinquent collections. The
Agency does receive supplemental taxes and refunds, if any, are deducted from amounts
available for deposit to the Redevelopment Property Tax Trust Fund. There can be no
assurance that the County Auditor - Controller will not change its policies with respect to
delinquencies in property tax payments in the future.
Unitary Property. Assembly Bill 2890 (Statutes of 1986, Chapter 1457) provides that,
commencing with fiscal year 1988 -89, tax revenues derived from unitary property and assessed
by the State Board of Equalization are accumulated in a single Tax Rate Area for the County.
The tax revenues are then to be allocated to each taxing entity county -wide in accordance with
AB 454 (Statutes of 1987, Chapter 921) which provides for the consolidation of all State -
assessed property, except for regulated railroad property, into a single tax rate area in each
county. Chapter 921 further provides for a new method of establishing tax rates on State-
assessed property and distribution of property tax revenue derived from State - assessed
property to taxing jurisdictions within each county in accordance with a new formula. Beginning
in fiscal year 2007 -08, unitary railroad values have been and continue to be reported on a
countywide basis and allocated based on a formula pursuant to State law. State - assessed non -
unitary values are reported at the local tax rate area level.
For Fiscal Year 2015 -16 unitary revenues are estimated to equal $ based
on the amount reported by Sonoma County.
Supplemental Assessments. California Revenue and Taxation Code Section 75.70
provides for the supplemental assessment and taxation of property as of the occurrence of a
change of ownership or completion of new construction. Before the enactment of this law, the
assessment of such changes was permitted only as of the next tax lien date following the
change, which delayed the realization of increased property taxes from the new assessments
for up to 14 months. Revenue and Taxation Code Section 75.70 provides increased revenue to
the Redevelopment Property Tax Trust Fund to the extent that supplemental assessments of
new construction or changes of ownership occur within the boundaries of the Project Area
subsequent to the January 1 lien date. To the extent that such supplemental assessments
occur within the Project Area, Tax Revenues may increase. However, because supplemental
assessments cannot be accurately projected, no provision has been made by the
Redevelopment Consultant to reflect the impact of supplemental assessments on Tax
Revenues shown in the projection tables set forth herein.
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Property Tax Administrative Costs. In 1990, the Legislature enacted SB 2557
(Chapter 466, Statutes of 1990) which allows counties to charge for the cost of assessing,
collecting and allocating property tax revenues to local government jurisdictions in proportion to
the tax - derived revenues allocated to each. SB 1559 (Chapter 697, Statutes of 1992) explicitly
includes redevelopment agencies among the jurisdictions which are subject to such charges.
In addition, Sections 34182(e) and 34183(a) of the Dissolution Act allow administrative
costs of the County Auditor - Controller for the cost of administering the provisions of the
Dissolution Act, as well as the foregoing SB 2557/SB 1559 amounts, to be deducted from
property tax revenues before monies are deposited into the Redevelopment Property Tax Trust
Fund available as Tax Revenues for payment of the Bonds. For Fiscal Year 2014 -15, the
County's administrative change to the Successor Agency for the Project Area was 2% of gross
tax revenue received by the Successor Agency in such Fiscal Year.
Article XIIIA of the State Constitution
On June 6, 1978, State voters approved an amendment (commonly known as
Proposition 13 or the Jarvis -Gann Initiative) which added Article XIIIA to the State Constitution.
Article XIIIA limits the amount of ad valorem taxes on real property to 1 % of "full cash value" of
such property, as determined by the county assessor. Article XIIIA defines "full cash value" to
mean "the county assessor's valuation of real property as shown on the State fiscal year 1975-
76 tax bill under 'full cash value,' or, thereafter, the appraised value of real property when
purchased, newly constructed, or a change in ownership has occurred after the 1975
assessment." Furthermore, the "full cash value" of all real property may be increased to reflect
the rate of inflation, as shown by the consumer price index, not to exceed 2% per year, or may
be reduced.
Article XIIIA has subsequently been amended to permit reduction of the "full cash value"
base in the event of declining property values caused by substantial damage, destruction or
other factors, and to provide that there would be no increase in the "full cash value" base in the
event of reconstruction of property damaged or destroyed in a disaster and in other special
circumstances.
Article XIIIA (a) exempts from the I% tax limitation the taxes to pay debt service on:
(a) indebtedness approved by the voters before July 1, 1978; or (b) bonded indebtedness for
the acquisition or improvement of real property approved on or after July 1, 1978, by two - thirds
of the votes cast by the voters voting on the proposition; (b) requires a vote of two - thirds of the
qualified electorate to impose special taxes, or certain additional ad valorem taxes; and (c)
requires the approval of two- thirds of all members of the State Legislature to change any State
tax laws resulting in increased tax revenues.
The validity of Article XIIIA has been upheld by both the State Supreme Court and the
United States Supreme Court.
In the general election held on November 4, 1986, voters of the State approved two
measures, Propositions 58 and 60, which further amended Article XIIIA. Proposition 58
amended Article XIIIA to provide that the terms "purchase" and "change of ownership," for the
purposes of determining full cash value of property under Article XIIIA, do not include the
purchase or transfer of (a) real property between spouses; and (b) the principal residence and
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the first $1,000,000 of other property between parents and children. This amendment to
Article XIIIA may reduce the rate of growth of local property tax revenues.
Proposition 60 amended Article XIIIA to permit the State Legislature to allow persons
over the age of 55 who sell their residence and buy or build another of equal or lesser value
within two years in the same county to transfer the old residence assessed value to the new
residence. As a result of the State Legislature's action, the growth of property tax revenues
may decline.
Legislation enacted by the State Legislature to implement Article XIIIA provides that all
taxable property is shown at full assessed value as described above. In conformity with this
procedure, all taxable property value included in this Official Statement is shown at 100% of
assessed value and all general tax rates reflect the $1 per $100 of taxable value (except as
noted). Tax rates for voter - approved bonded indebtedness and pension liabilities are also
applied to 100% of assessed value.
Each year the State Board of Equalization announces the applicable adjustment factor.
Since the adoption of Proposition 13, inflation has, in most years, exceeded 2% and the
announced factor has reflected the 2% cap. The changes in the California Consumer Price
Index from October of one year and October of the next year are used to determine the
adjustment factor for the January assessment date. Through fiscal year 2010 -11 there were six
occasions when the inflation factor was less than 2 %. Until fiscal year 2010 -11 the annual
adjustment never resulted in a reduction to the base year values of individual parcels; however,
the factor that was applied to real property assessed values for the January 1, 2010 assessment
date was - 0.237% and this resulted in a reductions to the adjusted base year value of parcels.
The table below reflects the inflation adjustment factors for the current fiscal year and 12 prior
fiscal years. Although the State Board of Equalization has announced an inflation factor of
1.998% for fiscal year 2015 -16, the projections of Tax Revenues in Table 8.2 herein assumes
an annual growth factor of 2% per year commencing fiscal year 2016 -17. See "THE PROJECT
AREA - Projected Tax Revenues and Estimated Debt Service Coverage."
14 -Year Summary of Inflation Adiustment Factors
Fiscal Year
Base Year Value Change
2003 -04
2.000%
2004 -05
1.867
2005 -06
2.000
2006 -07
2.000
2007 -08
2.000
2008 -09
2.000
2009 -10
2.000
2010 -11
(0.237)
2011 -12
0.753
2012 -13
2.000
2013 -14
2.000
2014 -15
0.454
2015 -16
1.998
2016 -17
1.525
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Appropriations Limitation — Article XIIIB
On November 6, 1979, State voters approved Proposition 4 (also known as the Gann
Initiative), which added Article XIIIB to the State Constitution. Article XIIIB limits the annual
appropriations of the State and its political subdivisions to the level of appropriations for the prior
fiscal year, as adjusted for changes in the cost of living, population and services rendered by the
government entity. The "base year" for establishing such appropriations limit is State fiscal year
1978 -79, and the limit is to be adjusted annually to reflect changes in population, consumer
prices and certain increases in the cost of services provided by these public agencies.
Section 33678 of the Redevelopment Law provides that the allocation of taxes to a
redevelopment agency for the purpose of paying principal of, or interest on, loans, advances, or
indebtedness is not deemed to be the receipt by an agency of proceeds of taxes levied by or on
behalf of an agency within the meaning of Article XIIIB, nor will such portion of taxes be deemed
receipt of proceeds of taxes by, or an appropriation subject to the limitation of, any other public
body within the meaning or for the purpose of the Constitution and laws of the State, including
Section 33678 of the Redevelopment Law. The constitutionality of Section 33678 has been
upheld in two State appellate court decisions. On the basis of these decisions, the Agency does
not believe that it is subject to Article XIIIB and has not adopted an appropriations limit.
Articles XIIIC and MID of the State Constitution
At the election held on November 5, 1996, Proposition 218 was passed by the voters of
the State. The initiative added Articles XIIIC and MID to the State Constitution. Provisions in
the two articles affect the ability of local government to raise revenues. The Bonds are secured
by sources of revenues that are not subject to limitation by Proposition 218.
Proposition 87
In 1993, the State legislature passed AB 1290, Chapter 942, Statutes 1993, which,
among other things -, required redevelopment agencies to adopt time limits in each
redevelopment plan specifying (a) the last date to incur debt for a redevelopment project; (b) the
last date to undertake redevelopment activity within a project area; and (c) the last date to
collect tax increment revenue from a project area to repay debt.
In 2001, the State Legislature enacted SB 211, Chapter 741, Statutes 2001, effective
January 1, 2002 ( "SB 211 "), which authorized, among other things, the deletion of the AB 1290
limitation on incurring indebtedness contained in a redevelopment plan adopted before
January 1, 1994. SB 211 also prescribed additional requirements that a redevelopment agency
would have to meet upon extending the time limit on the effectiveness of a redevelopment plan,
including requiring an increased percentage of new and substantially rehabilitated dwelling units
to be available at affordable housing cost to persons and families of low or moderate income
before the termination of the effectiveness of the plan.
The various amendments adopted by the City and the Former Agency included changes
to the financial and time limits of the Project Area, however under SB 107 enacted in September
2015 the applicability of plan limits have been eliminated; as such, all provisions of the
Redevelopment Law that depend on the allocation of tax increment to redevelopment agencies
will become inoperative commencing January 1, 2016. However, SB 107 provides that, solely
for the purposes of the payment of enforceable obligations under the Dissolution Act, the
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limitations relating to time, number of tax dollars or any other matters will continue to apply to
successor agencies.
Future Initiatives
Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID and certain other propositions
affecting property tax levies were each adopted as measures which qualified for the ballot
pursuant to California's initiative process. From time to time other initiative measures could be
adopted, further affecting Successor Agency revenues or the Successor Agency's ability to
expend revenues.
Appeals of Assessed Values
Under State law, a property owner may apply for a reduction of the property tax
assessment for such owner's property by filing a written application, in a form prescribed by the
State Board of Equalization, with the appropriate county board of equalization or assessment
appeals board.
In the County, a property owner desiring to reduce the assessed value of such owner's
property in any one year must submit an application to the County Assessment Appeals Board
(the "Appeals Board "). Applications for any tax year must be submitted by November 30 of
such tax year. Following a review of each application by the staff of the County Assessor's
Office, the staff makes a recommendation to the Appeals Board on each application which has
not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a
hearing and either reduces or confirms the assessment. The Appeals Board generally is
required to determine the outcome of appeals within two years of each appeal's filing date. Any
reduction in the assessment ultimately granted applies only to the year for which application is
made and during which the written application is filed. The assessed value increases to its pre -
reduction level for Fiscal Years following the year for which the reduction application is filed.
However, if the taxpayer establishes through proof of comparable values that the property
continues to be overvalued (known as "ongoing hardship "), the Assessor has the power to grant
a reduction not only for the year for which application was originally made, but also for the then -
current year as well. Appeals for reduction in the "base year" value of an assessment, which
generally must be made within three years of the date of change in ownership or completion of
new construction that determined the base year, if successful, reduce the assessment for the
year in which the appeal is taken and prospectively thereafter. Moreover, in the case of any
reduction in any one year of assessed value granted for "ongoing hardship" in the then - current
year, and also in any cases involving stipulated appeals for prior years relating to base year and
personal property assessments, the property tax revenues from which Tax Revenues are
derived attributable to such properties will be reduced in the then - current year. In practice, such
a reduced assessment may remain in effect beyond the year in which it is granted.
Proposition 8 Reductions. Proposition 8, approved in 1978 (California Revenue and
Taxation Code Section 51(b)), provides for the assessment of real property at the lesser of its
originally determined (base year) full cash value compounded annually by the inflation factor, or
its full cash value as of the lien date, taking into account reductions in value due to damage,
destruction, obsolescence or other factors causing a decline in market value. Reductions under
this code section may be initiated by the County Assessor or requested by the property owner.
In most cases, the appeal is filed because the applicant believes that present market
conditions (such as residential home prices) cause the property to be worth less than its current
M
assessed value. These market - driven appeals are known as Proposition 8 appeals. Under this
section of the code, the value of property can be reduced due to damage, destruction, removal
of property or other factors that cause a decline in value.
Any county may, on its own initiative, also process temporary assessed value reductions
for certain properties (where the assessed values exceeded the market value of properties as of
the January 1 lien date) without prompting from individual taxpayers. Typically, the properties to
be reviewed by the various counties for these "automatic" reductions were single - family homes
and condominiums which transferred ownership between 2003 and 2010. These reductions
were triggered because residential property values decreased in many areas of the State
through the 2012 -13 fiscal year. Between 2008 -09 and 2012 -13 the County made across the
board reductions pursuant to Proposition 8 to residential property that reduced value
significantly, however reversals of some of the reductions have occurred since then. See "THE
PROJECT AREA - "Appeals of Assessed Values; Proposition 8 Reductions."
Any reduction in the assessed value ultimately granted as a Proposition 8 appeal applies
to the year for which application is made and during which the written application was filed.
These reductions are often temporary and are adjusted back to their original values when
market conditions improve. Once the property has regained its prior value, adjusted for inflation,
it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA.
See also "RISK FACTORS — Reduction in Inflationary Rate."
Base Year Appeals. A second type of assessment appeal is called a Base Year appeal,
where the property owners challenge the original (basis) value of their property. Appeals for
reduction in the "base year" value of an assessment, if successful, reduce the assessment for
the year in which the appeal is taken and prospectively thereafter. The base year is determined
by the completion date of new construction or the date of change of ownership. Any base year
appeal must be made within four years of the change of ownership or new construction date.
Low and Moderate Income Housing
Before the Dissolution Act, the Redevelopment Law required the Former Agency to set
aside not less than 20% of all tax increment generated in the Project Area into a low and
moderate income housing fund to be used for the purpose of increasing, improving and /or
preserving the supply of low and moderate income housing. These tax increment revenues
were commonly referred to as "Housing Set - Aside."
The Dissolution Act eliminated the Housing Set -Aside requirement. As a result, and
because the Successor Agency has no obligations that are payable from Housing Set - Aside,
the amount of tax increment that would have been the former Housing Set -Aside is available to
pay debt service on the Bonds. Accordingly, the projection of Tax Revenues set forth in the
section of this Official Statement entitled "PROJECTED TAX REVENUES AND DEBT SERVICE
COVERAGE" assumes the availability of the former Housing Set -Aside for payment of the
Bonds.
Adjustments to Revenue
State law allows counties to charge taxing entities, including redevelopment agencies,
for the cost of administering the property tax collection system. In addition, the Dissolution Act
allows counties to recover their costs in implementing the redevelopment Dissolution Act.
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qq
Tax Sharing Payments. The Redevelopment Law authorized the Former Agency to
enter into agreements with taxing agencies whose territory was located within the Project Area,
whereby the Former Agency would pay tax increment revenues to such taxing agencies to
alleviate the financial burden or detriment caused by the redevelopment project. Additionally,
Sections 33607.5 and 33607.7 of the Redevelopment Law require successor agencies, under
certain circumstances, to make statutory pass- through payments to taxing agencies whose
territory is located within the Project Area, to alleviate the financial burden or detriment caused
by the redevelopment project. See "THE PROJECT AREA - Tax Sharing Payments" below.
THE DISSOLUTION ACT
The Dissolution Act requires the County Auditor - Controller to determine the amount of
property taxes that would have been allocated to the Former Agency (pursuant to subdivision
(b) of Section 16 of Article XVI of the State Constitution) had the Former Agency not been
dissolved pursuant to the operation of AB 1X 26, using current assessed values on the last
equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax
Trust Fund for the Successor Agency established and held by the County Auditor - Controller
pursuant to the Dissolution Act.
The Dissolution Act provides that any bonds authorized thereunder to be issued by the
Successor Agency will be considered indebtedness incurred by the Former Agency, with the
same lien priority and legal effect as if the bonds had been issued prior to the effective date of
AB 1X 26, in full conformity with the applicable provisions of the Redevelopment Law that
existed prior to that date, and will be included in the Successor Agency's Recognized Obligation
Payment Schedule (see "SECURITY FOR THE BONDS — Recognized Obligation Payment
Schedules ").
The Dissolution Act further provides that bonds authorized by the Dissolution Act to be
issued by the Successor Agency will be secured by a pledge of, and lien on, and will be repaid
from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund, and
that property tax revenues pledged to any bonds authorized to be issued by the Successor
Agency under the Dissolution Act, including the Bonds, are taxes allocated to the Successor
Agency pursuant to subdivision (b) of Section 33670 of the Redevelopment Law and Section 16
of Article XVI of the State Constitution.
Pursuant to subdivision (b) of Section 33670 of the Redevelopment Law and Section 16
of Article XVI of the State Constitution and as provided in the Redevelopment Plan for the
project area, taxes levied upon taxable property in the Project Area each year by or for the
benefit of the State, any city, county, city and county, district, or other public corporation (herein
sometimes collectively called "taxing agencies ") after the effective date of the ordinance
approving the applicable Redevelopment Plan, or the respective effective dates of ordinances
approving amendments to the applicable Redevelopment Plan that added territory to the Project
Area, as applicable, are to be divided as follows:
(a) To Taxing Agencies: That portion of the taxes which would be
produced by the rate upon which the tax is levied each year by or for each of the
taxing agencies upon the total sum of the assessed value of the taxable property
in the Project Area as shown upon the assessment roll used in connection with
the taxation of such property by such taxing agency last equalized prior to the
effective date of the ordinance adopting the applicable Redevelopment Plan, or
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the respective effective dates of ordinances approving amendments to the
applicable Redevelopment Plan that added territory to the Project Area, as
applicable (each, a "base year valuation "), will be allocated to, and when
collected will be paid into, the funds of the respective taxing agencies as taxes by
or for the taxing agencies on all other property are paid; and
(b) To the Former Agency /Successor Agency: Except for that portion
of the taxes in excess of the amount identified in (a) above which are attributable
to a tax rate levied by a taxing agency for the purpose of producing revenues in
an amount sufficient to make annual repayments of the principal of, and the
interest on, any bonded indebtedness approved by the voters of the taxing
agency on or after January 1, 1989 for the acquisition or improvement of real
property, which portion shall be allocated to, and when collected shall be paid
into, the fund of that taxing agency, that portion of the levied taxes each year in
excess of such amount, annually allocated within limitations established by the
applicable Redevelopment Plan, following the date of issuance of the Bonds,
when collected will be paid into a special fund of the Successor Agency. Section
34172 of the Dissolution Act provides that, for purposes of Section 16 of Article
XVI of the State Constitution, the Redevelopment Property Tax Trust Fund shall
be deemed to be a special fund of the Successor Agency to pay the debt service
on indebtedness incurred by the Former Agency or the Successor Agency to
finance or refinance the redevelopment projects of the Former Agency.
That portion of the levied taxes described in paragraph (b) above, less amounts
deducted pursuant to Section 34183(a) of the Dissolution Act for permitted administrative costs
of the County Auditor - Controller, constitute the amounts required under the Dissolution Act to be
deposited by the County Auditor - Controller into the Redevelopment Property Tax Trust Fund. In
addition, Section 34183 of the Dissolution Act effectively eliminates the January 1, 1989 date
from paragraph (b) above.
SECURITY FOR THE BONDS
Limited Obligation
The Bonds are limited obligations of the Agency secured by and payable from a pledge
of, and lien on, and repaid from certain incremental property tax revenues (the "Tax Revenues,"
as defined below) deposited with respect to the Project Area from time to time in the
Redevelopment Property Tax Trust Fund described herein and held by the County Auditor -
Controller. See "- Tax Revenues" below.
The Bonds are not a debt of the City, the County, the State or any of their political
subdivisions except the Successor Agency, and none of the City, the County, the State or any of
their political subdivisions except the Successor Agency are liable therefor. The Bonds do not
constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or
restriction. No member of the Successor Agency, the Oversight Board or the Board of
Supervisors of the County shall be individually or personally liable for the payment of the
principal of or interest or redemption premium, if any, on the Bonds.
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Tax Revenues
"Pledged Tax Revenues" also referred to herein as "Tax Revenues ", was originally
defined in the Indenture to mean, for each Fiscal Year all taxes (including all payments,
reimbursements and subventions, if any, specifically attributable to ad valorem taxes lost by
reason of tax exemptions and tax rate limitations) eligible for allocation to the Commission
pursuant to the Law in connection with the Project Areas, excluding (i) amounts, if any, received
by the Commission pursuant to Section 16111 of the Government Code, (ii) amounts required to
pay Senior Annual Debt Service payable during such period, (iii) the portion of revenues
required to be paid to other taxing agencies pursuant to Section 33607.5 of the Law except of
the Law except to the extent such payments are subordinated to the payment of debt service on
the Bonds, and (iv) Set Aside Revenues.
Subsequent to the dissolution of the Former Agency, the term "Pledged Tax Revenues"
was modified in the Second Supplemental Indenture to include all amounts transferred or
deposited into the Redevelopment Property Tax Trust Fund that would have been considered
Pledged Tax Revenues under the Indenture prior to the enactment of the Dissolution Act. For
purposes hereof, the reference to the portion of revenues required to be paid to other taxing
agencies pursuant to Section 33607.5 of the Law shall be deemed to refer to the portion of
revenues required to be paid to other taxing agencies under Section 34183(a)(1) of the Law.
The Bonds are secured by Tax Revenues on parity with the lien on Tax Revenues
securing the Series 2015A Bonds issued in the aggregate original amount of $19,545,000 and
the Series 2015B Bonds issued in the aggregate original amount of $16,060,000.
Pledge Under the Indenture
Except as described in "- Redevelopment Obligation Retirement Fund" below and as
required to compensate or indemnify the Trustee, the Bonds and any Additional Bonds are
equally secured by a pledge of, security interest in and lien on all of the Tax Revenues including
all of the Tax Revenues in the Redevelopment Obligation Retirement Fund and by a first and
exclusive pledge and lien upon all of the moneys in the Revenue Fund (including the Interest
Account, the Principal Account, the Sinking Account, and the Redemption Account) without
preference or priority for series, issue, number, dated date, sale date, date of execution or date
of delivery. The Bonds (and any Additional Bonds that is issued pursuant to a Supplemental
Indenture) are additionally secured by a first and exclusive pledge of, security interest in and
lien upon all of the moneys in the Reserve Account established for the Bonds by the Indenture.
The County Auditor - Controller will deposit property tax revenues into the Redevelopment
Property Tax Trust Fund pursuant to the requirements of the Dissolution Act, including inter alia
Health and Safety Code sections 34183 and 34170.5(b). Except for the Tax Revenues and
the moneys described in the previous paragraph, no funds or properties of the Successor
Agency are pledged to, or otherwise liable for, the payment of principal of or interest on the
Bonds.
There are no outstanding bonds of the Successor Agency with a senior lien on Tax
Revenues.
In consideration of the acceptance of the Bonds by purchasers of the Bonds, the
Indenture will be deemed to be and will constitute a contract between the Successor Agency
and the Trustee for the benefit of the Owners from time to time of the Bonds, and the covenants
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4
and agreements set forth in the Indenture to be performed on behalf of the Successor Agency
are for the equal and proportionate benefit, security and protection of all Owners of the Bonds
without preference, priority or distinction as to security or otherwise of any of the Bonds over
any of the others by reason of the number or date thereof or the time of sale, execution and
delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or
in the Indenture.
Flow of Funds Under the Indenture
General. The Successor Agency previously established the Redevelopment Obligation
Retirement Fund pursuant to Section 34170.5(a) of the Dissolution Act and agrees to hold and
maintain the Redevelopment Obligation Retirement Fund as long as any of the Bonds are
Outstanding.
Deposit in Redevelopment Obligation Retirement Fund; Transfer to Revenue
Fund. The Indenture provides that the Successor Agency shall deposit all of the Tax Revenues
into the Redevelopment Obligation Retirement Fund promptly upon receipt. All Tax Revenues
received by the Successor Agency in excess of the amounts required to pay debt service on the
Bonds during the applicable period or as additionally required pursuant to a Supplemental
Indenture or authorizing document for Additional Bonds, shall be released from the pledge and
lien under the Indenture and shall be applied in accordance with the Redevelopment Law,
including but not limited to the payment of debt service on any Subordinate Debt. Prior to the
payment in full of the principal of and interest and redemption premium (if any) on the Bonds
and the payment in full of all other amounts payable under the Indenture and under any
Supplemental Indentures, the Successor Agency shall not have any beneficial right or interest in
the moneys on deposit in the Redevelopment Obligation Retirement Fund, except as may be
provided in the Indenture and in any Supplemental Indenture.
Deposit of Amounts by Trustee. A trust fund to be known as the Revenue Fund, is
established and held in trust by the Trustee under the Indenture. Concurrently with making
transfers with respect to parity obligations, during each Bond Year the Successor Agency will
transfer moneys on deposit in the Redevelopment Obligation Retirement Fund that have been
deposited therein for the payment of debt service on the Bonds or for the replenishment of the
Reserve Account to the Trustee for deposit in the Revenue Fund. The Trustee will transfer
amounts on deposit in the Revenue Fund in the following amounts and in the following
respective special accounts, which are established in the Revenue Fund, and in the following
order of priority:
Interest Account. The Trustee shall set aside from the Revenue Fund and
deposit in the Interest Account an amount of money which, when added to the amount
contained in the Interest Account on that date, will be equal to the aggregate amount of
the interest becoming due and payable on the Outstanding Bonds the Interest Payment
Dates in such Bond Year. No such deposit need be made to the Interest Account if the
amount contained therein is at least equal to the interest to become due on the Interest
Payment Dates in such Bond Year. All moneys in the Interest Account shall be used
and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds
and any Additional Bonds as it shall become due and payable.
Principal Account. The Trustee shall set aside from the Revenue Fund and
deposit in the Principal Account an amount of money which, when added to the amount
contained in the Principal Account on that date, will be equal to the aggregate amount of
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Lf,
the principal becoming due and payable on the Outstanding Serial Bonds on the
Principal Payment Dates in such Bond Year. No such deposit need be made to the
Principal Account if the amount contained therein is at least equal to the aggregate
amount of principal on all of the Outstanding Serial Bonds and any Additional Bonds. All
moneys in the Principal Account shall be used and withdrawn by the Trustee solely for
the purpose of paying the principal of the Bonds and any Additional Bonds as it shall
become due and payable.
Sinking Account. The Trustee shall set aside from the Revenue Fund and deposit
in the Sinking Account an amount equal to the Sinking Account Installment payable on
the Sinking Account Payment Date in such Bond Year. All moneys on deposit in the
Sinking Account shall be used and withdrawn by the Trustee for the sole purpose of
paying the principal of the Term Bonds as it shall become due and payable upon
redemption or purchase pursuant to the Indenture.
Reserve Account. Within the Revenue Fund there will be established a separate
account known as the "Reserve Account" solely as security for payments payable by the
Successor Agency pursuant to the Indenture, which shall be held by the Trustee in trust
for the benefit of the Owners of the Bonds. See "Debt Service Reserve Account" below.
If the amount on deposit in the Reserve Account at any time becomes less than
the Reserve Requirement, the Trustee shall promptly notify the Successor Agency of
such fact. Upon receipt of any such notice and as promptly as is permitted by the
Redevelopment Law, the Successor Agency shall transfer to the Trustee an amount
sufficient to maintain the Reserve Requirement on deposit in the Reserve Account.
Debt Service Reserve Account
Definition of Reserve Requirement. The Indenture defines "Reserve Requirement"
to mean, as of any calculation date, an amount equal to the least of (i) ten percent (10 %) of the
initial offering price of Bonds to the public, (ii) one hundred twenty -five percent (125 %) of the
Average Annual Debt Service on all Outstanding Bonds, or (iii) Maximum Annual Debt Service
on all Outstanding Bonds.
The amount on deposit in the Reserve Account for the Bonds will be maintained at the
Reserve Requirement at all times prior to the payment of the Bonds in full. If there are
insufficient Tax Revenues to maintain the Reserve Requirement, the Successor Agency is
obligated under the Indenture to continue making transfers as Tax Revenues become available
until there is an amount sufficient to maintain the Reserve Requirement (including the payment
of all amounts due and payable to Insurer in connection with the Reserve Policy on deposit in
the Reserve Account. No such transfer and deposit need be made to the Reserve Account so
long as there is on deposit therein a sum at least equal to the Reserve Requirement.
Initial Deposit into the Reserve Account. On the date of issuance of the Bonds, the
Successor Agency will deposit a Qualified Reserve Account Credit Instrument into the Reserve
Account, in the form of the Reserve Policy in an amount equal to the initial Reserve
Requirement. The Indenture provides that if, at any time that the Bonds are Outstanding,
amounts are not available under the Reserve Policy other than in connection with a draw on the
Reserve Policy, the Successor Agency has no obligation to replace the Reserve Policy or to
fund the Reserve Account with cash.
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Separate Reserve Account Surety Policies (as defined in the Indenture) provided by
Assured Guaranty Mutual Corp. satisfy the Reserve Requirement for the 2015A Bonds and the
Reserve Requirement for the 2015B Bonds, in amounts equal to Maximum Annual Debt Service
on each Series of 2015 Bonds. Surety Policies that secure the 2015 Bonds are not available to
pay debt service on the Refunding Bonds.
Use of Moneys in the Reserve Account. All money in the Reserve Account will be
used and withdrawn by the Trustee solely for the purpose of making transfers to the Interest
Account, the Principal Account and the Sinking Account in the event of any deficiency at any
time in any of such accounts or for the retirement of all the Bonds then Outstanding, except that
so long as the Successor Agency is not in default under the Indenture, any amount in the
Reserve Account in excess of the Reserve Requirement will be withdrawn from the Reserve
Account semiannually on or before two Business Days preceding each November 1 and
November 1 by the Trustee and deposited in the Interest Account.
All amounts in the Reserve Account on the Business Day preceding the final Interest
Payment Date will be withdrawn from the Reserve Account and will be transferred to the Interest
Account and the Principal Account, in such order, to the extent required to make the deposits
then required to be made from the Reserve Account.
If the Reserve Requirement with respect to the Bonds, or a particular issue of Additional
Bonds issued pursuant to a Supplemental Indenture, is secured by a Qualified Reserve Account
Credit Instrument that relates only to the Bonds or such series of Additional Bonds, the
calculation of Reserve Requirement for such series of Additional Bonds shall be calculated on a
stand alone basis. The Reserve Account may be maintained in the form of one or more
separate sub - accounts which are established for the purpose of holding the proceeds of the
Bonds or separate issues of Additional . Bonds issued under a Supplemental Indenture in
conformity with applicable provisions of the Code to the extent directed by the Successor
Agency in writing to the Trustee.
Recognized Obligation Payment Schedules
Submission of Recognized Obligation Payment Schedule. When initially enacted,
the Dissolution required that not less than 90 days prior to each January 2 and June 1,
successor agencies prepare and submit to the successor agency's oversight board and the
DOF for approval, a Recognized Obligation Payment Schedule (the "Recognized Obligation
Payment Schedule or "ROPS ") pursuant to which enforceable obligations (as defined in the
Dissolution Act) of the successor agency are listed, together with the source of funds to be used
to pay for each enforceable obligation. On September 22, 2015, the Governor of the State
signed into law legislation adopted by the Legislature in Senate Bill 107 ( "SB 107 "), which,
among other things, requires successor agencies to prepare and submit a ROPS once each
year, rather than twice each year as under the former law, beginning with the annual ROPS
period that commences on July 1, 2016. SB 107 alternatively allows, subject to meeting certain
conditions, an optional "Last and Final Recognized Obligation Payment Schedule" to be
submitted on or after January 1, 2016. The Last and Final ROPS is binding on all parties and
the successor agency would no longer submit a periodic ROPS. Under that procedure, the
county auditor - controller remits the authorized funds to the successor agency in accordance
with the approved Last and Final ROPS until each remaining enforceable obligation has been
fully paid. SB 107 provides that a Last and Final ROPS can only be amended twice, and only
with DOF and county auditor - controller approval.
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In order to ensure that amounts are available for the Trustee to pay Annual Debt Service
on all Outstanding Bonds and all amounts due and owing to a bond insurer on a timely basis,
not later than November 1, of each year (or such other time as may be required by the
Dissolution Act), commencing November 1, 2016, the Successor Agency shall submit an
Oversight Board - approved Recognized Obligation Payment Schedule to the State Department
of Finance and to the Sonoma County Auditor - Controller that shall include:
(i) all of the debt service due on all Outstanding Bonds on November 1 and
November 1 of the Bond Year ending on November 1 of the next calendar year, which amount
shall be distributed in full to the Successor Agency on January 2 of such year, and
(ii) any amount required to cure any deficiency in the Reserve Account pursuant to
this Indenture (including any amounts required due to a draw on a Qualified Reserve Account
Credit Instrument [as well as all amounts due and owing to the a bond insurer under the
Indenture]).
In addition to the amounts described in clauses (i) and (ii) of the previous paragraph, if
the amount of Tax Revenues distributed to the Successor Agency on January 2 in any year is
less than the sum of the amounts specified in clauses (i) and (ii) of the previous paragraph, then
not later than November 1 of such year (or on such other date as may be required by the
Dissolution Act), the Successor Agency shall submit an Oversight Board - approved Recognized
Obligation Payment Schedule to the State Department of Finance and to the Sonoma County
Auditor - Controller that shall include the balance due to the Successor Agency, which amount
shall be distributed in full to the Successor Agency on June 1 of such year.
In the event the provisions set forth in the Dissolution Act as of the Closing Date of the
Bonds that relate to the filing of Recognized Obligation Payment Schedules are amended or
modified in any manner, the Successor Agency covenants that it shall use commercially
reasonable efforts to take all actions necessary to ensure the Agency receives on January 2 of
each year from moneys deposited into the Redevelopment Property Tax Trust Fund, sufficient
Tax Revenues to pay all Annual Debt Service due on all Outstanding Bonds during such'Bond
Year.
The Successor Agency has no power to levy and collect taxes, and various factors
beyond its control could affect the amount of Tax Revenues available to pay the principal of and
interest on the Bonds when due (see "RISK FACTORS ").
[The Successor Agency has never been late in filing the required ROPS submissions.]
Payment of Amounts Listed on the Recognized Obligation Payment Schedule. As
defined in the Dissolution Act, "enforceable obligation" includes bonds, including the required
debt service, reserve set - asides, and any other payments required under the indenture or
similar documents governing the issuance of the outstanding bonds of the former
redevelopment agency or the successor agency, as well as other obligations such as loans,
judgments or settlements against the former redevelopment agency or the successor agency,
any legally binding and enforceable agreement that is not otherwise void as violating the debt
limit or public policy, contracts necessary for the administration or operation of the successor
agency, and, under certain circumstances, amounts borrowed from the successor agency's low
and moderate income housing fund.
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1
A reserve may be included on the Recognized Obligation Payment Schedule and held
by the successor agency when required by a bond indenture or when the next property tax
allocation will be insufficient to pay all obligations due under the provisions of the bonds for the
next payment due in the following half of the calendar year.
Sources of Payments for Enforceable Obligations. Under the Dissolution Act, the
categories of sources of payments for enforceable obligations listed on a Recognized Obligation
Payment Schedule are the following: (i) the low and moderate income housing fund, (ii) bond
proceeds, (iii) reserve balances, (iv) administrative cost allowance (successor agencies are
entitled to receive not less than $250,000, unless that amount is reduced by the oversight
board), (v) the Redevelopment Property Tax Trust Fund (but only to the extent no other funding
source is available or when payment from property tax revenues is required by an enforceable
obligation or otherwise required under the Dissolution Act), or (vi) other revenue sources
(including rents, concessions, asset sale proceeds, interest earnings, and any other revenues
derived from the redevelopment agency, as approved by the oversight board).
The Dissolution Act provides that only those payments listed in the Recognized
Obligation Payment Schedule may be made by a successor agency and only from the funds
specified in the Recognized Obligation Payment Schedule.
Order of Priority of Distributions from Redevelopment Property Tax Trust Fund.
Typically, under the Redevelopment Property Tax Trust Fund distribution provisions of the
Dissolution Act, a county auditor - controller is to distribute funds for each six -month period in the
following order specified in Section 34183 of the Dissolution Act:
(i) first, subject to certain adjustments for subordinations to the extent
permitted under the Dissolution Act (if any, as described above under "TAX
INCREMENT FINANCING GENERALLY - Adjustment to Revenue - Statutory Pass -
Through Payments ") and no later than each January 2 and June 1, to each local
successor agency and school entity, to the extent applicable, amounts required for pass -
through payments such entity would have received under provisions of the
Redevelopment Law, as those provisions read on January 1, 2011, including negotiated
pass- through agreements and statutory pass- through obligations (note however, the
such pass- through payments have been made subordinate to debt service on the
Bonds);
(ii) second, on each January 2 and June 1, to the successor agency for
payments listed in its Recognized Obligation Payment Schedule, with debt service
payments scheduled to be made for tax allocation bonds having the highest priority over
payments scheduled for other debts and obligations listed on the Recognized Obligation
Payment Schedule;
(iii) third, on each January 2 and June 1, to the successor agency for the
administrative cost allowance, as defined in the Dissolution Act; and
(iv) fourth, on each January 2 and June 1, to taxing entities any moneys
remaining in the Redevelopment Property Tax Trust Fund after the payments and
transfers authorized by clauses (i) through (iii), in an amount proportionate to such taxing
entity's share of property tax revenues in the tax rate area in that fiscal year (without
giving effect to any pass- through obligations that were established under the
Redevelopment Law).
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Failure to Submit a Recognized Obligation Payment Schedule. The Recognized
Obligation Payment Schedule must be approved by the oversight board and must be submitted
by a successor agency to the county administrative office, the county auditor - controller, the
DOF, and the State Controller by each November 1. If the successor agency does not submit a
Recognized Obligation Payment Schedule by the applicable deadline, the city or county that
established the former redevelopment agency will be subject to a civil penalty equal to $10,000
per day for every day the schedule is not submitted to the DOF. For additional information
regarding procedures under the Dissolution Act relating to late Recognized Obligation Payment
Schedules and implications thereof on the Bonds, see "RISK FACTORS — Recognized
Obligation Payment Schedule."
Adjustments to Revenue
State law allows counties to charge taxing entities, including redevelopment agencies,
for the cost of administering the property tax collection system. In addition, the Dissolution Act
allows counties to recover their costs in implementing the redevelopment Dissolution Act.
For project areas adopted prior to 1994, taxing entities could elect to receive additional
property taxes above the base year revenue amount pursuant to former Section 33676 of the
Health and Safety Code. Such amounts are calculated by increasing the real property portion of
base year values by an inflation factor of up to 2% annually. Taxing entities can receive a
proportionate share of such revenues if they elected to do so prior to adoption of the
redevelopment plan. The Project Area is subject to the provisions of former Section 33676 and
such allocations have been deducted prior to determining Tax Revenues.
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THE SUCCESSOR AGENCY TO THE COMMUNITY DEVELOPMENT AGENCY
OF THE CITY OF PETALUMA
As described in "INTRODUCTION," the Dissolution Act dissolved the Former Agency as
of November 1, 2012. Thereafter, pursuant to Section 34173 of the Dissolution Act, the City
became the Successor Agency to the Former Agency. Subdivision (g) of Section 34173 of the
Dissolution Act, added by AB 1484, expressly affirms that the Successor Agency is a separate
public entity from the City, that the two entities shall not merge, and that the liabilities of the
Former Agency will not be transferred to the City nor will the assets of the Former Agency
become assets of the City.
Successor Agency Powers
All powers of the Successor Agency are vested in its five members who are elected
members of the City Council. Pursuant to the Dissolution Act, the Successor Agency is a
separate public body from the City and succeeds to the organizational status of the Former
Agency but without any legal authority to participate in redevelopment activities, except to
complete any work related to an approved enforceable obligation. The Successor Agency is
tasked with expeditiously winding down the affairs of the Former Agency, pursuant to the
procedures and provisions of the Dissolution Act. Under the Dissolution Act, substantially all
Successor Agency actions are subject to approval by the Oversight Board, as well as review by
the DOF.
Status of Compliance with Dissolution Act
The Dissolution Act requires a due diligence review to determine the unobligated
balances of each successor agency that are available for transfer to taxing entities. The due
diligence review involves separate reviews of each successor agency's low and moderate
income housing fund and of all other funds and accounts. Once a successor agency completes
the due diligence review and any transfers to taxing entities, the DOF will issue a finding of
completion that expands the authority of each successor agency in carrying out the wind down
process. A finding of completion allows a successor agency to, among other things, retain real
property assets of the dissolved redevelopment agency and utilize proceeds derived from bonds
issued prior to January 1, 2011.
After receiving a finding of completion, each successor agency is required to submit a
Long Range Property Management Plan detailing what it intends to do with its inventory of
properties. Successor agencies are not required to immediately dispose of their properties but
are limited in terms of what they can do with the retained properties. Permissible uses include:
sale of the property, use of the property to satisfy an enforceable obligation, retention of the
property for future redevelopment, and retention of the property for governmental use. These
plans must be filed by successor agencies within six months of receiving a finding of
completion, and the DOF will review these plans as submitted on a rolling basis.
The Successor Agency received DOF approval of its finding of completion on May 29,
2013 and its Long Range Property Management Plan on July 18, 2014.
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fl
THE PROJECT AREA
The Redevelopment Plan for the Project Area
Under the Law a city council may adopt, by ordinance, a redevelopment plan for a
redevelopment project. A redevelopment plan is a legal document, the content of which is
largely prescribed In the Law, rather than a "plan" In the customary sense of the word.
Furthermore, redevelopment project areas may be merged by the amendment of each affected
redevelopment plan and taxes attributable to each project area merged may be allocated to the
entire merged project area for the purpose of paying the principal of, and interest on,
indebtedness incurred by the redevelopment agency to finance or refinance, in whole or in part,
the merged redevelopment project; however, if the redevelopment agency has, prior to the
merger, incurred any indebtedness for one of the project areas to be merged, taxes attributable
to that area which are allocated to the agency shall be first used to comply with the terms of a
bond resolution or other agreement pledging the taxes from the constituent project area.
The City Council first adopted the Petaluma Community Development Project ( "PCD ")
Redevelopment Plan by Ordinance No. 1725 N.C.S. adopted on July 18, 1988, amended by
Ordinance 1972 adopted on November 21, 1994, amended by Ordinance No. 2100 N.C.S.
adopted on April 3, 2000, amended by Ordinance No. 2183 N.C.S. adopted on June 7, 2004,
and amended by Ordinance No. 2252 adopted on September 18, 2006, which fiscally merged
the PCD Project Area with the CBD Project Area and amended by Ordinance No. 2253 adopted
on September 18, 2006, which eliminated the time limit set forth in the PCD Redevelopment
Plan to establish loans, advances and indebtedness. The overall objective of the PCD
Redevelopment Plan is to eliminate blighted conditions in the PCD Project Area by undertaking
all appropriate projects pursuant to the Redevelopment Law.
The City Council first adopted the Petaluma Central Business District Redevelopment
Project ( "CBD" and together with the PCD, the "Redevelopment Project ") Redevelopment
Plan by Ordinance No. 1221 N.C.S. adopted on September 27, 1976, as amended by
Ordinance No. 1973 N.C.S. adopted on November 21, 1994, as amended by Ordinance No.
2092 N.C.S. adopted on June 21, 1999,, as amended by Ordinance No. 2116 N.C.S. adopted on
June 18, 2001 which added approximately 127 acres to the original 98 acres, as amended by
Ordinance No. 2184 adopted on June 7, 2004, as amended by Ordinance No. 2251 N.C.S.
adopted on September 18, 2006, which fiscally merged the CBD Project Area with the PCD
Project Area, as amended by Ordinance No. 2253 N.C.S. adopted on September 18, 2006,
which eliminated the time limit set forth in the PCD Redevelopment Plan to establish loans,
advances and indebtedness and finally, as amended by Ordinance No. 2254 N.C.S. adopted on
September 18, 2006, which, pursuant to Senate Bill 1096, extended certain time limitations with
respect to the CBD Redevelopment Plan. The overall objective of the CBD Redevelopment Plan
is to eliminate blighted conditions in the CBD Project Area by undertaking all appropriate
projects pursuant to the Redevelopment Law.
Both the PCD Redevelopment Plan and the CBD Redevelopment Plan were amended
on September 11, 2006 by Ordinance No. 2251 N.C.S. and Ordinance No. 2252 N.C.S.,
respectively, to provide for the fiscal merger of such Plans. The fiscal merger allows the
separate Redevelopment Plans to govern the applicable Project Area while permitting the
expenditure of tax increment funds in either Project Area, regardless of the source.
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Description of Project Area
The Merged Project Area consists of the PCD Project Area and the CBD Project Area
(together, the "Project Area ").
The PCD Project Area includes approximately 2,740 acres, a portion of which is outside
the City limits. The PCD Project Area includes about 30% of the 14.49 square miles in the City.
The PCD Project Area extends along both sides of U.S. Highway 101 from a point near the
southern City limits to the Old Redwood Highway at the northern end of the City. Existing
development includes commercial, industrial and residential uses.
[Included in the PCD Project Area are several major business parks and industrial uses
as well as five major retail centers: Washington Square, Petaluma Plaza North and South, the
Petaluma Premium Factory Outlets, and the Petaluma Auto Plaza. The PCD includes many
public and institutional uses. There is a significant amount.of vacant and /or underutilized land
within the PCD that provides development potential.]
The CBD Project Area includes approximately 225 acres of commercial, industrial and
residential uses. [Existing development includes numerous turn -of -the century commercial]
Land Use
The table below shows the land uses in the Project Area based on the property tax roll.
TABLE 1
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Merged Project
2016 -17 Secured Valuation by Land Use Category
Land Use Composition
Residential
Commercial
Industrial
Vacant
Other
Total Secured
Unsecured / State Assessed
Grand Total
Source: California Municipal Statistics, Inc.
# of Parcels Taxable % of
Value Total
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Major Taxable Property Owners. The following table lists the 10 largest taxable
property owners within the Project Area for fiscal year 2016 -17.
TABLE 2
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
10 Largest Taxpayers in Fiscal Year 2016 -17
Summary of Assessed Value History in the Project Area
General. Taxable values are prepared and reported by the County Auditor - Controller
each fiscal year and represent the aggregation of all locally assessed properties that are part of
the Project Area. The parcels are assigned to Tax Rate Areas which collectively have the same
boundaries as the Project Area.
The following table summarizes the historic Merged Project Area assessed value and
incremental value during the past 15- years:
TABLE 3
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Historical Assessed Valuation and Incremental Value
12-Mo.
Property Owner
Land Use
2016117
Assessed Value
% of Total
1.
MGP VIII Properties LLC
Commercial
$43,153,461
2.24%
2.
Regency Petaluma LLC
Commercial
42,150,713
2.19%
3.
TSA SKH Investors LLC
Commercial
33,776,037
1.75%
4.
Redwood Gateway LLC
Shopping Center
33,049,507
1.72%
5.
Target Corporation
Commercial
31,696,041
1.65 %
6.
Redwood Business Center 1 & 2 LLC
Commercial
30,306,257
1.57%
7.
Palo Alto Bayshore Investors LLC
Apartments
29,930,350
1.55%
8.
Novak Property LLC
Shopping Center
28,085,969
1.46%
9.
Quarry Heights LLC
Residential Development
27,920,811
1.45%
10.
Petaluma Marina Investors LLC
Hotel
26,351,825
1.37%
5.8%
2007
1,425,814,294
$326,420,971
16.94%
7.9%
399,073,367
1,495,990,081
$1,926,585,308
2008
Source: California Municipal Statistics, Inc.
409,954,889
1,962,127,309
3.5%
Summary of Assessed Value History in the Project Area
General. Taxable values are prepared and reported by the County Auditor - Controller
each fiscal year and represent the aggregation of all locally assessed properties that are part of
the Project Area. The parcels are assigned to Tax Rate Areas which collectively have the same
boundaries as the Project Area.
The following table summarizes the historic Merged Project Area assessed value and
incremental value during the past 15- years:
TABLE 3
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Historical Assessed Valuation and Incremental Value
12-Mo.
Ending
Secured
Unsecured
Total Assessed
%
Incremental
%
Nov. 1,
Value
Value
Value
Change
Base Value
Value
Change
2003
$1,069,910,909
$397,899,400
$1,467,810,309
$399,073,367
$1,068,736,942
2004
1,103,648,556
361,566,167
1,465,214,723
-0.2%
399,073,367
1,066,141,356
-0.2%
2005
1,180,141,366
501,429,992
1,681,571,358
14.8%
399,073,367
1,282,497,991
20.3%
2006
1,255,814,261
499,770,264
1,755,584,525
4.4%
399,073,367
1,356,511,158
5.8%
2007
1,425,814,294
469,249,154
1,895,063,448
7.9%
399,073,367
1,495,990,081
10.3%
2008
1,552,172,420
409,954,889
1,962,127,309
3.5%
399,073,367
1,563,053,942
4.5%
2009
1,683,941,023
374,038,934
2,057,979,957
4.9%
399,073,367
1,658,906,590
6.1%
2010
1,741,382,158
320,965,566
2,062,347,724
0.2%
399,073,367
1,663,274,357
0.3%
2011
1,688,498,602
301,716,249
1,990,214,851
-3.5%
399,073,367
1,591,141,484
-4.3%
2012
1,578,744,199
233,698,991
1,812,443,190
-8.9%
399,073,367
1,413,369,823
-11.2%
2013
1,523,373,769
240,585,104
1,763,958,873
-2.7%
399,073,367
1,364,885,506
-3.4%
2014
1,571,486,975
238,460,655
1,809,947,630
2.6%
399,073,367
1,410,874,263
3.4%
2015
1,693,129,095
264,591,105
1,957,720,200
8.2%
399,073,367
1,558,646,833
10.5%
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'51
2016 1,802,475,139 276,893,387 2,079,368,526 6.2% 399,073,367 1,680,295,159 7.8%
2017 1,926,585,308 297,710,128 2,224,295,436 7.0% 399,073,367 1,825,222,069 8.6%
Source: Office of the Sonoma County Assessor and Fraser & Associates.
Unitary Property
Unitary revenues are allocated to the Project Area based on a formula prescribed by
law. Generally, the Agency receives unitary revenues on the basis of amounts that were
received in the prior fiscal year. The prior year allocations are adjusted annually based on
changes in unitary revenue on a countywide basis. The amount of unitary revenues to be
allocated to the Successor Agency from the Project Area for fiscal year 2016 -17 is estimated to
be $
Tax Rates
Tax rates will vary from area to area within the State, as well as within a community and
a redevelopment project area. The tax rate for any particular parcel is based upon the
jurisdictions levying the tax rate for the area where the parcel is located. The tax rate consists
of the general levy rate of $1.00 per $100 of taxable value and any over -ride tax rate. The over-
ride rate is that portion of the tax rate that exceeds the general levy tax rate and is levied to pay
voter approved indebtedness or contractual obligations that existed prior to the enactment of
Proposition XIII.
Section 34183(a)(1) of the Dissolution Act requires the County Auditor - Controller to
allocate all revenues attributable to tax rates levied to make annual repayments of the principal
of and interest on any bonded indebtedness for the acquisition or improvement of real property
to the taxing entity levying the tax rate. As a result, the tax increment revenues being deposited
into the Redevelopment Property Tax Trust Fund include only revenues derived from the
general 1 % levy and includes no revenues derived from over -ride tax rates that had been
included in tax increment revenues prior to the dissolution of redevelopment agencies. The
projections of tax increment available to pay debt service on the Bonds are based only on
revenue derived from the general levy tax rate.
Appeals of Assessed Values; Proposition 8 Reductions
Pursuant to California law, property owners may apply for a reduction of their property
tax assessment by filing a written application, in form prescribed by the State Board of
Equalization, with the appropriate county board of equalization or assessment appeals board.
After the applicant and the assessor have presented their arguments, the Appeals Board
makes a final decision on the proper assessed value. The Appeals Board may rule in the
assessor's favor, in the applicant's favor, or the Board may set their own opinion of the proper
assessed value, which may be more or less than either the assessor's opinion or the applicant's
opinion.
Any reduction in the assessment ultimately granted applies to the year for which the
application is made and may also affect the values in subsequent years. Refunds for taxpayer
overpayment of property taxes may include refunds for overpayment of taxes in years after that
which was appealed. Current year values may also be adjusted as a result of a successful
-34-
appeal of prior year values. Any taxpayer payment of property taxes that is based on a value
that is subsequently adjusted downward will require a refund for overpayment.
Appeals for reduction in the "base year" value of an assessment, if successful, reduce
the assessment for the year in which the appeal is made and prospectively thereafter. The
base year is determined by the completion date of new construction or the date of change of
ownership. Any base year appeal must be made within four years of the change of ownership
or new construction date. The table below shows the history of appeals between fiscal years
2011 -12 and 2015 -16 and the appeals that are currently pending.
TABLE 4
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Historical Appeals
Fiscal Year Ending June 30 2012 2013 2014 2015 2016 Total
Number of Successful Appeals
Assessor's Opinion of Value
Reduction in Value Due to Successful Appeals
Percent Reduction in Value Due to Successful Appeals
Source: Office of the Sonoma County Assessor.
Adjustment of Resolved and Open Appeals
Resolved Appeals Open Appeals Total
Number of Open /Unresolved Appeals
Assessor's Opinion of Value
Actual /Expected Percent Reduction in Value Due to Successful Appeals
Actual /Expected Reduction in Value Due to Successful Appeals
Source: Office of the Sonoma County Assessor and Fraser & Associates.
As shown above, there were appeals that were resolved with valuation reductions
between fiscal years 2011 -12 and 2015 -16. The average value reduction was percent.
There were appeals that have been resolved so far during 2016 -17, with a value
reduction of $ million, that have not yet been deducted from the reported assessed
values. In addition, there are open appeals in which the applicants have requested value
reductions of $ million. If each of the applicants were successful and received reductions
equal to the average historical value reduction of 15 percent, future taxable values could be
reduced by $ million.
Appeals may also be filed under Section 51 of the Revenue and Taxation Code, which
requires that for each lien date the value of real property shall be the lesser of its base year
value annually adjusted by the inflation factor pursuant to Article XIIIA of the State Constitution
or its full cash value, taking into account reductions in value due to damage, destruction,
depreciation, obsolescence, removal of property or other factors causing a decline in value.
Currently open appeals will cause an estimated $ million reduction in assessed value.
Additionally, resolved appeals since the last tax rolls will reduce assessed value by
approximately $ million. As a result, projected reductions in assessed value for fiscal year
2016 -17 are approximately $ million Significant reductions have taken place in some
counties due to declining real estate values. Reductions made under this code section may be
initiated by the County Assessor or requested by a property owner. After a roll reduction is
granted under this section, the property is reviewed on an annual basis to determine its full cash
-35-
value and the valuation is adjusted accordingly. This may result in further reductions or in value
increases. Such increases must be in accordance with the full cash value of the property and it
may exceed the maximum annual inflationary growth rate allowed on other properties under
Article XIIIA of the State Constitution. Once the property has regained its prior value, adjusted
for inflation, it once again is subject to the annual inflationary factor growth rate allowed under
Article XIIIA. See "PROPERTY TAXATION IN CALIFORNIA" above.
Proposition 8, approved in 1978 (California Revenue and Taxation Code Section 51(b)),
provides for the assessment of real property at the lesser of its originally determined (base year)
full cash value compounded annually by the inflation factor, or its full cash value as of the lien
date, taking into account reductions in value due to damage, destruction, obsolescence or other
factors causing a decline in market value. Reductions under this code section may be initiated
by the County Assessor or requested by the property owner.
After such reductions in value are implemented, the County Assessor is required to
review the property's market value as of each subsequent lien date and adjust the value of real
property to the lesser of its base year value as adjusted by the inflation factor pursuant to Article
XIIIA of the California Constitution or its full cash value taking into account reductions in value
due to damage, destruction, depreciation, obsolescence, removal of property or other factors
causing a decline in value. Reductions made under Proposition 8 to residential properties are
normally initiated by the County Assessor but may also be requested by the property owner.
Reductions of value for commercial, industrial and other land use types under Proposition 8 are
normally initiated by the property owner as an assessment appeal.
After a roll reduction is granted under this code section, the property is reviewed on an
annual basis to determine its full cash value and the valuation is adjusted accordingly. This may
result in further reductions or in value increases. Such increases must be in accordance with the
full cash value of the property and may exceed the maximum annual inflationary growth rate
allowed on other properties under Article XIIIA of the State Constitution. Once the property has
regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary
factor growth rate allowed under Article XIIIA.
-36-
The Redevelopment Consultant reviewed Proposition 8 Adjustments from the County
since fiscal year to determine the number of residential properties that were not reduced
and the corresponding number of reversals. The results of the review are shown on the
following table.
TABLE 5
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Proposition 8 Residential Impacts
Decreases - as of 2012 -13
Number of Residential Parcels
Total Value Decline
Increases - 2013 -14 to 2015 -16
Number of Residential Parcels
Total Value Increase
Source: Fraser and Associates.
As shown above, 1,358 residential parcels (inclusive of both single and multifamily
parcels) had been reduced as of fiscal year 2012 -13 tax roll, with a value reduction of over $150
million. Proposition 8 value reductions are temporary, and once the market value of property
goes back up, the value for the parcels under Proposition 8 status can increase up to their
Proposition 13 base, including the compounded 2 percent inflation adjustment. Beginning in
2013 -14, and continuing through 2015 -16, the County has partially or fully reversed the prior
Proposition 8 reductions and increased value by $68 million in 2015 -16.
TABLE 6
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Proposition 8 Residential Impacts- Recent Trends, As of September, 2015
2014 Sales:
Total Sales
Aggregate Sales Price
Aggregate Tax Roll Value
Percent Increase Between Sales Price and
Tax Roll Value
2015 Sales (Through Sept. 2015):
Total Sales
Aggregate Sales Price
Aggregate Tax Roll Value
Percent Increase Between Sales Price and
Tax Roll Value
Source: Fraser and Associates.
The table shows that sales values were 36 percent higher than tax roll values in 2014,
and that 2015 sales values have been 33 percent higher. Given that sales prices are exceeding
tax roll values, and the County has begun to reverse the prior residential Proposition 8
-37-
I
reductions, the Redevelopment Consultant has assumed that there would be no further
Proposition 8 reductions in fiscal year 2015 -16 or future fiscal years for purposes of the tax
increment projections.
Tax Sharing Payments
Negotiated Tax Sharing Payments. Pursuant to former Health & Safety Code Section
33401, the Former Agency entered into agreements with taxing agencies whose territory was
located within the Project Area, whereby the Former Agency agreed to pay tax increment
revenues to such taxing agencies to alleviate the financial burden or detriment caused by the
Redevelopment Project. The Former Agency entered into such agreements with Sonoma
County and with the Sonoma County Library.
All of the statutory requirements necessary to subordinate the payment of all
amounts payable pursuant to the aforementioned negotiated tax - sharing agreements to
the payment of debt service on the Bonds and the 2015 Bonds have been satisfied.
Statutory Payments. Pursuant to former Health & Safety Code Section 33607.5, the
Former Agency is required to make certain Statutory Pass - Through Payments to taxing
agencies whose territory is located within the Project Area, to alleviate the financial burden or
detriment caused by the Redevelopment Project.
All of the statutory requirements necessary to subordinate the payment of all
amounts payable pursuant to the aforementioned statutory pass- through payments to
the payment of debt service on the Bonds and the 2015 Bonds have been satisfied.
Pursuant to former Health & Safety Code Section 33676, in lieu of entering into
negotiated tax - sharing agreements with the Former Agency, seven school districts whose
territory is located within the Project Area instead elected to receive pass- through payments
pursuant to a "2% unilateral election" to alleviate the financial burden or detriment caused by the
Redevelopment Project. For purposes of the Dissolution Act, such payments are senior to the
payment of debt service on the Bonds. During fiscal year 2016/17, tax - sharing payments
payable to these seven school districts pursuant to the aforementioned 2% unilateral election
equaled $634,134.
Housing Set -Aside
Before it was amended by the Dissolution Act, the Redevelopment Law required the
Former Agency to set aside not less than 20% of all tax increment generated in the Project Area
into a low and moderate income housing fund to be used for the purpose of increasing,
improving and /or preserving the supply of low and moderate income housing. These tax
increment revenues were commonly referred to as "Housing Set - Aside."
The Dissolution Act eliminated the Housing Set -Aside requirement. As a result, and
because the Successor Agency has no obligations that are payable from the former Housing
Set - Aside, amounts formerly required to be set aside for such purpose are included in Tax
Revenues pledged to the payment of debt service on the Bonds. Accordingly, the projection of
Tax Revenues set forth in the section of this Official Statement entitled "THE PROJECT AREA —
Projected Tax Revenues and Estimated Debt Service Coverage," assumes the availability of the
-38-
OF >_
former Housing Set -Aside for this purpose. The Successor Agency has no obligations payable
from the Housing Set - Aside,
Historical Available Tax Increment
The following table shows the Tax Revenue history for the Successor Agency for fiscal
years 2012 -13 through 2015 -16.
TABLE 7
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Historical Tax Collections
Fiscal Year Ending June 30,
Actual Receipts
Tax Increment Revenue
Unitary Revenue
Supplemental Taxes
Total Receipts
2013 20101 2015 2016
$13,781,078
$14,399,617
$15,674,144
$16,952,857
48,871
0
54,223
65,468
(158,161)
0
591,124
476,066
$13,671,788
$14,399,617
$16,319,491
$17,494,391
Actual Adjustments
County Administration Fee $250,360 $237,119 $224,835 $237,334
H &S Code Section 33676 Allocations 541,470 571,831 578,861 609,939
Total Adjustments $791,830 $808,950 $803,696 $847,273
Pledged Tax Revenue $12,879,958
Subordinate Tax Sharing Payments $3,549,307
$13,590,667 $15,515,795 $16,647,118
$3,788,106 $4,270,733 $4,624,975
(1) 2014 Tax increment Revenue include Unitary Revenue and Supplemental Taxes.
Sources: Office of the Sonoma County Auditor - Controller and Redevelopment Consultant.
Property tax revenues in the Project Area do not reflect actual collections because the
County has adopted the Teeter Plan. See "TAX INCREMENT FINANCING GENERALLY —
Property Tax Allocation Procedures - Delinquencies" above.
-39-
Projected Tax Revenues and Estimated Debt Service Coverage
2015 -16 Estimate of Tax Revenue. The following table shows the semi - annual tax
increment receipts for 2016 and 2017 .
TABLE 8
SUCCESSOR AGENCY TO THE
PETALUMA COMMUNITY DEVELOPMENT COMMISSION
Semi - Annual Tax Increment Receipts(') -2016 and 2017
Jan, to Jun. Jul. to Dec. Total 2016 Jan. to Jul. to Total 2017
2016 2016 Jun. 2017 Dec. 2017
Tax Increment
RPTTF Distribution $8,715,717 $8,778,675
$17,494,392
$9,158,645
$9,158,645
$18,317,289
Senior Liens
County Administration Fee 22,410 214,924
237,334
136,892
136,892
273,783
H &S Code Section 33676 Allocations 304,970 304,970
609,939
317,067
317,067
634,134
Total Adjustments $327,380 $519,894
$847,273
$453,959
$453,959
$907,917
Pledged Tax Revenue $8,388,338 $8,258,782
$16,647,119
$8,704,686
$8,704,686
$17,409,372
Bond Debt Service
Subordinate Tax Sharing Payments $2,268,830 $2,356,145
$4,624,974
$2,553,482
$2,553,482
$5,106,963
1 Actual Receipts for 2016; Estimated Receipts for 2017
Sources: Office of the Sonoma County Auditor- Controller and Redevelopment Consultant
Estimated Debt Service Coverage. The following
table
shows estimated
annual
debt
service coverage or the Bonds, assuming no annual
assessed valuation
growth
and no optional
redemption of the Bonds.
-40-
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RISK FACTORS
The following information should be considered by prospective investors in evaluating
the Bonds. However, the following does not purport to be an exhaustive listing of risks and other
considerations which may be relevant to investing in the Bonds. In addition, the order in which
the following information is presented is not intended to reflect the relative importance of any
such risks.
The various legal opinions to be delivered concurrently with the issuance of the Bonds
will be qualified as to the enforceability of the various legal instruments by limitations imposed
by State and federal laws, rulings and decisions affecting remedies, and by bankruptcy,
reorganization or other laws of general application affecting the enforcement of creditors' rights,
including equitable principles.
Recognized Obligation Payment Schedule
The Dissolution Act provides that only those payments listed in a Recognized Obligation
Payment Schedule may be made by a successor agency from the funds specified in the
Recognized Obligation Payment Schedule. Pursuant to Section 34177 of the Dissolution Act,
by February 1st each year, the Successor Agency is required to submit to the Oversight Board
and the DOF, a Recognized Obligation Payment Schedule. For each annual period, the
Dissolution Act requires each successor agency to prepare and approve, and submit to the
successor agency's oversight board and the DOF for approval, a Recognized Obligation
Payment Schedule pursuant to which enforceable obligations (as defined in the Dissolution Act)
of the successor agency are listed, together with the source of funds to be used to pay for each
enforceable obligation. Consequently, Tax Revenues will not be withdrawn from the
Redevelopment Property Tax Trust Fund by the county auditor - controller and remitted to the
Successor Agency without a duly approved and effective Recognized Obligation Payment
Schedule to pay debt service on the Bonds and to pay other enforceable obligations. In the
event the Successor Agency were to fail to file a Recognized Obligation Payment Schedule, the
availability of Tax Revenues to the Successor Agency could be adversely affected. See
"SECURITY FOR THE BONDS - Recognized Obligation Payment Schedules."
For a description of the covenants made by the Successor Agency in the Indenture
relating to the obligation to submit Recognized Obligation Payment Schedules on a timely basis,
see "SECURITY FOR THE BONDS — Recognized Obligation Payment Schedules."
AB 1484 also added provisions to the Dissolution Act implementing certain penalties in
the event a successor agency does not timely submit a Recognized Obligation Payment
Schedule. Specifically, a Recognized Obligation Payment Schedule must be submitted by the
successor agency to the oversight board, to the county administrative officer, the county auditor -
controller, the DOF, and the State Controller no later than the mandated deadlines. If a
successor agency does not submit a Recognized Obligation Payment Schedule by such
deadlines, the city or county that established the redevelopment agency will be subject to a civil
penalty equal to $10,000 per day for every day the schedule is not submitted to the DOF.
Additionally, a successor agency's maximum administrative cost allowance is reduced by 25% if
the successor agency does not submit an oversight board - approved Recognized Obligation
Payment Schedule within 10 days of the deadline.
-42-
�E�l
No Validation Proceedings Undertaken
Code of Civil Procedure Section 860 authorizes public agencies to institute a process,
otherwise known as a "validation proceeding," for purposes of determining the validity of a
resolution or any action taken pursuant thereto. Section 860 authorizes a public agency to
institute validation proceedings in cases where another statute authorizes its use. Relevant to
the Bonds, Government. Code Section 53511 authorizes a local agency to "bring an action to
determine the validity of its bonds, warrants, contracts, obligations or evidences of
indebtedness." Under Code of Civil Procedure Section 870, a final favorable judgment issued in
a validation proceeding will, notwithstanding any other provision of law, be forever binding and
conclusive, as to all matters herein adjudicated or which could have been adjudicated, against
all persons: "The judgment shall permanently enjoin the institution by any person of any action
or proceeding raising any issue as to which the judgment is binding and conclusive."
The Successor Agency has not undertaken or endeavored to undertake any validation
proceeding in connection with the issuance of the Bonds. The Successor Agency and Bond
Counsel have relied on the provisions of AB 1484 authorizing the issuance of the Bonds and
specifying the related deadline for any challenge to the Bonds to be brought. Specifically,
Section 34177.5(e) of the Dissolution Act provides that notwithstanding any other law, an action
to challenge the issuance of bonds (such as the Bonds), the incurrence of indebtedness, the
amendment of an enforceable obligation, or the execution of a financing agreement authorized
under Section 34177.5, must be brought within 30 days after the date on which the oversight
board approves the resolution of the successor agency approving such financing. Such
challenge period has expired with respect to the Bonds and the Resolution approving the
Bonds.
Reduction in Taxable Value
Tax increment revenue available to pay principal of and interest on the Bonds are
determined by the amount of incremental taxable value in the Project Area and the current rate
or rates at which property in the Project Area is taxed. The reduction of taxable values of
property in the Project Area caused by economic factors beyond the Successor Agency's
control, such as relocation out of the Project Area by one or more major property owners, sale
of property to a non - profit corporation exempt from property taxation, or the complete or partial
destruction of such property caused by, among other eventualities, earthquake or other natural
disaster, could cause a reduction in the tax increment available to pay debt service on the
Bonds. Such reduction of tax increment available to pay debt service on the Bonds could have
an adverse effect on the Successor Agency's ability to make timely payments of principal of and
interest on the Bonds; this risk could be increased by the significant concentration of property
ownership in the Project Area.
The County calculates tax increment to redevelopment project areas by applying a one
percent rate to the secured and unsecured incremental taxable values. The County also
allocates unitary revenue on the basis of the total unitary revenue in a project area, without
reductions for base year revenues. The allocation of unitary revenue is based on revenues
received in 1987 -88, adjusted by the actual growth or decline in unitary revenues on a
countywide basis.
As described in greater detail under the heading "PROPERTY TAXATION IN
CALIFORNIA - Article XIIIA of the State Constitution," Article XIIIA provides that the full cash
value base of real property used in determining taxable value may be adjusted from year to year
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I
to reflect the inflation rate, not to exceed a two percent increase for any given year, or may be
reduced to reflect a reduction in the consumer price index, comparable local data or any
reduction in the event of declining property value caused by damage, destruction or other
factors (as described above). Such measure is computed on a calendar year basis. Any
resulting reduction in the full cash value base over the term of the Bonds could reduce tax
increment available to pay debt service on the Bonds.
In addition to the other limitations on, and required application under the Dissolution Act
of Tax Revenues on deposit in the Redevelopment Property Tax Trust Fund, the State
electorate or Legislature could adopt a constitutional or legislative property tax reduction with
the effect of reducing Tax Revenues allocated to the Redevelopment Property Tax Trust Fund
and available to the Successor Agency. Although the federal and State Constitutions include
clauses generally prohibiting the Legislature's impairment of contracts, there are also
recognized exceptions to these prohibitions. There is no assurance that the State electorate or
Legislature will not at some future time approve additional limitations that could reduce the tax
increment available to pay debt service on the Bonds and adversely affect the source of
repayment and security of the Bonds.
Risks to Real Estate Market
The Successor Agency's ability to make payments on the Bonds will be dependent upon
the economic strength of the Project Area. The general economy of the Project Area will be
subject to all of the risks generally associated with urban real estate markets. Real estate
prices and development may be adversely affected by changes in general economic conditions,
fluctuations in the real estate market and interest rates, unexpected increases in development
costs and by other similar factors. Further, real estate development within the Project Area
could be adversely affected by limitations of infrastructure or future governmental policies,
including governmental policies to restrict or control development. The Project Area experienced
significant declines in value due to Proposition 8 reductions. In addition, if there is a significant
decline in the general economy of the Project Area, the owners of property within the Project
Area may be less able or less willing to make timely payments of property taxes or may petition
for reduced assessed valuation causing a delay or interruption in the receipt of Tax Revenues
by the Successor Agency from the Project Area. See "THE PROJECT AREA - Projected Tax
Revenues and Estimated Debt Service Coverage" for a description of the debt service coverage
on the Bonds.
Reduction in Inflationary Rate
As described in greater detail below, Article XIIIA of the State Constitution provides that
the full cash value of real property used in determining taxable value may be adjusted from year
to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be
reduced to reflect a reduction in the consumer price index or comparable local data. Such
measure is computed on a calendar year basis. Because Article XIIIA limits inflationary
assessed value adjustments to the lesser of the actual inflationary rate or 2 %, there have been
years in which the assessed values were adjusted by actual inflationary rates, which were less
than 2 %. The Successor Agency is unable to predict if any further adjustments to the full cash
value base of real property within the Project Area, whether an increase or a reduction, will be
realized in the future.
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Levy and Collection of Taxes
The Successor Agency has no independent power to levy or collect property taxes. Any
reduction in the tax rate or the implementation of any constitutional or legislative property tax
decrease could reduce the tax increment available to pay debt service on the Bonds.
Although delinquencies in the payment of property taxes by the owners of land in the
Project Area, and the impact of bankruptcy proceedings on the ability of taxing agencies to
collect property taxes, could have an adverse effect on the Successor Agency's ability to make
timely 'payments on the Bonds, the Successor Agency believes any such adverse impact is
unlikely in light of the debt service coverage provided net tax increment. In addition, the County
could elect to alter or terminate its Teeter Plan policy and, in such event, the amount of the levy
of property tax revenue that could be allocated to the Successor Agency would depend upon
the actual collections of the secured taxes within the Project Area. Substantial delinquencies in
the payment of property taxes could impair the timely receipt by the Successor Agency of Tax
Revenues. See "THE PROJECT AREA - Projected Tax Revenues and Estimated Debt Service
Coverage" for a description of the debt service coverage on the Bonds.
Bankruptcy and Foreclosure
The payment of the property taxes from which Tax Revenues are derived and the ability
of the County to foreclose the lien of a delinquent unpaid tax may be limited by bankruptcy,
insolvency, or other laws generally affecting creditors' rights or by the laws of the State 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, or 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 liens to become extinguished,
bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure
proceedings. Although such delay would increase the possibility of delinquent tax installments
not being paid in full and thereby increase the likelihood of a delay or default in payment of the
principal of and interest on the Bonds, the Successor Agency believes any such adverse impact
is unlikely in light of the debt service coverage provided by fiscal year 2015 -16 net tax
increment. See "THE PROJECT AREA - Projected Tax Revenues and Estimated Debt Service
Coverage" for a description of the debt service coverage on the Bonds.
Estimated Revenues
In estimating that net tax increment will be sufficient to pay debt service on the Bonds,
the Successor Agency has made certain assumptions with regard to present and future
assessed valuation and new development in the Project Area, future tax rates and percentage
of taxes collected. The Successor Agency believes these assumptions to be reasonable, but
there is no assurance these assumptions will be realized and to the extent that the assessed
valuation and the tax rates are less than expected, the net tax increment available to pay debt
service on the Bonds will be less than those projected and such reduced net tax increment may
be insufficient to provide for the payment of principal of, premium (if any) and interest on the
Bonds.
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Hazardous Substances
An additional environmental condition that may result in the reduction in the assessed
value of property would be the discovery of a hazardous substance that would limit the
beneficial use of taxable property within the Project Area. In general, the owners and operators
of property may be required by law to remedy conditions of the property relating to releases or
threatened releases of hazardous substances. The owner or operator may be required 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 property within the Project Area be affected by a hazardous substance, could be to
reduce the marketability and value of the property by the costs of remedying the condition.
Natural Disasters
The value of the property in the Project Area in the future can be adversely affected by a
variety of additional factors, particularly those which may affect infrastructure and other public
improvements and private improvements on property and the continued habitability and
enjoyment of such private improvements. Such additional factors include, without limitation,
geologic conditions such as earthquakes, topographic conditions such as earth movements,
landslides and floods and climatic conditions such as droughts. In the event that one or more of
such conditions occur, such occurrence could cause damages of varying seriousness to the
land and improvements and the value of property in the Project Area could be diminished in the
aftermath of such events. A substantial reduction of the value of such properties and could
affect the ability or willingness of the property owners to pay the property taxes.
Seismic. Earthquake faults exist in many parts of Northern California, including in areas
near to the Project Area. Most new construction is required to be built in accordance with the
Uniform Building Code which contains standards designed to minimize structural damage
caused by seismic events however, the occurrence of severe seismic activity affecting the
Project Area could result in substantial damage to property located in the Project Area, and
could lead to successful appeals for reduction of assessed values of such property. Such a
reduction of assessed valuations could result in a reduction of the Tax Revenues that secure
the Bonds.
Changes in the Redevelopment Law
There can be no assurance that the California electorate will not at some future time
adopt initiatives or that the Legislature will not enact legislation that will amend the Dissolution
Act, the Redevelopment Law or other laws or the Constitution of the State resulting in a
reduction of tax increment available to pay debt service on the Bonds.
It is possible that the definition of Tax Revenues could be affected by changes in law or
judicial decisions relating to the dissolution of redevelopment agencies. The Indenture provides
that if, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a)
of Section 34183 of the Redevelopment Law are invalidated by judicial decision, then "Tax
Revenues" will include all tax increment revenues allocated to the payment of indebtedness in
accordance with Section 33670 of the Redevelopment Law or such other section as may be in
effect at the time providing for the allocation of tax increment revenues in accordance with
Article XVI, Section 16 of the State Constitution; excluding moneys required to pay Senior
Obligations payable during such period. Additionally, any action by a court to invalidate
provisions of the Dissolution Act required for the timely payment of principal of, and interest on,
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1
the Bonds could be subject to issues regarding unconstitutional impairment of contracts and
unconstitutional taking without just compensation. The Successor Agency believes that the
aforementioned considerations would provide some protections against the adverse
consequences upon the Successor Agency and the availability of Tax Revenues for the
payment of debt service on the Bonds in the event of successful challenges to the Dissolution.
Act or portions thereof. However, the Successor Agency provides no assurance that any other
lawsuit challenging the Dissolution Act or portions thereof will not result in an outcome that may
have a detrimental effect on the Successor Agency's ability to timely pay debt service on the
Bonds.
Loss of Tax - Exemption
As discussed under the caption "TAX MATTERS," interest on the Bonds could become
includable in gross income for purposes of federal income taxation retroactive to the date the
Bonds were issued, as a result of future acts or omissions of the Successor Agency in violation
of its covenants in the Indenture.
In addition, current and future legislative proposals, if enacted into law, may cause
interest on the Bonds to be subject, directly or indirectly, to federal income taxation by, for
example, changing the current exclusion or deduction rules to limit the aggregate amount of
interest on state and local government bonds that may be treated as tax exempt by individuals.
Should such an event of taxability occur, the Bonds are not subject to special
redemption and will remain outstanding until maturity or until redeemed under other provisions
set forth in the Indenture.
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds, or, if a
secondary market exists, that the Bonds can be sold for any particular price. Occasionally,
because of general market conditions or because of adverse history or economic prospects
connected with a particular issue, secondary marketing practices in connection with a particular
issue are suspended or terminated. Additionally, prices of issues for which a market is being
made will depend upon the then prevailing circumstances.
TAX MATTERS
In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California,
Bond Counsel, subject, however to the qualifications set forth below, under existing law, the
interest on the Bonds is excluded from gross income for federal income tax purposes and such
interest is not an item of tax preference for purposes of the federal alternative minimum tax
imposed on individuals and corporations, provided, however, that, for the purpose of computing
the alternative minimum tax imposed on corporations (as defined for federal income tax
purposes), such interest is taken into account in determining certain income and earnings.
The opinions set forth in the preceding paragraph are subject to the condition that the
Successor Agency comply with all requirements of the Internal Revenue Code of 1986, as
amended (the "Tax Code ") that must be satisfied subsequent to the issuance of the Bonds.
The Successor Agency has covenanted to comply with each such requirement. Failure to
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comply with certain of such requirements may cause the inclusion of such interest in gross
income for federal income tax purposes to be retroactive to the date of issuance of the Bonds.
If the initial offering price to the public (excluding bond houses and brokers) at which a
Bond is sold is less than the amount payable at maturity thereof, then such difference
constitutes "original issue discount" for purposes of federal income taxes and State of California
personal income taxes. If the initial offering price to the public (excluding bond houses and
brokers) at which a Bond is sold is greater than the amount payable at maturity thereof, then
such difference constitutes "original issue premium" for purposes of federal income taxes and
State of California personal income taxes. De minimis original issue discount and original issue
premium is disregarded.
Under the Tax Code, original issue discount is treated as interest excluded from federal
gross income and exempt from State of California personal income taxes to the extent properly
allocable to each owner thereof subject to the limitations described in the first paragraph of this
section. The original issue discount accrues over the term to maturity of the Bond on the basis
of a constant interest rate compounded on each interest or principal payment date (with straight -
line interpolations between compounding dates). The amount of original issue discount accruing
during each period is added to the adjusted basis of such Bonds to determine taxable gain upon
disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code
contains certain provisions relating to the accrual of original issue discount in the case of
purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial
amount of such maturity. Owners of such Bonds should consult their own tax advisors with
respect to the tax consequences of ownership of Bonds with original issue discount, including
the treatment of purchasers who do not purchase in the original offering, the allowance of a
deduction for any loss on a sale or other disposition, and the treatment of accrued original issue
discount on such Bonds under federal individual and corporate alternative minimum taxes.
Under the Tax Code, original issue premium is amortized on an annual basis over the
term of the Bond (said term being the shorter of the Bond's maturity date or its call date). The
amount of original issue premium amortized each year reduces the adjusted basis of the owner
of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of
original issue premium on a Bond is amortized each year over the term to maturity of the Bond
on the basis of a constant interest rate compounded on each interest or principal payment date
(with straight -line interpolations between compounding dates). Amortized Bond premium is not
deductible for federal income tax purposes. Owners of premium Bonds, including purchasers
who do not purchase in the original offering, should consult their own tax advisors with respect
to State of California personal income tax and federal income tax consequences of owning such
Bonds.
In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of
California personal income taxes.
Owners of the Bonds should also be aware that the ownership or disposition of, or the
accrual or receipt of interest on, the Bonds may have federal or state tax consequences other
than as described above. Bond Counsel expresses no opinion regarding any federal or state
tax consequences arising with respect to the Bonds other than as expressly described above.
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,= ,,.
CONCLUDING INFORMATION
Underwriting
The Bonds are being purchased by (the "Underwriter "). The
Underwriter has agreed to purchase the Bonds at a price of $ (being the
principal amount of the Bonds [less a net original issue discount/plus a net original issue
premium] of $ and less an Underwriter's discount of
$ ). The Underwriter will purchase all of the Bonds if any are purchased.
The Underwriter may offer and sell Bonds to certain dealers and others at prices lower
than the offering prices stated on the inside cover page of this Official Statement. The offering
prices may be changed from time to time by the Underwriter.
Legal Opinion
The final approving opinion of Jones Hall, A Professional Law Corporation, San
Francisco, California, Bond Counsel, will be furnished to the purchaser at the time of delivery of
the Bonds. A copy of the proposed form of Bond Counsel's final approving opinion with respect
to the Bonds is attached hereto as Appendix B.
Certain legal matters will be passed on by Jones Hall, A Professional Law Corporation,
as Disclosure Counsel and , as Underwriter's Counsel.
In addition, certain legal matters will be passed upon for the Successor Agency by the
City Attorney of the City.
Compensation paid to Bond Counsel, Disclosure Counsel and Underwriter's Counsel is
contingent upon the sale and delivery of the Bonds.
Litigation
There is no action, suit or proceeding known to the Successor Agency to be pending and
notice of which has been served upon and received by the Successor Agency, or threatened,
restraining or enjoining the execution or delivery of the Bonds or the Indenture or in any way
contesting or affecting the validity of the foregoing or any proceedings of the Successor Agency
taken with respect to any of the foregoing. See, however, "RISK FACTORS- Challenges to
Dissolution Act."
Ratings
[[[The Successor Agency has applied for a bond insurance policy for the Bonds. The
Successor Agency may purchase such insurance to be delivered concurrently with the delivery
of the Bonds for some or all maturities. Any such decision will be made at the time of pricing.]]]
Standard & Poor's Ratings Services ( "S &P ") has assigned an underlying rating of
it " to the Bonds.
The ratings issued reflect only the view of S &P, and any explanation of the significance
of such ratings should be obtained from S &P. There is no assurance that such ratings will be
retained for any given period of time or that it will not be revised downward or withdrawn entirely
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by S &P if, in the judgment of S &P, circumstances so warrant. Any such downward revision or
withdrawal of any rating obtained may have an adverse effect on the market price of the Bonds.
Generally, a rating agency bases its rating on the information and materials furnished to
it and on investigations, studies and assumptions of its own. The Successor Agency has
provided certain additional information and materials to S &P (some of which does not appear in
this Official Statement).
There is no assurance that these ratings will continue for any given period of time or that
these ratings will not be revised downward or withdrawn entirely by S &P, if in the judgment of
S &P, circumstances so warrant. Any such downward revision or withdrawal of any rating on the
Bonds may have an adverse effect on the market price or marketability of the Bonds.
Continuing Disclosure
The Successor Agency has covenanted for the benefit of the holders and beneficial
owners of the Bonds pursuant to a Continuing Disclosure Certificate, dated the date of issuance
of the Bonds (the "Continuing Disclosure Certificate "), to provide certain financial information
and operating data (the "Annual Report ") no later than March 31st following the end of each
fiscal year, commencing with the report for the Fiscal Year ending June 30, 2017, and to provide
notice of the occurrence of certain enumerated events under Securities Exchange Commission
Rule 15c2 -12 (the "Rule ") through the EMMA System. The specific information to be contained
in the Annual Report and the enumerated events are set forth in "APPENDIX D - FORM OF
SUCCESSOR AGENCY CONTINUING DISCLOSURE CERTIFICATE," attached to this Official
Statement. These covenants have been made in order to assist the Underwriter (as defined
below) in complying with the Rule.
As an obligated party under the Rule, the Successor Agency is, or was during the past
five years prior to the issuance of the Bonds, responsible for providing continuing disclosure
with respect its bond issues, and on occasions during that time failed to fully
comply with filing requirements by failing to . As of the date of this Official
Statement, the Successor Agency reports that all of the items of their respective non-
compliance with continuing disclosure obligations that relate to its respective outstanding bond
issues have been corrected by filing on a late basis, and as such, as of the date of this Official
Statement, the Successor Agency believes it is presently in material compliance with all of its
continuing disclosure undertakings.
The Successor Agency engages for the preparation and filing of
continuing disclosure reports to ensure compliance with continuing disclosure obligations.
Audited Financial Statements
The City of Petaluma's Comprehensive Annual Financial Report for Fiscal Year Ended
June 30, 2016 (the "City CAFR ") is attached as Appendix E. The City's CAFR includes the
Successor Agency's audited financial statements for the fiscal year ended June 30, 2016. The
Successor Agency's audited financial statements were audited by ,
Certified Public Accountants (the "Auditor "). The Auditor has not been asked to consent to the
inclusion of the Successor Agency's audited financial statements in this Official Statement and
has not reviewed this Official Statement.
As described in "SECURITY FOR THE BONDS - Limited Obligation," the Bonds are
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payable from and secured by a pledge of Tax Revenues and the Bonds are not a debt of the
City. The City's CAFR is attached as Appendix,E to this Official Statement only because it
includes the Successor Agency's audited financial statements.
Miscellaneous
All of the preceding summaries of the Indenture, the Redevelopment Law, the
Dissolution Act, other applicable legislation, the Redevelopment Plan for the Project Area,
agreements and other documents are made subject to the provisions of such documents
respectively and do not purport to be complete statements of any or all of such provisions.
Reference is hereby made to such documents on file with the Successor Agency for further
information in connection therewith.
This Official Statement does not constitute a contract with the purchasers of the Bonds.
Any statements made in this Official Statement involving matters of opinion or estimates,
whether or not so expressly stated, are set forth as such and not as representations of fact, and
no representation is made that any of the estimates will be realized.
The execution and delivery of this Official Statement by its Executive Director has been
duly authorized by the Successor Agency.
PETALUMA COMMUNITY
DEVELOPMENT SUCCESSOR AGENCY
By:
Executive Director
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'
APPENDIX A
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
A -1
Ow
APPENDIX B
FORM OF BOND COUNSEL OPINION
'2017
Petaluma Community Development Successor Agency
11 English Street
Petaluma, CA 94952
OPINION: $ Petaluma Community Development Successor Agency Tax
Allocation Refundina Bonds Series 2017
Members of the Successor Agency:
We have acted as bond counsel in connection with the issuance by the Petaluma
Community Development Successor Agency (the "Successor Agency ") of the captioned bonds
(the "Bonds ") pursuant to the Community Redevelopment Law, constituting Part 1 (commencing
with Section 33000) of Division 24 of the Health and Safety Code of the State of California (the
"Law "), Part 1.85 (commencing with Section 34170) of Division 24 of the California Health and
Safety Code (the "Dissolution Act "), and Article 11 (commencing with Section 53580) of Chapter
3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the
"Refunding Law ").
The Bonds are being issued pursuant to an Indenture of Trust, dated as of 1,
2017 (the "Indenture "), by and between the Successor Agency and U.S. Bank National
Association, as trustee (the "Trustee "). We have examined the law and such certified
proceedings and other papers as we deem necessary to render this opinion.
As to questions of fact material to our opinion, we have relied upon representations of
the Successor Agency contained in the Indenture, and in certified proceedings and other
certifications of public officials furnished to us, without undertaking to verify such facts by
independent investigation.
Based upon the foregoing, we are of the opinion, under existing law, as follows:
1. The Successor Agency is duly created and validly existing as a public entity, with
the power to enter into the Indenture, perform the agreements on its part contained therein, and
issue the Bonds.
2. The Indenture has been duly approved by the Successor Agency, and constitutes
a valid and binding obligation of the Successor Agency, enforceable against the Successor
Agency in accordance with its terms.
3. Pursuant to the Law, the Dissolution Act and the Refunding Law, the Indenture
creates a valid lien on the funds pledged by the Indenture for the security of the Bonds, subject
to no prior lien granted under the Law, the Dissolution Act and the Refunding Law, except to the
extent described in the Indenture.
4. The Bonds have been duly authorized, executed and delivered by the Successor
Agency, and are valid and binding special obligations of the Successor Agency, payable solely
from the sources provided therefor in the Indenture.
5. The interest on the Bonds is excluded from gross income for federal income tax
purposes and is not an item of tax preference for purposes of the federal alternative minimum
tax imposed on individuals and corporations; although for the purpose of computing the
alternative minimum tax imposed on corporations (as defined for federal income tax purposes),
such interest is taken into account in determining certain income and earnings. The opinions set
forth in the preceding sentence are subject to the condition that the Successor Agency comply
with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to
the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from
gross Jncome for federal income tax purposes. The Successor Agency has covenanted to
comply with each such requirement. Failure to comply with certain of such requirements may
cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to
be retroactive to the date of issuance of the Bonds. We express no opinion regarding other
federal tax consequences arising with respect to the ownership, sale or disposition of the
Bonds, or the amount, accrual or receipt of interest on the Bonds.
6. The interest on the Bonds is exempt from personal income taxation imposed by the
State of California.
The rights of the owners of the Bonds, and the enforceability of the Bonds and the
Indenture, may be subject to bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting creditors' rights heretofore or hereafter enacted, and may also be subject
to the exercise of judicial discretion in appropriate cases. This opinion is given as of the date
hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or
circumstances that may hereafter come to our attention, or any changes in law that may
hereafter occur. Our engagement with respect to this matter has terminated as of the date
hereof.
Respectfully submitted,
A Professional Law Corporation
MN
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BOOK -ENTRY ONLY SYSTEM
The information in this Appendix C concerning The Depository Trust Company ( "DTC "),
New York, New York, and DTC's book -entry system has been obtained from DTC and the
Successor Agency takes no responsibility for the completeness or accuracy thereof. The
Successor Agency cannot and does not give any assurances that DTC, DTC Participants or
Indirect Participants will distribute to the Beneficial Owners (a) payments of interest, principal or
premium, if any, with respect to the Bonds, (b) certificates representing ownership interest in or
other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to
DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do
on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the
manner described in this Appendix. The current "Rules" applicable to DTC are on file with the
Securities and Exchange Commission and the current "Procedures" of DTC to be followed in
dealing with DTC Participants are on file with DTC.
The Depository Trust Company ( "DTC "), New York, NY, will act as securities depository
for the Bonds. The Bonds will be issued as fully- registered securities registered in the name of
Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully- registered certificate will be issued for each
maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be
deposited with DTC.
DTC, the world's largest securities depository, is a limited - purpose trust company
organized under the New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing Successor
Agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non -U.S.
equity issues, corporate and municipal debt issues, and money market instruments (from over
100 countries) that DTC's participants ( "Direct Participants ") deposit with DTC. DTC also
facilitates the post -trade settlement among Direct Participants of sales and other securities
transactions in deposited securities, through electronic computerized book -entry transfers and
pledges between Direct Participants' accounts. This eliminates the need for physical movement
of securities certificates. Direct Participants include both U.S. and non -U.S. securities brokers
and dealers, banks, trust companies, clearing corporations, and certain other organizations.
DTC is a wholly -owned subsidiary of The Depository Trust & Clearing Corporation ( "DTCC ").
DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed
Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by
the users of its regulated subsidiaries. Access to the DTC system is also available to others
such as both U.S. and non -U.S. securities brokers and dealers, banks, trust companies, and
clearing corporations that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ( "Indirect Participants "). DTC has a Standard & Poor's
rating of AA +. The DTC Rules applicable to its Participants are on file with the Securities and'
Exchange Commission. More information about DTC can be found at www.dtcc.com. The
information set forth on such website is not incorporated herein by reference.
Purchases of Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest
of each actual purchaser of each Bond ( "Beneficial Owner ") is in turn to be recorded on the
C -1
Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase. Beneficial Owners are, however, expected to receive written
confirmations providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into
the transaction. Transfers of ownership interests in the Bonds are to be accomplished by
entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their ownership interests in
Bonds, except in the event that use of the book -entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC
are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as
may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and
their registration in the name of Cede & Co. or such other DTC nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such
Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect
Participants will remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Direct Participants, by
Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to
Beneficial Owners will be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may
wish to take certain steps to augment the transmission to them of notices of significant events
with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments
to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that
the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to
Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and
addresses to the registrar and request that copies of notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity
are being redeemed, DTC's practice is to determine by lot the amount of the interest of each
Direct Participant in such maturity to be redeemed.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Successor
Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Principal, premium (if any), and interest payments on the Bonds will be made to Cede &
Co., or such other nominee as may be requested by an authorized representative of DTC.
DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and
corresponding detail information from the Successor Agency or the Trustee, on payable date in
accordance with their respective holdings shown on DTC's records. Payments by Participants
to Beneficial Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the
Successor Agency, subject to any statutory or regulatory requirements as may be in effect from
time to time. Principal, premium (if any), and interest payments with respect to the Bonds to
C -2
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Cede & Co. (or such other nominee as may be requested by an authorized representative of
DTC) is the responsibility of the Successor Agency or the Trustee, disbursement of such
payments to Direct Participants will be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as depository with respect to the Bonds at
any time by giving reasonable notice to the Successor Agency or the Trustee. Under such
circumstances, in the event that a successor depository is not obtained, certificates representing
the Bonds are required to be printed and delivered.
The Successor Agency may decide to discontinue use of the system of book - entry-only
transfers through DTC (or a successor securities depository). In that event, representing the
Bonds will be printed and delivered to DTC in accordance with the provisions of the Indenture.
The information in this section concerning DTC and DTC's book -entry system has been
obtained from sources that the Successor Agency believes to be reliable, but the Successor
Agency takes no responsibility for the accuracy thereof.
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APPENDIX D
FORM OF SUCCESSOR AGENCY CONTINUING DISCLOSURE CERTIFICATE
This CONTINUING DISCLOSURE CERTIFICATE (this "Disclosure Certificate ") is
executed and delivered by the PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR
AGENCY (the "Successor Agency ") in connection with the issuance of $
Petaluma Community Development Successor Agency Tax Allocation Refunding Bonds Series
2017 (the "Bonds "). The Bonds are being issued pursuant to an Indenture of Trust dated as of
April 1, 2007, as supplemented, including by a Fourth Supplement to Indenture, dated as of
2017 (the "Indenture "), by and between the Successor Agency and U.S. Bank
National Association, as trustee. The Successor Agency covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being
executed and delivered by the Successor Agency for the benefit of the holders and beneficial
owners of the Bonds and in order to assist the Participating Underwriter in complying with
S.E.C. Rule 15c2- 12(b)(5).
Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply
to any capitalized term used in this Disclosure Certificate, unless otherwise defined, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Successor Agency
pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
"Dissemination Agent" shall mean , or any successor
Dissemination Agent designated in writing by the Successor Agency and which has filed with
the Successor Agency a written acceptance of such designation.
"EMMA System" shall mean the Electronic Municipal Market Access system of the
MSRB or such other electronic system designated by the MSRB or the Securities and Exchange
Commission for compliance with S.E.0 Rule 15c2- 12(b).
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure
Certificate.
WSRB" means the Municipal Securities Rulemaking Board, which has been designated
by the Securities and Exchange Commission as the sole repository of disclosure information for
purposes of the Rule.
"Participating Underwriter" shall mean any of the original underwriters of the Bonds
required to comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2- 12(b)(5) adopted by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as the same may be amended from
time to time.
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Section 3. Provision of Annual Reports.
(a) The Successor Agency shall, or shall cause the Dissemination Agent to, not later
than nine (9) months after the end of the Successor Agency's fiscal year (which date currently
would be April 1, based upon the June 30 end of the Successor Agency's fiscal year),
commencing with the report for the 2016 -17 fiscal year, provide to the MSRB through the EMMA
System an Annual Report which is consistent with the requirements of Section 4 of this
Disclosure Certificate. Not later than fifteen (15) Business Days prior to said date, the
Successor Agency shall provide the Annual Report to the Dissemination Agent (if other than the
Successor Agency). The Annual Report may be submitted as a single document or as separate
documents comprising a package, and may include by reference other information as provided
in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the
Successor Agency may be submitted separately from the balance of the Annual Report, and
later than the date required above for the filing of the Annual Report if not available by that date.
If the Successor Agency's fiscal year changes, it shall give notice of such change in the same
manner as for a Listed Event under Section 5(c).
(b) If the Successor Agency is unable to provide to the MSRB through the EMMA
System an Annual Report by the date required in subsection (a), the Successor Agency shall
provide to the MSRB, in electronic format as prescribed by the MSRB through the EMMA
System, a notice in substantially the form attached as Exhibit A.
(c) The Dissemination Agent shall:
(i) determine each year prior to the Annual Report Date the then - applicable
rules and electronic format prescribed by the MSRB for the filing of annual
continuing disclosure reports; and
(ii) if the Dissemination Agent is other than the Successor Agency, file a
report with the Successor Agency certifying that the Annual Report has been
provided pursuant to this Disclosure Certificate, stating the date it was provided
to the MSRB through the EMMA System pursuant to this Disclosure Certificate.
Section 4. Content of Annual Reports. The Successor Agency's Annual Report shall
contain or incorporate by reference the following:
(a) Audited Financial Statements of the Successor Agency prepared in accordance
with generally accepted accounting principles as promulgated to apply to governmental entities
from time to time by the Governmental Accounting Standards Board. If such audited financial
statements are not available by the time the Annual Report is required to be filed pursuant to
Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar
to the financial statements contained in the final Official Statement, and the audited financial
statements shall be filed in the same manner as the Annual Report when they become
available.
(b) Unless otherwise provided in the audited financial statements filed on or prior to
the annual filing deadline for the Annual Reports provided for in Section 3 above, financial
information and operating data with respect to the Successor Agency for the preceding fiscal
year, substantially similar to that provided in the corresponding tables and charts in the Official
Statement for the Bonds, as follows:
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(i) identity of pending and successful appeals of assessed values in the Project
Area, but only if total appeals exceed, in the aggregate, 5% of assessed value in
the Project Area;
(ii) summary of taxable value in the Project Area for the most recent fiscal year;
(iii) a listing of the ten major property tax assessees in the Project Area;
(iv) summary of the Tax Revenues, the debt service for the Bonds and any Additional
Bonds and the debt service coverage ratio for the Bonds and any Additional
Bonds for the current fiscal year; and
(v) assessed valuation in the Project Area for the most recent fiscal year.
Any or all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the Successor Agency or related
public entities, which have been submitted to the MSRB through the EMMA System or the
Securities and Exchange Commission. If the document included by reference is a final official
statement, it must be available from the Municipal Securities Rulemaking Board. The Successor
Agency shall clearly identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) The Successor Agency shall give, or cause to be given, notice of the occurrence of
any of the following Listed Events with respect to the Bonds:
(1) Principal and interest payment delinquencies.
(2) Non - payment related defaults, if material.
(3) Unscheduled draws on debt service reserves reflecting financial
difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial
difficulties.
(5) Substitution of credit or liquidity providers, or their failure to perform.
(6) Adverse tax opinions, the issuance by the Internal Revenue Service of
proposed or final determinations of taxability, Notices of Proposed Issue
(IRS Form 5701 -TEB) or other material notices or determinations with
respect to the tax status of the security, or other material events affecting
the tax status of the security.
(7) Modifications to rights of security holders, if material.
(8) Bond calls, if material, and tender offers.
(9) Defeasances.
5.
L(
(10) Release, substitution, or sale of property securing repayment of the
securities, if material.
(11) Rating changes.
(12) Bankruptcy, insolvency, receivership or similar event of the Successor
Agency or other obligated person.
(13) The consummation of a merger, consolidation, or acquisition involving the
Successor Agency or an obligated person, or the sale of all or
substantially all of the assets of the Successor Agency or an obligated
person (other than in the ordinary course of business), the entry into a
definitive agreement to undertake such an action, or the termination of a
definitive agreement relating to any such actions, other than pursuant to
its terms, if material.
(14), Appointment of a successor or additional trustee or the change of name
of a trustee, if material.
(b) The Successor Agency shall, or shall cause the Dissemination Agent (if not the
Successor Agency) to, file a notice of such occurrence with the MSRB through the EMMA
System, in a timely manner not in excess of 10 business days after the occurrence of the Listed
Event. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(8)
and (9) above need not be given under this subsection any earlier than the notice (if any) of the
underlying event is given to holders of affected Bonds under the Indenture.
(c) The Successor Agency acknowledges that the events described in subparagraphs
(a)(2), (a)(7), (a)(8) (if the event is a bond call), (a)(10), (a)(13), and (a)(14) of this Section 5
contain the qualifier "if material." The Successor Agency shall cause a notice to be filed as set
forth in paragraph (b) above with respect to any such event only to the extent that the
Successor Agency determines the event's occurrence is material for purposes of U.S. federal
securities law. The Dissemination Agent shall not be responsible for determining whether an
event is material.
Section 6. Termination of Reporting Obligation. The Successor Agency's obligations
under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or
payment in full of all of the Bonds or upon the delivery to the Dissemination Agent of an opinion
of nationally recognized bond counsel retained by the Successor Agency to the effect that
continuing disclosure is no longer required. If such termination occurs prior to the final maturity
of the Bonds, the Successor Agency shall give notice of such termination in the same manner
as for a Listed Event under Section 5(c).
D -7
Section 7. Dissemination Agent.
(a) The Successor Agency may, from time to time, appoint or engage a Dissemination
Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may
discharge any such Dissemination Agent, with or without appointing a successor Dissemination
Agent. The Dissemination Agent shall not be responsible in any manner for the content of any
notice or report prepared by the Successor Agency pursuant to this Disclosure Certificate,
unless the Successor Agency is the Dissemination Agent, as provided herein. The initial
Dissemination Agent shall be Willdan Financial Services. If at any time there is no designated
Dissemination Agent appointed by the Successor Agency, or if the Dissemination Agent so
appointed is unwilling or unable to perform the duties of Dissemination Agent hereunder, the
Successor Agency shall be the Dissemination Agent and undertake or assume its obligations
hereunder. The Dissemination Agent may resign by providing thirty days written notice to the
Successor Agency and the Trustee.
Any company succeeding to all or substantially all of the Dissemination Agent's
corporate trust business shall be the successor to the Dissemination Agent hereunder without
the execution or filing of any paper or any further act. The Dissemination Agent may resign its
duties hereunder at any time upon written notice to the Successor Agency.
(b) The Dissemination Agent shall be paid compensation by the Successor Agency for
its services provided hereunder in accordance with its schedule of fees as agreed to between
the Dissemination Agent and the Successor Agency from time to time and for all expenses,
legal fees and advances made or incurred by the Dissemination Agent in the performance of its
duties hereunder. The Dissemination Agent (unless the Successor Agency is the Dissemination
Agent) shall have no duty or obligation to review any information provided to it by the Successor
Agency hereunder and shall not be deemed to be acting in any fiduciary capacity for the
Successor Agency, holders or beneficial owners or any other party. The Dissemination Agent
may rely and shall be protected in acting or refraining from acting upon any direction from the
Successor Agency or an opinion of nationally recognized bond counsel retained by the
Successor Agency.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the Successor Agency may amend this Disclosure Certificate, and any provision of
this Disclosure Certificate may be waived, provided that the following conditions are satisfied
(provided no amendment or waiver shall be made that affects the duties or rights of the
Dissemination Agent without its written consent):
(a) if the amendment or waiver relates to the provisions of Sections 3(a), 4 or 5(a), it may
only be made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature, or status of an obligated person
with respect to the Bonds, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion
of nationally recognized bond counsel retained by the Successor Agency, have complied with
the requirements of the Rule at the time of the primary offering of the Bonds, after taking into
account any amendments or interpretations of the Rule, as well as any change in
circumstances; and
(c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in
the manner provided in the Indenture for amendments to the Indenture with the consent of
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holders, or (ii) does not, in the opinion of nationally recognized bond counsel retained by the
Successor Agency, materially impair the interests of the holders or beneficial owners of the
Bonds.
If the annual financial information or operating data to be provided in the Annual Report
is amended pursuant to the provisions hereof, the first annual financial information filed
pursuant hereto containing the amended operating data or financial information shall explain, in
narrative form, the reasons for the amendment and the impact of the change in the type of
operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be
followed in preparing financial statements, the annual financial information for the year in which
the change is made shall present a comparison between the financial statements or information
prepared on the basis of the new accounting principles and those prepared on the basis of the
former accounting principles. The comparison shall include a qualitative discussion of the
differences in the accounting principles and the impact of the change in the accounting
principles on the presentation of the financial information, in order to provide information to
investors to enable them to evaluate the ability of the Successor Agency to meet its obligations.
To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change
in the accounting principles shall be sent to the MSRB through the EMMA System in the same
manner as for a Listed Event under Section 5(c).
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed
to prevent the Successor Agency from disseminating any other information, using the means of
dissemination set forth in this Disclosure Certificate or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Certificate. If the Successor Agency
chooses to include any information in any Annual Report or notice of occurrence of a Listed
Event in addition to that which is specifically required by this Disclosure Certificate, the
Successor Agency shall have no obligation under this Disclosure Certificate to update such
information or include it in any future Annual Report or notice of occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the Successor Agency to comply with any
provision of this Disclosure Certificate, the Participating Underwriter or any holder or beneficial
owner of the Bonds may take such actions as may be necessary and appropriate, including
seeking mandate or specific performance by court order, to cause the Successor Agency to
comply with its obligations under this Disclosure Certificate. A default under this Disclosure
Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy
under this Disclosure Certificate in the event of any failure of the Successor Agency to comply
with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Dissemination Agent. All of the
immunities, indemnities, and exceptions from liability in Article VI of the Indenture insofar as
they relate to the Trustee shall apply to the Trustee and the Dissemination Agent in this
Disclosure Certificate. The Dissemination Agent shall have only such duties as are specifically
set forth in this Disclosure Certificate, and the Successor Agency agrees to indemnify and save
the Dissemination Agent, its officers, directors, employees and agents, harmless against any
loss, expense and liabilities which it may incur arising out of or in the exercise or performance of
its powers and duties hereunder, including the costs and expenses (including attorneys fees) of
defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's
negligence or willful misconduct. The Dissemination Agent may rely and shall be protected in
1 •
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acting or refraining from acting upon any direction from the Successor Agency or an opinion of
nationally recognized bond counsel retained by the Successor Agency. The obligations of the
Successor Agency under this Section shall survive resignation or removal of the Dissemination
Agent and payment of the Bonds. No person, other than the Successor Agency, shall have any
right to commence any action against the Trustee or Dissemination Agent seeking any remedy
other than to compel specific performance of this Disclosure Certificate.
Section 92. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of
the Successor Agency, the Dissemination Agent, the Participating Underwriter and holders and
beneficial owners from time to time of the Bonds, and shall create no rights in any other person
or entity.
Dated:
PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY
91
► 'IF
Title
D -10
EXHIBIT A
NOTICEJO MUNICIPAL SECURITIES RULEMAKING
BOARD OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: Petaluma Community Development Successor Agency
Name of Bond Issue: $ Petaluma Community Development Successor
Agency Tax Allocation Refunding Bonds Series 2017
Date of Issuance: 2017
NOTICE IS HEREBY GIVEN that the Petaluma Community Development Successor
Agency (the "Issuer ") has not provided an Annual Report with respect to the above -named
Bonds as required by the Indenture of Trust, dated as of April 1, 2007, as supplemented, by and
between the Petaluma Community Development Successor Agency and U.S. Bank National
Association, as trustee. The Issuer anticipates that the Annual Report will be filed by
Dated:
cc: Trustee
PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY
am
I-FTiIMT
Title
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APPENDIX E
SUCCESSOR AGENCY FINANCIAL STATEMENTS
FOR FISCAL YEAR ENDED JUNE 30, 2016
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APPENDIX F
STATE DEPARTMENT OF FINANCE APPROVAL LETTER
9
as
APPENDIX G
CITY OF PETALUMA AND SONOMA COUNTY GENERAL INFORMATION
The following information in this section of the Official Statement concerning the City of
Petaluma and surrounding areas is included only for the purpose of supplying general
information regarding the community., The taxing power of the City of Petaluma, Sonoma
County, the State of California, and any political subdivision thereof is not pledged to the
payment of the Bonds. The Bonds are not a debt of the City of Petaluma, Sonoma County, the
State of California, or any of its political subdivisions, and neither the City, the County, the State
nor any of its political subdivisions is liable therefor.
Location and Organization
City of Petaluma. The City of Petaluma (the "City ") is located in Sonoma County,
approximately 40 miles north of the City of San Francisco. Situated along Highway 101,
Petaluma is part of the San Francisco Bay metropolitan area and the entrance to California's
renowned wine grape growing region.
Incorporated in 1858, its first charter was granted by the State in 1947, and it continues
to operate as a charter city. Municipal operations are conducted under the Council- Manager
form of government. The seven Council Members are elected at large for four -year, staggered
terms. The Mayor presides over all Council meetings. The City manager is responsible for the
operation of all municipal functions.
Sonoma County. One of California's original 27 counties (incorporated in 1850),
Sonoma County (the "County ") is the northernmost of the nine greater San Francisco Bay Area
counties. Bordered on the north and east by Mendocino, Lake, and Napa counties and to the
west and south by the Pacific Ocean, Marin County, and San Pablo Bay, its area encompasses
1,598 square miles.
Geographically, Sonoma County is divided almost equally into mountainous regions,
rolling hills .and valley land. Three narrow valleys, separated by mountains, run northwest to
southeast. Elevations range from sea level to 4,262 feet at Mt. Saint Helena, where Sonoma,
Napa, and Lake counties converge.
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Population
The historic population estimates of the cities in the County as of January 1 of the past
five years are shown in the following table.
CITY OF PETALUMA, COUNTY OF SONOMA & STATE OF CALIFORNIA
Population Estimates
(As of January 1)
Source: California State Department of Finance, Demographic Research Unit
Employment
The City's major employers as set forth in the City's Comprehensive Annual Report for
Fiscal Year ending as of June 30, 2016 are set forth in the table below. The City's
Comprehensive Annual Report for Fiscal Year ending June 30, 2017 is not yet available.
CITY OF PETALUMA
Principal Employers
(As of June 30, 2016)
Company
1. Petaluma School District
2. Petaluma Poultry Processors
3. Petaluma Valley Hospital
4. City Of Petaluma
5. Enphase Energy Inc
6. Lagunita's Brewing Company
7. Santa Rosa Junior College
8. Hansel Auto (includes Honda,
9. Calix Networks Inc.
10. Clover Stornetta Farms
Total Principal Employers
Toyota, Henry Curtis Ford, and Mgt)
Em
Source: City of Petaluma Comprehensive Annual Financial Report for Fiscal Year 2015 -16.
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1,300
597
501
362
342
320
300
273
254
235
4,484
t
2012
2013
2014
2015
2016
Cloverdale
8,642
8,700
8,736
8,799
8,825
Cotati
7,190
7,113
7,118
7,144
7,153
Healdsburg
11,410
11,439
11,544
11,667
11,699
Petaluma
58,195
58,889
59,508
59,934
60,375
Rohnert Park
40,840
41,262
41,463
41,797
42,003
Santa Rosa
169,168
170,895
172,317
174,475
175,667
Sebastopol
7,387
7,406
7,448
7,502
7,527
Sonoma
10,606
10,596
10,722
10,826
10,865
Windsor
26,818
26,710
26,821
26,961
27,031
Unincorporated
147,231
148,640
149,576
150,247
150,814
County Total
487,487
491,650
495,253
499,352
501,959
Source: California State Department of Finance, Demographic Research Unit
Employment
The City's major employers as set forth in the City's Comprehensive Annual Report for
Fiscal Year ending as of June 30, 2016 are set forth in the table below. The City's
Comprehensive Annual Report for Fiscal Year ending June 30, 2017 is not yet available.
CITY OF PETALUMA
Principal Employers
(As of June 30, 2016)
Company
1. Petaluma School District
2. Petaluma Poultry Processors
3. Petaluma Valley Hospital
4. City Of Petaluma
5. Enphase Energy Inc
6. Lagunita's Brewing Company
7. Santa Rosa Junior College
8. Hansel Auto (includes Honda,
9. Calix Networks Inc.
10. Clover Stornetta Farms
Total Principal Employers
Toyota, Henry Curtis Ford, and Mgt)
Em
Source: City of Petaluma Comprehensive Annual Financial Report for Fiscal Year 2015 -16.
G -2
1,300
597
501
362
342
320
300
273
254
235
4,484
t
The County's major employers as of June 30, 2015 are set forth in the following table.
COUNTY OF SONOMA
Major Employers
(As of June 30, 2016)
(1) As of Fall 2014.
(2) As of March 2015.
Source; County of Sonoma Comprehensive Annual Financial Report for Fiscal Year 2015 -16.
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Number of
Company
Employees (2)
County of Sonoma
3,855
Santa Rosa Junior College
3,733
Kaiser Permanente
2,640
Granton Resort and Casino
2,000
St. Joseph's Health System
1,578
Keysight Technologies
1,300
City of Santa Rosa
1,254
Sonoma State University ���
1,505
Sutter Santa Rosa Regional Hospital
936
Amy's Kitchen
870
(1) As of Fall 2014.
(2) As of March 2015.
Source; County of Sonoma Comprehensive Annual Financial Report for Fiscal Year 2015 -16.
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The City is included in the Santa Rosa Metropolitan Statistical Area ( "MSA "), which
consists of the County. The unemployment rate in the Sonoma County was 3.8 percent in
February 2017, down from a revised 4.1 percent in January 2017, and below the year -ago
estimate of 4.3 percent. This compares with an unadjusted unemployment rate of 5.2 percent
for California and 4.9 percent for the nation during the same period.
The following table shows the average annual estimates for the County's civilian labor
force, employed labor force, unemployment rate, and employment by industry for the years
2012 to 2016.
SANTA ROSA MSA
(Sonoma County)
Annual Average Civilian Labor Force, Employment and Unemployment,
Employment by Industry
(March 2016 Benchmark)
Waoe and Salary Emolovment (2)
Agriculture
Mining and Logging
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation, Warehousing and Utilities
Information
Finance and Insurance
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Federal Government
State Government
Local Government
Total, All Industries (3)
6,000
2012
2013
2014
2015
2016
Civilian Labor Force (1)
246,700
250,500
257,600
260,300
260,500
Employment
224,800
232,800
243,200
248,700
250,200
Unemployment
21,900
17,700
14,400
11,700
10,300
Unemployment Rate
8.9%
7.1%
5.6%
4.5%
4.0%
Waoe and Salary Emolovment (2)
Agriculture
Mining and Logging
Construction
Manufacturing
Wholesale Trade
Retail Trade
Transportation, Warehousing and Utilities
Information
Finance and Insurance
Professional and Business Services
Educational and Health Services
Leisure and Hospitality
Other Services
Federal Government
State Government
Local Government
Total, All Industries (3)
6,000
6,300
6,100
6,000
6,200
200
200
300
200
200
8,800
9,900
10,500
11,600
12,500
19,700
20,100
20,700
22,000
22,300
6,900
7,400
7,500
7,500
7,700
22,700
23,700
24,300
24,700
24,800
3,900
4,100
4,300
4,300
4,200
2,600
2,600
2,700
2,700
2,700
4,600
4,700
4,800
5,000
5,200
18,200
19,300
20,100
20,400
21,100
26,200
27,900
31,200
32,100
33,100
21,800
22,800
23,800
24,600
25,000
6,300
6,600
6,800
7,000
7,300
1,500
1,400
1,300
1,300
1,300
4,700
4,600
5,000
5,100
5,000
21,900
22,900
24,900
25,400
26,100
178,500 187,100 197,100 202,800 207,800
(1) Labor force data is by place of residence; includes self - employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
(2) Industry employment is by place of work; excludes self - employed individuals, unpaid family workers,
household domestic workers, and workers on strike.
(3) Totals may not add due to rounding.
Source: State of California Employment Development Department.
G -4
Effective Buying Income
"Effective Buying Income" is defined as personal income less personal tax and nontax
payments, a number often referred to as "disposable" or "after -tax" income. Personal income is
the aggregate of wages and salaries, other labor- related income (such as employer
contributions to private pension funds), proprietor's income, rental income (which includes
imputed rental income of owner - occupants of non -farm dwellings), dividends paid by
corporations, interest income from all sources, and transfer payments (such as pensions and
welfare assistance). Deducted from this total are personal taxes (federal, state and local),
nontax payments (fines, fees, penalties, etc.) and personal contributions to social insurance.
According to U.S. government definitions, the resultant figure is commonly known as
"disposable personal income."
The following table summarizes the median household effective buying income for the
City, the County, the State of California and the United States for the period 2011 through 2015.
COUNTY OF SONOMA
Median Effective Buying Income
Source: The Nielsen Company (US), Inc.
G -5
CA
2011
2012
2013
2014
2015
Petaluma
$58,107
$50,414
$60,794
$62,267
$67,405
Sonoma County
50,113
45,164
51,899
53,069
56,067
California
47,062
47,307
48,340
50,072
53,589
United States
41,253
41,358
43,715
45,448
46,738
Source: The Nielsen Company (US), Inc.
G -5
CA
Commercial Activity
Summaries of historic taxable sales within the City and County during the past five years for
which data are available are shown in the following tables. Annual data are not yet available for
calendar years 2015 and 2016.
CITY OF PETALUMA
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in Thousands)
(1) Not comparable to prior years. "Retail' category now includes "Food Services."
Source: State Board of Equalization.
Retail Stores
Total All Outlets
Numbers
Taxable
Number
Taxable
of Permits
Transactions
of Permits
Transactions
2010
1,360
$621,954
2,092
$805,825
2011
1,346
673,707
2,076
869,638
2012
1,398
724,772
2,124
921,574
2013
1,536
808,203
2,257
1,028,346
2014
1,590
864,189
2,312
1,100,262
(1) Not comparable to prior years. "Retail' category now includes "Food Services."
Source: State Board of Equalization.
Source: State of California, Board of Equalization.
G -6
SONOMA COUNTY
Taxable Retail Sales
Number of Permits and Valuation of Taxable Transactions
(Dollars in Thousands)
Retail
Stores
Total All Outlets
Numbers
Taxable
Number
Taxable
of Permits
Transactions of Permits
Transactions
2010
10,997
$4,583,801
17,303
$6,485,950
2011
10,799
4,895,477
16,972
6,962,114
2012
11,105
5,228,062
17,311
7,382,997
2013
11,586
5,618,188
17,788
8,017,882
2014
11,881
5,931,984
18,179
8,467, 551
Source: State of California, Board of Equalization.
G -6
Construction Activity
Building activity for the years 2011 through 2015 in the City and the County is shown in
the following tables.
CITY OF PETALUMA
Total Building Permit Valuations
(Dollars in Thousands)
2011 through 2015
Source: Construction Industry Research Board, Building Permit Summary
2011
2012
2013
2014
2015
Permit Valuation
(Dollars in Thousands)
New Single-family
$21,596.5
$17,022.1
$16,653.2
$3,876.7
$12,280.9
New Multi- family
4,803.2
15,290.0
4,053.1
14,603.8
5,698.2
Res. Alterations /Additions
6,844.8
6,561.0
12,872.2
8,386.3
13,233.6
Total Residential
$33,244.5
$38,873.1
$33,578.5
$26,866.8
$31,212.7
New Commercial
$44.0
$24,054.4
$19,136.0
$13,671.1
$10,268.3
New Industrial
0.0
1,964.3
0.0
0.0
0.0
New Other
69.0
0.0
2,384.6
1,214.5
947.4
Com. Alterations /Additions
14,715.7
25,711.1
20,223.3
16,016.3
24,654.9
Total Nonresidential
$14,828.7
$51,729.8
$41,743.9
$30,901.9
$35,870.6
New Dwelling Units
236
Multiple Family
184 318 732
214
206
Single Family
87
54
65
20
46
Multiple Family
68
116
272
144
64
TOTAL
155
170
337
164
110
Source: Construction Industry Research Board, Building Permit Summary
Source: Construction Industry Research Board, Building Permit Summary.
G -7
SONOMA COUNTY
Total Building Permit Valuations
(Dollars in Thousands)
2011 through 2015
2011 2012 2013
2014
2015
Permit Valuation
New Single- family
$114,931.4 $81,742.3 $91,419.1
$69,788.4
$65,968.4
New Multi- family
16,401.6 50,309.2 51,210.7
91,806.3
27,797.3
Res. Alterations /Additions
63,334.6 41,061.7 59,124.5
64,228.0
78,005.1
Total Residential
$194,667.6 $173,113.2 $201,754.3
$225,822.7
$171,770.8
New Commercial
$5,855.3 $43,428.1 $60,889.7
$55,718.9
$53,975.7
New Industrial
0.0 2,001.3 0.0
0.0
2,484.9
New Other
4,902.2 0.0 9,776.3
8,657.2
16,513.4
Com. Alterations /Additions
69,301.5 76,946.1 55,293.2
70,889.7
84,641.9
Total Nonresidential
$80,059.0 $122,375.5 $125,959.2
$135,265.8
$157,615.9
New Dwelling Units
Single Family
443 279 295
292
236
Multiple Family
184 318 732
214
206
TOTAL
627 597 1,027
506
442
Source: Construction Industry Research Board, Building Permit Summary.
G -7
Transportation
A local bus transit system serves the City of Petaluma, as well as Golden Gate Transit,
which provides access to the entire Bay Area. There is a municipal airport, and airport express
service to Oakland and San Francisco International airports, the major airports serving Sonoma
County,. There are active plans to expand rail services to the region, with funding to be provided
by a voter - approved sales tax increase, including the Sonoma - Marin Area Rail Transit
( "SMART "). SMART, a voter - approved passenger rail and bicycle pedestrian pathway project
located in Sonoma and Marin counties is currently being built and will serve a 70 -mile corridor
from the City of Larkspur to the City of Cloverdale.
[Remainder of page intentionally left blank]
G -8
■
Jones Hall Draft 4.13.17
ATTACHMENT 4
FOURTH SUPPLEMENT TO INDENTURE
Dated as of 1, 2017
by and between the
PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR AGENCY
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
Relating to
Petaluma Community Development Successor Agency
Merged Project Area
Tax Allocation Refunding Bonds, Series 2017
TABLE OF CONTENTS
ARTICLE XV
THE SERIES 2017 BONDS
Section15.01.
Definitions..... ................................................. ..............................................................
3
Section 15.02.
Authorization of Series 2017 Bonds ...............................................
..............................3
Section 15.03.
Terms of Series 2017 Bonds ..........................................................
..............................4
Section15.04.
Redemption .....................................................................................
..............................6
Section 15.05.
Redemption Procedures .................................................................
..............................6
Section 15.06.
Application of Proceeds of Sale of Series 2017 Bonds ..................
..............................6
Section 15.07.
Series 2017 Expense Account ........................................................
..............................7
Section 15.08.
Series 2017 Reserve Subaccount ..................................................
..............................7
Section 15.09
Rights of Series 2017 Bond Insurer ................................................
..............................7
Section 15.10.
Security for Series 2017 Bonds ......................................................
..............................7
Section 15.11.
Continuing Disclosure .....................................................................
..............................8
Section 15.12.
Tax Covenants ................................................................................
..............................8
Section 15.13.
Benefits Limited to Parties ..............................................................
..............................8
Section 15.14.
Effect of this Fourth Supplement ....................................................
..............................9
Section 15.15.
Partial Invalidity ...............................................................................
..............................9
Section 15.16.
Further Assurances .........................................................................
..............................9
Section 15.17.
Execution in Counterparts ..............................................................
..............................9
Section 15.18.
Governing Law ................................................................................
..............................9
EXHIBIT A FORM OF SERIES 2017 BOND
161
FOURTH SUPPLEMENT TO INDENTURE
This Fourth Supplement to Indenture (this "Fourth Supplement "), dated as of
1, 2017, is by and between the PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY, a public entity duly organized and existing under the laws of the State
of California (the "Successor Agency "), as successor to the Petaluma Community Development
Commission (the "Former Commission "), and U.S. BANK NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the United States of America (the
"Trustee ");
WITNESSETH.
WHEREAS, the Former Commission was duly established and authorized to transact
business and exercise powers under and pursuant to the provisions of the Community
Redevelopment Law, being Part 1 of Division 24 (commencing with Section 33000) of the
Health and Safety Code of the State of California (the "Law "), including the power to issue
bonds for any of its corporate purposes;
WHEREAS, pursuant to Section 33640 et seq. of the Law, the Former Commission was
authorized to issue bonds for any redevelopment purpose;
WHEREAS, the Former Commission has previously issued its $31,525,000 aggregate
principal amount of Petaluma Community Development Commission Merged Project Area
Subordinate Tax Allocation Bonds, Series 2007 (the "2007 Bonds ") under an Indenture dated as
of April 1, 2007 by and between the Former Commission and U.S. Bank National Association
(as supplemented by a First Supplement, Second Supplement, Third Supplement and this
Fourth Supplement, the "Indenture ") for the purpose of providing funds to finance and refinance
redevelopment activities in the Merged Project Area;
WHEREAS, the Former Commission has also previously issued its $11,369,000
aggregate principal amount of Petaluma Community Development Commission Merged Project
Area Subordinate Tax Allocation Bonds, Series 2011 (the "2011 Bonds ") pursuant to the
Indenture, as supplemented, for the purpose of providing funds to finance redevelopment
activities in the Merged Project Area;
WHEREAS, the Successor Agency in 2015 issued its $19,545,000 aggregate principal
amount of Tax Allocation Refunding Bonds, Series 2015A, currently outstanding in the principal
amount of $18,600,000; and its $16,060,000 aggregate principal amount of Tax Allocation
Refunding Bonds, Series 2015B, currently outstanding in the principal amount of $14,745,000
(together, the "2015 Bonds ");
WHEREAS, the 2007 Bonds, 2011 Bonds, 2015 Bonds are all parity obligations,
payable from Pledged Tax Revenues (as such term is defined in the Master Indenture and in
Section 2 of the Second Supplemental Indenture);
WHEREAS, the Indenture permits the issuance of Additional Bonds (as that term is
defined in Article IV of the Master Indenture and in Section 2 of the Second Supplemental
Indenture) on a parity basis with the 2015 Bonds, subject to certain conditions;
(6)-
WHEREAS, Assembly Bill X1 26, effective June 29, 2011, together with Assembly Bill
1484, effective June 27, 2012 (together, the "Dissolution Act ") resulted in the dissolution of the
Former Commission as of February 1, 2012, and the vesting in the Successor Agency of all of
the authority, rights, powers, duties and obligations of the Former Commission;
WHEREAS, Assembly Bill 1484, effective June 27, 2012 ( "AB 1484 "), authorizes the
Successor Agency to issue bonds pursuant to Article 11 (commencing with Section 53580) of
Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code (the "Refunding Law ") for
the purpose of achieving debt service savings within the parameters set forth in Section 13 of
AB 1484;
WHEREAS, the Successor Agency has determined that it can achieve debt service
savings within such parameters by the issuance pursuant to the Refunding Law of its
$ aggregate principal amount of Petaluma Community Development Successor
Agency Merged Project Area Tax Allocation Refunding Bonds, Series 2017 (the "Series 2017
Bonds ") to provide funds to refund the 2007 Bonds and 2011 Bonds;
WHEREAS, the conditions set forth in Section 4.01 and Section 4.02 of the Master
Indenture and in Section 2 of the Second Supplemental Indenture pertaining to the issuance of
Additional Bonds have been satisfied, and the Series 2017 Bonds will therefore be secured by a
pledge of and first lien on Pledged Tax Revenues as defined in the Master Indenture and
Second Supplemental Indenture, on parity with the pledge and lien securing the 2015 Bonds;
and
('(WHEREAS, the scheduled payment of principal of and interest due on the Series 2017
Bonds will be guaranteed under an insurance policy (the "Series 2017 Bond Insurance Policy ")
to be issued concurrently with the delivery of the Series 2017 Bonds by
(the "Series 2017 Bond Insurer ").]]
WHEREAS, the Successor Agency has certified that all acts and proceedings required
by law necessary to make the Series 2017 Bonds, when executed by the Successor Agency,
authenticated and delivered by the Trustee, and duly issued, the valid, binding and legal special
obligations of the Successor Agency in accordance with the Dissolution Act, and to constitute
this Fourth Supplement a valid and binding agreement for the uses and purposes herein set
forth in accordance with its terms, have been done and taken, and the execution and delivery of
the Fourth Supplement have been in all respects duly authorized.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto do hereby agree as follows:
2
ARTICLE XV
THE SERIES 2017 BONDS
Section 15.01. Definitions. Unless the context otherwise requires, the terms defined in
this Section 15.01 shall, for all purposes of this Article but not for any other purposes of this
Indenture, have the respective meanings specified in this Section 15.01. All terms defined in
Section 1.01 and not otherwise defined in Section 12.01 of the First Supplement, Section 13.01
of the Fourth Supplement, Section 14.01 of the Third Supplement, or this Section 15.01 shall,
when used in this Article XV, have the respective meanings given to such terms in Section 1.01.
"Article XV" means this Article XV which has been incorporated in and made a part of
this Indenture pursuant to the Fourth Supplement, together with all amendments of and
supplements to this Article XV entered into pursuant to the provisions of Section 15.01(b)(iii).
"Closing Date" means, with respect to the Series 2017 Bonds, the date on which the
Series 2017 Bonds are delivered to the Original Purchaser thereof.
"Continuing Disclosure Certificate" means, with respect to the Series 2017 Bonds, that
certain Continuing Disclosure Certificate relating to the Series 2017 Bonds executed by the
Successor Agency and dated the date of issuance .and delivery of the Series 2017 Bonds, as
originally executed and as it may be amended from time to time in accordance with the terms
thereof.
"Escrow Agent" means U.S. Bank National Association, as escrow agent under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Deposit and Trust Agreement dated as of
, 2017, by and between the Successor Agency and the Escrow Agent with respect
to the refunding of the 2007 Bonds and 2011 Bonds.
"Escrow Fund" means the escrow fund created and held by the Escrow Agent pursuant
to the Escrow Agreement.
"Interest Payment Date" means November 1 and May 1 in each year, commencing
November 1, 2017.
"Original Purchaser" means as the initial purchaser of the Series
2017 Bonds, and its successors and assigns.
"Series 2017 Bonds" means the Petaluma Community Development Successor Agency
Merged Project Area Tax Allocation Refunding Bonds, Series 2017, authorized pursuant to
Section 15.02 and at any time Outstanding under this Indenture.
"Series 2017 Bond Insurer" means
"Series 2017 Bond Insurance Policy" means
Series 2017 Expense Account" means the account by that name established and held
by the Trustee pursuant to Section 15.07.
I 0
"Series 2017 Reserve Account" means the account by that name within the Reserve
Account, established and held by the Trustee for the benefit of the Owners of the Series 2017
Bonds only pursuant to Section 15.08.
"Series 2017 Reserve Account Requirement" means, as of any date of calculation, an
amount equal to the lesser of: (i) Maximum Annual Debt Service on the Series 2017 Bonds; (ii)
ten percent (10 %) of the original principal amount of the Series 2017 Bonds; or (iii) 125% of
Average Annual Debt Service on the Series 2017 Bonds.
[[ "Series 2017 Surety Policy" means
"2007 Bonds" means the Former Commission's $31,525,000 aggregate principal amount
of Petaluma Community Development Commission Merged Project Area Subordinate Tax
Allocation Bonds, Series 2007.
"2011 Bonds" means the Former Commission's $11,369,000 aggregate principal amount
of Petaluma Community Development Commission Merged Project Area Subordinate Tax
Allocation Bonds, Series 2011.
"2017 Resolution" means Resolution No. of the governing Board of the
Petaluma Community Development Successor Agency adopted 2017
authorizing issuance of the Series 2017 Bonds.
Section 15.02. Authorization of Series 2017 Bonds. The Series 2017 Bonds have
been authorized to be issued and approved by the Successor Agency pursuant to the 2017
Resolution. The Series 2017 Bonds are issued as Additional Bonds in the aggregate principal
amount of Million Thousand Dollars ($ ) under and subject to
the terms of this Indenture, the Resolution, the Dissolution Act, the Refunding Law and the Law,
for the purpose of providing funds to refund the 2007 Bonds and 2011 Bonds in full. This
Indenture constitutes a continuing agreement with the Owners of all of the Series 2017 Bonds
issued hereunder and at any time Outstanding to secure the full payment when due of principal
of and premium, if any, and interest on all Series 2017 Bonds which may from time to time be
executed and delivered hereunder, subject to the covenants, agreements, provisions and
conditions herein contained. The Series 2017 Bonds shall be designated the "Petaluma
Community Development Successor Agency Merged Project Area Tax Allocation Refunding
Bonds, Series 2017."
The Series 2017 Bonds and the certificate of authentication to be executed thereon shall
be in substantially the form set forth as Exhibit A to this Fourth Supplement.
The Series 2017 Bonds shall be issued in book -entry only form, without coupons, in the
denomination of $5,000, or any integral multiple of $5,000 (not exceeding the principal amount
of Series 2017 Bonds maturing at any one time). The Series 2017 Bonds shall be numbered as
determined by the Trustee. The Series 2017 Bonds shall bear interest from the Interest
Payment Date next preceding the date of authentication thereof, unless such date of
authentication is during the period from the 16th day of the month next preceding an Interest
Payment Date to and including such Interest Payment Date, in. which event they shall bear
interest from such Interest Payment Date, or unless such date of authentication is on or before
the fifteenth day of the month next preceding the first Interest Payment Date, in which event
they shall bear interest from their dated date; provided, however, that if, at the time of
authentication of any Series 2017 Bond, interest is then in default on the Outstanding Series
4
[D
2017 Bonds, such Series 2017 Bond shall bear interest from the Interest Payment Date to which
interest previously has been paid or made available for payment on the Outstanding Series
2017 Bonds. Payment of interest on the Series
Principal on the Series 2017 Bonds due on or before the maturity or prior redemption of
such Series 2017 Bonds shall be made to the person whose name appears on the bond
registration books of the Trustee as the registered owner thereof, as of the close of business on
the applicable Record Date, such interest to be paid by check mailed on each Interest Payment
Date by first -class mail to such registered owner at such Owner's address as it appears on such
books, or, upon written request received by the Trustee prior to the fifteenth day of the month
preceding an Interest Payment Date, of an Owner of at least $1,000,000 in aggregate principal
amount of Series 2017 Bonds, by wire transfer in immediately available funds to an account
within the United States designated by such Owner.
Principal of and redemption premiums, if any, on the Series 2017 Bonds shall be
payable upon the surrender thereof at maturity or the earlier redemption thereof at the principal
corporate trust office of the Trustee or such other place as designated by the Trustee. Principal
of and redemption premiums, if any, and interest on the Bonds shall be paid in lawful money of
the United States of America.
Section 15.03. Terms of Series 2017 Bonds.
(a) The Series 2017 Bonds shall be dated the Closing Date and mature on
November 1 in each of the years and in the amounts, and shall bear interest (calculated on the
basis of a 360 -day year comprised of twelve 30 -day months) at the rates, as follows:
Principal Interest CUSIP
Maturity Amount Rate ( )
(b) Upon the execution and delivery of this Fourth Supplement, the Successor
Agency shall execute and deliver Series 2017 Bonds in the aggregate principal amount of
Bonds to
therefor.
to the Trustee and the Trustee shall authenticate and deliver the Series 2017
the Original Purchaser, upon receipt of a Written Request of the Successor Agency
Section 15.04. Redemption.
(a) Optional Redemption. The Series 2017 Bonds maturing on or after November 1,
are subject to redemption, as a whole or in part in such maturities as are selected by
the Successor Agency, prior to their respective maturity dates (or in the absence of such
direction, pro rata by maturity and by lot within a maturity), at the option of the Successor
Agency, on any date on or after November 1, at a redemption price equal to the
principal amount of Series 2017 Bonds called for redemption, together with interest accrued
thereon to the date fixed for redemption, without premium.
(b) Mandatory Sinking Fund Redemption. The Series 2017 Bonds are subject to
mandatory sinking fund redemption in part by lot, at a redemption price equal to 100% of the
principal amount thereof to be redeemed, without premium, in the aggregate respective principal
amounts and on May 1 in the respective years as set forth in the following table:
Sinking Fund Principal Amount
Redemption Date To Be Redeemed
Section 15.05. Redemption Procedures. Except as provided in this Fourth Supplement
the contrary, Section 2.04(b) through 2.12 of the Indenture shall also apply to the Series 2017
Bonds.
Section 15.06. Application of Proceeds of Sale of Series 2017 Bonds. Upon the
receipt of payment for the Series 2017 Bonds on the Closing Date, the net proceeds thereof,
being $ (consisting of the aggregate principal amount of the Bonds, less an
underwriting discount of $ , plus net original issue premium of
$ ), less the Series 2017 Bond Insurance Policy premium in the amount of
$ and the Series 2017 Reserve Surety premium in the amount of
$ wired by the Original Purchaser directly to the Series 2017 Bond Insurer,
shall be paid to the Trustee and deposited in a temporary fund (if required by the Trustee to
make the following transfers and deposits, which temporary fund shall be closed after such
transfers and deposits have been made), all of the amounts on deposit in which shall be
transferred on the Closing Date as follows:
(1) The Trustee shall transfer the amount of $ being the
remainder of the proceeds of the Series 2017 Bonds, to the Escrow Agent for deposit in
the Escrow Fund in accordance with the Escrow Agreement.
M
l
(2) The Trustee shall deposit in the Series 2017 Expense Account within the
Expense Fund an amount equal to $ to pay the costs incurred or to be
incurred by the Successor Agency in connection with the issuance of the Series 2017
Bonds.
Section 15.07. Series 2017 Expense Account. Costs of Issuance incurred in
connection with the issuance of the Series 2017 Bonds shall be paid from the Series 2017
Expense Account in accordance with Section 5.04 of the Indenture.
Section 15.08. Series 2017 Reserve Subaccount. (a) There is hereby established
a separate account within the Reserve Account established under Section 5.06 of the Master
Indenture to be known as the "Series 2017 Reserve Account" and the Trustee shall deposit
therein the Series 2017 Surety Policy, which shall be held by the Trustee in trust solely for the
benefit of the Original Purchaser and Owners of the Series 2017 Bonds. The Trustee shall draw
on the Series 2017 Surety Policy and apply amounts in the Series 2017 Reserve Account solely
for the purpose of making transfers to the Interest Account, the Principal Account and the
Sinking Account, in that order of priority, on any date on which the principal (whether at maturity
or as a sinking account payment) of or interest on the Series 2017 Bonds are due and payable,
if there is a deficiency at any time in any of such accounts related to the Series 2017 Bonds.
The Series 2017 Surety Policy and amounts on deposit in the Series 2017 Reserve Account
shall not secure or be applied to the payment of any obligations of the Successor Agency other
than the Series 2017 Bonds.
(b) Payment Procedure Pursuant to the 2017 Reserve Policy.
[to come from insurer]
(c) The Successor Agency hereby agrees that the 2017 Reserve Policy shall be
deemed to be satisfaction of the Reserve Account Requirement for the Series 2017 Bonds
pursuant to the terms of the Indenture.
Section 15.09. Rights of Series 2017 Bond Insurer. So long as the Series 2017 Bond
Insurance Policy is outstanding, notwithstanding anything to the contrary set forth in the
Indenture, the Successor Agency agrees as follows:
[to come from insurer]
Section 15.10. Security for Series 2017 Bonds. The Series 2017 Bonds are Additional
Bonds within the meaning of such term in Section 1.01 and shall be secured in the manner and
to the extent set forth in the Indenture. As provided in the Indenture, the Series 2017 Bonds
7
((-)
shall be secured on a parity with all other Bonds issued under this Indenture, including the 2015
Bonds, by a first pledge of and lien on all of the Pledged Tax Revenues and all money in the
Revenue Fund and in the funds or accounts so specified and provided for in this Indenture, as
well the special fund into which the Commission is required to deposit tax increment revenues
as required under the Law, whether held by the Commission or the Trustee. Pursuant to the
provisions of the Dissolution Act, all Additional Bonds shall also be equally secured by the
pledge and lien created with respect to Additional Bonds by Section 34177(g) of the Law on
moneys deposited from time to time in the Redevelopment Property Tax Trust Fund, as
provided herein and in the Second and Third Supplement to the Indenture. Except for Pledged
Tax Revenues and such moneys, no funds or properties of the Successor Agency shall be
pledged to, or otherwise liable for, the payment of principal of or interest on the Bonds.
Subsequent to the date of the Second and Third Supplement to the Indenture, the
Dissolution Act timing requirement for submission of Recognized Obligation Payment Schedules
was changed from semi - annual submissions to annual submissions. Due to such change, the
second to the last paragraph of Section 13.09 of the Third Supplement and 14.09 of the Third
Supplement is changed to the following:
In furtherance of the foregoing covenant, the Successor Agency covenants that not later
than February 1 of each year, the Successor Agency shall submit to the Oversight Board and to
the State Department of Finance a Recognized Obligation Payment Schedule for the following
fiscal year which shall include all scheduled interest and principal payments on all Outstanding
Bonds that are due and payable on November 1 of such calendar year, to the extent not
already held by the Successor Agency or the Trustee, together with all amounts required to
replenish the Reserve Account and all subaccounts established thereunder to the applicable
Reserve Account Requirement and all policy costs with respect to all Reserve Account Sureties
and other amounts due to any issuer of a Reserve Account Surety. Additionally, such
Recognized Obligation Payment Schedule shall include for disbursement to the Successor
Agency on January 2 of the following calendar year an amount equal to debt service on the
Bonds during such following calendar year, together with all amounts required to replenish the
Reserve Account and all subaccounts established thereunder to the applicable Reserve
Account Requirement and all policy costs with respect to all Reserve Account Sureties and
other amounts due to any issuer of a Reserve Account Surety.
Section 15.11. Continuing Disclosure. The Successor Agency hereby covenants and
agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure
Certificate. Notwithstanding any other provision of this Indenture, failure of the Successor
Agency to comply with the Continuing Disclosure Certificate shall not be considered an Event of
Default; however, any Participating Underwriter or any owner or beneficial owner of the Series
2017 Bonds may take such actions as may be necessary and appropriate, including seeking
specific performance by court order, to cause the Successor Agency to comply with its
obligations under this Section 15.12.
Section 15.12. Tax Covenants. The Successor Agency agrees to comply with the
requirements of Sections 5.12 with respect to the Series 2017 Bonds in addition to the Series
2015 Bonds.
Section 15.13. Benefits Limited to Parties. Nothing in this Fourth Supplement,
expressed or implied, is intended to give to any person other than the Successor Agency, the
Trustee, the Series 2017 Bond Insurer and the Owners of the Bonds, any right, remedy, claim
under or by reason of this Fourth Supplement. Any covenants, stipulations, promises or
E:3
(0
agreements in this Fourth Supplement contained by and on behalf of the Successor Agency
shall be for the sole and exclusive benefit of the Trustee and the Owners of the Bonds.
Section 15.14. Effect of this Fourth Supplement. Except as expressly provided in this
Fourth Supplement, every term and condition contained in the Indenture shall apply to this
Fourth Supplement and to the Series 2017 Bonds with the same force and effect as if the same
were herein set forth at length, with such omissions and variations thereof as may be
appropriate to make the same conform to this Fourth Supplement.
This Fourth Supplement and all the terms and provisions herein contained shall form
part of the Indenture as fully and with the same effect as if all such terms and provisions had
been set forth in the Indenture. The Indenture is hereby ratified and confirmed and shall
continue in full force and effect in accordance with the terms and provisions thereof, as
supplemented hereby.
As provided in Section 5.01, Section 5.02 and Section 5.03 of the Master Indenture, the
Series 2017 Bonds shall be secured on a parity with all other Bonds issued under this Indenture
by a first pledge of and lien on all of the Pledged Tax Revenues in the Revenue Fund and all
moneys in the accounts therein, including the Reserve Account.
Section 15.15. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase
of this Fourth Supplement shall for any reason be held illegal, invalid or unenforceable, such
holding shall not affect the validity of the remaining portions of this Fourth Supplement. The
Successor Agency hereby declares that it would have entered into this Fourth Supplement and
each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the
issue of the Series 2017 Bonds pursuant thereto irrespective of the fact that any one or more
Sections, paragraphs, sentences, clauses, or phrases of this Fourth Supplement may be held
illegal, invalid or unenforceable.
Section 15.16. Further Assurances. The Successor Agency will adopt, make, execute
and deliver any and all such further resolutions, instruments and assurances as may be
reasonably necessary or proper to carry out the intention or to facilitate the performance of this
Indenture, and for the better assuring and confirming unto the Owners of the Series 2017 Bonds
and the rights and benefits provided in the Indenture.
Section 15.17. Execution in Counterparts. This Fourth Supplement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one
and the same instrument.
Section 15.18. Governing Law. This Fourth Supplement shall be construed and
governed in accordance with the laws of the State of California.
SECTION 2. Attachment of Appendix F.
The Indenture is also hereby further amended by attaching thereto and incorporating
therein an Appendix F setting forth the form of the Series 2017 Bonds, which shall read
substantially asset forth in Exhibit A which is attached hereto and by this reference incorporated
herein.
D
I�
IN WITNESS WHEREOF, the PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR
AGENCY has caused this Fourth Supplement to be signed in its name by its Executive Director
and attested by its Secretary, and U.S. BANK NATIONAL ASSOCIATION, in token of its
acceptance of the trusts created hereunder, has caused this Fourth Supplement to be signed in
its corporate name by its officers thereunto duly authorized, all as of the day and year first
above written.
ATTEST:
go
Secretary
10
PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY
Executive Director
U.S. BANK NATIONAL ASSOCIATION, as
Trustee
Authorized Officer
►.
EXHIBIT A
APPENDIX F TO INDENTURE
(FORM OF SERIES 2017 BOND)
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR AGENCY
MERGED PROJECT AREA
TAX ALLOCATION REFUNDING BOND, SERIES 2017
INTEREST RATE: MATURITY DATE: DATED DATE:
% , 2017
REGISTERED OWNER:
PRINCIPAL AMOUNT:
The Petaluma Community Development Successor Agency, a public entity duly
organized and existing under the laws of the State of California (the "Successor Agency "), for
value received, hereby promises to pay to the Registered Owner specified above or registered
assigns (the "Registered Owner "), on the Maturity Date specified above, the Principal Amount
specified above in lawful money of the United States of America, and to pay interest thereon at
the Interest Rate specified above in like lawful money from the Interest Payment Date (as
hereinafter defined) next preceding the date of authentication of this Bond (unless this Bond is
authenticated on or before an Interest Payment Date and after the fifteenth (15th) calendar day
of the month preceding such Interest Payment Date (a "Record Date "), in which event it shall
bear interest from such Interest Payment Date, or unless this Bond is authenticated on or prior
to October 15, 2017, in which event it shall bear interest from the Dated Date specified above;
provided, however, that if, at the time of authentication of this Bond, interest is in default on this
Bond, this Bond shall bear interest from the Interest Payment Date to which interest hereon has
previously been paid or made available for payment), payable semiannually on November 1 and
May 1 in each year, commencing November 1, 2017 (the "Interest Payment Dates "), until
payment of such Principal Amount in full.
This Bond is one of a duly authorized issue of bonds of the Successor Agency
designated as the "Petaluma Community Development Successor Agency Merged Project Area
Tax Allocation Refunding Bonds, Series 2017" (the "Bonds ") of an aggregate principal amount
of Million Thousand Dollars ($ ), all of like tenor and date (except for such
variation, if any, as may be required to designate varying numbers, maturities or interest rates)
and all issued pursuant to the provisions of the Community Redevelopment Law of the State of
A -1
III
California, constituting Part 1 of Division 24 of the Health and Safety Code of the State of
California (the "Redevelopment Law "), pursuant to an Indenture, dated as of April 1, 2007, as
supplemented and amended, including as supplemented and amended by a Fourth Supplement
to Indenture, dated as of 1, 2017 (as so amended and supplemented, the
"Indenture "), pursuant to the Dissolution Act and pursuant the Refunding Law (as such terms
are defined in the Indenture). The Bonds have been issued on a parity with the certain
outstanding obligations of the Successor Agency as provided in the Indenture. Additional bonds
or other obligations may be issued on parity with the Bonds, but only subject to the terms of the
Indenture. Capitalized terms not otherwise defined herein shall have the meanings given them
in the Indenture.
All Bonds are equally and ratably secured in accordance with the terms and conditions
of the Indenture, and reference is hereby made to the Indenture, to any indentures
supplemental thereto and to the Law for a description of the terms on which the Bonds are
issued for the provisions with regard to the nature and extent of the security provided for the
Bonds and of the nature, extent and manner of enforcement of such security, and for a
statement of the rights of the registered owners of the Bonds; and all the terms of the Indenture
and the Law are hereby incorporated herein and constitute a contract between the Successor
Agency and the registered owner from time to time of this Bond, and to all the provisions thereof
the registered owner of this Bond, by such Owner's acceptance hereof, consents and agrees.
Each registered owner hereof shall have recourse to all the provisions of the Law and the
Indenture and shall be bound by all the terms and conditions thereof.
The Bonds are special obligations of the Successor Agency and are payable, as to
interest thereon, principal thereof and any premiums upon the redemption thereof, exclusively
from the Pledged Tax Revenues (as that term is defined in the Indenture and herein called the
"Pledged Tax Revenues "), and the Successor Agency is not obligated to pay them except from
the Pledged Tax Revenues. The Bonds are equally secured by a pledge of, and charge and lien
upon, the Pledged Tax Revenues, and the Pledged Tax Revenues constitute a trust fund for the
security and payment of the interest on and principal of and redemption premiums, if any, on the
Bonds. Additional tax allocation bonds payable from the Pledged Tax Revenues may be issued
which will rank equally as to security with the Bonds, but only subject to terms and conditions
set forth in the Indenture.
The Successor Agency hereby covenants and warrants that, for the payment of the
interest on and principal of and redemption premium, if any, on this Bond and all other Bonds
issued under the Indenture when due, there has been created and will be maintained by the
Trustee a revenue fund into which all Pledged Tax Revenues shall be deposited, and as an
irrevocable charge the Successor Agency has allocated the Pledged Tax Revenues solely to
the payment of the interest on and principal of and redemption premiums, if any, on the Bonds,
and the Successor Agency will pay promptly when due the interest on and principal of and
redemption premium, if any, on this Bond and all other Bonds of this issue and all additional tax
allocation bonds authorized by the Indenture out of said Revenue Fund, all in accordance with
the terms and provisions set forth in the Indenture.
The Bonds maturing on or after November 1, are subject to redemption, as a
whole or in part in such maturities as are selected by the Successor Agency, prior to their
respective maturity dates (or in the absence of such direction, pro rata by maturity and by lot
within a maturity), at the option of the Successor Agency, on any date on or after November 1,
at a redemption price equal to the principal amount of Bonds called for redemption,
together with interest accrued thereon to the date fixed for redemption, without premium.
A -2
11,25
The Bonds are subject to mandatory sinking fund redemption in part by lot, at a
redemption price equal to 100% of the principal amount thereof to be redeemed, without
premium, in the aggregate respective principal amounts and on May 1 in the respective years
as set forth in the following table:
Sinking Fund Principal Amount
Redemption Date To Be Redeemed
Unless this Bond is presented by an authorized representative of The Depository Trust
Company, a New York corporation ( "DTC "), to the Successor Agency or the Trustee for
registration of transfer, exchange, or payment, and any Bond issued is registered in the name of
Cede & Co. or in such other name as is requested by an authorized representative of DTC (and
any payment is made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered
Owner hereof, Cede & Co., has an interest herein.
As provided in the Indenture, notice of redemption of this Bond shall be mailed by first
class mail not less than thirty (30) days nor more than sixty (60) days before the redemption
date to the registered owner hereof, but failure to receive such notice or any defect therein shall
not affect the sufficiency of such proceedings for redemption. If notice of redemption has been
duly given as aforesaid and money for payment of the above - described redemption price is held
by the Trustee, then such Bonds shall, on the redemption date designated in such notice,
become due and payable at the above - described redemption price; and from and after the date
so designated interest on the Bonds so called for redemption shall cease to accrue and
registered owners of such Bonds shall have no rights in respect thereof except to receive
payment of such redemption price thereof. Notwithstanding anything to the contrary contained in
this Indenture, any notice of redemption may also state that the redemption of the Bonds shall
be conditioned upon receipt by the Trustee on or prior to the redemption date of moneys
sufficient to pay the principal of, premium, if any, and interest on the Bonds to be redeemed and
that, if such money shall not have been received, said notice shall be of no force and effect and
the Trustee shall not be required to redeem such Bonds. Such notice may further provide that if
such moneys are not received, the redemption shall not be made, and the Trustee shall within a
reasonable time thereafter give notice, in the manner in which the notice of redemption was
given, that such moneys were not so received.
If an event of default, as defined in the Indenture, shall occur, the principal of all Bonds
may be declared due and payable upon the conditions, in the manner and with the effect
A -3
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provided in the Indenture; -except that the Indenture provides that in certain events such
declaration and its consequences may be rescinded by the registered owners of at least a
majority in aggregate principal amount of the Bonds then outstanding.
The Bonds are issuable only in the form of fully registered Bonds in the denomination of
$5,000 or any integral multiple of $5,000 (not exceeding the principal amount of Bonds maturing
at any one time). The Owner of any Bond or Bonds may surrender the same at the above
mentioned -office of the Trustee in exchange for an equal aggregate principal amount of fully
registered Bonds of any other authorized denominations, in the manner, subject to the
conditions and upon the payment of the charges provided in the Indenture. This Bond is
transferable, as provided in the Indenture, only upon a register to be kept for that purpose at the
above - mentioned office of the Trustee or such other place as designated by the Trustee by the
registered owner hereof in person, or by such Owner's duly authorized attorney, upon surrender
of this Bond together with a written instrument of transfer satisfactory to the Trustee duly
executed by the registered owner or such owner's duly authorized attorney, and thereupon a
new fully registered Bond or Bonds, in the same aggregate principal amount, shall be issued to
the transferee in exchange therefor as provided in the Indenture, and upon payment of the
charges therein prescribed. The Successor Agency and the Trustee may deem and treat the
person in whose -name this Bond is registered as the absolute owner hereof for the purpose of
receiving payment of, or on account of, the interest hereon and principal hereof and redemption
premium, if any, hereon and for all other purposes. The Trustee shall not be required to register
the transfer of exchange of any Bond during the period the Trustee is selecting Bonds for
redemption of any Bond selected for redemption.
The rights and obligations of the Successor Agency and of the registered owners of the
Bonds may be amended at any time in the manner, to the extent and upon the terms provided in
the Indenture.
This Bond is not a debt of the City of Petaluma, the State of California or any of its
political subdivisions, and neither said City, and State nor any of its political subdivisions is liable
hereon, nor in any event shall this Bond or any interest hereon or any redemption premium
hereon be payable out of any funds or properties other than those of the Successor Agency.
The Bonds do not constitute an indebtedness within the meaning of any constitutional or
statutory debt limitation or restriction, and neither the members of the Successor Agency nor
any persons executing the Bonds shall be personally liable on the Bonds by reason of their
issuance.
This Bond shall not be entitled to any benefits under the Indenture or become valid or
obligatory for any purpose until the certificate of authentication and registration hereon endorsed
shall have been signed by the Trustee. It is hereby certified that all of the acts, conditions and
things required to exist, to have happened or to have been performed precedent to and in the
issuance of this Bond do exist, have happened and have been performed in due time, form and
mamler as required by law and that the amount of this Bond, together with all other
indebtedness of the Successor Agency, does not exceed any limit prescribed by the
Constitution or laws of the State of California, and is not in excess of the amount of Bonds
permitted to be issued under the Indenture.
A -4
Y
IN WITNESS WHEREOF, THE PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY has caused this Bond to be executed in its name and on its behalf with
the facsimile signature of its Chairman and attested to by the facsimile signature of its
Secretary, all as of the Dated Date set forth above.
ATTEST:
Secretary
PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY
M
CERTIFICATE OF AUTHENTICATION
Chairman
This is one of the Bonds described in the within - mentioned Indenture.
Dated: 12017
!n
U.S. BANK NATIONAL ASSOCIATION
as Trustee
go
Authorized Signatory
�ft�p
STATEMENT OF INSURANCE
[to come]
OR
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Bond, shall
be construed as though they were written out in full according to applicable laws or Tax
Regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT Custodian _
TEN ENT -- as tenants by the entireties (Cust.) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors Act
of survivorship and not as (State)
tenants in common
COMM PROP -- as community property
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED
THOUGH NOT IN THE LIST ABOVE
(FORM OF ASSIGNMENT)
For value received the undersigned hereby sells, assigns and transfers unto
(Name, Address and Tax Identification or Social Security Number of Assignee)
the within - registered Bond and hereby irrevocably constitute(s) and appoints(s)
attorney,
to transfer the same on the registration books of the Trustee with full power of substitution in the
premises.
Dated:
Signatures Guaranteed:
Note: Signature(s) must be guaranteed by an
eligible guarantor.
IM
Note: The signatures(s) on this Assignment must
correspond with the name(s) as written on the
face of the within Bond in every particular
without alteration or enlargement or any change
whatsoever.
I
Jones Hall Draft of March 28, 2017
ATTACHMENT 5
ESCROW AGREEMENT
Relating to the Redemption of.•
Petaluma Community Development Commission
2007 Subordinate Tax Allocation Bonds
and
2011 Subordinate Tax Allocation Bonds
This ESCROW AGREEMENT (this "Agreement'), made and entered into as of
1, 2017, by and between the PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY, a public entity existing under the laws of the State of California (the
"Successor Agency "), as successor to the PETALUMA COMMUNITY DEVELOPMENT
COMMISSION (the "Former Agency ") and U.S. BANK NATIONAL ASSOCIATION, a national
banking association organized and existing under the laws of the United States of America, as
trustee (the "Escrow Agent ") for the hereinafter defined Prior Bonds.
BACKGROUND:
WHEREAS, the Petaluma Community Development Commission (the "Former Agency ")
was a public body, corporate and politic, duly established and authorized to transact business
and exercise powers under and pursuant to the provisions of the Community Redevelopment
Law of the State of California, constituting Part 1 of Division 24 of the Health and Safety Code of
the State (as amended, the "Redevelopment Law "); and
WHEREAS, prior to the dissolution of the Former Agency, the Former Agency issued the
following outstanding series of bonds:
(i) $31,825,000 aggregate principal amount of Petaluma Community
Development Commission Merged Project Area Subordinate Tax Allocation Bonds,
Series 2007 (the "2007 Bonds "), issued pursuant to an Indenture, dated as of April 1,
2007 (the "Original 2007 Indenture "), by and between the Former Agency and U.S. Bank
National Association, as trustee (the "Prior Trustee');
(ii) $11,369,000 aggregate principal amount of Petaluma Community
Development Commission Merged Project Area Subordinate Tax Allocation Bonds,
Series 2011 (the "2011 Bonds," and together with the 2007 Bonds, the "Prior Bonds ")
issued pursuant to the Original 2007 Indenture, as supplemented and amended by a
First Supplement to Indenture, dated as of March9 1, 2011, (collectively the "Prior
Indenture') by and between the Former Agency and U.S. Bank National Association, as
trustee; and
WHEREAS, the Successor Agency has determined to defease and redeem the 2007
Bonds and the 2011 Bonds (collectively the "Prior Bonds "); and
WHEREAS, Assembly Bill X1 26, effective June 29, 2011, together with AB 1484,
effective June 27, 2012 ( "AB 1484 "), codified Part 1.8 (commencing with Section 34161) and
Part 1.85 (commencing with Section 34170) of Division 24 of the California Health and Safety
Code, and resulted in the dissolution of the Former Agency as of February 1, 2012, and the
vesting in the Successor Agency of all of the authority, rights, powers, duties and obligations of
the Former Agency; and
WHEREAS, the Successor Agency has authorized the issuance of the Refunding Bonds
and determined to use the proceeds of the Refunding Bonds to defease and redeem, in
advance of their stated maturities, the Prior Bonds; and
WHEREAS, the Successor Agency wishes to enter into this Agreement to provide for the
proceeds of sale of the Refunding Bonds, together with other funds held by the Escrow Agent,
in its capacity as trustee for the Prior Bonds, to be deposited in an irrevocable special escrow
fund created and maintained with the Escrow Agent for the purpose of providing for the
defeasance and redemption in full of the outstanding Prior Bonds; and
WHEREAS, the Escrow Agent has full powers to act with respect to said escrow fund
and to perform the duties and obligations to be undertaken pursuant to this Agreement;
NOW, THEREFORE, in consideration of the above premises and of the mutual promises
and covenants herein contained and for other valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto do hereby agree as follows:
Section 1. Appointment of Escrow Agent. The Successor Agency hereby appoints
the Escrow Agent as escrow agent for all purposes of this Agreement and in accordance with
the terms and provisions of this Agreement, and the Escrow Agent hereby accepts such
appointment.
Section 2. Establishment of Escrow Fund. There is hereby created the Escrow Fund
to be held by the Escrow Agent, separate and apart from any funds or accounts of the Escrow
Agent or the Agency, as an irrevocable escrow securing payment of principal of and interest on
the Prior Bonds as hereinafter set forth.
All cash and Defeasance Securities (as defined herein) in the Escrow Fund are hereby
irrevocably pledged as a special fund for the payment and prepayment of the Prior Bonds in
accordance with the terms hereof. If at any time the Escrow Agent receives actual knowledge
that the cash and amounts in the Escrow Fund will not be sufficient to make any payment
required by Section 4 hereof, the Escrow Agent will notify the Agency of such fact and the
Successor Agency will immediately cure such deficiency from any source of legally available
funds.
As used herein, the term " Defeasance Securities" means the federal securities set forth
on Exhibit A hereto and hereby incorporated herein.
Section 3. Deposit into Escrow Fund; Investment of Amounts.
(a) Concurrently with the execution and delivery of the 2017 Bonds, the Successor
Agency will cause to be transferred to the Escrow Agent for deposit into the Escrow Fund, the
amount of $ , from the following sources, (i) $ of which will be held in a
subaccount of the Escrow Fund hereby created and known as the "2007 Bonds Account," for
2
. (
the payment and prepayment of the 2007 Bonds, and (ii) $ of which will be held in a
subaccount of the Escrow Fund hereby created and known as the "2011 Bonds Account," for
the payment and redemption of the 2011 Bonds:
2007 Bonds Account
(i) from the 2017 Trustee out of the proceeds of the 2017 Bonds, the amount
of $ ; and
(ii) from the Prior Trustee from funds on hand related to the 2007 Bonds, the
amount of $
2011 Bonds Account
(i) from the 2017 Trustee out of the proceeds of the 2017 Bonds, the amount
of $ ; and
(ii) from the Prior Trustee from funds on hand related to the 2011 Bonds, the
amount of $
(b) With respect to the aggregate $ deposited into the 2007 Bonds
Account of the Escrow Fund, the Escrow Agent will:
(i) invest $ of the moneys deposited in the Defeasance
Securities described in Exhibit A hereto; and
(ii) hold the remaining $ in cash uninvested.
(c) With respect to the aggregate $ deposited into the 2011 Bonds
Account of the Escrow Fund, the Escrow Agent will:
(i) invest $ of the moneys deposited in the Defeasance
Securities described in Exhibit A hereto; and
(ii) hold the remaining $ in cash uninvested.
The Defeasance Securities and cash will be deposited with and held by the Escrow
Agent in the Escrow Fund solely for the uses and purposes set forth herein. The Escrow Agent
will have no lien upon or right of set off against the Defeasance Securities and cash at any time
on deposit in the Escrow Fund. The Escrow Agent may create such subaccounts within the
Escrow Fund as it may require to accomplish the purposes of this Escrow Agreement.
Section 4. Instructions as to Application of Deposit. The total amount of
Defeasance Securities and cash deposited in the Escrow Fund pursuant to Section 3 will be
applied by the Escrow Agent to the payment and prepayment of the Prior Bonds in accordance
with the agreements governing the Prior Bonds on the date(s) and in the amounts set forth on
Exhibit B hereto. Any amounts remaining in the Escrow Fund following the full prepayment of
all of the Prior Bonds will be transferred by the Escrow Agent to the 2017 Trustee, for deposit to
the Lease Payment Fund established and held by the 2017 Trustee with respect to the 2017
Bonds.
� -�
`
`
`
Section 5. Election to Prepay; Notices. The Successor hereby irrevocably
elects to prepay all of the 2007 Bonds outstanding on______ 2O17 and ho prepay all ofthe `
2011 Bonds outstanding on May 1.2O10.
The Escrow Agent is hereby directed to give a Notice ofDefeaoanoo and Prepayment of
the Prior Bonds on the issuance date of the 2017 Bonds substantially in the form attached
hereto as Exhibit C. to the Municipal Securities Ru|omaking Board (MGR8)'s Electronic
Municipal Market Access (EMMA) system accessible at the emma.msrb.org website.
The Escrow Agent is hereby directed ho take all steps required ho prepay the Prior Bonds
on the date and at the prepayment pricaset forth in the Prior Indenture. The Successor Agency
hereby irrevocably instructs the Escrow Agent ho cause o notice of redemption of the then
outstanding Prior Bonds, substantially in the form attached hereto as Exhibit D
the Escrow Agent otherwise deems appropriate), to be given by any means authorized in the
Prior Indenture in a timely manner as set forth in the Prior Indenture, to the registered owners of
the respective Prior Bonds at their roupooUvo addmoaaa appearing on the registration books
maintained for the respective Prior Bonds.
Section GL Compensation to Escrow Agent. From pm000do of the Prior Bonds or
other lawfully available aoumoo. the Su00000nr Agency will pay the Escrow Agent full
compensation for its duties under this Agreement, including out-of-pocket costs such as
publication oouts, prepayment expenses, legal fees and other costs and expenses relating
hereto and, in addition, all fees, costs and expenses relating to the purchase of any Defeasance
Securities after the date hereof. Under no circumstances will amounts deposited inorcredited
ho the Escrow Fund be deemed hobo available for said purposes.
Section 7. Immunities and Liabilities of Escrow Agent,
(i) The Escrow Agent undertakes to pohonn only such duties as are expressly and
specifically set forth in this Agreement and no implied duties or obligations will bo read into this
Agreement against the Escrow Agent.
(ii) The Escrow Agon will to�oo�nn of
' . '
own gross negligence m willful misconduct.
(iii) The Escrow Agent consult with counsel of its own choice (which may be
oounoetothoGuouonoorAgenoy ) and the opinion of such counsel will be full and complete
authorization to take or suffer in good faith any action in accordance with such opinion of
�
000noo
"=
(i4 The Escrow Agent will not be responsible for any of the recitals or
representations contained herein.
k0 The Escrow Agent will not bo liable for the of any calculations pmvidod
as to the sufficiency of the moneys or Defeasance 8onuhUoo deposited with it to pay the
principal of, and interest on, the Prior Bonds.
i) The Escrow Agent will not bo liable for any action or omission of the Successor
Agency—, ==`~~s'^^'~.^-^^^^--^g--~–'–^--------------------------_– Comment [EWDII: I do not see this
reference defined in the escrow
�
(vii) Whenever in the administration of this Agreement the Escrow Agent deems it
necessary or desirable that a matter be proved or established prior to taking or suffering any
action hereunder, such matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or willful misconduct on the part of the Escrow
Agent, be deemed to be conclusively proved and established by a certificate of an authorized
representative of the Successor Agency, and such certificate will, in the absence of negligence
or willful misconduct on the part of the Escrow Agent, be full warrant to the Escrow Agent for
any action taken or suffered by it under the provisions of this Agreement upon the faith thereof.
(viii) The Escrow Agent may conclusively rely, as to the truth and accuracy of the
statements and correctness of the opinions and the calculations provided, and will be protected
and indemnified, in acting, or refraining from acting, upon any written notice, instruction,
request, certificate, document or opinion furnished to the Escrow Agent signed or presented by
the proper party, and it need not investigate any fact or matter stated in such notice, instruction,
request, certificate or opinion.
(ix) The Escrow Agent may at any time resign by giving written notice to the
Successor Agency of such resignation. The Successor Agency will promptly appoint a
successor Escrow Agent by the resignation date. Resignation of the Escrow Agent will be
effective upon acceptance of appointment by a successor Escrow Agent. If the Successor
Agency does not promptly appoint a successor, the Escrow Agent may petition any court of
competent jurisdiction for the appointment of a successor Escrow Agent, which court may
thereupon, after such notice, if any, as it may deem proper and prescribe and as may be
required by law, appoint a successor Escrow Agent. After receiving a notice of resignation of an
Escrow Agent, the Successor Agency may appoint a temporary Escrow Agent to replace the
resigning Escrow Agent until the Agency appoints a successor Escrow Agent. Any such
temporary Escrow Agent so appointed by the Successor Agency will immediately and without
further act be superseded by the successor Escrow Agent so appointed.
(x) The Successor Agency covenants to indemnify and hold harmless the Escrow
Agent against any loss, liability or expense, including legal fees, in connection with the
performance of any of its duties hereunder, except the Escrow Agent will not be indemnified
against any loss, liability or expense resulting from its gross negligence or willful misconduct.
Section 8. Amendment. This Agreement may be amended by the parties hereto,
(i) without the consent of the owners of the Prior Bonds, but only if such amendment is made (a)
to cure, correct or supplement any ambiguous or defective provision contained herein, (b) to
pledge additional security to the payment and prepayment of the Prior Bonds, or (c) to deposit
additional monies for the purposes of this Agreement, or (ii) with the consent of 100% of the
owners of the Prior Bonds outstanding, and only if there will have been filed with the Successor
Agency and the Escrow Agent a written opinion of Jones Hall, A Professional Law Corporation,
as special counsel, stating that any such amendment will not materially adversely affect the
interests of the owners of the Prior Bonds, and that any such amendment will not cause the
portion of lease payments representing interest payable with respect to the Prior Bonds to
become includable in the gross income of the owners thereof for federal income tax purposes.
Section 9. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which will be an original and all of which will constitute but one and the
same instrument.
111
Section 10. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California.
Section 11. Severability. In the event any provision of this Agreement will be held
invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate
or render unenforceable any other provision hereof.
6
IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be
executed by their duly authorized officers all as of the date first above written.
PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY
By:
Its:
U.S. BANK NATIONAL ASSOCIATION, as
Escrow Agent
By:
Vice President
[Signature Page to Escrow Agreement]
EXHIBIT A
DEFEASANCE SECURITIES
2007 BONDS ACCOUNT
Type of
Maturity
Par
Security
Date
Amount Rate
Total Cost
Purchase
Date
Cost of
Securities Cash Deposit
Total Escrow Cost
2011 BONDS ACCOUNT
Type of
Maturity
Par
Security
Date
Amount Rate
Total Cost
Purchase
Date
Cost of
Securities Cash Deposit
Total Escrow Cost
A -1
II
EXHIBIT B
SCHEDULE OF PAYMENT AND PREPAYMENT /REDEMPTION
2007 Bonds
Period
Principal
Ending
Principal Interest Prepaid Total,
2011 Bonds
Period
Principal
Ending
Principal Interest Redeemed Total
9/1/17
B -1
II
EXHIBIT C -1
NOTICE OF DEFEASANCE AND PREPAYMENT
$31,825,000
Petaluma Community Development Commission
2007 Tax Allocation Bonds
Date of Issuance: , 2007
NOTICE IS HEREBY GIVEN, by the PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY (the "Successor Agency ") with respect to the captioned securities (the
"Bonds "), that it has defeased the Bonds set forth below as of , 2017 and has
irrevocably elected to optionally prepay such Bonds on , 2017. Amounts sufficient for
such prepayment have been deposited into an escrow fund held by Wells Fargo Bank National
Association, for such purpose.
The Bonds that have been defeased and that the Successor Agency has elected to
optionally prepay on , 2017 consist of the following:
Outstanding
Principal
Maturity Date Amount Interest Rate *CUSIP No.
* CUSIP data are provided by CUSIP Global Services, which is managed on behalf of
the American Bankers Association by S &P Capital IQ. The Agency and the Trustee shall not be
responsible for the selection or use of the CUSIP numbers listed above, nor is any
representation made as to the accuracy of the CUSIP numbers listed above or as printed on
any Bond; the CUSIP numbers are included solely for the convenience of the owners of the
Certificates.
Dated: 2017
U.S. BANK NATIONAL ASSOCIATION,
as Trustee for the Certificates and as Escrow Agent
C -1
EXHIBIT C -2
NOTICE OF DEFEASANCE AND REDEMPTION
$11,369,000
Petaluma Community Development Commission
2011 Tax Allocation Bonds
Date of Issuance: , 2011
NOTICE IS HEREBY GIVEN, by the PETALUMA COMMUNITY DEVELOPMENT
SUCCESSOR AGENCY (the "Successor Agency ") with respect to the captioned securities (the
"Bonds "), that it has defeased the Bonds set forth below as of , 2017 and has
irrevocably elected to optionally prepay such Bonds on , 2017. Amounts sufficient for
such prepayment have been deposited into an escrow fund held by Wells Fargo Bank National
Association, for such purpose.
The Bonds that have been defeased and that the Successor Agency has elected to
optionally prepay on , 2017 consist of the following:
Outstanding
Principal
Maturity Date Amount Interest Rate *CUSIP No.
* CUSIP data are provided by CUSIP Global Services, which is managed on behalf of
the American Bankers Association by S &P Capital IQ. The Agency and the Trustee shall not be
responsible for the selection or use of the CUSIP numbers listed above, nor is any
representation made as to the accuracy of the CUSIP numbers listed above or as printed on
any Bond; the CUSIP numbers are included solely for the convenience of the owners of the
Certificates.
Dated: 12017
U.S. BANK NATIONAL ASSOCIATION,
as Trustee for the Certificates and as Escrow Agent
C -2
EXHIBIT D -1
NOTICE OF REDEMPTION
TO HOLDERS OF
$31,825,000
Petaluma Community Development Commission
2007 Tax Allocation Bonds (the "Bonds ")
Date of Issuance: , 2007
Maturity
(December l)
Interest
Rate
Principal
Amount
Principal Amount
to be Prepaid
CUSIP*
Notice is hereby given that the Petaluma Community Development Commission (now
succeeded by the PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR AGENCY (the
"Agency "), has exercised an option to call and redeem on , 2017 (the
"Redemption Date "), all Outstanding Bonds, in accordance with the provisions of that certain
Indenture, dated as of April 1, 2007, as supplemented (the "Indenture "), among the Agency and
the undersigned, as trustee. All capitalized terms used in this Notice not otherwise defined shall
have the meanings ascribed to them in the Indenture.
On the Redemption Date there will become due and payable on the Bonds the principal
amount, without premium (the "Redemption Price "), together with interest accrued thereon to
the Redemption Date, and from and after the Redemption Date interest thereon shall cease to
accrue. Bonds will become due and payable upon presentation and surrender to:
By First Class /Registered/
Certified Mail: Express Delivery Only: By Hand Only:
The Bank of New York The Bank of New York The Bank of New York Mellon
Mellon Mellon
A signed W -9 is required to accompany the Bonds or 31% of the bond redemption
proceeds will be withheld. If you request payment of principal and /or interest via wire transfer,
please be advised there is a $25.00 fee which will be deducted from your payment.
No representation is made as to the accuracy of any CUSIP number, either in this Notice
of Redemption or as printed on any Bond. CUSIP numbers are included solely for the
convenience of the Bondholder.
M
7�,
Dated: 2017
By: U.S. Bank National Association, as
Trustee
D -2
I �21
EXHIBIT D -2
NOTICE OF REDEMPTION
TO HOLDERS OF
$11,369,000
Petaluma Community Development Commission
2011 Tax Allocation Bonds (the "Bonds ")
Date of Issuance: , 2011
Maturity
(December 1)
Interest
Rate
Principal
Amount
Principal Amount
to be Prepaid
CUSIP*
Notice is hereby given that the Petaluma Community Development Commission (now
succeeded by the PETALUMA COMMUNITY DEVELOPMENT SUCCESSOR AGENCY (the
"Agency "), has exercised an option to call and redeem on , 2017 (the "Redemption
Date "), all Outstanding Bonds, in accordance with the provisions of that certain Indenture, dated
as of April 1, 2007, as supplemented (the "Indenture "), among the Agency and the undersigned,
as trustee. All capitalized terms used in this Notice not otherwise defined shall have the
meanings ascribed to them in the Indenture.
On the Redemption Date there will become due and payable on the Bonds the principal
amount, without premium (the "Redemption Price'), together with interest accrued thereon to
the Redemption Date, and from and after the Redemption Date interest thereon shall cease to
accrue. Bonds will become due and payable upon presentation and surrender to:
By First Class /Registered/
Certified Mail: Express Delivery Only: By Hand Only:
The Bank of New York The Bank of New York The Bank of New York Mellon
Mellon Mellon
A signed W -9 is required to accompany the Bonds or 31% of the bond redemption
proceeds will be withheld. If you request payment of principal and /or interest via wire transfer,
please be advised there is a $25.00 fee which will be deducted from your payment.
No representation is made as to the accuracy of any CUSIP number, either in this Notice
of Redemption or as printed on any Bond. CUSIP numbers are included solely for the
convenience of the Bondholder.
Dated: 2017
By: U.S. Bank National Association, as
Trustee
D -3