Loading...
HomeMy WebLinkAbout90-32 - Assessment District 58 - Cannery VillageRESOLUTION NO. 90 -32 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, AUTHORIZING ISSUANCE OF BONDS, APPROVING BOND INDENTURE AND OFFICIAL STATEMENT FOR A SPECIAL ASSESSMENT DISTRICT WHEREAS, the CITY COUNCIL of the CITY OF NEWPORT BEACH, CALIFORNIA, is conduct- •ing proceedings for the construction of certain public improvements in a special assessment district pursuant to the terms and provisions of the "Municipal Improve- ment Act of 1913 ", being Division 12 of the Streets and Highways Code of the State of California, said special assessment district known and designated as ASSESSMENT DISTRICT NO. 58 (CANNERY VILLAGE) (hereinafter referred to as the "Assessment District "); and, WHEREAS, this legislative body has previously declared in its Resolution of Intention to issue bonds to finance said improvements, said bonds to issue pursuant to the terms and provisions of the "Improvement Bond Act of 1915 ", being Division 10 of said Code; and, WHEREAS, at this time this legislative body is desirous to set forth all formal terms and conditions relating to the authorization, issuance and administration of said bonds; and, WHEREAS, there has been presented, considered and ready for approval a bond indenture setting forth formal terms and conditions relating to the issuance and sale of bonds; and, WHEREAS, there has also been presented an Official Statement containing informa- tion including but not limited to the Assessment District and the type of bonds, including terms and conditions thereof. NOW, THEREFORE, IT IS HEREBY RESOLVED AS FOLLOWS: RECITALS SECTION 1. That the above recitals are true and correct. BOND AUTHORIZATION SECTION 2. That this legislative body does authorize the issuance of bonds pursuant to the terms and provisions of the "Improvement Bond Act of 1915 ", being Division 10 of the Streets and Highways Code of the State of California, and also pursuant to the specific terms and conditions as set forth in the BOND INDENTURE presented herein. BOND INDENTURE SECTION 3. The BOND INDENTURE is approved substantially in the form presented herein, and is subject to modifications as necessary and as approved by the Treasurer. Final approval of the BOND INDENTURE shall be conclusively evidenced by the signature of the City Treasurer upon final delivery of bonds and receipt of • proceeds. A copy of said BOND INDENTURE shall be kept on file with the transcript r of these proceedings and open for public inspection. OFFICIAL STATEMENT SECTION 4. That the Official Statement, as prepared and submitted, is hereby approved and adopted, and the execution and distribution is hereby authorized. A COPY of said Official Statement shall be kept on file with the transcript of these proceedings and remain open for public inspection. FINAL ASSESSMENTS SECTION 5. That the Certificate of Paid and Unpaid Assessments, as certified by the Treasurer, shall remain on file in that office and be open for public inspec- tion for all particulars as it relates to the amount of unpaid assessments to secure bonds for this Assessment District. IOR COURT FORECLOSURE SECTION 6. In the event of delinquency in the payment of any installment of unpaid assessments, this legislative body does specifically covenant for the benefit of the owners of the bonds that it shall cause judicial foreclosures to be initiated against all parcels for which the payment of assessment installments are delinquent if the cumulative delinquencies in the payment of assessment installments throughout the Assessment District exceed five percent (5 %) of the average annual debt services on the bonds; however, foreclosure actions may be deferred if the reserve fund is maintained at the Reserve Requirement as that term is defined in the Bond Indenture. For further particulars and specifics, reference is made to the Bond Indenture to be approved prior to any issuance and delivery of bonds. APPROVED and ADOPTED this 9th day of April , 1990. MAYOR Pro m Y CITY OF NEWPORT BEACH STATE OF CALIFORNIA ATTE CITY CLERK CITY OF NEWPORT BEACH STATE OF CALIFORNIA STATE OF CALIFORNIA COUNTY OF ORANGE CITY OF NEWPORT BEACH I, WANDA E. RAGGIO, CITY CLERK of the CITY OF NEWPORT BEACH, CALIFORNIA, DO HEREBY CERTIFY that the foregoing Resolution, being Resolution No. 90 -32 , was • duly passed, approved and adopted by the City Council, approved and signed by the Mayor, and attested by the City Clerk, all at the regular meeting of said City Council held on the 9th day of April 1990, and that the same was passed and adopted by the following vote: AYES: COUNCIL MEMBERS TURNER, WATT, SANSONE, HART, STRAUSS, COX NOES: COUNCIL MEMBERS NONE ABSENT: COUNCIL MEMBERS PLUMMER ABSTAIN: COUNCIL MEMBERS NONE EXECUTED this ay of , 1990, at Newport Beach, California. [SEAL] n CITY CLERK All CITY OF NEWPORT BEACH STATE OF CALIFORNIA NEW ISSUL; In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from State of California personal income taxes, is excluded from „ ross income for purposes of income taxation by the United States of America, and is not an item of tax preference for purposes of the alternative minimum tax imposed by the United States on individuals and corporations, subject to certain qualifications more particularly described under the heading "MISCELLANEOUS -TAX EXEMPTION" herein. COUNTY OF ORANGE STATE OF CALIFORNIA $107,746.07 • CITY OF NEWPORT BEACH 1915 ACT LIMITED OBLIGATION IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 58 (CANNERY VILLAGE) (Property Secured Only - No Issuer Liability) l Dated: March 15, 1990 Due: September 2, as shown below The Bonds which comprise the issue described herein are issued by the City of Newport Beach, California pursuant to the Improvement Bond Act of 1915, constituting Division 10 of the Streets and Highways Code, and are secured by assessments levied in proceedings conducted by the City pursuant to the Municipal Improvement Act of 1913, Division 12 of the Streets and Highways Code. The Bonds are issued only as fully registered Bonds in the denomination of $5,000 each or any integral multiple thereof. Interest is payable on March 2, 1991, and semiannually thereafter on March 2 and September 2 in each year. The principal of and premium, if any, on the Bonds are payable at the office of the City Treasurer. Interest on the Bonds is payable by check or draft mailed to the registered owners thereof. The Bonds will mature on September 2 of each of the years and in the amounts, and will bear interest at the rates, set forth in the following schedule. MATURITY SCHEDULE Maturity Principal Interest Maturity Principal Interest Sept.2 Amount Rate Price Sept.2 Amount Rate Price 1991 $ 2,746.07 6.25% 100% 1996 $10,000.00 6.90% 100% 1992 10,000.00 6.40 Ui0 1997 10,000.00 7.00 100 1993 10,000.00 6.60 100 1998 15,000.00 7.10 100 1994 10,000.00 6.70 100 1999 15,000.00 7.20 100 1995 10,000.00 6.80 100 2000 15,000.00 7.30 100 Lne 0011us dre 0 ieueiiipuun on any Marcn �)epWmM-er t in aavance ut maturity upon giving 3 ys prior notice and upon paymene the principal and interest accrued thereon to the date of redemption, plus a redemption premium of 3% of the principal amount of the Bonds to be redeemed. The Bonds are being issued for the purpose of financing the acquisition and construction of certain public improvements determined by the City to be of benefit to the properties within the City's Assessment District No. 58 (Cannery Village)). The Bonds will be secured by unpaid assessments on land within Assessment District No. 58. Under provisions of the Improvement Bond Act of 1915, installments of principal and interest sufficient to meet annual Bond debt service requirements are to be included on the regular property tax bills sent to owners of property against which there are unpaid assessments. These annual installments are to be paid into the Redemption Fund for the • Bonds and used to pay debt service on the Bonds as it becomes due. The Bonds are not secured by the general taxing power of the City, the State of California or any of its political subdivisions, nor is the full faith and credit of the City, the State of California or any of its political subdivisions pledged to the payment of the Bonds. The City shall not be obligated to use available funds (including any surplus funds) to purchase delinquent parcels or to pay the delinquent installment and future installments of the assessments on delinquent parcels. (See "SECURITY FOR THE BONDS, No Pledge of City Funds" herein.) The holders of the Bonds must assume, therefore, that the sole source of funds with which to cover deficiencies in the Redemption Fund will be the Reserve Fund. See the section of this Official Statement entitled "SPECIAL RISK FACTORS" for a discussion of special factors which should be considered, in addition to the other matters set forth herein, in evaluating the investment quality of the Bonds. The Bonds are offered when, as and if issued, subject to approval of Brown & Diven, San Diego, California, Bond Counsel. The Bonds are expected to be available for delivery on or about April 11, 1990, in Los Angeles, California. MILLER & SCHROEDER FINANCIAL, INC. The date of this Official Statement is April 9, 1990. CITY OF NEWPORT BEACH ASSESSMENT DISTRICT NO. 58 (CANNERY VILLEGE) CITY COUNCIL Donald A. Strass, Mayor RutheRn Plummer, Mayor Pro Tern Evelyn R. Hart, Councilmember Clarence J. Turner, Councilmember • Jean Watt, Councilmember Phil Sansone, Councilmember John C. Cox, Jr., Councilmember Robert L. Wynn - City Manager Benjamin B. Nolan - Public Works Director George Pappas - Finance Director Bond Counsel Brown & Diven [Newport Beach, California Assessment Engineer Professional Assessment Services, Inc. Irvine, California Underwriter Miller & Schroeder Financial, Inc. Solana Beach, California No dealer, broke�alesman or other person has beauthorized by the City of Newport Beach or Underwriter to give any infflPfnation or to make any representations other than those contained in this Official Statement, and, if given or made, such other information or representation must not be relied upon as having been authorized by either of the foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the City of Newport Beach and other sources which are believed to be reliable, but, such information is not guaranteed as to accuracy or completeness and such information is not to be construed as a representation by the Underwriter. The information and expression of opinions herein • are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City of Newport Beach or Assessment District No. 58. The summaries and references to the legislation and resolutions relating to the authorization, sale and issuance of the Bonds, and to other statutes and documents referred to herein do not purport to be comprehensive or definitive and are qualified in their entirety by reference to each such statute and document. This Official Statement is not to be construed as a contract between the City or the Underwriter and the purchaser or owner of any of the Bonds. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. • TABLE OF CONTENTS Introductory Statement The Bonds Purpose of the Bonds Authority for Issuance Description of the Bonds Bond Payment, Registration and Transfer Redemption of the Bonds Refunding Bonds Redemption Fund Deficiencies Sources and Application of Funds • Debt Service Schedule Security For The Bonds General Assessment Installments Reserve Fund Covenant to Commence Superior Court Foreclosure Land Values Prior Assessments No Pledge of City Funds Special Risk Factors Payment of Assessment Installments Tax Delinquencies Foreclosure Delays Loss of Tax Exemption Bankruptcy The Assessment District Assessment Proceedings Estimated Project Costs Assessment Criteria Land Use and Zoning Miscellaneous No Litigation Legal Opinion Tax Exemption No Rating Underwriting Execution of Official Statement Appendix A - List of Assessments and Land Values Appendix B - Assessment District Diagrams • Pace No 2 2 2 2 2 3 3 4 5 5 5 5 6 6 7 8 9 9 9 9 10 10 10 10 11 11 12 13 13 13 13 14 14 14 14 15 A -1 B -1 • • $107,746.07 CITY OF NEWPORT BEACH 1915 ACT LIMITED OBLIGATION IMPROVEMENT BONDS ASSESSMENT DISTRICT NO. 58 (CANNERY VILLAGE) (Property Secured Only - No Issuer Liability) INTRODUCTORY STATEMENT This Official Statement is provided to furnish information relating to the issuance by • the City of Newport Beach, California (the "City "), of $107,746.07 principal amount of its Limited Obligation Improvement Bonds (the "Bonds ") for Assessment District No. 58 (Cannery Village) (the "District "). The District was formed pursuant to the Municipal Improvement Act of 1913, Division 12 of the California Streets and Highways Code (the "1913 Act "); and the Bonds are issued pursuant to the Improvement Bond Act of 1915, Division 10 of the California Streets and Highways Code (the "1915 Act "). The proceeds from the sale of the Bonds will be used to finance the cost of acquiring or constructing certain public improvements determined by the City to benefit the properties within the District, to fund a reserve fund (the "Reserve Fund "), and to pay costs related to the issuance of the Bonds. The Bonds are payable from the annual assessment installments collected on the regular property tax bills sent to owners of property having unpaid assessments levied against them. In the event of a delinquency in the payment of any installment of an assessment, the City will transfer from the Reserve Fund to the redemption fund established for the Bonds (the "Redemption Fund ') the amount necessary to pay the next maturing installment of principal and interest on the Bonds. The Reserve Fund will be funded from proceeds from the sale of the Bonds in an amount equal to $5,387.30. In the event a superior court foreclosure proceeding is instituted by the City to enforce the lien of a delinquent assessment installment and the City purchases such parcel, the Reserve Fund will be used to make advances to the Redemption Fund for payment of the delinquent assessment installment and future installments on the assessment, and interest thereon, until such property is resold by the City. (See the section herein entitled "SECURITY FOR THE BONDS. ") As authorized by the 1915 Act, the City has determined not to obligate itself to advance available funds from the City treasury to cure any deficiency or delinquency which may occur in the Redemption Fund by reason of the failure of a property owner to pay an assessment installment. The Bonds are not an obligation of the City, the State of California (the "State ") or any of its political subdivisions, nor has the City, the State or any of its political subdivisions pledged its full faith and credit for the payment of the Bonds. See the section of this Official Statement entitled "SPECIAL RISK FACTORS" for a discussion of special factors which should be considered, in addition to other matters set forth herein, in considering the investment quality of the Bonds. The discussions and information herein do not purport to be comprehensive or definitive. All references to the Bonds and the assessment proceedings are qualified in their entirety by reference to the City's Bond Indenture and resolutions setting forth the terms and descriptions thereof. 0 0 THE BONDS ( Purpose of the Bonds The Bonds are being issued in order to acquire, construct and install street lighting, plus missing street improvements including curbs, gutters and sidewalks, and other facilities which are appurtenant and related to these public facilities (collectively, the "Project "). Authority for Issuance • The improvement proceedings for the District were initiated by adoption of Resolution No. 89 -144 (the "Resolution of Intention ") by the City Council of the City on December 11, 1989. The Bonds represent and are secured by unpaid assessments levied against private property in the District in accordance with the provisions of the 1915 Act and will be issued pursuant to the 1915 Act. Description of the Bonds The Bonds will be dated March 15, 1990, and will bear interest at the rates, and will mature in the principal amounts and on the dates, set forth on the cover page of this Official Statement. The Bonds are issued as fully registered Bonds in the denomination of $5,000 each or any integral multiple thereof, except that one Bond of the first maturity is in the principal amount of $2,746.07. Bond Payment, Registration and Transfer Interest on the Bonds will be payable semiannually on March 2 and September 2 of each year (each an "Interest Payment Date "), commencing March 2, 1991. Principal of and premium, if any, on the Bonds are payable at the office of the City Treasurer, (the "Paying Agent "), and interest thereon is payable by check or draft mailed to the respective registered owners as their names appear on the registration books of the Paying Agent as of the fifteenth day of the month immediately preceding each Interest Payment !date (the "Regular Record Date "). Each Bond shall bear interest from the interest Payment Date next preceding the date on which it is authenticated and registered, unless it is authenticated and registered (i) after a Regular Record Date and on or before the following Interest Payment Date, in which event it shall bear interest from such interest Payment Date, or (ii) on or before the first Regular Record Date, in which event it shall bear interest from March 15, 1990; provided, however, that if at the time of authentication and registration c a Bond interest thereon is in default, such Bond shall bear interest from the date ''.o which interest shall have been paid. Transfer of ownership of a Bond shall be made by exchanging the same for a new fully registered Bond of the same maturity in the same aggregate principal amount. All such exchanges shall be made in such manner and upon such terms as may from time to time be determined and prescribed by the City; provided, however, that no such exchange is required to be made between the Regular Record Date preceding any Interest Payment Date and such Interest Payment Date or during the period from the selection of Bonds for redemption through and including the applicable redemption date. Such transfer and registration shall take place at the principal office of the Paying Agent. 2 • • If any Bond is mutilated, lost, stolen or destroyed, the City may execute and the Paying Agent may authenticate and deliver a new Bond. or Bonds in replacement thereof in the same aggregate principal amount and of the same maturity. Mutilated Bonds must be surrendered to the Paying Agent. In the case of a lost, stolen and destroyed Bond, the l City and the Paying Agent may require satisfactory evidence of the loss, theft or destruction of the Bond and indemnification prior to authenticating and delivering a new Bond. The City and Paying Agent may charge the owners of mutilated, lost, stolen or destroyed Bonds for their reasonable fees and expenses in connection with replacing such Bonds. . Redemption of the Bonds Any Bond or portion thereof in increments of $5,000 may be called for redemption prior to maturity on any March 2 or September 2 upon payment of 103% of the par value, plus accrued interest to the date of redemption. No interest will accrue on a Bond beyond the date of redemption. Notice of redemption must be given at least 30 days prior to the redemption date. The determination as to which Bond or Bonds or portion thereof are to be called is to be made by the City Treasurer in accordance with the provisions of the L915 Act. These provisions generally require the redemption of Bonds proportionately from each maturity and the random selection of Bonds within each maturity. Redemption of the Bonds may occur as a result of either the issuance of refunding bonds (see the subsection hereof entitled "Refunding Bonds ") or the prepayment of one or more assessments. Under the provisions of the 1915 Act, a property owner may prepay the assessment and remove the lien of the same from his or her property by paying to the City Treasurer the sum of the following amounts: (a) the amount of any delinquent installments of principal and interest, together with penalties accrued to the date of prepayment; (b) the unpaid, nondelinquent principal of the assessment, including principal posted to the tae roll for the current fiscal year but not yet paid; (c) an allowance for redemption premium, calculated by multiplying the amount of the unmatured principal (exclusive of principal due during the fiscal year of prepayment) by three percent; (d) a reasonable fee, to be fixed by the City Treasurer, for the cost of administering the prepayment and the advance redemption of Bonds; and (e) interest accrued to the next Interest Payment Date which is not less than 90 days after the date of prepayment. Upon receipt of a prepayment of an assessment, the City Treasurer is to disburse the amount thereof as follows: (a) the administrative fee shall be deposited into the general fund of the City; (b) delinquent principal, interest, and penalties shall be transferred to the Redemption Fund unless the Reserve Fund has been depleted on account of the delinquencies, in which case the delinquent amounts and penalties shall be transferred instead to the Reserve Fund; (c) the installment of principal due in the fi :al year of prepayment shall be transferred to the Redemption Fund; (d) interest accrue( to the next Interest Payment Date shall be transferred to the Redemption Fund; and (e) the balance shall be used to advance the maturitv of Bonds to the next redemption date to the maximum extent that principal and redemption premium may be paid in full from said balance. Refunding Bonds Pursuant to the Refunding Act of 1954 for 1915 Improvement Act Bonds the City may issue refunding bonds for the purpose of redeeming any or all the Bonds. Upon issuing refunding bonds, the City could require that the Bonds be exchanged for refunding bonds on any basis which the City Council determines is for the benefit of the City, but 3 • w only with the consent of the Bondholders. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding bonds and utilize the proceeds to ( pay the principal of and interest and redemption premium, if any, on the Bonds as they k, become due, or advance the maturity of Bonds and pay the principal of and interest and redemption premium thereon. A refunding of some, but not all, of the Bonds could result in a situation in which the Bonds remaining outstanding after such refunding are secured by unpaid assessments on the less valuable properties within the District. Redemption Fund Deficiencies If a deficiency occurs in the Redemption Fund with respect to past due principal or interest or with respect to interest which will become due during the then current tax collecting year and said deficiency cannot be eliminated with transfers from the Reserve Fund, but it does not appear to the City Treasurer that there will be an ultimate loss to the bondholders, the City Treasurer shall pay matured Bonds as presented and make interest payments when due, as long as there are available funds in the Redemption Fund, in the following order of priority: (1) all matured interest payments shall be made prior to the payment of anv principal; (2) interest shall be paid on Bonds in order of their respective maturities starting at the earliest maturity date and in ascending numerical order within a single maturity; and (3) principal shall be paid in the order in which Bonds are presented for payments. Bonds not paid when presented, and interest payments not paid when due, shall bear interest at the rate stated in the Bonds, without compounding, until paid or until ten days from the mailing of notice to bondholders that funds are available with which to make a payment with respect to such Bonds and /or interest. If it appears to the City Treasurer that a Redemption Fund deficiency presents a danger of an ultimate loss accruing to the bondholders for any reason, he or she shall withhold payment of principal and interest and report the facts to the City Council so that it may take proper action to equitably protect all bondholders. Upon receipt of such a report from the City Treasurer, the City Council is required to fix a date for a public hearing and post notice thereof. Following said public hearing, if it determines that there will be no ultimate loss to the bondholders, it shall direct the City Treasurer to pay matured Bonds and interest as long as there is available money in the Redemption Fund. If the City Council determines that there will ultimately be insufficient money in the Redemption Fund to discharge the unpaid Bonds and interest, it shall direct the City Treasurer to pay the holders of all outstanding and unpaid Bonds such proportion of the monev then on deposit in the Redemption Fund as said money bears to the total amount of the unpaid principal of the Bonds and the interest which has accrued or will accrue thereon. Similar proportionate payments shall thereafter be made periodically as moneys come into the Redemption Fund. 4 • Sources and Application of Funds The Bond proceeds (other than accrued interest, which is to be deposited in the / Redemption Fund) will be applied as follows: Sources of Funds Principal Amount of Bonds Less: Bond Discount (2 %) Net Bond Proceeds Cash Collections • City Contribution Total Sources of Funds Application of Funds Construction Fund (including contingency and incidentials) Reserve Fund (5 %) Total Application of Funds Debt Service Schedule $107,746.07 (2,154.92) Set forth below is the debt service schedule for the Bonds: $105,591.15 46,600.18 7,000.00 $159.191.33 $153,804.03 5,387.30 159.191.33 Maturity September 1 Principal Interest Debt Service 1991 $ 2,746.07 $10,887.66 (1) $ 13,633.73 1992 10,000.00 7,280.00 17,280.00 1993 10,000.00 6,640.00 16,640.00 1994 10,000.00 5,980.00 15,980.00 1995 10,000.00 5,310.00 15,310.00 1996 10,000.00 4,630.00 14,630.00 1997 10,000.00 3,940.00 13,940.00 1998 15,000.00 3,240.00 18,240.00 1999 15,000.00 2,175.00 17,175.00 2000 15,000.00 1,095.00 16,095.00 Totals 5107.746.07 $158.932.73 (1) Includes interest from March 15, 1990. SECURITY FOR THE BONDS General The Bonds are secured by unpaid assessments levied against private property within the District pursuant to the assessment proceedings. Such unpaid assessments, together with interest thereon and moneys in the Redemption Fund, constitute a trust fund for the redemption and payment of the principal of, premium, if any, and interest on the Bonds. Principal of, premium, if any, and interest on the Bonds are payable exclusively out of the Redemption Fund. The Reserve Fund is also a trust fund for the benefit of the registered owners of the Bonds. (See "SECURITY FOR THE BONDS - Reserve Fund ".) The assessments and each installment thereof, and any interest and penalties thereon, constitute liens against the parcels of land on which they are levied until the • same are paid. Such liens are subordinate to all fixed special assessment liens previously imposed upon such property, but have priority over all existing and future private liens and over all fixed special assessment liens which may thereafter be created against the property. Although the unpaid assessments constitute liens on assessed parcels, they do not constitute a personal indebtedness of the respective property owners. There is no assurance that the property owners will be financially able to pay the annual assessment • installments or that they will pay such installments even if financially able to do so. The Bonds are not secured by the general taxing power of the City, the State or any of its political subdivisions, nor is the full faith and credit of the City, the State or any of its political subdivisions pledged to the payment of the Bonds. Assessment Installments Installments sufficient to meet annual payments of principal of and interest on the Bonds will be collected on the regular property tax bills sent to owners of property against which there are unpaid assessments. These annual installments are to be paid into the Redemption Fund which will be held by the Paying Agent, on behalf of the City, and used to pay the principal of and interest on the Bonds as they become due. The installment billed against each property each year represents such property's pro rata share of the total amount of principal of and interest coming due on the Bonds with respect to such years. The failure of a property owner to pay an annual assessment installment will not result in an increase in assessment installments against other property in the District. In the event of a delinquency in the payment of any installment of an assessment, the City Treasurer will transfer from the Reserve Fund, to the extent of available funds therein, to the Redemption Fund the amount necessary, in addition to the moneys on deposit therein, to pay the next maturing installment of principal and interest on the Bonds. In the event a superior court foreclosure action is instituted to enforce a delinquent assessment installment and the City purchases such property, the Reserve Fund will be used, to the extent of available funds, to make advances to the Redemption Fund for payment of the delinquent amount of the assessment on the property and future assessment installments, including interest thereon, until such property is resold by the City. Pursuant to the provisions of the 1915 Act, the City has determined not to obligate itself to advance any available funds from the City treasury to cover any deficiency or delinquency which may occur in the Redemption Fund by reason of the failure of a property owner to pay an annual assessment installment. (This determination by the City would not prevent the City, in its sole discretion, from so advancing such funds.) Reserve Fund The Bond Indenture approved by the City provides for the establishment of a Reserve Fund to be held by the Treasurer of the City as a separate trust account. The Reserve Fund shall be a source of available funds from which the City may make payment of delinquent assessment installments. It is estimated that this Reserve Fund shall be funded in an initial amount of $5,387.30. The Reserve Fund shall be maintained, used, transferred, reimbursed, and liquidated as follows: 0 0 0 (a) Amounts in said Reserve Fund shall be transferred to the Redemption Fund for the Bonds if, as result of delinquencies in the payment of assessments, -there are insufficient monies in said Redemption Fund to pay principal of and interest on the Bonds when due. Amounts so transferred shall be repaid to the Reserve Fund from proceeds from the redemption or foreclosure of property with respect to-which an assessment is unpaid and from payments of the delinquent assessments; (b) Interest earned on the permitted investments of monies on deposit in the Reserve Fund shall remain in the Reserve Fund only to the extent that the amount therein may accumulate to and subsequently be maintained at the "Reserve • Requirement." The Reserve Requirement shall be an amount equal to the lesser of (i) the Maximum Annual Debt Service on the Bonds, (ii) 125% of _'le average annual debt service on the Bonds, or (iii) 5% of the original principal amount of the Bonds. Annual Debt Service on the Bonds for each year ending September -'rid shall equal the sum of (a) the interest falling due on the outstanding Bonds in such 12 month period, assuming that the outstanding Bonds are retired as scheduled, and (b) the principal amount of outstanding Bonds falling due during such 12 month period. "Average Annual Debt Service" shall mean the average Annual Debt Service during the term of the Bonds. "Maximum Annual Debt Service" shall mean, as computed from time to time, the largest Annual Debt Service during the period from the date of such computation through the final maturity of any outstanding Bonds. (c) On July 15 of each fiscal year the amount on deposit in the Reserve Fund in excess of the Reserve Requirement shall be transferred from the Reserve Fund to the Redemption Fund and shall be credited to the unpaid assessment installments payable during such fiscal year. The Auditor's record, prepared pursuant to Section 8682 of the Streets and Highways Code, shall reflect the credits against each of the unpaid assessments in the manner provided in Streets and Highways Code Section 10427.1 in amounts equal to each parcel's proportionate share of such transfer. Notwitlistanding the above, interest earned on monies on deposit in the Reserve Fund in excess of the "yield" on the Bonds, as that term is defined in the Internal Revenue Code of 1986 (the "Code "), as amended, shall be subject to transfer and rebate to the United States. (d) Whenever monies in the Reserve Fund are sufficient to retire all of the Bonds outstanding, plus accrued interest thereon, such money shall be transferred to the Redemption Fund for the Bonds and collection of the remaining unpaid assessments shall cease. (e) In the event assessments are paid in cash in advance of their final maturity date, the Issuer is required to credit the prepaid assessment with a proportionate share of the Reserve Fund and to transfer en amount equal to such credit to the Redemption Fund to be utilized for the advance retirement of the Bonds. Covenant to Commence Superior Court Foreclos=e The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not paid when due, the City may order the institution of a superior court action to foreclose the lien of the unpaid assessment. In such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory. However, in the Bond Indenture, the City has 7 0 0 covenanted for the benefit of the owners of the Bonds that, in the event of delinquency in the payment of any installments of unpaid assessments, it will review assessment records of the County not later than August 1 of each year to determine the amount of the assessments collected in the prior fiscal year. If the cumulative delinquencies in the payment of assessment installments throughout the Assessment District exceed five percent (5 %), the Average Annual Debt Service on the Bonds, the Issuer shall commence foreclosure action(s) on all parcels for which the payment of assessment installments are delinquent in the Superior Court of the State of California (Part 14, Division 10, "Improvement Bond Act of 1915," Streets and Highways Code) on or before November 1 of each year, and diligently prosecute and pursue such foreclosure proceedings to • judgment and sale. Initiation of such foreclosure actions may be deferred in any fiscal year if the Reserve Fund is maintained at an amount equal to the Reserve Requirement. Prior to July 1, 1983, the right of redemption from foreclosure was limited to a period of one year from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from any such foreclosure has been repealed. However, a period of 140 days must elapse after service of the notice of levy before the sale of such parcel. If the purchaser at the sale is a judgment creditor, i.e. the City, an action may be commenced by the delinquent property owner within six months after the date of sale to set aside such sale. The constitutionality of the aforementioned legislation which repeals the one -year redemption period has not been tested, and there can be no assurance that, if tested, such legislation will be upheld. In the event such a superior court foreclosure is necessary, there may be a delay in payments to the Bondowners pending prosecution of the foreclosure proceedings and receipt by the City of proceeds from the foreclosure sale. Moreover, the lot or parcel securing the delinquent assessment may not be sold unless the amount to be paid pursuant to the bid is at least equal to the amount of the judgment with costs and interest, costs and interest accruing after issuance of the writ pursuant to which the sale has been conducted, the levying officer's costs, and any other amounts the total of which is required by law to be bid in order that such lot or parcel may be sold. It is therefore possible that no adequate bid for the purchase of any such property would be received at the foreclosure sale. Land Values Reference is made to Appendix A which contains the Assessed Values for each parcel in the District. Based upon the Assessed Values, the value of each parcel of land exceeds the amount of the assessment lien ap deist it. The 1915 Act requires only that a parcel be sold for the delinquent amount, (plus osts and penalties) and not the entire outstanding assessment, however, there is no assurance that in the event of a foreclosure sale for a delinquent assessment installment a legally sufficient bid will be received for such property (see "SPECIAL RISK FACTORS "). The lien ratio analysis set forth below is based upon the total outstanding special assessment indebtedness on the property including the City's Assessment District Limited Obligation Bonds for Assessment District No. 58. (See "Appendix A - List of Assessments and Assessed Values. ") 0 0 (1) Includes overlapping assessment indebtedness as specifically set forth in Appendix A. Prior Assessments The assessments and each installment thereof and any interest and penalties thereon constitute a lien against the lots and parcels of land on which they were imposed until the same are paid. Such lien is subordinate to all fixed special assessment liens previously �. imposed upon the same property, is on a parity with the lien of the reassessments securing the Refunding Bonds, and has priority over all existing and future private liens and over all fixed special assessment liens which may thereafter be created against the property. Such lien is co =equal to and independent of the lien for general property taxes and Community Facilities District special taxes. The Assessment Engineer reports that there are no prior assessments overlapping the District as shown in Appendix A. No Pledge of City Funds As authorized by the 1915 Act, the City has determined not to obligate itself to advance available funds from the City Treasury to cure any deficiency or delinquency which may occur in the Redemption Fund by reason of the failure of a property owner to pay an assessment installment. The City's legal obl' rations with respect to any delinquent assessment installments are solely (i) advancing funds from the Reserve Fund to the Redemption Fund to the extent such funds are available, and (ii) instituting judicial foreclosure proceedings. The City has no obligation to advance available funds of the City to the Redemption Fund under any circumstances. SPECIAL RISK FACTORS Payment of Assessment Installments In order to pay debt service on the Bonds, it is necessary that unpaid installments of assessments on land within the District be paid in a timely manner. Failure by owners of such land to pay installments of assessments when due, depletion of the Reserve Fund, or the inability of the City to sell parcels which have been subject to foreclosure proceedings for the legally established minimum amounts may result in the inability of 9 The following table summarizes the assessment and value information for each parcel in the District as set forth in Appendix A. The table indicates the amount of the assessments in the lien ratio groups. The lien ratios are arrived at by dividing the Assessed Value of a parcel by the special assessment indebtedness applicable thereto. �. For example, a 2:1 lien ratio means that the estimated land value is twice the lien amount. Lien Ratio Analysis Total Assessment Lien Ratio Group Amounts In Group (1) Percent In Group • 6.41 :1 to 10.00:1 $ 21,529.35 18.189% 10.01:1 to 25.00:1 37,403.88 31.600 25.01:1 to 50.00:1 4,364.85 3.688 50.01:1 and Over 55,068.55 46.524 Totals $118,366.63 100.000% (1) Includes overlapping assessment indebtedness as specifically set forth in Appendix A. Prior Assessments The assessments and each installment thereof and any interest and penalties thereon constitute a lien against the lots and parcels of land on which they were imposed until the same are paid. Such lien is subordinate to all fixed special assessment liens previously �. imposed upon the same property, is on a parity with the lien of the reassessments securing the Refunding Bonds, and has priority over all existing and future private liens and over all fixed special assessment liens which may thereafter be created against the property. Such lien is co =equal to and independent of the lien for general property taxes and Community Facilities District special taxes. The Assessment Engineer reports that there are no prior assessments overlapping the District as shown in Appendix A. No Pledge of City Funds As authorized by the 1915 Act, the City has determined not to obligate itself to advance available funds from the City Treasury to cure any deficiency or delinquency which may occur in the Redemption Fund by reason of the failure of a property owner to pay an assessment installment. The City's legal obl' rations with respect to any delinquent assessment installments are solely (i) advancing funds from the Reserve Fund to the Redemption Fund to the extent such funds are available, and (ii) instituting judicial foreclosure proceedings. The City has no obligation to advance available funds of the City to the Redemption Fund under any circumstances. SPECIAL RISK FACTORS Payment of Assessment Installments In order to pay debt service on the Bonds, it is necessary that unpaid installments of assessments on land within the District be paid in a timely manner. Failure by owners of such land to pay installments of assessments when due, depletion of the Reserve Fund, or the inability of the City to sell parcels which have been subject to foreclosure proceedings for the legally established minimum amounts may result in the inability of 9 the City to make full or punctual payment of debt ser-;ce on the Bonds. There is no assurance the property owners will be able to pay the assessment installments or that they will pay such installments even though financially ab'.e �o do so. Tax Delinquencies Assessment installments, from which funds necessan_ • for the payment of annual installments of principal of and interest on the Bonds are derived, will be billed to each property against which there is an unpaid assessment on .he regular property tax bills sent to the owner of such property commencing with tax bills for fiscal year 1990 -91. • Such installments are due and payable at the same time, and generally bear the same penalties and interest for nonpayment, as regular proper.% tax installments. Assessment installment payments cannot be made separately from proparty tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills, as evidenced by property tax delinquencies, may also indicate an unwillingness or inability to make regular property tax payments and assessment instailrnent payments in the future. Foreclosure Delays Foreclosure prosecution could take two years or more due to crowded local court calendars, legal delaying tactics, or bankruptcy. (See "Bankruptcy" and "SECURITY FOR THE BONDS - Covenant for Superior Court Foreclosure" herein.) It is possible also that no bid would be received at the foreclosure sale. As a result, there could be a default in payment of the principal of and interest on Bonds and curing of which would be dependent upon resale of the property by the City or redemption of the property by the property owner. No assurance can be given that the City will be able to resell any such delinquent parcel for an amount sufficient to pay all of the delinquent assessment installment amounts including the principal, interest, penalties, and cosTS due thereon. CLoss of Tax Exemption As discussed under the caption "MISCELLANEOUS - Tax Exemption," interest on the Bonds could become includable in gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of future acts or omissions of the City in violation of its covenants. ,. r M The payment of property owners' assessment installments and the ability of the City to foreclose on the lien of a delinquent unpaid assessment, as discussed in the section herein entitled "SECURITY FOR THE BONDS," may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds, including Bond Counsel's approving legal opinion, will be qualified, as to the enforceability of the various legal instruments, by reference to bankruptcy, reorganization, insolvency or other laws affecting the rights oz . creditors generally. Although bankruptcy proceedings would not cause the assessment liens to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings. Such a delay would Increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility that delinquent assessment installments might not be paid in full. 10 w w THE ASSESSMENT DISTRICT The District consists of approximately 10.2 acres located in the area known as Cannery Village bounded by 32nd Street on the north, Newport Harbor on the east, 28th Street on the south and Newport Boulevard on the west. The City is located in Orange County approximately 45 miles south of the City of Los Angeles. A map showing the general location of the District is set forth herein. The majority of the land within the District is developed. In response to requests from property owners in the District, the City has undertaken to conduct a series of assessment district improvement proceedings to provide for the • acquisition and construction of street lighting improvements plus missing street improvements including curbs, gutters and sidewalks for the benefit of land within the District. Assessment Proceedings The Assessment District was initiated by the City Council at the request of property owners within the Assessment District. After the proceedings were initiated, the engineer of work prepared a written report (the "Engineer's Report ") which contains, among other things, the estimate of project costs and the assessment for each parcel. The total amount of the proposed assessment was based upon the engineer's estimated cost of the Project. The individual assessments were spread among the various parcels of land within the Assessment District on the basis of the special benefit to be derived by each parcel from the improvements and acquisitions. The Engineer's Report was filed with and preliminarily approved by the City Council on December 11, 1989. Thereafter, notice was published in a local newspaper designated / by the City Council for that purpose. Notice was also posted along all of the open streets within the Assessment District. In addition, notice of the proposed assessment and a hearing thereon was mailed to each of the owners whose property was proposed to be assessed. The notices advised the property owners of the filing of the Engineer's Report, the date, time and place for a hearing on the Project, the proposed assessments and the right to protest. The mailed notice also advised the property owners of the amount proposed to be assessed against their properties, as shown in the Engineer's Report. Property owners had the right to protest in writing prior to or at the commencement of the hearing and to be heard at the hearing. No owners of land proposed to be assessed in the Assessment District filed written protests. The statutory period during which any legal action could have been commenced expired on March 14, 1990. At the conclusion of the hearing on February 12, 1990, the City Council unanimously adopted its Resolution No. 90 -11 confirming the Assessments, overruling protests and ordering the work and acquisitions. After confirmation, the Assessments became liens against the various assessed parcels. The property owners were given published and mailed notice of the opportunity to pay all or a portion of the assessment in cash within 30 days of the recording of the assessment. The notice further advised the property owners that if a cash payment was not made, bonds would be sold to represent unpaid assessments. The cash payment period ended on March 16, 1990. Cash payments were received in the total amount of $46,600.18. 11 0 Estimated Project Costs The following table sets forth the Assessment Engineer's confirmed estimated costs of the Project. I. Construction Costs Confirmed Costs Bid Items A. Street Lighting: • Install Street Light $ 54,600.00 Replace Ex. Street Light 4,400.00 Electrical Conduit 19,500.00 Pullboxes 4,200.00 Subtotal $ 82,700.00 B. Street Improvements: 12 Curb & Gutters $ 15,456.00 Sidewalk 7,541.00 Driveway Approach 9,522.00 AC Pavement (3 "ACl6 "AB) 2,325.00 AC Pavement (8 "AClNS) 783.00 AC Overlay 1,440.00 Ex. AC Pavement Removal 5,806.50 Misc. Removal & Relocation 2,689.00 Subtotal $ 44,562.50 Total $127,262.50 Contingency (10 %) $ 12,726.25 Total Construction Cost $139.988.75 II. Incidental Expenses A. Design Engineering $ 3,900.00 B. Assessment Engineering 3,550.00 C. Special Counsel 3,250.00 D. Construction Administration 2,615.00 E. Incidental Contingency 500.28 F. Bond Discount (2 %) 2,154.92 G. Bond Reserve (5 %) 5,387.30 Totallncidental $21,357.50 Total Construction & Incidential $161,346.25 III. Contribution Streetlighting in City Lot (7,000.00) Cash Collections and Assessments Less: Cash Collections 46,600.18 Unpaid Assessments S 7�QZ 12 i Assessment Criteria i The law requires and statutes provide that assessments, as levied pursuant to the provisions of the "Municipal Improvement Act of 1913 ", must be based on the benefit that the properties receive from the works of improvement. The statute does not specify the methods or formula that should be used in any special assessment district proceedings. The responsibility rests with the Assessment Engineer, who is appointed for the purpose of making an analysis of the facts and determining the correct apportionment of the assessment obligation. The Assessment Engineer then makes his recommendation at the public hearing on • the Assessment District, and the final authority and action rests with the City after hearing all testimony and evidence presented at the public hearing. Upon the conclusion of the public hearing, the City must make the final action in determining whether or not the assessment formula has been made in direct proportion to the benefits received. The installation of the "antique style" streetlighting will provide an area -wide benefit among the properties of the proposed district, including improved appearance, pedestrian safety for residents, employees and patrons, and the establishment of a unified theme throughout the Cannery Village area. All parcels would be assessed a pro rata share of costs based on actual area of properties benefitting from the installation of streetlighting. Those properties which partially front streets that will be receiving streetlighting were assigned an adjusted area based on the actual frontage benefitting from streetlight installation as a percentage of the properties total street frontage. Construction of new parkway improvements have been historically the responsibility of the fronting property owners. Installation of missing street improvements, such as curb, gutter and sidewalk, will provide a direct benefit to the adjacent fronting property. Therefore, the amount assessed to each parcel will vary according to the actual dimensions of improvements to be constructed, including incidental costs associated with the installation of curb, gutter and sidewalk, such as pavement removals, pavement patch back, and miscellaneous removals and relocations. According to the Superintendent of Streets the assessments for the Assessment District have been spread in direct accordance with the benefits that each parcel receives from the works of improvement. Land Use and Zoning The area included in the Assessment District is zoned Specific Planned District (Cannery Village McFadden Square). Land uses designated in the area are S, 2ciality Retail, Recreational, Service and Marine Commercial. Land uses include sl :ciality retail, antique, marine service and related commercial businesses. MISCELLANEOUS No Litigation There is no action, suit, or proceeding known by the City to be pending at the present time restraining or enjoining the delivery of the Bonds or in any way contesting or affecting the validity of the Bonds or any proceedings of the City taken with respect to i 13 0 the execution or delivery thereof. A no litigation certificate, executed by an official of the City, will be delivered to the Underwriter simultaneously with the delivery of the Bonds. Legal Opinion All proceedings in connection with the issuance of the Bonds are subject to the approval of Brown & Diven, San Diego, California, Bond Counsel for the City, in connection with the issuance of the Bonds. The unqualified opinion of Bond Counsel, approving the validity of the Bonds, will be printed on each Bond. • Tax Exemption In the opinion of Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from personal income taxes imposed by the State of California, 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. However, Bond Counsel notes that, with respect to corporations (as defined for federal income tax purposes), interest on the Bonds will be included in determining corporate adjusted net book income (adjusted current earnings for taxable years ending after December 31, 1989), a portion of which may increase the alternative minimum taxable income of such corporations. Bond Counsel's opinion as to the exclusion from gross income of interest on the Bonds is subject to the condition that the City comply with all requirements of the Code which must be satisfied subsequent to the issuance of the Bonds to assure that such interest will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements could cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The City has covenanted to comply with all such requirements. Bond Counsel will not undertake to determine (or to inform any person) whether any actions taken (or not taken) or events occurring after the issuance of the Bonds may affect the tax status of interest on the Bonds. Although Bond Counsel has rendered an opinion that interest on the Bonds is excluded from gross income for federal income tax purposes, the accrual or receipt of interest on the Bonds may otherwise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status and /or other items of income or deductions. Bond Counsel expressed no opinion regarding any such consequences. Accordingly, all potential purchasers ; hould consult their tax advisors before buyii . any of the Bonds. No Rating No rating has been sought or obtained for the Bonds. Underwriting Miller & Schroeder Financial, Inc., Underwriter of the Bonds, has purchased the Bonds from the City at a purchase price equal to 98 %, plus accrued interest. The public offering prices may be changed from time to time by the Underwriter. The Underwriter may offer and sell Bonds to certain dealers and others at a price lower than the offering prices stated on the cover page hereof. j.: Lµ Execution of Official Statement The execution and delivery of this Official Statement has been duly authorized by the City. CITY OF NEWPORT BEACH, CALIFORNIA By /s/ f Robert L. Wcnn • City Manager 15 Ll • APPENDIX A 0 LIST OF ASSESSMENTS AND ASSESSED VALUES 0 0 CITY OF NEWPORT BEACH ASSESSMENT DISTRICT NO. 58 LIEN RATIO ANALYSIS OVERLAPPING ASSESSED ASSESSED NUMBER ASSMT ASSESSMENT ASSESSMENT(1j__ASSESSMENT VALUE ?F I I 9,280 1,025 9 r TOTAL TOTA ASSESSED VALUE Ti VALUATION LIEN RAID 47- 23- 92 76 553.88 :00 558:88 1,232;023:00 54;129:00 1,24id;94b:Otl 107,746,07 10,62036 118,366.63 10,233,074.00 4,052,981.00 14,285,255.00 asaasaaaasaaeaaaaaaaasamsaeaaaacasaaeaaaaaaaaaamaaacaaaaaaaaaaaaa��cggaasoaacasaac _saasaaa= aaaa_ssaanaaaaaaaaaa RANGE ASSESSMENT PERCENTAGES5KENT .................................}}�_---..._..._.._ ............................... 48� OVEOR 88 e uea '- s1e,366.� 1oa.oDOz (1) Assessed NVVat enddcList of Unpaid AsaaDa.'f.9nia provided by the • C APPENDIX B ASSESSMENT DIAGRAM • • (CANNERY VILLAGE ) CITY OF NEWPORT BEACH COUNTY OF ORANGE, STATE OF CALIFORNIA LEGEND Ii EXISTDtC STREET IICHT TO BE REPLACED TT- EXISMO UfERSECIION LIGHTING TO REMAIN }Y PROPOSED STREET LIGHT ® ASSESSMENT PARCEL NUMBER M O ® PROPOSED BOUNDARIES I ha ebT cut* that do, wools mp sbowft Prop L na,nndad C—A .-=m Dlstdc . N1 i2� City of Newport Beach, stem of C waml> ems Wptw w by the City C=wn of the City of Newport Ilaa at a M14a Owd-C tbermt hats an the —day of _— ,:PiC�YRamfatlaN"'PIS Ciy Clash, Ctty of Newport Beach Filed to time o1Rm of the City Clerk or the CRT of Hewpurt Beaeb, State or 6llfomla as tic _ day of 1989 City Cteriy City of Noepart Bb Doeowat d PILED THIS _ DAY OF 198_ AT TTSE HOUR OF O'CLOCK: M. IN BOOR PACE _ OF MAPS OF ASSESSMENT AND COMMUNITY FACILRTPS DISTRICTS IN TH$ OFFICE OF THE RECORDER OF THE COUNTY OF ORANGE, STATE OF CALIFORNIA. Ceoaty Reamaea of On,nte Coaa.T o wo sae roes a sttr BOND INDENTURE This Bond Indenture (the "Indenture ") dated as of March 26, 1990, entered into and approved by the City of Newport Beach (the "Issuer "), a municipal corporation, to establish the terms and conditions pertaining to the issuance of bonds in a special assessment district known and designated as ASSESSMENT DISTRICT NO. 58 (CANNERY VILLAGE) (the "Assessment District "). • SECTION 1. Issuance, Designation and Amount. Pursuant to the provisions of the "Improvement Bond Act of 1915 ", being Division 10 of the Streets and Highways Code of the State of California, as amended (the "Act "), the Issuer does hereby authorize. the issuance of bonds to represent unpaid assessments within the Assessment District in principal amount not to exceed $196,650.00 and designated as the City of Newport Beach, Assessment District No. 58 (Cannery Village) Limited Obligation Improvement Bonds (the "Bonds "). SECTION 2. Term of Bonds. Bonds to represent the unpaid assessments, and bear interest at a rate not to exceed the current legal maximum rate of 12% per annum, will be issued in the manner provided in the Act, the last installment of which Bonds shall mature a maximum of and not to exceed nine (9) years from the second day of September next succeeding twelve (12) months from their date. The provisions of Part 11.1 of the Act, providing an alternative procedure for the advance payment of assess- -- ments and the calling of Bonds shall apply. SECTION 3. Registered Bonds. Said Bonds shall be issuable only as fully regis- tered Bonds in the denomination of $5,000, or any integral multiple thereof, except for one bond maturing in the first year of maturity, which shall include the amount by which the total issue exceeds the maximum integral multiple of $5,000 contained therein. SECTION 4. Date of Bonds. All of said Bonds shall be dated the 15th day of March, 1990, and interest shall accrue from that date. SECTION 5. Maturity and Denomination. The Bonds shall be issued in serial form with annual maturities on September 2nd of every year succeeding twelve (12) months after theii date, until the whole is paid. The amount maturing each year shall be as set forth in Exhibit "A" attached hereto and incorporated herein oy this reference and has been established so as to result in approximately equal annual debt service during the term of the issue as reflected by the interest rate and /or rates and principal amounts maturing in the respective years of maturity. The Issuer shall prescribe the denominations of the Bonds, which shall be in convenient amounts, not necessarily equal, and shall further provide for their issuance and delivery. SECTION 6. Interest. Each Bond shall be of a single maturity and shall bear interest at the rate as set forth in Exhibit "A" attached hereto from the interest payment date next preceding the date on which it authenti- cated and registered, unless said Bond is authenticated and registered as of an interest payment date, in which case it shall bear interest 1 0 0 from said interest payment date, or unless said Bond is authenticated ��- and registered prior to the first interest payment date, in which case it shall bear interest from its date, until payment of its principal sum has been discharged. SECTION 7. Place of Payment. The principal on the Bonds shall be payable in lawful money of the United States of America upon surrender of the Bond at the office of the City Treasurer, or such other registrar, transfer agent or paying agent as may be designated by supplemental indenture • approved by the Issuer. Interest on said Bonds shall be paid by check or draft to the regis- tered owner thereof at his address as it appears on the books of regis- tration, or at such address as may have been filed with the City Treasurer for that purpose, as of the 15th day of the month immediately preceding said interest payment date. SECTION S. Redemption. This Bond, or a portion thereof if issued in a denomina- tion greater than $5,000, shall be subject to redemption and payment in advance of maturity in increments of $5,000 as provided in Section 8768 of the Streets and Highways Code, on the 2nd day of Marth or September in any year, by giving the notice provided in said law to the regis- tered owner thereof at his address as it appears on the books of regis- tration and by paying principal of and accrued interest on such redeemed amount, together with a premium equal to three percent (38) of the redeemed principal amount. If less than the entire Bond is redeemed, the unredeemed portion shall be reissued to the registered owner thereof. SECTION 9. Transfer of Registered Bonds. Any fully registered Bond may, in accor- dance with its terms, be transferred upon the books of registration required to be kept pursuant to the provisions of Section 10 by the owner in whose name it is registered, or by his duly authorized attorney or legal representative, upon surrender of such fully regis- tered Bond for registration of such transfer, accompanied by delivery of a written instrument or transfer in a form approved by the City Treasurer and by the owner of said Bonds, duly executed. SECTION 10. Exchange of Registered Bonds. Fully registered Bonds may be exchanged at the office of the City Treasurer for a like aggregate principa. amount of Bonds of the same series, interest rate and maturity, subject to the terms and conditions provided in the system of registration foL registered debt obligations, including the payment of certain charges, if any, upon surrender and cancellation of this Bond. Upon such transfer and exchange, a new registered Bond or Bonds of any authorized denomination or denominations of the same maturity for the same aggregate principal amount will be issued to the transferee in exchange therefor. SECTION 11. Books of Registration. There shall be kept by the City Treasurer sufficient books for the registration and transfer of the Bonds and, • upon presentation for such purpose, the City Treasurer shall, under 4� such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said register, Bonds as hereinbefore provided. 2 0 0 SECTION 12. Execution of Bonds. The Bonds shall be executed in facsimile by the Treasurer and by the City Clerk, and the corporate seal shall be imprinted in facsimile on the Bonds. The Bonds shall then be delivered to the City Treasurer for authentication and registration. In case an officer who shall have signed or attested to any of the Bonds by facsi- mile or otherwise shall cease to be such officer before the authentica- tion, delivery and issuance of the Bonds, such Bonds nevertheless may be authenticated, delivered and issued, and upon such authentication, delivery and issue, shall be as binding as though those who signed and attested the same had remained in office. • SECTION 13. Authentication. Only such of the Bonds as shall bear thereon a certifi- cate of authentication substantially in the form below, manually . executed by the City Treasurer, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the transfer agent and registrar shall be conclusive evidence that the Bonds so authenticated have been duly executed, authenticated and delivered hereunder, and are entitled to the benefits of this Indenture. FORM OF CERTIFICATE OF AUTHENTICATION AND REGISTRATION This bond has been authenticated and registered on CITY TREASURER as Paying Agent By: SECTION 14. Negotiability, Registration and Transfer of Bonds. The transfer of any Bond may be registered only upon such books of registration upon surren- der thereof to the City Treasurer, together with an assignment duly executed by the owner or his attorney or legal representative, in satis- factory form. Upon any such registration of transfer, a new Bond or Bonds shall be authenticated and delivered in exchange for such Bond, in the name of the transferee, of any denomination or denominations authorized by this Indenture, and in an aggregate principal amount equal to the principal amount of such Bond or principal amount of such Bond or Bonds so surrendered. In all rases in which Bonds shall be exchanged or transferred, the City Treaiirer shall authenticate at the earliest practical time, Bonds in accc,tdance with the provisions of this Indenture. All Bonds surrendered in such exchange or registration transfer shall forthwith be cancelled. The City Treasurer may make a charge for every such exchange or registration of transfer of Bonds sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or registration of transfer. No transfer of fully registered Bonds shall be required to be made between the fifteenth (15th) day of the month next preceding each interest payment date, nor during the fifteen (15) days preceding the selection of any Bonds for redemption prior to the maturity thereof, nor with respect to any Bond which has been selected for redemption prior to the maturity thereof. 3 0 SECTION 15. Ownership of Bonds. The person in whose name any Bond shall be regis- €!� tared shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal and redemp- tion premium, if any, of any such Bond, and the interest on any such Bond, shall be made only to or upon the order of the registered owner thereof or his legal representative. All such payments shall be valid and. effectual to satisfy and discharge the liability upon such Bond, including the redemption premium, if any, and interest thereon, to the extent of the sum or sums so paid. • SECTION 16. Mutilated, Destroyed, Stolen or Lost Bonds. In case any Bond secured hereby shall become mutilated or be destroyed, stolen or lost, the Issuer shall cause to be executed and authenticated a new Bond of like date and tenor in exchange and substitution for and upon the cancella- tion of such mutilated Bond or in lieu of and in substitution for such Bond mutilated, destroyed, stolen or lost, upon the owner's paying the reasonable expenses and charges in connection therewith, and, in the case of a Bond destroyed, stolen or lost, his filing with the City Treasurer and Issuer of evidence satisfactory to them that such Bond was destroyed, stolen or lost, and of his ownership thereof, and furnishing the City Treasurer and Issuer with indemnity satisfactory to them. SECTION 17. Cancellation of Bonds. All Bonds paid or redeemed, either at or before maturity, shall be cancelled upon the payment or redemption of such Bonds, and shall be delivered to the City Treasurer when such payment ( or redemption is made. All Bonds cancelled under any of the provisions \_ of this Indenture shall be destroyed by the City Treasurer, which shall execute a certificate in duplicate describing the Bonds so destroyed, and shall retain said executed certificate in its permanent files for the issue. SECTION 18. Creation of Funds. The Treasurer is hereby authorized and directed to establish the following Funds for purposes of making payment for the costs and expenses for the works of improvement and payment of principal and interest on the Bonds. The Funds to be created are designated as follows: IMPROVEMENT FUND: The amounts received from the prepayment of assess- ments, if any, and the proceeds from the sale of the Bonds, after deposit of required amounts in the Reserve Fund and Redemption Fund, shall be placed in the Fund hereby created, pursuant to Sections 10602 and 10424 of the California Streets and Highways Code, as amended, which shall be called the "Improvement Fund ", and the monies in said Fund shall be used only for the purposes authorized in said assessment proceedings, and specifically to pay for the costs and expenses of the construction or acquisition of the authorized public capital improve- ments, together with all incidental expenses. Any surplus in the Improvement Fund after completion of the improvements shall remain in the Improvement Fund for a period of not lees than two (2) years from the receipt of Bond proceeds as provided in Section 10427.1 of the f California Streets and Highways Code, and thereafter shall be utilized 'rte Or distributed as determined by the Issuer. 4 rI L r^ REDEMPTION FUND: The Treasurer is hereby authorized and directed to F keep a Redemption Fund designated by the name of the proceedings, into which he shall place accrued interest, if any, on the Bonds from the date of the Bonds to the date of delivery to the initial purchaser thereof, all sums received for the collection of the assessments and the interest thereon, together with all penalties, if applicable. Principal of and interest on said Bonds shall be paid to the registered owner out of the Redemption Fund created pursuant to Section 8671 of • the California Streets and Highways Code. Accrued interest paid by the purchaser of the Bonds, if any, shall be deposited in the Redemption Fund. In all respects not recited herein, said Bonds shall be governed by the provisions of the Act. Under no circumstances shall the Bonds or interest thereon be paid out of any other fund except as provided by law. RESERVE FUND: Pursuant to Part 16 of the Act, there shall be created a special reserve fund for the Bonds to be designated by the name of the Assessment District and specified as the special "Reserve Fund ". An amount equal to five percent (5%) of the original Bond proceeds shall be deposited in the Reserve Fund out of said Bond proceeds. Monies in the Reserve Fund shall be applied as follows: A. Amounts in said Reserve Fund shall be transferred to the Redemption Fund for the Bonds if, as result of delinquencies in the payment of assessments, there are insufficient monies in said Redemption Fund to pay principal of and interest on the Bonds when due. Amounts SO transferred shall be repaid to the Reserve Fund from proceeds from the redemption or foreclosure of property with respect to which an assessment is unpaid and from payments of the delinquent assessments; B. Interest earned on the permitted investment of monies on deposit in the Reserve Fund shall remain in the Reserve Fund only to the extent that the amount therein may accumulate to and subsequently be maintained at the "Reserve Requirement ". The Reserve Require- ment shall be an amount equal to the lesser of (i) the Maximum Annual Debt Service on the Bonds, (ii) 125% of the average annual debt service on the Bonds, or (iii) 58 of the original principal amount of the Bonds. Annual Debt service on the Bonds for each year ending September 2nd shall equal the sum of (a) the interest falling due on the outstanding Bonds in such 12 month period, assuming that the outstanding Bonds are retired as scheduled, and (b) the principal amount of outstanding Bonds falling due during such 12 month period. "Average Annual Debt Service" shall mean the average Annual Debt Service during the term of the Bonds. "Maximum Annual Debt Service" shall mean, as computed from time to time, the largest Annual Debt Service during the period from the date of such computation through the final maturity of any outstanding Bonds. C. On July 15 of each fiscal year the amount on deposit in the Reserve .Fund in excess of the Reserve Requirement shall be transferred from the Reserve Fund to the Redemption Fund and shall be credited to 5 0 the unpaid assessment installments payable during such fiscal year. The Auditor's record, prepared pursuant to Section 8682 of the Streets and Highways Code, shall reflect the credits against each of the unpaid assessments in the manner provided in Streets and Highways Code Section 10427.1 in amounts equal to each parcel's proportionate share of such transfer. Notwithstanding the above, interest earnings on monies on deposit in the Reserve Fund in excess of the "yield" on the Bonds, as that • term is defined in the Internal Revenue Code of 1986 (the "Code "), shall be subject to transfer and rebate to the United States. D. Whenever monies in the Reserve Fund are sufficient to retire all of the Bonds outstanding, plus accrued interest thereon, such money shall be transferred to the Redemption Fund for the Bonds and collection of the remaining unpaid assessments shall cease. E. In the event assessments are paid in cash in advance of their final maturity date, the Issuer is required to credit the prepaid assess- ment with a proportionate share of the Reserve Fund and to transfer an amount equal to such credit to the Redemption Fund to be utilized for the advance retirement of Bonds. SECTION 19. No Issuer Liability. It is hereby further determined and declared that the Issuer will not obligate itself to advance any available funds from its Treasury to cure any deficiency or delinquency which may occur in �! the Bond Redemption Fund by failure of property owners to pay annual �. special assessments. This determination shall be clearly set forth and stated in the title of the Bonds to be issued pursuant to these proceed- ings as authorized and required by Section 8769 of the Streets and Highways Code of the State of California. SECTION 20. Covenant for Superior Court Foreclosure. In the event of delinquency in the payment of any installments of unpaid assessments, the Issuer does covenant for the benefit of the owners of the Bonds that it will review assessment records of the County not later than August 1 of each year to determine the amount of the assessments collected in the prior fiscal year. If the cumulative delinquencies in the payment of assess- ment installments throughout the Assessment District exceed five percent (5R), the Average Annual Debt Service on the Bonds, the Issuer shall commence foreclosure action(s) on all parcels for which the payment of assessment installments are delinquent in the Superior Court of the State of California (Part 14, Division 10, "Improvement Bond Act of 1915 ", Streets and Highways Code) on or before November 1 of each year, and diligently prosecute and pursue such foreclosure proceedings to judgment and sale. Initiation of such foreclosure actions may be deferred in any fiscal year if the Reserve Fund is maintained at an amount equal to the Reserve Requirement. SECTION 21. Covenant to Maintain Tax - Exempt Status. The Issuer covenants that it will not make any use of the proceeds of the Bonds issued hereunder _ which would cause the Bonds to become "arbitrage bonds" subject to Federal income taxation pursuant to the provisions of Section 148(a) of the Code, or to become "Federally- guaranteed obligations" pursuant to the provisions of Section 149(b) of the Cade, or to become "private activity bonds" pursuant to the provisions of Section 141(a) of the Code. To that end, the Issuer will comply with all applicable require- ments of the Code and all regulations of the United States Department of Treasury issued thereunder to the extent such requirements are, at the time, applicable and in effect. Additionally, the Issuer agrees to implement and follow each and every recommendation provided by Bond Counsel and deemed to be necessary to be undertaken by the Issuer to ensure compliance with all applicable provisions of the Code in order • to preserve the exemption of interest on the Bonds from Federal income taxation. SECTION 22. Covenant Regarding Arbitrage. The Issuer shall not take or permit nor suffer to be taken any action with respect to the gross proceeds of the Bonds as such term is defined under the Code which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds, would have caused the Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code and the regulations promulgated thereunder. SECTION 23. Order to Print and Authenticate Bonds. The Treasurer is hereby instructed to cause Bonds, as set forth above, to be printed, and to proceed to cause said Bonds to be authenticated and delivered to an authorized representative of the purchaser, upon payment of the purchase price as set forth in the accepted proposal for the sale of Bonds. ` SECTION 24. Arbitrage Certificate. On the basis of the facts, estimates and circum- stances now in existence and in existence on the date of issue of the Bonds, as determined by the Treasurer, said Treasurer is hereby autho- rized to certify that it is not expected that the proceeds of the issue will be used in a manner that would cause such obligations to be arbitrage Bonds. Such certification shall be delivered to the purchaser together with the Bonds. SECTION 25. Arbitrage Rebate Exemption. The term "Bond Proceeds ", as used in this Section, shall mean all amounts actually or constructively received by the Issuer from the sale of the Bonds. The term "Investment Proceeds" as used in this Section shall mean all amounts actually or construc- tively received from the investment of the Bond Proceeds. The Issuer shall expend all of the Bond Proceeds, other than such proceeds as are deposited in the Reserve Fund, and all of the Invest- ment Proceeds (including Investment Proceeds received from the invest- ment of Bond Proceeds deposited in the Reserve Fund) in accordance with the following schedule: (a) Not less than ten percent (108) of the above amount shall be expended within six (6) months following the date of delivery of the Bonds to the original purchaser thereof (the "Closing Date "); ( (b) Not less than forty -five percent (45 %) of the above amount shall �. be expended within one (1) year following the Closing Date; 7 • s (c) Not less than seventy -five percent (758) of the above amount shall be expended within eighteen (18) months following the Closing Date; and (d) Not less than one hundred percent (1008) of the above amount shall be expended within two (2) years following the Closing Date, provided, however, an amount equal to one hundred percent (1008) of the above amount shall be deemed to have been expended within • such two (2) year period if such requirement is met within the three (3) year period beginning on the Closing Date and the requirement would have been met within such two (2) year period, but for a reasonable retainage (not exceed 58 of the above amount). In the event that the Issuer does not satisfy the expenditure require- ment of this Section, the Issuer shall assure compliance with all applicable requirements contained in the Code for rebate to the Federal government of excess investment earnings, if any, with respect to earnings on the Bond Proceeds, the Investment Proceeds and on other applicable funds. Notwithstanding any other provision of this Section, the Issure shall assure compliance with applicable requirements contained in the Code for rebate to the Federal government of excess investment earnings, if any, with respect to earnings on the Reserve Fund and on other applic- able funds after the date which is two (2) yea wing the Closing Date. IN WITNESS WHEREOF, the Issuer has exe u d is and Indenture `ye^Ft the date first written hereinabove. 0 / l CITY OF'VEWPORT BEACH STATE OF CALIFORNIA 0 a E CITY OF NEWPORT BEACH ASSESSMENT DISTRICT NO. 58 (CANNERY VILLAGE) EXHIBIT ^A^ MATURITY SCHEDULE PRINCIPAL AMOUNT 2,746.07 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 15,000.00 15,000.00 15,000.00 C INTEREST RATE 6.25% 6.40% 6.60% 6.70% 6.80% 6.90% 7.00% 7.10% 7.20% 7.30% MATURITY SEPT. 1 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 E CITY OF NEWPORT BEACH ASSESSMENT DISTRICT NO. 58 (CANNERY VILLAGE) EXHIBIT ^A^ MATURITY SCHEDULE PRINCIPAL AMOUNT 2,746.07 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 15,000.00 15,000.00 15,000.00 C INTEREST RATE 6.25% 6.40% 6.60% 6.70% 6.80% 6.90% 7.00% 7.10% 7.20% 7.30%