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MEETING DATE:
OCTOBER 2, 2018
TITLE:
RESOLUTION OF THE SUCCESSOR AGENCY TO
THE FORMER REDEVELOPMENT AGENCY OF THE
CITY OF SANTA ANA APPROVING A FORM OF
PRELIMINARY OFFICIAL STATEMENT IN
CONNECTION WITH THE SALE AND DELIVERY OF
TAX ALLOCATION REFUNDING BONDS; MAKING
CERTAIN DETERMANATIONS RELATING THERETO;
AND AUTHORIZING CERTAIN OTHER ACTIONS IN
CONNECTION THEREWITH
{STRATEGIC PLAN NO. 4,2D)
CI Y ANAGER
RECOMMENDED ACTION
CLERK OF THE COUNCIL USE ONLY:
APPROVED
❑ As Recommended
❑ As Amended
❑ Implementing Resolution
❑ Other
CONTINUED TO
FILE NUMBER
Adopt a resolution approving a form of the Preliminary Official Statement in connection
with the sale and delivery of Tax Allocation Refunding Bonds; making certain
determinations relating thereto and authorizing certain other actions
2. Ratify and confirm the transfer of unspent proceeds of the Series 2011 Bonds in the
amount of approximately $5,831,789 to the respective redemption fund and to apply such
proceeds to defease an equal amount of outstanding Series 2011 Bonds, as specified in
its resolution adopted on July 17, 2018, in accordance with Health & Safety Code Section
34191.4(c)
3. Ratify and confirm the transfer of the reserve account of the Series 2011 Bonds in the
amount of approximately $6,727,062 to the respective redemption fund and to apply such
proceeds to defease an equal amount of outstanding Series 2011 Bonds.
DISCUSSION
In 2003, the Community Redevelopment Agency of the City of Santa Ana (the "former RDA")
issued its South Main Street Redevelopment Project, Tax Allocation Bonds, Series 2003A in the
amount of $20,945,000 (the "2003A Bonds"), and its Tax Allocation Refunding Bonds, Series
2003B in the amount of $34,145,000 (the "2003B Bonds", and collectively the "2003A & B
SA -3-1
Resolution Approving the Preliminary Official Statement
Tax Allocation Refunding Bonds, Series 2018A and 2018B
October 2, 2018
Page 2
Bonds"). The 2003A Bonds were issued to fund redevelopment activities of benefit to the South
Main Street Redevelopment Project Area. Approximately $12.5 million of the 2003A Bonds and
$2.8 million of the 2003B Bonds are currently outstanding. The 2003A & B Bonds consist of
interest rates ranging from 4.5% to 5% with the longest maturity (9/1/2031).
In 2011, the former RDA issued its Tax Allocation Bonds, Merged Project Area, 2011 Series A
(the "2011A Bonds") in the principal amount of•$66,790,000, of which $64,840,000 is currently
outstanding. The interest rates on the 2011A Bonds range from 5.25% to 6.75% for the longest
maturity (9/1/2028).
As of August 31, 2018 the Reserve, held by the fiscal agent, is $6,727,062 (Reserve). The
Reserve was established for both the 2003 and 2011 Bonds. Additionally, the 2011A Bonds
have, as of August 31, 2018, unspent Bond Proceeds in the amount of $5,831,789. The
Proceeds remain unspent due to the dissolving of the former Redevelopment Agency (see
below).
Per Assembly Bill (AB) 26 and 27, the State of California ("State") dissolved existing
redevelopment agencies, which led to the formation of the Successor Agency to the Santa Ana
Community Redevelopment Agency (the "Successor Agency"). The Successor Agency inherited
the responsibility for repayment of the former RDA debt service including the 2003A & B and
2011A Bonds. The State introduced additional legislation, AB 1484, which allowed existing
successor agencies to refund existing bonds, with approval of the Oversight Board and the State
Department of Finance, for the purpose of generating a debt service savings.
On June 27, 2018 City staff and the Successor Agency's bond financing team presented the
refinancing opportunity for the outstanding 2003A & B and 2011A Tax Allocation Bonds to the
Oversight Board for consideration. The Oversight Board voted in support of the refinancing
opportunity. Similar to the action taken by the Oversight Board, on July 17, 2018 the Successor
Agency also approved the refinancing.
Following both approvals, the required legal and financing documents were sent to the State
Department of Finance (DOF) and are currently under the 60 -day review period. City staff
anticipates DOF approval of the refinancing to occur during the week of October 1, 2018.
With the pending and anticipated approval from DOF imminent, as indicated by various other
approved refunding transactions throughout the state, City staff is seeking approval of the
Preliminary Official Statement (POS) so the marketing of the bonds to investors can begin with
the goal of pricing the bonds sometime in mid-October 2018. However, the process will not
commence in the event no approval is received from the DOF.
CURRENT MARKET ANALYSIS
Currently, market interest rates are at 3.59% however they are subject to change due to market
conditions. Refinancing the 2003A & B and 2011A Bonds through the issuance of a refunding
SA -3-2
Resolution Approving the Preliminary Official Statement
Tax Allocation Refunding Bonds, Series 2018A and 2018B
October 2, 2018
Page 3
bond issue (the "2018 Bonds"), with a 2018A series issued as tax exempt bonds and a 2018B
series issued as federally taxable bonds, is expected to generate a total debt service Savings
(Savings) of approximately $17.3 million (subject to change per market conditions and selection
of savings option), without extending the current final maturity dates of the bonds. In order to
maximize the savings amount, the Successor Agency will contribute the existing cash funded
reserve account (approximately $6.7 million) and unspent proceeds (approximately $5.8 million)
from the 2011A Bonds, to the refunding escrow for the 2018 Bonds.
The final Savings amount will depend on the market interest rates in effect at the time the 2018
Bonds are priced, which is anticipated to be during the third week of October 2018. Based on the
current redevelopment dissolution laws, the estimated savings amount (approx. $17.3 million for
the remaining life of the bond) would be allocated towards enforceable obligations, or shared
among taxing entities (including: the City of Santa Ana , the Santa Ana Unified School District,
the County of Orange, Rancho Santiago Community College District and other countywide
Special Districts) as residual revenues. The City of Santa Ana's share of the Savings is
anticipated to be approximately $3.5 million. The Savings to be receipted via increase Residual
Revenues is based on the selection of the upfront option which allocates the majority of the
Savings towards the City within the first three to four fiscal years (FY 2018-19 through FY 2021-
22). The upfront option was selected largely as a result of receiving the funds to address
deferred capital maintenance along with other operational needs.
FUTURE ACTIONS
Based on the timing of the DOF review period, it is anticipated that the Successor Agency will be
pricing the 2018 Bonds on October 17, 2018, with bond closing scheduled for October 31, 2018.
Upon closing of the bonds, the 2003A & B bonds will be redeemed. The net bond proceeds
necessary to redeem the outstanding 2011A Bonds will be placed into an escrow account with
the Escrow Agent, to be used to pay remaining principal and interest payments on the 2011A
Bonds through the first call date of March 1, 2021, at which time the remaining escrow balance
will be used to redeem all outstanding 2011A Bonds. Upon bond closing, the 2011A Bonds will
be defeased and no longer an obligation of the Successor Agency payable from tax revenues.
STRATEGIC PLAN ALIGNMENT
Approval of this item supports the City's effort to meet Goal #4 - City Financial Stability, Objective
#2 - (Provide a reliable five-year financial forecast that ensures financial stability in accordance
with the strategic plan), Strategy D (Conduct an assessment of the City's debt and refinancing
options to achieve savings).
FISCAL IMPACT
All costs associated with this transaction will be paid at closing with proceeds from the refunding
2018 Bonds. The proposed 2018 Bonds will generate an estimated total debt service savings of
$17.3 million (over the term of the Bonds) net of all costs related to the issuance of the debt for all
SA -3-3
Resolution Approving the Preliminary Official Statement
Tax Allocation Refunding Bonds, Series 2018A and 2018B
October 2, 2018
Page 4
Taxing Entities. Specifically the City of Santa Ana, which is a Taxing Entity of the Successor
Agency, will be in receipt of additional residual revenue as a result of the debt service savings.
An estimated twenty (20%) of the savings (noted above) will be distributed to the City's General
Fund Santa Ana Residual (account no. 01102002-50012) approximately $3.5 million over the
remaining term of the Bonds (FY 2031-32) with the balance going to other taxing entities
including the Santa Ana Unified School Distirct, the County of Orange, Rancho Santiago
Community College District and other countywide Special Districts.
A greater portion of the savings will be realized in the first three years, which will generate
significant debt service savings on the City's Recognized Obligation Payments Schedule
('BOPS") and, in turn, the taxing entities will receive additional property tax revenue for the life of
the bond.
Additionally, upon Council ratification and completion of the transaction (expected in mid to late
October 2108), staff will transfer the unspent bond proceeds to the trustee of this transaction
(Bank of New York) into the respective redemption fund and the reserve account will move from
the Series 2011 Bonds reserve account into the redemption fund for the 2018A & B Bonds. The
amount noted below is as of August 31, 2018; however the amount to be transferred will be the
amount noted as of the the date of the close of the transaction (mid to late October 2018):
Unspent Bond Proceeds
65401001-10201
$5,831,789
Reserve Account
65401001-15113
$6,727,062
Steven A. Mendoza
Executive Director
Community Development Agency
Exhibits: 1. Successor Agency Resolution
2. Preliminary Official Statement
AS TO FUNDS AND ACCOUNTS:
Sergio Vidal Do
Acting Executive Director
Finance and Management Services Agency
SA -3-4
EXHIBIT 1
RESOLUTION NO.
RESOLUTION OF THE SUCCESSOR AGENCY TO THE
COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF
SANTA ANA APPROVING THE PRELIMINARY OFFICIAL
STATEMENT IN CONNECTION WITH THE SALE AND DELIVERY
OF ITS TAX ALLOCATION REFUNDING BONDS; MAKING
CERTAIN DETERMINATIONS RELATING THERETO; AND
AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION
THEREWITH
WHEREAS, pursuant to the Community Redevelopment Law (Part 1 of Division 24 of
the Health and Safety Code of the State of California and referred to herein as the "Law"), the
City Council of the City of Santa Ana (the "City") created the former Community
Redevelopment Agency of the City of Santa Ana (the "Former RDA');
WHEREAS, the Former RDA was a redevelopment agency, a public body, corporate and
politic duly created, established and authorized to transact business and exercise its powers, all
under and pursuant to the Law, and the powers of such agency included the power to issue bonds
for any of its corporate purposes;
WHEREAS, the City agreed to serve as the successor agency (referred to herein as the
"Successor Agency") to the Former RDA commencing on February 1, 2012, pursuant to
Assembly Bill Xl 26 ("ABXl 26");
WHEREAS, on June 27, 2012, as part of the Fiscal Year 2012-2013 State of California
budget bill, the Governor signed into law Assembly Bill 1484 ("AB 1484"), which modified or
added to some of the provisions of ABXl 26, including provisions related to the refunding of
outstanding redevelopment agency bonds and the expenditure of remaining bond proceeds
derived from redevelopment agency bonds issued on or before December 31, 2010;
WHEREAS, Senate Bill No. 107 ("AB 107"), a follow on bill to ABXl 26 and AB
1484, was enacted on September 22, 2015, and provides additional terms and amendments for
operations of a successor agency;
WHEREAS, Health & Safety Code Section 34177.5(a)(1) authorizes successor agencies
to refund outstanding bonds 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 shall 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 shall 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;
WHEREAS, the Successor Agency has determined, to the extent authorized by
California Health and Safety Code Section 34177.5(a), to issue its Successor Agency to the
4134-0741-5831.2
SA -3-5
former Community Redevelopment Agency of the City of Santa Ana Tax Allocation Refunding
Bonds, in one or more series, one of which may be federally taxable if determined by bond
counsel to be required under federal tax law, and with such other name and series designation as
shall be deemed appropriate (the "Bonds"), for the purpose of: (i) refinancing certain
redevelopment activities of the Former RDA through the refunding of certain outstanding bonds
of the Former RDA; (ii) paying the costs of issuing the Bonds; (iii) funding a reserve account
and/or providing for a reserve policy or surety for deposit to the reserve account for the Bonds;
and, (iv) if advisable, paying for the cost of municipal bond insurance and/or a surety to fund the
reserve account for the Bonds in lieu of funding all or a portion of such reserve account with
bond proceeds;
WHEREAS, there is approximately $5,831,788 of unspent proceeds of the Community
Redevelopment Agency of the City of Santa Ana Tax Allocation Bonds (Merged Project Area),
2011 Series A (the "Series 2011 Bonds"), which the Successor Agency expects to apply in
accordance with Health and Safety Code Section 34191.4(c)(2) to the defeasance of the Series
2011 Bonds, as specified in its resolution adopted on July 17, 2018; and,
WHEREAS, a copy of the Official Statement in preliminary form, a final form of which
will be executed by the Successor Agency in connection with the issuance, sale and delivery of
the Bonds, is on file with the Secretary of the Successor Agency.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA ANA
ACTING AS SUCCESSOR AGENCY TO THE COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF SANTA ANA DOES HEREBY RESOLVE AS FOLLOWS:
1. Acknowledgement of Prior Approval of Issuance of Bonds. The City Council
acting for the Successor Agency, acknowledges that it adopted its resolution on July 17, 2018,
and through such resolution it approved the issuance of the Bonds and related financing
documents.
2. Approval of Preliminary Official Statement. The form, terms and provisions of
the Preliminary Official Statement on file with the Secretary of the Successor Agency are
approved, and the Successor Agency hereby approves the distribution of the Preliminary Official
Statement to prospective purchasers of the Bonds. The City Manager, or designee ("Authorized
Officer," acting for the Successor Agency), is authorized to certify on behalf of the Successor
Agency that the Preliminary Official Statement is deemed final as of its date, within the meaning
of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934, as amended. Any
Authorized Officer is authorized to execute, at the time of sale of the Bonds, said form of
Preliminary Official Statement, as revised to include pricing information in the form of a final
Official Statement (the "Official Statement'), with such changes and insertions therein as may be
necessary to cause the same to carry out the intent of this Resolution and as are approved by
counsel to the Successor Agency, such approval to be conclusively evidenced by the delivery
thereof.
3. Ratification of Direction to Apply Unspent Proceeds. The City Council acting for
the Successor Agency, ratifies and confirms its direction to transfer unspent proceeds of the
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4134-0741-5831.2
SA -3-6
Series 2011 Bonds in the amount of approximately $5,831,789 (as of August 31, 2018) and/or
the amount upon closing of the financial transaction to the respective redemption fund, and to
apply such proceeds to defease an equal amount of outstanding Series 2011 Bonds, as specified
in its resolution adopted on July 17, 2018, in accordance with Health & Safety Code Section
34191.4(c).
4. Other Acts. The officers and staff of the Successor Agency are hereby authorized
and directed, jointly and severally, to do any and all things to execute and deliver any and all
documents, which in consultation with Orrick, Herrington & Sutcliffe LLP, the Successor
Agency's bond counsel, they may deem necessary or advisable in order to consummate the
issuance, sale and delivery of the Bonds, or otherwise effectuate the purposes of this Resolution,
and any and all such actions previously taken by such officers or staff members are hereby
ratified and confirmed.
5. Effective Date. This Resolution shall take effect upon adoption.
PASSED, APPROVED and ADOPTED this 2018.
CITY OF SANTA ANA ACTING AS
SUCCESSOR AGENCY TO THE COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF
SANTA ANA
ATTEST:
City Cleric
APPROVED AS TO FORM:
�r'I '� for
SoniLk. CavWho.
City Attorney
Miguel A. Pulido, Mayor
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4134-0741-5831.2
SA -3-7
SECRETARY'S CERTIFICATE
I, Maria D. Huizar, Clerk of the Council, do hereby attest to and certify the attached
Resolution No, to be the original resolution adopted by the City Council of the City of
Santa Ana on '2018.
Date:
4134-0741-5831.2
SA -3-8
Clerk of the Council
City of Santa Ana
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PRELIMINARY OFFICIAL STATEMENT DATED 2018
NEW ISSUE — BOOK -ENTRY RATINGS
INSURED BONDS RATING: S&P:
UNINSURED BONDS AND UNDERLYING RATING: S&P:
(See "CONCLUDING INFORMATION - Ratings on the Bonds")
In the opinion of Orrick Herrington & Sutcliffe LLP, Bond Counsel to the Successor Agency, based apes an analysis of existing laws, regulations, rulings and
corm( decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain cavernous, Interest on the Series 2018.4 Bonds is
exdnded,frrom gross income for federal income tax pinposes under Section 103 of the Internal Revenue Code of 1986. In the further opinion of Bond Counsel, interest on the
Series 2018A Bonds is not a specific preference ltem for purposes of the federal alternative minimum tax. Bond Counsel is also of the opinion that interest on the Bonds is
exempt from State of California personal income taxes, Bond Counsel expresses no opinion regarding any other tax consequences related to the ownership or disposition of, or
the amount, accrual or receipt ofintereston, the Bonds. See"LEGAL MATTERS—Tax Matters."
Dated: Date of Delivery
SUCCESSOR AGENCY TO THE FORMER
COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF SANTA ANA
TAX ALLOCATION REFUNDING BONDS
Series 2018A (Tax -Exempt) Series 2018E (Federally Taxable)
Due: September I as shown on the inside cover pages
The cover page contains certain information for quick reference only. It is not a summary of the issues, Potential investors must read the entire
Official Statement to obtain information essential to the making of an informed investment decision, See "RISK FACTORS" for a discussion of special
risk factors that should be considered in evaluating the investment quality of the Bonds.
Proceeds from the sale of the Successor Agency to the Former Community Redevelopment Agency of the City of Santa Ana (tire "Successor
Agency") Tax Allocation Refunding Bonds, Series 2018A Bonds (Tax Exempt) (the "Series 2018A Bonds") and Tax Allocation Refunding Bonds, Series
2018B Bonds (Federally Taxable) (the "Series 2018B Bonds," and together with the Series 2018A Bonds, the "Bonds"), will be used to refinance the
following obligations of the former Community Redevelopment Agency of the City of Santa Ana (the "Former Agency"): (a) its $20,945,000 aggregate
principal amount of its South Main Street Redevelopment Project, Tax Allocation Bonds, Series 2003A (the "Series 2003A Bonds"); (b) its $34,145,000
aggregate principal amount of its South Main Street Redevelopment Project, Tax Allocation Refunding Bonds, Series 2003B (the "2003B Bonds" and,
together with the Series 2003A Bonds, the "2003 Bonds"); and (c) its $66,790,000 aggregate principal amount of its Tax Allocation Bonds (Merged
Project Area), 2011 Series A (the "2011A Bonds" and, together with the 2003 Bonds, the `Refunded Bonds").
The Bonds will be issued under an Indenture of Trust dated as of 1, 2018 (the "Indenture"), by and between the Successor Agency
and The Bank of New York Mellon Trust Company, N.A., as trustee (the `Trustee"). The Bonds are special obligations of the Successor Agency and are
payable solely from and secured by a pledge of certain Tax Revenues, as described in the Official Staternent, and a pledge of amounts to certain funds and
accounts established mrder the Indenture (see "SECURITY FOR THE BONDS" and `RISK FACTORS").
Interest on the Bonds is payable semiannually on each March l and September 1, commencing 1, 20 , until maturity (see "THE
BONDS - General Provisions"). The Series 2018A Bonds are subject to optional redemption prim to maturity. The Series 20t8B Bonds are not subject to
optional redemption prior to maturity. See"THE BONDS—Redemption."
The Bonds do not constiVme a debt or liability of the City of Santa Ana, the County of Orange, the State of California or of any of its political
subdivisions, other than the Successor Agency, The Successor Agency shall only be obligated to pay the principal of the Bonds, or related interest, from
the funds described in the Official Statement, and neither the faith and credit nor the taxing power of the City of Santa Ana, the County of Orange, the
State of California or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds. The Successor Agency has
no taxing power.
The Successor Agency has applied for a municipal bond insurance policy to insure the payment of principal of and interest on the Bonds and a
municipal debt service reserve policy N satisfy the Reserve Account Requirement (as defined herein) and will decide whether to purchase such policy in
connection with the offering of the Bonds. Such information will be included in the Official Statement.
The Bonds are being offered when, as and if issued, subject to the approval as to their legality by Oniek, Herrington & Sutcliffe LLP, Los
Angeles, California. Certain legal matters will also be passed on for the Successor Agency by Best Best & Krieger LLP, Riverside, California, as
Disclosure Counsel, and by the Assistant City Attorney of the City of Santa Ana, Santa Ana, California, as Successor Agency Counsel. Certain legal
matters will be passed on for the Underwriter by its counsel, Kutak Rock LLP, Irvine, California. It is anticipated that the Bonds will be available for
delivery through the facilities of The Depository Trust Company on or about , 2018 (see "APPENDIX G - THE BOOK -ENTRY SYSTEM"),
Dated: , 2018.
Preliminary, subject to change.
Ramirez & Co., Inc.
EXHIBIT 2
SA -3-9
SUCCESSOR AGENCY TO THE FORMER
COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF SANTA ANA
TAX ALLOCATION REFUNDING BONDS
Maturity Date Principal
(September 1) Amount
Maturity Date Principal
(September 1) Amount
Series 2018A (Tax -Exempt)
MATURITY SCHEDULE
Interest Rate Yield
$ r
Series 2018B (Federally Taxable)
Interest Rate Yield
Price CUSIPt
Price CUSIPt
Preliminary, subject to change.
t- Copyright 2018, American Bankers Association. CUSIP® is a registered trademark of the American Bankers Association.
CUSIP data contained in the Official Statement is provided by CUSIP Global Services Bureau, operated by Standard &
Poor's. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global
Services. CUSIP numbers have been assigned by an independent company not affiliated with the Successor Agency and are
included solely for the convenience of the holders of the Bonds. None of the Successor Agency, the Municipal Advisor or
the Underwriter takes any responsibility for the selection or uses of these CUSIP numbers, and no representation is made as
to their correctness on the Bonds or as included in the Official Statement. The CUSIP number for a specific maturity is
subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited
to, a refunding in whole or in part or as a result of the procurement of secondary market portfolio insurance or other similar
enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.
SA -3-10
SUCCESSOR AGENCY TO THE FORMER
COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF SANTA ANA
TAX ALLOCATION REFUNDING BONDS
CITY COUNCIL AND SUCCESSOR AGENCY GOVERNING BOARD
Miguel A. Pulido, Mayor
Michele Martinez, Mayor Pro Tem
P. David Benavides, Council Member
Vicente Sarmiento, Council Member
Jose Solorio, Council Member
Sal Tinajero, Council Member
Juan Villegas, Council Member
CITY STAFF
Raul Godinez II, City Manager
Steven A. Mendoza, Executive Director, Community Development Agency
Ryan O. Hodge, Assistant City Attorney
Maria D. Huizar, Clerk of the Council
PROFESSIONAL SERVICES
Bond Counsel
Orrick, Herrington & Sutcliffe LLP
Los Angeles, California
Disclosure Counsel
Best Best & Krieger LLP
Riverside, California
Municipal Advisor
Urban Futures Incorporated
Tustin, California
Fiscal Consultant
Urban Futures Incorporated
Tustin, California
Trustee and Escrow Agent
The Bank of New York Mellon Trust Company, N.A.
Los Angeles, California
Verification Agent
Grant Thornton LLP
Minneapolis, Minnesota
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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 most 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
information and expressions of opinions in the Official Statement are subject to change without notice and neither the
delivery of this Official Statement nor any sale of Bonds shall, under any circumstances, create any implication that there
has been no change in the affairs of the Successor Agency since its date. This Official Statement is submitted in connection
with the sale of the Bonds and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized
in writing by the Successor Agency. All summaries of the Bonds, the Indenture and other documents, are made subject to
the provisions of such documents 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. See
"INTRODUCTION - Summary Not Definitive."
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.
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 levels 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
inside cover pages 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 Bonds have not been registered under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended, in reliance upon exemptions for the issuance and
sale of municipal securities provided under Section 3(a)(2) of the Securities Act of 1933 and Section 3(a)(12) of the
Securities Exchange Act of 1934.
Estimates and Projections. Certain statements included or incorporated by reference in this Official Statement constitute
"forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995,
Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States
Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as "plan,"
"expect," "estimate," "budget' or other similar words.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISI{S, 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 of Santa Ana maintains an Internet website, but the information on the website is not incorporated in this
Official Statement.
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TABLE OF CONTENTS
INTRODUCTION......................................................
I
The Successor Agency and the Former
45
Agency............................................................
I
TheCity................................................................
2
Authority and Purpose ..........................................
2
Tax Allocation Financing Under the
47
Dissolution Act ................................................
3
The Redevelopment Project ..................................
3
Security for the Bonds ..........................................
4
Municipal Bond Insurance ....................................
5
LegalMatters........................................................
5
Professional Services ............................................
5
Offering of the Bonds ...........................................
5
Summary Not Definitive .......................................
5
THE FINANCING PLAN ..........................................
6
The Refunding Plan ..............................................
6
Estimated Sources and Uses of Funds ..................
7
THE BONDS.............................................................
8
General Provisions ................................................
8
Redemption...........................................................
9
Scheduled Debt Service on the Bonds ................
11
SECURITY FOR THE BONDS ..............................
12
Tax Allocation Financing ...................................
12
Tax Revenues......................................................
12
Pledged Tax Revenues ........................................
13
Redevelopment Property Tax Trust Fund...........
14
Recognized Obligation Payment
Schedules.......................................................
15
Pledged Tax Revenues ........................................
17
Reserve Account .................................................
17
Additional Bonds ................................................
18
PROPERTY TAXATION IN CALIFORNIA..........
19
THE SUCCESSOR AGENCY .................................
22
Government Organization ...................................
22
Successor Agency Powers ..................................
23
Dissolution Act Milestones .................................
23
Successor Agency Accounting Records
and Financial Statements ...............................
24
Plan Limitations ..................................................
24
Stipulation Judgments .........................................
24
THE PROJECT AREA ............................................
27
Description of the Project Area ...........................
27
LandUse.............................................................
27
Assessed Valuations and Tax Revenues .............
28
Major Taxpayers .................................................
29
Assessment Appeals ...........................................
29
Component Areas ...............................................
30
Tax Sharing Agreements ....................................
31
Statutory Tax Sharing Payments .........................
35
TAX REVENUES AND DEBT SERVICE
COVERAGE ..............................................
36
RISK FACTORS ......................................................
41
-i-
Factors Which May Affect Tax Revenues.......... 41
Challenges to Dissolution Act .............................
41
Real Estate and General Economic Risks...........
45
Recognized Obligation Payment Schedule.........
45
Series 2018A Bonds Loss of Tax
B-1
Exemption.....................................................
46
IRS Audit of Tax -Exempt Bond Issues ...............
47
Secondary Market ...............................................
47
Bankruptcy of Landowners .................................
47
Concentration of Property Ownership ................
47
Change in Law ....................................................
47
LEGAL MATTERS .................................................
47
Enforceability of Remedies .................................
47
Approval of Legal Proceedings ...........................
48
TaxMatters.........................................................
48
No Litigation.......................................................
52
CONCLUDING INFORMATION ...........................
52
Ratings on the Bonds ..........................................
52
The Municipal Advisor .......................................
53
Continuing Disclosure ........................................
53
Underwriting.......................................................
53
Additional Information .......................................
54
References...........................................................
54
Execution............................................................
54
APPENDIX A - SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE....
A-1
APPENDIX B - CITY OF SANTA ANA
INFORMATION .......................................
B-1
APPENDIX C - FISCAL CONSULTANT'S
REPORT ....................................................
C-1
APPENDIX D - CITY OF SANTA ANA
AUDITED FINANCIAL
STATEMENTS FOR THE FISCAL
YEAR ENDED JUNE 30, 2017 ...............
D-1
APPENDIX E - FORM OF CONTINUING
DISCLOSURE CERTIFICATE ................
E-1
APPENDIX F - PROPOSED FORM OF BOND
COUNSEL OPINION ...............................
F-1
APPENDIX G - THE BOOK -ENTRY SYSTEM.....
G-1
[APPENDIX H - SPECIMEN MUNICIPAL
BOND INSURANCE POLICY] ..............
H-1
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MAP OF PROJECT AREA
[TO COME]
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OFFICIAL STATEMENT
SUCCESSOR AGENCY TO THE FORMER
COMMUNITY REDEVELOPMENT AGENCY
OF THE CITY OF SANTA ANA
TAX ALLOCATION REFUNDING BONDS
Series 2018A (Tax -Exempt) Series 2018B (Federally Taxable)
This Official Statement, which includes the cover page, inside cover pages and appendices (the "Official
Statement"), is provided to furnish certain information concerning the sale of the Successor Agency to the
former Community Redevelopment Agency of the City of Santa Ana Tax Allocation Refunding Bonds, Series
2018A (Tax -Exempt) ("Series 2018A Bonds") and Tax Allocation Refunding Bonds, Series 2018B Bonds
(Federally Taxable) ("Series 2018B Bonds," and together with the Series 2018A Bonds, the "Bonds").
INTRODUCTION
This Introduction contains only a brief description of this issue and does not purport to be complete.
This Introduction is subject in all respects to more complete information in the entire Official Statement and the
offering of the Bonds to potential investors is made only by means of the entire Official Statement and the
documents summarized in the Official Statement. Potential investors must read the entire Official Statement to
obtain information essential to the making of an informed investment decision (see "RISK FACTORS'). For
definitions of certain capitalized terms used in the Official Statement and not otherwise defined, and the terms
relating to the Bonds, see the summary included in APPENDIX A - "SUMMARY OF CERTAIN PROVISIONS
OF THE INDENTURE. "
The Successor Agency and the Former Agency
The former Community Redevelopment Agency of the City of Santa Ana (the "Former Agency") was
established on June 2, 1973 by the City Council (the "City Council") of the City of Santa Ana (the "City")
pursuant to the Community Redevelopment Law (the "Redevelopment Law"), constituting Part 1 of Division 24
(commencing with Section 33000) of the Health and Safety Code of the State of California (the "State"). On
June 28, 2011, Assembly Bill No. 26 ("AB Xl 26") was enacted as Chapter 5, Statutes of 2011, together with a
companion bill, Assembly Bill No. 27 ("AB Xl 27"), A lawsuit was brought in the California Supreme Court,
California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. 2011), challenging the
constitutionality of AB X1 26 and AB XI 27. In its December 29, 2011 decision, the California Supreme Court
largely upheld AB Xl 26, invalidated AB Xl 27, and held that AB Xl 26 may be severed from AB Xl 27 and
enforced independently. As a result of AB Xl 26 and the decision of the California Supreme Court in the
California Redevelopment Association case, as of February 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 Xl 26 relating to the dissolution and wind down of former
redevelopment agency affairs are 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"), enacted as Chapter 26, Statutes of 2012, and as further amended on
September 22, 2015 by Senate Bill No. 107 ("SB 107") enacted as Chapter 325, Statutes of 2015. The
provisions of Part 1.85 as amended by AB 1484 and SB 107 are referred to in this Official Statement as the
" Preliminary, subject to change.
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"Dissolution Act." The Redevelopment Law, as amended by the Dissolution Act, is sometimes referred to in the
Official Statement as the "Law."
Pursuant to Section 34173 of the Dissolution Act, the City Council serves as the governing board of the
Successor Agency to the Former Agency. Since the February 1, 2012 dissolution of the Former Agency, the City
has served as the Successor Agency to the former Community Redevelopment Agency of the City of Santa Ana
(the "Successor Agency"). The Successor Agency is governed by a seven -member board consisting of the
Mayor and the members of the City Council. The Mayor acts as the chairman of the Successor Agency (see
"THE SUCCESSOR AGENCY").
Section 34173(g) of the Dissolution Act 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 (see "THE
SUCCESSOR AGENCY').
The City
The City is the county seat of the County of Orange (the "County"). The City encompasses
approximately 27.2 square miles. The City was first incorporated in 1886, and operates under a charter adopted
in 1952, which provides for a Council -Manager form of government. The January 1, 2018 population of the
City was 338,247. For certain information with respect to the City, see APPENDIX B — "CITY OF SANTA
ANA INFORMATION."
Authority and Purpose
The Bonds are being issued pursuant to the Constitution and laws of the State, including 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 (the "Refunding Law"), the Law and an Indenture of Trust dated as of 1, 2018 (the
"Indenture") by and between the Successor Agency and The Bank of New York Mellon Trust Company, N.A.,
as trustee (the "Trustee").
The Bonds are being issued to refund the following:
(a) $20,945,000 aggregate principal amount of its former Community Redevelopment
Agency of the City of Santa Ana, South Main Street Redevelopment Project, Tax Allocation Bonds,
Series 2003A, of which $12,545,000 aggregate principal amount is currently outstanding (the "2003A
Bonds");
(b) $34,145,000 aggregate principal amount of its former Community Redevelopment
Agency of the City of Santa Ana, South Main Street Redevelopment Project, Tax Allocation Refunding
Bonds, Series 2003B, of which $2,820,000 aggregate principal amount is currently outstanding, (the
"2003B Bonds," collectively with the 2003A Bonds, the "2003 Bonds"); and
(c) $66,790,000 aggregate principal amount of its Community Redevelopment Agency of
the City of Santa Ana Tax Allocation Bonds (Merged Project Area), 2011 Series A of which
$64,840,000 aggregate principal amount is currently outstanding (the "2011A Bonds," collectively with
the 2003 Bonds, the "Refunded Bonds").
The 2003 Bonds were issued pursuant to a First Supplement to Indenture with respect to the 2003A
Bonds, dated as of April 1, 2003 (the "2003 First Supplement'), and a Second Supplement to Indenture with
respect to the 2003B Bonds, dated as of May 1, 2003 (the "2003 Second Supplement'), each by and between the
Former Agency and BNY Western Trust Company (now known as The Bank of New York Mellon Trust
Company, N.A.), as successor trustee (the "Prior Trustee") and each supplementing that Indenture dated as of
August 1, 1993, by and between the Former Agency and Dai-Ichi Kangyo Bank of California (the "1993
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Indenture" and, as supplemented and amended by the 2003 First Supplement and the 2003 Second Supplement,
(the "2003 Indenture"). The 2011A Bonds were issued pursuant to an Indenture of Trust, dated as of February
1, 2011 (the "2011 Indenture"), between the Former Agency and the Prior Trustee, as trustee of the 2011A
Bonds.
See "THE FINANCING PLAN."
Tax Allocation Financing Under the Dissolution Act
Prior to the enactment of AB XI 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 drops below the base year level, the Taxing Agencies, as defined in the Official Statement,
thereafter received 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 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 agency obligations.
Under the Dissolution Act, moneys will be deposited from time to time in a Redevelopment Property
Tax Trust Fund (the "RPTTF") held by a county auditor -controller with respect to a successor agency, which are
equivalent to the tax increment revenues that were formerly allocated under the Redevelopment Law to the
redevelopment agency and formerly authorized under the Redevelopment Law to be used for the financing of
redevelopment projects using current assessed values on the last equalized roll on August 20 each year. See
"SECURITY FOR THE BONDS - Tax Allocation Financing" for additional information.
The Dissolution Act authorizes refer ding bonds, including the Bonds, to be secured by a pledge of
moneys deposited from time to time in the RPTTF. Tax Revenues, as defined in the Official Statement, pledged
to pay the Bonds consist of a portion of the amounts deposited from time to time in the RPTTF established
pursuant to and as provided in the Dissolution Act (see "Security for the Bonds" below).
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 legal effect as if the
bonds had been issued prior to the effective date of AB Xl 26, in full conformity with the applicable provision
of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency's
Recognized Obligation Payment Schedules ("ROPS") (see APPENDIX A — "SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE - Definitions" and "SECURITY FOR THE BONDS - Recognized
Obligation Payment Schedules").
The Redevelopment Project
As described in "THE PROJECT AREA" and the sections identified immediately below, the
redevelopment project consists of the following "Component Areas" which were merged into a project area (the
"Project Area" and also sometimes referred to as the "Redevelopment Project"):
• Central City Redevelopment Project;
• Inter -City Commuter Station Redevelopment Project;
• North Harbor Boulevard Redevelopment Project;
• South Harbor Boulevard/Fairview Street Redevelopment Project;
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• South Main Street Redevelopment Project; and
• Bristol Corridor Redevelopment Project.
In total, the Redevelopment Project contains approximately 4,989 acres, which comprises approximately
28.8 percent of the total acres in the City.
See "THE PROJECT AREA — Component Areas" for additional infornation on the Redevelopment
Project and "THE SUCCESSOR AGENCY" for additional information on the Redevelopment Plan.
Security for the Bonds
For the security of the Bonds, the Successor Agency grants a pledge of and lien on all of the Tax
Revenues. "Tax Revenues" are defined under the Indenture as all taxes annually allocated and paid to the
Successor Agency pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Law, Section 16
of Article XVI of the Constitution of the State and other applicable state laws and as provided in the
Redevelopment Plan available for or deposited into the RPTTF, [to the extent not payable with respect to Pass
Through Obligations, and subject to the equal and senior claims of indebtedness, if, any].
If, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a) of Section
34183 of the Dissolution Act are invalidated by a final judicial decision, then Tax Revenues will include all tax
revenues allocated to the payment of indebtedness pursuant to California Health and Safety Code Section 33670
or such other section as may be in effect at the time providing for the allocation of Tax Revenues in accordance
with Article XVI, Section 16 of the California Constitution. See "PROPERTY TAXATION IN CALIFORNIA"
and "THE PROJECT AREA - Tax Sharing Agreements" and "- Statutory Tax Sharing Payments."
The Successor Agency may not issue additional bonds payable on a basis senior to the Bonds. The
Successor Agency may issue additional bonds payable from Tax Revenues on a parity with the Bonds ("Parity
Debt") to refinance the Bonds. See "SECURITY FOR THE BONDS - Additional Bonds."
Certain obligations of the Successor Agency under tax sharing agreements are payable on a senior basis
to the Bonds. See "THE PROJECT AREA — Tax Sharing Agreements" and "- Statutory Tax Sharing
Payments."
Taxes levied on the property within the Project Area on that portion of the taxable valuation over and
above the taxable valuation of the base year property tax roll of the Project Area, will be deposited in the
RPTTF for transfer by the County of Orange Auditor -Controller (the "County Auditor -Controller") to the
Successor Agency's Redevelopment Obligation Retirement Fund, as defined below, on January 2 and June 1 of
each year to the extent required for payments listed in the Successor Agency's ROPS in accordance with the
requirements of the Dissolution Act. Moneys transferred by the County Auditor -Controller to the Successor
Agency will be deposited into the Successor Agency's Redevelopment Obligation Retirement Fund and will be
transferred by the Successor Agency to the Trustee for deposit in the Debt Service Fund established under the
Indenture. See "SECURITY FOR THE BONDS - Recognized Obligation Payment Schedules."
The Bonds do not constitute a debt or liability of the City, the County of Orange (the "County"),
the State or of any of its political subdivision, other than the Successor Agency. The Successor Agency
shall only be obligated to pay the principal of the Bonds, or related interest, from the funds described in
the Official Statement, and neither the faith and credit nor the taxing power of the City, the County or
the State is pledged to the payment of the principal of or the interest on the Bonds. The Successor Agency
has no taxing power.
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Municipal Bond Insurance
The Successor Agency has applied for a municipal bond insurance policy to insure the payment of the
principal of and interest on the Bonds and a municipal debt service reserve policy to satisfy the Reserve
Requirement (as defined herein) and will decide whether to purchase such policy in connection with the offering
of the Bonds. Such information will be included in the Official Statement.
Legal Matters
All legal proceedings in connection with the issuance of the Bonds are subject to the approving opinion
of Orrick, Herrington & Sutcliffe LLP, Los Angeles, California, as Bond Counsel. Such opinion, and certain tax
consequences incident to the ownership of the Bonds, including certain exceptions to the tax treatment of
interest, are described more fully under the heading "LEGAL MATTERS." Certain legal matters will be passed
on for the Successor Agency by Best Best & Krieger LLP, as Disclosure Counsel, by Assistant City Attorney of
the City of Santa Ana, Santa Ana, California, as general counsel to the Successor Agency, and for the
Underwriter by their Counsel, Kutak Rock LLP, Irvine, California ("Underwriter's Counsel").
Professional Services
The Bank of New York Mellon Trust Company, N.A. will act as Trustee with respect to the Bonds
Urban Futures Incorporated, Orange, California (the "Municipal Advisor") advised the Successor
Agency as to the financial structure and certain other financial matters relating to the Bonds and assisted the
Successor Agency with the preparation of this Official Statement.
Urban Futures Incorporated, Orange, California (the "Fiscal Consultant") served as fiscal consultant to
the Successor Agency.
Fees payable to Bond Counsel, Disclosure Counsel, Underwriter's Counsel, the Municipal Advisor and
the Fiscal Consultant are contingent upon the sale and delivery of the Bonds.
Offering of the Bonds
Authority for Issuance. The Bonds are to be issued and secured pursuant to the Indenture, as authorized
by Resolution Nos. 2018-001 and of the Successor Agency adopted on July 17, 2018 and October 2,
2018, respectively, the Refunding Law and the Law. The Successor Agency to the former Community
Redevelopment Agency of the City of Santa Ana Oversight Board (the "Oversight Board") approved the action
taken by the Successor Agency to refinance the Refunded Bonds on June 27, 2018. The State Department of
Finance approved the Oversight Board action by letter dated 12018.
Summary Not Definitive
The summaries and references contained in the Official Statement with respect to the Indenture, the
Bonds and other statutes or documents do not purport to be comprehensive or definitive and are qualified by
reference to each such document or statute, and references to the Bonds are qualified in their entirety by
reference to the form thereof included in the Indenture. Copies of the documents described in the Official
Statement are available for inspection during the period of initial offering of the Bonds at the offices of the
Municipal Advisor, Urban Futures Incorporated, 17821 E. 17' Street, Suite 245, Tustin, California 92780,
telephone (714) 283-9334. Copies of these documents may be obtained after delivery of the Bonds from the
Successor Agency at 20 Civic Center Plaza M-25, Santa Ana, California 92702.
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THE FINANCING PLAN
The Refunding Plan
Redemption of Refunded ]fonds. On the Closing Date, a portion of the proceeds of each series of the
Bonds will be transferred to the Trustee, as prior trustee, for the Refunded Bonds (the "Prior Trustee") for
deposit into separate revenue funds (together, the "Revenue Funds") as provided for each series of Refunded
Bonds, under certain Irrevocable Refunding Instructions and Agreements, dated as of the 1, 2018
(the "Escrow Agreement') delivered by the Successor Agency to the Prior Trustee.
The amount deposited in the Revenue Funds for the Refunded Bonds, together with other available
moneys, will be held uninvested and irrevocably pledged for the payment of the related Refunded Bonds on
their respective date of redemption as follows:
the $12,545,000 outstanding 2003A Bonds will be redeemed in full on 1,20
at a redemption price equal to 100% of the principal amount of the 2003A Bonds to be
redeemed together with accrued interest thereon to the date fixed for redemption, without
premium;
• the $2,820,000 outstanding 2003B Bonds will be redeemed in full on 1, 20 , at
a redemption price equal to 100% of the principal amount of the 2003B Bonds to be redeemed
together with accrued interest thereon to the date fixed for redemption, without premium; and
the $64,840,000 outstanding 2011A Bonds will be redeemed in full on 1,20
at a redemption price equal to 100% of the principal amount of the 2011A Bonds to be
redeemed together with accrued interest thereon to the date fixed for redemption, without
premium.
Amounts so deposited in the Revenue Funds will be pledged to the redemption price of the Refunded
Bonds on the respective redemption dates and the sufficiency of the amounts deposited in the Revenue Funds
for such purpose will be verified by the Verification Agent as described below. The lien of the Refunded Bonds
will be discharged, terminated and of no further force and effect upon the deposit with the Prior Trustee of the
amounts required pursuant to the Escrow Agreement.
The amounts held by the Prior Trustee for the respective Refunded Bonds in the Revenue Funds are
pledged solely to the payment of amounts due and payable by the Successor Agency under the applicable Prior
Indenture. The funds deposited in the Revenue Funds for the Refunded Bonds will not be available for the
payment of debt service on the Bonds.
Verifications of Mathematical Computations. The Verification Agent will examine the arithmetical
accuracy of certain computations included in the schedules provided by the Successor Agency relating to the
refunding of the Refunded Bonds. See "THE FINANCING PLAN" above. The Verification Agent has
restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any
study or evaluation of the assumptions and information upon which the computations are based and,
accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the
achievability of the forecasted outcome.
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Estimated Sources and Uses of Funds
Under the provisions of the Indenture, the Trustee will receive the proceeds from the sale of the Bonds
and other available funds and will apply them as shown below.
Series A Series B Total
Sources of Funds:
Par Amount of Bonds
[Plus Net Original Issue Premium/Less Original Issue
Discount]
Funds Held for the Refunded Bonds
TOTAL SOURCES OF FUNDS:
Uses of Funds:
Transfer to Revenue Funds
Costs of Issuancettl
TOTAL USES OF FUNDS:
Costs of issuance include fees and expenses of Bond Counsel, the Municipal Advisor, Disclosure Counsel, Verification
Agent, Fiscal Consultant, Trustee and Escrow Agent, costs of printing the Official Statement, rating fee, the Underwriter's
discount, [municipal bond insurance policy/debt service reserve policy premium] and other costs of issuance of the Bonds.
SA -3-21
THE BONDS
General Provisions
Repayment of the Bonds. The Bonds shall be issued in fully registered form without coupons in integral
multiples of $5,000 and will be dated as of the date of delivery (the "Closing Date"). Interest on the Bonds is
payable at the rates per annum set forth on the inside cover page of the Official Statement. Interest on the Bonds
will be computed on the basis of a year consisting of 360 days and twelve 30 -day months.
Interest on the Bonds will be payable on each March 1 and September 1, commencing March 1, 2019
(each an "Interest Payment Date"). The Bonds shall bear interest from the Interest Payment Date next preceding
the date of authentication thereof, unless (a) it is authenticated after the 15th calendar day of the month
preceding an Interest Payment Date (a "Record Date") and on or before the following Interest Payment Date, in
which event it shall bear interest from such Interest Payment Date, or (b) unless it is authenticated on or before
February 15, 2019, in which event it shall bear interest from the Closing Date; provided, however, that if, as of
the date of authentication of any Bond, interest thereon is in default, such Bond shall bear interest from the
Interest Payment Date to which interest has previously been paid or made available for payment thereon.
Any Bond may, in accordance with its terms, be transferred, upon the books required to be kept
pursuant to the provisions of the Indenture, by the person in whose name it is registered, in person or by his duly
authorized attorney, upon surrender of such Bond at the corporate trust office of the Trustee (the "Corporate
Trust Office") for cancellation, accompanied by delivery of a duly executed written instrument of transfer in a
form approved by the Trustee.
Whenever any Bond or Bonds shall be surrendered for transfer, the Successor Agency shall execute and
the Trustee will authenticate and deliver a new Bond or Bonds for a like aggregate principal amount of the same
Series, interest rate and maturity date (and interest rate in the case of bifurcated maturities). The Trustee shall
require the payment by the owner of the Bond (the "Owner") requesting such transfer of any tax or other
governmental charge required to be paid with respect to such transfer.
The Trustee will not be required to register the transfer of any Bonds during the fifteen (15) days prior
to the date of selection of the Bonds for redemption, or of any Bonds selected for redemption.
The Bonds may be exchanged at the Corporate Trust Office for a like aggregate principal amount of
Bonds of the same series, interest rate and maturity date (and interest rate in the case of bifurcated maturities) in
other authorized denominations. The Trustee shall require the payment by the Owner requesting such exchange
of any tax or other governmental charge required to be paid with respect to such exchange.
The Trustee will not be required to exchange any Bonds during the fifteen (15) days prior to the date of
selection of the Bonds for redemption, or of any Bonds selected for redemption.
The foregoing provisions regarding the transfer and exchange of the Bonds apply only if the book -entry
system is discontinued. So long as the Bonds are in the book -entry system of The Depository Trust Company
("DTC") as described below, the rules of DTC will apply for the transfer and exchange of Bonds.
The Bonds will be registered initially in the name of "Cede & Co.," as nominee of the Securities
Depository and shall be evidenced by one bond for each maturity of Bonds in the principal amount of the
respective maturities of Bonds. Registered ownership of the Bonds, or any portion thereof, may not thereafter
be transferred except as set forth herein.
Book -Entry System. DTC will act as securities depository for the Bonds. The Bonds will be issued as
fully registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other
name as may be requested by an authorized representative of DTC. Interest on and principal of the Bonds will
be payable when due by wire of the Trustee to DTC which will in turn remit such interest and principal to DTC
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Participants, which will in turn remit such interest and principal to Beneficial Owners of the Bonds (see
APPENDIX G - "THE BOOK -ENTRY SYSTEM."). As long as DTC is the registered owner of the Bonds and
DTC's book -entry method is used for the Bonds, the Trustee will send any notices to Bond Owners only to
DTC.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any
time by giving reasonable notice to the Successor Agency or the Trustee. Under such circumstances, if a
successor securities depository is not obtained, Bonds are required to be printed and delivered as described in
the Indenture. The Successor Agency may decide to discontinue use of the system of book -entry transfers
through DTC (or a successor securities depository). In that event, the Bonds will be printed and delivered as
described in the Indenture.
Redemption
Optional Redemption of the Series 2018A Bonds. The Series 2018A Bonds maturing on or after
September 1, 202_, are subject to optional redemption before maturity on or after September 1, 202, at the
option of the Successor Agency, in whole or in part, on any date, at a redemption price equal to the principal
amount of the Series 2018A Bonds to be redeemed, plus accrued but unpaid interest to the redemption date. The
Series 2018B Bonds are not subject to optional redemption prior to maturity.
In the case of any redemption of Bonds, the Trustee shall give notice, as hereinafter in this section
provided, that Bonds, identified by serial numbers, series and maturity date (and interest rate in the case of
bifurcated maturities), have been called for redemption and, in the case of Bonds to be redeemed in part only,
the portion of the principal amount thereof that has been called for redemption (or if all the Outstanding Bonds
are to be redeemed, so stating, in which event such serial numbers may be omitted), that they will be due and
payable on the date fixed for redemption (specifying such date) upon surrender thereof at the Corporate Trust
Office, at the redemption price (specifying such price), together with any accrued interest to such date, and that
all interest on the Bonds, the respective series of Bonds, or portions thereof, as applicable, so to be redeemed
will cease to accrue on and after such date and that from and after such date such Bond or such portion shall no
longer be entitled to any lien, benefit or security under the Indenture, and the Owner thereof shall have no rights
in respect of such redeemed Bond or such portion except to receive payment from such moneys of such
redemption price plus accrued interest to the date fixed for redemption.
Such notice shall be mailed by first class mail, postage prepaid, at least twenty (20) but not more than
sixty (60) days before the date fixed for redemption, to DTC, or such other securities depositories as designated
by the Trustee, the Municipal Services Rulemaking Board and the Owners of such Bonds, or portions thereof, so
called for redemption, at their respective addresses as the same shall last appear on the Bond Register. No
notice of redemption need be given to the Owner of a Bond to be called for redemption if such Owner waives
notice thereof in writing, and such waiver is filed with the Trustee prior to the redemption date. Neither the
failure of an Owner to receive notice of redemption of Bonds hereunder nor any error in such notice shall affect
the validity of the proceedings for the redemption of Bonds.
Any notice of redemption may be expressly conditional and may be rescinded by written request of the
Successor Agency given to the Trustee not later than the date fixed for redemption. Upon receipt of such
written request of the Successor Agency, the Trustee shall promptly mail notice of such rescission to the same
parties that were mailed the original notice of redemption.
Payment of Redeemed Bonds. If notice of redemption has been given or waived as provided in the
Indenture, the Bonds or portions thereof called for redemption shall be due and payable on the date fixed for
redemption at the redemption price thereof, together with accrued interest to the date fixed for redemption, upon
presentation and surrender of the Bonds to be redeemed at the office specified in the notice of redemption. If
there shall be called for redemption less than the full principal amount of a Bond, the Successor Agency shall
execute and deliver and the Trustee shall authenticate, upon surrender of such ,Bond, and without charge to the
SA -3-23
Owner thereof, Bonds of like interest rate and maturity in an aggregate principal amount equal to the
unredeemed portion of the principal amount of the Bonds so surrendered in such authorized denominations as
shall be specified by the Owner. If the Owner of the Bonds is registered to Cede & Co., payment of the
redeemed Bonds shall be made without presentment.
Manner of Redemption. From and after the date fixed for redemption, if funds available for the
payment of the principal of and interest on the Bonds so called for redemption shall have been duly deposited
with the Trustee, such Bonds so called shall 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
shall accrue thereon from and after the redemption date specified in such notice.
Manner of Redemption. Whenever less than all the outstanding Bonds of any one maturity are to be
redeemed on any one date, the Trustee shall select the particular Bonds to be redeemed by lot, and in selecting
the Bonds for redemption the Trustee shall treat each Bond of a denomination of more than five thousand dollars
($5,000) as representing that number of Bonds of five thousand dollars ($5,000) denomination which is obtained
by dividing the principal amount of such Bond by five thousand dollars ($5,000), and the portion of any Bond of
a denomination of more than five thousand dollars ($5,000) to be redeemed shall be redeemed in an authorized
denomination. The Trustee shall promptly notify the Successor Agency in writing of the numbers of the Bonds
so selected for redemption in whole or in part on such date.
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SA -3-25
SECURITY FOR THE BONDS
Tax Allocation Financing
Prior to the enactment of the Dissolution Act, the Redevelopment Law authorized the financing of
redevelopment projects through the use of tax increment revenues. First, the assessed valuation of the taxable
property in a project area, as last equalized prior to adoption of the redevelopment plan, was established and
became the base roll. Thereafter, except for any period during which the assessed valuation drops below the
base year level, the Taxing Agencies, on behalf of which taxes are levied on property within the project area,
receive the taxes produced by the levy of the then current tax rate upon the base roll. Taxes collected upon any
increase in the assessed valuation of the taxable property in a project area over the levy upon the base roll could
be pledged by a redevelopment agency to the repayment of any indebtedness incurred in financing the
redevelopment project. Redevelopment agencies themselves had no authority to levy taxes on property.
The Dissolution Act now 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 using current assessed values on the
last equalized roll on August 20, and to deposit that amount in the RPTTF for the Successor Agency established
and held by the Comity Auditor -Controller pursuant to the Dissolution Act. Such funds, or portions thereof
distributed to the Successor Agency, are deposited by the Successor Agency in its Recognized Obligation
Retirement Fund (the "Recognized Obligation Retirement Fund"). The Dissolution Act provides that any bonds
authorized to be issued by the Successor Agency will be considered indebtedness incurred by the dissolved
Former Agency, with the same legal effect as if the bonds had been issued prior to effective date of AB X1 26,
in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date, and
will be included in the Successor Agency's ROPS and will be secured by a pledge of, and lien on, and will be
repaid from moneys deposited from time to time in the RPTTF established pursuant to the Dissolution Act.
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.
The Dissolution Act authorizes refunding bonds, including the Bonds, to be secured by a pledge of
moneys deposited from time to time in a RPTTF held by a county auditor -controller with respect to a successor
agency, which are equivalent to the tax increment revenues that were formerly allocated under the
Redevelopment Law to the redevelopment agency and formerly authorized under the Redevelopment Law to be
used for the financing of redevelopment projects, less amounts deducted pursuant to Section 34183(a) of the
Dissolution Act for permitted administrative costs of the county auditor -controller and payments made under
Sections 33401, 33676, 33607.5 and 33607.7 (among others) of the Redevelopment Law.
Successor agencies have no power to levy property taxes but must receive an allocation of taxes as
described above. See "RISK FACTORS."
Tax Revenues
As provided in the Redevelopment Plan for the Project Area and pursuant to Article 6 of Chapter 6 of
the Redevelopment Law, and Section 16 of Article XVI of the Constitution of the State, taxes levied upon
taxable property in the Project Area each year by or for the benefit of the State, for cities, counties, districts or
other public corporations (collectively, the "Taxing Agencies" and each individually a "Taxing Agency") for
fiscal years beginning after the effective date of the ordinance approving the Redevelopment Plan, will 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
12
SA -3-26
connection with the taxation of such property by such Taxing Agency last equalized prior to the
effective date of the ordinance adopting the Redevelopment Plan, or the respective effective dates of
ordinances approving amendments to the Redevelopment Plan that added territory, 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 the Redevelopment Plan limit, when
collected will be paid into a special fund of the Former Agency/Successor Agency. Section 34183 of the
Dissolution Act effectively eliminates the January 1, 1989 date from this paragraph. Additionally,
effective September 22, 2015, debt service override revenues approved by the voters for the purpose of
supporting pension programs, capital projects, or programs related to the State Water Project, that are
not pledged to or needed for debt service on successor agency obligations are allocated and paid to the
entity that levies the override and will not be deposited into the RPTTF.
Tax revenues generated as set forth under (b) above and allocated to the Successor Agency constitute a
portion of the Tax Revenues, as that term is used in the Official Statement.
Pledged Tax Revenues
For the security of the Bonds, the Successor Agency grants a pledge of and lien on all of the Tax
Revenues. Tax Revenues are defined under the Indenture as all taxes annually allocated and paid to the
Successor Agency pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Law, Section 16
of Article XVI of the Constitution of the State and other applicable state laws and as provided in the
Redevelopment Plan available for or deposited into the RPTTF, [to the extent not payable with respect to Pass
Through Obligations, and subject to the equal and senior claims of indebtedness, if, any.]
If, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a) of Section
34183 of the Dissolution Act are invalidated by a final judicial decision, then Tax Revenues will include all tax
revenues allocated to the payment of indebtedness pursuant to California Health and Safety Code Section 33670
or such other section as maybe in effect at the time providing for the allocation of tax increment revenues in
accordance with Article XVI, Section 16 of the California Constitution.
The Successor Agency has covenanted and agreed in the Indenture that all Tax Revenues when and as
received, will be received by the Successor Agency in trust hereunder and will be transferred to the Trustee
within a reasonable period of time from the receipt by the Successor Agency, for deposit by the Trustee in the
Tax Increment Fund and will be accounted for through and held in trust in the Tax Increment Fund, and the
Successor Agency will have no beneficial right or interest in any of such money, except only as specifically
provided otherwise in the Indenture. All such Tax Revenues, whether received by the Successor Agency and
held in trust pending transfer or deposited with the Trustee, all as provided in the Official Statement, shall
nevertheless be disbursed, allocated and applied solely to the uses and purposes set forth in the Indenture, and
shall be accounted for separately and apart from all other money, funds, accounts or other resources of the
Successor Agency. Any Tax Revenues received by the Trustee in the Tax Increment Fund (other than amounts
deposited in the Reserve Account) in excess of the amounts required to be held by the Trustee in the Tax
Increment Fund shall be released from the pledge and lien hereunder and transferred to the Successor Agency
and may be used for any lawful purpose of the Successor Agency.
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SA -3-27
Pursuant to the laws of the State of California, including California Health and Safety Code Sections
34183 and 34170.5(b), the County Auditor -Controller is obligated to deposit the Tax Revenues into the RPTTF.
In furtherance of the Indenture and the Dissolution Act, and in accordance with the County Auditor -Controller's
obligations as set forth in California Health and Safety Code Section 34183, the Successor Agency shall take all
steps to ensure that the County Auditor -Controller (1) deposits the Tax Revenues into the RPTTF, (2) allocates
funds for the principal and interest payments due on the Outstanding Bonds and any Parity Debt and any
deficiency in the Reserve Account (including amounts due to the issuer of the Reserve Policy) pursuant to each
valid ROPS in accordance with the Dissolution Act and as provided in the Indenture, and (3) make the transfers
to the Trustee required under the Indenture.
The Bonds are special obligations of the Successor Agency. The Bonds do not constitute a debt or
liability of the City, the County, the State or of its political subdivision, other than the Successor Agency.
The Successor Agency shall only be obligated to pay the principal of the Bonds, or the interest thereon,
from the funds described in the Official Statement, and neither the faith and credit nor the taxing power
of the City, the County, the State or any of its political subdivisions is pledged to the payment of the
principal of or the interest on the Bonds. The Successor Agency has no taxing power.
The State Legislature has amended the Dissolution Act several times. The Successor Agency expects,
but cannot guarantee, that the processes for funding of enforceable obligations prescribed by any new legislative
change in the Dissolution Act will not interfere with its administering of the Tax Revenues in accordance with
the Indenture and will effectively result in adequate Tax Revenues for the timely payment of principal of and
interest on the Bonds when due.
See "THE PROJECT AREA - Tax Sharing Agreements" and "- Statutory Tax Sharing Payments."
Redevelopment Property Tax Trust Fund
Deposits to the Redevelopment Property Tax Trust Fund. Section 34172 of the Dissolution Act
provides that, for purposes of Section 16 of Article XVI of the State Constitution, the RPTTF 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.
Disbursements from the Redevelopment Property Tax Trust Fund. The Redevelopment Law
authorized redevelopment agencies to make payments to Taxing Agencies to alleviate any financial burden or
detriments to such Taxing Agencies caused by a redevelopment project. The Former Agency entered into
agreements with the Taxing Agencies for this purpose ("Tax Sharing Agreements"). Additionally, Sections
33607.5 and 33607.7 of the Redevelopment Law required mandatory tax sharing applicable to redevelopment
projects adopted on or after March I, 1994 or amended after January 1, 1994 in a manner specified in such
section (the "Statutory Tax Sharing"). Because the redevelopment projects for each redevelopment plan were
merged after March 1, 1994, the Successor Agency is obligated to make Statutory Tax Sharing payments. See
"THE PROJECT AREA - Tax Sharing Agreements" and "- Statutory Tax Sharing Payments").
Typically, under the RPTTF 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 (as described below) for subordination to the extent
permitted under the Dissolution Act (if any, as described below under "THE PROJECT AREA - Tax
Sharing Agreements" and "- Statutory Tax Sharing Payments") and no later than each January 2 and
June 1, to each local taxing 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;
14
SA -3-28
(ii) second, on each January 2 and June 1, to the successor agency for payments listed in its
ROPS, with debt service payments (and amounts required to replenish the related reserve funds, if any)
scheduled to be made for tax allocation bonds having the highest priority over payments scheduled for
other debts and obligations listed on the ROPS;
(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
RPTTF 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).
The Dissolution Act requires county auditor -controllers to distribute from the RPTTF amounts required
to be distributed wider the Tax Sharing Agreements and Statutory Tax Sharing to the taxing entities on each
January 2 and June 1 before amounts are distributed by the County Auditor -Controller from the RPTTF to the
Successor Agency's Redevelopment Obligation Retirement Fund, unless: (i) pass-through payment obligations
have been made subordinate to debt service payments for the bonded indebtedness of the Former Agency, as
succeeded to by the Successor Agency; (ii) the Successor Agency has reported, no later than the December 1
and May 1 preceding the applicable January 2 or June 1 distribution date, that the total amount available to the
Successor Agency from the RPTTF allocation to the Successor Agency's Redevelopment Obligation Retirement
Fund, from other funds transferred from the Former Agency and from funds that have or will become available
through asset sales and all redevelopment operations is insufficient to fund the Successor Agency's enforceable
obligations, pass-through payments and the Successor Agency's administrative cost allowance for the applicable
ROPS period; and (iii) the State Controller has concurred with the Successor Agency that there are insufficient
funds for such purposes.
If the requirements set forth in clauses (i) through (iii) of the foregoing paragraph have been met, the
Dissolution Act provides for certain modifications in the distributions otherwise calculated to be distributed on
the applicable January 2 or June 1 property tax distribution date (as adjusted for weekends and holidays). To
provide for calculated shortages to be paid to the Successor Agency for enforceable obligations, the amount of
the deficiency will first be deducted from the residual amount otherwise calculated to be distributed to the taxing
entities under the Dissolution Act after payment of the Successor Agency's enforceable obligations, pass-
through payments and the Successor Agency's administrative cost allowance. If such residual amount is
exhausted, the amount of the remaining deficiency will be deducted from amounts available for distribution to
the Successor Agency for administrative costs for the applicable ROPS period in order to fund the enforceable
obligations. Finally, funds required for servicing bond debt may be deducted from the amounts to be distributed
under subordinated Tax Sharing Agreements, in order to be paid to the Successor Agency for enforceable
obligations, but only after the amounts described in the previous two sentences have been exhausted. The
Dissolution Act provides for a procedure by which the Successor Agency may make statutory pass-through
payments subordinate to the Bonds. The Successor Agency's Tax Sharing Agreement with certain Taxing
Agencies are subordinate to the Bonds by their terms. However, the Successor Agency cannot guarantee that
this process prescribed by the Dissolution Act of administering the Tax Revenues and the subordinations
provided in the Tax Sharing Agreements will effectively result in adequate Tax Revenues for the payment of
principal and interest on the Bonds when due. See the captions "THE PROJECT AREA - Tax Sharing
Agreements" and "- Statutory Tax Sharing Payments" and "RISK FACTORS - Recognized Obligation Payment
Schedule."
Recognized Obligation Payment Schedules
Enforeeable Obligations. The Dissolution Act requires successor agencies to prepare and approve, and
submit to the successor agency's oversight board and the State Department of Finance for approval, a ROPS
15
SA -3-29
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. 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, as well as other obligations such as loans, judgments or settlements
against the former redevelopment 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 amounts borrowed from the Low and Moderate Income Housing Fund and from the city.
A reserve may be included on the ROPS and held by the successor agency when required by the bond indenture
or when the next property tax allocation will be insufficient to pay all obligations due under the provisions of the
bond for the next payment due in the following six-month period (see APPENDIX A — "SUMMARY OF
CERTAIN PROVISIONS OF THE INDENTURE"). The Successor Agency has covenanted to request such
reserves as described below.
Under the Dissolution Act, the categories of sources of payments for enforceable obligations listed on a
ROPS are the following: (i) the Low and Moderate Income Housing Fund, (ii) bond proceeds, (iii) reserve
balances, (iv) administrative cost allowance, (v) the RPTTF (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 former redevelopment agency, as approved
by the oversight board). Other than amounts deposited in the RPTTF allocable to the Project Area and amounts
held in funds and accounts under the Indenture, the Successor Agency does not expect to have any other funds
available to pay the Bonds.
The Dissolution Act provides that only those payments listed in the ROPS may be made by the
Successor Agency from the funds specified in the ROPS.
Required Approvals. As provided in SB 107, the ROPS, with respect to each Fiscal Year, and
segregated into each six-month period beginning July 1 and January 1, must be submitted by the Successor
Agency, after approval by the Oversight Board, to the the County Auditor -Controller, the State Department of
Finance, and the State Controller by each February 1. For information regarding procedures under the
Dissolution Act relating to late ROPS and implications thereof on the Bonds, see "RISK
FACTORS - Recognized Obligation Payment Schedule."
Pursuant to SB 107, commencing on September 22, 2015, successor agencies that have received a
Finding of Completion and the concurrence of the Department of Finance as to the items that qualify for
payment, among other conditions, may at their option, file a "Last and Final" ROPS. If approved by the
Department of Finance, the Last and Final ROPS will be binding on all parties, and the Successor Agency will
no longer submit a ROPS to the Department of Finance or the Oversight Board. The county auditor -controller
will remit 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. A Last and Final ROPS may only be amended
twice, and only with approval of the Oversight Board, the Department of Finance and the County Auditor -
Controller. The Successor Agency has not yet submitted a Last and Final ROPS nor has it yet determined a time
to file a Last and Final ROPS.
Debt Service. In the Indenture, the Successor Agency covenants to take all actions required under the
Dissolution Act to include on its ROPS the amounts described below to be transmitted to the Trustee for the
applicable ROPS Period in order to satisfy the requirements of the Indenture, including the principal and interest
due on Outstanding Bonds and any Parity Debt, any Compliance Costs, as defined in the Indenture, any
deficiency in the Reserve Account to the full amount of the Reserve Requirement. The Successor Agency shall
submit an Oversight Board -approved ROPE to the County Auditor -Controller and the Department of Finance on
or before February 1 with respect to the ROPS Period commencing the following July 1 and paid on June 1 of
the same year and January 2 of the following year.
16
SA -3-30
Expected Compliance Costs, if any, will be included in each RODS in accordance with the Dissolution
Act
In furtherance of such pledge, and in preparing a given ROPS, the Successor Agency has covenanted in
the Indenture to reflect on each annual ROPS that the amount due to the Trustee, received in trust from the
County Auditor -Controller for deposit in the Tax Increment Fund on June 1 of the then -current calendar year
from Tax Revenues required to be deposited into the RPTTF shall equal (1) the sum of (a) all scheduled
principal payments and Sinking Account Installments due and payable on the Outstanding Bonds and any Parity
Debt during the then -current calendar year as shown on, and (b) all scheduled interest payments due and payable
on the Outstanding Bonds and any Parity Debt during the then -current calendar year, plus (2) the amount of any
deficiency in the Reserve Account, less (3) the amounts, if any, on deposit in the Tax Increment Fund as of the
date of submission for the ROPS pursuant to this Section that are in excess of the amounts required to be applied
to payment of principal of or interest or sinking account payments on the Outstanding Bonds and any Parity
Debt in the then current calendar year. The amount due to the Trustee from the County Auditor -Controller for
deposit in the Tax Increment Fund on January 2 of the then -current calendar year from amounts required to be
deposited into the RPTTF shall be equal to the remainder due and payable on the Outstanding Bonds and any
Parity Debt during the then -current calendar year in an amount equal to not less than (1) the remaining the sum
of (a) all scheduled principal payments and Sinking Account Installments due and payable on the Outstanding
Bonds and any Parity Debt during the then -current calendar year, and (b) all scheduled interest payments due
and payable on the Outstanding Bonds and any Parity Debt during the then -current calendar year, plus (2) the
amount of any remaining deficiency in the Reserve Account.
Tax Revenues received by the Successor Agency during a ROPS Period in excess of the amount
required, as provided in this Section, to be deposited in the Tax Increment Fund shall, immediately following the
deposit with the Trustee of the amounts required to be so deposited as provided in this Section on each such
date, be released from the pledge, security interest and lien hereunder for the security of the Outstanding Bonds,
and may be applied by the Successor Agency for any lawful purpose of the Successor Agency, including but not
limited to the payment of subordinate debt, or the payment of any amounts due and owing to the United States
of America pursuant to the Indenture. Prior to the payment in full of the principal of and interest and
redemption premium (if any) on the Outstanding Bonds and any Parity Debt and the payment in fall of all other
amounts payable hereunder and under any Supplemental Indentures, the Successor Agency shall not have any
beneficial right or interest in the moneys on deposit in the Tax Increment Fund, except as may be provided in
the Indenture and in any Supplemental Indenture.
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 in any six-month period (or otherwise) to pay the principal of
and interest on the Bonds. See "RISK FACTORS."
Pledged Tax Revenues
If, and to the extent, that the provisions of Section 34172 or paragraph (2) of subdivision (a) of Section
34183 of the Dissolution Act are invalidated by a final judicial decision, then Tax Revenues will include all tax
revenues allocated to the payment of indebtedness pursuant to California Health and Safety Code Section 33670
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 California Constitution.
Reserve Account
A Reserve Account has been established under the Indenture to be held by the Trustee to further secure
the timely payment of principal of and interest on the Bonds. The Successor Agency must maintain a balance in
the Reserve Account equal to the lesser of (i) the Maximum Annual Debt Service attributable to the Outstanding
Bonds or (ii) 125% of Average Annual Debt Service attributable to the Outstanding Bonds (the "Reserve
Account Requirement"); provided however, that the Reserve Account Requirement when issuing a new series of
17
SA -3-31
bonds shall be the lesser of (i) or (ii) above, but limited to the addition to the Reserve Account of no more than
10% of the proceeds from the sale of such new series of bonds. If the Successor Agency fails to deposit with the
Trustee the full amount required by the Indenture to pay principal and interest due on the Bonds of that series
when due on any date, the Trustee will withdraw from the Reserve Account, the difference between the amount
required to be on deposit and the amount available on such date.
The Reserve Account established for the Bonds secures only the Bonds and will not secure any other
series of Parity Debt that may be issued under the Indenture (see "Additional Bonds" below).
The Indenture provides that in lieu of a cash deposit, the Successor Agency may satisfy all or a portion
of the Reserve Account Requirement by means of a Qualified Reserve Account Credit Instrument (see
APPENDIX A - "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE").
Additional Bonds
The Successor Agency may at any time after the issuance and delivery of the Bonds issue additional
bonds hereunder payable from the Tax Revenues and secured by a lien and charge upon the Tax Revenues equal
to and on a parity with the lien and charge securing the outstanding Bonds theretofore issued under the Indenture
(the "Additional Bonds"), for the purpose of refunding bonds or other indebtedness of the Successor Agency or
the Former Agency (including, without limitation, refunding Bonds outstanding under the Indenture) in
accordance with the Redevelopment Law, including payment of all costs incidental to or connected with such
refunding or providing for the funding of related reserves, but only subject to the following specific conditions,
which are hereby made conditions precedent to the issuance of any such Additional Bonds:
(a) A written request of the Successor Agency shall have been filed with the Trustee
containing a statement to the effect that the Successor Agency shall be in compliance with all covenants
set forth in the Indenture and any supplemental indentures, and no event of default under the Indenture
shall have occurred and be continuing.
(b) The issuance of such Additional Bonds shall have been duly authorized pursuant to the
Redevelopment Law and all applicable laws, and the issuance of such Additional Bonds shall have been
provided for by a supplemental indenture; which shall specify the following:
(i) The authorized principal amount of such Additional Bonds;
(ii) The date and the maturity date or dates of such Additional Bonds; provided that
(i) principal payment dates and sinking account payment Dates may occur only on Interest
Payment Dates, and (ii) fixed serial maturities or mandatory Sinking Account Installments, or
any combination thereof, shall be established to provide for the retirement of all such Additional
Bonds on or before their respective maturity dates;
(iii) The Interest Payment Dates for such Additional Bonds; provided that Interest
Payment Dates shall be on the same semiannual dates as the Interest Payment Dates for the
Bonds;
(iv) The denomination and method of numbering of such Additional Bonds;
(v) The redemption premiums, if any, and the redemption terns, if any, for such
Additional Bonds;
(vi) The amount and due date of each mandatory Sinking Account Installment, if
any, for such Additional Bonds;
18
SA -3-32
(vii) The amount, if any, to be deposited from the proceeds of such Additional
Bonds in the Reserve Account; provided that the amount deposited in or credited to such
Reserve Account shall be increased at or prior to the time such Additional Bonds become
outstanding to an amount at least equal to the Reserve Account Requirement on all then
outstanding Bonds and such Additional Bonds, and that an amount at least equal to the Reserve
Account Requirement on all Outstanding Bonds shall thereafter be maintained in or credited to
such Reserve Account;
(viii) The form of such Additional Bonds; and
(ix) Such other provisions, as are necessary or appropriate and not inconsistent with
the Indenture.
(c) Such Additional Bonds may be issued only for the purpose of refunding bonds or other
indebtedness of the Successor Agency or its Former Agency (including, without limitation, refunding
Bonds outstanding under the Indenture) in accordance with the Law, including payment of all costs
incidental to or connected with such refunding and funding or providing for the funding of related
reserves, and the payment of all costs incidental to or connected with such refunding, provided that the
issuance of such Additional Bonds shall comply with the terms of California Health and Safety Code
Section 34177.5.
Nothing contained in the Indenture shall limit the issuance of any tax increment bonds or other
obligations of the Successor Agency secured by a lien and charge on Tax Revenues junior to that of the Bonds.
PROPERTY TAXATION IN CALIFORNIA
Manner in Which Property Valuations and Assessments are Determined (Article XII). On June 6,
1978, California voters approved an amendment (commonly known as both Proposition 13 and the Jarvis -Gann
Initiative) to the State Constitution which imposes certain limitations on taxes that may be levied against real
property. This amendment, which added Article XIIIA to the State Constitution, among other things, defines full
cash value of property to mean "the county assessor's valuation of real property as shown on the 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." This full cash value may be
adjusted annually to reflect inflation at a rate not to exceed 2% per year, or any reduction in the consumer price
index or comparable local data, or any reduction in the event of declining property value caused by substantial
damage, destruction or other factors. The amendment further limits the amount of any ad valorem tax on real
property to 1% of the full cash value of that property, except that additional taxes may be levied to pay debt
service on indebtedness approved by the voters prior to July 1, 1978 and on any bonded indebtedness for the
acquisition or improvement of real property which is approved after July 1, 1978 by two-thirds of the votes cast
by voters voting on such indebtedness. However, pursuant to an amendment to the State Constitution,
redevelopment agencies were prohibited from receiving any of the Tax Revenue attributable to tax rates levied
to finance bonds approved by the voters on or after January 1, 1989 for the acquisition or improvement of real
property. Moreover, Section 34183 of the Dissolution Act effectively eliminates the January 1, 1989 date from
such prohibitions and SB 107 further states that pre -1989 tax override rates are no longer distributed to
successor agencies except in limited circumstances (see "SECURITY FOR THE BONDS - Tax Revenues,"
"RISK FACTORS - Factors Which May Affect Tax Revenues - Reduction in Inflationary Rate" and
"PROPERTY TAXATION IN CALIFORNIA — Property Tax Rate").
In the general election held November 4, 1986, voters in the State approved two measures, Propositions
58 and 60, which further amend the terms "purchase" and "change of ownership," for purposes of determining
full cash value of property under Article XIIIA, to not include the purchase or transfer of (1) real property
between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and
children. Proposition 60 amends Article XIIIA to permit the Legislature to allow persons over age 55 who sell
19
SA -3-33
their residence and buy or build another of equal or lesser value within two years in the same county (or in
certain cases, another county), to transfer the old residence's assessed value to the new residence.
Proposition 8 Adjustments. Proposition 8, approved in 1978, 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 based on Proposition 8
do not establish new base year values, and the property may be reassessed as of the following lien date up to the
lower of the then -current fair market value or the factored base year value. The State Board of Equalization has
approved this reassessment formula and such formula has been used by county assessors statewide, and such
methodology has been upheld by the California courts. During the recent recession, the County made significant
blanket assessed value reductions throughout the County pursuant to Proposition 8 from the maximum amount
that could be assessed on property.
Unsecured and Secured Property. In California, property which is subject to ad valorem taxes is
classified as "secured" or "unsecured." 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, arising pursuant to State law, has priority over all other
liens on the secured property, regardless of the time of the creation of the other liens.
Property in the Project Area is assessed by the Orange County Assessor except for public utility
property which is assessed by the State Board of Equalization.
The valuation of secured property is determined as of January 1 each year for taxes owed with respect to
the succeeding Fiscal Year. The tax rate is equalized during the following September of each year, at which time
the tax rate is determined. Secured and unsecured property is entered on separate parts of the assessment roll
maintained by the county assessor. The method of collecting delinquent taxes is substantially different for the
two classifications of property.
Property taxes on the secured roll are due in two installments, on November 1 and February 1 of the
fiscal year. If unpaid, such taxes become delinquent on September 10 and April 10, respectively, and a 10%
penalty attaches to any delinquent payment in addition to a $20 cost on the second installment. On July 1 of
each fiscal year any property which is delinquent will become defaulted. Such property may thereafter be
redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of 11/2%
per month to the time of redemption, together with any other charges permitted by law. If taxes are unpaid for a
period of five years or more, the property is subject to sale by the County Tax Collector. 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 for the amount of taxes which are delinquent.
The County has adopted 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. Under the Teeter Plan, the County Auditor -Controller distributes 100% of tax
increment revenues allocated to each successor agency in the County without regard to delinquencies in the
payment of property taxes. As a result of this allocation method, the Successor Agency receives no adjustments
for redemption payments on delinquent collections.
Property taxes on the unsecured roll become delinquent, if unpaid on August 31. A 10% penalty
attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 11/2% per month
begins to accrue on November 1 of the fiscal year. The County has four ways of collecting delinquent unsecured
personal property taxes: (1) a civil action against the taxpayer; (2) 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; (3) filing a
certificate of delinquency for record in the County Recorder's Office, in order to obtain a lien on certain
20
SA -3-34
property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests
belonging or assessed to the assessee.
Supplemental Assessments. Legislation adopted in 1984 (Section 75, et seq. of the Revenue and
Taxation Code of the State of California) provides for the supplemental assessment and taxation of property at
its full cash value as of the date of a change of ownership or the date of completion of new construction (the
"Supplemental Assessments"). To determine the amount of the Supplemental Assessment the County Auditor -
Controller applies the current year's tax rate to the supplemental assessment roll and computes the amount of
taxes that would be due for the full year. The taxes due are then adjusted by a proration factor to reflect the
portion of the tax year remaining as determined by the date on which the change in ownership occurred or the
new construction was completed. Supplemental Assessments become a lien against the real property on the date
of the change of ownership or completion of new construction.
Unitary Property. Commencing in fiscal year 1988/89, the Revenue and Taxation Code of the State of
California changed the method of allocating property tax revenues derived from state assessed utility properties.
It provides for the distribution of state assessed values to tax rate areas by a county -wide mathematical formula
rather than assignment of state assessed value according to the location of those values in individual tax rate
areas.
Commencing with fiscal year 1988/89, each county has established one county -wide tax rate area. The
assessed value of all unitary property in the county has been assigned to this tax rate area and one tax rate is
levied against all such property ("Unitary Revenues").
The property tax revenue derived from the assessed value assigned to the county -wide tax rate area shall
be allocated as follows: (1) each jurisdiction will be allocated up to 2% of the increase in Unitary Revenues on a
pro rata basis county -wide; and (2) any decrease in Unitary Revenues or increases less than 2%, or any increase
in Unitary Revenues above 2% will be allocated among jurisdictions in the same proportion of each
jurisdiction's Unitary Revenues received in the prior year to the total Unitary Revenues county -wide.
Legislation adopted in 2006 (SB 1317, Chapter 872) provides that, commencing with fiscal year
2007/08, certain property related to new electrical facilities shall be allocated entirely to the county in which
such property is located and property tax revenues derived from such property shall be allocated to such county
and certain Taxing Agencies with such county.
Property Tax Rate. The difference between the $1.00 general tax levy provided under Article XIIIA tax
rate and those actually levied (referred to as the "tax override rate") represents the tax levied by overlapping
entities to pay debt service on bonded indebtedness approved by the voters.
Section 34183 of the Dissolution Act effectively eliminated the tax override rate from the calculation of
Tax Revenues with respect to tax override rates authorized by voters for the purpose of repaying bonded
indebtedness for the acquisition or improvement of real property. Future Tax Revenues have been projected by
applying a tax rate of $1.00 per $100 of taxable value general levy to incremental taxable values.
Proposition 87. On November 8, 1988, the voters of California approved Proposition 87, which
amended Article XVI, Section 16 of the State Constitution to provide that property tax revenue attributable to
the imposition of taxes on property within a redevelopment project area for the purpose of paying debt service
on certain bonded indebtedness issued by a taxing entity (other than the Former Agency or the Successor
Agency) and approved by the voters of the taxing entity after January 1, 1989 will be allocated solely to the
payment of such indebtedness and not to redevelopment agencies. Effective September 22, 2015, the
Dissolution Act provides that such debt service override revenues approved by the voters for the purpose of
supporting pension programs, capital projects, or programs related to the State Water Project that are not
pledged to or not needed for debt service on successor agency obligations will be allocated and paid to the entity
that levies the override.
21
SA -3-35
Assessment Appeals. Property taxable values may be reduced as a result of a successful appeal of the
taxable value determined by the county assessor. An appeal may result in a reduction to the county assessor's
original taxable value and a tax refund to the applicant property owner. A reduction in taxable values within the
Project Area and the refund of taxes which may arise out of successful appeals by property owners will affect
the amount of Tax Revenues under the Indenture. The Successor Agency has in the past experienced reductions
in its tax increment revenues as a result of assessment appeals. The actual impact to tax increment is dependent
upon the actual revised value of assessments resulting from values determined by the Orange County
Assessment Appeals Board or through litigation and the ultimate timing of successful appeals. For a discussion
of historical assessment appeals in the Project Area and summary information regarding pending and resolved
assessment appeals for the Successor Agency, see "THE PROJECT AREA — Assessment Appeals" and
APPENDIX C - "REPORT OF FISCAL CONSULTANT."
Redevelopment Plan Limitations. In 1994, the California legislature made significant changes in the
Redevelopment Law by the adoption of AB 1290, Chapter 942, statutes of 1993 "AB 1290"). I£ a new
redevelopment project was formed by a redevelopment plan adopted on or after January 1, 1994 or if new
territory was added to a redevelopment project on or after January 1, 1994, under Section 33607.5 of the
Redevelopment Law, any affected taxing entity, including the City, would share in the Tax Revenues generated
by such added area pursuant to a statutory formula ("Statutory Tax Sharing"). For a further discussion of AB
1290 see "THE PROJECT AREA — Tax Sharing Payments."
In addition, with respect to redevelopment projects formed by adoption of a redevelopment plan prior to
January 1, 1994, if the Former Agency deleted the time limit to incur indebtedness in a redevelopment project
(pursuant to Section 33333.6(e) of the Redevelopment Law, as amended pursuant to SB 211) or increased the
total amount of Tax Revenues to be allocated to the project area or increased the duration of the Redevelopment
Plan and the period for receipt of Tax Revenues, Statutory Tax Sharing is required under Section 33607.7 of the
Redevelopment Law with all affected Taxing Agencies not already a party to a tax sharing agreement, once the
original limitations were reached.
SB 107 clarifies that former tax increment limits set forth in redevelopment plans such as the
Redevelopment Plan no longer apply for purposes of paying approved enforceable obligations such as the
Bonds.
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 on a prorated basis. 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 1559 amounts, to be
deducted from property tax revenues before moneys are deposited into the RPTTF. For Fiscal Year 2017/18, the
County administrative fees charged to the Project Area including administration of the RPTTF were $530,235.
In total, the fees represent approximately 0.77% of gross Tax Revenues.
THE SUCCESSOR AGENCY
Government Organization
The Former Agency was established by the City Council in 1973 pursuant to the Redevelopment Law.
On June 28, 2011, AB X1 26 was enacted, together with a companion bill, AB XI 27. 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 XI 26 and AB Xl 27. In its December 29,
2011 decision, the California Supreme Court largely upheld AB X1 26, invalidated AB XI 27, and held that AB
XI 26 may be severed from AB XI 27 and enforced independently. As a result of AB XI 26 and the decision of
the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all
22
SA -3-36
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.
Pursuant to Section 34173 of the Dissolution Act, the City Council serves as the governing board of the
successor agency to the Former Agency and thus, since the February 1, 2012 dissolution of the Former Agency,
the City has acted in such capacity. The Successor Agency is governed by a seven -member board which consists
of the Mayor and the members of the City Council. The Mayor acts as the chairman of the Successor Agency.
Section 34173(g) of the Dissolution Act 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 A2enev Board Members
Term Expires
Miguel A. Pulido, Chairman
November 2018
Michele Martinez, Vice -Chairman
November 2018
P. David Benavides, Agency Member
November 2018
Vicente Sanniento, Agency Member
November 2020
Jose Solorio, Agency Member
November 2020
Sal Tinajero, Agency Member
November 2018
Juan Villegas, Agency Member
November 2020
The City performs certain general administrative functions for the Successor Agency. The City Manager
serves as the Successor Agency's chief administrative officer and the City Cleric serves as the Successor Agency
secretary. The costs of such functions, as well as additional services performed by City staff are allocated
annually to the Successor Agency, within certain limitations established by the Dissolution Act. Such
reimbursement is subordinate to payment on any outstanding bonds of the Successor Agency.
Current City Staff assigned to administer the Successor Agency include:
Key Administrative Personnel
Raul Godinez II, City Manager
Steven A. Mendoza, Executive Director, Community Development Agency
Ryan O. Hodge, Assistant City Attorney
Maria D. Huizar, Clerk of the Council
Successor Agency Powers
All powers of the Successor Agency are vested in its members, who are the elected Mayor and 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, many Successor
Agency actions are subject to approval by the Oversight Board, as well as review by the State Department of
Finance. California has strict laws regarding public meetings (known as the Ralph M. Brown Act) which
generally make all Successor Agency and Oversight Board meetings open to the public in similar manner as
City Council meetings.
Dissolution Act Milestones
Section 34179.5 of the Dissolution Act established a due diligence review process for determining the
unobligated balances that redevelopment agencies had available as of June 30, 2012 to remit to their respective
23
SA -3-37
county auditor -controllers for distribution to affected Taking Agencies within project areas of the former
redevelopment agencies. The Successor Agency has remitted to the County Auditor -Controller all of the
unobligated balances as determined by the State Department Finance. On November 26, 2014, the Successor
Agency received its Finding of Completion from the State Department of Finance. Receipt of the Finding of
Completion allows the Successor Agency to do several things, among them, developing a plan for the
disposition of any properties held by the Successor Agency and spending proceeds of bonds issued prior to
December 31, 2010, all requiring approval of the Oversight Board.
After receiving the finding of completion, each successor agency is required to submit a Long Range
Property Management Plan (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 fulfill 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 with the State
Department of Finance within six months of receiving a finding of completion. The State Department of Finance
approved the Successor Agency's Long Range Property Management Plan on December 18, 2015.
Successor Agency Accounting Records and Financial Statements
The activities of the Successor Agency are reported as a fiduciary trust fund, which is in accordance
with guidance issued by the State Department of Finance on September 19, 2012 and available on its website
relating to redevelopment dissolution (www.dof.ca.gov/redevelopment) under the category of "Common RDA
Dissolution Questions and Answers," interpreting Section 34177(n) of the Law concerning certain successor
agency postaudit obligations. The State Department of Finance's website is not in any way incorporated into this
Official Statement, and the Successor Agency cannot take any responsibility for, nor make any representation
whatsoever as to, the continued accuracy of the Internet address or the accuracy, completeness, or timeliness of
information posted there. In addition, from time to time, the State Department of Finance changes its guidance
without notice.
The City's financial statements for the Fiscal Year ended June 30, 2017, which include information
regarding the Successor Agency, are attached as "APPENDIX D" to this Official Statement and have been
audited by White Nelson Diehl Evans LLP, Irvine, California. The Successor Agency's audited financial
statements are public documents and are included within this Official Statement without the prior approval of
the auditor. White Nelson Diehl Evans LLP has not been engaged to perform, and has not performed, since
the date of its report included in the Official Statement, any procedures on the financial statements addressed
in that report. White Nelson Diehl Evans LLP also has not performed any procedures relating to this Official
Statement.
Plan Limitations
In accordance with the Redevelopment Law, redevelopment plans were required to include certain
limits on the financing of redevelopment projects. These limits could include a time limit on the life of the
redevelopment plan, a time limit to incur debt, a time limit on the receipt of Tax Revenues and the repayment of
debt, and a limit on the amount of bonded indebtedness outstanding at any time. SB 107, which became
effective September 22, 2015, amended the Dissolution Act to provide that the time limits for receiving property
tax revenues and the limitation on the amount of property tax revenues that may be received by the Former
Agency and the Successor Agency set forth in the Redevelopment Plan are not effective for purposes of paying
the Successor Agency's enforceable obligations such as the Bonds.
Stipulation Judgments
Between 1984 and 1994, the Former Agency entered into five separate stipulated judgments filed in the
Superior Court for the County of Orange that required the Former Agency to set-aside various percentages of
24
SA -3-38
tax increment for low -and -moderate -income housing. The following provides a brief summary of each
stipulated judgment:
a. Rodriguez, et al. v. City of Santa Ana, et al., Case No. 38 58 57, concerning the North
Harbor Boulevard Redevelopment Project, established July 6, 1982 by City of Santa Ana Ordinance No.
NS -1637, and requiring set aside of 30% of the tax increment revenue generated, or moneys repayable
from tax increment from that project area, for low- and moderate -income housing purposes. A
Stipulated Judgment for this validation action was filed March 2, 1984;
b. Peebler, et al. v. City of Santa Ana, et al., Case No. 38 58 59, concerning the South
Main Street Redevelopment Project, established July 6, 1982 by City of Santa Ana Ordinance No. NS -
1639, and requiring set aside of 20% of the tax increment revenue generated, or moneys repayable from
tax increment from that project area, for low- and moderate -income housing purposes. A Stipulated
Judgment for this validation action was filed March 2, 1984;
C, Edwards, et al. v. City of Santa Ana, et al., Case No. 38 58 60, concerning the Inter City
Commuter Station Redevelopment Project, established July 6, 1982 by City of Santa Ana Ordinance
No. NS -1636, and requiring set aside of 30% of the tax increment revenue generated, or moneys
repayable from tax increment from that project area, for low- and moderate -income housing purposes.
A Stipulation Judgment for this validation action as filed March 2, 1984;
d. Gibson v. City of Santa Ana, et al., Case No. 38 58 61, concerning the South Harbor
Boulevard Fairview Street Redevelopment Project, established July 6, 1982 by City of Santa Ana
Ordinance No. NS -1638, and requiring set aside of 60% of the tax increment revenue generated, or
moneys repayable from tax increment from that project area, for low- and moderate -income housing
purposes. A Stipulated Judgment for this validation action was filed March 2, 1984; and
e. Gonzales, et al. v. City of Santa Ana, et al., Case No. 614918, concerning the Bristol
Corridor Redevelopment Project, established December 4, 1989 by City of Santa Ana Ordinance No.
NS -2039, and requiring set aside of 30% of the tax increment from that project area, for specified low -
and moderate -income housing purposes. A Stipulation for Entry of Judgment for this validation action
was filed October 12, 1994.
Each Stipulated Judgment is hereinafter referred to as a "Judgment' or collectively the "Judgments."
Prior to dissolution, a redevelopment agency was generally required to establish and maintain a Low
and Moderate Income Housing Fund (the "Housing Fund") and deposit not less than 20 percent of tax increment
allocated to such redevelopment agency (the "Housing Set -Aside") into the Housing Fund. The Former Agency
used monies in its Housing Fund to fulfill its obligations under the Judgments.
On April 3, 2013, parties interested in the enforcement of the Judgments filed an action, Hilda Cuenca,
Claudia Castaneda, Emilia Hernandez, Evangelina Avalos and Habitat for Humanity of Orange County v. State
of California Department of Finance, Sacramento Superior Court Case No. 34-2013-8001427-CV-WM-GDS
(the "Successor Agency Lawsuit'), seeking to compel the State of California Department of Finance to (a)
require the Successor Agency to continue to set-aside tax increment in the amounts set forth in the Judgment and
(b) require the Successor Agency to remit funds held in its Housing Fund to finance a certain low and moderate
income housing project for Habitat for Humanity.
On April 1, 2014, the court ordered that the fund held by the Successor Agency in the Housing Fund
must be remitted to Habitat for Humanity for the designated project. However, the court also stated the
Successor Agency does not have an obligation to continue to collect and set-aside tax increment for low and
moderate income housing in amounts set forth in the Judgments. The Court reasoned that the Dissolution Act
only authorizes such amounts to be collected for enforceable obligations. The Judgments were not enforceable
25
SA -3-39
obligation because under the Judgements the Former Agency was only required to set-aside tax increment
collected. Under the Dissolution Act, the Successor Agency is no longer entitled to collect tax increment and
therefore there would be no amounts to be set-aside under the Judgements. The plaintiffs appealed the lower
court's decision. On February 6, 2017, the Third Court of Appeals affirmed the lower court's decision. On
March 20, 2017, the plaintiffs petitioned the California Supreme Court to review the decision of the Third Court
of Appeals. The California Supreme Court affirmed the decision of the Third Court of Appeals. No further
appeals may be made with respect to the Successor Agency Lawsuit.
26
SA -3-40
THE PROJECT AREA
Description of the Project Area
As described in the Official Statement, the Project Area is comprised of six merged component
redevelopment projects totaling 4,989 acres and encompasses 28.8 percent of the total acres in the City. The
Project Area is comprised of the following six component project areas:
The redevelopment projects for each Redevelopment Plan were merged by Ordinance Nos. NS -2662,
NS -2663, NS -2664, NS -2665, NS -2666, and NS -2667 adopted by the City Council on September 20, 2004.
Land Use
Land use within the Project Area is predominantly commercial and industrial, encompassing 81.57% of
all uses. The following table shows land use among all components of the Project Area by assessed value.
TABLE 1
BY LAND USE BY ASSESSED VALUE")
FISCAL YEAR 2018/19
2018/19
Net Taxable
% of
Land Use
Parcels
Total
Total
Commercial
2,018
$3,691,500,081
Assessed
Number of
1,309
2,309,405,817
Component Area
Value
Acres
Formation
Central City Redevelopment Project
$1,490,781,295
694
July
2, 1973
Inter -City Commuter Station Redevelopment Project
550,087,778
536
July
6, 1982
North Harbor Boulevard Redevelopment Project
545,125,274
428
July
6, 1982
South Harbor Boulevard/Fairview Street Redevelopment Project
1,723,639,895
1,050
July
6, 1982
South Main Street Redevelopment Project
3,139,064,455
1,500
July
6, 1982
Bristol Corridor Redevelopment Project
849.645.279
781
December 4, 1989
Total
$8,298,393,976
4,989
The redevelopment projects for each Redevelopment Plan were merged by Ordinance Nos. NS -2662,
NS -2663, NS -2664, NS -2665, NS -2666, and NS -2667 adopted by the City Council on September 20, 2004.
Land Use
Land use within the Project Area is predominantly commercial and industrial, encompassing 81.57% of
all uses. The following table shows land use among all components of the Project Area by assessed value.
TABLE 1
BY LAND USE BY ASSESSED VALUE")
FISCAL YEAR 2018/19
Based on fiscal year 2018/19 secured assessed valuation of $7,356,533,026
(s) Totals may not add due to rounding.
Source: Fiscal Consultant's Report.
27
SA -3-41
Number of
Net Taxable
% of
Land Use
Parcels
Value(')
Total
Commercial
2,018
$3,691,500,081
50.18%
Industrial
1,309
2,309,405,817
31.39
Single Family Residential
2,362
689,455,601
9.37
Multi -Family Residential
180
663,313,634
9.02
Governmental/Institutional/Other
742
2,857,894
0.04
Totals
6,611
$7,356,533,026
100.00%
Based on fiscal year 2018/19 secured assessed valuation of $7,356,533,026
(s) Totals may not add due to rounding.
Source: Fiscal Consultant's Report.
27
SA -3-41
Assessed Valuations and Tax Revenues
Total assessed value of the Project Area, together with assessed values of the constituent areas
comprising the Project Area between fiscal years 2013/14 and 2018/19 are shown in the tables below.
TABLE 2
MERGED PROJECT AREA
CURRENT AND HISTORICAL VALUATIONS
FISCAL YEARS 2013/14 THROUGH 2018/19
TABLE 3
MERGED PROJECT AREA
CURRENT ASSESSED VALUATIONS AND
INCREMENTAL VALUE BY COMPONENT PROJECT
FISCAL YEAR 2018/19
Less:
Less:
Secured
Unsecured
Total
Base Year
Incremental
Assessed
Fiscal Assessed
Assessed
Assessed
Assessed
Assessed
%
Gross Tax
Year Valuation
Valuation
Valuation
Valuation
Valuation
Chane
Revenue(')
2013-14 $5,766,230,137
$1,043,696,952
$6,809,927,089
$1,282,905,364
$5,527,021,725
-
$55,141,931
2014-15 5,965,248,429
1,001,603,286
6,966,851,715
1,282,612,862
5,684,238,853
2.84%
56,964,190
2015-16 6,292,183,781
980,400,256
7,272,584,037
1,282,612,862
5,989,971,175
5.38
59,630,354
2016-17 6,532,889,385
944,728,172
7,477,617,557
1,281,987,262
6,195,630,295
3.43
63,797,434
2017-18 6,937,988,009
991,257,529
7,929,245,538
1,278,115,315
6,651,130,223
7.35
68,547,168
2018-19 7,356,533,026
941,860,950
8,298,393,976
1,277,735,568
7,020,658,408
5.56
71,552,723
t11 Based on actual RPTTF
deposits for fiscal years
2013/14 through 2017/18. Includes supplemental and
unitary revenues. Fiscal
year 2018/19 amount is
estimated based on 1% of incremental valuation plus estimated unitary revenue amount
of $1,346,139.
Source: Fiscal Consultant's Report.
TABLE 3
MERGED PROJECT AREA
CURRENT ASSESSED VALUATIONS AND
INCREMENTAL VALUE BY COMPONENT PROJECT
FISCAL YEAR 2018/19
28
SA -3-42
Less:
Secured
Unsecured
Total
Base Year
Incremental
Assessed
Assessed
Assessed
- Assessed
Assessed
Component Area
Valuation
Valuation
Valuation
Valuation
Valuation
Central City
$1,413,628,136
$77,153,159
$1,490,781,295
$ (111,359,539)
$1,379,421,756
Inter -City Commuter Station
516,834,125
33,253,653
550,087,778
(88,581,677)
461,506,101
North Harbor Blvd
521,670,269
23,455,005
545,125,274
(53,289,406)
491,835,868
South Harbor Blvd
1,347,808,146
375,831,749
1,723,639,895
(330,231,463)
1,393,408,432
South Main
2,753,116,610
385,947,845
3,139,064,455
(417,376,629)
2,721,687,826
Bristol Corridor
803,475,740
46,219,539
849,695,279
(276 896,854)
572,798,425
Total
$7,356,533,026
$941,860,950
$8,298,393,976
$(1,277,735,568)
$7,020,658,408
Source: Fiscal Consultant's Report.
For a detailed description of current and historical
assessed value
in each Component Area see
APPENDIX C — "FISCAL CONSULTANT'S REPORT."
28
SA -3-42
Major Taxpayers
The following table shows the largest taxpayers within all component areas of the Project Area. The ten
largest property taxpayers represent 17.01% of the fiscal year fiscal year 2018/19 secured assessed value of the
Project Area.
Property Owner
1. Mainplace Shoppingtown
2. RP/Essex Skyline
3. Bre/OC Griffin LLC
4. First American Title
5. Apg Ocic LLC
6. Bre/OC Mac Arthur LLC
7. Banc ofCANA
8. Bre-Furca LLC
9. The Marke at South Coast
10. Solaro Apartments SA LLC
Total
TABLE 4
MERGED PROJECT AREA
TEN LARGEST TAXPAYERS
FISCAL YEAR 2018/19
Taxable Secured
Assessed Valuation
$ 334,180,056
141,563,922
138,904,328
133,548,850
109,171,140
89,167,218
82,732,786
79,798,287
79,605,680
62,834.958
$1,251,507,225
Primary Land Use
Commercial
Multi -Family Residential
Commercial
Commercial
Industrial
Commercial
Commercial
Multi -Family Residential
Multi -Family Residential
Multi -Family Residential
(') Based on fiscal year 2018/19 Secured assessed valuation of $7,356,533,026.
('-) Based on fiscal year 2018/191ncrernental valuation of$7,020,658,408.
Source; Fiscal Consultant's Report.
Assessment Appeals
Percent of
Secured
Assessed Valuation(n
4.54%
1.92
1.89
1.82
1.48
1.21
1.12
1.08
1.08
0_85
17.01%
Percent of
Secured Incremental
Assessed Valuation(2)
4.76%
2.02
1.98
1.90
1.55
1.27
1.18
1.14
1.13
0_90
17.83%
As of August 31, 2018, there were a total 206 pending appeals filed in the last 6 years by property
owners in the Project Area as shown below. The total value of property under appeal for all years is
$834,780,062. Some appeals have been filed for multiple years for the same property. A summary of all pending
appeals is shown below.
29
SA -3-43
Pending Assessment Appeals as of August 31, 2018
TABLE 5
Owner's
Potential Loss
(Est.) Reduction
MERGED PROJECT AREA
Assessed Value
Opinion of
of Assessed Historical
ASSESSMENT APPEALS
Appealed Appeals Filed
of Property
Value
January 1, 2013 Through August 31, 2018
Historical Success
2013 6
Number of
Owner's Total Requested
Reduction
Allowed
Number of Successful
Assessed Value Opinion of Assessed Valuation
Allowed by
Reductions as
Appeals Filed Appeals
of Propertv Value Reduction
Board
% of Reauested
1049 168
$5,567,337,845 $4,135,185,877 $1,432,151,968
$203,210,462
14.19%
Pending Assessment Appeals as of August 31, 2018
Component Areas
Specific information about each Component Area and its redevelopment plan (collectively, the
"Redevelopment Plan") is set forth below.
Central City. The redevelopment plan for the Central City Redevelopment Project ("Central City
Redevelopment Plan") was adopted by the City Council on July 2, 1973 by Ordinance No. NS -1173. The
Central City Redevelopment Plan was amended by Ordinance No. NS -1258 adopted on June 2, 1975, to add
approximately 190 acres to the Central City Redevelopment Project. The Central City Redevelopment Project
consists of approximately 694 acres and is located principally in the central and northern parts of the City,
generally along Broadway, Main Street, and Bush Street from the 22 Freeway to 1st Street and between 1st
Street and 10th Street, east of Balser Street and west of Main Street. The Central City Redevelopment Project
encompasses the historic downtown area and includes retail, office and government uses.
The Central City Redevelopment Project has four major sub -areas: 1) MainPlace, which consists of a
one million square foot regional shopping center owned and managed by Centinnial Real Estate as well as a
mixed-use retail, residential and live/work development just east of MainPlace; 2) the Museum District, home to
the Bowers Museum, an internationally recognized cultural art museum; the Discovery Science Center;
Kidseurn; and the Wooden Floor (a ballet company for under -privileged Santa Ana youth); 3) the Midtown
District, which is a 40 block section between Broadway to Bush Street that links the downtown retail core and
MainPlace and where a 37 -story office tower is planned (One Broadway Plaza) and 4) the downtown business
district and civic center.
The downtown is a certified historic district, and is the hub for governmental services for city, county,
state and federal offices. Downtown is also a cultural center with its Artists Village—a mix of live/work
residential units, retail and restaurants, all anchored by the California State Fullerton Grand Central Art Center
(graduate arts school, artists in residence program, gallery and living units for students).
30
SA -3-44
Owner's
Potential Loss
(Est.) Reduction
Roll Year Number of
Assessed Value
Opinion of
of Assessed Historical
Based on
Appealed Appeals Filed
of Property
Value
Value Success Rate
Historical Success
2013 6
$3,703,509
$1,640,290
$2,063,219 14.19%
$292,754
2014 6
4,321,727
2,397,140
1,924,587 14.19%
273,083
2015 15
203,980,209
135,894,239
68,085,970 14.19%
9,660,833
2016 30
176,442,025
123,004,674
53,437,351 14.19%
7,582,316
2017 144
441,966,138
257,61.1,151
184,354,987 14.19%
26,158,441
2018 5
4,366,454
2.783,517
1.582 937 14.19%
224M6
Totals 206
$834,780,062
$523,331,011
$311,449,051
$44,192,032
Source: Fiscal Consultant's Report.
There are appeals pending for two (2) of the largest
property owners included in
TABLE 4 – "TEN
LARGEST TAXPAYERS."
The Successor
Agency cannot
predict the outcome of any pending
appeals. For
January 1, 2013 to August 31,
2018, 14.19% of all appeal filings
were reduced or stipulated.
Component Areas
Specific information about each Component Area and its redevelopment plan (collectively, the
"Redevelopment Plan") is set forth below.
Central City. The redevelopment plan for the Central City Redevelopment Project ("Central City
Redevelopment Plan") was adopted by the City Council on July 2, 1973 by Ordinance No. NS -1173. The
Central City Redevelopment Plan was amended by Ordinance No. NS -1258 adopted on June 2, 1975, to add
approximately 190 acres to the Central City Redevelopment Project. The Central City Redevelopment Project
consists of approximately 694 acres and is located principally in the central and northern parts of the City,
generally along Broadway, Main Street, and Bush Street from the 22 Freeway to 1st Street and between 1st
Street and 10th Street, east of Balser Street and west of Main Street. The Central City Redevelopment Project
encompasses the historic downtown area and includes retail, office and government uses.
The Central City Redevelopment Project has four major sub -areas: 1) MainPlace, which consists of a
one million square foot regional shopping center owned and managed by Centinnial Real Estate as well as a
mixed-use retail, residential and live/work development just east of MainPlace; 2) the Museum District, home to
the Bowers Museum, an internationally recognized cultural art museum; the Discovery Science Center;
Kidseurn; and the Wooden Floor (a ballet company for under -privileged Santa Ana youth); 3) the Midtown
District, which is a 40 block section between Broadway to Bush Street that links the downtown retail core and
MainPlace and where a 37 -story office tower is planned (One Broadway Plaza) and 4) the downtown business
district and civic center.
The downtown is a certified historic district, and is the hub for governmental services for city, county,
state and federal offices. Downtown is also a cultural center with its Artists Village—a mix of live/work
residential units, retail and restaurants, all anchored by the California State Fullerton Grand Central Art Center
(graduate arts school, artists in residence program, gallery and living units for students).
30
SA -3-44
Inter -City Commuter Station Redevelopment Project. The redevelopment plan for the Inter -City
Commuter Station Redevelopment Project (the "Inter -City Commuter Station Redevelopment Plan") was
adopted by the City Council on July 6, 1982 by Ordinance No. NS -1636. The Inter -City Commuter Station
Redevelopment Project is comprised of 536 acres located in the east -central portion of the city, bounded
generally by 17th Street on the north, Chestnut Street on the south, Poinsettia Street on the west, and Grand
Avenue and the 5 Freeway on the east. Major roadways traversing the Inter -City Commuter Station
Redevelopment Project include the 5 Freeway, Grand Avenue, 1st Street and 4th Street. The focal point of the
Inter -City Commuter Station Redevelopment Project is the Santa Ana Regional Transportation Center, which
the Former Agency participated in developing. The Inter -City Commuter Station Redevelopment Project is
comprised principally of older industrial uses, with commercial uses at the intersection of 17th Street and Grand
Avenue and scattered residential uses.
North Harbor Boulevard Redevelopment Project. The redevelopment plan for the North Harbor
Boulevard Redevelopment Project (the "North Harbor Boulevard Redevelopment Plan") was approved and
adopted by the City Council on July 6, 1982 by Ordinance No. NS4637. The North Harbor Boulevard
Redevelopment Project is comprised of approximately 428 acres of land, generally located along Harbor
Boulevard from Westminster Avenue to Kent Avenue and along 5th Street, 1st Street and McFadden Avenue
from Harbor Boulevard to the Santa Ana River. The North Harbor Boulevard Redevelopment Project is
substantially developed and includes a mix of older residential and strip commercial uses fronting on Harbor
Boulevard with newer commercial uses developed near 1 st Street and 5th Street.
South Harbor Boulevard/Fairview Street Redevelopment Project. The redevelopment plan for the
South Harbor Boulevard/Fairview Street Redevelopment Project (the "South Harbor Boulevard/Fairview Street
Redevelopment Plan") was approved and adopted by the City Council on July 6, 1982 by Ordinance No. NS -
1638. The South Harbor Boulevard/Fairview Street Redevelopment Project consists of approximately 1,050
acres located principally in the southwest quadrant of the city, primarily along Harbor Boulevard from Warner
Avenue to MacArthur Boulevard and along the west side of Fairview Street from Edinger Avenue to Sunflower
Avenue. This Component Area is substantially developed and is comprised principally of light industrial and
commercial land uses.
South Main Street Redevelopment Protect. The redevelopment plan for the South Main Street
Redevelopment Project (the "South Main Street Redevelopment Plan") was approved and adopted by the City
Council on July 6, 1982 by Ordinance No. NS -1639. The South Main Street Redevelopment Project consists of
approximately 1,500 acres and is located along Main Street from 1st Street to Sunflower Avenue and the area
west of the 55 Freeway along McFadden Avenue, Edinger Avenue, Warner Avenue, Dyer Road and MacArthur
Boulevard. The South Main Street Redevelopment Project is substantially developed, consisting principally of
older strip commercial uses interspersed with residential units radiating out from the downtown along Main
Street, and newer manufacturing and light industrial uses along the southeastern boundary of the City.
Bristol Corridor Redevelopment Project. The redevelopment plan for the Bristol Corridor
Redevelopment Project (the "Bristol Corridor Redevelopment Plan") was adopted on December 4, 1989 by
Ordinance No. NS -2039. The Bristol Corridor Redevelopment Project contains approximately 781 acres of land
and is primarily located along Bristol Street from 17th Street to Central Avenue and in the area east of Fairview
Street along 1st Street and 17th Street. The Bristol Corridor Redevelopment Project is substantially developed,
primarily with older strip commercial uses and some residential uses.
Tax Sharing Agreements
Pursuant to prior Section 33401(b) of the Redevelopment Law, a redevelopment agency was authorized
to enter into an agreement to pay Tax Revenues to any Taxing Agency that has territory located within a Project
Area to alleviate any financial burden or detriment caused by the Project Area. These agreements are commonly
referred to as "tax sharing agreements" or "pass-through agreements."
31
SA -3-45
In addition, pursuant to former Section 33676 of the Redevelopment Law, any affected taxing agency
that had not entered into a tax sharing agreement with the redevelopment agency prior to the adoption of a
redevelopment plan could elect, by resolution adopted prior to the adoption of a redevelopment plan, to receive
the portion of Tax Revenues attributed to one or both of the following:
(a) Increases in the rate of tax imposed for the benefit of the taxing agency which levy
occurs after the tax year in which the ordinance adopting the redevelopment plan becomes effective; and
(b) Increases in the assessed value of the taxable property in the redevelopment project
area, as the assessed value is established by the assessment roll last equalized prior to the effective date
of the ordinance adopting the redevelopment plan pursuant to subdivision (a) of Section 33670, which
are, or otherwise would be, calculated annually pursuant to subdivision (f) of Section 110.1 of the
Revenue and Taxation Code.
Payments due under Section 33676(b) are referred to in the Official Statement as "inflationary growth."
The Former Agency entered into the Tax Sharing Agreements with payment provisions described
below
Senior Public Sector Pass -Through Agreements. Pursuant to former Health and Safety Code Section
33401, the Former Agency entered into the following agreements with various Taxing Agencies, agreeing to
make payments to these entities of specified percentages of the tax increment allocated to the Former Agency.
The Successor Agency's obligations under these agreements are payable from Tax Revenues generated in the
Redevelopment Project on a senior basis to the Bonds.
Orange County Taxing Entities — South Harbor Boulevard/Fairview Street Redevelopment
Project. An agreement was entered into with the County, the County Flood Control District and the County
Harbors, Beaches and Parks County Services Area #26 on September 15, 1992. The payment provisions set
forth by the agreement commence when the aggregate tax increment received by the Successor Agency since the
adoption of the Plan reaches $109,875,000, which limit was reached in fiscal year 2005/06, thereby triggering
the pass through. In the first "trigger" year, the Successor Agency will pay to the County 11.9% of the tax
increment that exceeds $109,875,000, which limit was reached in fiscal year 2005/06. The payment continues
until such time that a cumulative cap amount of $1,383,000,000 has been received by the Successor Agency
from such Project Area (this cap amount excludes the amount equal to the difference between 60% of a given
year's tax increment minus the amount deposited to the Housing Fund in the year). After the $1,383,000,000 cap
amount has been received by the Successor Agency, the County shall receive its full share of tax increment
thereafter. Such agreement contains no subordination provisions.
Santa Ana Unified School District — South Harbor Boulevard/Fairview Street Redevelopment
Project. The Former Agency and the Santa Ana Unified School District (the "School District") entered into an
agreement dated January 19, 1993 under which the Successor Agency agrees to allocate 20% of the School
District's share of gross tax increment to the School District, commencing when the Successor Agency receives
a cumulative $109,875,000, which limit was reached in fiscal year 2005/06, from the Component Area.
Santa Ana Unified School District — South Main Street Redevelopment Project. [The Former
Agency and the School District entered into an agreement dated May 18, 1993, under which the Successor
Agency has the obligation to semiannually pay approximately 58% of the principal, interest, annual costs,
remarketing fees and fees for issuance of letters of credit (collectively, the "School District Debt Service") on
certificates of participation (the "School District Certificates") executed and delivered by the School District in
1993. On August 1, 2009, the School District refinanced the School District Certificates. [As such the
Successor Agency's obligation to make such payments has terminated.]
32
SA -3-46
The Successor Agency is additionally obligated to semiannually pay an amount equal to 20% of the
School District's share of taxes allocated to the Successor Agency for the corresponding semiannual period,
pursuant to Section 33670(b) of the Redevelopment Law, provided however, that such payment obligation does
not begin until the aggregate amount of such tax increment received by the Successor Agency under such
Section reaches $209,900,000, which amount has been reached and provided further that the amount payable
under the 20% computation shall be offset by the amount of payment made by the Successor Agency to the
School District for School District Debt Service for the same semiannual period.
Santa Ana Unified School District — Bristol Corridor Redevelopment Project. The Fortner Agency
and the School District entered into an agreement dated April 18, 1989 in which the Successor Agency allocates
the School District's full share of annual tax increment derived from the growth in assessed value generated by
the Proposition 13 annual inflationary increase.
Rancho Santiago Community College District — South Harbor Boulevard/Fairview Street
Redevelopment Project. An agreement was entered into with the Rancho Santiago Community College
District (the "College District") on January 19, 1993. The payment provisions set forth by the agreement require
that the Successor Agency commence payments equal to the annual gross tax increment multiplied by the
greater of either 3.6% or the percentage share paid to the School District under its agreement with the Successor
Agency. The payment was to commence when the aggregate tax increment received by the Successor Agency
since the adoption of the redevelopment plan reaches $109,875,000, which limit was reached in fiscal year
2005/06.
Rancho Santiago Community College District — Bristol Corridor Redevelopment Project. An
agreement was entered into with the College District on April 18, 1989. The agreement requires that the
Successor Agency allocate the College District's full share of annual tax increment.
Orange County Water District — Inter -City Commuter Station Redevelopment Project, North
Harbor Boulevard Redevelopment Project, South Harbor Boulevard/Fairview Street Redevelopment
Project, and South Main Street Redevelopment Project. An agreement was entered into with the Orange
County Water District (the "Water District") on November 17, 1982. The Successor Agency's obligation to the
Water District under the terms of the agreement requires that the Successor Agency will pay an amount equal to
I% of the basic one percent gross tax increment levy.
Orange County Water District — Bristol Corridor Redevelopment Project. An agreement was
entered into with the Water District on April 18, 1989 to allocate 100% of the Water District's share of gross tax
increment to the District.
33
SA -3-47
Orange County Sanitation District — Inter -City Commuter Station Redevelopment Project, South
Harbor Boulevard/Fairview Street Redevelopment Project, and South Main Street Redevelopment
Project. Agreements were entered into with the County Sanitation District (the "Sanitation District") on June
10, 1992 requiring that the Successor Agency pay to the Sanitation District an amount equal to 100% of the
difference between the ad valorem property tax revenues derived from properties located in the respective
Component Areas which the Sanitation District would have otherwise received from the County during a fiscal
year if the redevelopment plans for the Component Areas had not been adopted, and the amount of ad valorem
property tax revenues derived from such properties which were actually received by the Sanitation District from
the County during such fiscal year. After the date upon which the taxes allocated to the Successor Agency over
the life of the redevelopment plan for each Component Area equal the thresholds identified below, the
obligation reduces to 80% of the difference:
Inter -City $259,500,000 (not projected to be reached by final
maturity of 2018 Bonds)
South Harbor/Fairview $109,875,000 (amount reached)
South Main $209,900,000 (amount reached)
Orange County Sanitation District — North Harbor Boulevard Redevelopment Project. An
agreement was entered into with the Sanitation District on June 10, 1992 requiring that the Successor Agency
pay to the Sanitation District an amount equal to 100% of the difference between the ad valorem property tax
revenues derived from properties located in the Component Area which the Sanitation District would have
otherwise received from the County during a fiscal year if the redevelopment plan for the Component Area had
not been adopted, and the amount of ad valorem property tax revenues derived from such properties which were
actually received by the Sanitation District from the County during such fiscal year.
County Vector Control District — Bristol Corridor Redevelopment Project. An agreement was
entered with the County Vector Control District on March 20, 1990 to allocate 100% of the County Vector
Control District's share of gross tax increment to the County Vector Control District.
Subordinate Public Sector Pass -Through Agreements. Pursuant to Health and Safety Code Section
33401, the Former Agency had entered into the following agreements with various Taxing Agencies, agreeing to
make payments to these entities of specified percentages of the Tax Revenues allocated to the Successor
Agency.
Orange County Taxing Entities — South Main Street Redevelopment Project. An agreement was
entered into with the County, the County Flood Control District and the County Harbors, Beaches and Parks
County Services Area #26 on December 20, 1993. The payment provisions set forth by the agreement
commence when the aggregate tax increment received by the Successor Agency since the adoption of the Plan
reaches $209,000,000, which amount has been reached, thereby triggering the pass through. hi the first "trigger"
year, the Successor Agency will pay 60% of the County's share of tax increment in excess of the $209,000,000
cumulative amount. In the second through ninth subsequent years, the Successor Agency will pay 60% of the
County's share of annual tax increment. In the tenth through twentieth year, the Successor Agency will pay 75%
of the County's share of annual tax increment. Commencing in the twentieth year through fiscal year 2031/32,
the Successor Agency will pay 80% of the County's share of annual tax increment. In any year after fiscal year
2031/32, the Successor Agency will pay 100% of the County's share of annual tax increment. Based upon the
Fiscal Consultant's review of the weighted average distribution of the basic one percent tax levies for fiscal year
2017/18, the County's share of the tax rate is 10.81%.
Orange County Taxing Entities — Bristol Corridor Redevelopment Project. An agreement was
entered into with the County and the County Flood Control District on June 20, 1989, which was thereafter
amended on June 22, 1993. The payment provisions set forth by the agreement, as amended, commenced in the
fourth fiscal year in which the Successor Agency received tax increment from the Component Area. The County
34
SA -3-48
general fund receives 8.715% of the annual gross tax increment and the County Flood Control District receives
2.97% of the annual gross tax increment.
Orange County Department of Education (Superintendent of Schools) — Bristol Corridor
Redevelopment Project. An agreement was entered into with the Orange County Department of Education
(Superintendent of Schools) on April 18, 1989. The Successor Agency annually allocates 25% of such
department's share of annual gross tax increment.
Orange County Superintendent of Schools — South IIarbor Boulevard/Fairview Street
Redevelopment Project and South Main Street Redevelopment Project. Agreements were entered into with
the Orange County Superintendent of Schools on January 19, 1993 (South Harbor) and December 20, 1993
(South Main). The payment provisions set forth by the agreements require that the Successor Agency commence
payments equal to a certain percentage of such superintendent's share of annual tax increment commencing
when the aggregate tax increment received by the Successor Agency since the adoption of the respective
redevelopment plans reaches certain cumulative thresholds. For South Harbor, the allocation will be 30% of the
superintendent's share of annual gross tax increment after a cumulative collection of $109,875,000, which
occurred in fiscal year 2005/06. For South Main, the allocation will be 25% of the superintendent's share of
annual gross tax increment after a cumulative collection of $209,900,000.
Rancho Santiago Community College District — South Main Street Redevelopment Project. An
agreement was entered into with the College District on December 20, 1993. The payment provisions set forth
by the agreement require that the Successor Agency commence payments equal to 25% of the College District's
share of annual tax increment commencing when the aggregate tax increment received by the Successor Agency
since the adoption of the Redevelopment Plan reaches $209,900,000, which amount has been reached.
Saddleback [South Orange County] Community College District — South Main Street
Redevelopment Project. An agreement was entered into with the Saddleback Community College District now
identified on the County Auditor -Controller's records as the "South Orange County" Community College
District on December 20, 1993. The payment provisions set forth by the agreement require that the Successor
Agency commence payments equal to 80% of the District's Share of annual tax increment commencing when
the aggregate tax increment received by the Successor Agency since the adoption of the Redevelopment Plan
reaches $209,900,000, which amount has been reached.
Election Under Fortner Health and Safety Code Section 33676. Pursuant to former Health and Safety
Code Section 33676, Taxing Agencies were permitted (and in some cases directed) to elect to receive, in
addition to the taxes allocated to them pursuant to Health and Safety Code Section 33670(a), the amount of
taxes that would otherwise be allocated to the Successor Agency pursuant to Health and Safety Code Section
33670(b) attributable to (1) any increase in the Taxing Agency's tax rate and (2) the annual inflation adjustment
in the assessed valuation of the property within a project area, as set forth in Revenue and Taxation Code section
110.1(£). This former provision applied to project areas adopted between 1984 to 1994, and, according to the
County Auditor -Controller remittance records, applies to the Bristol Corridor Component Area. According to
the County Auditor — Controller's records, $701,521 was apportioned to the Garden Grove Unified School
District and Orange Unified School District in fiscal year 2017/18 pursuant to apportionments required pursuant
to Section 33670 of the Redevelopment Code. Payments are projected to increase based on the cumulative 2%
inflationary growth factor applied to the base year real property values of the Bristol Corridor Redevelopment
Project in subsequent fiscal years.
Statutory Tax Sharing Payments
Certain provisions were added to the Redevelopment Law by the adoption of AB 1290 in 1994. If a new
redevelopment project was formed by a redevelopment plan adopted on or after January 1, 1994 or if new
territory was added to a redevelopment project on or after January 1, 1994, under Section 33607.5 of the
Redevelopment Law, any affected taxing entity, including the City, would share in the Tax Revenues generated
35
SA -3-49
by such added area pursuant to a statutory formula ("Statutory Tax Sharing") as follows: (1) from the first fiscal
year in which a redevelopment agency or its successor receives tax increment until the last fiscal year in which
such agency receives the tax increment, 25% of the tax increment is passed through to the taxing agencies (net
of Housing Set -Aside); (2) commencing in the eleventh year, an additional 21% of the tax increment calculated
by applying the tax rate to the increase in assessed value over the assessed value in the tenth year in which such
redevelopment agency or its successor receives tax increment is passed through to the taxing agencies (net of
Housing Set -Aside); and (3) commencing in the thirty-first year, an additional 14% of the tax increment
calculated by applying the tax rate to the increase in assessed value over the assessed value in the thirtieth year
in which a redevelopment agency or its successor receives tax increment is passed through to the taxing
agencies (net of Housing Set -Aside).
In addition, with respect to redevelopment projects formed by adoption of a redevelopment plan prior to
January 1, 1994, if the Former Agency deleted the time limit to incur indebtedness in a redevelopment project
(pursuant to Section 33333.6(e) of the Redevelopment Law, as amended pursuant to SB 211) or increased the
total amount of Tax Revenues to be allocated to the project area or increased the duration of the Redevelopment
Plan and the period for receipt of Tax Revenues, Statutory Tax Sharing is required under Section 33607.7 of the
Redevelopment Law with all affected Taxing Agencies not already a party to a tax sharing agreement, once the
original limitations were reached.
The Dissolution Act provides for a procedure by which the Successor Agency may make Statutory Tax
Sharing amounts subordinate to the Bonds. The Former Agency had not previously undertaken proceedings to
subordinate such payments to the Refunded Bonds. The Successor Agency will not undertake such procedure
with respect to the Bonds.
The Central City and Inter -City Redevelopment Projects are subject to the triggered statutory pass
through obligations commencing after fiscal year [2003/04] as a result of the elimination of the debt incurrence
time limits, Bristol Corridor Redevelopment Project commencing fiscal year [2009/10] and the South
Harbor/Fairview and South Main Redevelopment Projects commencing fiscal year [2010/11].
The City has elected to receive its portion of the tax revenue as described in (d) above. The City has not
subordinated the payment of such amounts to the Bonds.
Since dissolution, the County Auditor -Controller calculates and pays the Statutory Tax Sharing
amounts.
TAX REVENUES AND DEBT SERVICE COVERAGE
As shown in Table 6 and 7, the actual amounts received by the Successor Agency depends on the
realization of certain assumptions relating to the Tax Revenues. The Fiscal Consultant has projected taxable
valuation and Tax Revenues in the Project Area. Table 6 reflects taxable value and Tax Revenues assuming no
growth on the tax base. Table 7 includes certain tax base growth assumptions as presented below. The
Successor Agency believes the assumptions upon which the projections are based are reasonable; however,
some assumptions may not materialize and unanticipated events and circumstances may occur (see "RISK
FACTORS"). Therefore, the actual Tax Revenues received during the forecast period may vary from the
projections and the variations may be material and could affect the Successor Agency's ability to timely pay
principal of and interest on the Bonds.
Following is a discussion of assumptions used in the projection of Tax Revenues:
Baseline Assumption
(b) The values of unsecured personal property and state assessed utility property and the
amount of unitary revenues have been maintained throughout the projections at their fiscal year 2017/18
levels, with no growth assessed.
36
SA -3-50
(b) A tax rate of $1.00 per $100 of assessed value applied to the taxable property in the
Project Area has been used to determine Tax Revenues.
(c) Incremental value over base value has been assumed at $1,277,735,568.
(d) Projected Tax Revenues include a deduction for property tax collection administrative
costs charged by Orange County.
(e) Projected Tax Revenues do not reflect delinquencies.
(f) Projected Tax Revenues do not reflect any potential future Proposition 8 adjustments.
(g) Projected Tax Revenues do not reflect any potential decreases resulting from pending
assessment appeals. See "THE PROJECT AREA - Assessment Appeals."
(h) Projected Tax Revenues do not include supplemental property taxes.
(i) Projected Tax Revenues include a deduction for payments due to Taxing Agencies
under the Tax Sharing Agreements and Tax Sharing Statutes, excluding subordinate payments.
Growth Assumption
(a) The secured roll is assumed to increase 2% annually for inflation. See "Property
Taxation in California - Manner in Which Property Valuations and Assessments are Detennined (Article
XIIIA)."
(b) For the purposes of the projections, it is assumed that there will not be any value added
to the tax rolls as a result of new construction or changes in property ownership.
37
SA -3-51
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SA -3-53
TABLE 8
PROJECT AREA
PROJECTED DEBT SERVICE COVERAGE"
NO GROWTH
FISCAL YEARS 2018/19 THROUGH 2031/32
Year
Pledged Tax
Debt Service
Debt Service
(As of September 1)
Revenues
2018 Bonds"
Coverage Ratio`
2019
$58,358,906
$ 7,993,524
7.30
2020
58,358,906
9,728,622
6.00
2021
58,358,906
8,639,730
6.75
2022
58,358,906
8,940,695
6.53
2023
58,358,906
9,269,468
6.30
2024
58,358,906
9,585,695
6.09
2025
58,358,906
9,912,626
5.89
2026
58,358,906
10,235,754
5.70
2027
58,358,906
11,171,326
5.22
2028
58,358,906
3,814,417
15.30
2029
58,358,906
3,201,949
18.23
2030
58,358,906
1,166,500
50.03
2031
58,358,906
1,163,750
50.15
2032
58,358,906
1,163,375
50.16
Preliminary, subject to change
Source: The Underwriter.
The projected Tax Revenues shown above are subject to several variables described below. See "RISK
FACTORS." The Successor Agency provides no assurance that the projected Tax Revenues will be achieved.
TABLE 9
PROJECT AREA
PROJECTED DEBT SERVICE COVERAGE"
GROWTH ASSUMED(n
FISCAL YEARS 2018/19 THROUGH 2031/32
Year
Pledged Tax
Debt Service
Debt Service
(As of September 1)
Revenues
2018 Bonds"
Coverage Ratio
2019
$58,358,906
$ 7,993,524
7.30
2020
59,657,620
9,728,622
6.13
2021
60,980,299
8,639,730
7.06
2022
62,327,373
8,940,695
6.97
2023
63,690,167
9,269,468
6.87
2024
65,087,114
9,585,695
6.79
2025
66,509,786
9,912,626
6.71
2026
67,958,641
10,235,754
6.64
2027
69,434,150
11,171,326
6.22
2028
70,936,787
3,814,417
18.60
2029
72,456,388
3,201,949
22.63
2030
74,014,467
1,166,500
63.45
2031
75,601,145
1,163,750
64.96
2032
77,216,930
1,163,375
66.37
Preliminary, subject to change.
(D Annual growth for assessed values assumed at 2% beginning fiscal year 2018/19.
Source: The Underwriter.
40
SA -3-54
RISK FACTORS
The purchase of the Bonds involves investment risk. 7f a risk factor materializes to a sufficient degree, it
could delay or prevent payment of principal of and/or interest on the Bonds. Such risk factors include, but are
not limited to, the following matters and should be considered, along with other information in this Official
Statement, by potential investors.
Factors Which May Affect Tax Revenues
The ability of the Successor Agency to pay principal of and interest on the Bonds depends on the timely
receipt of Tax Revenues as projected in the Official Statement (see "TAX REVENUES AND DEBT SERVICE
COVERAGE"). Projections of Tax Revenues are based on the underlying assumptions relating to Tax Revenues
of the Project Area. Tax Revenues allocated to the Successor Agency (which constitute the ultimate source of
payment of principal of and interest on the Bonds, as discussed in the Official Statement) are determined by the
amount of incremental valuation of taxable property in the Project Area, taxed at a rate of $1.00 per $100 of
assessed value (1%) and the percentage of taxes collected in the Project Area, adjusted to reflect prior claims on
the Tax Revenues. A number of factors which may affect Tax Revenues are outlined below.
Challenges to Dissolution Act
Several successor agencies, cities and other entities have filed judicial actions challenging the legality of
various provisions of the Dissolution Act. One such challenge is an action filed on August 1, 2012, by Syncora
Guarantee Inc. and Syncora Capital Assurance Inc. (collectively, "Syncora") against the State, the State
Controller, the State Director of Finance, and the Auditor -Controller of San Bernardino County on his own
behalf and as the representative of all other County Auditors in the State (Superior Court of the State of
California, County of Sacramento, Case No. 34-2012-80001215). Syncora are monoline financial guaranty
insurers domiciled in the State of New York, and as such, provide credit enhancement on bonds issued by state
and local governments and do not sell other kinds of insurance such as life, health, or property insurance.
Syncora provided bond insurance and other related insurance policies for bonds issued by former California
redevelopment agencies.
The complaint alleged that the Dissolution Act, and specifically the "Redistribution Provisions" thereof
(i.e., California Health and Safety Code Sections 34172(d), 34174, 34177(d), 34183(a)(4), and 34188) violate
the `contract clauses" of the United States and California Constitutions (U.S. Const. art. 1, § 10, cl.l; Cal.
Const. art. 1, § 9) because they unconstitutionally impair the contracts among the former redevelopment
agencies, bondholders and Syncora. The complaint also alleged that the Redistribution Provisions violate the
"Takings Clauses" of the United States and California Constitutions (U.S. Const, amend. V; Cal Const. art. 1 §
19) because they unconstitutionally take and appropriate bondholders' and Syncora's contractual right to critical
security mechanisms without just compensation.
After hearing by the Sacramento County Superior Court on May 3, 2013, the Superior Court ruled that
Syncora's constitutional claims based on contractual impairment were premature. The Superior Court also held
that Syncora's takings claims, to the extent based on the same arguments, were also premature. Pursuant to a
judgment stipulated to by the parties, the Superior Court on October 3, 2013, entered its order dismissing the
action. The judgment, however, provides that Syncora preserves its rights to reassert its challenges to the
Dissolution Act in the future. The Successor Agency does not guarantee that any reassertion of challenges by
Syncora or that the final results of any of the judicial actions brought by others challenging the Dissolution Act
will not result in an outcome that may have a material adverse effect on the Successor Agency's ability to timely
pay debt service on the Bonds.
Reductions in Assessed Value. Tax Revenues allocated to the RPTTF are determined by the amount of
incremental taxable value in the Project Area taxed at a rate of $1.00 per $100 of assessed value (1%). The
reduction of taxable values of property in the Project Area caused by economic factors beyond the Successor
41
SA -3-55
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 Revenues that provide for the repayment of and secure the Bonds. Such reduction of Tax Revenues
could have an adverse effect on the Successor Agency's ability to make timely payments of principal of and
interest on the Bonds.
Proposition 13. Pursuant to the California voter initiative process, on June 6, 1978, California voters
approved Proposition 13 which added Article XIIIA to the California Constitution. This amendment imposed
certain limitations on taxes that may be levied against real property to 1% of the full cash value of the property,
adjusted annually for inflation at a rate not exceeding 2% annually. Full cash value is determined as of the
1975/76 assessment year, upon change in ownership (acquisition) or when newly constructed (see "- Property
Taxation in California" for a more complete discussion of Article XIIIA). 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.
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. Through 2010-11 there were six occasions when the inflation factor has been less than 2%. Until 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 a -0.237%
and this resulted in a reductions to the adjusted base year value of parcels. The changes in the California
Consumer Price Index (CCPI) from October of one year and October of the next year are used to determine the
adjustment factor for the January assessment date. The table below reflects the inflation adjustment factors for
the current fiscal year, eight prior fiscal years and the estimated adjustment factor for the next fiscal year.
Historical Inflation Adjustment Factors
Fiscal Year
Inflation Adj. Factor
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
2017-18
2.000
Source: State of California Board of Equalization.
Proposition 8 Adjustments. Proposition 8, approved in 1978, 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 based on Proposition 8
do not establish new base year values, and the property may be reassessed as of the following lien date up to the
lower of the then -current fair market value or the factored base year value. The State Board of Equalization has
approved this reassessment formula and such formula has been used by county assessors statewide. This
methodology has been approved by the Fourth District Court of Appeals in a case in which the California
Supreme Court declined further review. See "PROPERTY TAXATION IN CALIFORNIA."
42
SA -3-56
If Proposition 8 adjustments are made by the County Assessor in future years because of declines in the
fair market value of properties caused by the lack of real estate development in the area generally, Tax Revenues
may be adversely affected and as a possible consequence may have an adverse effect on the Successor Agency's
ability to pay debt service on the Bonds.
Assessment Appeals. Assessment appeals may be filed by property owners seeking a reduction in the
assessed value of their property. After the property owner files an appeal, the County's Appeals Board will hear
the appeal and make a determination as to whether or not there should be a reduction in assessed value for a
particular property and the amount of the reduction, if any. To the extent that any reductions are made to the
assessed valuation of such properties with appeals currently pending, or appeals subsequently filed, Tax
Revenues will be reduced. Such reductions may have an adverse effect on the Successor Agency's ability to pay
debt service on the Bonds. As of August 31, 2018, there were 206 pending appeals filed within the last six years
by property owners within the Project Area relating to $834,780,062 of current year or prior years' assessed
value (see "THE PROJECT AREA - Assessment Appeals"). To the extent these appeals are resolved in favor of
the property owner, Tax Revenues will be reduced.
Earthquake, Flood and Other Risks. Any natural disaster or other physical calamity, including
earthquake, may have the effect of reducing Tax Revenues through reduction in the aggregate assessed valuation
within the boundaries of the Project Area.
Seismic Activity. The City is located in close proximity to two major, known and active fault zones: the
Newport -Inglewood fault zone located to the southwest and Whittier -Elsinore fault zone located to the
northeast. The San Andreas and Raymond Faults are also proximate to the City.
The Newport -Inglewood fault zone passes within approximately 5 miles of the southerly limits of the
City. The Newport -Inglewood fault zone is considered capable of generating an earthquake with a magnitude of
7.4 on the Richter Scale.
The Whittier -Elsinore fault zone is the closest major fault system to the City and one of the largest in
Southern California. The Whittier -Elsinore fault zone does not extend inside the City boundaries, but
approaches within less than one mile of the northeastern comer of the City. The Whittier -Elsinore fault is
currently active and is capable of generating an earthquake of up to a magnitude of 7.5 on the Richter Scale,
which could result in surface rupture along one or more of its fault traces.
Older, unreinforced masonry buildings are the most vulnerable building types in any region prone to
earthquakes. The City of Santa Ana has an inventory of 211 such masonry buildings; however, California has
instituted more stringent building codes and related seismic strengthening standards and, since the 1980s, the
City has enacted and enforced stringent local ordinances to cause all but one of these buildings to undergo
seismic strengthening and retrofitting to comply with the California Existing Building Code.
If an earthquake were to substantially damage or destroy taxable property within the Project Area, the
assessed valuation of such property would be reduced. Such a reduction of assessed valuations would result in a
reduction of the Tax Revenues that secure the Bonds.
Approximately 10% of the City is located in Flood Zone A, which is due east of the Garden Grove
Wintersburg Channel located on the northwest side of the City. Approximately 20% of the North Harbor
Boulevard Redevelopment Project (but no other portion of the Redevelopment Project) is located within Flood
Zone A. According to the Federal Emergency Management Agency ("FEMA"), Flood Zone A is subject to
inundation by the 1% annual -chance flood event. Because detailed hydraulic analyses have not been performed,
no Base Flood Elevation or flood depths are shown on the Flood Insurance Rate Map. For properties in a flood
zone, flood insurance is mandatory and floodplain management standards will apply.
43
SA -3-57
FEMA, through the Federal Insurance Administration, makes flood insurance available to residents of a
participating community, provided the community adopts and enforces adequate floodplain management
regulations that meet the requirements of the National Flood Insurance Program ("NFIP"). The City joined the
NFIP on September 14, 1979 and has updated its Floodplain Management Regulations on a regular basis.
Because the City follows federal and state floodplain management requirements, Santa Ana property owners,
whose properties fall within a flood zone, are able to obtain flood insurance. At the present time, there are over
3,000 flood insurance policies in force in Sana Ana.
The City's Emergency Operations Plan includes a hazard analysis for earthquake, flood, and fire risk
required to comply with FEMA requirements for disaster relief funding.
Hazardous Substances. An additional environmental condition that may result in the reduction in the
assessed value of parcels would be the discovery of a hazardous substance that would limit the beneficial use of
a property within the Project Area. In general, the owners and operators of a 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 would be to reduce the
marketability and value of the property, perhaps by an amount in excess of the costs of remedying the condition.
The Successor Agency can give no assurance that future development will not be limited by these conditions.
Development Risks. The Successor Agency's collection of Tax Revenues is directly affected by the
economic strength of the Project Area. Potential development within the Project Area will be subject to all the
risks generally associated with real estate development projects, including unexpected delays, disruptions and
changes. Real estate development operations may be adversely affected by changes in general economic
conditions, fluctuations in real estate market and interest rates, unexpected increases in development costs and
other similar factors. Further, real estate development operations within the Project Area could be adversely
affected by future governmental policies, including governmental policies to restrict or control development. If
projected development in the Project Area is delayed or halted, the economy of the Project Area could be
affected, causing a reduction in Tax Revenues available to pay debt service on the Bonds.
Certain Bankruptcy Risks. The enforceability of the rights and remedies of the Owners of the Bonds
and the obligations of the Successor Agency may become subject to the following: the federal bankruptcy code
and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the
enforcement of creditors' rights generally, now or hereafter in effect; usual equitable principles which may limit
the specific enforcement under state law of certain remedies; the exercise by the United States of America of the
powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain
exceptional situations, of the police power inherent in the sovereignty of the State of California and its
governmental bodies in the interest of servicing a significant and legitimate public purpose. Bankruptcy
proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the Owners
of the Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise and consequently
may entail risks of delay, limitation, or modification of their rights.
Limited Obligations. The Successor Agency has no power to levy and collect property taxes, and any
property tax limitation, legislative measure, voter initiative or provision of additional sources of income to
Taxing Agencies having the effect of reducing the property tax rate must necessarily reduce the amount of Tax
Revenues that would otherwise be available to pay the principal of, and interest on the Bonds.
Interpretation of and Future Changes in the Law; Voter Initiatives. The Redevelopment Law and the
Dissolution Act are complex bodies of law and their application to the Successor Agency, the Redevelopment
Plan and the Project Area may be subject to different interpretations by the Successor Agency, the Department
of Finance, the County Auditor -Controller, Taxing Agencies and other interested parties, including with respect
to Tax Sharing Agreements and Statutory Tax Sharing obligations and enforceable obligations. Since the
44
SA -3-58
effectiveness of the Dissolution Act, the State Department of Finance and various successor agencies have from
time to time disagreed about the interpretation of different language contained in the Dissolution Act, as well as
whether or not the State Department of Finance has exceeded its authority in rejecting items from ROPS
submitted by successor agencies, as evidenced by numerous lawsuits. While the Successor Agency has
covenanted in the Indenture to preserve and protect the security of the Bonds and the rights of the Bondholders
(see APPENDIX A — "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE"), any such action
taken by the Successor Agency could incur substantial time and cost that may have a detrimental effect on the
Successor Agency's ability to timely pay debt service on the Bonds. Moreover, the Successor Agency cannot
guarantee the outcome of any such action taken by the Successor Agency to preserve and protect the security of
the Bonds and the rights of the Bondholders.
In addition to the existing limitations on Tax Revenues described in this Official Statement under
"PROPERTY TAXATION IN CALIFORNIA," the California electorate or Legislature could adopt future
limitations with the effect of reducing Tax Revenues payable to the Successor Agency.
Real Estate and General Economic Risks
Tax Revenues available for payment of any indebtedness of the Successor Agency are based upon the
latest actual assessed values for the fiscal year 2018/19. Redevelopment of real property within the Project Area
by the City, as well as private development in the Project Area, may be adversely affected by changes in general
economic conditions, fluctuations in the real estate markets and interest rates, unexpected increases in
development costs, changes in or new governmental policies including governmental policies to restrict or
control certain kinds of development and by other similar factors. If development and redevelopment activities
in the Project Area encounters significant obstacles of the kind described in the Official Statement or other
impediments, the economy of the area in and around the Project Area, could be adversely affected, causing
reduced taxable valuation of property in the Project Area a reduction of the Tax Revenues available to repay the
Bonds. Due to the decline in the general economy of the region, owners of property within the Project Area may
be less able or less willing to make timely payments of property taxes, causing a delay or reduction of Tax
Revenues available to repay the Bonds.
Recognized Obligation Payment Schedule
The Dissolution Act provides that only those payments listed in the ROPS may be made by the
Successor Agency from the funds specified in the ROPS. The Dissolution Act requires successor agencies to
prepare and approve, and submit to the successor agency's oversight board and the State Department of Finance
for approval, a 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.
Tax Revenues will not be distributed from the RPTTF by the County Auditor -Controller to the Successor
Agency's Redevelopment Obligation Retirement Fund without a duly approved and effective ROPS obtained in
sufficient time prior to the January 2 or June 1 distribution dates, as applicable. See "SECURITY FOR THE
BONDS - Recognized Obligation Payment Schedules." In the event the Successor Agency were to fail to file a
ROPS with respect to any six-month period, the availability of Tax Revenues to the Successor Agency could be
adversely affected for such period.
The Successor Agency has covenanted to take all actions required under the Dissolution Act to include
scheduled debt service on the Bonds as well as any amount required under the Indenture to replenish the
Reserve Account of the Debt Service Fund, in ROPS for each six-month period of a fiscal year and to enable the
County Auditor -Controller to distribute from the RPTTF to the Successor Agency's Redevelopment Obligation
Retirement Fund on each January 2 and June 1 amounts required for the Successor Agency to pay principal of,
and interest on, the Bonds coming due in the respective six-month period of a fiscal year, including listing a
reserve on the ROPS to the extent required by the Indenture or when the next property tax allocation is projected
to be insufficient to pay all obligations due under the provisions of the Bonds for the next payment due in the
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following six-month period (see APPENDIX A — "SUMMARY OF CERTAIN PROVISIONS OF THE
INDENTURE").
The Dissolution Act also contains certain penalties in the event the Successor Agency does not timely
submit a ROPS for a fiscal year. Specifically, a ROPS must be submitted by the Successor Agency, after
approval by the Oversight Board to the County Auditor -Controller, the State Department of Finance, and the
State Controller no later than February 1 of each year. If the Successor Agency does not submit an Oversight
Board -approved ROPS by such deadlines, the City will be subject to a civil penalty equal to $10,000 per day for
every day the schedule is not submitted to the State Department of Finance. Additionally, the Successor
Agency's administrative cost allowance is reduced by 25% if the Successor Agency does not submit an
Oversight Board -approved ROPS by the 10th day after the February 1 deadline with respect to a ROPS for the
subsequent annual period.
The Successor Agency has submitted all Recognized Obligation Payment Schedule, duly approved by
the Oversight Board, in a timely manner.
Commencing on February 1, 2016, pursuant to SB 107, successor agencies were transitioned to an
annual ROPS process pursuant to which successor agencies will be required to file ROPS with the Department
of Finance and the County Auditor -Controller for approval each February 1 for the July 1 through June 30
period immediately following such February 1 commencing with the July 1, 2016 through June 30, 2017 period.
Commencing September 22, 2015, successor agencies which received a Finding of Completion and the
concurrence of the Department of Finance as to the items that qualify for payment, among other conditions, may
at their option, file a Last and Final ROPS. If approved by the Department of Finance, the Last and Final BOPS
will be binding on all parties, and the Successor Agency will no longer submit a Recognized Obligation
Payment Schedule to the Department of Finance or the Oversight Board. The County Auditor -Controller will
remit the authorized funds to the Successor Agency in accordance with the approved Last and Final Recognized
Obligation Payment Schedule until each remaining enforceable obligation has been fully paid. A Last and Final
ROPS may only be amended twice, and only with approval of the Department of Finance and the County
Auditor -Controller. The Successor Agency has not submitted a Last and Final Recognized Obligation Payment
Schedule nor has it yet determined when it plans to file a Last and Final ROPS.
Series 2018A Bonds Loss of Tax Exemption
As discussed under the caption "LEGAL MATTERS - Tax Matters," interest on the Series 2018A
Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date
the Series 2018A Bonds were executed and delivered as a result of future acts or omissions of the Successor
Agency in violation of its covenants contained in the Indenture. Should such an event of taxability occur, the
Series 2018A Bonds are not subject to special redemption or any increase in interest rate and will remain
outstanding until maturity.
In addition, Congress has considered in the past, is currently considering and may consider in the future,
legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or
eliminate the exclusion from gross income for federal income tax purposes of interest on municipal bonds, such
as the Series 2018A Bonds. Prospective purchasers of the Series 2018A Bonds should consult their own tax
advisors regarding any pending or proposed federal tax legislation. The Successor Agency can provide no
assurance that federal tax law will not change while the Series 2018A Bonds are outstanding or that any such
changes will not adversely affect the exclusion of the interest on the Series 2018A Bonds from gross income for
federal income tax purposes. If the exclusion of the interest on the Series 2018A Bonds from gross income for
federal income tax purposes were amended or eliminated, it is likely that the market price for the Series 2018A
Bonds would be adversely impacted.
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IRS Audit of Tax -Exempt Bond Issues
The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond
issues, including both random and targeted audits. It is possible that the Series 20t8A Bonds will be selected for
audit by the Internal Revenue Service. It is also possible that the market value of the Series 2018A Bonds might
be affected as a result of such an audit of the Series 2018A Bonds (or by an audit of similar bonds).
Secondary Market
There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market
exists, that such 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 then prevailing circumstances. Such prices could be
substantially different from the original purchase price.
Bankruptcy of Landowners
The bankruptcy of a major assessee in the Project Area could delay and/or impair the collection of
property taxes by the County with respect to properties in the bankruptcy estate. Although the Successor
Agency is not aware of any major property owners in the Project Area that are in bankruptcy or threatening to
declare bankruptcy, the Successor Agency cannot predict the effects on the collections of Tax Revenues if such
an event were to occur.
Concentration of Property Ownership
Concentration of ownership presents a risk in that, if one or more of the largest property owners in the
Project Area were to default on their taxes (and if the County were to change its current practice of distributing
Tax Revenues to the Successor Agency regardless of delinquencies) or were to successfully appeal the tax
assessments on property within the Project Area, a substantial decline in Tax Revenues could occur. The top ten
taxpayers in all Project Areas represent 17.83% of the total incremental assessed value of all Project Areas
combined. See "PROJECTED COVERAGE ON THE BONDS" for a description of the debt service coverage
on the Bonds.
Change in Law
In addition to the other limitations on Tax Revenues, the State electorate or legislature could adopt a
constitutional or legislative property tax decrease with the effect of reducing Tax Revenues payable to the
Successor Agency. There is no assurance that the State electorate or legislature will not at some future time
approve additional limitations that could reduce the Tax Revenues and adversely affect the security of the 2018
Bonds.
LEGAL MATTERS
Enforceability of Remedies
The remedies available to the Trustee and the Owners of the Bonds upon an event of default under the
Indenture or any other document described in the Official Statement are in many respects dependent upon
regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial
decisions, the remedies provided for under such documents may not be readily available or may be limited. The
various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified to the extent
that the enforceability of certain legal rights related to the Bonds and the Indenture are subject to limitations
imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors
generally and by equitable remedies and proceedings generally.
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Approval of Legal Proceedings
Orrick, Herrington & Sutcliffe LLP, as Bond Counsel, will render opinions with respect to the Bonds
which state that the Indenture is a valid and binding obligation of the Successor Agency and enforceable in
accordance with its terms. The legal opinions of Bond Counsel will be subject to the effect of bankruptcy,
insolvency, moratorium and other similar laws affecting creditors' rights and to the exercise of judicial
discretion in accordance with general principles of equity. See "APPENDIX F" for the proposed forms of Bond
Counsel's opinions with respect to the Bonds.
The Successor Agency has no knowledge of any fact or other information which would indicate that the
Indenture is not so enforceable against the Successor Agency, except to the extent such enforcement is limited
by principles of equity and by state and federal laws relating to bankruptcy, reorganization, moratorium or
creditors' rights generally.
Certain legal matters will be opined on for the Successor Agency by Assistant City Attorney of the City
of Santa Ana, Santa Ana, California, as Successor Agency Counsel. Best Best & Krieger LLP, Riverside,
California, will also pass on certain legal matters for the Successor Agency as Disclosure Counsel. Certain legal
matters will be passed on for the Underwriter by its counsel, ICutak Rock LLP, Irvine, California. Fees payable
to Bond Counsel, Disclosure Counsel and Underwriter's Counsel are contingent upon the sale and delivery of
the Bonds.
Tax Matters
Series 2018A Bonds. In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the
Successor Agency ("Bond Counsel"), based upon an analysis of existing laws, regulations, rulings and court
decisions, and assuming, among other matters, the accuracy of certain representations and compliance with
certain covenants, interest on the Series 2018A Bonds is excluded from gross income for federal income tax
purposes under Section 103 of the Internal Revenue Code of 1986 (the "Code") and is exempt from State of
California personal income taxes. Bond Counsel is of the further opinion that interest on the Series 2018A
Bonds is not a specific preference item for purposes of the federal alternative minimum tax. A complete copy of
the proposed form of opinion of Bond Counsel is set forth in Appendix F hereto.
To the extent the issue price of any maturity of the Series 2018A Bonds is less than the amount to be
paid at maturity of such Series 2018A Bonds (excluding amounts stated to be interest and payable at least
annually over the term of such Series 2018A Bonds), the difference constitutes "original issue discount," the
accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the
Series 2018A Bonds which is excluded from gross income for federal income tax purposes and State of
California personal income taxes. For this purpose, the issue price of a particular maturity of the Series 2018A
Bonds is the first price at which a substantial amount of such maturity of the Series 2018A Bonds is sold to the
public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the
Series 2018A Bonds accrues daily over the term to maturity of such Series 2018A Bonds on the basis of a
constant interest rate compounded semiannually (with straight-line interpolations between compounding dates).
The accruing original issue discount is added to the adjusted basis of such Series 2018A Bonds to determine
taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Series 2018A
Bonds. Beneficial Owners of the Series 2018A Bonds should consult their own tax advisors with respect to the
tax consequences of ownership of Series 2018A Bonds with original issue discount, including the treatment of
Beneficial Owners who do not purchase such Series 2018A Bonds in the original offering to the public at the
first price at which a substantial amount of such Series 2018A Bonds is sold to the public.
Series 2018A Bonds purchased, whether at original issuance or otherwise, for an amount higher than
their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Bonds") will
be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium
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in the case of bonds, like the Premium Bonds, the interest on which is excluded from gross income for federal
income tax purposes. However, the amount of tax-exempt interest received, and a Beneficial Owner's basis in a
Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such
Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to
the proper treatment of amortizable bond premium in their particular circumstances.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from gross
income for federal income tax purposes of interest on obligations such as the Series 2018A Bonds. The
Successor Agency has made certain representations and covenanted to comply with certain restrictions,
conditions and requirements designed to ensure that interest on the Series 2018A Bonds will not be included in
federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result
in interest on the Series 2018A Bonds being included in gross income for federal income tax purposes, possibly
from the date of original issuance of the Series 2018A Bonds. The opinion of Bond Counsel assumes the
accuracy of these representations and compliance with these covenants. Bond Counsel has not undertaken to
determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not
occurring), or any other matters coming to Bond Counsel's attention after the date of issuance of the Bonds may
adversely affect the value of, or the tax status of interest on, the Series 2018A Bonds. Accordingly, the opinion
of Bond Counsel is not intended to, and may not, be relied upon in connection with any such actions, events or
matters.
Although Bond Counsel is of the opinion that interest on the Series 2018A Bonds is excluded from
gross income for federal income tax purposes and is exempt from State of California personal income taxes, the
ownership or disposition of, or the accrual or receipt of amounts treated as interest on, the Series 2018A Bonds
may otherwise affect a Beneficial Owner's federal, state or local tax liability. The nature and extent of these
other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner's
other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax
consequences.
Current and future legislative proposals, if enacted into law, clarification of the Code or court decisions
may cause interest on the Series 2018A Bonds to be subject, directly or indirectly, in whole or in part, to federal
income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial
Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of
any such legislative proposals or clarification of the Code or court decisions may also affect, perhaps
significantly, the market price for, or marketability of, the Series 2018A Bonds. Prospective purchasers of the
Series 2018A Bonds should consult their own tax advisors regarding the potential impact of any pending or
proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel is expected to
express no opinion.
The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly
addressed by such authorities, and represents Bond Counsel's judgment as to the proper treatment of the Series
2018A Bonds for federal income tax purposes. It is not binding on the Internal Revenue Service ("IRS") or the
courts. Furthermore, Bond Counsel cannot give and has not given any opinion or assurance about the future
activities of the Successor Agency, or about the effect of future changes in the Code, the applicable regulations,
the interpretation thereof or the enforcement thereof by the IRS. The Successor Agency has covenanted,
however, to comply with the requirements of the Code.
Bond Counsel's engagement with respect to the Series 2018A Bonds ends with the issuance of the
Series 2018A Bonds, and, unless separately engaged, Bond Counsel is not obligated to defend the Successor
Agency or the Beneficial Owners regarding the tax-exempt status of the Series 20t8A Bonds in the event of an
audit examination by the IRS. Under current procedures, parties other than the Successor Agency and their
appointed counsel, including the Beneficial Owners, would have little, if any, right to participate in the audit
examination process. Moreover, because achieving judicial review in connection with an audit examination of
tax-exempt bonds is difficult, obtaining an independent review of IRS positions with which the Successor
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Agency legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to
selection of the Series 2018A Bonds for audit, or the course or result of such audit, or an audit of bonds
presenting similar tax issues may affect the market price for, or the marketability of, the Series 2018A Bonds,
and may cause the Successor Agency or the Beneficial Owners to incur significant expense.
Series 20I8B Bonds. Interest on the Series 2018B Bonds is not excluded from gross income for federal
income tax purposes under Section 103 of the Code. Bond Counsel is of the opinion that interest on the Series
2018B Bonds is exempt from State of California personal income taxes. Bond Counsel expresses no opinion
regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual, or
receipt of interest on, the Series 2018B Bonds. A complete copy of the proposed form of opinion of Bond
Counsel is set forth in Appendix F hereto.
The following discussion summarizes certain U.S. federal income tax considerations generally
applicable to U.S. Holders (as defined below) of the Series 2018B Bonds that acquire their Series 2018B Bonds
in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and
available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective
investors should note that no rulings have been or are expected to be sought from the IRS with respect to any of
the U.S. federal income tax considerations discussed below, and no assurance can be given that the IRS will not
take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable
to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors,
some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S.
Holders), such as certain U.S, expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations,
dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold
their Series 2018B Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors
whose "functional currency" is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax
consequences, (ii) the net investment income tax imposed under Section 1411 of the Code, or (iii) the indirect
effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of
the Series 2018B Bonds under state, local or non -U.S. tax laws. In addition, this summary generally is limited
to U.S. tax considerations applicable to investors that acquire their Series 2018B Bonds pursuant to this offering
for the issue price that is applicable to such Series 2018B Bonds (i.e., the price at which a substantial amount of
the Series 20t8B Bonds are sold to the public) and who will hold their Series 20t8B Bonds as "capital assets"
within the meaning of Section 1221 of the Code. The following discussion does not address tax considerations
applicable to any investors in the Series 2018B Bonds other than investors that are U.S. Holders.
As used herein, "U.S. Holder" means a beneficial owner of a Series 2018B Bond that for U.S. federal
income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable
as a corporation created or organized in or under the laws of the United States or any state thereof (including the
District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its
source or a trust where a court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons (as defined in the Code) have the authority to
control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury
Regulations to be treated as a domestic trust). If a partnership holds Series 2018B Bonds, the tax treatment of
such partnership or a partner in such partnership generally will depend upon the status of the partner and upon
the activities of the partnership. Partnerships holding Series 2018B Bonds, and partners in such partnerships,
should consult their own tax advisors regarding the tax consequences of an investment in the Series 2018B
Bonds (including their status as U.S. Holders).
Notwithstanding the rules described below, it should be noted that, under newly enacted law that is
effective for tax years beginning after December 31, 2017 (or, in the case of original issue discount, for tax years
beginning after December 31, 2018), certain taxpayers that are required to prepare certified financial statements
or file financial statements with certain regulatory or governmental agencies may be required to recognize
income, gain and loss with respect to the Series 2018B Bonds at the time that such income, gain or loss is
recognized on such financial statements instead of under the rules described below.
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Prospective investors should consult their own tax advisors in determining the U.S. federal, state, local
or non -U.S. tax consequences to them from the purchase, ownership and disposition of the Series 2018B Bonds
in light of their particular circumstances.
U.S. Holders
Interest. Interest on the Series 2018B Bonds generally will be taxable to a U.S. Holder as ordinary
interest income at the time such amounts are accrued or received, in accordance with the U.S. Holder's method
of accounting for U.S. federal income tax purposes.
To the extent that the issue price of any maturity of the Series 2018B Bonds is less than the amount to
be paid at maturity of such Series 2018B Bonds (excluding amounts stated to be interest and payable at least
annually over the term of such Series 2018B Bonds) by more than a de minimis amount, the difference may
constitute original issue discount ("OID"). U.S. Holders of Series 2018B Bonds will be required to include OID
in income for U.S. federal income tax purposes as it accrues, in accordance with a constant yield method based
on a compounding of interest (which may be before the receipt of cash payments attributable to such income).
Under this method, U.S. Holders generally will be required to include in income increasingly greater amounts of
OID in successive accrual periods.
Series 2018B Bonds purchased for an amount in excess of the principal amount payable at maturity (or,
in some cases, at their earlier call date) will be treated as issued at a premium. A U.S. Holder of a Series 2018B
Bond issued at a premium may make an election, applicable to all debt securities purchased at a premium by
such U.S. Holder, to amortize such premium, using a constant yield method over the term of such Series 2018B
Bond.
Sale or Other Taxable Disposition of the Series 2018B Bonds. Unless a nonrecognition provision of the
Code applies, the sale, exchange, redemption, retirement (including pursuant to an offer by the Successor
Agency) or other disposition of a Series 2018B Bond will be a taxable event for U.S. federal income tax
purposes. In such event, in general, a U.S. Holder of a Series 2018B Bond will recognize gain or loss equal to
the difference between (i) the amount of cash plus the fair market value of property received (except to the
extent attributable to accrued but unpaid interest on the Series 2018B Bond, which will be taxed in the manner
described above) and (ii) the U.S. Holder's adjusted U.S. federal income tax basis in the Series 2018B Bond
(generally, the purchase price paid by the U.S. Holder for the Series 2018B Bond, decreased by any amortized
premium, and increased by the amount of any OID previously included in income by such U.S. Holder with
respect to such Series 2018E Bond). Any such gain or loss generally will be capital gain or loss. In the case of a
non -corporate U.S. Holder of the Series 2018B Bonds, the maximum marginal U.S. federal income tax rate
applicable to any such gain will be lower than the maximum marginal U.S. federal income tax rate applicable to
ordinary income if such U.S. holder's holding period for the Series 2018B Bonds exceeds one year. The
deductibility of capital losses is subject to limitations.
Defeasance of the Series 2018B Bonds. If the Successor Agency defeases any Series 2018B Bond, the
Series 2018B Bond may be deemed to be retired and "reissued" for U.S. federal income tax purposes as a result
of the defeasance. In that event, in general, a holder will recognize taxable gain or loss equal to the difference
between (i) the amount realized from the deemed sale, exchange or retirement (less any accrued qualified stated
interest which will be taxable as such) and (ii) the holder's adjusted tax basis in the Series 2018B Bond.
Information Reporting and Backup Withholding. Payments on the Series 2018B Bonds generally will
be subject to U.S. information reporting and possibly to "backup withholding." Under Section 3406 of the Code
and applicable U.S. Treasury Regulations issued thereunder, a non -corporate U.S. Holder of the Series 2018B
Bonds may be subject to backup withholding at the current rate of 24% with respect to "reportable payments,"
which include interest paid on the Series 2018B Bonds and the gross proceeds of a sale, exchange, redemption,
retirement or other disposition of the Series 2018B Bonds. The payor will be required to deduct and withhold
the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number ("TIN") to the
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payor in the manner required, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect,
(iii) there has been a "notified payee underreporting" described in Section 3406(c) of the Code or (iv) the payee
fails to certify under penalty of pequry that the payee is not subject to withholding under Section 3406(a)(1)(C)
of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against the
U.S. Holder's federal income tax liability, if any, provided that the required information is timely furnished to
the IRS. Certain U.S. holders (including among others, corporations and certain tax-exempt organizations) are
not subject to backup withholding. A holder's failure to comply with the backup withholding rules may result in
the imposition of penalties by the IRS.
Foreign Account Tax Compliance Act ("FATCA')
Sections 1471 through 1474 of the Code impose a 30% withholding tax on certain types of payments
made to foreign financial institutions, unless the foreign financial institution enters into an agreement with the
U.S. Treasury to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.-owned
entities, annually report certain information about such accounts, and withhold 30% on payments to account
holders whose actions prevent it from complying with these and other reporting requirements, or unless the
foreign financial institution is otherwise exempt from those requirements. In addition, FATCA imposes a 30%
withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it
does not have any substantial U.S. owners or the entity furnishes identifying information regarding each
substantial U.S. owner. Failure to comply with the additional certification, information reporting and other
specified requirements imposed under FATCA could result in the 30% withholding tax being imposed on
payments of interest and principal under the Series 2018B Bonds and sales proceeds of Series 20t8B Bonds
held by or through a foreign entity. In general, withholding under FATCA currently applies to payments of U.S.
source interest (including OID) and, under current guidance, will apply to (i) gross proceeds from the sale,
exchange or retirement of debt obligations paid after December 31, 2018 and (ii) certain "passthru" payments no
earlier than January 1, 2019. Prospective investors should consult their own tax advisors regarding FATCA and
its effect on them.
The foregoing summary is included herein for general information only and does not discuss all aspects
of U.S. federal taxation that may be relevant to a particular holder of Series 2018B Bonds in light of the holder's
particular circumstances and income tax situation. Prospective investors are urged to consult their own tax
advisors as to any tax consequences to them from the purchase, ownership and disposition of Series 2018B
Bonds, including the application and effect of state, local, non -U.S., and other tax laws.
No 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.
CONCLUDING INFORMATION
Ratings on the Bonds
S&P Global Inc., a division of Standard & Poor's Financial Services LLC business ("S&P"), has
assigned the Bonds an underlying rating of "_." Such ratings reflect only the views of such organization and
any desire explanation of the significance of such ratings should be obtained from the rating agency furnishing
the same. Generally, a rating agency bases its rating on the information and materials famished to it and on
investigations, studies and assumptions of its own. There is no assurance such ratings will continue for any
given period of time or that such ratings will not be revised downward or withdrawn entirely by the rating
agencies, if in the judgment of such rating agencies, circumstances so warrant. Any such downward revision or
withdrawal of such ratings may have an adverse effect on the market price of the Bonds.
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The Municipal Advisor
The material contained in this Official Statement was prepared by the Successor Agency with the
assistance of Urban Futures Incorporated, Orange, California, an independent financial consulting firm, which
advised the Successor Agency as to the financial structure and certain other financial matters relating to the
Bonds. The information set forth in the Official Statement has been obtained by the Successor Agency from
sources which are believed to be reliable, but such information is not guaranteed by the Municipal Advisor as to
accuracy or completeness, nor has it been independently verified. Fees paid to the Municipal Advisor are
contingent upon the sale and delivery of the Bonds.
Continuing Disclosure
[TO BE UPDATED]
The Successor Agency will provide annually certain financial information and data relating to the Bonds
by not later than March 31 in each year commencing March 31, 2019 (the "Annual Report"), and to provide
notices of the occurrence of certain other listed events. The Municipal Advisor will act as Dissemination Agent.
The specific nature of the information to be contained in the Annual Report or the notices of listed events and
certain other terns of the continuing disclosure obligation are found in the form of the Successor Agency's
Disclosure Certificate attached in APPENDIX E — "FORM OF CONTINUING DISCLOSURE
CERTIFICATE."
The City and certain of its related entities have entered into previous continuing disclosure
undertakings. A review of compliance with continuing disclosure undertakings for filings required by the City
and its related entities within the past five years indicates that the City and its related entities have filed to fully
comply with prior continuing disclosure undertakings under the Rule. Identification of the below described
events does not constitute a representation by the City or its related entities that the late filings were material.
The review indicated that failure to comply fell into two general categories: (i) failure to provide significant
event notices with respect to changes in the ratings of outstanding indebtedness, primarily related to changes in
the ratings of various bond insurers insuring the indebtedness of the City or its related entities; and (ii) missing,
incomplete, or late filing of annual reports with respect to a number of the City or its related entities outstanding
bond issues. Based on the review, the City and its related entities have made additional filings to provide certain
previously omitted information and completed corrective filings.
The City, on behalf of its self and certain of its related entities, self-reported under the current
Municipalities Continuing Disclosure Cooperation ("MCDC") initiative of the SEC. MCDC is a program which
allows issuers and underwriters to voluntarily report non-compliance with disclosure obligations. The reporting
relates to the former Community Redevelopment Agency of the City of Santa Ana Tax Allocation Bonds
(Merged Project Area), 2011 Series A.
In order to ensure ongoing compliance by the City and its related entities with their respective
continuing disclosure undertakings, the City has adopted procedures to ensure future compliance and
coordination between the City and its related entities and has contracted with Urban Futures, Inc. to assist the
City in filing accurate, complete, and timely annual reports on behalf of the City.
Underwriting
The Bonds were sold to Samuel A. Ramirez & Co., Inc. (the "Underwriter"), who is offering the Bonds
at the prices set forth on the inside cover pages hereof. The initial offering prices may be changed from time to
time and concessions from the offering prices may be allowed to dealers, banks and others.
The Underwriter has purchased the Series 2018A Bonds at a price equal to $ , which amount
represents the principal amount of the Series 2018A Bonds plus a net original issue premium of $ ,
less an Underwriter's discount of $ . The Underwriter has purchased the Series 2018B Bonds at a
53
SA -3-67
price equal to $ , which amount represents the principal amount of the Series 2018B Bonds less an
original issue discount of $ , less an Underwriter's discount of $ The Underwriter will
pay certain of its expenses relating to the offering from the Underwriter's discount.
Additional Information
The summaries and references contained in the Official Statement with respect to the Indenture, the
Bonds, statutes and other documents, do not purport to be comprehensive or definitive and are qualified by
reference to each such document or statute and references to the Bonds are qualified in their entirety by
reference to the form hereof included in the Indenture. Copies of the Indenture are available for inspection
during the period of initial offering of the Bonds at the offices of the Municipal Advisor, Urban Futures
Incorporated, 3111 N. Tustin Avenue, Suite 230, Orange, California 92865, telephone (714) 283-9334. Copies
of this document may be obtained after delivery of the Bonds from the Successor Agency at 20 Civic Center
Plaza M-25, Santa Ana, California 92702.
References
All statements in this Official Statement involving matters of opinion, whether or not expressly so
stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a
contract or agreement between the Successor Agency and the purchasers or Owners of any of the Bonds.
Execution
The execution and delivery of this Official Statement by the Executive Director of the Successor
Agency has been duly authorized by the Successor Agency.
SUCCESSOR AGENCY TO THE FORMER
COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF SANTA ANA
Raul Godinez II, City Manager
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APPENDIX A
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
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APPENDIX B
CITY OF SANTA ANA INFORMATION
GENERAL ECONOMIC DATA CONCERNING
TIIE CITY OF SANTA ANA AND THE COUNTY OF ORANGE
The following material is descriptive of the City of Santa Ana (the "City") and the surrounding areas of
Orange County (the "County"). It has been prepared by or excerpted from sources as noted in the Official
Statement, and has not been independently verified by Bond Counsel, Disclosure Counsel or the Underwriter.
The Bonds are payable solely from the sources described in the Official Statement (see "SECURITY FOR THE
BONDS").
General
The City, county seat of the County and one of the oldest communities in Southern California, is located
33 miles southeast of Los Angeles, 20 miles east of the Ports of Los Angeles and Long Beach, ten miles inland
from the Pacific Ocean and 90 miles north of San Diego. The City encompasses an area of approximately 27
square miles and lies on generally level land at an elevation approximately 135 feet above sea level.
The City was established by William H. Spurgeon in 1869. The City was incorporated on June 1, 1886
and reorganized under a City Charter in 1888. In 1952, the voters approved a charter which established a
council-manager form of government. The charter was modified by an election in 1986 to provide for the
mayor to be elected by the voters. A 1988 redistricting resulted in a six -member City Council, in addition to the
Mayor. The City Council is elected biannually at large for four-year terms and the Mayor is elected directly for
two-year terms.
The City has served as the county seat since the formation of the County in 1889. Numerous
government offices have taken advantage of the City's central location and position as county seat. City,
County, State of California (the "State") and federal offices are conveniently located in the multi -government
civic center in the heart of the City. The City has an industrial base which supports the local economy.
Orange County
The County is located in southern California, north of San Diego County and south of Los Angeles
County. The County occupies a land area of approximately 798 square miles, with a coastline of approximately
42 miles, and serves a population of over 3 million. The County represents the third most populous county in
the State, and ranks sixth in the United States.
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Population
The following table summarizes population estimates for the State, County, and City for 1990, 2000,
2010 and the last five years.
POPULATION ESTIMATES
The State of California, County of Orange
and the City of Santa Ana
(As of January 1 of Each Year)
Source: California State Department of Finance, Demographic Research Unit
Income
The following tables show the personal income and per capita income for the County, State, and United
States for calendar years 2013 through 2017.
PERSONAL INCOME(n
County of Orange, State of California, and United States
Calendar Years 2013 through 2017
California
County of
Year
State Total
Orange
Santa Ana
1990
29,758,213
2,410,668
293,827
2000
33,721,583
2,831,799
336,223
2010
37,253,956
3,010,232
324,647
2014
38,568,628
3,126,918
335,441
2015
38,912,464
3,152,314
337,180
2016
39,179,627
3,172,222
337,373
2017
39,500,973
3,198,968
337,843
2018
39,809,693
3,221,103
338,247
Source: California State Department of Finance, Demographic Research Unit
Income
The following tables show the personal income and per capita income for the County, State, and United
States for calendar years 2013 through 2017.
PERSONAL INCOME(n
County of Orange, State of California, and United States
Calendar Years 2013 through 2017
All dollar estimates are in current dollars (not adjusted for inflation). Estimates for 2010-2016 reflect
Census Bureau midyear population estimates available as of December 2017. Estimates for 2010-2016
reflect County population estimates available as of March 2018.
(2) Last year such data is available.
Source: U.S. Department of Commerce, Bureau of Economic Analysis and City of Santa Ana Audited
Financial Statements for the Fiscal Year Ended June 30, 20t7.
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County of
Year
Orange
California
United States
2013
$168,966,400
$1,861,956,514
$14,068,960,000
2014
177,412,900
1,986,025,976
14,811,388,000
2015
185,500,000
2,133,664,158
15,547,661,000
2016
190,978,000
2,212,691,221
15,912,777,000
2017[')
199,492,000
2,303,870,496
16,413,550,863
All dollar estimates are in current dollars (not adjusted for inflation). Estimates for 2010-2016 reflect
Census Bureau midyear population estimates available as of December 2017. Estimates for 2010-2016
reflect County population estimates available as of March 2018.
(2) Last year such data is available.
Source: U.S. Department of Commerce, Bureau of Economic Analysis and City of Santa Ana Audited
Financial Statements for the Fiscal Year Ended June 30, 20t7.
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PER CAPITA PERSONAL INCOME(')
County of Orange, State of California, and United States
Calendar Years 2013 through 2017
(1) Per capita personal income is the total personal income divided by the total midyear population
estimates of the Census Bureau. All dollar estimates are in current dollars (not adjusted for inflation).
Estimates for 2010-2015 reflect Census Bureau midyear state population estimates available as of
December 2017. Estimates for 2010-2015 reflect County population estimates available as of March
2018.
(2) last year such data is available.
Source: U.S. Department of Commerce, Bureau of Economic Analysis and City of Santa Ana Audited
Financial Statements for the Fiscal Year Ended June 30, 2017.
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County of
Year
Orange
California
United States
2013
$54,827
$48,555
$44,489
2014
56,973
51,317
46,486
2015
58,933
54,664
48,429
2016
59,999
56,308
49,204
2017 (2)
62,458
58,272
50,392
(1) Per capita personal income is the total personal income divided by the total midyear population
estimates of the Census Bureau. All dollar estimates are in current dollars (not adjusted for inflation).
Estimates for 2010-2015 reflect Census Bureau midyear state population estimates available as of
December 2017. Estimates for 2010-2015 reflect County population estimates available as of March
2018.
(2) last year such data is available.
Source: U.S. Department of Commerce, Bureau of Economic Analysis and City of Santa Ana Audited
Financial Statements for the Fiscal Year Ended June 30, 2017.
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Employment
The following table summarizes the labor force, employment and lmemployment figures for calendar
years 2012 through 2017 for the County, State of California and the United States and as of December of each
year for the City.
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
City of Santa Ana, County of Orange, State of California and the United States
2012-2017(2)
(') Data as of December of each year.
(2) Data is based on annual averages, unless otherwise specified, and is not seasonally adjusted.
Source: U.S. Department of Labor — Bureau of Labor Statistics, California Employment Development Department, March
2010 Benchmark.
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Unemployment
Area
Labor Force
Employment
Unemployment
Rate
2012
City of Santa Ana(')
159,400
146,700
12,700
8.0%
Orange County
1,562,100
1,439,300
122,900
7.9
State of California
18,523,800
16,602,700
1,921,100
10.4
United States
154,975,000
142,469,000
12,506,000
8.1
2013
City of Santa AnaO
157,500
147,200
10,300
6.6
Orange County
1,565,300
1,462,300
103,100
6.6
State of California
18,625,000
16,958,400
1,666,600
8.9
United States
155,389,000
143,929,000
11,460,000
7.4
2014
City of Santa Ana()
158,500
150,200
8,400
5.3
Orange County
1,572,700
1,486,400
86,300
5.5
State of California
18,758,400
17,351,300
1,407,100
7.5
United States
155,922,000
146,305,000
9,617,000
6.2
2015
City of Santa Ana(n)
158,600
151,300
7,300
4.6
Orange County
1,588,800
1,517,800
70,900
4.5
State of California
18,896,500
17,724,800
1,171,700
6.2
United States
157,130,000
148,834,000
8,296,000
5.3
2016
City of Santa AnaO
158,300
152,400
5,900
3.7
Orange County
1,602,500
1,537,700
64,800
4.0
State of California
19,093,700
18,048,800
1,044,800
5.5
United States
159,187,000
151,436,000
7,751,000
4.9
2017
City of Santa Ana(n)
160,200
155,500
4,700
2.9
Orange County
1,619,200
1,562,600
56,600
3.5
State of California
19,312,000
18,393,100
918,900
4.8
United States
160,320,000
153,337,000
6,982,000
4.4
(') Data as of December of each year.
(2) Data is based on annual averages, unless otherwise specified, and is not seasonally adjusted.
Source: U.S. Department of Labor — Bureau of Labor Statistics, California Employment Development Department, March
2010 Benchmark.
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Industry
The following table summarizes employment figures by industry for the County.
INDUSTRY EMPLOYMENT & LABOR FORCE ANNUAL AVERAGES
County of Orange
Calendar Years 2012 through 2017
Note: Items may not add to total due to independent rounding.
Source: California Employment Development Department, Labor Market Information Division. March 2017 Benchmark
Principal Employers
The following tables present the principal employers in the City and County for fiscal year 2016/17.
PRINCIPAL EMPLOYERS
County of Orange
Fiscal Year 2016/17
2012
2013
2014
2015
2016
2017
Total Farm
2,800
2,900
2,800
2,400
2,400
2,200
Mining and Logging
600
600
700
600
600
700
Construction
72,900
78,400
83,100
91,700
97,400
101,700
Manufacturing
158,300
158,000
157,400
157,000
157,000
158,600
Retail Trade
143,900
145,500
148,500
151,400
152,400
153,400
Transportation, Warehousing and Utilities
28,000
27,500
26,500
26,900
27,200
27,600
Information
24,300
25,000
24,500
25,500
26,400
27,300
Financial Activities
108,300
113,100
113,600
116,100
117,600
119,000
Professional and Business Services
260,600
267,300
276,600
286,600
296,900
301,700
Education and Health Services
177,000
186,000
190,800
198,800
206,000
215,700
Leisure and Hospitality
180,600
187,800
194,500
203.800
212,000
218,200
Other Services
44,600
45,600
47,300
48,900
50,400
50,200
Government
147,900
148,700
152,200
156,400
159,600
160,500
Note: Items may not add to total due to independent rounding.
Source: California Employment Development Department, Labor Market Information Division. March 2017 Benchmark
Principal Employers
The following tables present the principal employers in the City and County for fiscal year 2016/17.
PRINCIPAL EMPLOYERS
County of Orange
Fiscal Year 2016/17
Source: Comprehensive Annual Financial Report of the County of Orange for Fiscal Year 2016-17
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Number of
Percentage of Total
Name of Business
Employees
Rank
County Employment
Walt Disney Co.
29,000
1
1.80%
University of California, Irvine
23,605
2
1.46
County of Orange
18,264
3
1.13
St. Joseph Health System
11,925
4
0.74
Allied Universal
8,229
5
0.51
Kaiser Permanente
7,694
6
0.48
Boeing Co.
6,103
7
0.38
Wal-Mart
6,000
8
0.37
California State University, Fullerton
5,781
9
0.36
Bank of America
5,500
10
0.34
Source: Comprehensive Annual Financial Report of the County of Orange for Fiscal Year 2016-17
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PRINCIPAL EMPLOYERS
City of Santa Ana
Fiscal Year 2016/17
Source: Comprehensive Annual Financial Report of the City of Santa Ana for Fiscal Year 2016-17
Taxable Sales
The history of taxable transactions in the City from calendar year 2009 through 2016 is shown in the
following table.
TAXABLE SALES
City of Santa Ana
Calendar Years 2009 through 2016
Number of
Percentage of Total
Name of Business
Employees
County Employment
County of Orange
18,742
11.8%
Santa Ana Unified School District
4,963
3.1
Santa Ana College
3,175
2.0
First American Title Co.
1,780
1.1
City of Santa Ana
1,491
0.9
KPC Healthcare (formerly Integrated
1,347
0.9
Healthcare Holdings)
2012
4,003
Superior Court of CA -County of Orange
766
0.5
United States Postal Service (3 locations)
516
0.3
Johnson & Johnson (Prev: Abbott Medical
500
0.3
Optics Inc (AMO))
2,708,189
6,918
Yokohama Tire Corp
137
0.1
Source: Comprehensive Annual Financial Report of the City of Santa Ana for Fiscal Year 2016-17
Taxable Sales
The history of taxable transactions in the City from calendar year 2009 through 2016 is shown in the
following table.
TAXABLE SALES
City of Santa Ana
Calendar Years 2009 through 2016
0) Taxable transactions in thousands of dollars.
(2) Last year such data is available.
Source: "Taxable Sales in California (Sales & Use Tax)," California Board of Equalization
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Retail
Retail and Food
Total Outlets
Year
Permits
Taxable Transactionslrl
Total Permits
Taxable Transactions(l)
2009
3,715
2,139,858
6,717
$3,116,988
2010
3,863
2,235,903
6,838
3,178,264
2011
3,926
2,363,736
6,845
3,326,962
2012
4,003
2,518,026
6,848
3,492,395
2013
3,988
2,608,681
6,745
3,655,025
2014
4,146
2,708,189
6,918
3,816,866
2015
4,462
2,799,397
7,617
3,954,540
2016 (2)
4,592
2,935,193
7,857
4,134,901
0) Taxable transactions in thousands of dollars.
(2) Last year such data is available.
Source: "Taxable Sales in California (Sales & Use Tax)," California Board of Equalization
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APPENDIX C
FISCAL CONSULTANT'S REPORT
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APPENDIX D
CITY OF SANTA ANA AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL
YEAR ENDED JUNE 30, 2017
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APPENDIX E
FORM OF CONTINUING DISCLOSURE CERTIFICATE
This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed and
delivered by the Successor Agency to the Former Community Redevelopment Agency of the City of Santa Ana
(the "Issuer") in connection with the issuance of its Tax Allocation Refunding Bonds, Series 2018A (Tax -
Exempt) and Tax Allocation Refunding Bonds, Series 2018B (Federally Taxable) (the "Bonds"). The Bonds are
being issued pursuant to an Indenture of Trust, dated as of 1, 2018, by and between The Bank of
New York Mellon Trust Company, N.A., as trustee (the "Trustee") and the Issuer (the "Indenture"). The Issuer
covenants and agrees as follows:
Section 1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the Issuer for the benefit of the Beneficial Owners and bondholders in order to assist the
Participating Underwriter in complying with Securities and Exchange Commission Rule 15e2-12.
Section 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any
capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following
capitalized terns shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in,
Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through
nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income
tax purposes.
"Dissemination Agent" shall mean Urban Futures Incorporated, or any successor Dissemination Agent
designated in writing by the Issuer and which has filed with the Issuer a written acceptance of such designation.
In the absence of such a designation, the Issuer shall act as the Dissemination Agent.
"EMMA" or "Electronic Municipal Market Access" means the centralized on-line repository system
located at www.emma.msrb.org for documents filed with the MSRB pursuant to the Rule, such as official
statements and disclosure information relating to municipal bonds, notes and other securities as issued by state
and local governments.
"Listed Events" shall mean any of the events listed in Section 5(a) and (b) of this Disclosure Certificate.
"MSRB" 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,
or any other repository of disclosure information which may be designated by the Securities and Exchange
Commission as such for purposes of the Rule in the future.
"Participating Underwriter" shall mean Samuel A. Ramirez & Co., Inc., or 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 adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
"State" shall mean the State of California.
"State Repository" shall mean any public or private repository or entity designated by the State as a state
repository for the purpose of the Rule. As of the date of this Certificate, there is no State Repository,
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Section 3. Provision of Annual Reports
(a) Delivery of Annual Report to MSRB. The Issuer shall, or shall cause the Dissemination
Agent to, not later than [March 31] in each year, commencing [March 31, 20191 and to file with
EMMA, in a readable PDF or other electronic format as prescribed by the MSRB, an Annual Report
that is consistent with the requirements of Section 4 of this Disclosure Certificate; provided however,
that the first Annual Report due on March 31, 2019 shall consist solely of a copy of the Official
Statement. The Annual Report may be submitted as a single document or as separate documents
comprising a package, and may cross-reference other information as provided in Section 4 of this
Disclosure Certificate; provided, that the audited financial statements of the Issuer 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 they are not available by that date.
(b) Change of Fiscal Year. If the Issuer's fiscal year changes, it shall give notice of such
change in the same manner as for a Listed Event under Section 5(d).
(c) Delivery of Annual Report to Dissemination Agent. Not later than five days prior to the
date specified in subsection (a) for providing the Annual Report to EMMA, the Issuer shall provide the
Annual Report to the Dissemination Agent (if other than the Issuer). If by such date, the Dissemination
Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the Issuer.
(d) Report of Non -Compliance. If the Issuer is unable to provide an Annual Report by the
date required in subsection (a), the Dissemination Agent shall send a notice to EMMA in a timely
manner in an electronic format prescribed by the MSRB.
(e) Annual Compliance Certification. The Dissemination Agent shall, if the Dissemination
Agent is other than the Issuer, file a report with the Issuer certifying that the Annual Report has been
provided pursuant to this Disclosure Certificate, stating the date it was provided.
Section 4. Content of Annual Reports. The Issuer's Annual Report shall contain or incorporate by
reference the following:
(a) Audited financial statements of the Issuer for the preceding fiscal year, prepared in
accordance with the laws of the State and including all statements and information prescribed for
inclusion therein by the Controller of the State. I£ the Issuer's 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. The audited Financial Statements of the
Issuer may be included in the City of Santa Ana's Comprehensive Annual Financial Report if no
separate Financial Statement is prepared for the Issuer.
(b) To the extent not included in the audited final statement of the Issuer, the Annual
Report shall also include the following information for the prior fiscal year, insofar as available from
public records:
(i) Table No. I — Land Use;
(ii) Table No. 2 — Current and Historical Assessed Valuations;
(iii) Table No. 4 - Ten Largest Taxpayers;
(iv) Table Nos. 6 and 7 — Projected Tax Revenues; and
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(v) Table Nos. 8 and 9 - Debt Service Coverage.
(c) 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 Issuer or related public entities, which are
available to the public on the MSRB's Internet web site or filed with the Securities and Exchange
Commission. The Issuer shall clearly identify each such other document so included by reference.
If the document included by reference is a final official statement, it must be available from
EMMA.
(d) In addition to any of the information expressly required to be provided under paragraph
(b) of this Section 4, the Issuer shall provide such further information, if any, as may be necessary to
make the specifically required statements or information (as set forth herein), in the light of the
circumstances under which they are made, not misleading.
Section 5. Reporting of Sienificant Events.
(a) Reportable Events. The Issuer shall, or shall cause the Dissemination (if not the
Successor Agency) to, give notice of the occurrence of any of the following events with respect to the
Bonds (in accordance with (e) below):
(1)
Principal and interest payment delinquencies.
(2)
Unscheduled draws on debt service reserves reflecting financial difficulties.
(3)
Unscheduled draws on credit enhancements reflecting financial difficulties.
(4)
Substitution of credit or liquidity providers, or their failure to perform.
(5)
Defeasances.
(6)
Rating changes.
(7)
Tender offers.
(8)
Bankruptcy, insolvency, receivership or similar event of the obligated person.
(9)
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.
(b) Material Reportable Events. The Issuer shall give, or cause to be given, notice of the
occurrence of any of the following events with respect to the Bonds, if material:
(1)
Non-payment related defaults.
(2)
Modifications to rights of security holders.
(3)
Bond calls.
(4)
The release, substitution, or sale of property securing repayment of the
securities.
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(5) The consummation of a merger, consolidation, or acquisition involving an
obligated person or the sale of all or substantially all of the assets of the 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 terns.
(6) Appointment of a successor or additional trustee, or the change of name of a
trustee.
(c) Determination of Materiality of Listed Events. Whenever the Issuer obtains knowledge
of the occurrence of a Listed Event listed under Section 5(b), the Issuer shall as soon as possible
determine if such event would be material under applicable federal securities laws.
(d) Notice to Dissemination Agent. If the Issuer has determined that knowledge of the
occurrence of a Listed Event listed under Section 5(b) would be material under applicable federal
securities laws, the Issuer shall promptly notify the Dissemination Agent (if other than the Issuer) in
writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to
subsection (d).
(e) Notice of Listed Events. The Issuer shall file, or cause the Dissemination Agent to file, a
notice of the occurrence of a Listed Event listed in Section 5(a), and, listed in Section 5(b), if material,
with EMMA, in a readable PDF or other electronic fornat as prescribed by the MSRB, in a timely
manner not in excess of ten (10) business days after the occurrence of the Listed Event. Notwithstanding
the foregoing, notice of Listed Events described in subsections (a)(5) and (b)(3) need not be given under
this subsection any earlier than the notice (if any) of the underlying event is given to Bondholders of
affected Bonds.
Section 6. Identifying Information for Filings with EMMA. All documents provided to EMMA
under this Disclosure Certificate shall be accompanied by identifying information as prescribed by the MSRB.
Section 7. Termination of Reporting Obligation. The Issuer's obligations under this Disclosure
Certificate shall terminate upon the defeasance, prior redemption or payment in full of all of the Bonds.
Section 8. Dissemination Agent.
(a) Appointment of Dissemination Agent. The initial Dissemination Agent shall be Urban
Futures Incorporated. The Issuer may, from time to time, appoint or engage a different Dissemination
Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any
such agent, with or without appointing a successor Dissemination Agent. If the Dissemination Agent is
not the Issuer, the Dissemination Agent shall not be responsible in any manner for the content of any
notice or report prepared by the Issuer pursuant to this Disclosure Certificate.
(b) Compensation of Dissemination Agent. The Dissemination Agent, if not the Issuer, shall
be paid compensation by the Issuer for its services provided hereunder in accordance with its schedule
of fees as agreed to between the Dissemination Agent and the Issuer from time to time and all expenses,
legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties
hereunder. The Dissemination Agent shall not be deemed to be acting in any fiduciary capacity for the
Issuer, 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 Issuer or an opinion of
nationally recognized bond counsel. The Dissemination Agent may at any time resign by giving written
notice of such resignation to the Issuer.
Section 9. Amendments Waiver. Notwithstanding any other provision of this Disclosure
Certificate, the Issuer may amend this ,Disclosure Certificate (and the Dissemination Agent shall agree to any
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amendment so requested by the Issuer that does not impose any greater duties or risk of liability on the
Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided that the
following conditions are satisfied:
(a) Change in Circumstances. If the amendment or waiver relates to the provisions of
Sections 3(a), A 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 the type of business conducted;
(b) Compliance as oflasue Date. The undertaking, as amended or taking into account such
waiver, would, in the opinion of a nationally recognized bond counsel, have complied with the
requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any
amendments or interpretations of the Rule, as well as any change in circumstances; and
(c) Consent of Holders; Non -impairment Opinion. The amendment or waiver either (i) is
approved by the Bondholders in the same manner as provided in the Indenture for amendments to the
Indenture with the consent of Bondholders, or (ii) does not, in the opinion of nationally recognized bond
counsel, materially impair the interests of the Bondholders or Beneficial Owners.
If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, the
Issuer shall describe such amendment or waiver in the next following Annual Report and shall include, as
applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or in
the case of a change of accounting principles, on the presentation) of financial information or operating data
being presented by the Issuer. In addition, if the amendment relates to the accounting principles to be followed
in preparing financial statements, (i) notice of such change shall be given in the same manner as for a Listed
Event under Section 5(d), and (ii) the Annual Report for the year in which the change is made should present a
comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as
prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting
principles.
Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the Issuer 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 Issuer 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 Issuer 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 11. Default. In the event of a failure of the Issuer to comply with any provision of this
Disclosure Certificate, any Bondholder or Beneficial Owner may take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the Issuer to comply
with its obligations under this Disclosure Certificate. The sole remedy under this Disclosure Certificate in the
event of any failure of the Issuer to comply with this Disclosure Certificate shall be an action to compel
performance.
Section 12. Duties Immunities and Liabilities of Dissemination Agent. All of the immunities,
indemnities, and exceptions from liability in Article IX of the Indenture insofar as they relate to the Trustee shall
apply to 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 Issuer agrees to indemnify and save the
Dissemination Agent, and its officers, directors, employees and agents, harmless against any loss, expense and
liabilities which it may incur arising out of the disclosure of information pursuant to the Disclosure Certificate
or arising out of or in the exercise of performance of its powers and duties hereunder, including the costs and
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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 shall have no duty of
obligation to review any information provided to it hereunder and shall not be deemed to be acting in any
fiduciary capacity for the Issuer, the owner of a Bond, or any other party. The Trustee shall have no liability to
any party for any monetary damages or other financial liability of any kind whatsoever related to or arising from
any breach of this Disclosure Certificate. No person shall have any right to commence any action against the
Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure
Certificate. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon
any written direction from the Issuer or an opinion of Special Counsel. The obligations of the Issuer under this
Section shall survive resignation or removal of the Dissemination Agent or the Trustee and payment of the
Bonds.
Section 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Issuer,
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: , 2018 SUCCESSOR AGENCY TO THE FORMER
COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF SANTA ANA
US
Steven A. Mendoza
Executive Director, Community
Development Agency
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APPENDIX F
PROPOSED FORM OF BOND COUNSEL OPINION
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APPENDIX G
TI3E BOOI{-ENTRY SYSTEM
The following description of the Depository Trust Company ("DTC"), the procedures and record
keeping with respect to beneficial ownership interests in the Bonds, payment of principal, interest and other
payments on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial
ownership interest in the Bonds and other related transactions by and between DTC, the DTC Participants and
the Beneficial Owners is based solely on information provided by DTC. Accordingly, no representations can be
made concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the
foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC
Participants, as the case may be.
Neither the issuer of the Bonds (the "Issuer") nor the trustee, fiscal agent or paying agent appointed with
respect to the Bonds (the "Agent") take any responsibility for the information contained in this Appendix.
No assurances can be given 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.
1. The Depository Trust Company ("DTC"), New York, NY, will act as securities
depository for the securities (the "Securities"). The Securities 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 Security certificate will be
issued for each issue of the Securities, each in the aggregate principal amount of such issue, and will be
deposited with DTC. If, however, the aggregate principal amount of any issue exceeds $500 million,
one certificate will be issued with respect to each $500 million of principal amount, and an additional
certificate will be issued with respect to any remaining principal amount of such issue.
2. 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 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
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can be found at www.dtcc.com. The information contained on such Internet site is not incorporated
herein by reference.
3. Purchases of Securities under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of
each actual purchaser of each Security (`Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of
their purchase. Beneficial Owners are, however, expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities 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 Securities, except in the event that use of the book -entry system
for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities 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 Securities 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 Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts such Securities are credited,
which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
5. 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 Securities may wish to take
certain steps to augment the transmission to them of notices of significant events with respect to the
Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents.
For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the
Securities 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.
6. Redemption notices shall be sent to DTC. If less than all of the Securities within an
issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with
respect to Securities unless authorized by a Direct Participant in accordance with DTC's MMI
Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities 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 Issuer or Agent, 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, Agent, or Issuer, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend
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payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of
DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will
be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the
responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the Securities
at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a
successor depository is not obtained, Security certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book -entry transfers through DTC
(or a successor securities depository). In that event, Security certificates will be printed and delivered to
DTC.
11. The information in this section concerning DTC and DTC's book -entry system has been
obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the
accuracy thereof,
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