HomeMy WebLinkAboutRES NO 003-05 o 03-05
RESOLUTION NO. -05
RESOLUTION APPROViNG FORM AND SUBSTANCE OF
PRELIMiNARY OFFICIAL STATEMENT AND BOND PURCHASE
CONTRACT, AUTHORIZiNG MODIFICATIONS THERETO,
AUTHORIZING EXECUTION THEREOF, AND AUTHORIZiNG
RELATED DOCUMENTS AND ACTIONS
CITY OF BAKERSFIELD
ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK III)
WHEREAS, in connection with the proposed issuance, sale m~d delivery of the
City of Bakersfield, Limited Obligation Improvement Bonds, Assessment District No. 04-1
(Countryside/The Homestead/Cherry Hill/Olive Park III) (the "Bonds"), the City of Bakersfield
(the "City") has retained Pillsbury Winthrop LLP as Disclosure Counsel ("Disclosure Counsel"),
to assist the City in the preparation of a Preliminary Official Statement for use and distribution
by UBS Financial Services Inc., as Underwriter of the Bonds (the "Underwriter") in connection
with issuance, sale and distribution of the Bonds to the public; and
WHEREAS, Disclosure Counsel has filed with the City Clerk of the City (the
"City Clerk") a proposed Preliminary Official Statement (the "Preliminary Official Statement"),
and this City Council hereby finds and determines that it is in the public interest and for the
public benefit that the Preliminary Official Statement be approved; and
WHEREAS, the Underwriter has advised that the law firm of Stradling Yocca
Carlson & Rauth has been retained to serve as Underwriter's Counsel ("Underwriter's Counsel")
with respect to the purchase of the Bonds by the Underwriter, and Underwriter's Counsel has
filed with the City Clerk a proposed Bond Purchase Contract, which has been reviewed and
approved as to form by Orrick, Herrington & Sutcliffe LLP, Bond Counsel to the City for the
DOCSSF1:778803.2 >- ~
40213-33 SS4 ~ C)
ORIGINAL
Bonds ("Bond Counsel"), and this City Council hereby finds and determines that it is in the
public interest and for the public benefit that the Bond Purchase Contract be approved;.
NOW, THEREFORE, THE CITY COUNCIL HEREBY FINDS, DETERMINES
AND RESOLVES as follows:
SECTION 1. APPROVAL OF PRELIMINARY OFFICIAL STATEMENT.
This City Council hereby approves the Preliminary Official Statement, and in connection
therewith, hereby finds, determines and declares (1) that the facts contained in the Preliminary
Official Statement as presented on the date hereof are true and correct in all material respects and
(2) that the Preliminary Official Statement neither contains any untrue statement of a material
fact nor omits to state any material fact necessary to make any statement therein not misleading
in light of the circumstances under which it was made. The Preliminary Official Statement shall
be deemed "nearly final" for purposes of compliance with U.S. Securities and Exchange
Commission Rule 15c(2)-12, and the Finance Director of the City (the "Finance Director") is
hereby authorized, upon request of the Underwriter, to execute and deliver a certificate
respecting such finality along with the Preliminary Official Statement.
This City Council hereby authorizes the making of corrections to or additions to
the Preliminary Official Statement by supplement or amendment thereto or by appropriate
insertions into the Preliminary Official Statement.
The Underwriter is authorized to distribute the Preliminary Official Statement in
connection with its offering of the Bonds to the public, leading to the sale of the Bonds to the
Underwriter, as evidenced by execution of the Bond Purchase Contract.
DOCSSF1:778803.2
40213-33 SS4 2
>- m
O~iGINAL
SECTION 2. EXECUTION AND DISTRIBUTION OF OFFICIAL
STATEMENT AUTHORIZED. This City Council hereby authorizes the Finance Director to
execute the Official Statement to be substantially derived from the Preliminary Official
Statement. The Underwriter is authorized to distribute the Official Statement in connection with
its offering or reoffering of the Bonds to the public.
This City Council hereby authorizes the preparation of an Official Statement to be
substantially derived from the Preliminary Official Statement.
SECTION 3. BOND PURCHASE CONTRACT APPROVED. The proposed
Bond Purchase Contract is hereby approved as to form and substance, and once Schedule I
thereto has been completed to the satisfaction of the Finance Director, the Finance Director is
hereby authorized to execute the same. The Finance Director is further authorized to approve
changes and modifications to said Bond Purchase Contract prior to execution, which approval
shall be conclusively demonstrated by execution thereof by the Finance Director; provided that
(1) the principal amount of the Bonds shall not exceed $4,410,000, (2) the average coupon
interest rate (exclusive of bond discount) shall not exceed seven percent (7.00%) per annum, and
(3) the bond discount (including both Underwriter's discount and original issue discount, if any)
shall not exceed two percent (2.0%) of the principal amount of the Bonds.
SECTION 4. AUTHORIZATION FOR RELATED ACTIONS. Any appropriate
officer, employee or representative of the City is hereby authorized to take any action and to
execute and deliver any document reasonably required to accomplish the issuance, sale and
delivery of the Bonds.
DOCSSF1:778803.2
40213-33 SS4 3
ORIGINAl.
I HEREBY CERTIFY that the foregoing resolution was passed and
adopted by the Council of the City of Bakersfield at a regular meeting thereof held on January
12, 2005, by the following vote:
~,'~.~ COUNCILMEMBER
NOES: COUNCILMEMBER
ABSTAIN: COUNCILMEMBER
ABSENT: COUNCILMEMBER
CARSON, BENHAM, MAGGARD, COUCH, HANSON, SULLIVAN, SCRIVNER
City Clerk and Ex Officio
Clerk of the Council of the
City of Bakersfield
APPROVED AS TO FORM:
ORRICK, HERR1NGTON & SUTCLIFFE LLP
Bond Counsel
COUNTERSIGNED:
VIRGINIA GENNAR/¢~
By
DOCSSF1:778803.2
40213-33 SS4
4
O,qlG[NAL
PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 19, 2004
NEW ISSUE
BOOK-ENTRY ONLY SYSTEM
NO RATING
In the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing
laws, regulations, rulings, and court decisions and assuming (among other things) compliance with certain
covenants, interest on the Bonds is excluded from gross income for federal tax purposes and is exempt from State of
California personal income taxes. In the opinion of Bund Counsel, interest on the Bonds is not a specific preference
item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel
observes that such interest is included in adjusted current earnings in calculating federal corporate alternative
minimum taxable income. Bond Counsel expresses no opinion regarding any other tax consequences caused by the
ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See "TAX MATTERS."
$4,340,000*
CITY OF BAKERSFIELD
ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK HI)
LIMITED OBLIGATION IMPROVEMENT BONDS
Dated: Date of Delivery Due: September 2, as shown below
The Bonds described herein (the "Bonds") are special, limited obligation bonds being issued by the City of
Bakersfield, California (the "City"), to finance the acquisition of certain public improvements specially benefiting
properties located within the boundaries of the City's Assessment District No. 04-1 (Countryside/The
Homestead/Cherry Hill/Olive Park III) (the "Assessment District"). The Assessment District was formed and the
acquisition of the improvements will be undertaken as authorized under the provisions of the Municipal
Improvement Act of 1913 (Division 12 of the California Streets and Highways Code) and Section 13.08.070 of the
Municipal Code of the City. The Bonds are being issued pursuant to the provisions of the Improvement Bond Act of
1915 (Division 10 of the California Streets and Highways Code) (the "1915 Act").
The Bonds are issuable only as fully registered Bonds in the denomination of $5,000 each or any integral
multiple thereof. Principal, interest at maturity or upon earlier redemption, as applicable, and premium, if any, with
respect to the Bonds will be payable upon presentation and surrender thereof at the corporate trust office of U.S.
Bank National Association, the paying agent, registrar, and transfer agent for the Bonds (the "Paying Agent"), in St.
Paul, Minnesota. Interest on the Bonds (other than the final payment of interest, which is payable upon surrender of
the Bonds) will be payable fi.om their date of delivery, commencing March 2, 2005, and therea~er semiannually on
September 2 and March 2 (each an "Interest Payment Date") in each year by check of the Paying Agent mailed on
each Interest Payment Date to the pemons in whose names such Bonds are registered at the close of business on the
fifteenth day of the calendar month immediately prior to an Interest Payment Date (or, in the case of an owner of at
least $1,000,000 in principal amount of the Bonds who so requests in writing prior to the close of business on the
fifteenth day of the month immediately preceding such Interest Payment Date, by wire transfer).
The Bonds will be issued initially in book-entry only form through the book-entry system of The
Depository Trust Company, New York, New York. See BOOK-ENTRY ONLY SYSTEM.
The Bonds are subject to redemption on any Interest Payment Date in advance of maturity at the option of
the City upon giving at least thirty (30) days prior notice and upon payment of the principal thereof and interest
accrued thereon to the date of redemption, plus any applicable redemption premium, as more fully described herein.
The Term Bonds maturing on September 2, 20__ are also subject to mandatory redemption in part prior to
their stated matUrity, as more fully described herein.
Further development of parcels within the Assessment District, transfers of property ownemhip, and other
similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in
redemption of a portion of the Bonds prior to their stated maturities.
Prehmmaw; subject to change.
20518102v3
Under the provisions of the 1915 Act, installments of principal and interest sufficient to meet annual debt
service requirements with respect to the Bonds shall be included on the regular Kern County tax bills sent to owners
of property against which there are unpaid assessments. The portion of the armual installments for the payment of
principal of and interest on the Bonds is to be paid into the Redemption Fund, to be held by the Finance Director,
and will be used to pay debt service on the Bonds as it becomes due.
To provide funds for payment of the Bonds and the interest thereon as a result of any delinquent assessment
installments, the City will establish a Special Reserve Fund and deposit therein Bond proceeds in the original
amount of $ . Additionally, the City has covenanted that, under certain circumstances, by no later than
October 1 in any year, it will file an action in superior court to foreclose the lien on each delinquent assessment, as
more particularly described herein.
IF A DELINQUENCY OCCURS IN THE PAYMENT OF ANY ASSESSMENT INSTALLMENT, THE
CITY WILL HAVE A DUTY ONLY TO TRANSFER INTO THE REDEMPTION FUND THE AMOUNT OF
THE DELINQUENCY OUT OF THE SPECIAL RESERVE FUND. THIS DUTY OF THE CITY IS
CONTINUING DURING THE PERIOD OF DELINQUENCY, ONLY TO THE EXTENT OF FUNDS
AVAILABLE FROM THE SPECIAL RESERVE FUND, UNTIL REINSTATEMENT, REDEMPTION, OR SALE
OF THE DELINQUENT PROPERTY. THERE IS NO AssLrRANCE THAT SUFFICIENT FUNDS WILL BE
AVAILABLE FROM THE SPECIAL RESERVE FUND FOR THIS pLrRPOSE. THUS, IF, DURING THE
PERIOD OF DELINQUENCY, THERE ARE INSUFFICIENT AVAILABLE FUNDS, A DELAY MAY OCCUR
IN PAYMENTS TO THE OWNERS OF THE BONDS. IN ACCORDANCE WITH SECTION 8769(b) OF THE
1915 ACT, THE CITY HAS DETERMINED THAT IT WILL NOT OBLIGATE ITSELF TO ADVANCE FUNDS
FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION FUND.
This cover page contains certain information for quick reference only. It is not a summary of the issue.
Investors must read the entire Official Statement to obtain information essential to the making of an informed
investment decision.
MATURITY SCHEDULE
$ Serial Bonds
Maturity Principal Interest Maturity Principal Interest
tSe~tember 2) Amount Rate Price CUSIP I~)No. (Sentember 2) Amount Rate Price CUSIP (~)No.
$ __ % Term Bond Due September 2, 20__ - Price: __% (CUSIP I~l NO. )
(1) Copyright 2004, American Bankers Ass~iation. CUSIP dam herein is provided by S~andard & Poor's CUSIP Service Bureau, a division of The
McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substii~te for the CUSIP services.
THE BONDS ARE NOT SECURED BY THE GENERAL TAXING POWER OF THE CITY, THE
COUNTY OF KERN (THE "COUNTY"), THE STATE OF CALIFORNIA (THE "STATE"), OR ANY OTHER
POLITICAL SUBDIVISION OF THE STATE, AND NEITHER THE CITY, NOR TIlE COUNTY, NOR THE
STATE, NOR ANY OTHER POLITICAL SUBDIVISION OF THE STATE HAS PLEDGED ITS FULL FAITH
AND CREDIT FOR THE PAYMENT OF THE BONDS.
The Bonds are being offered when, as, and if issued by the City and received by the Underwriter, subject to
prior sale and to the approval of validity by Orrick, Herrington & Sutcliffe LLP, San Francisco, California, Bond
Counsel, and the approval of certain matters for the City by the City Attorney of the City of Bakersfield. Certain
other legal matters will be passed on by Pillsbury Winthrop LLP, Los Angeles. California, as disclosure counsel to
the City. Stradling, Yocca, Carlson & Rauth, Newport Beach, California, has represented the Underwriter in
connection with the issuance of the Bonds. It is expected that the Bonds in definitive form will be available for
delivery in New York, New York, on or about December 16, 2004.
UBS FINANCIAL SERVICES INC.
Dated: ,2004
20518102v3
No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give
any information or to make any representations other than those contained in this Official Statement, and, if given or
made, such other information or representations must not be relied upon as having been authorized by any of the
foregoing. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor will
there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such
offer, solicitation or sale.
This Official Statement is not to be construed to be a contract with the purchasers of the Bonds. Statements
contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not
expressly described herein, are intended solely as such and are not to be construed as representations of fact.
The information set forth herein has been obtained from the City and other sources which are believed to be
reliable, but it is not guaranteed as to accuracy or completeness, and it is not to be construed as a representation by
the City. The information and expressions of opinion herein are subject to change without notice, and neither the
delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any
implication that there has been no change in the affairs of the City or the Assessment District since the date hereof.
The UnderWriter has provided the following sentence for inclusion in this Official Statement. The
Underwriter has reviewed the hifbrmation 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.
This Official Statement is submitted in connection with the sale of the Bonds referred to heroin and may
not be reproduced or used, in whole or hi part, for any other purpose.
THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, 1N RELIANCE UPON AN EXEMPTION CONTAINED 1N SUCH ACT. THE BONDS HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL
ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AREA MAP
I-5
Ne~mdl
FsMflo Oo~m
KERN
~NTY
The City of Bakersfield, California,
the county seat of the County of
Kern, is located at the southern end
of California's San Joaquin Valley.
Bakersfield is approximately 110
miles north of Los Angeles and
290 miles south of San Francisco.
CITY OF BAKERSFIELD
Mayor and City Council
Harvey L. Hall, Mayor
Irma Carson, Councilmember First Ward
Susan M. Bev_haw, Councihnember Second Ward
Mike Maggard, Councilmember Third Ward
David R. Couch, Vice Mayor, Councilmember Fourth Ward
Harold Hanson, Councilmember Fifth Ward
Jacquie Sullivan, Councilmember Sixth Ward
Mark C. Salvaggio, Councilmember Seventh Ward
City Staff
Alan Tandy, City Manager
Virginia Gennaro, City Attorney
Pamela A. McCarthy, City Clerk
Raul M. Rojas, Public Works Director
Gregory J. Klimko, Finance Director
BOND COUNSEL
Orrick, Harrington & Sutcliffe LLP
San Francisco, California
ASSESSMENT ENGINEER
Wilson & Associates
Fresno, California
PAYING AGENT, REGISTRAR, AND TRANSFER AGENT
U.S. Bank National Association
Los Angeles, California
PROPERTY APPRAISER
Kern Appraisal Company
Bakersfield, California
DISCLOSURE COUNSEL
Pillsbury Winthrop LLP
Los Angeles, California
TABLE OF CONTENTS
Page
INTRODUCTORY STATEMENT ............................................................................................................................... 1
The Bonds ............................................................................................................................................................... 1
The Assessment District ......................................................................................................................................... 1
Property Ownership ................................................................................................................................................ 1
Improvements ......................................................................................................................................................... 2
Assessments ............................................................................................................................................................ 2
Appraisal ................................................................................................................................................................. 3
Security for the Bonds ............................................................................................................................................ 3
Special Reserve Fund ............................................................................................................................................. 3
Foreclosure ............................................................................................................................................................. 4
Assessment Delinquencies ...................................................................................................................................... 4
Book-Entry Only System ........................................................................................................................................ 4
Continuing Disclosure ............................................................................................................................................ 4
Forward-Looking Statements ................................................................................................................................. 4
Miscellaneous ......................................................................................................................................................... 5
ESTIMATED SOURCES AND USES OF FUNDS ..................................................................................................... 5
THE BONDS ................................................................................................................................................................. 5
Purpose of the Bonds .............................................................................................................................................. 5
Authority for Issuance ............................................................................................................................................ 6
General ................................................................................................................................................................... 6
Transfer and Exchange of Bonds ............................................................................................................................ 7
Bonds Mutilated, Destroyed, or Lost ...................................................................................................................... 7
Redemption ............................................................................................................................................................. 7
Effect of Redemption; Defeasance ......................................................................................................................... 8
Refunding Bonds .................................................................................................................................................... 8
Disposition of Surplus from the Improvement Fund .............................................................................................. 9
Investment of Bond Proceeds ................................................................................................................................. 9
Security for the Bonds ............................................................................................................................................ 9
Special Reserve Fund ........................................................................................................................................... 10
Redemption Fund Deficiencies ............................................................................................................................. 11
Covenant to Commence Superior Court Foreclosure ........................................................................................... 11
Priority of Lien ..................................................................................................................................................... 12
Tax Covenants ...................................................................................................................................................... 12
Debt Service Schedule .......................................................................................................................................... 13
BOOK-ENTRY ONLY SYSTEM ............................................................................................................................... 13
THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS .............................................................................. 15
General ................................................................................................................................................................. 15
Description of the Community Areas and the Improvements ............................................................................... 16
Estimated Improvement Costs .............................................................................................................................. 19
Method of Assessment Spread .............................................................................................................................. 20
OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT......21
Ownership of Property in the Assessment District ............................................................................................... 21
Centex Homes ...................................................................................................................................................... 22
Gardiner LLC ....................................................................................................................................................... 22
Bakersfield Avalon ............................................................................................................................................... 23
Development and Financing Plans ....................................................................................................................... 25
Assessment Roll ................................................................................................................................................... 28
Utilities ................................................................................................................................................................. 28
Flood and Earthquake Zones ................................................................................................................................ 28
Zoning .................................................................................................................................................................. 28
Tax Delinquencies ................................................................................................................................................ 29
Environmental Issues Affecting Assessment District Property ............................................................................ 29
Bulk Value-to-Assessment Lien Ratio ................................................................................................................. 29
Direct and Overlapping Debt ................................................................................................................................ 30
SPECIAL RISK FACTORS ........................................................................................................................................ 31
General ................................................................................................................................................................. 31
Risks of Real Estate Secured Investments Generally ........................................................................................... 32
Availability of Funds to Pay Delinquent Assessment Installments ...................................................................... 32
Hazardous Substances .......................................................................................................................................... 32
Endangered and Threatened Species .................................................................................................................... 33
Factors Which May Affect Land Development .................................................................................................... 33
Private Improvements; Increased Debt ................................................................................................................. 34
Subordinate Debt; Payments by FDIC and other Federal Agencies ..................................................................... 34
Property Values .................................................................................................................................................... 35
Concentration of Ownership ................................................................................................................................. 35
Tax Delinquencies ................................................................................................................................................ 36
Limited Obligation of the City Upon Delinquency .............................................................................................. 36
Bankruptcy and Foreclosure ................................................................................................................................. 36
Economic, Political, Social and Environmental Conditions ................................................................................. 37
Articles XIIIA and XIIIB of the California Constitution ...................................................................................... 37
Articles XIIIC and XIIID of the California Constitution ...................................................................................... 39
Future Initiatives ................................................................................................................................................... 40
Covenant to Commence Superior Court Foreclosure ........................................................................................... 40
Price Realized Upon Foreclosure ......................................................................................................................... 40
Profity of Lien ..................................................................................................................................................... 41
Refunding Bonds .................................................................................................................................................. 42
Absence of Market for Bonds ............................................................................................................................... 42
Loss of Tax Exemption ......................................................................................................................................... 42
ENFORCEABILITY OF REMEDIES ........................................................................................................................ 42
LITIGATION .............................................................................................................................................................. 42
No Litigation Relating to the Bonds ..................................................................................................................... 42
Litigation Pertaining to The Homestead Area ...................................................................................................... 43
CERTAIN INFORMATION CONCERNING THE CITY ......................................................................................... 43
TAX MATTERS ......................................................................................................................................................... 43
APPROVAL OF LEGALITY ..................................................................................................................................... 44
UNDERWRITING ...................................................................................................................................................... 44
NO RATING ............................................................................................................................................................... 44
CONTINUING DISCLOSURE ................................................................................................................................... 44
MISCELLANEOUS .................................................................................................................................................... 45
APPENDIX A - CITY OF BAKERSFIELD ECONOMIC, FINANCIAL, AND
DEMOGRAPHIC INFORMATION ............................................................................................. A- 1
APPENDIX B - APPRAISAL ................................................................................................................................... B- 1
APPENDIX C - FORM OF OPINION OF BOND COUNSEL ................................................................................ C-I
APPENDIX D - ASSESSMENT DIAGRAM ........................................................................................................... D-I
APPENDIX E- ASSESSMENT ROLL AND VALUE-TO-LIEN DATA ............................................................... E-I
APPENDIX F - CONTINUING DISCLOSURE CERTIFICATES .......................................................................... F-1
OFFICIAL STATEMENT
$4,340,000*
CITY OF BAKERSFIELD
ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK III)
LIMITED OBLIGATION IMPROVEMENT BONDS
INTRODUCTORY STATEMENT
THIS INTRODUCTORY STATEMENT IS SUBJECT IN ALL RESPECTS TO THE MORE COMPLETE
INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING THE COVER PAGE AND APPENDICES
HERETO, AND THE OFFERING OF THE BONDS TO POTENTIAL INVESTORS IS MADE ONLY BY
MEANS OF THE ENTIRE OFFICIAL STATEMENT.
The Bonds
The purpose of this Official Statement, which includes the cover page and the appendices hereto, is to set
forth certain information concerning the issuance and sale by the City of Bakersfield, California (the "City"), of
$4,340,000' in principal mount of its City of Bakersfield, Assessment District No. 04-1 (Countryside/The
Homestead/Cherry Hill/Olive Park III), Limited Obligation Improvement Bonds (the "Bonds"), for Assessment
District No. 04-1 (Countryside/The Homestead/Cherry Hill/Olive Park III) (the "Assessment District"). The Bonds
are issued pursuant to the Improvement Bond Act of 1915, being Division 10 of the California Streets and Highways
Code (the "1915 Act"), the Charter and Municipal Code of the City, and Resolution No. -04 adopted by the City
Council of the City (the "City Council") on _, 2004 (the "Bond Resolution").
The Assessment District
The Assessment District was formed and the assessments are being levied in accordance with the
Municipal Improvement Act of 1913, being Division 12 of the California Streets and Highways Code (the "1913
Act"), and Section 13.08.070 of the Municipal Code of the City. Proceedings for the formation of the Assessment
District were commenced by the City Council pursuant to property owner petitions filed by Centex Homes, a
Nevada corporation ("Centex Homes"), J & L Gardiner, LLC, a California limited liability company ("Gardiner
LLC"), Cherry Hill, Inc., a California corporation ("Cherry Hill, Inc."), and Olive Park Land Company, a California
corporation ("Olive Park Land Company"), as the owners at the date of the filing thereof of more than 60% of the
assessable land within the Assessment District. See "OWNERSHIP AND PLANNED FINANCING AND
DEVELOPMENT OF THE ASSESSMENT DISTRICT."
The Assessment District is comprised of four separate community areas in northwest Bakersfield that are
identified as (i) the "Countryside Area," (ii) "The Homestead Area," (iii) the "Cherry Hill Area," and (iv) the "Olive
Park III Area" (collectively, the "Community Areas"). The Assessment District boundaries am shown on the
assessment diagram, a copy of which is attached hereto as APPENDIX D. For a further description of the
Assessment District and the Community Areas, see "THE ASSESSMENT DISTRICT AND THE
IMPROVEMENTS - General."
Property Ownership
Centex Homes is developing the Countryside Area, Gardiner LLC, with the assistance of its development
consultant Adavco, Inc., a California corporation ("Adavco"), is developing The Homestead Area, and Olive Park
Land Company is developing the Olive Park III Area. As of the date of this Official Statement, Cherry Hill, Inc.,
has substantially completed development of the property in the Cherry Hill Area into 76 finished residential lots and
has sold such property to Bakersfield Avalon L.L.C., a California limited liability company ("Bakersfield Avalon"),
* Prelimina~; subject m change.
which is building homes thereon. Upon the issuance of the Bonds, the Community Areas will, together, bear 100%
of the total assessment lien. The property within the Assessment District is involved in various stages of the land
development process. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE
ASSESSMENT DISTRICT" for a description of the planned development of the respective Community Areas.
As of November 1, 2004, Centex Homes owned approximately 49.02% of the assessed property in the
Assessment District and had executed sales contracts and opened escrows for 36 homes on such property, which is
located in the Countryside Area, to be sold to individuals, none of which had closed by such date. As of
November 1, 2004, Gardiner LLC owned approximately 35.08% of the assessed property in the Assessment District
and intends to develop such property, with the assistance of its development consultant Adavco, into 328 finished
residential lots and then sell such property to merchant builders Lennar and Beazer (as such terms are defmed
herein), who are expected to construct homes thereon. Gardiner LLC anticipates that the sale of its Assessment
District property to Lennar and Beazer will take place on or about December 31, 2004, and January 5, 2005,
respectively. Cherry Hill, Inc., owned approximately 6.43% of the assessed property in the Assessment District at
the time the petitions to form the Assessment District were filed by the applicable property owners. As of
November 1, 2004, Cherry Hill had sold all of its property in the Cherry Hill Area to Bakersfield Avalon, which
plans to develop such property for sale to individual homeowners. As of November 1, 2004, Olive Park Land
Company owned approximately 9.47% of the assessed property in the Assessment District and plans to develop such
property into 77 finished residential lots and then sell suer lots to merchant builders, who are expected to build
homes thereon. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE
ASSESSMENT DISTRICT Ownership of Property in the Assessment District" herein.
Improvements
Proceeds fi.om the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to
finance (i) the acquisition of certain public infi.astmcture improvements for each of the four Community Areas,
which improvements will be owned by the City and operated and maintained by the City (collectively, the
"Improvements"), and (ii) the payment of certain incidental costs and expenses related to the acquisition of the
Improvements, the Assessment District proceedings, and the Bond issuance, including the establishment of a Special
Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2005. For a
further description of the Community Areas and the Improvements, see "THE ASSESSMENT DISTRICT AND
THE IMPROVEMENTS - Description of the Community Areas and the Improvements."
The Improvements are proposed to be financed by the City in accordance with the terms and conditions of
(i) the Acquisition and Disclosure Agreement, by and between the City and Centex Homes (approved by the City as
Agreement No. 04-222 on August 18, 2004, and referred to herein as the "Centex Acquisition Agreement"), (ii) the
Acquisition and Disclosure Agreement, by and between the City and Gardiner LLC (approved by the City as
Agreement No. 04-223 on August 18, 2004, and referred to herein as the "Gardiner LLC Acquisition Agreement"),
(iii) the Acquisition and Disclosure Agreement, by and between the City and Cherry Hill, Inc. (approved by the City
as Agreement No. 04-224 on August 18, 2004, and referred to herein as the "Cherry Hill, Inc., Acquisition
Agreement"), and (iv) the Acquisition and Disclosure Agreement, by and between the City and Olive Park Land
Company (approved by the City as Agreement No. 04-225 on August 18, 2004, and referred to herein as the "Olive
Park Land Company Acquisition Agreement" and, together with the Centex Acquisition Agreement, the Gardiner
LLC Acquisition Agreement, and the Cherry Hill, Inc., Acquisition Agreement, the "Acquisition Agreements").
Upon their completion, the Improvements are proposed to be acquired by the City using funds provided through the
Assessment District proceedings.
The land within each of the four respective Community Areas in the Assessment District specially
benefited by the Improvements has been assessed to pay the estimated cost of the Improvements and certain
financing costs related thereto. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Estimated
Improvement Costs." The City Council, pursuant to Resolution No. -04, adopted on ., 2004,
confirmed the amount of assessments remaining unpaid for the Assessment District in the aggregate amount of
$4,410,000. The Bonds are secured by the assessments as hereinafter described under the heading "THE BONDS -
Security for the Bonds." The total assessment lien is not less than the aggregate principal amount of the Bonds
being issued.
Appraisal
An appraisal dated as of October 13, 2004 (the "Appraisal"), of the property within the Assessment District
that is subject to the lien of the assessments has been prepared for the City by Kern Appraisal Company,
Bakersfield, California (the "Appraiser"). Based on the Appraisal, the ratio of the aggregate Bulk Value of the
Assessment District property to the aggregate assessment lien is 9.15:1. See "OWNERSHIP AND PLANNED
FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT Bulk Value to Assessment Lien
Ratio." The assumptions and limitations regarding the appraised valuations are set forth in the Appraisal, which is
attached hereto as APPENDIX B. Certain considerations relating to the Appraisal are discussed under the heading
"SPECIAL RISK FACTORS." The complete Appraisal is on file with the City. The City makes no representations
as to the accuracy or completeness of the Appraisal.
See APPENDIX E for a listing of the ratio of the appraised value of each assessed parcel to the amount of
the assessment lien against such parcel. The appraised values of the Assessment District property reflected in the
Appraisal have been determined assuming, among other things, the completion of the Bond-financed Improvements.
See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Description of the Community Areas and
the Improvements" and "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE
ASSESSMENT DISTRICT" for descriptions of the plans of Centex Homes, Gardiner LLC, Bakersfield Avalon, and
Olive Park Land Company for the development of the property within the Assessment District.
Security for the Bonds
The Bonds are issued upon and secured by the unpaid assessments and, together with interest thereon,
constitute security for the redemption and payment of the principal of the Bonds and the interest thereon. All the
Bonds are secured by the moneys in the Redemption Fund created pursuant to the Bond Resolution and by the
unpaid assessments levied to provide for payment of said acquisition of the Improvements, and, including principal
and interest, are payable exclusively out of the Redemption Fund. The unpaid assessments represent fixed liens on
the parcels of land assessed under the proceedings. They do not, however, constitute the personal indebtedness of
the owners of said parcels.
Under the provisions of the 1915 Act, assessment installments sufficient to meet annual debt service on the
Bonds are to be collected on the regular Kern County tax bills sent to owners of property within the Assessment
District against which there are unpaid assessments. These annual installments are to be paid into the Redemption
Fund, which will be held by the Finance Director and used to pay Bond principal and interest as they become due.
The installments billed against each parcel of property each year represent a pro rata share of the total principal and
interest coming due that year, based on the percentage which the unpaid assessment against that property bears to
the total of unpaid assessments within the Assessment District.
The Bonds are not secured by the general taxing power of the City, the County of Kern (the
"County"), the State of California (the "State"), or any other political subdivision of the State, and neither the
City, nor the County, nor the State, nor any other political subdivision of the State has pledged its full faith
and credit for the payment of the Bonds.
Special Reserve Fund
The City will establish a Special Reserve Fund (the "Special Reserve Fund") in the amount of $
from Bond proceeds, which amount will be transferred to the Redemption Fund in the event of delinquencies in the
payment of the assessment installments to the extent of such delinquencies. The Special Reserve Fund will be
maintained, from assessment installment payments and from proceeds of redemption or sale of parcels with
assessment delinquencies, in an amount equal to the least of (i) 10% of the proceeds of the Bonds, (ii) the maximum
armnal debt service on the Bonds, or (iii) 125% of the average annual debt service on the Bonds, less any amounts
transferred to the Redemption Fund when assessments are paid following the issuance of the Bonds, as determined
from time to time (the "Reserve Requirement"). See "THE BONDS - Special Reserve Fund."
The City has covenanted that it will, no later than October 1 in any year, file an action in the Superior Court
of the County to foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies
for the preceding fiscal year exceeds 5% of the assessment installments posted to the tax roll for that fiscal year and
(ii) the amount in the Special Reserve Fund is less than the Reserve Requirement. See "THE BONDS - Covenant to
Commence Superior Court Foreclosure" and "SPECIAL RISK FACTORS - Covenant to Commence Superior
Court Foreclosure."
Assessment Delinquencies
If a delinquency occurs in the payment of any assessment installment, the City has a duty to transfer into
the Redemption Fund the amount of the delinquency out of the Special Reserve Fund. This duty of the City is
continuous during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property.
There is no assurance that funds will be available for such purpose and if, during the period of delinquency, there are
insufficient moneys in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds.
As authorized by the 1915 Act, the City has elected not to obligate itself to advance available funds
from its treasury to cure any deficiency which may occur in the Redemption Fund by reason of the failure of
a property owner to pay an assessment installment when due. If there are additional delinquencies after
depletion of funds in the Special Reserve Fund, the City is not obligated to transfer into the Redemption Fund
the amount of such delinquencies out of any other available moneys of the City.
Book-Entry Only System
The Bonds will be initially issued and registered in the name of Cede & Co., as nominee of The Depository
Trust Company, New York, New York ("DTC"). Payment of principal of and interest on the Bonds to the
Beneficial Owners (as defined below) will be made in accordance with the procedures of DTC, described below.
See "BOOK-ENTRY ONLY SYSTEM."
Continuing Disclosure
The City, Centex Homes, and Gardiner LLC have each covenanted in its respective Continuing Disclosure
Certificate for the benefit of Bondholders to provide an annual or semi-annual report, as applicable, containing
certain financial information and operating data relating to the Assessment District and the property in the
Assessment District and to provide notices of the occurrence of certain enumerated events, if material. The form of
each such Continuing Disclosure Certificate is attached hereto as "APPENDIX F - CONTINUING DISCLOSURE
CERTIFICATES." These covenants have been made in order to assist the Underwriter in complying with Securities
and Exchange Commission Rule 15c2-12(b)(5), as it may be amended from time to time. See "CONTINUING
DISCLOSURE."
Each of Bakersfield Avalon and Olive Park Land Company, as an owner of property in the Assessment
District that, when aggregated with all other property in the Assessment District owned by such owner or its
affiliates, is subject to a lien of less than twenty percent (20%) of the annual assessment securing payment of the
Bonds, does not have an obligation to provide continuing disclosure information and has not entered into a
continuing disclosure certificate.
Forward-Looking Statements
This Official Statement contains statements relating to future results that are "forward-looking statements"
as de£med in the Private Securities Litigation Reform Act of 1995. When used in this Official Statement, the words
"estimate," "forecast," "intend," "expect," and similar expressions identify forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual results to differ materially fi.om those
contemplated in such forward-looking statements. Any forecast is subject to such uncertainties. Inevitably, some
assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may
occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may
be material. See also "SPECIAL RISK FACTORS" herein.
Miscellaneous
Set forth herein are brief descriptions of the Bonds, the Assessment District, the Community Areas, the
Improvements, the City, the Bond Resolution, Centex Homes, Gardiner LLC, Bakersfield Avalon, Olive Park Land
Company, and certain other matters. Such descriptions and the discussions and information contained herein do not
purport to be comprehensive or definitive. All references in this Official Statement to documents, the Bonds, and
the Assessment District proceedings are qualified in their entirety by references to such documents and the City's
resolutions setting forth the terms and descriptions thereof. Copies of the Bond Resolution and other documents
described in this Official Statement may be obtained from the City. The City's address for such purpose is: City of
Bakersfield, 1501 Tmxtun Avenue, Bakersfield, California 93301, Attention: Finance Director; telephone number
(661) 326-3030.
ESTIMATED SOURCES AND USES OF FUNDS
The proceeds of the sale of the Bonds will be deposited with the Finance Director in trust pursuant to the
terms of the Bond Resolution in the amounts set forth below. The moneys in the Improvement Fund established for
the Bonds will be used to acquire or otherwise finance the Improvements and to pay certain costs associated with the
issuance and delivery of the Bonds. A portion of the net proceeds of the Bonds will be deposited in the Special
Reserve Fund. Capitalized interest on the Bonds from their dated date to September 2, 2005, will be deposited into
the Redemption Fund.
The estimated sources and uses of funds for the Bonds are summarized as follows:
Sources of Funds
Principal Amount of Bonds $
Less: Underwriter's Discount
Total $
Uses of Funds
Improvement Fund $ ( 1 )
Special Reserve Fund
Redemption Fund {2)
Total $
(1) Includes costs of issuance ofapproximataly $
(2) Represents capitalized interest on the Bonds from their dated date to September 2, 2005.
THE BONDS
Purpose of the Bonds
Proceeds from the sale of the Bonds will be used to finance (i) the Improvements, which are comprised of
the acquisition of certain public improvements within the four Community Areas, and (ii) the payment of certain
incidental costs and expenses related to the acquisition of the Improvements, the Assessment District proceedings,
and the Bond issuance, including the establislunent of a Special Reserve Fund for the Bonds and the funding of
capitalized interest on the Bonds through September 2, 2005. See "THE ASSESSMENT DISTRICT AND THE
IMPROVEMENTS - Description of the Community Areas and the Improvements."
Authority for Issuance
The Assessmem Distxict proceedings are being conducted pursuant to the 1913 Act, Section 13.08.070 of
the Municipal Code of the City, and a Resolution of Intention No. 1336, adopted by the City Council of the City on
May 26, 2004. The Bonds, which represent the unpaid assessments levied against privately owned property in the
Assessment District, are being issued pursuant to the provisions of the 1915 Act and the Bond Resolution approving
the issuance of the Bonds under the 1915 Act and the terms thereof.
In the proceedings of the City with respect to the Assessment District, all costs either are estimated or are
ascertained prior to the construction or acquisition of the improvements, right-of-way, or property involved. Under
such proceedings, the assessments are then levied, cash collections are made, and bonds are sold m repmsant unpaid
assessmems. The money obtained from cash collections and bond proceeds is used by the City as payment for the
improvements to be acquired, for the property or rights-of-way (if any) to be acquired, and for incidental expenses
and expenses of the Bond issue. Centex Homes, Gardiner LLC, Bakersfield Avalon, and Olive Park Land Company
have each waived the cash collection period and no such cash collections were made.
Assessment district proceedings can be initiated by either a petition or by the City Council without a
petition. Petitions filed with the City Council and signed by Centex Homes, Gardiner LLC, Cherry Hill, Inc., and
Olive Park Land Company, respectively, the owners of more than 60% of the assessable land within the Assessment
District at the time of such filing, initiated the proceedings for the Assessment District. The property owner
petitions were accepted by Resolution No. 189-04, adopted by the City Council on May 26, 2004.
After the proceedings were initiated, Wilson & Associates, Fresno, California (the "Assessment
Engineer"), prepared a written report, which contains, among other things, the list of improvement costs and the
amount of the assessments to be levied against the parcels in the Assessment District. The assessments were levied
on the basis of the special benefit to be derived by such parcels from the Improvements. (See "THE AS SESSMENT
DISTRICT AND THE IMPROVEMENTS - Method of Assessment Spread.")
The Assessment Engineer's written report was filed with the City Clerk on July 30, 2004, and was
approved by the City Council in preliminary form on August 18, 2004. The Assessment Engineer's written report in
final form was filed with the City Clerk on October 8, 2004. The public hearing required by law was held on
October 20, 2004. The property owners in the Assessment District had the tight to protest the levy of the proposed
assessments in writing prior to or at the commencement of the heating and to be heard at the hearing. No such
protests were made. In accordance with Article XIIID of the State Constitution, the property owners were also
requested to submit ballots, weighted according m the proportional financial obligation of the affected property, in
favor of or opposition to the assessment. All ballots submitted by property owners were in favor of the assessment.
See "SPECIAL RISK FACTORS - Articles XIIIC and XIIID of the California Constitution."
Upon conclusion of the hearing, the City Council tabulated the ballots and adopted its resolution
confirming the assessments and ordering the acquisition of improvements. The assessments confirmed by the City
were based on the improvement costs listed in the Assessment Engineer's final written report (the "Engineer's
Report"). After conf'Lrmation, the assessments became liens against the assessed parcels by recordation of a notice
of assessment, which recording was made in the Office of the Superintendent of Streets on October 21, 2004, and in
the Office of the County Recorder on October 22, 2004. No cash payments were made by the property owners.
General
The Bonds will be issued in fully registered form, without coupons, in the denomination of $5,000 each or
in any integral multiple thereof. The Bonds will be dated the date of delivery, and will bear interest at the rotes per
annum, will mature on the dates (each a "Principal Payment Date"), and will mature in the amounts set forth on the
front cover pages of this Official Statement.
Imerest on the Bonds is payable on March 2, 2005, and thereafter semiannually on September 2 and
March 2 (each an "Interest Payment Date"). Principal, interest at maturity or upon earlier redemption, if applicable,
and premium, if any, with respect to the Bonds will be payable at the corporate trust office of U.S. Bank National
Association, as paying agem, registrar, and transfer agem (the "Paying Agent"), in St. Paul, Miunesota, upon
presentation and surrender of the Bonds. Interest (other than at maturity or upon earlier redemption) on the Bonds
will be payable by check of the Paying Agem mailed on each Interest Payment Date to the owners of record at the
addresses shown on the registration books maintained by the Paying Agem for such purposes (the "Registration
Books") as of the fifteenth day of the month immediately prior to an Interest Payment Date (or, in the case of an
owner of at least $1,000,000 in principal amount of the Bonds who so requests in writing prior to the close of
business on the fifteenth day of the month immediately preceding such Interest Payment Date, by wire transfer).
Transfer and Exchange of Bonds
Any Bond may be transferred or exchanged upon surrender of such Bond for cancellation, accompanied by
delivery of a written instrument of transfer or authorization for exchange, duly executed in a form approved by the
Paying Agent. ~t~e Paying Agent shall not be obligated to make any transfer or exchange of any Bond during the
period commencing with the fifteenth day of the month immediately preceding each Interest Payment Date and
ending on such Interest Payment Date. The City may require the Bond Owner requesting such transfer or exchange
to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange.
Bonds Mutilated, Destroyed, or Lost
If any Bond becomes mutilated, the City, at the expense of the Owner of such Bond, will execute, and the
Paying Agent will authenticate and deliver, a new Bond in exchange and substitution for the Bond so mutilated, but
only upon stm'ender by the owner of the Bond so mutilated. Every mutilated Bond so surrendered will be canceled.
If any Bond becomes lost or destroyed, evidence of such loss or destruction may be submitted to the City and, if
such evidence is approved by the City and indenmity satisfactory to the City is given, the City, at the expense of the
Owner, will execute, and the Paying Agent will authenticate and deliver, a new Bond in lieu of and in replacement
for the Bond so lost or destroyed. The owner must pay all costs of issuance of the new Bond.
Redemption
Optional Redemption and Prepayment of Bonds. Any Bond or portion thereof in the amount of $5,000 or
any integral thereof outstanding may be called for redemption prior to maturity on any Interest Payment Date upon
payment of the principal, plus accrued interest to the date of redemption, together with a redemption premium
(calculated as a pementage of the par value of Bonds being redeemed) as set forth in the following table*:
Redemption Dates (March 2 and September 2)
March 2, 2005 through September 2, 2014
March 2, 2015 and September 2, 2015
March 2, 2016 and September 2, 2016
March 2, 2017 and thereafter
Redemption Premium
3.0%
2.0%
1.0%
0.0%
No interest will accrue on a Bond beyond the Interest Paymem Date on which said Bond is called for
redemption. Notice of redemption must be given to the registered owner of the Bond by registered or certified mail
or by personal service at least thirty (30) days prior to the redemption date, as provided in the 1915 Act. In
accordance with the 1915 Act, the Finance Director will select Bonds for redemption in such a way that the ratio of
outstanding Bonds to issued Bonds will be approximately the same in each annual series insofar as possible. Within
each annual series, Bonds shall be selected for redemption by lot.
Further development of the parcels in the Assessment District, a transfer of property ownership, and other
similar circumstances could result in prepayment of all or part of the assessments. Such prepayment would result in
redemption of a portion of the Bonds prior to their stated maturities.
prelimina~; subject to change.
Mandatory Redemption of Term Bonds
The Bonds maturing on September 2, 20__ (the "Term Bonds"), are subject to mandatory advance
redemption in part prior to their stated maturity, as authorized under the Bond Resolution. The redemption shall
occur on September 2 in the following years and in the following principal amounts, together with interest accrued
on such amounts to the date fixed for redemption, and shall be without premium:
Year
2O
2O
2O
20
20__ (maturity)
Principal Amount
If the Bonds are redeemed in part, as described under the subheading "Optional Redemption and
Prepayment of Bonds" above, the principal of the Term Bonds to be redeemed on each of the payment dates set
forth above shall be modified by deducting the principal amount of the Bonds redeemed in $5,000 increments as
proportionally as practicable from the principal mounts set forth above.
Effect of Redemption; Defeasance
From and at~er the date fixed for redemption pursuant to the Bond Resolution, if funds available for the
payment of the principal of and interest (and redemption premium, if any) on the Bonds or portion of Bonds so
called for redemption have been duly provided, then Bonds or portion of Bonds so called for redemption will
become due and payable at the redemption price therein specified, and from and after such date (unless the City
shall default in the payment of the redemption price or interes0 such Bonds or portions of Bonds shall be defensed
and shall cease to be entitled to any benefit or security under the Bond Resolution (other than the right to receive
payment of the redemption price and interest) and shall cease to bear interest.
Receipt of notice of redemption by the owner of a Bond shall not be a condition precedent to redemption
and failure by the owner of a Bond to actually receive such notice of redemption shall not affect the validity of the
proceedings for the redemption of such Bond or the cessation of interest.
Refunding Bonds
Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5 of the California
Streets and Highways Code), the City may issue refunding bonds for the purpose of redeeming the Bonds. The City
may issue and sell refunding bonds without giving notice to and conducting a hearing for the owners of property in
the Assessment District, or giving notice to the owners of the Bonds, if the City Council finds that:
(A) Each estimated annual installment of principal and interest on the reassessment to secure
the refunding bonds is less than the corresponding annual installment of principal and interest on the
portion of the original assessment being superseded and supplanted by the same percentage for all
subdivisions of land within the Assessment District. Any amount added to the annual installments on the
reassessment due to a delinquency in payment on the original assessment need not be considered in this
calculation;
(B) The number of years to maturity of all refunding bonds is not more than the number of
years to the last maturity of the Bonds; and
(C) The principal amount of the reassessment on each subdivision of land within the
Assessment District is less than the unpaid principal amount of the portion of the original assessment being
superseded and supplanted by the same percentage for each subdivision of land within the Assessment
District. Any amount added to a reassessment because of a delinquency in payment on the original
assessment need not be considered in this calculation.
Upon issuing refunding bonds, the City Council could require that the Bonds be exchanged for refunding
bonds on any basis which the City Council determines is for the City's benefit, if the Bond owners consent to the
exchange. As an alternative to exchanging the refunding bonds for the Bonds, the City could sell the refunding
bonds and use the proceeds to pay the principal of and interest and redemption premium, if any, on the Bonds as
they become due, or advance the maturity of the Bonds and pay the principal of and interest and redemption
premium thereon.
Disposition of Surplus from the Improvement Fund
The amount of any surplus remaining in the Improvement Fund after completion of the acquisition of the
Improvements and payment of all claims shall be applied as a credit to the assessments or to call Bonds, all as
provided in the 1913 Act.
Investment of Bond Proceeds
Moneys held in the Improvement, Redemption, and Special Reserve Funds created pursuant to the Bond
Resolution shall be invested by the Finance Director in accordance with generally applicable City investment
policies, subject to State law and federal tax regulations governing the investment of tax-exempt bond proceeds.
Investment income on moneys in the Redemption Fund shall be retained therein. Proceeds of the investment of
amounts in the Improvement Fund and the Special Reserve Fund will be deposited into an Investment Earmngs
Fund, to be established and maintained by the Finance Director. Moneys in the Investment Earnings Fund will be
rebated, to the extent required by law, to the federal government. To the extent that moneys in the Investment
Earnings Fund are not required for rebate to the federal government, as determined by the Finance Director as of
June 30 of each year, such moneys shall be transferred to the Special Reserve Fund until the balance therein is equal
to the Reserve Requirement. The remaining balance, if any, in the Investment Earnings Fund will be transferred,
first, to the Improvement Fund until the Improvements are completed and such fund is closed and, thereafter, to the
Redemption Fund to be used, in the discretion of the Finance Director, as a credit upon the annual installments of
assessments or for the advance retirement of Bonds.
Security for the Bonds
The Bonds are issued upon and secured by the unpaid assessments against the property in the Assessment
District, together with interest thereon, and said unpaid assessments, together with interest thereon, constitute
security for the redemption and payment of the principal of the Bonds and the interest thereon. The Bonds are
further secured by the moneys in the Redemption Fund and the Special Reserve Fund created pursuant to the
Assessment District proceedings. Principal of and interest and redemption premiums, if any, on the Bonds are
payable exclusively out of the Redemption Fund.
The assessments and each installment thereof and any interest and penalties thereon constitute a lien against
the parcels of land on which the assessments are levied until the same are paid. Such lien is subordinate to all fixed
special assessment liens previously imposed upon the same property, but has priority over all existing and future
private liens and over all fixed special assessment liens that may thereafter be created against the property. Such
lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without
limitation, special taxes created pursuant to the "Mello-Roos Community Facilities Act of 1982" (being Chapter 2.5,
Part 1, Division 2, Title 5 of the Government Code of the State of California) (the "Mello-Roos Act"), whenever
created against the property.
Upon the issuance of the Bonds, none of the property in the Assessment District will be subject to any other
special assessment lien created under the 1913 Act. The property within The Homestead Area, the Cherry Hill Area,
and the Olive Park III Area, and the property within a portion of the Countryside Area, are subject to an existing
special tax lien created by Community Facilities District No. 92-1 of the RNR School Financing Authority ("RNR
CFD No. 92-1") pursuant to the Mello-Roos Act. Moreover, the portion of the Countryside Area currently located
outside ofRNR CFD No. 92-1 is expected to be annexed into RNR CFD No. 92-1 during the 2004-2005 tax year.
The amount of special taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon the
zoning, the entitlements, and the type and level of development of such property. See "THE BONDS - Priority of
Lien."
The Bonds are not secured by the general taxing power of the City, the County, the State, or any
other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other
political subdivision of the State has pledged its full faith and credit for the payment thereof.
Although the unpaid assessments constitute fixed liens on the parcels assessed, they do not constitute the
personal indebtedness of the owners of said parcels. Furthermore, there can be no assurance as to the ability or the
willingness of such owners to pay the unpaid assessments. In addition, there can be no assurance that the present
owners will continue to own all or any of said parcels.
The unpaid assessments will be collected in annual installments, together with interest on the declining
balance, on the County tax roll on which ganeml taxes on real property are collected, and are payable and become
delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and
interest after delinquency as do said general taxes. Notwithstanding the City's covenant to commence foreclosure
proceedings in connection with delinquent assessments, the property upon which the assessments were levied is
subject to the same provisions for sale and redemption as are properties for nonpayment of general taxes. The
annual assessment installments are to be paid into the Redemption Fund, which will be held by the Finance Director
and used to pay the principal of and interest on the Bonds as they become due. The installments billed against all of
the parcels of property in the Assessment District subject to the assessments will be equal to the total principal and
interest coming due on all of the Bonds that year, plus, with respect to each parcel in the Assessment District, an
additional amount to cover the administrative charges of the City.
Special Reserve Fund
Out of the proceeds of the sale of the Bonds, the City Council will set aside into a Special Reserve Fund the
amount orS . The Special Reserve Fund will be maintained, from assessment installment payments and
from proceeds of redemption or sale of parcels with assessment delinquencies, in an amount equal to the least of (i)
10% of the proceeds of the Bonds, (ii) the maximum annual debt service on the Bonds, or (iii) 125% of the average
annual debt service on the Bonds, less any amounts transferred to the Redemption Fund when assessments are paid
following the issuance of the Bonds, as determined from time to time (the "Reserve Requirement"). The Special
Reserve Fund will constitute a trust fund for the benefit of the owners of the Bonds. The Special Reserve Fund will
be maintained, used, transferred, reimbursed, and liquidated as follows:
(a) Whenever there are insufficient funds in the Redemption Fund to pay the next maturing installment of
principal of or interest on the Bonds, an amount necessary to make up such deficiency will be transferred from the
Special Reserve Fund, to the extent of available funds, to the Redemption Fund. The amounts so advanced will be
reimbursed from the proceeds of redemption or sale of the parcel for which payment of delinquent installments of
the assessments and interest thereon has been made from the Special Reserve Fund. In the event that the Special
Reserve Fund is completely depleted from such advances prior to reimbursement from resales of property or
delinquency redemptions, payments to the owners of the Bonds will be dependent upon reimbursement of the
Special Reserve Fund.
(b) If any assessment or any portion thereof is prepaid prior to the final maturity of the Bonds, the amount
of principal of the assessment to be prepaid will be reduced by an amount which is in the same ratio to the original
amount of the Special Reserve Fund as the original amount of the prepaid assessment bears to the total original
amount of unpaid assessments originally securing the Bonds. The reduction in the amount of principal prepaid shall
be compensated for by a transfer of like amount from the Special Reserve Fund to the Redemption Fund.
(c) Alt proceeds from the investment of moneys in the Special Reserve Fund will be deposited into an
Investment Earnings Fund, to be established and maintained by the Finance Director. Moneys in the Investment
Earnings Fund will be rebated, to the extent required by law, to the federal govermnant. To the extent that moneys
in the Investment Earnings Fund are not required for rebate to the federal government, as determined by the Finance
Director as of June 30 of each year, such moneys shall be transferred to the Special Reserve Fund until the balance
10
therein is equal to, as of the date of calculation, the Reserve Requirement. The remaining balance, if any, in the
Investment Earnings Fund will be transferred, first, to the Improvement Fund until the Improvements are completed
and such fund is closed and, thereafter, to the Redemption Fund to be used, in the discretion of the Finance Director,
as a credit upon the annual installments of assessments or for the advance retirement of Bonds. Amounts in the
Special Reserve Fund in excess of the Reserve Requirement shall be deposited into the Investment Earnings Fund.
See "THE BONDS - Investment of Bond Proceeds."
(d) When the balance in the Special Reserve Fund is sufficient to retire all Bonds then outstanding
(whether by advance retirement or otherwise), the amount of the Special Reserve Fund will be transferred to the
Redemption Fund, end the remaining installments of principal and interest not yet due from the assessed property
owners will be canceled without payment, and the Special Reserve Fund will be liquidated upon the retirement of
the Bonds.
(e) In the event that the balance in the Special Reserve Fund at the time of liquidation exceeds the amount
necessary to retire all Bonds then outstanding, the excess will be paid to the oWners of the assessed parcels in the
Assessment District provided, however, that, if the excess is less than $1,000, such excess may be transferred by the
Finance Director to the General Fund of the City.
The need to make advances fi.om the Special Reserve Fund may result in its total depletion prior to
reimbursement fi.om resales of property or delinquency redemptions. In that event, there could be a default in
payments to oWners of the Bonds, the curing of which would be dependent upon reimbursement of the Special
Reserve Fund.
Redemption Fund Deficiencies
If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency
and the City Council determines that there is a deficiency in the Redemption Fund to pay the principal of and
interest on the Bonds such that there will be an ultimate loss accruing to the owners of the Bonds, the City will pay
to the owners of the Bonds a proportionate share of the principal and interest due on the Bonds based on the
percentage that the amount on deposit in the Redemption Fund is of the total amount of the unpaid principal of the
Bonds and the interest thereon. Thereafter, as moneys representing payments of the assessments are periodically
deposited into the Redemption Fund, similar proportionate payments will be made to the owners of the Bonds, all in
accordance with the procedures set forth in the 1915 Act.
If there are not sufficient funds in the Special Reserve Fund to fully cover a Redemption Fund deficiency
and it is determined by the Finance Director that there will not be an ultimate loss to the owners of the Bonds, the
Finance Director is required to direct the Paying Agent to pay matured Bonds as presented and pay interest on the
Bonds when due as long as there am available funds in the Redemption Fund, in the following order of priority:
(1) all matured interest payments shall be made before the principal of any Bonds is paid; (2) interest on Bonds of
earlier maturity shall be paid before interest on Bonds of later maturity; (3) within a single maturity, interest on
lower-numbered Bonds shall be paid before interest on higber-nnmbered Bonds; and (4) the principal of Bonds shall
be paid in the order in which the Bonds are presented for payment. This procedure could result in some matured
Bonds not being redeemed and interest on the Bonds not being fully paid on the due dates. Such matured Bonds
would not be fully redeemed and such delayed interest would not be paid until funds are available from a foreclosure
sale of the property having the delinquent assessment installments.
Covenant to Commence Superior Court Foreclosure
The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not
paid when due, the City may order the institution of a court action to foreclose the lien of the unpaid assessment. In
such an action, the real property subject to the unpaid assessment may be sold at judicial foreclosure sale. This
foreclosure sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted with the
Bond owners that, in the event any assessment or installment thereof, including any interest thereon, is not paid
when due, the City will, no later than October 1 in any year, file an action in the Superior Court of the County to
foreclose the lien on each delinquent assessment if (i) the sum of uncured assessment delinquencies for the
preceding fiscal year exceeds 5% of the assessment installmems posted to the tax roll for that fiscal year, and (ii) the
amoum in the Special Reserve Fund is less than the Reserve Requirement. In the event such Superior Court
foreclosure or foreclosures are necessary, there may be a delay in payments to Bond ownem pending prosecution of
the foreclosure proceedings and receipt by the City of the proceeds of the foreclosure sale. It is also possible that no
bid for the purchase of the applicable property would be received at the foreclosure sale. See "SPECIAL RISK
FACTORS - Covenant to Commence Superior Court Foreclosure."
Priority of Lien
Each assessmem (and any reassessmant) and each installment thereof, and any imerest and penalties
thereon, constitutes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is
subordinate to all fixed special assessmem liens previously imposed upon the same property, but has priority over all
private liens and over alt fixed special assessmem liens that may thereafter be created against the property. Such a
lien is co-equal to and independent of the lien for general property taxes and special taxes, including, without
limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property.
None of the property in the Assessment District is subject to any other special assessmem lien created
under the 1913 Act. The property within The Homestead Area, the Cherry Hill Area, and the Olive Park III Area,
and the property within a portion of the Countryside Area, however, are subject to an existing special tax lien
created by RNR CFD No. 92-1 pursuant to the Mello-Roos Act. Moreover, the portion of the Countryside Area
currently located outside of RNR CFD No. 92-1 is expected to be annexed into RNR CFD No. 92-1 during the
2004-2005 tax year. The amount of special taxes, if any, to which property within RNR CFD No. 92-1 is subject
varies based upon the zoning, the entitlements, and the type and level of development of such property. For fiscal
year ending June 30, 2005, the property within the aforementioned Community Areas is subject to the following
RNR CFD No. 92-1 special taxes: No special taxes are collected fi.om property for which no final tract map has
been recorded. Upon recordation of a final tract map and if no building permit has been issued for a subdivision lot
prior to March 1, 2004, an annual special tax of $124.33 (which may be increased by 2% each fiscal year) per
subdivision lot acre of subject property is payable. Upon the issuance of a residential building permit for a lot or
parcel prior to March 1, 2~)04, a one-time special tax payment of $1.25 (which may be increased each fiscal year
based upon the percentage change in the designated construction cost index) per building square foot is payable, and
such pamel is subject to an annual special tax payment of $487.43 (which may be increased by 2% each fiscal year).
In the alternative, at the time of issuance of such residential building permit, the owner of such parcel may prepay a
specified amount, in which case the one-time special tax payment and the annual special tax described above will
not be levied on such parcel. The prepayment amount is currently $9,122.39 (which may be increased each fiscal
year based upon the pementage change in a designated conshmction cost index). All assessed properties in the
Assessment District have a single-family residential land use designation. Therefore, there are no assessed
properties within the Assessment District that are subject to the multifamily residential, commercial, or industrial
use RNR CFD No. 92-1 special tax rates. Accordingly, the RNR CFD No. 92-1 multifamily residential,
commercial, and industrial land use designation parcel special tax rates are not presented herein.
Each of Centex Homes, Gardiner LLC, Bakersfield Avalon, and Olive Park Land Company has indicated
that it does not intend to pay the specified prepayment amount of the special tax for any parcel within the
Assessment Disthct that lies within the RNR CFD No. 92-1. Thus, the annual special tax will be payable by all
property owners within the Assessment District that lies within the ILNR CFD No. 92-1 after the parcels therein are
developed. Each of Centex Homes, Gardiner LLC, Bakersfield Avalon, and Olive Park Land Company has reported
that the majority of the building permits required for the planned development in its respective Community Area
have not been obtained as of November 1, 2004.
Tax Covenants
Pursuam to the Bond Resolution, the City has covenanted that it will not make any use of the proceeds of
the Bonds which would cause the Bonds to become "arbitrage bonds" subject to Federal income taxation pursuant to
the provisions of Section 148(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or to become
"Federally-guaranteed obligations" pursuant to the provisions of Section 149(b) of the Code, or to become "private
activity bonds" pursuant to the provisions of Section 141(a) of the Code. To that end, the City will comply with all
12
applicable requirements of the Code and all regulations of the United States Department of Treasury issued
thereunder to the extent such requirements are, at the time, applicable and in effect.
Debt Service Schedule
Set forth below is the debt service schedule for the Bonds.
Annual Bond Debt Service
Period Ending Principal Total Bond
(Se~tcrnber 2) Maturing Interest Debt Service
O)
Totals
(1) Capitalized interest on the Bonds has been funded through September 2, 2005.
Source: UBS Financial Services Inc.
BOOK-ENTRY ONLY SYSTEM
The Bonds will be initially delivered in the form of one fully registered Bond for each of the maturities of
the Bonds, registered in the name of Cede & Co., as nominee of DTC, as registered owner of all the Bonds. The
following description of DTC and its book-entry system has been provided by DTC and has not been verified for
accuracy or completeness by the City, and the City shall have no liability in respect thereof. The City shall have no
responsibility or liability for any aspects of the records maintained by DTC relating to or payments made on account
of beneficial ownership, or for maintaining, supervising, or reviewing any records maintained by DTC relating to
beneficial ownership, of interests in the Bonds.
DTC 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
"cleating 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 securities
that its participants (the "Participants") deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-
entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that
clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
13
Participants"). The roles applicable to DTC and its Participants are on file with the Securities and Exchange
Commission.
Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will
receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the
Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership
interests in the Bonds except in the event that use of the book-antry system for the Bonds is diseonfinned.
To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name
of DTC's partnership nominee, Cede & Co. or such other name as requested by an authorized representative of
DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee
do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the
Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited,
which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of
notices of significant events with respect to the Bonds, such as redemptions and defaults. Beneficial Owners of
Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit
notices to Beneficial Owners or in the alternative, Beneficial Owners may wish to provide their names and addresses
to the registrar and request that copies of notices be provided directly to them.
REDEMPTION NOTICES SHALL BE SENT BY THE PAYING AGENT TO DTC. IF LESS
THAN ALL OF THE BONDS 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.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the
Bonds. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting fights to those Direct Participants to whose
accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments with respect the Bonds will be made to Cede & Co. or such other nominee
as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants'
accounts upon DTC's receipt of funds and corresponding detail information from the City or the Paying Agent, on
the 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 (or its nominee), the Paying Agent, or the City, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of principal and interest to Cede & Co. (or
such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or
the Paying Agem, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to Beneficial Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services with respect to the Bonds at any time by giving reasonable
notice to the City or the Paying Agent. Under such circumstances, in the event that a successor securities depository
14
is not obtained, Bond certificates are required to be printed and delivered in accordance with the terms of the Bond
Resolution.
THE INFORMATION 1N THIS SECTION CONCERNING DTC AND DTC'S BOOK-ENTRY SYSTEM
HAS BEEN OBTAINED FROM SOURCES THAT THE CITY BELIEVES TO BE RELIABLE, BUT IT TAKES
NO RESPONSIBILITY FOR THE ACCURACY THEREOF. THE CITY CANNOT AND DOES NOT GIVE
ANY ASSURANCES THAT DTC WILL DISTRIBUTE PAYMENTS TO DTC PARTICIPANTS OR THAT
PARTICIPANTS OR OTHERS WILL DISTRIBUTE PAYMENTS WITH RESPECT TO THE BONDS
RECEIVED BY DTC OR ITS NOMINEES AS THE REGISTERED OWNER, ANY REDEMPTION NOTICES,
OR OTHER NOTICES TO THE BENEFICIAL OWNERS, OR THAT THEY WILL DO SO ON A TIMELY
BASIS, OR THAT DTC WILL SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL
STATEMENT.
THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS
The information under this heading is taken primarily from the Engineer's Report for the Assessment
District prepared by Wilson & Associates, Fresno, California, which Engineer's Report is on file with the City, and
from information provided by Centex Homes, Gardiner LLC, Cherry Hill, Inc., Bakersfield Avalon, and Olive Park
Land Company.
General
The Assessment District was formed in accordance with the 1913 Act and Section 13.08.070 of the
Municipal Code of the City. Proceedings for the formation of the Assessment District were commenced by the City
Council pursuant to property owner petitions filed by Centex Homes, Gardiner LLC, Cherry Hill, Inc., and Olive
Park Land Company, who, at the time the petition was filed, were the owners of over 60% of the assessable land
within the Assessment District. The petitions were accepted by Resolution No. 189-04, adopted by the City Council
on May 26, 2004, and the petitions are on file with the City Clerk of the City.
The Assessment District is comprised of four separate Community Areas in northwest Bakersfield totaling
approximately 292 acres and generally described as (i) the Countryside Area, containing approximately 146.5 acres
and generally bounded by Olive Drive on the south, Allen Road on the west, Snow Road on the no~h, and Old Farm
Road on the east, also identified as Tract No. 6118 (except Phase 1 and lots 11 through 26 in Phase 2) and Tract No.
6195, (ii) The Homestead Area, containing approximately 100.0 acres and generally bounded by Reina Road on the
north, Old Farm Road on the east, and Noriega Road on the south, also identified as Tract No. 6234, (iii) the Cherry
Hill Area, containing approximately 17.0 acres and generally located south of Reina Road and approximately one-
quarter mile west of Jewetta Avenue, also identified as Tract No. 6153 Unit Two (except lots 77 and 78), and (iv)
the Olive Park III Area, containing approximately 28.5 acres and generally located at the northwest comer of the
intersection of Reina Road and Jewetta Avenue, also identified as Tract No. 6117 Unit Three. Final tract maps have
been recorded for Tract Nos. 6118-Phases 2 through 5, 6195-Phases 1 through 4, 6153 Unit Two, and 6117 Unit
Three. A vesting tentative tract map for Tract No. 6234 has been approved; however, a final tract map for Tract No.
6234 (i.e., The Homestead Area) is not expected to be recorded before the issuance of the Bonds.
The four irregularly shaped Community Areas are located within a rectangular section of northwest
Bakersfield that has a north-to-south dimension of approximately one and one-half miles as measured from the north
end of the Countryside Area to the south end of The Homestead Area and a west-to-east dimension of approximately
one mile as measured from the westerly boundary of the Countryside Area to the easterly boundary of the Olive
Park III Area. Each of the four Community Areas is involved in various stages of the land development entitlement
and/or site development process. See "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF
THE ASSESSMENT DISTRICT."
The Assessment Disthct boundaries are shown on the assessment diagram, consisting of seven sheets,
entitled "ASSESSMENT DIAGRAM OF CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK III), COUNTY OF KERN, STATE OF
CALIFORNIA," a copy of which is attached hereto as APPENDIX D.
15
Proceeds from the sale of the Bonds issued pursuant to the Assessment District proceedings will be used to
finance (i) the Improvements, which are generally described as the acquisition of certain public infrastructure
improvements for each of the four Community Areas, which Improvements will be owned by the City and operated
and maintained by the City, and (ii) the payment of certain incidental costs and expenses related to the acquisition of
the Improvements, the Assessment District proceedings, and the Bond issuance, including the establishment of a
Special Reserve Fund for the Bonds and the funding of capitalized interest on the Bonds through September 2, 2005.
The Improvements are proposed to be financed by the City in accordance with the terms and conditions of
the Acquisition Agreements, as applicable. The Acquisition Agreements set forth the procedure by which the
Improvements are to be constructed and installed by Centex Homes, Gardiner LLC, Cherry Hill, Inc., and Olive
Park Land Company, as applicable, and, upon their completion, acquired by the City using funds provided through
the Assessment District proceedings.
The scope of the Improvements includes the acquisition by the City of off-site and/or on-site (in-tract)
subdivision improvements and the payment of incidental costs that are already required or that are expected by
Centex Homes, Gardiner LLC, Cherry Hill, Inc., or Olive Park Land Company, as applicable, to be required to be
installed as conditions of final subdivision or site plan approvals, as applicable, within the four Community Areas.
Each of the four Community Areas is a separate assessment area within the Assessment District. The costs financed
by the Assessment District for the acquisition of the respective Improvements located within or adjacent to each of
the four Community Areas have been allocated only to the parcels that are located within the Community Area to be
served by those Improvements. Bond proceeds are not expected to be used for the acquisition of land, easements, or
rights-of-way.
Description of the Community Areas and the Improvements
The information under this subheading has been provided by the Engineer's Report, Centex Homes,
Gardiner LLC, Cherry Hill, Inc., Bakersfield Avalon, or Olive Park Land Company, as applicable, and has not been
verified for accuracy or completeness by the City or the Underwriter, and neither the City nor the Underwriter shah
have liability with respect thereto.
The current development plans for the respective Community Areas within the Assessment District
are subject to change. Furthermore, the current plans are subject, in large part, to the f'mancial resources
and construction and marketing capabilities and efforts of Centex Homes, Gardiner LLC, Bakersfield
Avalon, and Olive Park Land Company, as applicable, and the builders or other persons to whom the parcels
within the Assessment District are sold. There can be no assurance that such development will occur as
described herein, or that it will occur at ali.
Countryside/lrea
The Countryside Area encompasses an approximately 146.5-acre block of land (of which approximately
124.86 acres is assessable), also identified as Tract No. 6118 (except Phase I and lots 11 through 26 in Phase 2) and
Tract No. 6195, which land is planned for subdivision into a combined total of 457 R-I lots (as defined in the
section entitled "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT
DISTRICT Zoning"), six equestrian trail lots, three canal lots, and one storm drain sump lot. Centex Homes is the
subdivider of the portion of Tract No. 6118 included in the Countryside Area and of Tract No. 6195 and is
responsible for constructing the Improvements therein. The Improvements in the Countryside Area are generally
described as improvements in and along Snow Road, Old Farm Road, Olive Drive, and Allen Road that are required
to be constructed, or are expected by Centex Homes to be required to be constructed, as conditions of approval of
the applicable portion of Tract No. 6118 and of Tract No. 6195. The general location and extent of the planned
Improvements related to Snow Road include completion of the eastbound half of the street (south half of the street)
to its full design width, including excavation, paving, curb, gutter, sidewalk, handicap ramps, street lights with
conduits and pull boxes, and median deposit. The general location and extent of the planned Improvements related
to Old Farm Road include completion of the southbound half of the street (west half of the stree0 to its full design
width, including excavation, paving, curb, gutter, sidewalk, handicap romps, street signs, street lights with conduits
and pull boxes, and an 18-inch diameter storm drain pipeline with catch basins and manholes. The general location
16
and extem of the planned Improvements related to Olive Drive include completion of the westbound half of the
street (north half of the street) to its full design width, including excavation, paving, curb, gutter, sidewalk, handicap
ramps, street signs, street lights with conduits and pull boxes, median curb, andan 18-inch diameter storm drain
pipeline stub-out with a catch basin and an outlet structure at the storm drain sump located at the sound end of Tract
No. 6118. The general location and extent of the planned Improvements related to Allen Road include completion
of the northbound half of the street (east half of the street) to its full design width, including excavation, paving,
curb, gutter, sidewalk, handicap ramps, street signs, and street lights with conduits and pull boxes. Also included in
the scope of the Countryside Area Improvements are Centex Homes' incidental costs for design engineering,
improvement bonds, construction staking, soils and materials analysis and testing, plan check and inspection fees.
Final tract maps have been recorded for Tract No. 6118-Phases 2 through 5 and Tract No. 6195-Phases 1 through 4.
The Homestead ~lrea
The Homestead Area encompasses an approximately 100.0-acre block of land (of which approximately
89.37 acres is assessable), also identified as Tract No. 6234, which is planned for subdivision into 328 R-1 tots, one
storm drain sump lot, and one to-be-abandoned oil well drill site lot. Gardiner LLC is the subdivider of Tract No.
6234 and is responsible for constructing the Improvements therein. The Improvemems in The Homestead Area are
generally described as improvements in and along Reina Road, Old Farm Road, and Noriega Road, and in-tract/on-
site storm dnfm improvements that are required to be constructed, or are expected by Gardiner LLC to be required to
be constructed, as conditions of approval for Tract No. 6234. The general location and extent of the planned
Improvements related to Reina Road include completion of the eastbound half of the street (south half of the street)
to its full design width, including excavation, paving, curb, gutter, sidewalk, striping, street signs, street lights with
conduits, and a subdivision block wall. The general location and extent of the planned Improvements related to Old
Farm Road include completion of die southbound half of the street (west half of the street) to its full design width,
including excavation, paving, curb, gutter, sidewalk, median curb, striping, street signs, street lights with conduits,
and a subdivision block wall. The general location and extent of the planned Improvements related to Noriega Road
include completion of the westbound half of the street (north half of the street) to its full design width, including
excavation, paving, curb, gutter, sidewalk, striping, street signs, street lights with conduits, and a subdivision block
wall. The general location and extent of the planned in-tract/on-site storm drain Improvements in The Homestead
Area include construction of a storm drain system, including 36-, 30-, 24-, and 18-inch diameter pipelines with
manholes and catch basins, and a complete storm drain sump with all required excavation, an outlet structure, and a
block wall. Not included in the scope of the Improvements for The Homestead Area are Gardinar LLC's incidental
costs for design engineering, improvement bonds, construction staking, soils and materials analysis and testing, plan
check fees, and inspection fees. A vesting tentative tract map for Tract No. 6234 has been approved; however, a
final tract map for Tract No. 6234 is not expected to be recorded before the issuance of the Bonds.
James B. Gardiner and Lucille C. Gardiner, on behalf of die Gardiner Trust, the predecessor owner of
property in The Homestead Area, are currently parties to an appeal pending in California Court of Appeals with
respect to a favorable summary judgment relating to a dispute over property that includes the property within The
Homestead Area. Arguments regarding the appeal have been completed and a judgment is expected to be rendered
by the court by early November 2004. Although the Gardiners expect to prevail in the pending appeal, there can be
no assurance that the summary judgment will be upheld by the court. In the event the court reverses the summary
judgment, the original legal action would then be reinstated and would proceed to trial, and the adverse party in the
litigation would likely have the right to record a lis pendens against the disputed property. If the original legal
action proceeds and a lis pendens is recorded against such property, the development of The Homestead Area as
described in this Official Statement may be disrupted or delayed indefinitely. For a more detailed description of the
pending action, and the potential consequences of an adverse decision therein, see "LITIGATION - Litigation
Pertaining to The Homestead Area" herein.
Cherry Hill Area
The Cherry Hill Area encompasses an approximately 17.0-acre block of land (of which approximately
16.39 acres is assessable), also identified as Tract No. 6153 Unit Two (except lots 77 and 78, which are not in the
Assessment Distric0, which is planned for subdivision into a total of 76 R-I lots. Prior to the sale of the Cherry Hill
Area property by Cherry Hill, Inc., to Bakersfield Avalon, Cherry Hill, Inc., was the subdivider of the portion of
17
Tract No. 6153 Unit Two that comprises thc Cherry Hill Area and was responsible for constructing the
Improvements therein, which Improvements are substantially complete. The Improvements in the Cherry Hill Area
are generally described as in-tract/on-site street, sewer, and storm drain improvements that are required to be
constructed, or that were expected by Cherry Hill, Inc., to be required to be constructed, as conditions of approval
for the portion of Tract No. 6153 Unit Two that comprises the Cherry Hill Area. The general location and extent of
the planned in-tract/on-site street Improvements in the Cherry Hill Area include completion of all in-tract/on-site
streets, including excavation, paving, curb, gutter, sidewalk, driveway approaches, and cross gutters. The general
location and extent of the planned in-tract/on-site sewer Improvements in the Cherry Hill Area include construction
of an in-tract/on-site sewer system, including 10-, 8-, and 6-inch diameter sewer lines, 4-inch diameter sewer laterals
for all 76 R-I lots, manholes, and clean outs. The general location and extent of the planned in-tract/on-site storm
drain Improvements in the Cherry Hill Area include construction of an in-tract/on-site storm drain system, including
36-, 30-, 24-, and 18-inch diameter pipelines with manholes and catch basins. Not included in thc scope of the
Cherry Hill Area Improvements are the incidental costs of Cherry Hill, Inc., or Bakersfield Avalon for design
engineering, improvement bonds, construction staking, soils and material analysis and testing, plan check fees, and
inspection fees. A final tract map has been recorded for Tract No. 6153 Unit Two.
Olive Park II1 Area
The Olive Park III Area encompasses an approximately 28.5-acre block of land (of which approximately
24.11 acres is assessable), also identified as Tract No. 6117 Unit Three, which is planned for subdivision into 77 R- I
lots. Olive Park Land Company is the subdivider of Tract No. 6117 Unit Three and is responsible for constructing
the Improvements therein. The Improvements in the Olive Park III Area are generally described as improvements in
and along Jewetta Avenue and in-tract/on-site street improvements that are required to be constructed, or are
expected by Olive Park Land Company to be required to be constructed, as conditions of approval for Tract No.
6117 Unit Three. The general location and extent of the planned Improvements on the west side of Jewetta Avenue
include construction of curb, gutter, sidewalk, street signs, street lights with conduits, and a subdivision block wall.
The general location and extent of the planned in-traction-site street Improvements in the Olive Park III Area
include completion of all in-tract/on-site streets, including excavation, paving, curb, gutter, sidewalk, driveway
approaches, cross gutters, street signs, and street lights. Not included in the scope of the Olive Park III Area
Improvements are Olive Park Land Company's incidental costs for design engineering, improvement bonds,
construction staking, soils and materials analysis and testing, plan check fees, and inspection fees. A final tract map
has been recorded for Tract No. 6117 Unit Three.
[Remainder of Page Intentionally Left Blank]
18
Estimated Improvement Costs
Set forth below are the confirmed assessment amounts with regard to the estimated costs of the
Improvements and other costs relating to the Assessment District proceedings, as described in the Engineer's
Report. A copy of the Engineer's Report is on file with the City.
ENGINEER'S ESTlMATE OF TOTAL COST AND ASSESSMENT
City of Bakersfield Assessment District No. 04-1
(Countryside/The Homestead/Cherry Hill/Olive Park III)
ACTIVITY DESCRIPTION
1. COUNTRYSIDE AREA IMPROVEMENT COST
A. IMPROVEMENTS $1,485,694.00
B. INCIDENTALS 147.575.00
C. TOTAL COUNTRYSIDE AREA IMPROVEMENT COST $1,633,269.00
2. THE HOMESTEAD AREA IMPROVEMENT COST
A. IMPROVEMENTS $1,036,077.73
B. INCIDENTALS 0.00
C. TOTAL THE HOMESTEAD AREA IMPROVEMENT COST $1,036,077.73
CHERRY HILL AREA IMPROVEMENT COST
A. IMPROVEMENTS $313,731.19
B. INCIDENTALS 0.00
C. TOTAL CHERRY HILL AREA IMPROVEMENT COST $313,731.19
OLIVE PARK Ill AREA IMPROVEMENT COST
A. IMPROVEMENTS $438,868.50
B. INCIDENTALS 0.00
C. TOTAL OLIVE PARK Ill AREA IMPROVEMENT COST $438,868.50
ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND EXPENSE
A. COUNTRYSIDE AREA $120,780.55
B. THE HOMESTEAD AREA 76,618.14
C. CHERRY HILL AREA 23,200.48
D. OLIVE PARK 111 AREA 32,454,41
E. TOTAL ESTIMATED ASSESSMENT DISTRICT PROCEEDING COST AND $253,053.58
EXPENSE
SUBTOTAL COST TO ASSESSMENT
A. COUNTRYSIDE AREA $1,754,049.55
B. THE HOMESTEAD AREA 1,112,695.87
C. CHERRY HILL AREA 336,931.67
D. OLIVE PARK Ill AREA 471.322.91
E. SUBTOTAL COST TO ASSESSMENT $3,675,000.00
UNDERWRITER'S DISCOUNT, CAPITALIZED INTEREST, AND RESERVE FUND
A. COUNTRYSIDE AREA $350,809.92
B. THE HOMESTEAD AREA 222,539.17
C. CHERRY HILL AREA 67,386.33
D. OLIVE PARK Ill AREA 94,264.58
E. TOTAL UNDERWRITER'S DISCOUNT, CAPITALIZED INTEREST,
AND RESERVE FUND $735,000.00
TOTAL AMOUNT ASSESSED $4,410,000.00
ALLOCATION OF TOTAL AMOUNT ASSESSED TO EACH DEVELOPMENT AREA
1. COUNTRYSIDE AREA $2,104359.47
2. THE HOMESTEAD AREA 1~35,235.04
3. CHERRY HILL AREA 404~318.00
4. OLIVE PARK Ill AREA 565,~87.49
CONFIRMED
ASSESSMENT
Source: Engineer's Report prepared by Wilson & Associates.
19
Method of Assessment Spread
Spread of the Assessment District Costs to Benefited Parcels
Section 10204 of the 1913 Act requires that the assessments must be levied in proportion to the estimated
benefit that the subject properties receive from the works of improvement. The statute does not provide the specific
method or formula that should be used in any particular special assessment district proceeding. That responsibility
rests initially with the Assessment Engineer, who is retained by the City for the purpose of making an independent
analysis of the facts and recommendations about the apportionment of the assessment obligation. For the
proceedings with respect to the Assessment District, the City has retained Wilson & Associates, Fresno, California,
to serve as the Assessment Engineer.
The 1913 Act provides that the Assessment Engineer makes his recommendations as to the cost and
method of apportionment of the assessments in the Engineer's Report, which is then considered at the public hearing
on the Assessment Dish'ict. Final authority and action with respect to the levy of the assessments rests with the City
Council after hearing all testimony and evidence presented at the public hearing. Upon the conclusion of the public
hearing, the City Council must take final action in determining the proportionality of the benefits received by the
properties assessed.
The financed costs will be spread to the assessed parcels in the Assessment District in the manner set forth
in Municipal Code Section 13.08.070 - Benefit Spread, which was added to the City's Municipal Code on
April 5, 1995, by City Council adoption of Ordinance No. 3643. The parcel assessment shares for City assessment
districts are to be allocated or spread in accordance with the 1913 Act, which requires that the financed cost in a
special assessment proceeding be allocated among the benefited parcels of land in proportion to the estimated
benefit each parcel can be expected to receive from the work and improvement covered by the assessment.
Municipal Code Section 13.08.070 authorizes the "reallocation" to alternate properties of assessments initially
allocated to parcels in proportion to their estimated benefit (i.e., initial allocation made in accordance with the 1913
Act cost/benefit requirement), when such reallocation is so requested by the owner of all property to be assessed and
upon the written consent of the owner of the property to which assessments are reallocated and approval thereof by
the City Cotmcil.
The Assessment District individual parcel assessment amounts shown on APPENDIX E have been
calculated or spread among the assessed parcels pursuant to Municipal Code Section 13.08.070. The alternate
method used by the Assessment Engineer to realhicate the benefit based assessment shares initially allocated by the
Assessment Engineer to each assessed parcel has been provided by Centex Homes, Gardiner LLC, Cherry Hill, Inc.,
and Olive Park Land Company. The Assessment Engineer has determined that the spreading of the assessments in
accordance with the alternate method conforms to the requirements of Municipal Code Section 13.08.070. To the
extent that any assessments are reapportioned after the Bonds have been issued, the City will approve the same only
if the security for the Bonds is not reduced or impaired.
Reallocation Spread Method
In accordance with Municipal Code Section 13.08.070, Centex Homes, Gardiner LLC, Cherry Hill, Inc.,
and Olive Park Land Company have submitted a proposed alternate method and rate of assessment. Further, Centex
Homes, Gardiner LLC, Cherry Hill, Inc., and Olive Park Land Company have stated that, as of the date of the
approval of the alternate method and rate of assessment, they were the owners of all the property proposed to be
reallocated a share of the assessment and, as of such date, they consented to the reallocation. The Assessment
Engineer's estimates of the costs of the Improvements is presented above under the heading "THE ASSESSMENT
DISTRICT AND THE IMPROVEMENTS Estimated Improvement Costs."
The alternate method (the "Reallocation Spread Method") is described as follows:
The total improvement acquisition cost within each of the four Community Areas is spread among the
developed and undeveloped parcels within each Community Area in direct proportion to parcel net assessable
20
acreage and to each planned or existing R-1 lot within those developed and undeveloped parcels as an equal per R-1
lot cost share. There are no exceptions in the Countryside Area, the Cherry Hill Area, or the Olive Park III Area to
the equal cost share per acre and equal cost per existing or planned R-I lot Reallocation Spread Method. The
following parcels in The Homestead Area constitute exceptions to the Reallocation Spread Method and will not be
apportioned a share of the assessment levied in The Homestead Area: (i) the portion of The Homestead Area
curremly occupied by the Gardiner family home, and (ii) that portion of The Homestead Area currently identified as
a "to-be-abandoned oil well drill site."
OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT
Ownership of Property in the Assessment District
As of November 1, 2004, Centex Homes owned approximately 49.02% of the assessed property within the
Assessmem District and had executed sales contracts and opened escrows for 36 homes on such property, which is
located in the Countryside Area, to be sold to individuals, none of which had closed by such date. Centex Homes
plans to develop the property in the Countryside Area for sale to individual homeowners and does not intend to sell
any lots in the Countryside Area to merchant builders. See "- Development and Financing Plans - Centex Homes
Development Plan" below.
As of November 1, 2004, Gardiner LLC owned approximately 35.08% of the assessed property within the
Assessment District. With the assistance of its development consultant, Adavco, Gardiner LLC intends to develop
such property, which is located in The Homestead Area, into 328 finished residential lots, and then sell such
property to merchant builders Lennar and Beazer, which are expected to construct homes thereon. Gardiner LLC
anticipates that the sale of its Assessment District property to Lenuar and Beazer will take place on or about
December 31, 2004, and January 5, 2005, respectively. See" - Development end Financing Plans - Gardiner LLC
Development Plan" below.
Cherry Hill, Inc., owned all of the property in the Cherry Hill Area at the time the petitions to form the
Assessmem District were filed by the applicable property owners. In October 200~, Cherry Hill, Inc., sold all of its
property in the Cherry Hill Area, which, as of November 1, 2004, constitutes approximately 6.43% of the assessed
property in the Assessmem District, and which Cherry Hill, Inc., had substantially developed into 76 finished
residential lots, to Bakersfield Avalon. Bakersfield Avalon plans to develop the property in the Cherry Hill Area for
sale to individual homeowners and does not intend to sell any lots in the Cherry Hill Area to memhant builders. See
"- Development and Financing Plans - Bakersfield Avalon Development Plan" below.
As of November 1, 2004, Olive Park Land Company owns approximately 9.47% of the assessed property
in the Assessment District. Olive Park Land Company intends to develop such property, which is located in the
Olive Park III Area, into 77 finished residential lots, and then sell such property to merchant builders, who are
expected to build homes thereon. See "- Development and Financing Plans - Olive Park Land Company
Development Plan" below.
None of Centex Homes, Gardiner LLC, Bakersfield Avalon, Olive Park Land Company, or any other
owner of property within the Assessment District (each, a "Property Owner"), w'di be personally liable for
payments of the assessments to be applied to pay the principal of and interest on the Bonds. In addition,
there is no assurance that Celltex Homes, Gardiner LLC, Bakersfield Avalon, Olive Park Land Company, or
any other Property Owner wffi be able to pay the assessment installments or that Centex Homes, Gardiner
LLC, Bakersfield Avalon, Olive Park Land Company, or any other Property Owner will pay such
installments even if it is financially able to do so. Furthermore, except to the extent expressly set forth herein,
no representation is made that Centex Homes, Gardiner LLC, Bakersfield Avalon, Olive Park Land
Company, or any other Property Owner will have moneys available to complete or improve the development
of the land within the Assessment District (other than the Improvements) in the manner described herein.
Accordingly, no Property Owner's financial statements are included in this Official Statement.
21
Centex Homes
The information under this subheading has been provided by Centex Homes and has not been verified for
accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in
respect thereo)5
Centex Homes is a Nevada general partnership, the managing general partner of which is Centex Real
Estate Corporation, a Nevada corporation ("Centex Real Estate Corporation"). Centex Homes was formed to
purchase real estate and develop and construct improvements thereon. The parent corporation of Centex Homes and
Centex Real Estate Corporation is Centex Corporation, a Nevada corporation ("Centex Corporation"). Centex
Homes is the primary home building operation of Centex Corporation and it or its related entities have built and sold
homes in more than 480 neighborhoods in 25 states since its formation.
Centex Homes has had a presence in California's Central Valley for more than a decade. Most recently,
Centex Homes has constructed the following residential developments in the Bakersfield area:
Northwoods. A 37-1ot single-family development located in the Riverlakes area of the City. Sales for
homes in the Northwoods development began in April 2002. The homes in this development range in
size from 2,000 square feet to 3,600 square feet, with prices ranging from $180,000 to $275,000.
Montara. A 278-1ot single-family residential development located in the northwest area of the City.
Sales for the Montara development began in 1999 and were completed in 2004. Homes in this
development range in size fi'om 1,800 square feet to 2,800 square feet and were sold at prices ranging
from $190,000 to $265,000.
Belsera. A 257-1ot single-family residential development located in the northwest area of the City.
Sales for the Belsera development began in 1999 and were completed in 2004. Homes in this
development range in size from 1,050 square feet to 1,874 square feet and were sold at prices ranging
from $110,000 to $180,000.
Centex Corporation is a Fortune 500 company traded on the New York Stock Exchange and the London
Stock Exchange under the symbol "CTX." Centex Corporation employs more than 15,000 people located in more
than 1,000 offices and construction job sites in the United States and the United Kingdom. In its 2004 fiscal year
(ended March 31, 2004), Centex Corporation's net earnings were $828 million, with revenues of $10.4 billion.
Subsidiaries of Centex Corporation are involved in home building, manufactured home production, building
supplies, home services, fmancial and title insurance services, contracting and construction services, construction
products, and real estate investment.
The Securities and Exchange Commission ("SEC") maintains an Intemet website that contains reports,
proxy, and information statements, and other information regarding registrants that file electronically with the
Commission, including Centex Corporation. The address of such website is http://www.sec.gov. This internet
address is included for reference only, and the information on this internet site is not a part of this Official
Statement and is not incorporated by reference into this Official Statement.
Gardiner LLC
The information under this subheading has been provided by Gardiner LLC and has not been verified for
accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no liability in
respect thereof
Gardiner LLC is a California limited liability company, the members of which are James B. Gardiner and
Lucille C. Gardiner, husband and wife. Gardiner LLC was originally formed in August 2002 to develop the
approximately 100 acres of family-owned farmland located in the Assessment District.
22
In July 2003, Gardiner LLC entered into a consulting agreement with Adavco for the purpose of developing
the property in The Homestead Area. The principals of Adavco are Annette Davis and Arthur Davis. With more
than 25 years of experience in land development, Adavco specializes in the entire residential development cycle,
from acquiring and entitling raw land to developing such land for residential housing. Adavco plans to subcontract
all entitlement and development work in The Homestead Area on behalf of Gardiner LLC.
In addition to the development in The Homestead Area, Gardiner LLC's development consultant Adavco,
or its principals or related entities, have constructed, or are in the process of constructing, the following projects in
the County:
Polo Grounds. Adavco, or its principals or a related entity, developed approximately 320 acres of
farmland located in the City called the Polo Grounds. Adavco developed the property from
agricultural land to the tentative map stage and then sold the property to Centex and Probnilt
Development & Construction, Inc., a California corporation ("Probuilt") The final sale of the 320
acres was completed in January 2004.
Preiskear Ranch in Santa Maria. Adavco, or its principals or a related entity, developed
approximately 120 acres located in the City of Santa Maria, California. This project was developed in
two stages ever a nine-year period, and sold as finished lots to Probuilt. The Preiskear Ranch included
a school lot, a park lot, and a church lot. The sale of the Preiskear Ranch property was completed in
December 2003.
Hageman Northwest. Adavco, or its principals or a related entity, is the development consultant for a
379-1ot single-family residential development located in the County. The lots will be developed as
finished lots and contracts have been executed to sell the lots to' Richmond American Homes of
California, Inc., a Colorado corporation, and Beazer Homes Holdings Corp., a Delaware corporation,
which entities intend to build single-family residences on such lots and sell them to homeowners.
Saco Ranch. Adavco, or its principals or a related entity, is the development consultant with respect to
the development of 750 acres of farmland located in the County, which is intended to be developed as
a master-planned community. It is anticipated that the Saco Ranch development, which is still in the
planning stage, will include approximately 100 acres of commercial development, approximately 150
acres of industrial development, and approximately 550 acres of residential development, including
single-family and multifamily units. The property on which the Saco Ranch development is located
currently consists of unincorporated land within the County, which is expected to be annexed into the
City within the next 12 months for entitlement and development purposes.
Bakersfield Avalon
The information under this subheading has been provided by Bakersfield Avalon and has not been verified
for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have no
liabiliiy in respect thereof
Bakersfield Avalon was formed on February 26, 2002, as a California limited liability company for the
purpose o f developing single- family residences. See "The Bakersfield Avalun Development Plan" below.
The managing member of Bakersfield Avalon is Probuilt. Probuilt was incorporated in 1993 and its
principals have been engaged in the development of residential and real estate properties in the Bakersfield area
since 1991. Since being incorporated, Probuilt has constructed more than 2,500 single family homes. Since its
inception, Probuilt and its affiliates have constructed an average of 200 single family housing units per year within
the City and an average of 200 single family housing units per year within the City of Santa Mafia.
23
Mark Shuman, the President and Chief Executive Officer of Probuilt, has 15 years of experience in the
construction business, 9 of which have been spent with Probuilt. Mr. Shuman has overseen the consh'uction of over
1,000 single family homes in the Bakersfield and Santa Maria areas.
Chris Hayden is Vice President of Probuilt and has 10 years experience in mai estate sales and
construction. Mr. Hayden holds both a California broker's license and a California real estate sales license and
oversees sales and marketing for Probuilt.
In addition to the development being undertaken in the Cherry Hill Area, Bakersfield Avalon is currently
engaged in the following residential developments in the City:
The Cape. A 130-lot single-family development located in the Riverlakes area of the City. Sales for
homes in The Cape development began on July 1, 2002, and were completed in August 2003. The
homes in this development range in size fi.om 1,250 square feet to 2,000 square feet, with prices
ranging from $115,000 to $140,000.
Silver Oak Ranch. A 150-lot single-family residential development located in the northwest area of
the City. Sales for the Silver Oak Ranch development began on August 1, 2002, and were completed
in August 2004. Homes in this development range in size fi.om 2,000 square feet to 5,000 square feet,
with prices ranging fi.om $250,000 to $500,000.
Olive Park Land Company
The information under this subheading has been provided by Olive Park Land Company and has not been
verified for accuracy or completeness by the City or the Underwriter, and the City and the Underwriter shall have
no liability in respect thereof
Olive Park Land Company is a California corporation. James Bryan Batey and Ben E. Batey are the
president and vice president, respectively, of Olive Park Land Company, and each owns 50% of the outstanding
stock thereof. Olive Park Land Company was formed to purchase real estate and develop and construct
improvements thereon.
James Bryan Batey has more than 20 years of experience in the real estate industry. Mr. Batey has held
California real estate broker and/or salesman licenses for more than 10 years and is licensed by the State of
Califomia as a general building contractor. Mr. Batey is the president of Rosedale Builders, Inc., which is an active
builder of custom and semi custom homes in the Bakersfield market. Mr. Batey has also been the managing partner
for entities that have constructed residential subdivisions in and around the City.
Ben E. Batey, James Bryan Batey's father, has more than 30 years of experience in the real estate industry.
Mr. Ben Batey has held California real estate broker and/or salesman licenses for more than 30 years and is licensed
by the State of California as a general building contractor. Mr. Ban Batey is the president of Batey Development,
Inc., which is an active builder of custom and semi-custom homes in the Bakersfield market. Mr. Ben Batey has
also been developer and/or partner in several residential subdivisions in and around the City.
Representative subdivisions in which James Bryan Batey and Ben E. Batey have participated include the
following:
Olive Park - Phase 1. A ll0-1ot single-family development located at the comer of Olive Drive and
Jewetta Avenue in the City. Approximately 80% of the prepared residential lots have been sold to
merchant builders at prices ranging from $40,000 to $60,000.
Verdugo Lane and Hageman Road. An 80-lot single-family development located at the comer of
Verdugo Lane and Hageman Road in Bakersfield. All of the lots have been sold and improved with
homes ranging in size from 2,000 to 4,000 square feet. The lots were sold to merchant builders at
prices ranging from $35,000 to $50,000.
24
Verdugo Lane and Noriega Roa& A 36-1ot single-family residential development located at the
comer of Verdugo Lane and Noriega Road in the City of Bakersfield. All of the prepared residential
lots have been sold to merchant builders or improved with homes and sold to final customers. Lots
ranged in prices fi.om $40,000 to $60,000.
Hageman Road and Renfro Road. A 100-lot single-family residential development, part of a larger
development known as Westdale North, located at the comer of Hageman Road and Renfi.o Road in
the unincorporated area of Greater Bakersfield. Approximately 50% of the prepared lots were sold to
merchant builders and approximately 50% of the prepared lots were improved with single-family
homes by Batey affiliates. All of the lots have been sold and all of the homes are occupied by
homeowners. The development is comprised of custom and semi-custom homes ranging in size from
2,000 to 4,000 square feet.
Jenkins Road and Hageman Road. A 110-lot single-family residential developmem, part of a larger
development known as Westdale North, located at the comer of Jenkins Road and Hageman Road in
the unincorporated area of Greater Bakersfield. All of the lots have been sold and all of the homes are
occupied by homeowners. Batey affiliates built approximately 45% of the homes in this project;
approximately 55% of the homes were built by merchant builders. The project includes estate-size lots
ranging from 10,900 to 19,000 square feet, containing homes ranging in size from 2,200 to 4,000
square feet.
Development and Financing Plans
The current development plans and financing plans of Centex Homes, Gardiner LLC, Bakersfield
Avalon, and Olive Park Land Company for the development of the property within the Assessment District
are subject to change. Furthermore, the current development plans and financing plans envisioned for the
Assessment District are subject, in large part, to the financial resources and construction and marketing
capabilities and efforts of Centex Homes, Gardiner LLC, Bakersfield Avalon, Olive Park Land Company,
and any merchant builders and other persons to whom the parcels within the Assessment District may be
sold. There can be no assurance that such development will occur as described herein, or that it will occur at
ail. The information under this section has been provided by Centex Homes, Gardiner LLC, Bakersfield
Avalon, and Olive Park Land Company, as applicable, and has not been verified for accuracy or
completeness by the City or the Underwriter, and neither the City nor the Underwriter shall have any
liability with respect thereto.
Centex Homes Development Plan
Centex Homes is developing the Countryside Area, which encompasses approximately 146.5 acres. The
project being developed by Centex Homes in the Countryside Area extends beyond the boundaries of the
Countryside Area and will include 500 single-family homes on 500 R-1 lots, to be built in 16 phases. The portion of
the Centex Homes project within the boundaries of the Countryside Area will consist of 457 single-family homes on
457 R-1 lots, plus an equestrian trail covering 6 equestrian trail lots, 3 canal lots, and 1 storm drain sump lot. The
residemial component of the Countryside Area project consists of two distinct neighborhoods, Fox Run, which
consists of 219 R-1 lots (plus another 43 R-1 lots adjacent to, but outside the boundaries of the Countryside Area),
and Briarwood, which consists of 238 R-1 lots. Consh'uction of homes in the Fox Run neighborhood began in
March 2004, and construction of homes in the Briarwood neighborhood began in October 2004. Construction of
model homes in the Briarwood neighborhood has commenced, and such models are scheduled to open in May 2005.
Centex Homes began accepting deposits fi.om prospective buyers for homes in the Countryside Area in
April 2004. As of November 1, 2004, sales contracts were signed and escrows were opened for 9 homes in the
Briarwood Area and 47 homes in the Fox Run neighborhood (none of which have closed escrow). Centex Homes
estimates that the homes in the Countryside Area will close escrow at a rate of approximately 16 per month,
commencing in September 2004.
25
Homes in the Fox Run neighborhood will range in size fi.om 1,445 to 2,870 square feet and prices are
expected to range fi.om $170,490 to $284,990. Homes in the Briarwood neighborhood will range in size fi.om 2,484
to 3,013 square feet and prices are expected to range fi.om $287,990 to $375,990.
The Centex Homes Financing Plan
Centex Homes financed the purchase of the land in the Countryside Area with available cash, and plans to
finance the development of completed homes in the Countryside Area with available cash. No loans or lines of
credit are expected to be used for the financing of the development of the Countryside Area.
Centex Homes has estimated the total budget for construction of its development within the Countryside
Area to be $12,510,103. As of November 1, 2004, Centex Homes had expended approximately $3,809,500 on such
construction, leaving approximately $8,700,603 in remaining construction costs. Notwithstanding available sources
of financing, Centex Homes is under no obligation to apply such sources to the completion of its development
within the Countryside Area.
Gardiner LL C Development Plan
Gardiner LLC, with the assistance of its development consultant Adavco, is developing The Homestead
Area, which encompasses approximately 100 acres and is expected to consist of 328 single-family homes on 328 R-
1 lots, plus 1 storm drain sump lot, and will be developed in six phases, designated "Unit One," "Unit Two," "Unit
Three," "Unit Four," "Unit Five," and "Unit Six." The residential component of The Homestead Area project
consists of two distinct neighborhoods, one that is expected to be developed by Leunar Bakersfield, Inc., a Delaware
corporation CLennar"), which neighborhood consists of 117 R-1 lots in Units One and Four, and another that is
expected to be developed by Beazer Homes Holdings Corp., a Delaware corporation ("Beazer"), which
neighborhood consists of211 R-t lots in Units Two, Three, Five, and Six. Gardiner LLC has entered into contracts
with Leunar and Beazer pursuant to which Gardiner LLC is expected to sell the R-1 lots in The Homestead Area, as
finished residential lots, to such entities. Subsequent to such sale, which is expected to occur with respect to the
Lennar lots on or about December 31, 2004, and with respect to the Beazer lots on or about January 5, 2005, in both
cases after the issuance of the Bonds, Leunar and Beazer are expected to construct residential units on their
respective lots. As of November 1, 2004, the property within The Homestead Area has been graded, storm drains
and sewers have been installed, construction of curbs and gutters has commenced in Unit Six, a retaining wall has
been constructed, and construction has commenced on a wall around the sump lot. Gardiner LLC expects that
construction of homes in the Lennar and Beazer neighborhoods will commence in the ftrst quarter of 2005.
Gardiner LLC Financing Plan
All improvements to be undertaken by Gardiner LLC within The Homestead Area that are not financed
with proceeds fi.om the sale of the Bonds will be financed through a combination of cash assets and a Credit
Agreement (as described and defined in the following paragraph). Gardiner LLC has estimated the total budget for
construction of its development within The Homestead Area to be $6,770,452. As of November 1, 2004, Gardiner
LLC had expended approximately $1,312,575 on such construction, leaving approximately $5,457,877 in remaining
budgeted construction costs.
A portion of Gardiner LLC's development costs for The Homestead Area is being financed pursuant to a
credit agreement (the "Credit Agreement") between Gardiner LLC and Farm Credit West. Under the Credit
Agreement, Farm Credit West is providing a non-revolving acquisition and development loan in the aggregate
amount of $4,000,000, of which $1,248,000 is due and owing as of November 1, 2004. Borrowings made by
Gardiner LLC pursuant to the Credit Agreement bear interest at the prevailing federal funds rate. The Credit
Agreement contains customary covenants with respect to Gardiner LLC, including negative pledges, limitations on
consolidations, mergers, and sales of assets, limitations on incurring other debt, financial covenants relating to
tangible net worth, total indebtedness, and operating losses, the requirement for arm's length transactions with
affiliates, limitations on the payment of dividends, and limitations on investments. The total credit available under
the Credit Agreement may be reduced or increased upon the occurrence of certain events, as described in the Credit
Agreement; provided, however, that no assurances can be given as to whether such amounts will be reduced or
increased in the future. The obligation of Gardiner LLC under the Credit Agreement is not secured by a lien against
26
any property ia the Assessment Distxict owned by Gardiaer LLC. Notwithstanding available sources of financing,
Gardiaer LLC is under no obligation to apply such sources to the completion of its development within The
Homestead Area.
Bakersfield Avalon Development Plan
The Cherry Hill Area encompasses approximately 17 acres. Bakersfield Avalon acquired 76 finished R-1
lots in the Cherry Hill Area fi.om Cherry Hill, Inc., in October 2004 and plans to build 76 single-family homes
thereon. The Cherry Hill Area project will be developed ia one phase and is expected to be completed by September
2005. Sales of completed homes are expected to commence in November 2004, and have been projected by
Bakersfield Avalon to close at the rate of 8 to 10 homes per month. Homes in the Chemy Hill Area are expected to
range is size from 1,400 to 2,000 square feet and in price from $180,000 to $250,000.
Bakersfield Avalon Financing Plan
Bakemfield Avalon fmanced the purchase of the finished lots in the Cherry Hill Area with a loan from
Midstate Bank ia the amount of $2,142,000, which bears interest at 6.5% per annum and which is payable in June
2006. Bakersfield Avalon is current with respect to its scheduled payments, if any, under the Midstate Loan.
Bakersfield Avalon has estimated the cost to construct homes in the Cherry Hill Area to be $7,000,000.
Bakersfield Avalon has represented to the City that it expects to obtain financing for such home construction fi.om
Midstate Bank, in the form of loans, lines of credit, or a combination thereof, and that such financing will be
sufficient to pay the total estimated cost of its planned development ia the Cherry Hill Area. Notwithstanding
available sources of financing, Bakersfield Avalon is under no obligation to apply such sources to the completion of
its development within the Cherry Hill Area.
Olive Park Land Company Development Plan
The Olive Park III Area encompasses approximately 28.5 acres. Olive Park Land Company plans to
develop the Olive Park III Area as a single-family subdivision, which is expected to include 77 buildable R-1 lots.
Finished R-1 lots are expected to range in size from approximately 10,000 to approximately 18,000 square feet.
Olive Park Land Company plans to sell the completed lots to merchant builders. As of November 1, 2004, Olive
Park Land Company has not sold any lots to merchant builders, but has opened escrows to sell 30 lots to individuals,
which escrows are scheduled to close between November 1, 2004, and November 15, 2004.
The merchant builders are expected to build single-family residences on the property within the Olive Park
III Area. Construction of the homes commenced in November 2004, and the homes are expected to range in size
from approximately 2,200 to 3,200 square feet and to range ia price from approximately $350,000 to $500,000. As
of November 1, 2004, rough grading of the R-1 lots and the curbs and gutters have been completed. Olive Park
Land Company expects all of the Improvements in the Olive Park III Area that are to be financed with Bond
proceeds to be completed by the and of 2004.
Olive Park Land Company Financing Plan
All improvements being undertaken by Olive Park Land Company within the Olive Park III Area not
f'manced with proceeds from the sale of the Bonds will be financed through a combination of cash assets and credit
agreements. Olive Park Land Company has estimated the total budget for land acquisition and construction of its
improvements in the Olive Park III Area to be $3,080,000. As of November 1, 2004, Olive Park Land Company has
expanded approximately $750,000 on land acquisition and approximately $2,000,000 on construction, leaving
approximately $333,000 in remaining construction costs.
The officers and shareholders of Olive Park Land Company have agreed to extend credit to Olive Park
Land Company in the amount of $3,100,000 to complete its planned development ia the Olive Park III Area. In
addition, James Bryan Batey maintains a credit agreement with Wells Fargo Bank (the "JB Batey Credit
Agreement"), pursuant to which Wells Fargo Bank provides a revolving credit line of $l,000,000. Under the JB
27
Batey Credit Agreement, James Bryan Batey is required to pay interest to Wells Fargo Bank on outstanding
balances at a rate per annum that is adjusted based on Wells Fargo Bank's prime rate. As of November l, 2004, the
total outstanding borrowed balance under the JB Batey Credit Agreement was $0. James Bryan Batey also
maimains deposit accounts at Wells Fargo Bank, as well as at Citizens Business Bank and Merrill Lynch.
Ben E. Batey (through Batey Development, Inc.) also maintains a credit agreement with Wells Fargo Bank
(the "Batey Development Credit Agreement"), pursuant to which Wells Fargo Bank provides an unsecured
revolving credit line of up to $2,000,000. Under the Batey Development Credit Agreement, Ben E. Batey is
required to pay interest to Wells Fargo Bank on outstanding balances at a rate per annum that is adjusted based on
Wells Fargo Bank's prime rate. As of November l, 2004, the total outstanding borrowed amount under the Batey
Development Credit Agreement was $0. Ben E. Batey also maintains banking relationships with Salomon Smith
Barney and A.G. Edwards.
Notwithstanding available sources of financing, Olive Park Land Company is under no obligation to apply
such sources to the completion of its development within the Olive Park III Area.
Assessment Roll
Set forth in APPENDIX E is the assessment roll, including Bulk Value (as defined herein) to assessment
lien ratio information, for the parcels of property within the Assessment District that are subject to the lien of the
assessments. The assessment roll shows the amount of the total estimated cost of the proposed Improvement
acquisition, construction and incidental cost that is assessed upon each of the lots and parcels within the Assessment
District based upon the alternate method and rate of assessment permitted under Section 13.08.070 of the Municipal
Code of the City. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Method of Assessment
Spread" above. The assessment numbers that appear on the assessment roll correspond to the assessment numbers
shown on the assessment diagram, attached hereto as APPENDIX D.
Utilities
For each Community Area, all utilities, including gas, water, electricity, sewer, storm drains, telephone
service, and cable television service are or will be installed in the streets within the Community Area and will
connect to existing facilities in the surrounding streets. Natural gas service is provided by Southern California Gas
Company; water service is provided by California Water Service or Vanghn Water Company; sewer service is
provided by North of the River Sanitation District or the City; electricity service is provided by PG&E; telephone
service is provided by SBC; and cable television is provided by Bright House Networks.
Flood and Earthquake Zones
Pursuant to the Appraisal, according to the maps prepared by the Federal Emergency Management Agency,
the Community Areas are situated in a Zone C flood area. "Zone C" denotes an area that is not considered a flood
hazard zone. No flood insurance is required for property in a Zone C flood area, and no flood insurance has been
obtained for any property within the Assessment District.
Pursuant to the Appraisal, the Assessment District is not located within any Special Studies Zone, as
defined in the Alquist-Priolo Special Studies Zone Act.
Zoning
According to the Planning Department of the City, all of the parcels in the Assessment District are zoned
R-1. An R-1 zoning designation allows single-family residential land uses, with a minimum lot size of 6,000 square
feet for each dwelling unit (referred to herein as "R-1 lots").
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Tax Delinquencies
The City reports that, based upon the records of the office of the Kern County Tax Collector, there are no
delinquent taxes or penalties owed against the parcels in the Assessment District. Centex Homes, Gardner LLC,
Bakersfield Avalon, and Olive Park Land Company have each reported that it has never been late on making
assessment payments in other assessment districts, defaulted on any bond issue, or lost any property to foreclosure
as a result of not paying assessments.
Environmental Issues Affecting Assessment District Property
Pursuant to the Charter and Municipal Code of the City, the formation of an assessment district is exempt
fi.om compliance with the California Environmental Quality Act ("CEQA"). Accordingly, a Notice of Exemption
fi.om CEQA was filed by the City with the Kern County Clerk for the Assessment District proceedings on July 1,
2004. The City reports that separate environmental review proceedings will be conducted for the improvement
projects proposed to be financed by the District as part of the CEQA compliance associated with the land use
entitlement and subdivision approval process within each Community Area. Each of Centex Homes, Gardiner LLC,
Cherry Hill, Inc., Bakersfield Avalon, and Olive Park Land Company have reported that, to its knowledge, there are
no additional environmental issues affecting its respective property within the Assessment District that would
impede the development of such property as described in this Official Statement.
Bulk Value-to-Assessment Lien Ratio
An Appraisal of the property within each of the four Community Areas in thc Assessment District that is
subject to the lien of the assessments has been prepared for the City by the Appraiser. The Appraisal, subject to the
various limitations and assumptions set forth therein, provides an estimate of the as-is market value (designated in
the Appraisal as the "Bulk Value of Recorded Lots or Land" and defined herein as the "Bulk Value") of each parcel
of property within the Assessment District.
The "Aggregate Finished Lot Value When Complete" is described in the Appraisal as the value of each
parcel assuming the completion of the Improvements and taking into account the value added by existing
improvements, a recorded subdivision map, and the "Completion Costs," which are def'med herein as the costs
associated with the developer-funded improvements necessary to develop such parcel as a finished lot available for
improving with new housing un/ts. The Completion Costs were presumed by the Appraiser to include direct and
indirect costs for each lot, taxes during construction, costs associated with school bonds and other applicable direct
and overlapping debt, profits, commissions, administrative and miscellaneous expenses, and the time value of
money. See "APPENDIX B - Appraisal. For a discussion of liens encumbering the Assessment District property
other than the assessments, see "Direct and Overlapping Debt" below and "THE BONDS - Priority of Lien" herein.
Based on the Appraisal, the ratio of the aggregate Bulk Value of the Assessment District property to the
aggregate assessment lien is 9.15:1. The following table sets forth the Bulk Value of the Assessment District
property and the applicable Bulk Value-to-assessment lien ratios.
[Remainder of Page Intentionally Left Blank]
29
APPRAISED VALUES AND BULK VALUE-TO-ASSESSMENT LIEN RATIOS
CITY OF BAKERSFIELD ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK lid
Assessment No.
Bulk Value-to-
Assessment Assessment Lien
Net Acres m Bulk Value Lien Ratio
COUNTRYSIDE AREA
I-I 6 (Tract No. 6118-Phase 2, Lots 1-10 and 2%32)
1748 (Tract No. 6118-Phase 3)
40-80 (Tract No. 6118-Phase 4)
81-114 (Tract No. 6118-Phase 5)
3.91 $ 849,000 $ 66,761.57 12.72:1
7.89 1,714,000 133,523.19 12.84:1
7.89 1,709,000 133,523.19 12.80:1
8.31 1,763,000 141,868.38 12.43:1
I 15 (Tract No. 6118-Phase 5, Lot 35 - Portion of Future Tract No. 6118-Phase 6) 3.15
t22 (LLA No. 122-99, Parcel E- Future Tract No. 6118-Phases 6, 7, and 8) 24.57
Subtotals Tract No. 6118- Fox Run Neighborhood 55.72
374.566 62,589.01 5.98: I
2,969,396 375,533.95 7.91 :l
9,378,962 913,799.29 10.26:1
123 - 149 (Tract NO. 6195-Phase I ) 8.40
156-187 (Tract No. 6195-Phase 2) 8.76
188-218 (Tract No. 6195-Phase 3) 8.91
219-249 (Tract No. 6195-Phase 4) 8.82
250 (Tract No. 6195-Phase 4, Lot 32 - Future Tract No. 6195-Phases 5, 6, 7, and
8) 34.25
Subtotals Tract No. 6195- Briarwood Neighborhood 69.14
TOTALS/AVERAGE FOR COUNTRYSIDE AREA 124.86
1,377,000 135,120.28 10.19:1
1,690,000 160,142.55 10.55:1
1,635,000 155,138.09 10.54:1
1,620,000 155,138.09 10.44:1
4,386,336 585,521. l 7 7.49: I
10,708,336 1,191,060.18 8.99:1
20,087,298 2,104,859.47 934:1
THE HOMESTEAD AREA
251 (Lots 5, 6, 7, 1 I, and 12 of Sales Map of Lands of Kern County Land Company
(Future Tract No. 6234-Phases I through 6, excluding I R-I lot and one oil well
drill site)
89.37 11,139,078 1,335,235.04 8.34:1
CHERRY HILL AREA
252-327 (Tract No. 6153 Unit Two)
16.39 3,522,000 404,318.00 8.7l:1
OLIVE PARK Ill AREA
328-404 (Tract No. 6117 Unit Three)
24.11 5.617,000 565,587.49 9.93: I
ASSESSMENT DISTRICT TOTALS
254.73 $40,365,376 $4,410,000.00 9.15:1
(I) Net Acres does not include offsitc streets, equestrian trail lots, storm dnfin sump lots, an oil well drill site, and canal lots.
Source: Appraisal.
The assumptions and limitations regarding the appraised valuations are set fox~th in the Appraisal, a copy of
which is attached hereto as APPENDIX B. See APPENDIX E for additional information regarding the appraised
value of each assessed parcel and the ratio of such value to the amount of the assessment lien against such parcel.
The City makes no representations as to the accuracy or completeness of the Appr~fisal. Certain considerations
relating to the Appraisal are discussed under the heading "SPECIAL RISK FACTORS."
NO REPRESENTATIONS ARE MADE REGARDING TI-IE APPRAISED VALUATIONS QUOTED IN
APPENDIX B OR E, AND PROSPECTIVE PURCHASERS ARE CAUTIONED NOT TO RELY ON THE
VALUATIONS IN DETERMINTNG WHETHER OR NOT THE BONDS DESCRIBED HEREIN ARE A
SUITABLE INVESTMENT. PROSPECTIVE PURCHASERS OF THE BONDS SHOULD NOT ASSUME THAT
THE PROPERTY WITHIN THE ASSESSMENT DISTRICT COULD BE SOLD FOR THE VALUATION
AMOUNT AT A FORECLOSURE SALE FOR DELINQUENT ASSESSMENTS.
Direct and Overlapping Debt
The following table (the "Direct and Overlapping Debt Table") details the direct and overlapping debt
currently encumbering property within the Assessment District. The Direct and Overlapping Debt Table has been
derived from data assembled and reported to the City by California Municipal Statistics, Inc., as of
30
November 1, 2004. Neither the City nor the Underwriter has independently verified the information in the Direct
and Overlapping Debt Table and neither the City nor the Underwriter guarantees its completeness or accuracy. The
Direct and Overlapping Debt Table does not include the special tax liens described trader the heading "THE
BONDS - Priority of Lien" herein.
Direct and Overlapping Debt
City of Bakersfield Assessment District No. 04-1
(Countryside/The Homestead/Cherry Hill/Olive Park III)
[ORDERED FROM CALIFORNIA MUNICIPAL STATISTICSI
2004-05 Local Secured Assessed Valuation: $
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable Debt 11/1/04
Kern Community College District School Facilities lmprov~a~nent District No. 1
Kern County Union High School District
Rosedale Union School District
City of Bakersfield
Kern County Water Agency, I.D, No. 4
Kern Delta Water Dist'rict
Kern Community College District Assessment District
City of Bakersfield Assessment District No. 04-1 100. - (1)
TOTAL GROSS DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
Less: City of Bakersfield water bonds
TOTAL NET DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
OVERLAPPING GENERAL FUND OBLIGATION DEBT:
Kern County General Fund Obligations
Kern County Pension Obligations
Kern County Board of Education Ceaificates of Participation
Kern Community College District Certificates of Participation
Kern County Union High School District General Fund Obligations
City of Bakersfield Ceaificates of Participation
TOTAL OVERLAPPING GENERAL FUND OBLIGATION DEBT
GROSS COMBINED TOTAL DEBT (2)
NET COMB1NED TOTAL DEBT
(1) Excludes 1915 Act bonds to be sold.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease
obligations.
Ratios to 20044}5 Assessed Valuation:
Direct Debt ..................................................................................................................... -
Total Gross Direct and Overlapping Tax and Assessment Debt ........................................
Total Net Direct and Overlapping Tax and Assessment Debt ........................................... %
Gross Combined Total Debt ..............................................................................................
Net Cominned Total Debt .................................................................................................
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/03:$0
Source: California Municipal Statistics, Inc.
SPECIAL RISK FACTORS
General
Under the provisions of the 1915 Act, assessment installments, from which funds for the payment of annual
installments of principal and interest with respect to the Bonds are derived, will be billed to properties against which
there are unpaid assessments on the regular property tax bills sent to owners of such properties. Such assessment
installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property
tax installments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as
evidenced by property tax delinquencies will likely indicate an unwillingness or inability to make regular property
tax payments and assessment installment payments in the future.
In order to pay debt service on the Bonds, it is necessary that unpaid installments of assessments on land
within the Assessment District are paid in a timely manner. Should the installments not be paid on time, the City
has established a Special Reserve Fund in the initial amount of $ _, which will thereafter be maintained,
from assessment installment payments and fi'om proceeds of redemption or sale of parcels with assessment
31
delinquencies, in the amount of the Reserve Requirement, to cover delinquencies in the payment of assessments.
The assessments are secured by a lien on the parcels of land and the City can institute foreclosure proceedings to sell
land in the Assessment District with delinquent installmems for the amoum of such delinquem installments in order
to obtain funds to pay debt service on the Bonds.
Failure by owners of the parcels to pay installments of assessments when due, depletion of the Special
Reserve Fund, or the inability of the City to sell parcels which have been subject to foreclosure proceedings for
amounts sufficient to cover the delinquent installments of assessments levied against such parcels may result in the
inability of the City to make full or punctual payments of debt service on the Bonds, and Bond owners would
therefore be adversely affected.
The Bonds are not secured by the general taxing power of the City, the County, the State, or any
other political subdivision of the State, and neither the City, nor the County, nor the State, nor any other
political subdivision of the State has pledged its full faith and credit for the payment thereof.
Unpaid assessments do not constitute a personal indebtedness of the owners of the lots and parcels within
the Assessment District. There is no assurance the owners will be able to pay the assessment installments or that
they will pay such installments even though financially able to do so.
Risks of Real Estate Secured Investments Generally
Owners of the Bonds will be subject to the risks generally incidem to an investmem secured by real estate,
including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of
real property in and in the vicinity of the Assessment District, the supply of or demand for competitive properties in
such area, and the market value of residential property or buildings and/or sites in the event of sale or foreclosure;
(ii) changes in real estate tax rate and other operating expenses, governmental rules (including, without limitation,
zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; and (iii) natural
disasters (including, without limitation, earthquakes and floods), which may result in uninsured losses.
Availability of Funds to Pay Delinquent Assessment Installments
The City will establish a Special Reserve Fund out of Bond proceeds in the amount of $ , which
will thereafter be maintained, from assessment installment payments and from proceeds of redemption or sale of
parcels with assessment delinquencies, in the amount of the Reserve Requirement. As discussed herein under the
heading "THE BONDS - Special Reserve Fund," if a delinquency occurs in the payment of any assessment
installment, the City has a duty to transfer to the Redemption Fund the amount of the delinquency out of the Special
Reserve Fund. This duty of the City is continuing during the period of delinquency, until reinstatement, redemption,
or sale of the delinquent property. There is no assurance that the balance in the Special Reserve Fund will always be
adequate to pay all delinquent installments and if, during the period of delinquency, there are insufficient funds in
the Special Reserve Fund to pay all delinquent installments, a delay may occur in payments to the owners of the
Bonds.
Hazardous Substances
Although governmental taxes, assessments, and charges ere a common claim against the value of an
assessed parcel, other less common claims may be relevant. One of the most serious in terms of the potential
reduction in the value that may be realized to pay the unpaid assessments is a claim with regard to hazardous
substances. In general, the owners and operators of parcels within the Assessment District may be required by law
to remedy conditions of the parcels related to the releases or threatened releases of hazardous substances. The
federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, sometimes referred to
as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but California
laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner (or
operator) is obligated to remedy a hazardous substances condition of a property whether or not the owner (or
operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any
parcel within the Assessment District be affected by a hazardous substance, would be to reduce the marketability
32
and value of the parcel by the costs of remedying the condition, because the owner (or operator) is obligated to
remedy the condition. Further, such liabilities may arise not simply fi.om the existence of a hazardous substance but
from the method of handling or disposing of it. All of these possibilities could significantly affect the financial and
legal ability of a property owner to develop the affected parcel or other parcels, as well as the value of the property
that is realizable upon a delinquency and foreclosure.
The eppmised values set forth in the Appraisal do not, unless expressly noted, take into account the
possible reduction in marketability and value of any of the parcels by reason of the possible liability of the owner (or
operator) for the remedy of a hazardous substance condition of the parcel. Centex Homes, Gardiner LLC, Cherry
Hill, Inc., Olive Park Land Company, and Bakersfield Avalon, and have each represented to the City that it is not
aware of any current liability for hazardous substances with respect to any of its parcels within the Assessment
District.
Further, it is possible that liabilities may arise in the future with respect to any of the parcels within the
Assessment District resulting fi.om the existence, currently, on the parcel of a substance presently classified as
hazardous but which has not been released or the release of which is not presently threatened, or may arise in the
future resulting from the existence, currently, on the parcel of a substance not presently classified as hazardous but
which may in the future be so classified. Such liabilities may arise not simply fi.om the existence of a hazardous
substance but fi.om the method of handling or disposing of it. All of these possibilities could significantly affect the
value of an assessed parcel that is realizable upon a delinquency of an unpaid assessment. See "OWNERSHIP AND
PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT - Environmental Review."
Endangered and Threatened Species
No threatened or endangered species (or their respective habitats) have been identified in any of the
Community Areas. If, however, any threatened or endangered species (or their respective habitats) were to be
discovered on a parcel within the Assessment District prior m or during development, the ability of the then-current
landowner to develop the affected parcel could be severely limited. In such an event, the then-current landowner's
willingness or ability to pay assessment installments could be adversely affected.
The property within the Assessment District is subject to the Metropolitan Bakersfield Habitat
Conservation Plan ("MBHCP"), a joint program of the City and the County that was undertaken to assist urban
development applicants in complying with State and federal endangered species laws. Under the MBHCP, each
development applicant pays to the County a mitigation fee for grading or building permits that funds the purchase
and maintenance of habitat land to compensate for the effects of urban development on endangered species habitat.
The lands acquired for the MBHCP program are generally located outside the metropolitan Bakersfield area. In
exchange for the MBHCP mitigation fee, the applicant is relieved of the obligation of demonstrating compliance
with the endangered species laws by preparing biological reports, securing compensation lands, and undertaking
other measures to avoid impacts to the species.
Factors Which May Affect Land Development
There is no assurance that the amount to be financed by the assessments will be sufficient to pay for the
entire cost of the Improvements. Centex Homes, Gardiner LLC, Cherry Hill, Inc., Bakersfield Avalon, and Olive
Park Land Company will each be obligated to pay all of its costs in excess of the amount financed by the
assessments. See "THE ASSESSMENT DISTRICT AND THE IMPROVEMENTS - Description of the
Community Areas and the Improvements."
Future development in the Assessment District may be affected by changes in the general economic
conditions, fluctuations in the real estate market, and other factors. In addition, development may be subject to
future federal, state, and local regulations. Approval may be required fi.om various agencies fi.om time to time in
connection with the layout and design of any proposed development in the Assessment District, the nature and
extent of public improvements, land use, zoning, and other matters. Although no such delays are anticipated, failure
to meet any such future regulations or obtain any such approvals in a timely manner could delay or adversely affect
any proposed development in the Assessment District. The development of property within the Assessment District
33
could be adversely affected if lawsuits or other actions were commenced to restrict or prevent further development
within the Assessment District.
Private Improvements; Increased Debt
The development of the property within the Assessment District depends upon both public and private
improvement of land within the Assessment District. The cost of additional private improvements within the
Assessment District, together with public improvements financed with any additional property secured financing,
will increase the public and private debt for which the land within the Assessment District is the security. Any
additional public improvements for which the property owners or their properties might be obligated could reduce
the ability or willingness of the property owners within the Assessment District to pay the annual assessment
installments levied against their property. See "SPECIAL RISK - Priority of Lien."
In addition to thc assessments being levied to finance the construction and acquisition of the Improvements,
the City intends to include as a part of such levy an annual assessment upon each parcel of land in the Assessment
District to cover all administrative costs of the City with respect to the Assessment District. These additional
administrative assessment amounts could reduce the ability or willingness of the property owners within the
Assessment District to pay the annual assessment installments levied against their property.
Subordinate Debt; Payments by FDIC and other Federal Agencies
Each of Cemex Homes, Gardiner LLC, Olive Park Land Company, and Bakersfield Avalon has reported
that none of its property within the Assessment District currently serves as security for any of its obligations to third
party lenders. Ail or portions of the Assessment District property may in the future secure additional loans of the
owners thereof. Any such loans axe subordinate to the lien of the assessments. However, in the event that any of the
financial institutions making any loan that is secured by real property within the Assessment District is taken over
by the Federal Deposit Insurance Corporation ("FDIC") or if a lien is imposed on the property by the Drug
Enforcement Agency, the Internal Revenue Service, or other similar federal governmental agency, and, prior thereto
or thereafter, the loan or loans go into default, the ability of the City to collect interest and penalties specified by
state law and to foreclose the lien of a delinquent unpaid assessment may be limited.
Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding
the Payment of State and Local Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was
revised and superseded by new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy
Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if
those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes
assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property
tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as
is consistent with sound business practice and the orderly administration of the institution's affairs, unless
abandoranent of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on
delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is
secured by a valid lien. The FDIC will not pay any mounts in the nature of fines or penalties and will not pay nor
recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by
a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy
Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or
sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC
to be eliminated by foreclosure without the FDIC's consent.
The Policy Statement is unclear as to whether the FDIC considers assessments such as those levied by the
City to be "real property taxes" which they intend to pay. However, the Policy Statement states that the FDIC
generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest
unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it
recognize the validity of any lien to the extent it purports to secure the payment of any such amounts.
The City is unable to predict what effect the application of the Policy Statement would have in the event of
a delinquency on a parcel within the Assessment District in which the FDIC has or obtains an interest, although
34
prohibiting the lien of the FDIC to be foreclosed at a judicial foreclosure sale would reduce or eliminate the persons
willing to purchase a parcel at a foreclosure sale. Owners of the Bonds should assume that the City will be unable to
foreclose on any parcel owned by the FDIC. Such an outcome could cause a draw on the Special Reserve Fund and
perhaps, ultimately, a default in payment on the Bonds. Based on the secured tax roll as of November 1, 2004, the
FDIC does not presently own any property within the Assessment District. The City expresses no view concerning
the likelihood that the risks described above will materialize while the Bonds are outstanding.
Property Values
Reference is made to APPENDIX B, which contains the Appraisal and the Appraiser's opinion with respect
to the value of the property that is subject to the lien of the assessments and the assumptions made by the Appraiser
in connection therewith. Reference is also made to "OWNERSHIP AND PLANNED FINANCING AND
DEVELOPMENT OF THE ASSESSMENT DISTRICT - Bulk Value-to-Assessment Lien Ratio" for a summary of
the value of the property within each of the four respective Community Areas in the Assessment District that is
subject to the lien of the assessments and the ratio of the appraised value of such property to the total amount of the
assessment liens on such property that secure the Bonds. See also APPENDIX E for a listing of the ratio of the
appraised value of each assessed parcel to the amount of the assessment lien against such parcel.
No assurance can be given that this appraised value to lien ratio will not decline should subsequent liens be
placed on property within the Assessment District. Further, there is no assurance that in the event of a foreclosure
sale for a delinquent assessment installment, any bid will be received for any such property within the Assessment
District or that any bid received or resale price will be sufficient to pay such delinquent installments (plus costs and
penalties). The 1915 Act provides that a parcel be sold for the delinquent installment(s) amount (plus costs and
penalties) and not the entire outstanding assessment.
The Appraiser has made various assumptions, which may vary from the assumptions made by other parties
(including Centex Homes, Gardiner LLC, Cherry Hill, Inc., Bakersfield Avalon, and Olive Park Land Company), in
order to derive the aggregate valuation estimate of the property within the Assessment District to be assessed. See
APPENDIX B for an explanation of methodology and a statement of contingent and limiting conditions and
assumptions used by the Appraiser to derive the aggregate value of the property. Although these contingent and
limiting conditions and assumptions were considered reasonable by the Appraiser based on information available to
the Appraiser, neither the Appraiser nor the City can give any assurance that any parcel will be developed in
accordance with the uses that the Appraiser has projected.
Concentration of Ownership
As of November 1, 2004, Centex Homes owned approximately 49.02% of the assessed property in the
Assessment District, Gardiner LLC owned approximately 35.08% of the assessed property in the Assessment
District, Bakersfield Avalon owned approximately 6.43% of the assessed property in the Assessment District, and
Olive Park Land Company owned approximately 9.47% of the assessed property in the Assessment District.
Although Gardiner LLC has entered into contracts to sell its Assessment District property to two merchant
builders, and Olive Park Land Company has indicated its intention to sell some or all of its Assessment District
property to merchant builders, there can be no assurance that such sales will occur as planned. Thus, there is no
assurance of any degree of diversification of ownership of the assessed property. Also, unless and until such
ownership is further diversified, the inability or refusal of Centex Homes, Gardiner LLC, Bakersfield Avalon, or
Olive Park Land Company to pay is respective assessment installments when due could result in the rapid total
depletion of the Special Reserve Fund prior to reimbursement thereof from foreclosure proceedings. Under such
circumstances, there would be insufficient moneys with which to pay principal of and/or interest on the Bonds.
Failure of any future property owners to pay installments of assessments when due could also result in a
default in payment of the principal of and interest on the Bonds prior to the resales of foreclosed property or
delinquency redemptions. In that event, there could be a default in payments of the principal of and interest on the
Bonds.
35
Tax Delinquencies
Assessmem installments, from which funds necessary for the payment of annuai installments of principal of
and interest on the Bonds are to be derived, will be billed to each property against which there is an unpaid
assessment on the regular property tax bills sent to the owner of such property. Such installments are due and
payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. Under
certain circumstances, assessment installment payments on parcels of property in Kern County can be made
separately from regular property tax payments for such parcels. Property tax payments will not be accepted,
however, unless the assessment installments for such parcels have also been paid. Therefore, the unwillingness or
inability of a property owner to pay regular property tax bills, as evidenced by property tax delinquencies, will likely
indicate an unwillingness or inability to make regular property tax payments and assessment installment payments in
the future. A failure of property owners to pay installments of assessments when due could result in a default in
payments of the principal of and interest on the Bonds.
The City repons that, based upon the records of the office of the Kern County Tax Collector, none of the
parcels in the respective Community Areas within the Assessment District shows delinquencies in the payment of
fiscal year 2001-02, 2002-03, or 2003-04 property tax installments.
Limited Obligation of the City Upon Delinquency
If a delinquency occurs in the payment of any assessment installment, the City has a duty only to transfer
into the Redemption Fund the amount of the delinquency out of the Special Reserve Fund and to undertake, under
certain circumstances, judicial foreclosure proceedings to recover such delinquencies. This duty of the City is
continuing during the period of delinquency, until reinstatement, redemption, or sale of the delinquent property.
There is no assurance that funds will be available for this purpose and if, during the period of delinquency, there are
insufficient funds in the Special Reserve Fund, a delay may occur in payments to the owners of the Bonds. If there
are additional delinquencies after exhaustion of funds in the Special Reserve Fund, the City is not obligated to
transfer into the applicable Redemption Fund the amount of such delinquency out of any other available moneys of
the City.
THE CITY'S LEGAL RESPONSIBILITIES WITH RESPECT TO SUCH DELINQUENT
INSTALLMENTS ARE LIMITED TO ADVANCING THE AMOUNT THEREOF SOLELY FROM ANY
AVAILABLE MONEYS IN THE SPECIAL RESERVE FUND AND TO UNDERTAKING, UNDER CERTAIN
CIRCUMSTANCES, JUDICIAL FORECLOSURE PROCEEDINGS TO RECOVER SUCH DELINQUENCIES.
THIS DUTY OF THE CITY TO ADVANCE FUNDS IS CONTINUING DURING THE PERIOD OF
DELINQUENCY ONLY TO THE EXTENT OF FUNDS AVAILABLE FROM THE SPECIAL RESERVE FUND
UNTIL REINSTATEMENT, REDEMPTION, OR SALE OF THE DELINQUENT PROPERTY. IN
ACCORDANCE WITH SECTION 8769(b) OF THE 1915 ACT, THE CITY HAS DETERMINED THAT IT WILL
NOT ADVANCE FUNDS FROM ITS TREASURY TO CURE ANY DEFICIENCY IN THE REDEMPTION
FUND.
Bankruptcy and Foreclosure
The payment of assessment installments and the ability of the City to foreclose on the lien of a delinquent
unpaid assessment, as discussed below in the section entitled "SPECIAL RISK FACTORS - Covenant to
Commence Superior Court Foreclosure," may be limited by bankruptcy, insolvency, or other laws generally
affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure.
The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified, as
to the enforceability of the various legal instruments, by reference to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws affecting the rights of creditors generally, to the application of
equitable principles, to the exercise of judicial discretion in appropriate cases, and to the limitations on legal
remedies in the State.
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On July30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a
bankruptcy case entitled In re Glctsply Marine Industries. In that case, the court held that ad valorem property taxes
levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for
bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. The court upheld
the priority of unpaid taxes imposed after the filing of the bankruptcy petition as "administrative expenses" of the
bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was able to foreclose on the
property and retain all of the proceeds of the sale except the mount of the pre-petition taxes.
According to the court's ruling, as administrative expenses, post-petition taxes would have to be paid,
assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such administrative
expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through
foreclosure or otherwise) it would at that time become subject to current ad valorem taxes.
Glasply is controlling precedent on bankruptcy courts in the State of California. Pursuant to statute, the
lien date for general ad valorem property taxes levied in the State of California is the January 1 preceding the fiscal
year for which the taxes are levied. Therefore, under Glasply, a bankruptcy petition filing would prevent the lien for
general ad valorem property taxes levied in subsequent fiscal years fi.om attaching so long as the property was a part
of the estate in bankruptcy. Under current law, the lien of an assessment, unlike the lien for general ad valorem
property taxes, attaches upon recordation of the notice of assessment. The notice of assessment for the Assessment
District assessments was recorded in the Official Records of the County on October 22, 2004. Thus, before applying
Glasply to a bankruptcy situation involving assessments rather than general ad valorem property taxes, a court
would need to consider the differences in the statutory provisions for creation of the applicable assessment lien. Ifa
court were to apply Glasply to eliminate the priority as a secured claim of the assessment lien with respect to post
petition levies of the assessments as against property owners within the Assessment District who file for bankruptcy,
collections of the assessments fi.om such property owners could be reduced.
It should also be noted that on October 22, 1994, Congress enacted 11 U.S.C. Section 362(b)(18), which
added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision after
the filing ora bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy petition filed
on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property
is part of the bankruptcy estate. Bond owners should be aware that the potential effect of 11 U.S.C.
Section 362(b)(18) on the Assessment District assessments depends upon whether a court were to determine that the
assessments should be treated like ad valorem taxes for this purpose.
Whether or not bankruptcy proceedings were to cause the assessment liens to become extinguished,
bankruptcy of a property owner in all likelihood would result in a delay in prosecuting superior court foreclosure
proceedings. Such a delay would increase the likelihood of a delay or default in payment of the principal of and
interest on the Bonds, and the possibility that delinquent assessment installments might not be paid in full.
Economic, Political, Social and Environmental Conditions
Prospective investors are encouraged to evaluate current and prospective economic, political, social, and
environmental conditions as part of an informed investment decision. Changes in economic, political, social, or
environmental conditions on a local, state, federal and/or international level may adversely affect investment risk
generally. Such changes may also adversely affect the value of property within the Assessment District and/or the
willingness or ability of the owners of land within the Assessment District to pay their assessments. Such
conditional changes may include (but are not limited to) fluctuations in business production, consumer prices, or
financial markets, unemployment rates, technological advancements, shortages or surpluses in natural resources or
energy supplies, changes in law, social unrest, fluctuations in the crime rate, political conflict, acts of war or
terrorism, environmental damage, and natural disasters.
Articles XIIIA and XIIIB of the California Constitution
On June 6, 1978, California voters approved an amendment to the California Constitution, commonly
known as Proposition 13 (the Jarvis/Gann Initiative) which added Article XIIIA to the California Constitution. The
37
effect of Article XIIIA is to limit ad valorem taxes on real property. On November 7, 1978, California voters
approved Proposition 8, which made certain clarifications to Article XIIIA.
Article XIIIA of the Califomia Constitution limits the mount of ad valorem taxes on real property to 1%
of "full cash value" as determined by the county assessor. Article XIIIA defines "full cash value" to mean "the
county assessor's valuation of real property as shown on the 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." The "full cash value" is subject to annual adjustment to reflect increases, not to exceed 2%
per year, or decreases in the consumer price index or comparable local dam, or to reflect reductions in property value
caused by damage, destruction or other factors.
Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters
prior to July 1, 1978, and allows local governments to raise their property tax rates above the constitutionally
mandated 1% ceiling for the purpose of paying off certain new general obligation debt issued for the acquisition or
imp(ovement of real property and approved by two-thirds of the votes cast by the qualified electorate. Article XIIIA
requrres a vote of two-thirds of the qualified electorate to impose special taxes on real property, while otherwise
generally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In
addition, Article XIIIA requires the approval of two-thirds of all members of the State Legislature to change any
State laws resulting in increased tax revenues.
Enactment of Article XIIIA has reduced the mount of general property tax revenues received by the City.
This reduction in such revenues makes it less likely that the City will have surplus funds, other than the Special
Reserve Fund, with which to advance funds to make any payments or to cure any deficiency in the Redemption
Fund, should the City, in the exercise of its discretion, choose to do so. If there are additional delinquencies at~er
exhaustion of funds in the Special Reserve Fund, the City has no obligation to transfer into the Redemption Fund the
amount of any such delinquencies out of any surplus moneys of the City.
On July 2, 1979, the Fifth District Court of Appeal rendered a 3~0 decision in the case of County of Fresno
v. Malmstrom (94 Cal. App. 3d 1974) that determined that special assessments are not subject to the limitations of
Article XIIIA (Proposition I3). The Court held the one pement tax limitation imposed by California Constitution
Article XIIIA on ad valorem taxes does not apply to special assessments levied pursuant to the Improvement Act of
1911 (Streets and Highways Code, Section 5000 et seq., the relevant portions of which are incorporated in the 1915
Act) and the 1913 Act. The Court further held that because special assessments pursuant to such acts are not within
the definition of "special taxes" in Article XIIIA, the Constitution does not require the levy of assessments and the
issuance of bonds to be approved by a two-thirds vote of the qualified electors in an assessment district. On
September 12, 1979, the California Supreme Court refused to hear an appeal of the lower court's decision.
At the November 6, 1979, general election, Proposition 4 (the Gann Initiative) was approved by the voters
of California. Such proposition added Article XII1B to the California Constitution.
Article XIIIB of the California Constitution limits the annual appropriations of the State and of any city,
county, school district, authority or other political subdivision of the State to the level of appropriations of the
particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living, population and
services rendered by the governmental entity. The "base year" for establishing such appropriation limit is the fiscal
year 1978-79 and the limit is to be adjusted annually to reflect changes in population, consumer prices and certain
increases in the cost of services provided by these public agencies.
Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by the State or other
entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from
retirement, unemployment insurance and disability insurance funds. "Proceeds of taxes" include, but are not limited
to, all tax revenues and the proceeds to an entity of government from (i) regulatory licenses, user charges, and user
fees (but only to the extent such proceeds exceed the cost of providing the service or regulation), and (ii) the
investment of tax revenues. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the
amounts permitted to be spent, the excess would have to be allocated to fund schools or be returned by revising tax
rates or fee schedules over the subsequent two years.
38
On December 17, 1980, the Third District Court of Appeal rendered a 3-0 decision in the case County of
Placer v. Corin (113 Cal. App. 3d 443) that determined that special assessments are not subject to the limitation of
Article XIIIB (Proposition 4). The Court held that the definition of "proceeds of taxes" imposed by California
Constitution Article XIIIB does not apply to special assessments and improvement bonds issued pursuant to the
1915 Act and the 1913 Act. The decision of the Court was not appealed.
The enactment of Article XIIIA of the California Constitution (Proposition 13) and subsequent legislative
enactments effectively repeal the otherwise mandatory duty on the part of the City, under the 1915 Act, to levy and
collect a special tax (in an mount necessary to meet delinquencies, but not to exceed ten cents on each $100 of
assessable property within the City in any one year) if other funds are not available to cover delinquencies.
In early 1990, the U.S. Supreme Court struck down as a violation of equal protection certain property tax
assessment practices in West Virginia, which had resulted in vastly different assessments of similar properties.
Since Article XIIIA provides that property may only be reassessed up to 2%, per year, except upon change of
ownership or new construction, recent purchasers may pay substantially higher property taxes than long-time owners
of comparable property in a community. The Supreme Court in the West Virginia case expressly declined to
comment in any way on the constitutionality of Article XIIIA.
Based on this decision, however, property owners in California brought three suits challenging the
acquisition value assessment provisions of Article XIIIA. Two cases involve residential property and one case
involves commercial property. In all three cases, State trial and appellate courts have upheld the constitutionality of
Article XIIIA's assessment roles and concluded that the West Virginia case did not apply to California's laws. On
June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in the challenge relating to commercial property, but
the plaintiff subsequently decided to drop the case.
On October 7, 1991, the U.S. Supreme Court granted the plaintiff's petition for a writ of certiorari and
agreed to hear the Nordlinger v. Lynch case. On June 18, 1992, the U.S. Supreme Court affirmed the Nordlinger
decision (112 U.S. 2326) of the California Court of Appeal, Second Appellate District, which previously held that
Article XIIIA does not violate the U.S. Constitution.
The City cannot predict whether any other pending or future challenges to the State's present system of
property tax assessment will be successful, when the ultimate resolution of any challenge will occur, or the ultimate
effect any decision regarding the State's present system of property tax assessment will have on the City's revenues
or on the State's fmancial obligations to local governments.
Articles XIIIC and XIIID of the California Constitution
Proposition 218, a state ballot initiative known as the "Right to Vote on Taxes Act," was approved by
California voters on November 5, 1996. Proposition 218 added Articles XIIIC and XIIID to the State Constitution,
and, with the exception of certain provisions, Articles XIIIC and XII1D became effective on November 6, 1996.
Article XIIID, entitled "Assessment and Property Related Fee Reform," contains several new provisions
making it generally more difficult for local agencies to levy and maintain "assessments" for municipal services and
programs. Article XIIID requires that, beginning July 1, 1997, the proceedings for the levy of any assessment by the
City under the 1913 Act (including, if applicable, any increase in such assessment or any supplemental assessment
under the 1913 Ac0 must be conducted in conformity with the provisions of' Section 4 of' Article XIIID.
"Assessment" is defined to mean any levy or charge upon real property for a special benefit conferred upon the real
property. Article XII1D additionally provides that in levying "assessments" a local government must separate the
"general benefits" from the "special benefits" conferred on a parcel and may not impose on any parcel an
assessment which exceeds the "reasonable cost of the proportional special benefit conferred on that parcel." Article
XIIID also contains various notice requirements and a public hearing requirement and prohibits the imposition of an
assessment if ballots submitted by property owners, weighted according to the proportional financial obligation of
the affected property, in opposition to the assessment exceed the ballots submitted in favor of the assessment. The
City believes that it has complied with all provisions of Article XIIID applicable to the Assessment District
proceedings described herein. AIl ballots submitted by property owners were in favor of the assessment.
39
Article XIIIC, entitled "Voter Approval for Local Tax Levies," provides, in Section 3 thereof, that the
initiative power shall "not be prohibited or otherwise limited in matters reducing or repealing any ... assessment" of
the City. Thus, Article XIIIC removes limitations on the initiative power in matters of, among other things,
assessments. Consequently, the voters of the City could, by future initiative, repeal, reduce, or prohibit the future
imposition or increase of any assessment. "Assessment," is not defined in Article XIIIC and it is not clear whether
the definition of that term in Article XIIID (which is generally property-related as described above) would be
applied to Article XIIIC. No assurance can be given that the voters of the City will not, in the future, approve
initiatives that repeal, reduce, or prohibit the future imposition or increase of any assessments.
In the case of the unpaid assessments that are pledged as security for payment of the Bonds, the 1915 Act
provides a mandatory, statutory duty of the City and the Kern County Auditor to post installments on account of the
unpaid assessments to the Kern County property tax roll each year while any of the Bonds are outstanding in
aggregate amounts equal to the principal of and interest on the Bonds coming due in the succeeding calendar year.
Although the provisions of Article XIIIC have not been interpreted by the courts, the City believes that the initiative
power cannot be used to reduce or repeal the unpaid assessments that are pledged as security for payment of the
Bonds or to otherwise interfere with the mandatory, statutory duty of the City and the Kern County Auditor with
respect to the unpaid assessments that are pledged as security for payment of the Bonds.
The interpretation and application of Proposition 218 will ultimately be determined by the courts with
respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the
outcome of such determination.
Future Initiatives
Articles XIIIA, XIIIB, XIIIC, and XIIID of the Constitution were each adopted as measures that qualified
for the ballot pursuant to California's initiative process. From time to time other initiative measures could be
adopted, which may affect the ability of the City to levy and maintain assessments.
Covenant to Commence Superior Court Foreclosure
The 1915 Act provides that in the event any assessment or installment thereof or any interest thereon is not
paid when due, the City may order the institution of a court action to foreclose the lien of assessment. In such an
action, the real proper~y subject to the unpaid assessment may be sold at judicial foreclosure sale. This foreclosure
sale procedure is not mandatory. However, in the Bond Resolution, the City has covenanted that, in the event any
assessment or installment thereof, including any interest thereon, is not paid when due, the City will, no later than
October 1 in any year, file an action in the Superior Court of Kern County to foreclose the lien on each delinquent
assessment if (i) the sum of uncured assessment delinquencies for the preceding fiscal year exceeds 5% of the
assessment installments posted to the tax roll for that fiscal year and (ii) the amount in the Special Reserve Fund is
less than the Reserve Requirement. In the event such Superior Court foreclosure or foreclosures are necessary, there
may be a delay in payments to the owners of the Bonds, pending prosecution of the foreclosure proceedings and
receipt by the City of the proceeds of the foreclosure sale. It is also possible that no bid for the purchase of the
applicable property would be received at the foreclosure sale.
Prior to July 1, 1983, the right of redemption from foreclosure sales was limited to a period of one year
from the date of sale. Under legislation effective July 1, 1983, the statutory right of redemption from such
foreclosure sales has been repealed. However, a period of 140 days must elapse after a court adjudges and decrees a
lien against the lot or parcel of land covered by an assessment or reassessment before the sale of such parcel can be
given. Furthermore, if the purchaser at the sale is the judgment creditor, i.e., the City, an action may be commenced
by the delinquent property owner within ninety (90) days after the date of sale to set aside such sale.
Price Realized Upon Foreclosure
The 1915 Act provides that, under certain circumstances, property may be sold upon foreclosure at less
than the Minimum Price or without a Minimum Price upon petition by the City. "Minimum Price" as used in this
section is the amount equal to the delinquent installments of principal and interest on the assessment or
40
massessment, together with ail interest, penalties, costs, fees, charges and other mounts more fully detailed in the
1915 Act. The court may authorize a sale at less than the Minimum Price if the court determines, based on the
evidence introduced at the required hearing, any of the following:
(A) Saie at the lesser Minimum Price or without a Minimum Price will not result in an ultimate loss to
the owners of the Bonds.
(B) Owners of 75% or more of the outstanding Bonds, by principal amount, have consented to such
petition by the City and the sale will not result in an ultimate loss to the non-consenting Bond owners.
(C) Owners of 75% or more of the outstanding Bonds, by principai amount, have consented to the
petition and all of the following apply:
(1) By reason of determination pursuant to the 1915 Act, the City is not obligated to advance
funds to cure a deficiency (the City made such a determination not to be obligated with respect to the Bonds).
(2)
No bids equal to or greater than the Minimum Price have been received at the foreclosure
sale.
(3) No funds remain in the Special Reserve Fund.
(4) The City has reasonably determined that a reassessmant and refunding proceeding is not
practicable, or has in good faith endeavored to accomplish a reassessmant and refunding and has not been
successful, or has completed a reassessment and refunding arrangement which will, to the maximum extent feasible,
minimize the ultimate loss to the Bond owners.
(5) No other remedy acceptable to owners of 75% or more of the outstanding Bonds, by
principal amount, is reasonably available.
The assessment or reassessment lien upon property sold pursuant to this procedure at a lesser price than the
Minimum Price shall be reduced by the difference between the Minimum Price and the saie price. In addition, the
court shall permit participation by the Bond owners in its consideration of the petition as necessary to its
determinations.
Implementation of the above-described Minimum Price provision by the court upon foreclosure could
result in nonpayment of amounts due to Bond owners who are not in agreement with the 75% of such Bond owners
required to appmve the sale at less than the Minimum Price. Reference should be made to the 1915 Act for a
complete presentation of this provision.
Priority of Lien
Each assessment (and any reassessment) and each installment thereof, and any interest and penalties
thereon, constitutes a lien against the parcel of land on which it was imposed until the same is paid. Such a lien is
subordinate to all fixed special assessment liens previously imposed upon the same property, but has priority over all
private liens and over all fixed special assessment liens which may thereafter be created against the property. Such a
lien is co-equal to and independent of the lien for general property taxes and speciai taxes, including, without
limitation, special taxes created pursuant to the Mello-Roos Act, whenever created against the property.
Upon the issuance of the Bonds, none of the property in the Assessment District will be subject to any other
special assessment lien created under the 1913 Act. The property within The Homestead Area, the Cherry Hill Area,
the Olive Park III Area, and a portion of the Countryside Area is subject to an existing special tax lien created by
RNR CFD No. 92-1 pursuant to the Mello-Roos Act. Moreover, the portion of the Countryside Area currently
located outside ofRNR CFD No. 92-1 is expected to be annexed into RNR CFD No. 92-1 during the 2004-2005 tax
year. The amount of special taxes, if any, to which property within RNR CFD No. 92-1 is subject varies based upon
41
the zoning, the entitlements, and the type and level of development of such property. See "THE BONDS - Priority
of Lien."
Refunding Bonds
Pursuant to the Refunding Act of 1984 for 1915 Improvement Act Bonds (Division 11.5 of the California
Streets and Highways Code), the City may issue refunding bonds for the purpose of redeeming the Bonds. After the
making of certain required findings by the City Council, the City may issue and sell refunding bonds without giving
notice to and conducting a hearing for the owners of property in the assessment district, or giving notice to the
owners of the Bonds. See "THE BONDS - Refunding Bonds." Upon issuing refunding bonds, the City Council
could require that the Bonds be exchanged for refunding bonds on any basis which the City Council determines is
for the City's benefit, if the Bond owners consent to the exchange. As an alternative to exchanging the refunding
bonds for the Bonds, the City could sell the refunding bonds and use the proceeds to pay the principal of and interest
and redemption premium, if any, on the Bonds as they become due, or advance the maturity of the Bonds and pay
the principal of and interest and redemption premium thereon.
Absence of Market for Bonds
No application has been made for a rating for the Bonds, and it is not known whether a rating for the Bonds
could be secured either now or in the future. There can be no assurance that there will ever be a secondary market
for purchase or sale of the Bonds, and from time to time there may be no market for them, depending upon
prevailing market conditions and the financial condition or market position of firms who may make the secondary
market.
Loss of Tax Exemption
As discussed under the heading "TAX MATTERS," interest on the Bonds could cease to be excluded fi.om
gross income for purposes of federal income taxation, retroactive to the date the Bonds were issued, as a result of
future acts or omissions of the City.
ENFORCEABILITY OF REMEDIES
The remedies available to the Paying Agent, the City, or the owners of the Bonds upon any nonpaymem of
assessment installments are in many respects dependent upon judicial actions, which are often subject to discretion
and delay. Under existing constitutional and statutory law and judicial decisions, including specifically Title 11 of
the United States Code (the federal bankruptcy code) and relevant banking and insurance law, the remedies provided
in the 1915 Act and the 1913 Act may not be readily available or may be limited. The various legal opinions to be
delivered concurrently with the delivery of the Bonds will be qualified as to the enforceability of the various legal
instruments by limitations imposed by bankruptcy, reorganization, insolvency, or other similar laws affecting the
rights of creditors generally, to the application of eqintable principles, to the exercise of judicial discretion in
appropriate cases, and to the limitations on legal remedies in the State of California.
LITIGATION
No Litigation Relating to the Bonds
No litigation is pending concerning the validity of the Bonds or the Bond Resolution, and an opinion of the
City Attorney to that effect will be furnished to the purchaser at the time of the original delivery of the Bonds. The
City is not aware of any litigation pending or threatened questioning the political existence of the City or contesting
the City's ability to pay interest on the Bonds. There are a number of lawsuits and claims pending against the City.
In the opinion of the City Attorney, the aggregate amount of liability that the City might incur as a result of adverse
decisions in such cases would be covered under the City's insurance policies or self-insurance program.
42
Litigation Pertaining to The Homestead Area
In January 2001, James B. Gardiner and Lucille C. Gardiner (the "Gardiners"), on behalf of the Gardiner
Trust, the predecessor owner of property in The Homestead Area, entered into an escrow agreement (the "Hinesley
Escrow") with Floyd Hinesley ("Hinesley') regarding the sale to Hinesley of property that included The Homestead
Area (the "Disputed Property"). After granting a number of extensions of the Hinesley Escrow, the Gardiners
terminated the Hinesley Escrow after determining that Hinesley could not satisfy certain conditions thereunder.
Following such termination, Hinesley filed a lawsuit (the "Hinesley Lawsuit") claiming breach of contact and
requesting specific performance under the Hinasley Escrow. Hinasley also recorded a lis pendens against the
Disputed Property in connection with the Hinesley Lawsuit.
A motion for summary judgment was filed by counsel for the Gardiners and granted by the trial court.
Subsequent to the favorable trial court decision regarding the summary judgment, such counsel filed a motion to
expunge the lis pendens, which was also granted. The lispendens was thereafter expunged. Hinesley subsequently
filed an appeal with the California Court of Appeals, Fifth District (the "Appellate Court"), seeking to reverse the
summary judgment. Arguments regarding the appeal have been completed and a judgment is expected to be
rendered by the Appellate Court by early November 2004.
Although the Gardiners expect to prevail in the pending appeal, there can be no assurance that the summary
judgment will be upheld by the Appellate Court. In the event the Appellate Court reverses the summary judgment
granted in favor of the Gardiners, the original legal action would then be reinstated and would proceed to trial, and
Hinesley would likely have the fight to record another lis pendens against the Disputed Property. If the original
legal action proceeds and another lis pendens is recorded against the Disputed Property, the development of The
Homestead Area as described in this Official Statemem may be disrupted or delayed indefinitely.
CERTAIN INFORMATION CONCERNING THE CITY
Certain general information concerning the City is included in APPENDIX A hereto. THE GENERAL
FUND OF THE CITY IS NOT LIABLE FOR THE PAYMENT OF THE BONDS OR THE INTEREST
THEREON, AND THE TAXING POWER OF THE CITY IS NOT PLEDGED FOR THE PAYMENT OF THE
BONDS OR THE INTEREST THEREON.
TAX MATTERS
In the opinion of Ordck, Herrington & Sutcliffe LLP, Bond Counsel, based upon an analysis of existing
laws, regulations, rulings, and court decisions, interest on the Bonds is excluded from gross income for federal
income tax purposes and is exempt from State of California personal income taxes. Bond Counsel is also of the
opinion that interest on the Bonds is not a specific preference item for purposes of the federal individual and
corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted
current earnings in calculating federal corporate alternative minimum taxable income. A complete copy of the
opinion of Bond counsel is set forth in APPENDIX C hereto.
The Internal Revenue Code of 1986 (the "Code") imposes various restrictions, conditions, and
requirements relating to the exclusion from gross income for federal income tax purposes of interest on obligations
such as the Bonds. The City has covenanted to comply with certain restrictions designed m assure that interest on
the Bonds will not be included in federal gross income. Failure to comply with these covenants may result in
interest on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds. The
opinion of Bond Counsel assumes compliance with these covenants. Bond Counsel has not undertaken to determine
(or m inform any person) whether any actions taken (or not taken) or events occurring (or not occurring) after the
date of issuance of the Bonds may adversely affect the tax status of the interest on the Bonds.
Certain requirements and procedures contained or referred to in the Bond Resolution, the tax certificate to
be executed by the City at closing, and other relevant documents may be changed and certain actions (including,
without limitation, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the
terms and conditions set forth in such documents. Bond Counsel expresses no opinion as to any Bonds or the
43
interest thereon if any such change occurs or actions are taken or omitted upon the advice or approval of bond
counsel other than Ordck, Herrington & Sutcliffe LLP. However, without limiting the generality of the foregoing,
the City has covenanted in the Bond Resolution that, prior to making any change to or taking or omitting to take any
action with respect to any of the agreements, requirements, or procedures contained or referred to in the Bond
Resolution, the tax certificate, or other relevant documents pertaining to the Bonds, the City will do either of the
following: (i) obtain a subsequem opinion of Orrick, Herrington & Sutcliffe LLP that such change, action, or
omission will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the
Bonds; or (ii) obtain an opinion of alternative nationally recognized bond counsel to the effect originally delivered
by Bond Counsel that, notwithstanding such change, action, or omission, interest on the Bonds is excluded from
gross income for federal income tax purposes.
Although Bond Counsel will render an opinion that imerest on the Bonds is excluded from gross income
for federal income tax purposes and is exempt from California personal income taxes, the ownership or disposition
of, or the accrual or receipt of interest on, the Bonds may otherwise affect a Bondholder's federal tax liability. The
nature and extent of these other tax consequences will depend upon the particular tax status of the Bondholder or the
Bondholder's other items of income or deduction. Bond Counsel expresses no opinion regarding any such other tax
consequences.
APPROVAL OF LEGALITY
The validity of the Bonds and certain other legal matters are subject to the approving opinion of Orrick,
Herrington & Sutcliffe LLP, Bond Counsel. A complete copy of the proposed form of bond counsel opinion is
contained in APPENDIX C hereto and is printed on the Bonds. Bond counsel undertakes no responsibility for the
accuracy, completeness, or fairness of this Official Statement. Certain matters will be passed upon for the City by
the City Attorney of the City of Bakersfield. Certain other matters will be passed upon by Pillsbury Winthrop LLP,
Los Angeles, California, as disclosure counsel to the City. Stradling, Yocca, Carlson & Rauth, Newport Beach,
California, has represented the Underwriter in connection with the issuance of the Bonds.
UNDERWRITING
Pursuant to a Bond Purchase Contract between the City and the Underwriter, the Bonds are being
purchased by the Underwriter at a purchase price equal to the principal amount of Bonds being issued less an
Underwfiter's discount of $ . The Bond Purchase Contract provides that the Underwriter will purchase all
of the Bonds if any are purchased, the obligation to make such purchase, if made, being subject to certain terms and
conditions set forth in the Bond Purchase Contract, the approval of certain legal matters by counsel, and certain
other conditions.
The Underwriter may offer and sell Bonds to certain dealers and others at a price other than the offering
price. The offering price may be changed from time to time by the Underwriter.
NO RATING
The City has not made and does not contemplate making application to any rating agency for the
assignment of a rating to the Bonds.
CONTINUING DISCLOSURE
The City, Cemex Homes, and Gardiner LLC have each covenanted for the benefit of Bondholders to
provide an annual or semi-annual report, as applicable, containing certain financial information and operating data
relating to the Assessment District and the property in the Assessment District, and to provide notices of the
occurrence of certain enumerated events, if material. The specific nature of the information to be contained in each
annual or semi-annual report, as applicable, or each notice of material events, if any, and the applicable deadlines,
are set forth in the respective Continuing Disclosure Certificates, the forms of which are attached hereto as
"APPENDIX F CONTINUING DISCLOSURE CERTIFICATES." These covenants have been made in order to
assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended (the
44
"Rule"). Each of the City, Centex, and Gardiner LLC has represented that it has never failed to comply with any
previous undertaking to provide annual or semi-annual reports, as applicable, and notices of material events.
Neither Bakersfield Avalon nor Olive Park Land Company, as an owner of property in the Assessment
District that, when aggregated with all other property in the Assessment District owned by such owner or its
affiliates, is subject to a lien of less than twenty pemant (20%) of the annual assessment securing payment of the
Bonds, has an obligation to provide continuing disclosure information and therefore has not entered into a
continuing disclosure certificate.
MISCELLANEOUS
The foregoing summaries or descriptions of provisions of the Bonds, the Bond Resolution, and all
references to other materials not purporting to be quoted in full are only brief outlines of some of the provisions
thereof and do not purport to summarize or describe all of the provisions thereof, and reference is made to said
documents for full and complete statements of their provisions. The appendices hereto are a part of this Official
Statement.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated,
are intended as such and not as representations of fact. The Official Statement is not to be construed as a contract
or agreement between the City and the purchasers or owners of any of the Bonds.
The execution and delivery of this Official Statement has been duly authorized by the City.
CITY OF BAKERSFIELD
By:
Gregory J. Klimko
Finance Director
45
APPENDIX A
CITY OF BAKERSFIELD
ECONOMIC, FINANCIAL AND DEMOGRAPHIC INFORMATION
General
The City is located at the southern end of the San Joaquin Valley, approximately 110 miles north of Los
Angeles and 290 miles south of San Francisco. The City includes over 116 square miles of land and an additional
76 square miles of land area is located within the City's sphere of influence.
The City is a regional center for industty, government, transpo~tion, retail trade, medical services, and oil
field operations. Major manufacturing activities include iron and steel fabrication, plastic foam products, food
products, petroleum refining, and textiles. Bakersfield is one of the leading convention centers of the state and is the
commercial hub of Kern County (the "County"). As the County seat, it is the location of many county, state, and
federal offices.
The metropolitan area has expanded considerably beyond the City limits. As of January 1, 2004, the
estimated population of the County was 724,883 and the estimated population of the City was 279,672, according to
the Califorffta Department of Finance and the City's Finance Department, respectively. The Bakersfield Standard
Metropolitan Statistical Area (SMSA) includes all of Kern County, as def'med by the State Department o£
Employment Development.
City Government
The City was incorporated on January 11, 1898, under the general laws of the State of California (the
"State"). The City is a charter city with a council/manager form of government. The City Council is comprised of
seven council members, elected by ward on a staggered basis for a term of four years. The mayor is directly elected
for a four-year term. The council appoiats the City Attorney and the City Manager, who also serves as the
Executive Director of the Bakersfield Redevelopment Agency (the "Agency"). There are approximately 1,245
permanent City employees, including 74 persons in management and 150 persons in supervisory positions. Fire
protection is provided by 170 Firefighters, manning 13 stations. The police department has 311 Police Officers.
Tax Levies and Delinquencies; Assessed Valuation of Taxable Property
The Kern County Tax Collector collects ad valorem property tax levies ~presenting taxes levied for each
fiscal year on taxable real and personal property which is situated in the County as of the preceding March 1.
Unsecured taxes are assessed and payable on March 1 and become delinquent August 31, in the next fiscal year.
Accordingly, unsecured taxes arc levied at the rate applicable to the fiscal year preceding the one in which they are
paid.
One half of the secured tax levy is due November 1 and becomes delinquent December 10; the second
installment is due February I and becomes delinquent April 10. A ten percent penalty is added to any late
installment. On June 30, delinquent properties are sold to the State.
Property owners may redeem property upon payment of delinquent taxes and penalties. Tax-defaulted
properties are subject to a redemption penalty of one and one-half percent (1-1/2%) of the tax due, charged from
July I following the date on which the property became tax-defaulted to the date of redemption, plus a penalty for
every subsequent tax year (i.e., July 1 through June 30) in which the property remains tax-defanlted, at a rate of one
and one-half percent (1-1/2%) of the tax due for each such tax year. Properties may be redeemed under an
installment plan by paying current taxes, plus 20% of delinquent taxes each year for five years, with interest
accruing at one and one-half pement (1-1/2%) per month on the unpaid balance. If no payments have been made on
delinquent taxes at the end of five fiscal years, the property is deeded to the State. Such properties may thereafier be
conveyed to the County Tax Collector as provided by law.
A-I
The table below summarizes the City's property tax levies, the current amounts delinquent, and total
collections for fiscal years 1993-94 through 2002-03.
Table A-1
City of Bakersfield
Property Tax Levies and Delinquencies o)
Fiscal Years 1993-94 through 2002-03
Total Total Tax Percent of Levy Percent of Current
Fiscal Tax Levy Collections Collected Taxes Collected
Year
1993-94 $15,835,374 $15,796,355 97.1% 99.8%
1994-95 16,349,776 16,239,085 96.7 99.3
1995-96 16,856,805 16,975,278 96.4 100.7
1996-97 17,175,495 17,464,195 97.5 101.7
1997-98 17,289,200 17,430,365 97.4 100.8
1998-99 17,864,445 20,488,683 111.7 114.7
1999-00 18,554,717 19,123,448 99.5 103.1
2000-01 19,093,149 18,199,926 92.9 95.3
2001-02 20,121,528 20,675,415 99.4 102.8
2002-03 21,301,453 23,523,106 107.4 110.4
(1) Excludes redevelopment tax increment revenues.
Source: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003.
The table below summarizes the assessed valuations in the City for fiscal years 1993-94 through 2002-03.
Table A-2
City of Bakersfield
Assessed Value of Taxable Property
(Fiscal Years 1993-94 through 2002-03)
Percent
Total Assessed Increase
Fiscal Year Secured Unsecured Utility Value (Decrease)
1993-94 $7,243,647,529 $342,279,574 $13,306,584 $7,599,233,687 4.90%
1994-95 7,662,423,762 342,662,118 14,097,810 8,019,183,690 5.53
1995-96 8,068,506,294 356,616,991 13,232,785 8,438,356,070 5.23
1996-97 8,213,247,086 350,499,835 13,971,013 8,577,717,934 1.65
1997-98 8,407,516,746 374,446,012 15,497,196 8,797,459,954 2.56
1998-99 8,628,532,571 453,535,838 17,719,409 9,099,787,818 3.44
1999-00 9,268,459,616 423,862,659 19,424,138 9,711,746,413 6.72
2000-01 9,809,567,800 432,049,903 19,039,560 10,260,657,263 5.65
2001-02 10,111,103,449 462,192,054 18,851,231 10,592,146,734 3.23
2002-03 10,820,926,790 481,183,430 18,614,866 11,320,725,086 6.88
Source: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003.
A-2
The table below shows the assessed valuations of the principal taxpayers in the City as of June 30, 2003.
Table A-3
City of Bakersfield
Assessed Valuation of Principal Taxpayers
(June 30, 2003)
2002-03
Assessed
Taxpayer fl) Valuation
Bakersfield Mall LLC $ 114,341,670
Castle & Cooke Comm. Inc. 101,116,491
Ice Cream Partners, USA 63,866,689
State Farm 58,422,309
Bear Mountain Limited 55,727,020
Sun Easton Corporation 28,721,236
Wal Mart Stores, Inc. 24,958,174
Time Warner Entertainment 24,680,726
Albertsons Inc. 24,655,249
United States Cold Storage of CA 24,180,076
Total taxable assessed value of ten (10) largest taxpayers $ 520,669,640
Total taxable assessed value of other taxpayers 10~800~055~446
Total taxable assessed value of all taxpayers
Percentage of Total
Type of Business Assessed Valuation
Shopping Center 1.01%
Real Estate Development 0.89
Manufacturing 0.56
Insurance 0.52
Cogeneration 0.49
Commercial 0.25
Retail Sales 0.22
Cable 0.22
Groceries 0.22
Industrial 0.21
4.60
95.40
100.00%
(I) Related parties grouped together on the original source document (County's list of assessed valuations) are included in the
total assessed valuation amount for each taxpayer cited. Unitary and operating nonunitary are excluded as valuation by parcel is
no longer available.
Source: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003, citing HDL Coren & Cone and Kern
County Assessor 2002/03 Combined Tax Rolls.
Demographic Statistics
The following table sets forth various demographic data regarding the City, including population, estimated
median household income, elementary school enrollment, and estimated unemployment rate, from fiscal year 1993-
94 through 2002-03.
Table A-4
City of Bakersfield
Demographic Statistics
(Fiscal Years 1993-94 through 2002-03)
Estimated
Median Elementary Estimated
Household School Unemployment
Fiscal Year Population Income Enrollment Rate
1993-94 197,469 $35,885 26,312 13.5%
1994-95 207,472 37,449 26,350 12.8
I995-96 212,715 31,852 26,903 12.4
1996-97 214,554 31,888 27,126 11.4
1997-98 221,689 33,339 27,370 10.9
1998-99 230,771 33,754 27,668 11.0
1999-00 237,222 34,343 27,783 12.5
2000-01 254,368 37,573 28,099 10.4
2001-02 257,914 35,153 28,267 11.2
2002-03 266,784 42,800 28,179 12.0
Sources: City Comprehensive Annual Financial Report for Fiscal Year Ended June 30, 2003.
A-3
Employment
Thc County's total labor force, the number of persons who work or are available for work, is estimated to
be 305,400 for 2003, an increase of 2.11% over the preceding year. The number of employed workers in thc labor
force is estimated to be 267,900 for the same date.
The following table sets forth information regarding the size of the labor force, employment and
unemployment rates for the County, the State, and the United States for the calendar years 1998 through 2003.
Table A-5
Employment - Averages
Calendar Years 1998 - 2003
1998 1999 2000 2001 2002 2003
Kern County
Labor Force (000s) 277.9 277.9 287.1 292.0 299.1 305.4
Employment (000s) 244.2 246.3 254.7 260.9 264.0 267.9
Unemployment Rate 12.1% 11.4% 11.3% 10.6% 11.7% 12.32%
State of California
Labor Force (000s) 16,138.1 16,375.6 16,884.2 17,182.9 17,404.6 17,629.3
Employment (000s) 15,180.9 15,522.3 16,048.9 16,260.1 16,241.8 16,455.4
Unemployment Rate 5.9% 5.2% 4.9% 5.4% 6.7% 6.7%
United States
Labor Force (000s) 137,673 (1) 139,368 (1) 142,583 (1) 143,734 144,863 146,510 (1)
Employment (000s) 131,463 (1) 133,488 (1) 136,891 (1) 136,933 136,485 137,736
Unemployment Rate 4.5% 4.2% 4.0% 4.7% 5.8% 6.0%
(1) Not strictly comparable with data for prior years.
Source: California Employment Development Department and U.S. Department of Labor Bureau of Labor Statistics.
The following table sets forth the top twenty employers in the City as of July 2003.
FIRM
County of Kern
Grimmway Enterprises
Giumarra Farms
Wm. Bolthouse Farms
Bakersfield M~norial Hospital
City of Bakersfield
Aera Energy LLC
Mercy Hospitals
State Farm Insurance
Califomia State University Bakersfield
ChevronTexaco
Pandol & Sons
San Joaquin Community Hospital
ACS
Frito-Lay Inc.
Kaiser Permanante
Sears Logistics
B.A.R.C.
Paramount Citrus Association
Bakersfield College
Table A-6
CITY OF BAKERSFIELD
Principal Employers
(As of July 2003)
PRODUCT/SERVICE
Government
Agriculture
Agriculture
Agriculture
Hospital
Government
Oil and Gas Production
Hospital
Insurance
Education
Oil and Gas Production
Agdculturc
Hospital
Call Center
Food Production
Health Care
Logistics
Non-Profit
Agriculture
Education
EMPLOYEES
9,400
5,000
4,000
2,400
1,350
1,275
1,150
1,003
1,003
1,000
955
800
800
729
650
560
550
400
Source: City of Bakersfield.
A4
Building Activity
94.
The following table summarizes the City's total annual building permit valuations since Fiscal Year 1993-
Table A-7
CITY OF BAKERSFIELD
Property Value, Construction, and Bank Deposits (1)
Fiscal Years 1993-94 through 2002-03
Commercial Residential Other Total
Construction Construction Construction Construction
Fiscal Number of Number of Number of Bank
Year Units Value Units Value Value Units Value Deposits
1993-94 30 $70,472 1,581 $154,577 $28,533 1,611 $253,582 $1,646,679
1994-95 39 65,891 1,571 150,429 37,167 1,610 253,487 1,563,075
1995-96 50 26,287 1,909 179,127 41,962 1,959 247,376 1,678,075
1996-97 102 42,352 1,352 132,785 40,459 1,454 215,596 2,310,008
1997-98 147 49,241 1,983 197,773 67,281 2,130 314,295 2,438,004
1998-99 213 78,199 2,088 223,576 36,958 2,301 338,733 2,464,202
199%00 140 51,251 1,890 218,656 34,438 2,030 304,245 2,454,280
2000-01 123 38,113 2,012 261,522 48,067 2,135 347,702 2,730,107
2001-02 143 70,874 2,445 311,639 57,983 2,588 440,496 2,865,985
2002-03 141 56,694 2,981 428,534 62,112 3,122 547,340 Not Available
(1) Propeay values and bank deposits are repoaed in thousands.
Sources: City Finance Department.
Commercial Activity
Consumer spending in calendar year 2002 resulted in approximately $3,828,193 in taxable sales in the City,
which is approximately 2.24% above calendar year 2001. The following table sets forth information regarding
taxable sales in the City for calendar years 1998 through 2002.
Table A-8
CITY OF BAKERSFIELD
Taxable Retail Sales 1998 - 2002
(O00s)
1998
Apparel stores $ 93,522
General merchandise stores 522,425
Food stores 148,581
Eating and drinking places 250,628
Home furnishings and appliances 102,108
Building materials and farm implmts. 184,458
Automobile dealers and auto supplies 531,261
Service stations 157,046
Other retail stores 318,548
Total Retail Outlets 2,308,577
All Other Outlets 588,811
Total All Outlets $2,897,388
1999 2000 2001 2002
$ 97,207 $ 109,847 $ 117,059 $ 126,267
564,971 598,519 633,892 667,344
162,505 176,986 181,300 196,060
266,476 287,815 309,643 330,061
113,435 123,510 126,841 142,019
217,197 244,146 256,506 286,088
623,868 716,804 845,904 850,364
179,011 209,649 187,497 178,716
342,586 372,930 384,538 413,285
2,567,256 2,840,206 3,043,180 3,190,204
629,476 657,574 701,212 637,989
$3,196,732 $3,497,780 $3,744,392 $3,828,193
Source: California State Board of Equalization.
A-5
There are three major shopping centers in the City. Major department stores with local outlets include
Robinsons-May, Macy's, Mervyns, LC. Penney, and Sears. The retail base includes two Wal-Marts, two Targets,
one K-Mart, two Home Depots, a Lowe's Home Improvement Store, and a Costco.
The number of sales permits issued and the valuation of taxable transactions for the years 1998 through
2002 is presented in the following table.
Table A-9
CITY OF BAKERSFIELD
Number of Permits and Valuation of Taxable Transactions
1998-2002
Year
Retail Stores
No. of Permits Taxable Transactions
Total All Outlets
No. of Permits Taxable Transactions
1998 2,838 $2,308,577 5,864 $2,897,388
1999 2,955 2,567,256 5,887 3,196,732
2000 3,163 2,840,206 5,961 3,497,780
2001 3,422 3,043,180 6,213 3,744,392
2002 3,552 3,190,204 6,359 3,828,193
Source: State of California, Board of Equalization.
Transportation
Well-developed surface and air transportation facilities are available to City residents and business firms.
Main lines of both the Union Pacific and the Burlington Northern Santa Fe railroads traverse the area. Amtrak
service is available.
State Highway 99, the main north-south artery serving the most populous communities along the east side
of the Central Valley, runs through the center of the City. State Highway 58 provides east-west link. age between
Interstate 5, 20 miles west, and Interstate 15 at Barstow, to the east, Highway 178, heading northeast, is the major
route along the Kern River Valley. Highway 65, to the north, provides access to communities east of Highway 99
and to Sequoia National Park.
Interurban motor transportation is made available by Orange Belt Stages, Greyhound, and Trailways.
Golden Empire Transit provides local bus transportation.
Meadows Field (Kern County Airport) adjoins the City to the north. Regularly scheduled passenger and air
cargo service is available as well as charter service and general aviation services. The main runway is 11,000 feet in
length.
Utilities
Electricity throughout the City is supplied by Pacific Gas and Electric Company. This company, along
with Southern California Gas Company, also supplies natural gas. Telephone service is by SBC. Fifteen private
water companies serve the City. Sewer service is provided by the City.
Education
Public education in the City through the secondary grades is provided by a number of elementary school
districts, including the Bakersfield City School District and Kern High School District. There are also a number of
private schools, nursery schools, and pre-schools within the City.
The City lies within Kern Community College Dislrict, which administers Bakersfield College. This two
year institution is located on a 150-acre site in northeast Bakersfield. Vocational and technical courses are offered
as well as academic courses designed to equip the student for transfer to a four-year college or university in the third
year. Bakersfield College attracts about half the local high school graduating class each year.
California State University, Bakersfield opened in 1970. It is one of the newest campuses in the State
University system, receiving its university status in 1988. It is on a 375-acre site located in the western portion of
the City. Majors offered include anthropology, art, earth sciences, philosophy, mathematics, political science,
business and teaching. A graduate program offers the master's degree in a number of fields.
The newest campus in the University of California system, UC Memed, is scheduled to open in 2004. UC
Merced will serve the entire San Joaqnin Valley, with the main campus located in the City of Merced and satellite
centers located in the City (which satellite center has already opened) and the Cities of Fresno and Modesto.
Financial Services
Statewide banking systems serving the City include Bank of America, Washington Mutual Bank, Sanwa
Bank California, Union Bank, and Wells Fargo Bank. Their services are supplemented by local and regional banks,
and various savings and loan associations.
Community Facilities
The City has six general hospitals with a total bed capacity of 1,075. The City is a primary medical center
of a region larger than some states. Mercy Hospital and Greater Bakersfield Memorial Hospital are among the
largest employers in the City. Kern Medical Center, administered by the County, is affiliated with UCLA Medical
Center of Los Angeles.
The daily "Bakersfield Californian" and two weekly newspapers provide regional news coverage.
Bakersfield has twenty radio stations, four television stations and three cable TV companies.
The City has 47 public parks, covering a total of 395 acres.
The Bakersfield Centennial Garden and Convention Center contains a 3,250-seat concert hall, a 9,000-seat
arena, four meeting halls, and six conference moms. Memorial Stadium hosts more National AAU track meets than
any other city in the country. County-owned golf courses and five private courses offer year-round golf, and tennis
is played throughout the year at the Bakersfield Racquet Club.
Cultural advantages of the City include a community theater, the Bakersfield Symphony orchestra, a
corurnunity concert group, and Cunningham Art Gallery. Bakersfield College and California State University,
Bakersfield, sponsor plays, concerts, lectures, and special events throughout the year.
A-7
APPENDIX B
APPRAISAL
[TO FOLLOWI
B-!
APPENDIX C
FORM OF OPINION OF BOND COUNSEL
Closing Date, 2004
City Council
City of Bakersfield
1501 Tmxtun Avenue
Bakersfield, CA 93301
City of Bakersfield
Assessment District No. 04-1
(Countryside/The Homestead/Cherry Hill/Olive Park III)
Limited Obligation Improvement Bonds
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance by the City of Bakersfield (the "Issuer") of
$4,340,000 aggregate pnnc~pal mount of the City of Bakersfield Assessment District No. 04-1 (Countryside/The
Homestead/Cherry Hill/Olive Park III) Limited Obligation Improvement Bonds (the "Bonds") pursuant to the
provisions of the Municipal Improvement Act of 1913 and the Improvement Bond Act of 1915 and Resolution No.
__-04, adopted by the City Council on ., 2004 (the "Resolution"). Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Resolution.
In such connection, we have reviewed the Resolution, the Tax Certificate of the Issuer dated the date hereof (the
"Tax Certificate") an opinion of counsel to the Issuer, certifications of the Issuer and others and such other
documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein.
Certain agreements, requiremems and procedures contained or referred to in the Resolution, the Tax Certificate and
other relevant documents may be changed and certain actions(including, without limitation, defeasance of the
Bonds) may be taken or omitted under the circumstances and subject to the terms and conditions set forth in such
documents. No opinion is expressed herein as to any Bond or the interest thereon if any such change occurs or
action is taken or omitted upon the advice or approval of counsel other than ourselves.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and
cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or
omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person,
whether any such actions are taken or omitted or events do occur. Our engagement with respect to the Bonds has
concluded with their issuance, end we disclaim any obligation to update this opinion. We have assumed the
genuineness of all documents and signatures presented to us (whether as originals or copies) and the due and legal
execution and delivery thereof by, and validity against, any parties other than the Issuer. We have not undertaken to
verify independently, and have assumed, the accuracy of the factual matters represented, warranted or certified in
the documents, and of the legal conclusions contained in the opinion, referred to in the second paragraph hereof.
Furthermore, we have assumed compliance with all covenants and agreements contained in the Resolution and the
Tax Certificate, including (without limitation) covenants and agreemems compliance with which is necessary to
assure that future actions, omissions or events will not cause interest on the Bonds to be included in gross income for
federal income tax purposes. In addition, we call attention to the fact that the fights and obligations under the
Bonds, the Resolution and the Tax Certificate may be subject to bankruptcy, insolvency, reorganization,
Preliminary; subject to change.
C-1
arrangement, fraudulent conveyance, moratorium and other similar laws relating to or affecting creditors' rights, to
the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to the
limitations on legal remedies against cities in the State of California.
We express no opinion on the plans, specifications, maps and other engineering details of the proceedings, or upon
the validity of the individual separate assessments securing the Bonds which validity depends, in addition to the
legal steps required, upon the accuracy of certain of the engineering details. Finally, we undertake no responsibility
for the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bonds
and express no opinion with respect thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following
opinions:
1. The Bonds constitute valid and binding special assessment obligations of the Issuer, payable solely from
and secured by the unpaid assessments and certain funds held under the Resolution.
2. The Resolution has been duly adopted and constitutes a valid and binding obligation of the Issuer.
3. Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of
the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes. Interest on the
Bonds is not a specific preference item for purposes of the federal individual or corporate alternative minimum
taxes, although we observe that it is included in adjusted current earnings in calculating corporate alternative
minimum taxable income. We express no opinion regarding other tax consequences related to the ownership or
disposition of, or the accrual or receipt of interest on, the Bonds.
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE LLC
per
c-2
APPENDIX D
ASSESSMENT DIAGRAM
[TO FOLLOW]
APPENDIX E
ASSESSMENT ROLL AND VALUE-TO-LIEN DATA
[TO FOLLOW]
APPENDIX F
CONTINUING DISCLOSURE CERTIFICATES
CITY OF BAKERSFIELD
ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK III)
LIMITED OBLIGATION IMPROVEMENT BONDS
CITY CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City
of Bakersfield (the "City") in connection with the issuance by the City of $4,340,000* in aggregate principal amount
of the above-referenced bonds (the "Bonds") for Assessment District No. 04-1 (Countryside/The Homestead/Cherry
Hill/Olive Park III) (the "Assessment District"). The Bonds are being issued pursuant to a resolution authorizing
issuance of the Bonds, being Resolution No. -04 (the "Resolution"), adopted by the City Council of the City on
,2004. The City covenants and agrees as follows:
Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and
delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the
Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5), as amended.
Section 2. Definitions. In addition to the definitions set forth above and in the Resolution, which
apply to any capitalized term used in this Disclosure Certificate, unless otherwise defined in this section, the
following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in,
Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person who 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).
"Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in writing by
the City and which has filed with the City a written acceptance of such designation.
"Fiscal Year" shall mean the 12-month period beginning on July 1 and ending on the next following June
30, unless and until changed by the City.
"Holder" shall mean either the registered owner of any Bond, or, if the Bonds are registered in the name of
DTC or another recognized depository, any Beneficial Owner or applicable participant in its depository system.
"Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.
"National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository
for purposes of the Rule. The current National Repositories are listed on the Securities and Exchange Commission
website at http://www, sec.gov/info/municipal/nnnsir.htm.
"Official Statement" shall mean the fmal Official Statement, dated
Bonds.
, 2004, pertaining to the
Preliminary; subject to change.
"Participating Underwriter" shall mean UBS Financial Services Inc., and any other original underwriters of
the Bonds required to comply with the Rule in connection with offering of the Bonds.
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
"State Repository" shall mean any public or private repository or entity designated by the State of
California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange
Commission. As of the date of this Disclosure Certificate, there is no State Repository.
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than nine (9) months after the
end of the City's Fiscal Year (i.e., curremly not later than April 1 of each year), commencing with the report for the
2004-05 Fiscal Year, provide to each Repository an Annual Report which is consistent with the requirements of
Section 4 of this Disclosure Certificate. The Annual Report may be submitted as a single document or as separate
documents comprising a package, and may include by reference other information as provided in Section 4 of this
Disclosure Certificate; provided that the audited financial statements of the City may be submitted separately from
the balance of the Annual Report, and later than the date required above for the filing of the Annual Report if not
available by that date. If the City's Fiscal Year changes, it shall give notice of such change in the same mariner as
for a Listed Event under Section 5(c).
(b) Not later than fiReen (15) Business Days prior to the date required in subsection (a), the City shall
provide the Annual Report to the Dissemination Agent (if other than the City). If the City is unable to provide to
each Repository an Annual Report by the date required in subsection (a), the City shall send to each Repository a
notice in substantially the form attached hereto as Exhibit A.
(c) The Dissemination Agent shall:
(i) determine each year, prior to the date for providing the Annual Report, the name and
address of each Repository, and file the Annual Report with each Repository, and
(ii) if the Dissemination Agent is other than thc City, file a report with the City certifying that
the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided and
listing all the Repositories to which it was provided.
Section4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by
reference the following:
(a) The audited financial statements of the City for the prior Fiscal Year, prepared in accordance with
generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the
Governmental Accounting Standards Board. If the City'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 m the financial statements contained in the fmal Official Statement, and the
audited financial statemems shall be filed in the same manner as the Annual Report when they become available.
Notwithstanding the foregoing, each Annual Report or other filing containing the City's financial statements may
include the following or other similar statement:
THE FOLLOWING FINANCIAL STATEMENTS ARE PROVIDED SOLELY TO COMPLY
WITH THE SECURITIES AND EXCHANGE COMMISSION STAFF'S INTERPRETATION
OF RULE 15c2-12. NO FUNDS OR ASSETS OF THE CITY OF BAKERSFIELD (OTHER
THAN THE ASSESSMENTS LEVIED IN THE ASSESSMENT DISTRICT) ARE REQUIRED
TO BE USED TO PAY DEBT SERVICE ON THE BONDS, AND THE CITY IS NOT
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OBLIGATED TO ADVANCE AVAILABLE FUNDS FROM THE CITY TREASURY TO
COVER ANY DELINQUENCIES. INVESTORS SHOULD NOT RELY ON THE FINANCIAL
CONDITION OF THE CITY IN EVALUATING WHETHER TO BUY, HOLD, OR SELL THE
BONDS.
(b) The following information with respect to the City for the Fiscal Year to which the Annual Report
relates, which information may be provided by its inclusion in the audited financial statements of the City for the
prior Fiscal Year described in subsection (a) above:
(i) The principal mount of Bonds outstanding, including principal amounts and years of
maturity of Bonds, if any, called for redemption in advance of maturity.
(ii) The balances as of the end of such Fiscal Year in each of the following funds established
pursuant to the Resolution: (A) the Improvement Fund; (B) the Redemption Fund; and (C) the Reserve Fund.
(iii) Identification of each parcel for which any installment of the unpaid assessment is
delinquent, together with the following information respecting each such parcel: (A) the amount delinquent
(exclusive of late charges and monthly penalties for reinstatement); (B) the date (December 10 or April 10) of the
first delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such
complaint has not yet been dismissed, the date on which the complaint was filed in the Kern County Superior Court;
and (D) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of
such foreclosure sale.
(iv) A current statement of the status of completion or progress toward completion of the
public improvements described in the Official Statement under the subheading "THE ASSESSMENT DISTRICT
AND THE IMPROVEMENTS - Description of the Community Areas and the Improvements."
(v) A current statement of the land-secured public financing information summarized in the
Official Statement under the subheading "THE BONDS - Priority of Lien."
(vi) A current statement of the parcel information set forth in Columns 5 through 9, inclusive,
of APPENDIX E to the Official Statement, for both existing and future pamels.
(c) In addition to any of the information expressly required to be provided under paragraphs (a) and
(b) of this Section, the City shall provide such further information, if any, as may be necessary to make the
specifically required statements, in the light of the circumstances under which they are made, not misleading.
Any or all of the items listed above may be included by specific reference to other documents, including
official statements of debt issues of the City or related public entities, which have been submitted to each of the
Repositories or the Securities and Exchange Commission. If the document included by reference is a final official
statement, it must be available from the Municipal Securities Rulemaking Board. The City shall clearly identify
each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the
occurrence of any of the following events (each, a "Listed Event") with respect to the Bonds, if material:
(i) principal and interest payment delinquencies;
(ii) non-payment related defaults;
(iii) modifications to rights of Bond Holders;
(iv) optional, contingent, or unscheduled Bond calls;
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(v) defeasances;
(vi) rating changes;
(vii) adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds;
(viii) unscheduled draws on the debt service reserves reflecting £mancial difficulties;
(ix) unscheduled draws on credit enhancements reflecting financial difficulties;
(x) substitution of credit or liquidity providers, or their failure to perform; or
(xi) release, substitution, or sale of property securing repayment of the Bonds.
(b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon
as possible determine if such event would be material under applicable Federal securities law.
(c) If the City determines that knowledge of the occurrence of a Listed Event would be material under
applicable Federal securities law, the City shall promptly file a notice of such occurrence with either (i) the
Municipal Securities Rulemaking Board and the State Repository or (ii) the Repositories. Notwithstanding the
foregoing, notice of Listed Events described in subsections (a)(iv) and (v) need not be given under this subsection
any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the
Resolution.
Section 6. Termination of Reporting Obligation. The City's obligations under this Disclosure
Certificate shall terminate upon the legal defeasance, prior redemption, or payment in full of all of the Bonds. If
such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the
same manner as for a Listed Event under Section 5(c).
Section 7. Dissemination Agent. The City may, fi.om time to time, appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge
any such Dissemination Agent, with or without appointing a successor Dissemination Agent.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate,
the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived,
provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5(a), it may only be
made in connection with a change in circumstances that arises from a change in legal requirements, change in law,
or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business
conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of naftonally
recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the
Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in
circumstances; and
(c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner
provided in the Resolution for amendments to the Resolution with the consent of Holders, or (ii) does not, in the
opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners
of the Bonds.
If the annual financial information or operating data to be provided in the Annual Report is amended
pursuant to the provisions hereof, the first annual financial information filed pursuant hereto cunt~lning the amended
F-4
operating data or financial information shall explain, in narrative form, the reasons for the amendmem and the
impact of the change in the type of operating data or financial information being provided.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the City shall
describe such amendment in the next 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 City. If an amendment is
made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the
annual fmancial information for the year in which the change is made shall present a comparison between the
financial statements or information prepared on the basis of the new accotmting principles and those prepared on the
basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in
the accounting principles and the impact of the change in the accounting principles on the presentation of the
financial information, in order to provide information to investors to enable them to evaluate the ability of the City
to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the
change in the accounting principles shall be sent to the Repositories in the same manner as for a Listed Event under
Section 5(c).
Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in this
Disclosure Certificate or any other means of communication, or including any other information in any Annual
Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate.
If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in
addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under
this Disclosure Certificate to update such information or include it in any future Annual Report or notice of
occurrence ora Listed Event.
Section 10. Default. In the event of a failure of the City to comply with any provision of this
Disclosure Certificate any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and
appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its
obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an
Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in the event of any
failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.
Section 11. Duties, Immunities, and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specifically set forth in this Disclosure Certificate, and the City agrees to
indemnify and save the Dissemination Agent, its officers, directors, employees, and agents, harmless against any
losses, expenses, and liabilities which it may incur arising out of or in the exercise or performance of its powers and
duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of
liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The
obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and
payment of the Bonds.
Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the
Dissemination Agent, 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.
Date: [Closing Date]
CITY OF BAKERSFIELD
By:
Finance Director
F-5
EXHIBIT A
NOTICE OF FAILURE TO FILE ANNUAL REPORT
Name of Issuer: City of Bakersfield, California
Name of Bond Issue: Assessment District No. 04-1 (Countryside/The Homestead/Cherry Hill/Olive Park III)
Limited Obligation Improvement Bonds
Date of Issuance: [Closing Date]
NOTICE IS HEREBY GIVEN that the City of Bakersfield, California (the "City), has not provided an
Annual Report with respect to the above-named Bonds as required Section 4(a) of the Continuing Disclosure
Certificate executed by the City on [Closing Date]. The City anticipates that the Annual Report will be filed by
Dated:
CITY OF BAKERSFIELD
By:
Finance Director
F-6
CITY OF BAKERSFIELD
ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK lid
LIMITED OBLIGATION IMPROVEMENT BONDS
DEVELOPER'S CONTINUING DISCLOSURE CERTIFICATE
This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by
[APPLICABLE LANDOWNER], a [type of entity] (the "Developer"), in connection with the
issuance by the City of Bakersfield (the "City") of $4,340,000* in aggregate principal mount of the above-
referenced bonds (the "Bonds") for Assessment District No. 04-1 (Countryside/The Homestead/Cherry Hill/Olive
Park III) (the "Assessment District"). The Bonds are being issued pursuant to a resolution authorizing issuance of
the Bonds, being Resolution No. __-04 (the "Resolution"), adopted by the City Council of the City on
,2004. The Developer covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate.
This Disclosure Certificate is being executed and delivered by the Developer for the benefit of the City,
UBS Financial Services Inc., as the underwriter of the Bonds (the "Underwriter"), and the Holders and Beneficial
Owners (each as defined below) of the Bonds in order to assist the Underwriter in complying with Securities and
Exchange Commission Rule 15c2-12(b)(5), as amended.
SECTION 2. Definitions.
In addition to the definitions set forth above and in the Resolution, which apply to any capitalized term
used in this Disclosure Certificate, unless otherwise defined in this section, the following capitalized terms shall
have the following meanings:
"Affiliate" of another Person shall mean (a) a Person directly or indirectly owning, controlling, or holding
with power to vote, 5% or more of the outstanding voting securities of such other Person, (b) any Person 5% or more
of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by
such other Person, or (c) any Person directly or indirectly controlling, controlled by, or under common control with,
such other Person. For purposes hereof, "control" means the power to exercise a controlling influence over the
management or policies of a Person, unless such power is solely the result of an official position with such Person.
"Assumption Agreement" means an agreement or certificate by a Successor Developer, containing terms
substantially similar to this Disclosure Certificate, whereby such Successor Developer shall agree to provide Semi-
Annual Reports and notices of Listed Events with respect to the property in the Assessment District owned by such
Successor Developer and its Affiliates, if any.
"Beneficial Owner" shall mean any person who has the power, directly or indirectly, to vote or consent
with respect to, or to dispose of ownership of, any Bond or Bonds, including persons holding Bonds through
nominees, depositories, or other intermediaries.
"Development Plan" shall mean the specific improvements the Developer intends to make, or cause to be
made, in order for the Community Area to reach the Planned Development Stage, the time frame in which such
improvements are intended to be made, and the estimated costs of such improvements. The Developer's
Development Plan, as of the date hereof, is described in the Official Statement under the heading "OWNERSHIP
AND PLANNED FINANCING AND DEVELOPMENT OF THE ASSESSMENT DISTRICT."
* Preliminary; subject to change.
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"Disclosure Period" shall mean the six-month period beginning on July 1 or January 1 and ending on the
next following June 30 or December 3 l, as applicable.
"Disclosure Representative" shall mean the president, the managing member, any vice-president, or the
chief financial officer of the Developer or ins or her designee, or such other officer, employee, or agent as the
Developer shall designate in writing to the Dissemination Agent and the City from time to time.
"Dissemination Agent" shall mean the City, or any successor Dissemination Agent designated in writing by
the City and which has filed with the City a written acceptance of such designation.
"Event of Bankruptcy" shall mean, with respect to a Person, that such Person files a petition or institutes a
proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or
insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in
any similar capacity, wherein or whereby such Person asks, seeks, or prays to be adjudicated a bankrupt, or is to be
discharged from any or all of such Person's debts or obligations, or offers to such Person's creditors to effect a
composition or extension of time to pay such Person's debts or obligations, or asks, seeks, or prays for
reorganization or to effect a plan of reorganization, or for a readjustment of such Person's debts, or for any other
similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or
instituted or taken against such Person, or if a receiver of the business, property, or assets of such Person is
appointed by any court, or if such Person makes a general assignment for the benefit of such Person's creditors.
"Financing Plan" shall mean the method by which Developer intends to finance its Development Plan,
including specific soumes of funding for such Developmem Plan. The Developer's Financing Plan, as of the date
hereof, is described in the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING
AND DEVELOPMENT OF THE ASSESSMENT DISTRICT."
"Financial Statements" shall mean the full financial statements, special purpose financial statements,
project operat'mg statements, or other reports reflecting the financial position of the Developer's parent company or,
if such financial statements are prepared separately for the Developer, reflecting the financial position of the
Developer; provided that, if such financial statements or reports are otherwise prepared as audited financial
statements or reports, then "Financial Statements" means such audited financial statements or repons. The Financial
Statements for the Developer or its parent company shall consist of a balance sheet, an income statement, and a
statement of cash flows, all prepared in accordance with genamlly accepted accounting principles.
"Holders" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name
of The Depository Trust Company or another recognized depository, any Beneficial Owner or applicable participant
in its depository system.
"Listed Event" shall have the meaning given to such term in Section 5 of this Disclosure Certificate.
"National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository
for purposes of the Rule. The current National Repositories are listed on the Securities and Exchange Commission
website at http://www.sec.gov/info/municipal/nrmsir.htm.
"Official Statement" shall mean the £mal Official Statement dated
Bonds.
,2004, pertaining to the
"Person" means an individual, a corporation, a partnership, an association, a joint stock company, a limited
liability company, a trust, any unincorporated organization, or a government or a political subdivision thereof.
"Planned Development Stage" shall mean, with respect to any property in the Assessment Dish-ict owned
by the Developer or its Affiliates, if any, the stage of development to which the Developer intends to develop such
property, as described in the Official Statement, which is the stage at which backbone infrastructure is in place for
the applicable Community Area, and the Developer has completed cons~a'uction and/or development as described in
F-8
the Official Statement under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT
OF THE ASSESSMENT DISTRICT."
"Repository" shall mean each National Repository and each State Repository.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as the same may be amended from time to time.
"Semi-Annual Report" shall mean any Semi-Annual Report provided by the Developer pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Certificate.
"State Repository" shall mean any public or private repository or emity designated by the State of
California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange
Commission. As of the date of this Disclosure Certificate, there is no State Repository.
"Successor Developer" shall mean any property owner, other than the Developer or its Affiliates, which
purchases property in the Assessment District for the purpose of developing the property and not merely as an end-
user.
SECTION 3. Provision of Semi-Annual Reports.
(a) So long as the Developer is obligated hereunder and said obligation bas not been terminated
pursuant to Section 6 of this Disclosure Certificate, the Developer shall provide, or shall cause the Dissemination
Agent to provide, not later than three (3) months after the end of each Disclosure Period (i.e., not later than
September 30 or March 31 of each year, as applicable), commencing with the report for the Disclosure Period
ending December 31, 2004, to each Repository a Semi-Anunal Report relating to the immediately preceding
Disclosure Period which is consistent with the requirements of Section 4 of this Disclosure Certificate. The Semi-
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, however, that if
audited Financial Statements are required to be provided, such audited Financial Statements may be submitted
separately from the balance of the Semi-Annual Report, and later than the date required above for the filing of the
Semi-Annnal Report, if not available by that date.
(b) So long as the Developer is obligated hereunder and said obligation has not been terminated
pursuant to Section 6 of this Disclosure Certificate, not later than fifteen (15) business days prior to the date required
in subsection (a) hereof, the Developer shall provide the Semi-Annnal Report to the Dissemination Agent. If the
Developer is unable to provide, or cause to be provided, to each Repository a Semi-Aunual Report by the date
required in subsection (a) hereof, the Dissemination Agent shall, first, confirm that the Developer's obligation
hereunder has not been terminated pursuant to Section 6 of this Disclosure Certificate, and, if the Developer is still
obligated hereunder, the Dissemination Agent shall send to each Repository a notice in substantially the form
attached hereto as Exhibit A.
(C) The Dissemination Agent shall:
(i) determine each year, prior to the date for providing the Semi-Annual Report, the name
and address of each Repository, and file the Semi-Annnal Report with each Repository, and
(ii) following the filing of the Semi-Annual Report with each Repository, file a certificate
with the City and the Developer certifying that the Semi-Annual Report has been filed with each Repository
pursuant to this Disclosure Certificate, stating the date on which the Semi-Annual Report was filed, and listing each
Repository (by name and address) with which it was filed.
SECTION 4. Content of Semi-Annnal Reports.
So long as the Developer is obligated hereunder and said obligation has not been terminated pursuant to
Section 6 of this Disclosure Certificate, the Developer shall provide a Semi-Annual Report for the preceding
Disclosure Period with respect to property within the Assessment District owned by the Developer or its Affiliates,
if any, which Semi-Annual Report shall contain or incorporate by reference the following:
(a) The Developer shall provide a general description of progress made in the Development Plan, and
any significant changes in the Development Plan, Financing Plan, or zoning during the prior Disclosure Period. The
Developer shall track actual absorption relative to projected absorption according to the framework described in the
Official Statemem under the heading "OWNERSHIP AND PLANNED FINANCING AND DEVELOPMENT OF
THE ASSESSMENT DISTRICT." The Developer shall identify any material deviations in actual versus expected
sale prices, and identify zoning changes, if any. The Developer shall also include information concerning the
recordation of final maps, if applicable, and information concerning the sale or transfer of property to Persons that
are not Affiliates of the Developer.
The Developer shall describe any significant changes in the Financing Plan for its development project
including, without limitation, changes in status of the Developer's credit line (or the credit line of any Affiliates of
the Developer that own property within the Assessment District), if applicable.
The Developer shall describe (i) any change in the legal structure of the Developer or of any of its
Affiliates that own property within the Assessment District; (ii) any previously undisclosed amendments to the land
use entitlements or environmental conditions or other governmental conditions that are necessary to complete its
Development Plan; or (iii) any previously undisclosed legislative, administrative, or judicial challenges to the
Development Plan, if known.
(d) Each fiscal year, one Semi-Annual Report shall make reference to the quarterly and annual
financial statements of the Developer, on file with the Securities and Exchange Commission (if applicable). All
such references shall contain the following caveat:
The quarterly and annual reports of the Developer are referred to for informational purposes only. In the
event of a failure to pay any installment of assessments, and atter depletion of the Reserve Fund, the real property in
the Assessment District is the sole security for the Bonds. The obligation of the Developer to pay the unpaid
assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets
(other than the property in the Assessment District) of the Developer may be required, by operation of law or
otherwise, to be used to pay debt service on the Bonds. It should not be inferred from the reference to the quarterly
and annual reports of the Developer that the funds or assets (other than the property in the Assessment District) are
available to cure any delinquencies in the payment of assessments.
(e) To the extent that Financial Statements are prepared separately for the Developer, Financial
Statements prepared in accordance with generally accepted accounting principles, as in effect from time to time,
shall be provided. To the extent that audited Financial Statements are prepared separately for the Developer, if
audited Financial Statements are required to be provided and such audited Financial Statements are not available by
the time the applicable Semi-Annual Report is required to be provided pursuant to Section 2(a) of this Disclosure
Certificate, the applicable Semi-Annual Report shall contain unaudited Financial Statemems, and the audited
Financial Statements shall be filed in the same manner as the applicable Semi-Annual Report when they become
available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby.
To the extent that audited Financial Statements of the Developer are prepared, the Developer shall include such
audited Financial Statements in the applicable Semi-Amaual Report. To the extent that the provisions of this
subsection (e) become applicable, the provisions of subsection (d) above shall cease to be applicable. All such
audited Financial Statements of the Developer, if any, shall contain the following caveat:
The audited financial statements of the Developer are included for informational purposes only. In the
event of a failure to pay any installment of assessments, and after depletion of the Reserve Fund, the real property in
the Assessment District is the sole security for the Bonds. The obligation of the Developer to pay the unpaid
assessment installments does not constitute a personal indebtedness of the Developer for which the funds or assets
(other than the property in the Assessment District) of the Developer may be required, by operation of law or
otherwise, to be used to pay debt service on the Bonds. It should not be inferred from audited financial statements
F-lO
of the Developer that the funds or assets (other than the property in the Assessment District) are available to cure
any delinquencies in the payment of assessments.
(f) In addition to any of the information expressly required to be provided under this Section, the
Developer shall provide such further information, if any, as may be necessary to make the specifically required
statements, in the light of the circumstances under which they are made, not misleading.
Any or all of the items listed above may be included by specific reference to other documents that have
been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included
by reference is a final official statement, it must be available fi.om the Municipal Securities Rulemaking Board. The
Developer shall clearly identify each such other document so included by reference.
SECTION 5. Developer's Report of Listed Events.
(a) So long as the Developer is obligated hereunder and said obligation has not been termmated
pursuant to Section 6 of this Disclosure Certificate, pursuant to the provisions of this Section 5, the Developer shall
promptly give, or cause to be given notice of the occurrence of any of the following events (each, a "Listed Event")
with respect to Developer and any of its Affiliates that own property within the Assessment District:
(i) Any conveyance by the Developer or any of its Affiliates to a Successor Developer or its
Affiliates, if any, of property that, when aggregated with all other property in the Assessment District then-owned by
such Successor Developer and its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the
annual assessment securing payment of the Bonds.
(ii) Any failure of the Developer or any of its Affiliates to pay when due general property
taxes, special taxes, or assessments with respect to its property within the Assessment District.
(iii) Any termination of a line of credit or loan, any termination of, or uncured material
default under, any line of credit or loan, or any other loss of a source of funds that could have a material adverse
affect on the Developer's most recently disclosed Financing Plan or Development Plan, if any, or on the ability of
the Developer or any of its Affiliates to pay assessment installments with respect to the Assessment District when
due.
(iv) The occurrence of an Event of Bankruptcy with respect to the Developer or any of its
Affiliates that could have a material adverse affect on the Developer's most recently disclosed Financing Plan or
Development Plan, if any, or on the ability of the Developer or any of its Affiliates to pay assessment installments
with respect to the Assessment District when due.
(v) Any significant amendments to land use entitlements for the Developer's or its Affiliates'
property in the Assessment District, if material.
(vi) Any previously undisclosed governmentally-imposed preconditions to commencement or
continuation of development on the Developer's or its Affiliates' property in the Assessment District, if material.
(vii) Any previously undisclosed legislative, administrative, or judicial challenges to
development on the Developer's or its Affiliates' property in the Assessment District, if material.
(viii) Any changes, if material, in the alignment, design, or likelihood of completion of
significant public improvements, including major thoroughfares, sewers, water conveyance systems, and similar
facilities.
(ix)
Disclosure Certificate.
The assumption of any obligations by a Successor Developer pursuant to Section 6 of this
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(b) Whenever the Developer obtains knowledge of the occurrence of a Listed Evem, the Developer
shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to
report the occurrence pursuant to subsection (c) below.
(c) If the Dissemination Agent has been inslmcted by the Developer to report the occurrence of a
Listed Event, the Dissemination Agent shall file a notice of such occurrence with either (i) the Municipal Securities
Rulemaking Board and each State Repository or (ii) the Repositories, with a copy to the Participating Underwriter.
SECTION 6. Termination of Developer's Reportine Oblination.
The Developer's continuing obligation to provide a Semi-Annual Report and notices of material Listed
Events will terminate upon the earlier of(l) the legal defeasance, prior redemption, or payment in full of all of the
Bonds, or (2) the date upon which the Developer and its Affiliates, if any, cease to own property in the Assessment
District that, when aggregated with all other property in the Assessment District then-owned by the Developer and
its Affiliates, if any, is subject to the lien of greater than twenty percent (20%) of the annual assessment securing
payment of the Bonds, or (3) when the Developer's Community Area has reached the Planned Development Stage.
If the Developer conveys to a Successor Developer property in the Assessment District prior to the time at which
such property reaches the Planned Development Stage, and such property conveyed, when aggregated with all other
property in the Assessment District then-owned by such Successor Developer and its Affiliates, if any, is subject to
the lien of greater than twenty pement (20%) of the annual assessment securing payment of the Bonds, then the
Developer shall require a Successor Developer to enter into an Assumption Agreement, but only to the extent and
upon the terms, if any, required by the Rule.
SECTION 7. Dissemination Agem.
The City may, fi.om time to time, appoint or engage a Dissemination Agent to assist the Developer in
carrying out its obligations under this Disclosure Certificate, and the City may discharge any such Dissemination
Agent, with or without appointing a successor Dissemination Agent.
SECTION 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Certificate,
the Developer may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be
waived, provided that the City agrees in writing and the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of Section 3(a), 4, or 5, it may only be made
in connection with a change in circumstances that arises from a change in legal requirements, change in law, or
change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business
conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally
recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the
Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in
circumstances; and
(c) the proposed amendment or waiver either (i) is approved by Holders of the Bonds in the manner
provided in the Resolution for amendments to the Resolution with the consent of Holders, or (ii) does not, in the
opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners
of the Bonds.
If the annual financial information or operating data to be provided in the Semi-Annual Report is amended
pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended
operating data or financial information shall explain, in narrative form, the reasons for the amendment and the
impact of the change in the type of operating data or financial information being provided.
In the event of any amendment or waiver of a provision of this Disclosure Agreement, the Developer shall
describe such amendment in the next Semi-Annnal Report, and shall include, as applicable, a narrative explanation
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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 Developer. If an
amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial
statements, the annual financial information for the year in which the change is made shall present a comparison
between the financial statements or information prepared on the basis of the new accounting principles and those
prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of
the differences in the accounting principles and the impact of the change in the accounfmg principles on the
presentation of the fmancial information, in order to provide information to investors to enable them to evaluate the
ability of the Developer to meet its obligations. To the extent reasonably feasible, the comparison shall be
quantitative. A notice of the change in the accounting principles shall be sent to the Repositories in the same
manner as for a Listed Event under Section 5.
SECTION 9. Additional Information.
Nothing in this Disclosure Certificate shall be deemed to prevem the Developer 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 Semi-Annual Report or notice of occurrence of a Listed
Event, in addition to that which is required by this Disclosure Certificate. If the Developer chooses to include any
information in any Semi-Annnal Report or notice of occurrence of a Listed Event in addition to that which is
specifically required by this Disclosure Certificate, the Developer shall have no obligation under this Disclosure
Certificate to update such information or include it in any future Semi-Annual Report or notice of occurrence of a
Listed Event.
SECTION 10. Default.
In the event of a failure of the Developer to comply with any provision of this Disclosure Certificate, the
Underwriter, the City, or any Holder or Beneficial Owner of outstanding Bonds may take such actions as may be
necessary and appropriate, including seeking mandate or specific performance by court order, to cause the
Developer to comply with its obligations under this Disclosure Certificate. A default under this Disclosure
Agreement shall not be deemed to be an event of default under the Resolution, and the sole remedy under this
Disclosure Certificate in the event of any failure of the Developer to comply with this Disclosure Certificate shall be
an action to compel performance.
SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent.
The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure
Certificate, and the Developer agrees to indemnify and save the City, the Dissemination Agent, and their respective
officers, directors, employees, and agents, harmless against any losses, expenses, and liabilities which either or both
of them may incur arising out of or in the exercise or performance of the Developer's powers and duties hereunder,
including the costs and expenses (including attorneys fees) of defending against any claim of liability, bm excluding
liabilities due to the City's or the Dissemination Agent's negligence or willful misconduct. The obligations of the
Developer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the
Bends.
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SECTION 12. Beneficiaries.
This Disclosure Certificate shall be binding upon the Developer and shall inure solely to the benefit of the
Developer, the Dissemination Agent, the Underwriter, the City, and the Holders and Beneficial Owners from time to
time of the Bonds, and shall create no rights in any other person or entity.
Date: [Closing Date]
[APPLICABLE LANDOWNER]
a [type of entity]
By:
Title:
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EXItlBIT A
NOTICE TO REPOSITORIES OF FAILURE TO FILE SEMI-ANNUAL REPORT
Name of Developer: [APPLICABLE LANDOWNER], a
[type of entity]
Name of Bond Issue:
CITY OF BAKERSFIELD, CALIFORNIA
ASSESSMENT DISTRICT NO. 04-1
(COUNTRYSIDE/THE HOMESTEAD/CHERRY HILL/OLIVE PARK III)
LIMITED OBLIGATION IMPROVEMENT BONDS
Date of Issuance:
[Closing Date]
NOTICE IS HEREBY GIVEN that [APPLICABLE LANDOWNER], a [type of entity] (the
"Developer"), has not provided a Semi-Annual Report with respect to the above-named Bonds as required by
Section 3 of the Developer's Continuing Disclosure Certificate, dated [Closing Date]. The Developer anticipates
that the Semi-Annual Report will be filed by
Date:
THE CITY OF BAKERSFIELD,
as Dissemination Agent, on behalf of
[APPLICABLE LANDOWNER],
a [type of entity]
By:
Finance Director
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