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99-0817_CAPISTRANO UNIFIED SCHOOL DISTRICT_H1a_Supplemental Agenda ReportSUPPLEMENTAL AGENDA ITEM AGENDA ITEM TO: George Scarborough, City Manager FROM: Cynthia L. Russell, Administrative Services Director August 17, 1999 SUBJECT: Consideration of Joint Community Facilities District between City of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School District on behalf of the Pacific Point Project (SunCal Companies) By motion, approve the attached Joint Community Facilities Agreement between the City of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School District. SITUATION: In the original August 17, 1999, staff report for this Agenda Item, we stated that, based upon the initial estimate for property values for the Pacific Point development, the proposed $11,765,000 bond could be supported with a supplemental tax rate of .53% resulting in a total tax rate of 1.63%. We also stated, however, that Joseph Janczyk of Empire Economics was evaluating the estimated property values for the development and his refined estimates might result in the need to reduce the size of the bond issue in order to retain the anticipated tax rate below 1.7%. Mr. Janczyk has completed his evaluation and his findings are contained in the attached letter to Mr. David Doomey, Assistant Superintendent of Facilities' Planning for the Capistrano School District. Mr. Janczyk concludes that the estimated property values should be based on $182 per square foot for finished construction rather than the initial estimate of $200 per square foot. Based on the $182 per square foot conclusion, the proposed $11,765,000 bond will result in an estimated total tax rate of 1.7%. Although an estimated total tax rate of 1.7% is significantly greater than the original estimate of 1.63%, it remains within the threshold staff had established and therefore staff continues to support the proposed $11,765,000 bond. x C. ICES IMR AGE-ar /(�� 1" Y AGENDA ITEM -2- August 17, 1999 Description 1999-00 Estimated Property Value Current Property Tax Special Tax Proposed by Developer Revised Total Tax Proposed by Developer Maximum Tax Rate 1.10% .60% 1.70% Construction Proceeds Generated $11,765,000 $11,765,000 (_> 5,500 SF) $1,001,000 $11,011 $6,108 $17,119 (4,500 - 5,499 SF) $819,000 $9,009 $4,998 $14,007 (3,500 - 4,499 SF) $637,000 $7,007 $3,887 $10,894 (2,500 - 3,499 SF) $455,000 $5,005 $2,777 $7,782 (<2,500SF) $327,600 $3,604 $1,999 $5,603 FACILITIES CONSTRUCTION COSTS: Current Facilities Proposal School Facilities: Kinoshita School Site $2,100,000 Las Ramblas School Site 4,800,000 Subtotal - School Facilities 6,900,000 Non -School Facilities: Water Facilities $2,671,000 Roadway & Storm Drain Improvements 2,194,000 Subtotal - Non -School Facilities 4.865.000 TOTAL $11.765.000 AGENDA ITEM -3- COMMISSION/BOARD REVIEW AND RECOMMENDATIONS: Not Applicable FINANCIAL CONSIDERATIONS: August 17, 1999 The City and Water District would incur minimal costs associated with review and approval of the appropriate documents. As previously indicated, the bonds would be in the name of the School District, therefore the City and Water District would have no costs associated with the cost of debt issuance. NOTIFICATION: SunCal Companies, Inc. 5109 East La Palma, Suite D Anaheim, California 92807 Attn: Marc L. Magstadt ALTERNATE ACTIONS: Capistrano Unified School District 32972 Calle Perfecto San Juan Capistrano, California 92675 Attn: Dave Doomey 1. By motion, approve the attached Joint Community Facilities Agreement between the City of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School District. 2. By motion, state the City Council's intent to approve a Joint Community Facilities District with an anticipated tax rate not to exceed 1.63%. 3. Request additional information. 0 AGENDA ITEM -4- August 17, 1999 RECOMMENDATION: By motion, approve the attached Joint Community Facilities Agreement between the City of San Juan Capistrano, Capistrano Valley Water District and Capistrano Unified School District. Respectfully Submitted, Cyr h rTt is L. Russe Administrative Services Director yf3/11/1999 113:1! August 11, 1999 kMN1kN NCUNUM U EMPIRE ECONOMICS, LLC Economic -Real Estate Consultants Joseph Thomas Janczyk, Ph.D. 35505 Camino Capistrano, Suite 200 Capistrano Beach, CA 92624 Phone: (949) 661-7012 Fax. (949) 661-8763 Mr. David Doomey Assistant Superintendent of Facilities Planning Capistrano Unified School District 32972 Calle Perfecto San Juan Capistrano, CA 92675 Re: Capistrano Unified School District: Pacific Point Community Facilities District Recommended Prices for Forthcoming Residential Products Dear Mr. Doomey: NAGE_ bd_--- Pursuant to your request, Empire Economics (EE) has performed a comprehensive analysis of the planned residential products in Pacific Point, in order to arrive at pricing recommendations for structuring the forthcoming Community Facilities District (CFD). Description of Research Empire Economics' research included the compilation and analysis of the following information: ➢ Site Visit: Planning Areas, Proposed Product "Types and View Potential ➢ Market Surveys of Residential Projects Offering New Homes ➢ Market for Resale I Jnits: 60+ Recent Comparable Sales ➢ Prior Project with Comparable Views: PCH & Del Obispo, Northeast Corner ➢ Chapman University Economic Forecast Primary Research Findings Accordingly, based upon a consideration of the research conducted, the primary findings are now presented. 14101b1U 011 1 MI'1 K[ [ I.UfYUM1l,U Before proceeding, it is worthwhile to note that the following analysis utilizes the price per sq.ft of living area, rather than the price itself, since the former provides a more accurate/reliable indicator as to how the price of a given size home varies as a result of location and other factors. Finally, considering the location of Pacific Point, its Market Area is comprised of San Juan Capistrano, Dana Point (excluding Monarch Beach), and San Clemente. Proposed Product Mix of Pacific Point The current product mix contemplates 350 single-family detached homes with 2000-5500 sgJ1. of living area. However, it should be noted that the property owner is currently seeking some changes which, if approved, would increase the number of units. Nevertheless, for purposes of this analysis, EE utilizes the currently approved configuration of 350 units. The developer expects that the prices of the homes will amount to some $200 pes sq.ft. Market Surveys of Residential Projects offering New Homes EE market field surveys identified eight currently/recently active projects, excluding view premiums, in the Market Area_ The prices of the homes amounted to some $442-498,000 for some 2730-3112 sq.ft. of living area resulting in value ratios of $161, on the average. The two projects which are the most comparable to Pacific Point, based upon their proximity, are Mandalay by John Laing Homes and Naples by Greystone, and their value ratios are $169 and $176, respectively; however, their view orientations are not comparable to Pacific Point. Please refer to Table 1 and the aerial for additional information. Market for Resale Units: 60+ Recent Comparable Sales EE compiled information on the sales of existing homes in the vicinity of Pacific Point, and the results are as follows: ➢ The resale units in the immediate vicinity of Pacific Point, to the southeast but excluding Conemera, have prices of $412,000 with 2,624 sq.ft. of living area, for a value ratio of $158. ➢ The resale units in another comparable site, to the northeast of Route 5 and Pico, have prices of $424,750 for some 2,460 sq.ft., resulting in a value ratio of $174. Please refer to Table 2 for additional information. grior Project with Coruparahte Views: PCH & Del Obispo Northeast Corner The most comparable neighborhood, with respect to views, is a prior residential project that is located northcastmty of PCH & Del Obispo. This project initially sold homes in the early 1990's and the most recent resales occurred in April 1998 and January 1999, and had value ratios of $155 and $192, respectively. Based upon Chapman University, housing prices in 7 Nki/L1/IIi`fy hd:l/ 44`J661N /b_i tMF'lh'F FI:UNUMiI � 1'Aht_ b'� Orange County from April 1998 and January 1999 to July 1999 increased by some II% and 5%, respectively, so the adjusted value ratio amounts to $187, on the average. Please refer to Table 3 for additional information. Cliapman University Economic Forecast The Chapman University Economic Forecast, published in June 1999, has a forecasted rate of employment growth for Orange County of 42,000 jobs in 1999 and another 40,000 jobs in 2000. While housing price appreciation is expected to amount to 11% in 1999 and another 7.6% in the year 2000. Although the employment growth and housing price appreciation is expected to benefit the price for the forthcoming residential projects in Pacific Point, which are not anticipated to enter the marketplace until mid -2000, the analysis herein considers only current prices. Price Recommendations for the Pacific Point CFD Financing Structure Based upon a consideration of the above factors, the primary conclusions regarding the price structure for utilization in the CFD Financing Structure for Pacific Point's residential products are as follows: ➢ For projects offering new housing units, the two most comparable projects have value ratios of $172, on the average; however, they do not feature the same views as Pacific Point. ➢ For resale units, the most comparable are in the neighborhood of Route 5/Pico- northeast, and these have value ratios of $174, on the average. Although these have similar views, the value ratios are diminished by their age, since they were built in the mid -1980's. ➢ Finally, for the most comparable neighborhood, northeasterly of PCH and Del Obispo, the most recent resales occurred in April 1998 and January 1999, and their adjusted value ratios amount to $187, on the average. So, based upon the vaet majority of home sales and resales in the Market Area, the value ratios for comparable new and comparable resales amount to $172 and $174, respectively. Furthermore, it is worthwhile to note that the most comparable recent sales, in the PCH/Del Obispo neighborhood, have adjusted value ratios of $187. Therefore, based upon the CURRENT MARKET CONDITIONS EXCLUDING VIEW PREMIUMS, the recommended prices for the Pacific Point Financing Structure, based upon blending of the value ratios, is $182 per sq. ft., on the average. If you have any additional comments or considerations, contact me as I would be pleased to respond to them. '}L �m s Janczyk, Ph.D. Consultant A h>f/11/l`f `fY X3:11 `i4 `ibblHlbd tMFiKt IUJN( MI KI I, r W J Go NNW Q Y 66 Q g W I - Z Z O 2 W Z _Z LL O U LU w CL 0 O> A rM r (n w W W Vt m M w CIDV `w 4A CD M m LL LU p O m U) U to is r» w i» w » us w till .L CL p N 8cko mc m l0i Owl �j In N N <O N m N (7 m 4:9 C9 1411 a D p 4' Obi, cro N a00 Cl) N (D N cn co N O) ? M - o7 m !� N � � QOi 6? O O pq O p p O pb O p� p p OO p p 1+ I� f- (h N N Q/ r n (D co (D m N 69 D) m 0 m orn O O O o O q O o O g O C O o 01 0) a M o N o o ui o Z% �t c � gcEf E4� p U L U y U m c od a m U O d m d c c m R 0 ? ca x m 7 c m V) m w r p0 Y (a F a� w r c N N m V ` � :3o t0ip 0 x C � a `o L m c o T ( tm a x F pCCC� g 3 F U U a P lC3 a m 'a aj rn UN in m 4 m d U U N f� t m vi4 m of m z a cn m D o N t7 V �D cp f� t%1 U 9-5-99 s OC99-972 r VOO . A:L1 �� ,r1�• t, u, I i, I I , , tl,,. 1 I 14 Jbclicll U 0 TABLE 2 0 RECENT SALES OF EXSITING HOMES IN THE NEIGHBORHOOD TOanae4h SSW43afa P&A ulnn Ana Value Ratio Peke Living Area. Value ROW 08I81/1908 5586000 28087 _ W7J8 0807//1880 _ 5578.000 5 1 5179 - --- ----- _ 071-J0 o7anims$302,000 _ zssi 8128 971-40 08118!1980 _ ,300 2,319- - - e71J9 0&08/1 DB8pm.000 _ 2500 $137 - -- _ _ 971-40 0601/1808 _ 90 000 2,81T $174 - - . 971.b OSbd/008 _ 000 2,291 180 - - 971Je 04/29/1099 000 75000 epee 3 8 $174 104 - -� 411-40 09199/lwe — — - - ------ 971JO 052141990 _ _ _ 40000 1 671-40 03112/1889 364000 2 82 $127 971-48 0220/1888 _ 10.000 2782 $152 - 97/-48 01/26/1 BBe _ 70000 2.3n 5108._ - s71J8 01/1141809 14000 2,318 135 $429.760 23g9 $183 - 072.C4 06/23/1888 0 000 5562 000 9 2 2 aa9 178 --- 5122 $580 00_0 _ 3 246 _ 178 _ 97aC6 08/20/1898 972 -CS 07zC5 08(10/1998 97114/1998 f4450op- 3457 --- _ _5120 s 000 _ 2223 _ 972-Gb osmi1Bu9 ___W2C5_ 0 68271 9 9 8 89000 2273 3=.SW _ 2,148- $390000 _ 3.190 --- 122 $350.000 _ 2199-- - -- 1Ba_ 972-G3 0607/1890 un.cb 05M7/1 NO 0 _ - - - --- 972 -ES —OWN __ 3545000 9480 167 _ _ ---- 5390344 _— - Od120/18Be $3N. OOp -- 2.350 139- 0000 2,950 -- _ - 3145 $393000 2.560 $107 972.C5 0412711998_ 97215 Odg2N099 97306 _ OY1B71999 _ 672-C6 _ 09/16/1900 .. __ 0000 5321.000 Sd250�pp 390000 3aB3�000 338.000__ - $443,0DO $265 ppp _ _ 3,180 - 2350 2,040 2380 2,360 2223 --- 2,008 2,2843___ _ 180 170 SIDE _ $140 Sled- $152 _ §134 _ 720 972 CS _02!25/1998 072-05 Ob lana 972-cS _01/28/1 BBB 2.371 - --- -- 150 - --- ---_ - 972.68 _ 05/2N188B -Oam6H990277,090 _ 2iBb 972,C9 972 -CB 07207 - 972-C1 _ _ 872-C7 972-C> - 973-04__- 972-06 972.06 -072-05 01!0711999 _ - - 07/171998 _ 07/1&1090 08/29/1998 - 03117/1899- 0812271088 07/14/1999 0812211998 3,393 160 5993,750 - -_ -�- _56p 000 $44B.360 - 556,000 - $462300 2,180 - a,280 - -- 3149 -- ---- --- _3410- 32)7,000 - 37 -OD 000 _-- 3287009 SSB 000 1694zW0 10000 _ 54 _10000 - _ $377 000 - _ 77000__ - _;986000 _ _5725,000 -- 64fi2000 5301000 36,0002496 35000 5357000 416000 405000 3a5i000� 350000 900000 5430 00021]0 $500ODO _ 3bBp00 _ $193600 _ .3443,000 2200_ _ 2,308 2 151 - 3 260 3,460 9190 3.097 _- _ 2 888 9p01 2,572 - ---- d 1 2087 __._. 22'ls5193/1996 - 2,495 2436992.4111999 2,26]___�/19(!9 2�4 6 2336 - _2.202- 2436 22A9- 2 995 2769 22w6 2251 129 992 -721 9177 _ $129 $132 17A 122 _- _ -- --- 4160 3171 218 .._�__. 148!1988 17599244111998 $470 f1B8)i 14:47-- 8229--_ _ 191 299 1JN _ 19J 178 1171 0412&1998 972-0.5 _ 03/25/1880 _ 972T5— 011191890 002-2 1 -- 07/2417988 - Sus 992-61 07/0211098 1i9BB -_. _ _ 992.117$423000 M8 G4721241109H -HI Be _ _ 992.12 07/30/1908 - 992117 08/291092 9e1-H2 OBloeltg0e_ 992-H2 OS49119B8 _ _ 992412 05/13/1986 002112 03/10/1989 902442 0120/1899_ 10iA1 180 -- $219 2.092 2,958002 - _ _ 2.359 {M6 333 v _ plo.m9 - - --- - 0 NR/11/'_-999 673:1! 9496618!63 kWf IKf ICI]NI IM I C`, J m 0 J LU i V CL Cl* LL Mw 0 W Ng 1.f. 0 TW i w z w w 2 O x LL 0 LU J cn y C) O, N n co N r — M M to i C O (� O L a Q A (n 0) Ql W m W rn cj N N OJ (V t?j N al D)tiCD OD aIN - 001,—cm Lu �Q� y o0— 0 0 ,- C3 0 � o00 0 0 d CV LO N 7 (P V' m m M M co n N o N� tr�-U) O (p N M n N n Q) O N tl' N M n N N m M M N N M M M N M M M N (V (Ci N gb 0 g 0 O o 0 0 0 0 0 o g o 0 0 0 o 0 0 o g o og 8 0 0 0 0 0 0 d •Fa Cion oSuQilow mC)on ocopui o !tLO (A d9 f9 bP Yl as W y N 1"- 'n N M O� O 7 fes- C? O n ry .- m o M M U N N C? r N �- CM n C n n y n m n (D (V n C4 Q ti N �n U a m� `o �� � �� o muco (n (0 0. m (o m cp m (o cp w 0 0 o � W ctOo (o (p cmo (mo mf 0 0 JOINT COMMUNITY FACILITIES AGREEMENT THIS JOINT COMMUNITY FACILITIES AGREEMENT (the "Agreement") is entered into effective as of the day of 1999, by and among the CAPISTRANO VALLEY WATER DISTRICT, a county waterworks district formed pursuant to Division 16 of the California Water Code (the "Water District"), the CAPISTRANO UNIFIED SCHOOL DISTRICT, a public entity, (the "School District") and SJD PARTNERS, LTD., a California Limited Partnership (the "Company"), and relates to the proposed formation of COMMUNITY FACILITIES DISTRICT NO. 98-1 OF THE CAPISTRANO UNIFIED SCHOOL DISTRICT (PACIFIC POINT) (the "District"). RECITALS: A. The Company is the owner of all of the land within Assessor's Parcel Numbers listed on Exhibit "A" hereto in the incorporated territory of the City of San Juan Capistrano, State of California (the "Property") and which is proposed to constitute the land within the boundaries of the District. Such boundaries are shown on the map included in Exhibit "A" attached hereto, which is incorporated by reference herein. B. The Company is the developer of the Property and intends to obtain the necessary development approvals to construct approximately 325-425 residential units, as well as approximately 23 acres of commercial improvements, on the Property and to provide the required infrastructure for such units and improvements, including schools to be owned and operated by the School District (the "School Facilities') and certain water improvements to be owned and operated by the Water District which are described in Exhibit B hereto and incorporated by reference herein (the "Water District Facilities"). The Water District Facilities and the School Facilities are sometimes collectively referred to herein as the "Facilities". Additionally, the Company has requested that the City of San Juan Capistrano (the "City") enter into ajoint community facilities agreement with the School District with respect to certain roadway and storm drain facilities (collectively, the "City Facilities") to be financed by the District. C. It is expected that the cost of the School Facilities will exceed the cost of the Water District Facilities and City Facilities and, therefore, the School District is permitted to have primary responsibility for the formation and administration of the District. D. The Company has requested the Board of Trustees of the School District (the "Board of Trustees") to form and establish the District pursuant to the provisions of the Mello -Roos Community Facilities Act of 1982, Chapter 2.5 (commencing with Section 5331 1) of Part I of Division 2 of Title 5 of the California Government Code (the "Act"). E. The provision of the School Facilities and the Water District Facilities is necessitated by the development of the land within the District and the parties hereto find and determine that the residents of the Water District, the School District and the District will be benefited by the 655164.2V22508.0025 0 0 CAPISTRANO UNIFIED SCHOOL DISTRICT SAFEGUARDS RELATED TO CFD BOND ISSUANCES Over the past ten years, Capistrano Unified School District ("CUSD") has established eight Community Facilities Districts (CFDS") and sold seven CFD bond issues and refunding issues to finance over $125 million in school facilities- Diming this period of time, CUSD's CFD special tax delinquency rate has averaged below 3%, despite a major economic recession, and no draws have ever been made against any of the CFDs' reserve funds. CUSD has been able to achieve this high level of success with its CFD financings by following some basic bond sale and homeowner disclosure due diligence procedures which will also be in place for the proposed Pacific Pant CFD. These procedures follow the California Debt Advisory Commission disclosure guidelines for land-based securities which were promulgated based in large part on testimony offered at public hearings conducted by the State Treasurer. David Doomey of CUSD was among the speakers at the foregoing hearings presenting evidence regarding the need for enhanced secondary market disclosure and other safeguards designed to protect the interests of Mello -Roos taxpayers and bondholders. Prior to approval of any CFD bonds by the CUSD Board of Trustees, the CUSD staff follows certain procedures, including without limitation the following tasks 1. Require the Developer to provide a Project development proforma which establishes the economic viability of the Project based an the Developer's assumptions about profit, costs, land sales and available funding sources for the development 2. Review the proforma, including the Project marketing plan, and lure an independent absorption consultant to determine marketability of Project, to project absorption rates and to evaluate developer's proposed sales prices of development within Project. 3. Review property owner financial statements for all owners responsible for 20% or more of the special tax payments, to determine the financial wherewithal of the Developer(@) at the time of bond issuance to support the bond issue's annual debt service and other Project costs in the early years of the Project, should development not proceed as anticipated, to examine the Developer's debt repayment history and to determine that Project proponents have sufficient equity or commitments for conventional financing available at the time of bond issuance to support all expected Project cashllow needs. 4. Review status of property tax payments by Project proponents in recent years to determine if any property tax delinquencies have occurred. 5. Review proposed public facilities (e.g., school facilities) land acquisition and construction costs to ascertain that they are adequate to build these facilities. 6. Research existence of other non CFD public liens on CFD properties (e g , overlapping debt). 7 l lire An indapondcrit a ipiaisci within six months prior to bond sale to conflrm, based upon an appraisal made in a niamier consistent with the policies adopted by the Hoard of "Trustees in >44"7 112'2509067S ATTACHMENT 05-97 '3:47 From:STRADLiNG YOCCA S 7147254100 7-971 P 03/03 Jae -b94 1994, that values for propci ty within dre CFD which are subject to the tax will be at least three times the total public liens (CFD and other overlapping public debt) on such property. a. Include a Maximum Special Tax rate in Special Tax Formula to assure that homeowner taxes will not exceed a certain level, as well as maximum term of tax levy on homeowner property. 9. Consider desirability of inclusion of Prepayment Option in Special Tax Formula to provide merchant builder or homeowner option to "pre -pay' their special taxes in one lump -sum, to avoid annual special taxes on their property tax bill. 10. Review of CFD Disclosure Form proposed by Developer to be provided to each homeowner at time of purchase Tabs Disclosure Form is required by law to be executed by each home purchaser prior to close of escrow. (CUSD required distribution of the Disclosure Form and also the recording of a Notice of Special Tax Lien in the County Recorder's Office before either safeguard was a statutory requirement of CFD law. In addition to recent enhancements of disclosure to homeowners under the Mello -Roos Act, the California legislature has created a specific requirement under the Civil Code for disclosure of CFD taxes to prospective purchasers by the realtor conducting the sale.) 11. Require annual disclosure to bondowners by Developer until Project completion or until the Developer's share of CFD taxes is less than 201/6. 12. Require the Maximum Tax on homeowner property to be set at a level which holds the homenwner's total tax burden to less than 20/6 of the assessed value of their property based on projected sales prices. 13. In addition to the foregoing, CUSD complies with homeowner protections which were added to the Mello -Roos Act following the CDAC hearings, such as: (a) limiting the annual escalation of homeowner CFD taxes to 2% per annum; and (b) providing that no homeowner tax may be increased by more than 10% as a consequence of delinquency or default by the owner of any other parcel or parcels. 17' 1 ; S0& t. )"I . ).. 0 0 construction and/or acquisition of the Water District Facilities and the School Facilities and that this Agreement is beneficial to the interests of such residents. F. The parties hereto intend to have the District assist in financing the Water District Facilities by disbursing District bond construction proceeds in an amount which is estimated at, and shall not exceed, $2,672,000 (the "Water District Facilities Amount") at the written request to the District of the Water District to finance the construction and/or acquisition of the Water District Facilities. G. The Water District is authorized by Section 53313.5 of the Act to assist in the financing of the acquisition and/or construction of the Water District Facilities and the School District is authorized to assist in the financing of the School Facilities. This Agreement constitutes a joint community facilities agreement, within the meaning of Section 53316.2 of the Act, by and among the Water District and the School District, pursuant to which the District when formed will be authorized to finance the construction and/or acquisition of the Water District Facilities in the not to exceed amount of $2,672,000 and to finance the School Facilities in the approximate amount of $7,000,000. As authorized by Section 53316.6 of the Act, responsibility for constructing, providing and operating the School Facilities is delegated to the School District and responsibility for constructing, providing for and operating the Water District Facilities is delegated to the Water District to the extent set forth herein. H. Pursuant to Government Code Section 53314.9, the Board of Trustees of the School District is authorized to accept advances of funds from any source, including, but not limited to, private persons or private entities, and may provide, by resolution, for the use of those funds for any authorized purposes, including, but not limited to, paying any costs incurred by the local agency in creating a district. The legislative body may also enter into an agreement, by resolution, with the person or entity advancing the funds, to repay all or a portion of the funds advanced provided that certain conditions are met. The conditions to be satisfied require that (1) the proposal to repay the funds must be included in the resolution of intention for the proposed district and in the resolution of formation for the proposed district and (2) that any proposed special tax is approved by the qualified electors of the district pursuant to the Act and that if not approved any funds which have not been committed for any authorized purpose by the time of the election must be returned to the person or entity advancing funds. 1. The parties hereto intend to have the District assist in financing the Water District Facilities by transferring to the Water District a portion of District Bond construction proceeds, in accordance with the terms of this Agreement and pursuant to the Act. Under the terms set forth herein, the District will transfer to the Water District up to $2,672,000 in District Bond proceeds (the "District Contribution'). AGREEMENT NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows: Recitals. Each of the above recitals is incorporated herein and is true and correct. 2. Proposed Formation of District. At the request of the Company, the School District will undertake to analyze the appropriateness of forming a community facilities district to finance 655164.2\22508.0025 0 0 the Facilities. The School District will retain, at the Company's expense, the necessary consultants to analyze the proposed formation of the District, including an engineer, special tax consultant, bond counsel, appraiser and other consultants deemed necessary by the School District. 3. Sale of Bonds and Use of Proceeds. In the event the District is formed, the Board of Trustees of the School District acting as the legislative body of the District may, in its sole discretion, finance the design, construction and acquisition of the School Facilities and the Water District Facilities by issuing bonds (the "Bonds"). If any Bond proceeds are escrowed, after payment of the costs of issuing the Bonds, there shall first be reserved from the Bond construction proceeds $7,000,000 to finance the School Facilities. The District anticipates that proceeds from the sale of District Bonds shall be available for the Water District Facilities substantially in accordance with this Section 3, however, release of Bond proceeds to the Water District for Water District Facilities may be subject to escrow release tests to be established in the bond documents which the District will hereafter enter into with respect to the Bonds (the "Bond Documents"), and the terms of such escrow release test, if any, shall be as the District shall determine, in its sole discretion, to be reasonably appropriate in order to comply with the School District's Statement of Local Goals and Policies and municipal bond industry standards for land -secured financings. The District shall maintain records relating to the disbursements of proceeds of the sale of the District Bonds. The Company acknowledges that the acquisition and construction of the Water District Facilities, including the amount and timing for the delivery of all funding, including the District Contribution, required for the Water District Facilities shall be in all respects subject to the sole discretion and approval of the Water District and the School District, as applicable. In no event will an act, or an omission or failure to act, by the Water District or the District with respect to the disbursement or nondisbursement of the District Contribution or by the District with respect to the provision of any other funding for the School Facilities or the Water District Facilities subject the District, the School District or the Water District to pecuniary liability hereunder. The Bonds shall be issued only if in its sole discretion the Board of Trustees determines that all requirements of state and federal law and all School District policies and any applicable Water District policies have been satisfied or in the case of the policies waived by the School District or the Water District, as applicable. In no event shall the Company have a right to compel the issuance of the Bonds. 4. Disbursements. (a) District Bond proceeds designated for the Water District Facilities shall be held, together with all District Bond proceeds designated for the acquisition and/or construction of School Facilities, by the fiscal agent for the District (the "Fiscal Agent") in a special fund (the "Acquisition and Construction Fund") which shall be invested by the Fiscal Agent and earn and accumulate its own interest. The District shall designate in the Acquisition and Construction Fund an amount equal to the District Contribution as funds available solely for Water District Facilities, and all moneys in the Acquisition and Construction Fund designated for the Water District Facilities shall at all times be available for the Water District Facilities except to the extent the School District determines interest earnings must be rebated to the United States in accordance with the Internal Revenue Code of 1986, as amended. 655164.2\22508.0025 3 (b) The Fiscal Agent shall make disbursements from the Acquisition and Construction Fund in accordance with the terms of this Agreement and neither the School District nor the District shall be responsible to the Water District for costs incurred by the Water District as a result of withheld or delayed payments. (c) The Water District agrees that prior to requesting payment from the District it shall review and approve all costs included in its request and (a) will have already paid such costs of Water District Facilities from its own funds or shall have prepared a check for disbursement which will be mailed or hand delivered within 48 hours of receipt of District funds or (b) will have already encumbered the funds requested and will trace and remit to the District all earnings, if any, by the Water District in excess of the yield on the applicable District Bonds accruing from the investment of the District Bond proceeds requested, from the date of receipt of such District Bond proceeds by the Water District to the date of expenditure by the Water District of such District Bond proceeds for actual legitimate capital costs of the Water District Facilities. Such remittance, if any, shall occur on the earlier of the date of expenditure of such District Bond proceeds or each anniversary date of the transfer of such District Bond proceeds from the District to the Water District. The Water District agrees that in processing the above disbursements it will comply with all legal requirements for the expenditure of bond proceeds under the Act, as amended, and the Internal Revenue Code of 1986 and any amendments thereto. (d) The Water District agrees to maintain adequate internal controls over its payment function and to maintain accounting records in accordance with generally accepted accounting procedures. The Water District will, upon request, provide to the District its annual financial report certified by an independent Certified Public Accountant for purposes of calculating the District's arbitrage rebate obligations. The District shall have the right to conduct its own audit of the Water District's records at reasonable times and during normal business hours. (e) The Water District shall submit a request for payment to the Fiscal Agent which shall be in the form attached hereto as Exhibit "C", which shall be signed by its General Manager or written designee and which shall be for the exact amount paid or encumbered or to be disbursed as provided in paragraph (d) above by the Water District for Water District Facilities costs under paragraph (c) above, which costs shall in no event exceed the District Contribution of $2,672,000. Upon receipt of an approved payment request completed in accordance with the terms of this Agreement, the Fiscal Agent shall wire transfer such portion of requested funds as are then available for release pursuant to the Bond Documents to the Water District's bank account, as directed by the Water District. 5. Construction. The Water District will complete the design of the Water District Facilities and the plans and specifications for construction of the Water District Facilities (hereinafter the "Plans and Specifications") in a form and substance which is satisfactory to the Water District. ]Is the Company responsible for design or plans and specs?] 6. Ownership of Facilities. Notwithstanding the fact that some or all of the Water District Facilities may be constructed in dedicated street rights-of-way or on property which has been or will be dedicated to the City or the County of Orange, the Water District Facilities shall be and remain the property of the Water District. 6551642\22508.0025 a 0 7. Indemnification. The School District shall assume the defense of, indemnifv and save harmless, the Water District, its officers, employees and agents, and each and every one of them, from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subjected or put, by reason of, or resulting from, this Agreement and the design, engineering and construction of the School Facilities. No provision of this Agreement shall in any way limit the extent of the School District's responsibility for payment of damages resulting from the operations of the School District and its contractors; provided, however, that the School District shall not be required to indemnify any person or entity as to damages resulting from negligence or willful misconduct of such person or entity or their agents or employees. The Water District shall assume the defense of. indemnify and save harmless, the School District, its officers, employees and agents, and each and every one of them. from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subjected or put, by reason of, or resulting from, this Agreement, and the design, engineering and construction of the Water District Facilities. No provision of this Agreement shall in any way limit the extent of the Water District's responsibility for payment of damages resulting from the operations of the Water District and its contractors; provided, however, that the Water District shall not be required to indemnify any person or entity as to damages resulting from negligence or willful misconduct of such person or entity or their agents or employees. 8. Disclosure. The Company shall cooperate with the District and the School District in complying with the requirements of Rule 15c12-12 of the Securities and Exchange Commission in connection with the issuance and sale of the Bonds. The Company shall provide information to the District and the School District regarding its operations and financial condition, including, if available, an audited financial statement for its most recently completed fiscal year, for inclusion in the preliminary official statement and the final official statement for the Bonds. The Company acknowledges that, due to the extent of its initial property ownership in the District, it will be an "obligated person" for purposes of compliance with Rule 15c 12-12(b)(5) of the Securities and Exchange Commission and that it will therefore be necessary that Company enter into a continuing disclosure undertaking that so long as it remains an obligated person it will annually, at the time specified in such undertaking, provide information to the District and the School District regarding the Company's financial condition, including, if available, audited financial statements, to be included in the annual reports which the District will file with the Nationally Recognized Municipal Securities Repositories which are identified by the Securities and Exchange Commission and any state information depository that may be designated for the State of California, as required by that rule. The Company further acknowledges that it will be an obligated person pursuant to such rule as long as it owns property within the District that is responsible for the payment of annual special tax installments which represent 10 percent or more of the annual debt service on the outstanding Bonds. 9. Allocation of Special Taxes. Upon sale and delivery of the Bonds, or such earlier date as the District, in its sole discretion, determines appropriate, the Board of Trustees, as the legislative body of the District, shall annually levy a special tax as provided for in the formation proceedings of the District. The entire amount of any special tax levied by the District to repay the Bonds, or to fund other obligations, shall be allocated to the District. 10. Amendment. This Agreement may be amended at any time but only in writing signed by each party hereto. 655164.2\22508.(X)25 18. Singular and Plural; Gender. As used herein, the singular of any word includes the plural, and terms in the masculine gender shall include the feminine. 19. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute but one instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year written below. Date: 1 1999 CAPISTRANO UNIFIED SCHOOL DISTRICT President of the Board of Trustees ATTEST: 0 Clerk of the Board of Trustees of the Capistrano Unified School District CAPISTRANO VALLEY WATER DISTRICT 0 Its: President of the Board of Directors ATTEST: Secretary of the Board of Directors 655164.2\22508.0025 7 SJD PARTNERS, LTD., a California Limited Partnership By: SJD Development Corp., a California Corporation, General Partner M 6551642\22508 0025 Todd Kurtin, Chief Financial Officer & Secretary EXHIBITAL DESCRIPTION OF PROPERTY The real property to be included within Community Facilities District No. 98-1 of the Capistrano Unified School District (Pacific Point): 666-301-01 666-301-09 675-081-04 675-081-10 675-081-14 675-361-01 675-361-04 675-361-05 6551642\22508.0025 A-1 PROPOSED BOUNDAR OF SHEET 1 of 1 • -COMMUNITY FACILITIES DIST NO. 98-1 '4.12acl-_ . P int OF THE CAPISTRANO UNIFIED SCHOOL DISTRICT ORANGE COUNTY (1) Red it 9e Dike d k Od d 9e NW d STATE OF CALIFORNIA Tndm 06 _ doy of 19— Pds L bom4 fa clot d 9e end d Tn64ea (?) I"m16iy tiv Be vain MW *mq 9e Popo W basdeieT d Candy haiia aim Ra 98-1. liege U* Slide d Cdialio, bot append h k NW d T9sba d a m* emig tw§A mm m Bisdy d 19_„ ay b bmMim Ra Pete 1 boo EEA Cart of be Boob of Trmkt Tho Following A nR Pmcd Numbs aw wltlHn C.U.SU1. C.F.D. Na 96-1: 666 -301 -OI am 301-09 675-061-04 M Fieri ft — dor/ of 19_, d ktard_eded_iknW of mw d I ori Cmtw* FoAm QetFdo d pie _ ed a kierd Ra in 9fe d9a of tie cm* Roads of amp OR* Skk d Cdbd . Cay L Qaek, Cony Reads d Qege Cady Il/ PREPARED BY DAVID TAUSSIG & ASSOCIATES, INC 0 0 EXHIBIT B DESCRIPTION OF WATER DISTRICT FACILITIES The following improvements are eligible for acquisition as Water District Facilities: DESCRIPTION Pump Station Underground Prestressed Concrete Reservoir Zone Transmission Mains Bore & Jack under 1-5 Fwy - with steel casing 655164.2\22508.0025 B-1