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11-12-2008 CC Rpt A17COUNCIL AGENDA STAFF REPORT Meeting Date: November 12.2008 Public Hearing: n Discussion Item: 0 ^ Consent Item: Y NOVEMBER 5, 2008 TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CITY MANAGER CITY CLERK USE ONLY SUBJECT: COMMUNITY FACILITIES DISTRICT NO. 5 ("CFD No. 5") SPECIAL TAX PREPAYMENT AND APPROVAL OF ESCROW AGREEMENT RECOMMENDATION: Adopt a resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT, AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS. BACKGROUND/ANALYSIS: The City of Chino Hills formed Community Facilities District No. 5 ("CFD No. 5"), under the provisions of the Mello Roos Community Facilities District Act of 1982. CFD No. 5 has issued the "City of Chino Hills Soquel Canyon, Rincon and Woodview Community Facilities District No. 5 Special Tax Bonds, Series 2004" and the "City of Chino Hills Soquel Canyon, Rincon and Woodview Community Facilities District No, 5 Special Tax Bonds, Series 2006" (collectively, the "CFD No. 5 bonds") in order to finance and refinance certain public facilities. The City levies a special tax on property within CFD No. 5 to pay debt service on the bonds. A property owner in CFD No. 5 prepaid the entire remaining special tax obligation earlier this year; however, the bonds are not subject to early redemption from the funds derived from the property owner. An agreement needs to be entered into directing U.S. Bank, National Association, as fiscal agent, for the bonds (the "Fiscal Agent") to invest and hold the funds in trust for payment of the bonds over the next five years. The attached resolution resolves to provide authorization to the Finance Director or designee to sign the Escrow Agreement, by and between CFD No. 5 and the fiscal agent, and transfer the funds from the prepayment to the fiscal agent to invest and hold in trust for payment of the bonds over the next five years. AGENDA DATE: NOVEMBER 12, 2008 SUBJECT: COMMUNITY FACILITIES DISTRICT NO. 5 ("CFD No. 5") SPECIAL TAX PREPAYMENT AND APPROVAL OF ESCROW AGREEMENT PAGE TWO REVIEW BY OTHERS: This agenda item has been reviewed by the City Attorney, the City's bond counsel, Orrick, Herrington & Sutcliffe, LLP, and the City's financial advisor, Harrell & Company. FISCAL IMPACT: There is no fiscal impact to this agenda item. Respectfully submitted, pp Dougl s l . La Belle, City Manager Recommended by: i &,� J#y)R. I.�4ncaster, Finance Director RESOLUTION NO. 08R- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS, AUTHORIZING THE EXECUTION AND DELIVERY OF AN ESCROW AGREEMENT, AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS. Community Facilities District No. 5 WHEREAS, the City of Chino Hills Sequel Canyon, Rincon and Woodview Community Facilities District No. 5 (the "Community Facilities District") was established under the provisions of the Mello -Roos Community Facilities Act of 1982 (the "Act"); and WHEREAS, pursuant to the Act, the City Council (the "City Council") of the City of Chino Hills (the "City") is the legislative body of the Community Facilities District; and WHEREAS, the Community Facilities District is authorized under the Act to issue bonds payable from special taxes (the "Special Taxes") levied within the Community Facilities District in order to finance and refinance certain public facilities (the "Facilities"); and WHEREAS, the Community Facilities District, previously issued the City of Chino Hills Sequel Canyon, Rincon and Woodview Community Facilities District No. 5 Special Tax Bonds, Series 2004 (the "Series 2004 Bonds") and the City of Chino Hills Sequel Canyon, Rincon and Woodview Community Facilities District No. 5 Special Tax Bonds, Series 2006 (the "Series 2006 Bonds"), in order to finance and refinance certain public facilities; and WHEREAS, the Series 2004 Bonds and the Series 2006 Bonds were issued under the Fiscal Agent Agreement, dated as of February 1, 2004, by and between the Community Facilities District and U.S. Bank, National Association, as trustee (the "Trustee"), as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2006, by and between the Community Facilities District and the Trustee (collectively, the "Fiscal Agent Agreement"); and WHEREAS, subject to the satisfaction of certain conditions precedent contained therein, the Fiscal Agent Agreement provides the Community Facilities District may at any time issue one or more Series of Additional Bonds (in addition to the Series 2004 Bonds and the Series 2006 Bonds) (any such Additional Bonds together with the Series 2004 Bonds and the Series 2006 Bonds are referred to herein as the "Bonds"); and WHEREAS, the Community Facilities District is in receipt of a Special Tax prepayment from an owner of land within the Community Facilities District; and Page 1 of 4 WHEREAS, in order to meet the debt service requirements of the Bonds, the Community Facilities District desires to invest the prepaid Special Taxes in a manner such that such prepaid Special Taxes and earnings thereon will be available to pay debt service on the Bonds at such times and in such amounts as will as closely as possible match when such Special Taxes would have been received if there was no such prepayment pursuant to an Escrow Agreement by and between the Community Facilities District and U.S. Bank National Association, as Trustee and as escrow bank (such Escrow Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Escrow Agreement'); and WHEREAS, there have been prepared and submitted to this meeting a form of the Escrow Agreement; and WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the transactions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Community Facilities District is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such transactions for the purpose, in the manner and upon the terms herein provided. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CHiNO HiLLS, DOES RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Escrow Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Mayor of the City, and such other members of the City Council as the Mayor may designate, the City Manager of the City, the Assistant City Manager of the City and the Finance Director of the City, and such other officers of the City as the City Manager may designate (the "Authorized Officers") are, and each of them is, hereby authorized and directed, for and in the name of the Community Facilities District, to execute and deliver the Escrow Agreement in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Escrow Agreement by such Authorized Officer. SECTION 2. The Authorized Officers and the officers and employees of the City are, and each of them is, hereby authorized and directed, for and in the name of the Community Facilities District to do any and all things and to execute and deliver any and all documents which they or any of them deem necessary or advisable in order to consummate the transactions contemplated by this Resolution and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. SECTION 3. All actions heretofore taken by the officers, employees and agents of the City with respect to the transactions set forth above are hereby approved, confirmed and ratified. Page 2 of 4 SECTION 4. The City Clerk shall certify as to the adoption of this Resolution. PASSED, APPROVED and ADOPTED this 12th day of November 2008. CURT HAGMAN, MAYOR ATTEST: MARY M. McDUFFEE, CITY CLERK APPROVED AS TO FORM: MARK D. HENSLEY, CITY ATTORNEY Page 3 of 4 ESCROW AGREEMENT by and between CITY OF CHINO HILLS SOQUEL CANYON, RINCON AND WOODVIEW COMMUNITY FACILITIES DISTRICT NO. 5 and U.S. BANK NATIONAL ASSOCIATION, AS FISCAL AGENT AND AS ESCROW BANK Dated as of I, 2008 Relating to City of Chino Hills Soquel Canyon, Rincon and Woodview Community Facilities District No. 5 Special Tax Bonds ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Escrow Agreement"), dated as of 1, 2008, is by and between CITY OF CHINO HILLS SOQUEL CANYON, RINCON AND WOODVIEW COMMUNITY FACILITIES DISTRICT NO. 5, a community facilities district organized and existing under the laws of the State of California (the "Community Facilities District"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, as Fiscal Agent (as defined herein) and as escrow bank (the "Escrow Bank"). WITNESSETH: WHEREAS, the Community Facilities District was established under the provisions of the Mello -Roos Community Facilities Act of 1982 (the "Act"); WHEREAS, the Community Facilities District is authorized under the Act to issue bonds payable from special taxes (the "Special Taxes") levied within the Community Facilities District in order to finance and refinance certain public facilities (the "Facilities"); WHEREAS, the Community Facilities District, previously issued the City of Chino Hills Soquel Canyon, Rincon and Woodview Community Facilities District No. 5 Special Tax Bonds, Series 2004 (the "Series 2004 Bonds") and the City of Chino Hills Soquel Canyon, Rincon and Woodview Community Facilities District No. 5 Special Tax Bonds, Series 2006 (the "Series 2006 Bonds"), in order to refinance and finance certain of the Facilities; WHEREAS, the Series 2004 Bonds and the Series 2006 Bonds were issued under the Fiscal Agent Agreement, dated as of February 1, 2004, by and between the Community Facilities District and U.S. Bank National Association, as fiscal agent, as amended and supplemented by the First Supplemental Fiscal Agent Agreement, dated as of August 1, 2006, by and between the Community Facilities District and said fiscal agent (collectively, the "Fiscal Agent Agreement"); WHEREAS, the Escrow Bank is the fiscal agent (the "Fiscal Agent") under the Fiscal Agent Agreement; WHEREAS, subject to the satisfaction of certain conditions precedent contained therein, the Fiscal Agent Agreement provides the Community Facilities District may at any time issue one or more Series of Additional Bonds (in addition to the Series 2004 Bonds and the Series 2006 Bonds) (any such Additional Bonds together with the Series 2004 Bonds and the Series 2006 Bonds are referred to herein as the "Bonds"); WHEREAS, the Community Facilities District is in receipt of a Special Tax prepayment from an owner of land within the Community Facilities District; WHEREAS, in order to meet the debt service requirements of the Bonds, the Community Facilities District desires to invest the prepaid Special Taxes in a manner such that such prepaid Special Taxes and earnings thereon will be available to pay debt service on the Bonds at such times and in such OHS West260531009.3 amounts as will as closely as possible match when such Special Taxes would have been received if there was no such prepayment; NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained, the Community Facilities District and the Escrow Bank agree as follows: Section 1. Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms ni the Fiscal Agent Agreement. Section 2. The Prenavment Account. (a) There is hereby established a special account (the "Prepayment Account") to be held by the Escrow Bank, which the Escrow Bank shall keep separate and apart from all other funds of the Community Facilities District and the Escrow Bank and which shall be applied solely as provided in this Escrow Agreement. The Prepayment Account shall constitute an account within the Special Tax Fund established pursuant to the Fiscal Agent Agreement. (b) The Escrow Bank hereby acknowledges the deposit by the Community Facilities District of $ which the Community Facilities District hereby states constitute prepaid Special Taxes. Section 3. Use and Investment of Monevs. (a) The Escrow Bank hereby acknowledges deposit of the moneys described in Section 2(b) hereof and agrees to invest $ of such moneys in the Federal Securities set forth in Exhibit A hereto. (b) All Federal Securities purchased pursuant to this Escrow Agreement shall be deposited in and held for the credit of the Prepayment Account. No moneys or Federal Securities deposited with the Escrow Bank pursuant to this Escrow Agreement nor principal of or interest payments or other investment income on, any such Federal Securities shall be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of principal of and interest on the Bonds as provided in Section 4 hereof. (c) The Escrow Bank shall not be held liable for investment losses resulting from compliance with the provisions of this Escrow Agreement. (d) The Community Facilities District acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Community Facilities District the right to receive brokerage confirmations of security transactions as they occur, the Community Facilities District specifically waives receipt of such confirmations to the extent permitted by law. The Escrow Bank will furnish the Community Facilities District periodic cash transaction statements which include detail for all investment transactions made by the Escrow Bank hereunder. Section 4. Transfers to Bond Fund. From the maturing principal of the Federal Securities held in the Prepayment Account and the investment income and other earnings thereon and any uninvested money then held in the Prepayment Account, the Escrow Bank, as the Fiscal Agent, shall transfer to the Bond Fund established under the Fiscal Agent Agreement such amounts and on such dates as are set forth on Exhibit B hereto. 2 Section 5. Escrow Bank's Authoritv to Make Investments. The Escrow Bank shall have no power or duty to invest any funds held under this Escrow Agreement except as provided in Section 3 hereof. The Escrow Bank shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided in this Escrow Agreement. Section 6. Indemnity. To the extent permitted by law, the Community Facilities District hereby agrees to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors and assigns, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time in any way relating to or arising out of the execution and delivery of this Escrow Agreement by the Escrow Bank and the performance by the Escrow Bank of its duties hereunder; provided, however, that the Community Facilities District shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or willful misconduct, the negligence or willful misconduct of the Escrow Bank's respective successors or assigns or the material breach by the Escrow Bank or such successors or assigns of the terms of this Escrow Agreement. The indemnities contained in this Section shall survive the termination of this Escrow Agreement. Section 7. Resnonsibilities of Escrow Bank. The recitals of fact contained in the "whereas" clauses herein shall be taken as the statements of the Community Facilities District, and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representation as to the sufficiency of the securities to be purchased pursuant hereto and any uninvested moneys to accomplish the purposes specified in this Escrow Agreement. The Escrow Bank shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence, willful misconduct or default. The Escrow Bank is responsible only for the performance of the duties of the Escrow Bank specifically provided in this Escrow Agreement and no implied duties shall be read into this Escrow Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the Community Facilities District, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering or omitting any action under this Escrow Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds) may be deemed to be conclusively established by a written certification of the Community Facilities District. Whenever the Escrow Bank shall deem it necessary or desirable that a matter specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds be proved or established prior to taking, suffering or omitting any such action, such matter may be established only by a certificate signed by a nationally recognized firm of certified public accountants or such opinion of counsel of recognized standing in the field of law relating to municipal bonds. 3 The Escrow Batik may resign by giving written notice to the Community Facilities District, and upon receipt of such notice the Community Facilities District shall promptly appoint a successor Escrow Bank. If the Community Facilities District does not appoint a successor Escrow Bank within 30 days of receipt of such notice, the resigning Escrow Bank may, at the expense of the Community Facilities District, petition a court of competent jurisdiction for the appointment of a successor Escrow Bank, which court may thereupon, upon such notice as it shall deem proper, appoint a successor Escrow Bank. Upon acceptance of appointment by a successor Escrow Bank, the resigning Escrow Bank shall transfer all amounts held by it in the Prepayment Account to such successor Escrow Bank and be discharged of any further obligation or responsibility hereunder. Section 8. Amendments. The Community Facilities District and the Escrow Bank may amend this Escrow Agreement or enter into agreements supplemental to this Escrow Agreement and such amendments or supplements shall be in writing. Section 9. Comnensation. The Community Facilities District shall from time to time pay or cause to be paid to the Escrow Bank the agreed upon compensation for its services to be rendered hereunder, and reimburse the Escrow Bank for all of its reasonable advances in the exercise and performance of its duties hereunder; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien whatsoever on any moneys or obligations in the Prepayment Account for the payment of fees and expenses for services rendered or expenses incurred by the Escrow Bank under this Escrow Agreement or otherwise. Section 10. Severability. If any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the Community Facilities District or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. Section 11. Counteraarts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as an original but all of which shall constitute and be but one and the same instrument. Section 12. Governing Law. This Escrow Agreement shall be construed under the laws of the State of California. 4 IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date first above written. CITY OF CHINO HILLS SOQUEL CANYON, RINCON AND WOODVIEW COMMUNITY FACILITIES DISTRICT NO. 5 is U.S. BANK NATIONAL ASSOCIATION, AS FISCAL AGENT AND AS ESCROW BANK Authorized Officer 5 EXHIBIT A UNITED STATES TREASURY SECURITIES Maturity Par Interest Total Type Date Amount Rate Price Cost EXHIBIT B TRANSFERS TO BOND FUND Transfer Date Transfer Amount