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HomeMy WebLinkAboutCertificate as to Arbitrage Quint & Thimmig LLP 4/25/06 $51,250,000 TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) 2006 SPECIAL TAX BONDS CERTIFICATE AS TO ARBITRAGE I, the undersigned Executive Director of the Temecula Public Financing Authority, Temecula, California (the "Authority"), being one of the officers of the Authority duly charged (by resolution of the Board of Directors of the Authority), with others, with the responsibility of issuing the Authority's $51,250,000 principal amount of Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds (the "Bonds"), dated the date hereof, and being issued this date, hereby certify as follows: (1) Purpose of Bonds. The Bonds are being issued pursuant to a Fiscal Agent Agreement, dated as of March 1, 2006 (the "Fiscal Agent Agreement"), between the Authority and U.S. Bank National Association, as fiscal agent (the "Fiscal Agent"), for the purpose of providing funds for (a) the design, acquisition and construction of certain public facilities (the "Project"), which Project is more particularly described in the Certificate Regarding Use of Proceeds dated the date hereof and included elsewhere in the transcript for the Bonds, and (b) the refunding on an advance basis certain outstanding debt of the Riverside County Public Financing Authority (the "County Authority"). (2) Statement of Expectations. On the basis of the facts and estimates in existence on the date hereof, I reasonably expect the following with respect to the amount and use of gross proceeds of the Bonds: (a) Amount Received from Sale of Bonds: No Aggregated Issues. The Bonds were sold to Stone & Youngberg LLC (the "Underwriter"), at their face amount ($51,250,000.00), less Underwriter's discount of $955,625.00, for a total amount of $50,294,375.00. Of said amount, $990,000.00 will be deposited in the Costs of Issuance Fund; $3,503,850.00 will be deposited in the Reserve Fund; $942,260.50 will be deposited in the Capitalized Interest Account of the Bond Fund; $60,000.00 will be deposited in a temporary account on the records of the Fiscal Agent, for immediate transfer to the Treasurer of the Authority, for deposit by the Treasurer of the Authority in the Administrative Expense Fund; $491,158.10 will be deposited in the Refunding Fund; and the following amounts will be deposited in the following accounts within the Improvement Fund: (i) in the City Account an amount equal to $4,162,710.00, (ii) in the EMWD Account an amount equal to $1,381,015.00, (iii) in the Public Works Administration Account an amount equal to $680,000.00, and (iv) in the Acquisition Account an amount equal to $38,083,381.40. All of such Accounts and Funds (other than the Administrative Expense Fund) are held by the Fiscal Agent. No tax-exempt debt has been sold within fifteen (15) days before or after the date the Bonds were sold that will be paid from substantially the same source of funds as the Bonds (excluding guarantees from unrelated parties). (b) Costs of Issuance Fund. $990,000.00 of the proceeds of the Bonds deposited in the Costs of Issuance Fund will be used for payment of legal fees, printing costs and other costs of issuance of the Bonds, and will be fully expended promptly upon receipt of invoices. Amounts deposited in the Costs of Issuance Fund, if invested, will be invested without yield restrictions. Interest earnings and gains resulting from said investment will be retained in the Costs of Issuance Fund and used for the purposes thereof. Amounts, if any, remaining in the Costs of Issuance Fund on the date which is 90 days after the date of delivery of the Bonds will be transferred to the Administrative Expense Fund to be used for the purposes of such fund. Amounts in the Costs of Issuance Fund will be invested without yield limitations. (c) Use of Improvement Fund and Refunding Fund; Reimbursement. The proceeds of the Bonds deposited in the accounts within the Improvement Fund and deposited in the Refunding Fund will be used for the payment of costs of design, acquisition and construction of the Project; except that the amount deposited to the Refunding Fund ($491,158.10) will be used to prepay certain assessment liens on property in the Authority's Community Facilities District No. 03-02 (Roripaugh Ranch), which prepayments will be used to refund, on an advance basis, a portion of the County Authority's Riverside County Public Financing Authority Reassessment Revenue Bonds Reassessment District No. 161-R (Winchester Properties) 2001 Series A and 2001 Series B issued on February 27, 2001 in the original principal amount of $24,835,000 (the "2001 County Authority Bonds"). The portion of the 2001 Authority County Bonds being refunded with proceeds of the Bonds is allocable to the proceeds of the 2001 County Authority Bonds used to (i) currently refund a portion of the County's Assessment District No. 161 (Winchester Properties) of the County of Riverside Limited Obligation Improvement Bonds, Series A issued on May 11, 1989 in the original principal amount of $7,723,930.18 to fund various public improvements, of which $3,975,000 was outstanding on February 27, 2001 and was refunded on March 2, 2001 with a portion of the proceeds of the 2001 County Authority Bonds; and (ii) currently refund a portion of the County of Riverside Assessment District No. 161 (Winchester Properties) Limited Obligation Improvement Bonds, Series B, issued on August 30, 1990, 1990, in the original principal amount of $55,764,604.38 to fund various public improvements, of which $19,600,000 was outstanding on February 27, 2001 and was refunded on March 2, 2001 with a portion of the proceeds of the 2001 County Authority Bonds. No portion of the proceeds of the Bonds will be used for reimbursement of expenditures paid by the Authority prior to the date hereof except for (i) expenditures paid for costs of issuance of the Bonds, (ii) preliminary capital expenditures incurred before commencement of acquisition or construction of the Project that do not exceed twenty percent (20%) of the issue price of the Bonds (see subparagraph (n) below), and (iii) capital expenditures that (A) were paid no earlier than sixty (60) days before the date of the adoption by the Authority of a declaration of intent to reimburse such expenditures from the proceeds of obligations, and (B) are reimbursed no later than eighteen (18) months after the later of the date the expenditure was paid or the date the Project is placed in service (but no later than three (3) years after the expenditure is paid). Proceeds (if any) used for reimbursement of expenditures will be deposited in the general funds of the Authority or the public entity that expended the same and will not be used to replace funds of the Authority or such public entity to be used to refund debt of the Authority or such public entity, to create a sinking or pledged fund for such debt or the Bonds or otherwise to create replacement proceeds for such debt or for the Bonds. (d) Completion of Project; Investment of Improvement Fund; Capital Expenditures. The Authority has entered into a contract for the acquisition of a portion of the Project, which contracts constitute a substantial binding obligation of the Authority to a third party and is in excess of five percent (5%) of the "Net Sale Proceeds" of the Bonds (namely, an amount of proceeds of the Bonds equal to the issue price of the Bonds, as referenced in subparagraph (n) below, less the proceeds deposited in the Reserve Fund, as referenced in subparagraph (e) below). The Authority will proceed -2- with due diligence to complete the Project and to spend the proceeds of the Bonds. Completion is expected by April 1, 2009. All expenditures from the accounts within the Improvement Fund to be used to pay costs of the Project will be capital expenditures. Not less than eighty-five percent (85%) of the Net Sale Proceeds will be spent within three (3) years of the date hereof. Amounts deposited in the accounts within the Improvement Fund will be invested without yield restrictions for the period from the date hereof to the date that is three (3) years after the date hereof unless earlier expended (the "3-year Temporary Period"). Interest earnings and gains resulting from investment of the accounts within the Improvement Fund will be retained in the respective account of the Improvement Fund and used for the payment of costs of the Project.Proceeds of the Bonds and interest earnings and gains on investment thereof, if any, remaining in the accounts within the Improvement Fund, following the 3-year Temporary Period will be invested at a yield not in excess of the yield of the Bonds (see subparagraph (n) below) or yield reduction payments will be made to the federal government with respect to such investment after the end of the 3-year Temporary Period. Amounts, if any, remaining in the accounts within the Improvement Fund upon completion of the Project will be transferred to the Bond Fund and will be used for payment of debt service on the Bonds. (e) Reserve Fund. The proceeds of the Bonds ($3,503,850.00) deposited in the Reserve Fund is equal to the initial "Reserve Requirement," being an amount equal to the least of maximum annual debt service on the Bonds, one hundred and twenty-five percent (125%) of average annual debt service on the Bonds and ten percent (10%) of the outstanding principal amount of the Bonds. The Underwriter has represented that the establishment of the Reserve Fund in the amount of the Reserve Requirement was vital to the marketing of the Bonds and reasonably required to assure the payment of debt service on the Bonds. Amounts deposited in the Reserve Fund will be invested without yield restrictions. Interest earnings and gains resulting from investment of amounts deposited in the Reserve Fund will be retained in the Reserve Fund in the event that the amount on deposit in such Fund is less than the Reserve Requirement then applicable and otherwise will be transferred to the Bond Fund and used for payment of interest on the Bonds on the next Interest Payment Date following that transfer. Amounts in the Reserve Fund may also be used to pay any rebate liability with respect to the Bonds, and to pay a portion of the redemption price of Bonds to be redeemed with the proceeds of Special Tax prepayments. Pledge of Tax Revenues: Bond Fund and Special Tax Fund. The Authority has pledged certain revenues from special taxes imposed on certain property in the District (the "Tax Revenues") to the payment of debt service on the Bonds. As soon as practicable following receipt, the Tax Revenues (other than prepayments of special taxes which will be deposited to the Special Tax Prepayments Account of the Bond Fund and the portion of the special taxes levied for administrative expenses of the Authority which will be deposited to the Administrative Expense Fund) will be deposited in the Special Tax Fund held by the Fiscal Agent. On each Interest Payment Date on the Bonds, amounts in the Special Tax Fund will be transferred from said Fund (i) to the Bond Fund to the extent necessary to pay debt service due on the Bonds on such Interest Payment Date on the Bonds, and (ii) to the Reserve Fund if necessary to increase the amount on deposit therein to the amount of the then Reserve Requirement (see subparagraph (e) above). Prepayments of special taxes will be deposited in the Special Tax Prepayments Account of the Bond Fund to be used for redemption of the Bonds on the next Interest Payment Date for which notice of redemption can timely be given. Bond proceeds will be deposited to the Capitalized Interest Account of the the Bond Fund to -3- be used to pay interest on the Bonds to September 1, 2006, and with investment earnings on the amount so deposited to be used to pay a portion of the interest due on the Bonds on March 1, 2007. The Special Tax Fund and the Bond Fund (including the Capitalized Interest Account and the Special Tax Prepayment Account in the Bond Fund) have been established primarily to achieve a proper matching of revenues (consisting primarily of Tax Revenues and certain interest earnings) and debt service due on the Bonds during each year that the Bonds are outstanding. Amounts deposited in the Special Tax Fund, the Bond Fund, the Capitalized Interest Account and the Special Tax Prepayments Account will be spent within thirteen (13) months of the date of deposit, and said Funds and Account will be depleted at least once a year except for a reasonable carryover amount not in excess of the greater of earnings on said Funds and Account during the preceding bond year for the Bonds (see subparagraph (1) below) or one-twelfth (I/12th) of debt service on the Bonds during the preceding bond year for the Bonds. Amounts in the Special Tax Fund, the Bond Fund, the Capitalized Interest Account and the Special Tax Prepayments Account will be invested without yield restrictions. Interest earnings and gains resulting from investment will be retained in the Fund or Account in which investment was made and used for the purposes thereof. (g) Administrative Expense Fund. Tax Revenues will be deposited from time to time in the Administrative Expense Fund to be used for the purposes of such fund. Amounts deposited in the Administrative Expense Fund will be used for the payment of costs of administering the special tax program represented by the Tax Revenues and of carrying the Bonds. Amounts in the Administrative Expense Fund are not available for payment of debt service on the Bonds and, if invested, will be invested without yield restrictions. Interest earnings and gains resulting from that investment will be deposited in the Administrative Expense Fund and used for the purposes thereof. (h) No Other Fledged Amounts or Investment-Type Property. Except as described herein, no amounts have been pledged to, or are reasonably expected to be used directly or indirectly to pay, principal or interest on the Bonds, nor are there any amounts that have been reserved or otherwise set aside such that there is a reasonable assurance that such amounts will be available to pay principal or interest on the Bonds. In addition, the Authority has not entered into, and does not reasonably expect to enter into, a hedge contract primarily for the purpose of reducing the Authority's risk of interest rate changes with respect to the Bonds. (i) No Negative Pledges. There are no amounts held under any agreement requiring the maintenance of amounts at a particular level for the direct or indirect benefit of the owners of the Bonds or any guarantor of the Bonds, excluding for this purpose amounts in which the Authority may grant rights that are superior to the rights of the owners of the Bonds or any guarantor of the Bonds and amounts that do not exceed reasonable needs for which they are maintained and as to which the required level is tested less often than every six (6) months and that may be spent without any substantial restriction other than a requirement to replenish the amount by the next testing date. (j) No Replacement Proceeds. There are no amounts that have a sufficiently direct nexus to the Bonds or to the Project to conclude that the amounts would have been used for the Project or for debt service on the Bonds if the proceeds of the Bonds were not being used for those purposes; and the term of the Bonds is not longer than reasonably necessary for the Project in that the weighted average maturity of the Bonds does not exceed one hundred twenty percent (120%) of the average reasonably expected economic life of the Project. -4- (k) No Improper Financial Advantage. The transaction contemplated herein does not represent an exploitation of the difference between tax-exempt and taxable interest rates to obtain a material financial advantage and does not overburden the taxexempt bond market in that the Authority is not issuing more bonds, issuing bonds earlier, or allowing bonds to remain outstanding longer than is otherwise reasonably necessary to accomplish the governmental purposes of the bonds. (1) Bond Year for the Bonds. The Authority will select a bond year for the Bonds consistent with the requirements of the Internal Revenue Code of 1986, as amended. (m) Rebate Requirement. The Authority has covenanted in the Fiscal Agent Agreement to comply with requirements for rebate of excess investment earnings to the federal government to the extent applicable and acknowledges that the first payment of excess investment earnings, if any, is required to be rebated to the federal government no later than sixty (60) days after the end of the fifth (5th) bond year for the Bonds. No portion of the Bonds will constitute a private activity bond within the meaning of section 141(a) of the Internal Revenue Code of 1986 (the "Code"), the average maturity of the Bonds is greater than five (5) years and none of the interest rates on the Bonds vary during the term of the Bonds. As a consequence of the foregoing, investment earnings on the Bond Fund will be excluded for the purposes of computation of the amount required to be rebated to the federal government as referenced in this subparagraph without regard to the total amount of said earnings. (n) Yield of the Bonds. The yield of the Bonds is 5.432148%, determined on the basis of regularly scheduled principal and interest payments on the Bonds discounted to the issue price of the Bonds (being $51,250,000.00, which is an amount equal to the face amount of the Bonds). The Underwriter has represented that (i) based upon reasonable expectations and actual facts which existed on April 13, 2006, being the date upon which the Authority sold the Bonds to the Underwriter, the initial offering price of each maturity of the Bonds to the public (excluding bondhouses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers) at which a substantial amount of each maturity of the Bonds was to be sold to the public on the date hereof was par; and (ii) the Bonds of each maturity were actually offered to the general public in a bona fide public offering for a price of par. There is no expectation by the Authority that there will be prepayments of Tax Revenues. (o) No Hedge Bonds. The Bonds do not constitute "hedge bonds" in that at least eighty-five percent (85%) of the Net Sale Proceeds will be used to carry out the governmental purposes of the Bonds within three (3) years of the date hereof, and not more than fifty percent (50%) of the proceeds of the Bonds, if any, are invested in investments having a substantially guaranteed yield for four (4) or more years. (3) No Notice of Certificates. The Authority has not received notice that its Certificate as to Arbitrage may not be relied upon with respect to its own issues nor has it been advised that any adverse action by the Commissioner of the Internal Revenue Service is contemplated. On the basis of the foregoing, it is not expected that the proceeds of the Bonds will be used in a manner that would cause the Bonds to be arbitrage bonds within the meaning of section 148 of the Code and applicable regulations. To the best of my knowledge, information and belief, the expectations herein expressed are reasonable and there are no facts or estimates, other than those expressed herein, that would materially affect the expectations herein expressed. IN WITNESS WHEREOF, I have hereunto set my hand as of the 27th day of April, 2006. By: Shawn D. Nelson, Executive Director -6-