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HomeMy WebLinkAboutSR - ORD No. 1175 CITY OF PALM DESERT STAFF REPORT REQUEST: INTRODUCE FOR FIRST READING ORDINANCE NO. 1175 , ESTABLISHING AN ALTERNATIVE PROCEDURE FOR ISSUING BONDS IN CONNECTION WITH THE CITY OF PALM DESERT ENERGY INDEPENDENCE LOAN PROGRAM SUBMITTED BY: PAUL S. GIBSON, DIRECTOR OF FINANCE DATE: NOVEMBER 20, 2008 � " �����_�,����,� � CONTENTS: ORDINANCE NO. 1�75 [� ��;�j������ G�PASSE�TO 2N0 REAQI�G � �" ` �I�C� b Recommendation: By Minute motion, that the City Council waive full reading and introduce Ordinance No. 11�� establishing an alternative procedure for issuing bonds in connection with the City of Palm Desert Energy Independence Loan Program. Executive Summarv: The City established a contractual assessment program pursuant to AB 811 to finance the installation of distributed generation renewable energy sources and energy efficiency improvements to real property in the City. In connection with this program, the City appropriated $2.5 million dollars from General Fund Reserves to the Palm Desert Energy Independence Loan Fund. AB 811 provides that the City may issue bonds pursuant to AB 811 that are secured by contractual assessments to provide funds to reimburse City advances or to make additional loans pursuant to the program. Ordinance No. �i75 adds Title 17 to the Palm Desert Municipal Code to provide an alternative system for the issuance of such bonds. Backqround: On July 21, 2008, the Governor signed into law AB 811, which became effective immediately as an emergency measure. AB 811 authorizes cities to establish a program to enter into contractual assessment agreements with property owners to finance the installation of distributed generation renewable energy sources or energy efficiency improvements that are permanently fixed to real property. In summary, an AB 811 program allows a city to make loans to property owners for the purchase and installation of such improvements. Property owners repay the loans through contractual Ordinance No. �175 Staff Report November 20, 2008 Page 2 of 3 assessments on their property. Contractual assessment installments are collected on property owners' tax bills at the same time and in the same manner as property taxes. On July 21, 2008, the City Council Adopted Resolution No. 08-75 declaring its intent to establish the Energy Independence Program ("EIP") pursuant to AB 811. Pursuant to Resolution No. 08-75, the Director of the City's Office of Energy Management (the "OEM") prepared the Independence Program Report and Administrative Guidelines (the "Report") and set a date for a public hearing on the EIP. Following a duly noticed public hearing, the City Council adopted Resolution No. 08-89 on August 28, 2008, approving the Report and establishing the EIP as provided in the Report. The OEM administers the EIP. EIP loans are available for owners of non tax- exempt improved real property in the City for a broad range of energy efficiency improvements, solar systems and custom energy measures. Pursuant to Resolution No. 08-89, the City established the Energy Independence Loan Fund (the "Fund") and transferred $2.5 million from the General Fund to the Fund for the purpose of funding EIP loans. Pursuant to the Report, the maximum total aggregate dollar amount of contractual assessments is limited to $25 million, the maximum term for EIP loans is 20 years, the maximum interest rate is 7% for EIP loans made from the initial $2.5 million advance, and the maximum interest rate is 10% for EIP loans entered into thereafter. Pursuant to AB 811 the City may issue notes or bonds to reimburse the General Fund for deposits to the Fund or to fund EIP loans should the City Council decide to not continue to fund the program from additional General Fund contributions. Discussion: AB 811 provides that the City may issue bonds to be repaid from contractual assessments. AB 811 further provides that Division 10 (commencing with Section 8500) of the Streets and Highways Code shall apply to any such bonds insofar as that division is not in conflict with Chapter 29 (the chapter of the Streets and Highways Code amended by AB 811). Because Palm Desert is a charter city, as an alternative to issuing bonds pursuant to Chapter 29 and Division 10, the City Council may adopt its own procedural ordinance to govern the issuance of bonds secured by contractual assessments. Adopting a procedural ordinance will allow the City to expand on the provisions in Division 10 and customize bond issuance provisions as the City deems convenient and necessary. Examples include providing different dates for the payment of interest and redemption of bonds. The attached Ordinance No. ���5provides a comprehensive system for the issuance of bonds secured by AB 811 contractual assessments, including provisions governing the G:\Finance\Niamh Ortega\Staff ReportsW6 811 Procedural Ordinance 111008.Docx Ordinance No. 11�5 Staff Report November 20, 2008 Page 3 of 3 Council's determination to issue bonds, the form and content of the bonds, the interest rate on the bonds, the establishment of a reserve fund for the bonds, and the advance retirement of bonds. Su itted by: Approval: __��K aul S. Gibson Carlos �rt a City Treasurer/ Director of Finance City Manager Justin McCarthy ACM/Redevelopment G:\Finance\Niamh Ortega\Staff ReportsW6 811 Procedural Ordinance 111008.Docx ORDINANCE NO. 1175 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA, AMENDING CHAPTER 17 OF THE PALM DESERT MUNICIPAL CODE BY ADDING TITLE 17 RELATIVE TO PROCEDURES FOR THE ISSUANCE AND SALE OF BONDS IN CONNECTION WITH CHAPTER 29 OF PART 3 OF DIVISION 7 OF THE CALIFORNIA STREETS AND HIGHWAYS CODE NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT, CALIFORNIA DOES HEREBY ORDAIN AS FOLLOWS: Section 1. The Palm Desert Municipal Code is hereby amended by adding Title 17 to read as follows: "TITLE 17. PROCEDURES FOR THE ISSUANCE AND SALE OF BONDS IN CONNECTION WITH CHAPTER 29 OF PART 3 OF DIVISION 7 OF THE CALIFORNIA STREETS AND HIGHWAYS CODE CHAPTER 1. GENERAL PROVISIONS CHAPTER 2. DETERMINATION TO ISSUE BONDS CHAPTER 3. ISSUANCE OF BONDS CHAPTER 4. FORM AND CONTENT OF BONDS CHAPTER 5. VARIABLE INTEREST RATE BONDS CHAPTER 6. BOND RECORDS AND PAYMENTS CHAPTER 7. BOND ANTICIPATION NOTES CHAPTER 8. ADVANCE RETIREMENT OF BONDS CHAPTER 9. REDEMPTION FUND DEFICIENCIES CHAPTER 10. SPECIAL RESERVE FUND CHAPTER 11. MISCELLANEOUS PROVISIONS CHAPTER 1 GENERAL PROVISIONS 17.01.010 Alternative method. This Title shall be deemed to provide a complete, additional, and alternative method for doing the things authorized hereby, and shall be regarded as supplemental and additional to the powers conferred by the City Charter and other laws. 17.01.020 Power of City Council. The City Council, exercising the powers reserved to the City under the Constitution of the State of California and its powers under the Charter of the City, may determine that Bonds shall be issued as provided in this Title to be secured by Contractual Assessments levied pursuant to the Act. Such Bonds may be serial or term Bonds, or both, and shall be issued and sold to assist in financing or Ordinance No. 1175 refinancing Improvements or to reimburse the City for advances made to finance Improvements. The City may transfer in trust or assign for the benefit of any Bond owners, or take any other action that the City Council deems necessary or desirable with respect to, all of the right, title and interest of the City in the Contractual Assessment Agreements, including the City's rights to receive the Contractual Assessments and any and all of the other rights of the City under the Contractual Assessment Agreements as may be necessary to enforce payment of such Contractual Assessments when due or otherwise to protect the interest of the owners of the Bonds. 17.01.030 Definitions. Unless the particular provision or the context otherwise requires, the definitions and general provisions contained in this Chapter shall govern the construction of this Title. (a) "Act" means Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code, commencing with Section 5898.10. (b) "Administrative Assessment" means the annual assessment levied on each parcel to pay costs incurred by the City and not otherwise reimbursed which result from the administration and collection of assessments or from the administration or registration of any associated bonds and reserve or other related funds. (c) "Bond", and any of its variants, means bonds, notes, commercial paper or other evidences of indebtedness. (d) "Contractual Assessment Agreements" means the agreements by and between the City and property owners whereby the City has extended loans to such property owners to finance Improvements to the owners' properties pursuant to the Act. (e) "Contractual Assessments" means the assessments made pursuant to the Act. "Contractual Assessments" do not include Administrative Assessments. (� "City" means the City of Palm Desert. (g) "City Clerk" means the person who is or acts as clerk of the City or any person designated by such clerk to perform the duties of the clerk. (h) "City Manager" means the City Manager of the City. (i) "City Council" means the Council of the City. (j) "Engineer" means the City officer appointed by the City Council to perform the duties imposed on the engineer. (k) "Improvement" or "Improvements" means all work and improvements, authorized or undertaken by any property owner, which are authorized to be done under the Act. 2 Ordinance No. 1175 (I) "Resolution of Intention" means the resolution of intention adopted by the City Council pursuant to Section 5898.20 of the Act. (m) "Superintendent of Streets" means the City officer appointed by the City Council to perform the duties imposed on the Superintendent of Streets. (n) "Treasurer" means the City Treasurer. (o) "Trust Indenture" means the trust indenture or other similar agreement to be executed or the resolution to be adopted in connection with the issuance of Bonds. 17.01.040 Directory provisions of Title. The provisions of this Title relative to the time or place of performance of official duty or relative to the form of any resolution, notice, agreement, order, list, certificate of sale, deed or other instrument are directory only. 17.01.050 California Code references. Any references to a California Code shall be references to such law as it is amended from time to time. 17.01.060 Income from investments; payments to exclude interest on obligations from federal gross income. Notwithstanding any other provision of this Title, income realized from the investment of money on deposit in a fund or account established pursuant to this Title may be used, at the option of the City Council, to pay all or any portion of any amount required to be rebated to the United States. CHAPTER 2 DETERMINATION TO ISSUE BONDS 17.02.010 Power of City Council. The City Council may determine that serial Bonds, term Bonds, or both, shall be issued as provided in this Title to be secured by Contractual Assessments or to reimburse the City for advances made to finance or refinance Improvements. In order to enhance the marketability of the Bonds, the City council may also arrange with one or more banks or other financial institutions to provide credit enhancement facilities, including but not limited to letters of credit, lines of credit, standby purchase agreements and insurance policies, as an additional source of payment of the Bonds and the resulting costs thereof may be treated as incidental expenses. 17.02.020 Resolution of Intention; contents. If the City Council determines that Bonds shall be issued as provided in this Title, it shall, in the Resolution of Intention, do all of the following: (a) Declare that Bonds shall be issued pursuant to this Title to represent the expenses of the Improvements or to reimburse the City for advances made to finance or refinance Improvements. 3 Ordinance No. 1175 (b) Specify whether the Bonds shall bear interest at a variable or fixed rate and the rate or maximum rate of interest which the Bonds shall bear. (c) Declare whether the City will obligate itself to advance available funds from the City treasury to cure any deficiency which may occur in the funds and accounts established for the payment of the Bonds. 17.02.030 Determination that Bonds not be subject to refunding until specified date. (a) The City Council may determine that Bonds issued pursuant to this Title shall not be subject to refunding until a specified date in the Trust Indenture. (b) This determination shall not apply to, or in any manner limit, advancement of the maturity of any Bond or Bonds pursuant to the procedures of Chapter 7 of this Title. (c) This determination shall not apply to, or in any manner limit, the redemption and payment of any Bonds pursuant to subsequent assessment proceedings which provide for the payment in full of all amounts necessary to eliminate any Contractual Assessment previously imposed. 17.02.040 Refunding Bonds. The City Council may issue Bonds for the purpose of refunding any Bonds issued under this Title then outstanding pursuant to Article 11 of Chapter 3 of Part 1of Division 2 of Title 5 of the California Government Code (commencing with Section 53580). CHAPTER 3 ISSUANCE OF BONDS 17.03.010 List of Assessments. The Superintendent of Streets shall make and file with the Treasurer a complete list of all Contractual Assessments, which shall be updated from time to time. 17.03.020 Determination of amount of assessments; delivery of Bonds. After the City Council determines that Bonds shall be issued as provided in this Title, the Treasurer shall determine the aggregate amount of Contractual Assessments and may provide for the issuance of Bonds in such amounts and at such times as determined in accordance with a resolution of the City Council. 17.03.030 Sale of the Bonds. The Bonds may be sold at public or private sale and shall be sold in the manner determined by resolution of the City Council. 17.03.040 Effect of inability to issue Bonds secured by particular assessments. If Bonds cannot be issued upon the security of any particular Contractual Assessments because of a restraining order, injunction or other cause not applicable to other 4 Ordinance No. 1175 Contractual Assessments, the issuance of Bonds upon the security of the Contractual Assessments not affected by such restraining order, injunction or other cause, shall not be delayed, and such Bonds may be issued in advance of the issuance of the Bonds so affected. CHAPTER 4 FORM AND CONTENT OF BONDS 17.04.010 Principal and interest payments. The Bonds shall be in such denominations and payable at such time or times, in lawful money of the Unities States of America, and at such interest rate or rates, either fixed or variable, as the City Council shall determine by resolution. Except as otherwise provided in the Trust Indenture, the Bonds shall bear interest from the date of the Bonds on all sums unpaid, until the whole of the principal sum and interest are paid. 17.04.020 Form, date and division of issue. The City Council shall prescribe the form of the Bonds and shall fix the date of the Bonds. The City Council may divide the principal amount of any issue into two or more divisions and fix different dates for the payment of Bonds of each division. The Bonds of one division may be made payable at different times than Bonds of any other division. 17.04.030 Maximum maturity date. The final series of installment of the Bonds shall mature and be payable on a date which shall not exceed 39 years from the first principal payment date on such Bonds. 17.04.040 Redemption; redemption premium. Except as otherwise provided in the Resolution of Intention or the Trust Indenture, each Bond, or any portion of the Bond in a fixed amount or any integral multiple of the fixed amount, shall be subject to redemption in advance of its maturity on any interest payment date upon payment to the registered owner of the principal and accrued interest to the date of redemption together with a redemption premium equal to not more than five percent of the principal. 17.04.050 Bonds; signature, seal. The Bonds shall be signed by the City Manager or Treasurer and attested by the City Clerk. The City Council may by order authorize the use upon the Bonds of an engraved, printed, or lithographed signature of the City Manager, Treasurer and the City Clerk in place of a signature by hand. It may also authorize the seal to be placed in like manner on the Bonds. 17.04.060 Effect of issuance. The Bonds, by their issuance, shall be conclusive evidence of the regularity of all proceedings had prior thereto under this Title and under the Act. 5 Ordinance No. 1175 CHAPTER 5 VARIABLE INTEREST RATE BONDS 17.05.010 Authority to issue variable interest rate Bonds. As an alternative to any other authority, the City Council may, at its discretion, issue Bonds bearing a variable interest rate pursuant to this Title. This Chapter does not alter or restrict authority to authorize Contractual Assessments or issue Bonds pursuant to any other provision of this Title or other law in any way. If the City Council in its discretion issues Bonds bearing a variable interest rate pursuant to this Title, all provisions of the Title shall apply to the proceedings, except as expressly pr,ovided in this Chapter. 17.05.020 Interest on unpaid assessments. Except as otherwise provided in the Trust Indenture, interest on all Contractual Assessments shall run from the date of the Bonds, and shall be computed for each interest pay period at the date determined pursuant to the terms of the Bond for that interest pay period. 17.05.030 Variable interest rate on Bonds. The City Council may, by resolution, specify that the interest rate on the Bonds may vary from time to time as determined by an index or some other means prescribed in the resolution. 17.05.040 Conversion of Bonds to fixed interest rate. The City Council may, by resolution, specify terms and conditions under which the Bonds may be converted to a fixed interest rate or other interest rate mode. 17.05.050 Repurchase of Bonds; costs. The City Council may, by resolution, specify terms and conditions under which the City agrees to repurchase the Bonds. The City Council may secure a letter of credit or other instrument to secure payment or repurchase of any Bonds, and the resulting costs thereof, including costs of initially securing, maintaining, or making any payments arising from the exercise of, a letter of credit or other instrument, may be treated as incidental expenses. The City Council may engage a remarketing agent and an indexing agent, subject to terms and conditions agreed to by the City Council, and the resulting costs may be treated as incidental expenses. CHAPTER 6 BOND RECORDS AND PAYMENTS 17.06.010 Place of Payment. The Bonds and interest shall be paid at the office of the City Treasurer or of another paying agent designated by the City Council. 17.06.020 Redemption Fund. The Treasurer or paying agent designated by the Treasurer or the City Council shall keep a redemption fund designated by the name of the Bonds, in which there shall be placed all sums received from the collection of the Contractual Assessments. The fund shall be considered a trust fund for the benefit of the holders of the Bonds. The redemption fund shall be used for paying principal and 6 Ordinance No. 1175 interest and redemption premium, if any, payments on the Bonds directly, or money in the fund may be forwarded to the paying agent for these purposes. Under no circumstances shall the Bonds or the interest thereon be paid out of any other fund. If there is a surplus remaining in the redemption fund after payment of all Bonds and the interest thereon, such surplus may be transferred to the City to be used for any lawful purposes. 17.06.030 Bond register; cancellation of paid Bonds; retention. The Treasurer or the designated paying agent shall keep a register in his or her office showing the series, number, date, amount, rate of interest, and last known holder of each Bond. The Treasurer or paying agent shall cancel and file each Bond which he or she pays. The register and canceled Bonds shall be retained for five years beyond the last maturity of the Bonds. CAAPTER 7 BOND ANTICIPATION NOTES 17.0'1.010 Trust Indenture; issuance; maximum maturity date. The City Council may, by Trust Indenture, borrow money in anticipation of the sale of Bonds which have been authorized pursuant to this Title, but which have not been sold and delivered, issue Bond anticipation notes therefor, and renew the notes from time to time. The maximum maturity of any Bond anticipation notes, including the renewals thereof, shall not exceed three years from the date of delivery of the original notes. 17.07.020 Source of principal and interest payments. The principal and interest on the Bond anticipation notes may be paid from any money available for their payment. Any portion of the principal or interest which is due and payable shall be paid from the proceeds of the next sale of Bonds in anticipation of which the notes were issued. 17.07.030 Purpose; use of proceeds. The proceeds of Bond anticipation notes issued pursuant to this Chapter may be used for any purpose for which the Bonds in anticipation of which the notes were issued may be used. 17.07.040 Amount of issuance. The Bond anticipation notes shall not be issued in any amount in excess of the aggregate amount of Bonds which the City Council has been authorized to issue, less the amount of any Bonds of the authorized issue which have been previously sold and less the amount of other Bond anticipation notes previously issued and still outstanding. 17.07.050 Trust Indenture; call and redemption prior to maturity. The City Council may provide, in its Trust Indenture authorizing the issuance of Bond anticipation notes, that the note shall be subject to call and redemption prior to maturity, at the option of the City Council, at the price or prices which are fixed in the Trust Indenture, but not to exceed a premium of six percent of the par value of the note subject to redemption. The Trust Indenture shall fix the method of giving notice of redemption to the holders of the notes to be redeemed and the price or prices at which the note shall 7 Ordinance No. 1175 be subject to redemption. Any notes that are subject to call and redemption prior to maturity shall contain a recital to that effect on their face, and no note shall be subject to call or redemption prior to its fixed maturity date unless it contains that recital. 17.07.060 Manner of issuance and sale. The Bond anticipation notes may be issued and sold in the same manner as the Bonds. 17.07.070 Contents of notes and Trust Indenture. The Bond anticipation notes and the Trust Indenture authorizing them may contain any provisions, conditions, or limitations which a Trust Indenture of the City Council authorizing the issuance of Bonds may contain. 17.07.080 Trust Indenture; remedy; anticipated Bonds not sold at time or in amount specified; default. The City Council shall provide a remedy in its Trust Indenture authorizing the issuance of Bond anticipation notes if the anticipated Bonds cannot be sold at the time or in the amount specified in the Trust Indenture or if any default occurs with respect to the notes. CHAPTER 8 ADVANCE RETIREMENT OF BONDS 17.08.010 Assessment prepayment subaccount of Bond redemption fund; deposits; disbursements. Upon receiving a partial or full prepayment of a Contractual Assessment, the Treasurer shall deposit it in an assessment prepayment subaccount of the Bond redemption fund. All prepayments may be commingled in a single account. From the account, the Treasurer shall make disbursements as follows unless provided otherwise in the Trust Indenture: (a) The administrative fee, if any, shall be deposited in the general fund of the City. (b) Delinquent principal, interest, and penalties shall be transferred to the redemption fund for the Bonds. If a special reserve fund has been established for the Bonds and has been depleted on account of the delinquencies, the delinquent amounts and penalties shall be transferred instead to the special reserve fund. (c) The installment of principal due in the fiscal year of prepayment shall be transferred to the redemption fund for the Bonds. (d) Interest accrued to the next redemption date shall be transferred to the redemption fund for the Bonds. (e) The balance in the assessment prepayment account shall be used to advance the maturity of Bonds to the next call date. The amount of Bonds to be retired shall be the maximum for which principal and redemption premium may be paid in full 8 Ordinance No. 1175 from the prepayment account. Accrued interest on Bonds to be retired shall be paid from the redemption fund. 17.08.020 Notice of advanced maturity; service or mailing. Notice of advanced maturity shall be given in writing to the holder of the Bond by personal service, registered or certified mail. Such notice may be conditional and shall be made at least 30 days before the date fixed for advanced maturity, or such shorter period upon the consent of the holder of the Bond that is subject to advanced maturity. 17.08.030 Surrender; payment; redemption premium; failure to surrender for payment. If notice of advanced maturity is given, the Bond shall mature and become payable on the date fixed for maturity in the notice. The holder of the Bond may, prior to the date of advanced maturity, with the consent of the Treasurer, surrender it and receive the principal and interest thereon to the date of payment together with the redemption premium provided for the Bond. If the Bond has not been sooner surrendered on the date fixed for advanced maturity, the Treasurer shall set aside to the credit of the owner of the Bond the amount of principal and accrued interest then due on the Bond together with the redemption premium and the Bond shall then be deemed to have matured and interest shall cease to accrue on the Bond. The amount so set aside shall upon demand and upon the surrender and cancellation of the Bond be paid to the holder or owner of the Bond. � 17.08.040 Cost of notice of advanced maturity. To the extent fund are available for such purpose, the cost of serving the notice of advanced maturity may be paid from the redemption fund. 17.08.050 Notice covering more than one Bond. More than one Bond may be covered in a single notice of advanced maturity. 17.08.060 Tender of other Bonds for cancellation; notice to bondholders. Prior to the surrender of any Bond or the setting aside of any funds, the Treasurer may waive and vacate any notice of advanced maturity upon being tendered for cancellation some other Bond or Bonds of an equivalent amount and of a maturity not earlier than that noticed, if notice of the Treasurer's intention so to do is first given, prior to the date of advanced maturity, by mail or otherwise to the holder or owner of the Bond noticed for advanced maturity and such holder or owner has not objected to such action. 17.08.070 Manner of selecting Bonds for retirement. The Treasurer shall select Bonds for retirement in accordance with the redemption provisions of the Trust Indenture. 17.08.080 Alternative procedures. Notwithstanding the foregoing provisions of the Chapter, the City Council may by resolution establish alternative procedu�es for the advance retirement of Bonds. 17.08.090 Obligation of City to cure deficiency; determination; declaration; statement in Bonds. Before issuing Bonds pursuant to this Title, the City Council shall determine, and shall declare in the Resolution of Intention, whether or not the City will 9 Ordinance �o. 1175 obligate itself to advance available funds from the City treasury to cure any deficiency which may occur in the Bond redemption fund. The determination made pursuant to this section shall be clearly stated in the text of the Bonds issued pursuant to this Title. CHAPTER 9 REDEMPTION FUND DEFICIENCIES 17.09.010 Withholding payments; report to the City Council. If it appears to the Treasurer that there is danger of an ultimate loss accruing to the holders of the Bonds for any reason, he or she shall withhold payment on all matured Bonds and interest and report the facts to the City Council so that proper action may be taken by the City Council to equitably protect all holders. 17.09.020 Determinations. On receipt of the report, the City Council shall determine whether in its judgment there will ultimately be insufficient money in the redemption fund to discharge the unpaid Bonds and interest. If it determines that in its judgment there will be no such shortage, it shall direct the Treasurer to pay matured Bonds and interest as long as there is available money in the redemption fund. The City Council may make other determinations and take other actions from time to time as may be equitable and proper. 17.09.030 Proportionate payments. If the City Council determines that in its judgment there will be a shortage in the redemption fund, it shall direct the Treasurer to pay to the holders of all outstanding and unpaid Bonds such proportion thereof as the amount of funds on hand bears to the total amount of the unpaid principal of the Bonds and the interest which has accrued or will accrue thereon. Similar proportionate payments shall thereafter be made periodically as moneys come into the redemption fund. 17.09.040 Registration and cancellation of outstanding Bonds; proportionate payments of principal and interest; notice to holders of unsurrendered Bonds. In order to facilitate the making of proportionate payments, the holders of outstanding Bonds shall surrender them to the Treasurer for registration and cancellation. Upon cancellation each holder shall be credited with the amount of the holder's Bond so canceled. Thereupon the Treasurer shall by warrant pay to each holder the proportionate amount of principal and accrued interest due on his or her Bonds as may be available from time to time out of the money in the redemption fund. Interest shall cease on payments made on account of principal from the date of payment, but interest shall continue to run on the unpaid principal at the rate specified in the Bonds until payment thereof be made. No premiums shall be paid on payments made in advance of the due date. If Bonds are not surrendered for registration and payment the Treasurer shall give notice to the holder thereof by registered mail, at the holder's address as last known to the Treasurer, of the amount available for payment. 10 Ordinance No. 1175 Thereupon interest shall cease as to the amount so available for payment 10 days from the date of mailing of the notice. 17.09.050 Temporary redemption fund deficiency; priority for payment. If a deficiency occurs in the redemption fund with which to pay past due Bonds, past due interest, or Bonds or interest which will become due during the current tax collecting year, but it does not appear to the Treasurer that there will be an ultimate loss to the bondholders, the Treasurer shall pay matured Bonds as presented and make interest payments when due as long as there are available funds in the redemption fund, in accordance with the provisions of the Trust Indenture. 17.09.060 Notice to holders of registered Bonds; failure to present for payment. When funds become available for the payment of any Bond which was not paid upon presentment, the Treasurer shall notify the holder thereof by registered mail to present the Bond for payment. If the Bond is not presented for payment within 10 days after the mailing of the notice, interest shall cease to run on the Bond. CHAPTER 10 SPECIAL RESERVE FUND 17.010.010 Creation; amount. In any proceedings leading to the issuance of Bonds pursuant to this Title, the City Council may include, as an incidental expense of the proceedings, an amount to create a special reserve fund for the Bonds. The amount so provided shall not exceed 10 percent of the total amount of Contractual Assessments to be levied under the proceedings. 17.010.020 Advance payment of assessment; reduction of assessment levied on parcel; ratio. Where a special reserve fund is created for an issue or series of Bonds and the amount to create a special reserve fund was included in the Contractual Assessment, the Contractual Assessment levied on any parcel for the payment of the Bonds shall be reduced upon the prepayment following issuance of the Bonds, in whole or in part, of the Contractual Assessment. The proportional reduction on the Contractual Assessment shall equal the ratio of the total amount initially provided for the special reserve fund to the total amount originally assessed in the proceedings for the Bonds. 17.010.030 Transfer of sale proceeds to fund; trust fund. Upon receipt of the proceeds from the sale of the Bonds, the amount so provided for the special reserve fund pursuant to this Chapter shall be transferred to the fund. The special reserve fund shall be identified by the name of the proceedings under which the Bonds are issued and shall constitute a trust fund for the benefit of the bondholders, subject to and to be administered in accordance with the provisions of this Chapter. 17.010.040 Availability of fund for transfer to redemption fund; reimbursement from proceeds of redemption or sale. The money in the special reserve fund shall be 11 Ordinance No. 1175 available for transfer into the redemption fund for the Bonds. The amount so advanced shall be reimbursed from the proceeds of redemption or sale of the parcel for which payment of delinquent installments was made from the special reserve fund. 17.010.050 Payment of assessment; transfer to redemption fund of amount equal to assessment reduction. Whenever a Contractual Assessment is paid off following the issuance of Bonds, there shall be transferred, from the special reserve fund to the redemption fund, an amount equal to the reduction in the Contractual Assessment determined pursuant to Section 17.010.020. 17.010.060 Adequacy of fund to retire Bonds; discontinuance of principal and interest collection; liquidation; disposition of excess. Provided that the amount to create the special reserve fund was included in the Contractual Assessment, whenever the balance in the special reserve fund is sufficient to retire all remaining outstanding Bonds in the issue, whether by advance retirement or otherwise, collection of the principal and interest on the Contractual Assessments shall be discontinued and the special reserve fund shall be liquidated in retirement of the Bonds. In the event that the balance in the fund at the time of liquidation exceeds the amount required to retire all outstanding Bonds in the issue or series, the excess shall be apportioned to each parcel upon which the individual Contractual Assessment remained unpaid at the time the balance in the special reserve fund was sufficient to retire all outstanding Bonds in the issue. The payments shall be made in cash to the respective owners of the parcels except that, if the excess is not greater than $1,000, the excess may be transferred to the general fund of the City. 17.010.070 Temporary investments. Money in the special reserve fund may be temporarily invested in any authorized investments pursuant to Article 1 (commencing with Section 53600) of Chapter 4 of Part 1 of Division 2 of Title 5 of the California Government Code, or in any authorized investments pursuant to law. Any income realized from such investments shall be credited to the special reserve fund, and any loss or expense resulting from such investment shall be charged to that fund. 17.010.080 Use of fund; assessment credit; advance Bond retirement. Notwithstanding any other provision in this Chapter, for the purposes of providing for reduction of the amount of money in the special reserve fund during the term of the Bonds, the City Council may, by Trust Indenture or resolution adopted prior to the issuance of Bonds under this Title, provide that money in the special reserve fund, including investment income, shall be used, in the amounts and at the times as the City Council may determine, for either or both of the following: (a) Credit upon the Contractual Assessment in the manner provided in the Trust Indenture. (b) Transfer to the redemption fund for advance retirement of the Bonds pursuant to this Title. 12 Ordinance No. 1175 The Trust Indenture or resolution may specify the terms and conditions, as the City Council may determine to be reasonable, with respect to its authorization of any or all of the uses. CHAPTER 11 MISCELLANEOUS PROVISIONS 17.011.010 Errors in computation of amount due. No Bond, Contractual Assessment, or installment thereof or of the interest or penalties thereon, or declaration of default or deed shall be held invalid for any error in the computation of the proper amount due on the same, if the error is found to be comparatively negligible, or is found to be in favor of the owner of the real property affected thereby. 17.011.020 City ownership of bonds; waiver. So long as the City is the sole owner of the Bonds, the City may waive any provisions of this Title. 17.011.030 Validation proceeding. An action to determine the validity of any Contractual Assessments, Bonds or contracts may be brought by the City Council, or by any person designated by the City Council, pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the California Code of Civil Procedure. 17.011.040 Liberal construction. This Title is adopted pursuant to the power granted to the City the by City Charter and the Constitution of the State of California and is an exercise by the City of its power as to municipal affairs and its police powers, and this Title shall be liberally construed to uphold its validity under the laws of the State of California. 17.011.050 Improvements are not public improvement. The proceedings under the Act and the issuance of Bonds to finance the Improvements shall not subject the City to liability under any state, federal or local law for any cause of action which may be brought with respect to the Improvements installed or constructed pursuant to the Act. Such Improvements shall at all times be private improvements owned, built, controlled, operated and maintained by the private owners of the property upon which the Improvements are made and will not be public improvements." Section 2. Any provisions of the Palm Desert Municipal Code or appendices thereto or any other ordinances of the City inconsistent herewith, to the extent of such inconsistencies and no further, are hereby repealed or modified to the extent necessary to effect the provisions of this ordinance. Section 3. If any section, subsection, sentence, clause or phrase of this ordinance is for any reason held to be invalid, illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this ordinance. The City council hereby declares that it would have adopted this ordinance and each and every other section, subsection, sentence, clause and phrase hereof not declared invalid, illegal or unenforceable 13 Ordinance No. 1175 without regard to whether any portion of this ordinance would be subsequently declared invalid, illegal or unenforceable. PASSED, APPROVED AND ADOPTED by the City Council of the City of Palm Desert at its regular meeting held this day of November, 2008, by the following vote, to wit: AYES: NOES: ABSENT: ABSTAIN: JEAN M. BENSON, MAYOR ATTEST: RACHELLE D. KLASSEN, CITY CLERK CITY OF PALM DESERT, CALIFORNIA 14