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AnAC Page 2� <br /> I <br /> SECURITY AND SOURCES OF PAYMENT FOR THE BONDS <br /> Special Taxes <br /> A Special Tax applicabie to each taxable parcel in the District will be levied and collected <br /> according to the tax liability determined by the City Council through the application of the <br /> Special Tax Formula prepared by David Taussig & Associates, Inc., Newport Beach, California <br /> (the "Special Tax Consultant") and set forth in APPENDIX A hereto for all taxable properties in <br /> the District. Interest and principal on the Bonds is payable from the annual Special Taxes (net I <br /> of certain administrative expenses) to be levied and collected on taxable property within the <br /> District, from amounts held in the funds and accounts established under the Fiscal Agent <br /> Agreement (other than the Rebate Fund) and from the proceeds, if any, from the sale of such , <br /> property for delinquency of such Special Taxes. I <br /> The Bonds are not an obligation of the City, and no funds of the City (ofher fhan the <br /> Special Taxes (net of certain administrative expenses) and the amounts on deposit hereunder) <br /> are pledged to the payment of the Bonds. <br /> The Special Taxes are exempt from the property tax limitation of Article XIIIA of the <br /> California Constitution, pursuant to Section 4 thereof as a"special tax" authorized by a two- '� <br /> thirds vote of the qualified electors. The levy of the Special Taxes was authorized by the City <br /> pursuant to the Act in an amount determined according to the Special Tax Formula approved by <br /> the City. See "Special Tax Methodology" below and "APPENDIX A— RATE AND METHOD OF <br /> APPORTIONMENT OF SPECIAL TAX." <br /> The amount of Special Taxes that the District may levy in any year, and from which <br /> principal and interest on the Bonds is to be paid, is strictly limited by the maximum rates <br /> approved by the qualified electors within the District which are set forth as the annual <br /> "Maximum Special Tax" in the Special Tax Formula. Under the Special Tax Formula, Special <br /> Taxes for the purpose of making payments on the Bonds will be levied annually in an amount, <br /> not in excess of the annual Maximum Special Tax. The Special Taxes constitute a trust fund for <br /> the principal of and interest on the Bonds pursuant to the Fiscal Agent Agreement and, so long <br /> as the principal of and interest on these obligations remains unpaid, the Special Taxes and <br /> investment earnings thereon will not be used for any other purpose, except as permitted by the <br /> Fiscal Agent Agreement, and will be held in trust for the benefit of the owners thereof and will <br /> be applied pursuant to the Fiscal Agent Agreement. The Special Tax Formula apportions the <br /> Special Tax Requirement (as defined in the Special Tax Formula and described below) among <br /> the taxable parcels of real property within the District according to the rate and methodology set <br /> forth in the Special Tax Formula. See "Special Tax Methodology" below. See also <br /> "APPENDIX A— RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." <br /> The City may levy the Special Tax at the annual Maximum Special Tax rate authorized <br /> by the qualified electors within the District, as set forth in the Special Tax Formula, if conditions <br /> so require. The City has covenanted to annually levy the Special Taxes in an amount at least <br /> sufficient to pay the Special Tax Requirement (as defined below). Because each Special Tax <br /> levy is limited to the annual Maximum Special Tax rates authorized as set forth in the Special <br /> Tax Formula, no assurance can be given that, in the event of Special Tax delinquencies, the <br /> amount of the Special Tax Requirement will in fact be collected in any given year. See <br /> "SPECIAL RISK FACTORS — Tax Delinquencies" herein. The Special Taxes are collected for <br /> -9- <br />