AgdaPkt 2012-01-09 - Laserfiche WebLink

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8.A. - Page 60 recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello-Roos Act and a special tax formula which determines the specill tax due each year are specifically identified in the Policy Statement 1s being imposed each year and therefore covered by the FDICs federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes. The City is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on a Taxable Parcel in which the FDIC has or obtains an i�zterest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Fund and perhaps, ultimately, if enough property were to become owned by the FDIC, a default in payment on the Bonds. No Acceleration Provision The Bonds and the Fiscal Agent Agreement do not contain a provision allowing for the lcceleration of the Bonds in the event of a payment default or other default under the terms of the Boilds or the Fiscal Agent Agreemeilt or in the event interest on the Bonds becomes included in gross income for federal i�zcome tax purposes. Taxability and Audit Risk As discussed herein under the caption "TAX MATTERS—General," interest on the Bonds could become includable in gross income for purposes of federal income taxation retrolctive to the date the Bonds were issued, as a result of future acts or omissions of the City in violation of its covenants in the Fiscal Agent Agreement and otherwise designed to satisfy the requirements of the Code. There is no provision in tlle Bonds or tlle Fiscal Agent Agreement for special redemption or acceleration or for the payment of additional ulterest should such an event of taxability occur, and the Bonds will remlin outstanding until maturity or until redeemed under one of the other redemption provisions contained in the Fiscal Agent Agreement. In lddition, Congress is or may be considering in the future legislative proposals, including some that carry retroactive effective dates, that, if enacted, would alter or eliminate the exclusion from gross income for federal income tax purposes of i�zterest on municipal bonds, such as the Bonds. Prospective purchasers of the Bonds should consult their own tax ldvisors regarding any pending or proposed federal tax legislation. The City c1n provide no assurance that federal tax law will not change while the Bonds are outstanding or that any such changes will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes. If the exclusion of interest on the Bonds from gross income for federll income tax purposes were amended or eliminated, it is likely that the marl<et price for the Bonds would be adversely impacted. The Internal Revenue Service (the "Service") has an ongoing program of auditing tax- exempt obligations to determine whether, in the view of the Service, interest on such tax- exempt obligations is includable in the gross income of the owners thereof for federal income tax purposes. It cannot be predicted whether or not the Service will commence an audit of the Bonds. If an audit is commenced, under current procedures the Service may treat the City as a taxplyer and the Bondholders may have no right to participate in such procedure. The commencement of an audit could adversely affect the market value and liquidity of the Bonds until the audit is concluded, regardless of the ultimate outcome. -36-