California Comprehensive Annual Financial Report - City of Temecula

City of Temecula
Notes to Financial Statements (Continued)
Note 15: Contingencies (Continued)
Investment Partners, LLC is also a member and 50% owner of Tanamera Homes, LLC,
the 100% member of three limited liability companies that own land within the Community
Facilities District that is responsible, as of June 1,2006, for approximately 15.52% of the
estimate(l allocation of special tax liability with respect to the Community Facilities District;
and that USA Investment Partners, LLC is a 95% member of the nonmember manager of
those three entities.
On May 26, 2006, the Authority was notified that Chapter II reorganization filings were
made in the U.S. Bankruptcy Court, District of Nevada (Las Vegas) on April 13, 2006, for
USA Commercial Mortgage Company and four related entities which are affiliates of or
have common ownership with USA Investment Partners, LLC. A reorganization plan has
been approved by the Bankruptcy Court. As of April 13, 2006 USA Investment Partners,
LLC, however was not one of the entities for which Chapter 11 reorganization filings were
made. On April 4, 2007, however, involuntary bankruptcy petitions were filed against USA
Investment Partners n the U.S. Bankruptcy Court, District of Nevada (Las Vegas).
Several matters concerning Ashby USA, LLC and the bankruptcies were not discussed in
the Official Statement. Since the close of the Bonds, the Authority has not made any
disbursements to Ashby USA from the proceeds of the Bonds.
As of August 8, 2007, the City has been advised that Ashby USA has not made any
payments on its loan with Amtrust Bank (formerly Ohio Savings Bank) and that a
forbearance letter from Amtrust Bank to Ashby USA was in place. The City does not have
any information as to the expiration date of such forbearance letter or the expectation of its
being extended. As of October 6, 2008, however, neither the City nor the Authority has
been notified of the initiation of foreclosure proceedings by AmTrust Bank. Another lender
of Ashby USA on the Project, Bank of the West, foreclosed on approximately 88 acres of
land within the Roripaugh Ranch Project owned by Ashby USA and on February 19, 2008,
sold the 88 acres of the Roripaugh Ranch Project to Wingsweep Corporation at a
foreclosure sale.
Certain Planning Areas in Phase I of the Roripaugh Ranch Property in the Phase I area
previously owned by the Tanamera/USA entities and Davidson Homes are now owned by
either their lenders or parties who purchased from lenders.
A letter of credit was posted by Ohio Savings Bank (with a confirmation from Citibank) in
April 2006, and a new one posted in April 2007, in the amount of $6,679,002, which is
equivalent to two years estimated expected annual Special Taxes. In March 2008,
AmTrust Bank failed to renew the letter of credit. As a result the Authority drew the
remaining amount in the letter of credit, approximately $3.4 million, and deposited it into
the Reserve Fund for future payment of debt service. In March 2009, the Authority
transferred $671,159 from the letter of credit reserve fund to the Special Tax Fund to pay
debt service. The Current balance is approximately 2.8 million.
As of August 14, 2008, the Authority has approximately $54,866,752 in the fund and
accounts established under the Fiscal Agency Agreement.
As of October 6, 2008, no lawsuits alleging violations of Securities and Exchange
Commission Rule 10b-5 arising out of disclosure deficiencies for the Bonds have been
served on the City or the Authority. In addition no claims for damages have been filed with
the City or the Authority concerning the Bonds or the Project. On March 6, 2007, the
Authority entered into Supplement No. 1 to the Acquisition Agreement with Ashby USA
and the City entered into the Fourth Operating Memorandum to the Development
Agreement with Ashby USA and Ohio Savings Bank (now AmTrust Bank).
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