Bond Debt

On October 28, 2016, the District issued $11,960,000 Limited Tax (Convertible to Unlimited Tax) General Obligation Refunding and Improvement Bonds, Series 2016 (the Senior Bonds). The proceeds from the sale of the Senior Bonds (including a $61,828 premium) were used as follows:

• $6,379,371 was allocated to financing or reimbursing the costs of public improvements related to development within the District;

• $2,869,219 was allocated to paying of the Series 2006 bonds;

•  $1,225,503 was allocated as capitalized interest on the Senior Bonds;

•  $1,120,750 was allocated to fund the Senior Reserve and Surplus Funds; and

•  $426,985 was allocated to pay the costs of issuing the Senior Bonds.

The Senior Bonds were issued as two term bonds that bear interest at 4.625% and 5.000%, and are payable semi-annually on June 1 and December 1, beginning on December 1, 2016. Annual mandatory sinking fund principal payments are due on December 1, beginning on December 1, 2020. The Senior Bonds mature on December 1, 2046.

The Senior Bonds are secured by and payable solely from Senior Pledged Revenue, net of any costs of collection, which is comprised of the following:

• all Senior Property Tax Revenues (generated by the imposition of the Senior Required Mill Levy);
• all Senior Specific Ownership Taxes (attributable to the Senior Required Mill Levy);
• any other legally available amounts that the District determines, in its absolute discretion, to credit to the Senior Bond Fund.

Amounts on deposit in the Senior Reserve Fund and, prior to the Conversion Date, amounts on deposit in the Senior Surplus Fund also secure payment of the Senior Bonds. Available Senior Pledged Revenue, if any, is to be accumulated in the Senior Surplus Fund in accordance with the Senior Indenture up to the Maximum Surplus Amount of $1,196,000.

The Senior Bonds are subject to redemption prior to maturity, at the option of the District on December 01, 2021, and on any date thereafter, upon payment of par, accrued interest, and a redemption premium equal to a percentage of the principal amount so redeemed, as follows:

Series 2018B Subordinate Bonds

On April 25, 2018 (13 days prior to an election that replaced all directors on the District’s board – all of whom served as directors on the AHPDMD board, three of whom were owners/managers of ACM and one who reported other conflicts of interest serving as a director – with five independent, homeowner directors), the District issued $2,540,000 Subordinate Limited tax general Obligation Bonds (Subordinate Bonds) and $750,000 Junior Lien Limited Tax General Obligation Bonds, (Junior Lien Bonds). The net proceeds from the sale of the Subordinate and Junior Lien Bonds were transferred to AHPDMD under a 2005 Facilities Funding, Construction and Operations Agreement with AHPDMD where the District agreed to reimburse AHPDMD for costs AHPDMD incurred related to installing public infrastructure within the District.

Pursuant to a reimbursement agreement dated April 12, 2018 between AHPDMD and Almond Palm, LLC – an entity created on April 03, 2018 and owned by one or more of the District’s directors – AHPDMD transferred the net proceeds of the Subordinate and Junior Lien Bonds received from the District to Almond Palm, LLC. Almond Palm, LLC was dissolved on August 26, 2019 – approximately 17 months after it was created.

Series 2018B Subordinate Bonds – Terms

The Subordinate Bonds were issued at the rate of 7.75% per annum and are payable annually on December 15, beginning December 15, 2018, from, and to the extent of, Subordinate Pledged Revenue available, if any, and mature on December 15, 2038. The Subordinate Bonds are structured as cash flow bonds meaning that there are no scheduled payments of principal or interest prior to the final maturity date. Unpaid interest on the Subordinate Bonds compounds annually on each December 15. In the event any amounts due and owing on the Subordinate Bonds remain outstanding on December 15, 2046, such amounts shall be deemed discharged and shall no longer be due and outstanding.

No payments on the 2018B Bonds are permitted to be made until (a) the Surplus Fund reaches the Maximum Surplus Amount in the amount of $1,196,000 established pursuant to the 2016 Senior Indenture, and (b) annual debt service on the 2016 Senior Bonds and any obligations issued on parity therewith are paid in full.

The Subordinate Bonds are secured by and payable from Subordinate Pledged Revenue, net of any costs of collection, which includes:

• all Subordinate Property Taxes (generated by the imposition of the Subordinate Required Mill Levy);
•  all Subordinate Specific Ownership Taxes (attributable to the Subordinate Required Mill Levy); and
• any other legally available moneys which the District determines, in its absolute discretion, to credit to the Subordinate Bond Fund.

Under the Senior Indenture of Trust, any amounts in the Senior Surplus Fund (which is funded up to the Maximum Amount) upon termination of such fund are pledged to the payment of the Subordinate Bonds.

Series 2018C Junior Lien Bonds

The Junior Lien Bonds were issued at the rate of 12.5% per annum and are payable annually on December 15, beginning December 15, 2018, from, and to the extent of, Junior Lien Pledged Revenue available, if any, and mature on December 15, 2038. The Junior Lien Bonds are structured as cash flow bonds meaning that there are no scheduled payments of principal or interest prior to the final maturity date. Unpaid interest on the Junior Lien Bonds compounds annually on each December 15. In no event is any principal or interest to be paid on the Junior Lien Bonds until the Subordinate Bonds, and to the extent required by the applicable Senior/Subordinate Obligation Indentures, any other Senior/Subordinate Obligations, have been paid in full or defeased.

Per section 4.05(f) of the Junior Lien Indenture of Trust, if the Junior Lien Pledged Revenue is insufficient or is anticipated to be insufficient to pay the principal of, premium if any, and interest on the Junior Lien Bonds when due, the District has irrevocably covenanted to use its best efforts to refinance, refund, or otherwise restructure the Bonds so as to avoid such payment shortfall. In the event any amount of principal or interest on the Junior Lien Bonds remains unpaid on December 15, 2046 after application of (1) all Junior Lien Pledged Revenue and (2) proceeds from refinancing, refunding or restructuring the Junior Lien Bonds, the Junior Lien Bonds will be discharged and the bondholders will have no recourse against the District.

The Junior Lien Bonds are secured by and payable from Junior Lien Pledged Revenue, net of any costs of collection, which includes:

• all Junior Lien Property Taxes (generated by the imposition of the Junior Lien Required Mill Levy);
• all Junior Lien Specific Ownership Taxes (attributable to the Junior Lien Required Mill Levy);
• any other legally available moneys which the District determines, in its absolute discretion, to credit to the Junior Lien Bond Fund.

In no event is any principal or interest to be paid on the 2018C Bonds until the 2018B Bonds, and to the extent required by the applicable 2016 Senior Indenture and 2018B Indenture, any other 2016 Bond and 2018B Bond Obligations, have been paid in full or defeased.

Per the 2018 Financial Forecast included with the Junior Lien Bond Offering document, the Junior Lien Bonds are projected to be repaid in full by 2038. Interest payments per the 2018 Financial Forecast totaled $5,080,131, which equates to an annual net effective interest rate of 32.3%.