Part 12. Redemption Fund Deficiencies of California Streets And Highways Code >> Division 10. >> Part 12.

If it appears to the treasurer that there is danger of an ultimate loss accruing to the bondholders for any reason, he or she shall withhold payment on all matured bonds and interest and report the facts to the legislative body so that proper action may be taken by that body to equitably protect all bondholders.

On receipt of the report, the legislative body shall fix a date for hearing thereon. The clerk shall give notice of the hearing by posting for 10 days. At the hearing the legislative body 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.

If the legislative body 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.

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 his 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. Thereupon interest shall cease as to the amount so available for payment 10 days from the date of mailing of the notice.

The legislative body may hold supplemental hearings on like notice and such other and supplemental orders may be made from time to time as may be equitable and proper.

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, he shall pay matured bonds as presented and make interest payments when due as long as there are available funds in the redemption fund, in the following order of priority:
  (1) All matured interest payments shall be made before the principal of any bonds is paid.
  (2) Interest on bonds of earlier maturity shall be paid before interest on bonds of later maturity.
  (3) Within a single maturity, interest on lower-numbered bonds shall be paid before interest on higher-numbered bonds.
  (4) The principal of bonds shall be paid in the order in which the bonds are presented for payment. Any bond which is presented but not paid shall be assigned a serial number according to the order of presentment and shall be returned to the bondholder. Bonds not paid when presented, and interest payments not paid when due, shall bear interest at the rate stated in the bonds, without compounding, until paid.

When funds become available for the payment of any bond which was not paid upon presentment, the treasurer shall notify the registered owner 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.

If a deficiency remains in the redemption fund after one year from the issuance of the bonds, the legislative body may require all persons interested to appear before it at a day, hour and place fixed by it for a hearing and to show cause why a supplemental assessment should not be made to pay for the cost and incidental expenses of the original work done upon which the original assessments were made upon which the bonds were issued.

Notice of the hearing shall be given by publication, and shall also be posted by the street superintendent in the same manner as provided by the law pursuant to which the work was done for the posting of notices of the passage of the resolution of intention. The first publication of the notice and the posting shall be completed 10 days before the time fixed for the hearing.

At the time set for the hearing the legislative body shall proceed to hear any person appearing and may determine whether or not such deficiency was due to the fact that the original assessment for such cost and incidental expenses was not apportioned equitably or in accordance with benefits. The hearing may be postponed from time to time. If it appears to the legislative body that the amount apportioned to any lot was less than the amount which such lot should equitably bear according to the benefit which it received from the improvement, the legislative body may levy a supplemental assessment apportioning to such lot the additional sums which it should equitably bear according to such benefits.

The cost of the publication and posting of the notice and of making the supplemental assessment may be included in the supplemental assessment. A copy of the order levying the supplemental assessment shall be recorded in the office of the street superintendent and from and after such recording, the sum therein levied on any lot shall be and constitute a lien thereon and thereafter bear interest at the rate specified in the bonds. The several amounts levied by the supplemental assessment shall be extended on the next succeeding tax rolls to be delivered to the tax collector and shall be collected in the manner provided for the collection of installments of the original assessments.

The legislative body may provide in its order levying the supplemental assessment that the supplemental assessments may be collected in annual installments during the remaining term of years during which the bonds run, an equal proportion of principal coming due in each of the remaining years. However, any property owner may pay the whole of the supplemental assessment subsequent to the order of the legislative body and before the amount has been extended on the tax roll, whereupon interest shall cease on such assessment.

All money collected on the supplemental assessment shall be paid into the redemption fund and be applied to the payment of the costs of publishing and posting the notice of hearing and of making the supplemental assessment and then to the payment of the bonds and interest thereon. After satisfaction of the bonds, repayment, if possible, of all funds collected on the supplemental assessment shall be made to those persons paying the same out of recoveries had through the collection of the delinquent installments of the assessments upon which the bonds were originally issued and of the interest and penalties thereon, and then out of any surplus remaining in the redemption fund after repayment to the city of any special taxes levied by it for the purpose of advancing funds under Part 13 (commencing with Section 8800) less its recovery on the sale or redemption of the properties assessed and any costs incurred by it under this division.

If there is a surplus remaining in the redemption fund after payment of all bonds and the interest thereon, that surplus shall first be applied to repayment to the city of any special taxes levied by it for the purpose of advancing funds under Part 13 (commencing with Section 8800) less its recovery on the sale or redemption of the properties assessed, and also of any costs incurred by it under this division. The remainder shall be repaid in accordance with the provisions of Section 8783 to persons paying supplemental assessments, if any, and the balance may be proportionately credited upon the final installments due upon the assessments securing the bonds and repaid to those persons whose assessments have been previously paid or may be transferred to the general fund of the city.