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HomeMy WebLinkAbout06/27/2006 CC Reports CITY OF LAKE ELSINORE. " ':""'::','-" TVESDAY,JtJNE 27, 2006 - CLOSED SESSION AT 5: , . . PUBLIC SESSION AT 7:00 ~. l/YlJu, .e,..:t,.City Council Meeting p/~lISe, llftrk in the. :- Lot ,iCrOss 14 . . t.:from the Cultural Center. Th.c;~iIl ll$sist limitingthe.;",ptICt of meetings on the Downtown' BmitleSf Thank YO'(l/or,your COoperationl .' , . ,". "," c. ~ITYCOUNCIL AGENQt\.. ROBERT E. "BOrl#GEE.MAYOIl .IlO,BEltT L.SqItIt'~";,,"Y$l PRO TEM ,THOMAS 8JJCKUY.~EIl DAIlYL Ell ,.. GENaBih;y, ,1lOItEItT A:. ,CAY4.TO QRP~' '~" " .c;,. , . CO 'WITH LEGAL COUNSEL - ANTICIPATED ' . .'- -, '.'" - - , ,'- '- - " ',--.' ," Lm , . ,N -' Sfgnifieant exposure to litigation pursuant to'Subdi~~n (b) ofOov't CpdeSection 54956.9 (1 potential case) .' " - ',' . ,~L.~Qf~~CE INVOCAJM)N -:M~MElfT OF SIL~PRAYER j J j j ,.\ } Reject the claims. Annual adoption of Investment Policy. I Approve investment PO'licy. Cjtywide/{Jighting and Landscaping Maintenance District ~d ~e tandsca~ and :Lighting M~tenance District NO'. 1 for,the;~isea1 , ,.Year2~7 ~ ApprO'valoCthe Engineer's reportsandlt.,Jutl9nO'f Intention. ' f' , .~ ',. .... "/'''':~t<<?ATION: Adopt Resolution"NO'. 2006-87, ,',. " _ _'- - - - -: _.-- _ -: -_ ,,' '_,. ',-, _ _ '_: - :_ -_'~---';o..,~"",,, apprO'ving the ER ror the:Cit}rwtdcf tLMD. Adopt ResolutiO'n.No.' declaring CO'uncil' s in~ provide an AnnuafLeVyimd Collection ofAssessment.$:atl . ' "',,", a pubiichearing fO'r July 25, 2 Adopt Resolution N'o. 2006-89, . approving the Eft.' for the L~<No. I. ' , Adopt ~solutiO'n No.2()()6-90, declaring Council's intenfjqnto. provide an AnntialLevy mid. ,. Collection of AssessmentS in LtMD NO'.l. Schedule a public bearing for July; 25, 2006. ' , ,......(......... " ., yl 1 7. ResOlutiO'ninititt,ting proceedings and approving the Engilleer's. Report for.AnnutltiOD No. 11 (Tract 31957) toLLMD No. .1 arid scheduJethe.public hearing on tlIt~ District formation. . .~ " Page 5 - CityCo..dJ,AgeDda~JuDe 'J7J 2.' , RECOMMENDATION: Adopt Resolution No. 2006-94, approving the agreements. listed m the staff report. .. , Adopt Resolution No. 2006...95, establishing CFD No.20P6-'6", .. , (Tessera) and calling apublit~: " . , t, '.. ' - ,'y;._.., _ for August 8, 2006. ,'.-:": ',' Adopt Resolution No. 2006-96, ~Ol to incur bonded indebtedness. -I, , ,Fiscal Year ErtdBndget Adjustm~ts., Approve the fiscal year end budg~d adjustments as provided,in the ~ Ho~_H@)rdousWaste Collection Agreement - County of, Riversi4eiWasteManagement Department. .. 'RECOMMBNDATION: RECoMMENDATION: Approve the agreement with RiverSide County Waste Management Department for household hazardous waste. \. , , c . 'Planning~Di~ision Contract staff personal & professiona1.,servic~- 'contracts., , Authorize the City Managef'to:' , into contract with the contraCt:' ,listed'ih the staff feport. ,Final M$pNo. 31792. RECOMMENDATION: Approve Final Map,No~ 31792 subject to the City Bngineer's < . .'- ,'. ,-- ; . acceptance., , Authorize the City Clerk-waeeept all ' dedications~ sign the map and arrange for the recordation. h~ "<~. ,Page 1- City <:~..eilAgeDda~ JuDe 21, 2006 . - - ." . " -. .- , .\..- ~Jl$~S " Adopt Resolutiol\~:No. 2006-99, ordering canvassing of the election results. Conduct first reading of Ordinance No. 1183, by title Ortly, authorizing the levy of a special tax. t 3 L Second Reading";" Ordinance No. 1182 - Authorizing the,Jevy of a, services'speeiaftax and special tax. ' . '. , RECOMMENDATION: - . -..,' ~'- Adopt Ordinance No., 1182, upon' second reading, by title only. ' , ,32. Resolution authorizing the issuance of bonds and approving bond doc~ts forCFD No. 2003-2 (Canyon Hills) - ImprovementArea B.'.'.. , . . RECOMMENDATION: Adopt Resolution No. 2606-100,. . approving the issuance of em 2003- '2 Special Tax Bonds (Improvem~ Area B) 2006 Series A, Fiscal " )nt Agreement, Continuing Disc. , Agreement, PurChase ~actMCi" Preliminary Official Sta ...... t. .~ ~; ~ i,-, " .33.. Resolution authorizing the issuance of bonds and approving bond documetitsfor CFDNo. 2006-2 (Viscaya). .RECOMMPNDATlON: . Adopt Resolution NQ. 2()06.:.10 1, approving the issuance 'of CFD 2006- 2 Special, Tax BPIld$ ZOO6'Series A, Fiscal Agent AgreelJlen~ Continuing ,Disclosure Agreeme.at'Purchase Contract. and Preliminary Official Statement. 34. Agreementtofonn the Lake Elsinore and Canyon Lake TMDLTask Force. Page '~City'COIIDeiI Agenda - June 27, 280() . >.>~nx AIT~Yf;O~TS " ClTY (:O~C~ COMMENTS '.AQ1Q~ ,1 ", .- ,- '-:' '" "_~<> .~~" -, . -r- .;} ; '~ AGENDA ITEM NO. A- ( l PAGE OF ~_~= "..... MINUTES CITY COUNCIL MEETING CITY OF LAKE ELSINORE 183 NORTH MAIN STREET LAKE ELSINORE, CALIFORNIA TUESDAY, APRIL 11,2006 ****************************************************************** CALL TO ORDER The Regular City Council Meeting was called to order by Mayor Magee at 5 :00 p.m. ROLL CALL PRESENT: COUNCILMEMBERS: BUCKLEY, HICKMAN, KELLEY, SCHIFFNER, MAGEE "..... ABSENT: COUNCILMEMBERS: NONE Also present were: City Manager Brady, City Attorney Leibold, Administrative Services Director Pressey, Community Development Director Preisendanz, Community Services Director Sapp, Lake & Aquatic Resources Director Kilroy, Information/Communications Manager Dennis, Building & Safety Manager Chipman, RecreationlTourism Manager Fazzio, Police Chief Fetherolf, City Treasurer Weber and City Clerk Ray. CLOSED SESSION THE REGULAR CITY COUNCIL MEETING WAS RECESSED INTO CLOSED SESSION AT 5:00 P.M. RECONVENE IN PUBLIC SESSION (7:00 P.M.) PLEDGE OF ALLEGIANCE ~ The Pledge of Allegiance was led by Mayor Magee. Agenda Item No. 1 a Page-Lof 39 Page 2 - City Council Meeting Minutes -April 11, 2006 INVOCATION - MOMENT OF SILENT PRAYER ,..., Mayor Magee led the meeting in a moment of silent prayer. ROLL CALL PRESENT: COUNCILMEMBERS: ,BUCKLEY, HICKMAN KELLEY, SCHIFFNER, MAGEE ABSENT: COUNCILMEMBERS: NONE Also present were: City Manager Brady, City Attorney Leibold, Administrative Services Director Pressey, Community Development Director Preisendanz, Community Services Director Sapp, Lake & Aquatic Resources Director Kilroy, Information/Communications Manager Dennis, Building & Safety Manager Chipman, RecreationlTourism Manager Fazzio, Police Chief Fetherolf, City Treasurer Weber and City Clerk Ray. CLOSED SESSION "'-'" A. CONFERENCE WITH LEGAL COUNSEL-ANTICIPATED LITIGATION - Significant exposure to litigation pursuant to subdivision (b) of Gov't Code ~ 54956.9: (3 potential cases). PRESENTATION/CEREMONIALS A. Business of the Quarter - Arreverdirci Roma Restaurant Mayor Magee called forward Paul Kramer, Donna Kramer and Antonio Tartaglia; the owners of Arreverdirci Roma. He commented that they had a unique dinning experience. Mayor Magee presented the owners with a plaque. Mr. Antonio Tartaglia thanked the Council for the honor. He invited everyone to visit the restaurant. Mr. Kramer thanked the Council for the honor. ~ Agenda Item No. 1 a Page ~of 39 Page 3 - City Council Meeting Minutes -April 11, 2006 r" CLOSED SESSION REPORT City Attorney Leibold announced the Closed Session discussion items as listed under Closed Session Item A. She noted that there was no reportable action. PUBLIC COMMENTS - NON-AGENDIZED ITEMS -:-1 MINUTE Lorraine Watts, NAACP President, commented on the scholarship banquet that was recently held. She noted that they would be able to give 11 $500 scholarships. She indicated that all high school seniors in the valley were highly encouraged to apply. Eric Van Schoyck, 29213 Sandpiper Drive, commented on safety for children in his neighborhood. He commented on vehicles racing on Sandpiper Drive. He requested assistance from the Council. Mayor Magee commented that the City Manager had made Council aware of the issue and the City Manager was working with the Police Chief regarding the issue. /"""' Mark Powers, 4637 Presidio Drive, Los Angeles, commented that he owned property in the City. He questioned receiving a notice for weed abatement. He noted the property was on an incline and was not a fire hazard. He question if an extension could be given beyond the May deadline. Mayor Magee suggested that Mr. Powers speak with Community Services Director Sapp. Donna Franson, Lake Elsinore Citizens Committee, commented that they would be holding a meeting at 7 p.m., Thursday, April 13th, at the Tuscany Hills Club House. She noted that Chamber President Kim Cousins would be the guest speaker. CONSENT CALENDAR ITEMS MOVED BY BUCKLEY, SECONDED BY KELLEY AND CARRIED BY A UNANIMOUS VOTE OF mOSE PRESENT TO PULL ITEMS 5,6, 7 and 8 AND APPROVE THE BALANCE OF THE CONSENT CALENDAR AS PRESENTED. ,.-. Agenda Item No. 1 a Page --Lor 39 Page 4 - City Council Meeting Minutes -April 11, 2006 1. The following Minutes were approved: "WIll a. Regular City Council Meeting - February 28, 2006. b. Joint City Council/Redevelopment Agency Study Session - March 14,2006. c. Regular City Council Meeting - March 14, 2006. I 2. Ratified Warrant List for March 30, 2006. 3. Rejected the claims as listed and directed the City Clerk to send letters to each claimant informing them of the decision. 4. Authorized the City Manager to execute the Professional Services Agreement with HDR Engineering for environmental services. 9. Authorized the City Manager to execute the agreement, subject to any modifications as might be approved by the City Attorney, with OMNIS for on- call Professional Engineering Services including pavement management update. ITEM PULLED FROM THE CONSENT CALENDAR '--'" 5. Request for approval to sell alcohol on the Levee. Mayor Magee introduced the item. Recreationffourism Manager Fazzio commented on the item. She noted that it was for the Wakeboard Championship event scheduled in June. She reminded Council that the Levee was considered a park and currently alcohol was not allowed in the City parks. Kim Cousins suggested that community organizations and non-profit organizations be utilized to operate venues that sell alcohol so they receive revenue from the events. MOVED BY SCHIFFNER, SECONDED BY BUCKLEY AND CARRIED BY A UNANIMOUS VOTE TO APPROVE THE REQUEST BY THE WORLD SPORTS AND MARKETING TO SELL ALCOHOL ON THE LEVEE FOR THE W AKEBOARD CHAMPIONSHIP EVENT. '--' Agenda Item No. 1 a Page ~of 39 Page 5 - City Council Meeting Minutes -April 11, 2006 ,..... 6. Waiver of fees - Boys & Girls Club. Mayor Magee introduced the item and deferred to Recreation/Tourism Manager Fazzio. Mrs. Fazzio commented on the item. She noted the location of the event. She indicated that they had requested a waiver of all fees. She indicated that the City normally did not waive staff fees and lighti'ng costs. Councilmember Kelley noted that the amount requesting to be waived. She indicated that the event was expected to have 350 to 400 attendees. Boys & Girls Club Director Angela Fox commented on the request. She noted the fund raising event would allow the club to provide services. She commented that the funds raised, would help to allow the club to keep their fees to a minimum. Chamber President Kim Cousins commented that he was in support of waiving the fees for the event. .-. MOVED BY SCHIFFNER, SECONDED BY KELLEY AND CARRIED BY A UNANIMOUS VOTE TO APPROVE THE WAIVER OF FEES FOR THE BOYS & GIRLS CLUB. 7. Implementation documents to Concession Agreement for Destination R.V. Resorts. Mayor Magee introduced the item and deferred to Lake & Aquatic Resources Director Kilroy. Lake & Aquatic Resources Director Kilroy gave an overview of the item and deferred to Fred Rice of Destination R.V. Resorts. Mr. Rice commented on the Memorandum of Lease which needed to be approved by Council. He noted that the completion of the project would be in 18 months. He noted that the Resort would benefit the community when it was finished. ,-. Councilmember Buckley commented on the project. Agenda Item No. 1 a Page ~of 39 Page 6 - City Council Meeting Minutes -April 11, 2006 Councilmember Hickman noted the cost of the project was estimated at $22 million. ~ MOVED BY BUCKLEY, SECONDED BY SCHIFFNER AND CARRIED BY A UNANIMOUS VOTE TO AUTHORIZE THE MAYOR TO EXECUTE FINAL DOCUMENTS SUBJECT TO ANY MINOR MODIFICATIONS AS MAY BE APPROVED BY THE CITY ATTORNEY. 8. Traffic Signal and Intersection Improvements at Grand Avenue and Ortega Highway (SR-74) Change Order No. 1. City Engineer Seumalo gave an overview of the item. He commented on the Change Order. He noted that Council approved the design in October 2005. He noted construction was to begin in July and project completion was anticipated in early November. MOVED BY SCHIFFNER, SECONDED BY KELLEY AND CARRIED BY A UNANIMOUS VOTE TO APPROVE CHANGE ORDER NO.1 FOR $19,800 FOR NBCE, INC AND AUTHORIZE THE CITY MANAGER TO EXECUTE CHANGE ORDER NO.1. ~ PUBLIC HEARINGS 21. Canyon Hills Estates Annexation. Mayor Magee introduced the item and deferred to City Manager Brady. City Manager Brady commented on the item and deferred to Community Development Director Preisendanz. ' Community Development Director Preisendanz commented that the item was a request to annex and pre-zone approximately 246 acres, located adjacent to the City's boundaries. He commented that it was specifically located south of and contiguous to the Canyon Hills Specific Plan. He noted the items before Council to be approved were Mitigated Negatiye Declaration No. 2006-02, General Plan Amendment No. 2005-08, Zone Change (Pre-Zone) No. 2005-09 and Annexation No. 75. He noted that the item was heard by the Planning Commission on February 21, 2006 and there was no recommendation from the Planning Commission. He noted staff recommendations were for the City Council to adopt the resolution adopting the Mitigated Negative Declaration, Agenda Item No. 1 a ~ Page ~of 39 Page 7 - City Council Meeting Minutes -April 11, 2006 ",.-- adopt a resolution approving General Plan Amendment changing the City's boundaries to incorporate the subject parcels, a~opt City Council Ordinance approving Pre-Zoning of the property to future Specific Plan and approve City Council resolution approving Annexation No. 75 consenting to the commencement of the proceeding to annex the subject property into the corporate boundaries of the City of Lake Elsinore. Mr. Preisendanz commented that if the City adopts the resolutions, the applicant would submit this item to LAFCO; and if LAFCO deemed the application complete they would issue a Certificate and file them. He indicated that the item would be on LAFCO's consent calendar to be heard by the Commission. /'"" Mr. Preisendanz commented on some points of clarification. He commented that the project was originally submitted on October 12,2005. He noted that in that submittal was the Negative Declaration, General Plan Amendment, Zone Change and Annexation. He noted that it had also included a Tentative Tract Map that had been since withdrawn and the money refunded to the applicant. He noted that application was submitted in the attempt to submit a site plan. He indicated that there was not a project before Council at this time. He explained that if the property was annexed into the City of Lake Elsinore it would go through the hearing process and the applicant would be submitting whatever project they would submit as part of the Specific Plan. Mayor Magee opened the public hearing at 7:32 p.m. Steve Draine, 32255 Navajo Springs Road, Wildomar, commented that he was the CEO of a large architectural firm. He commented that he was familiar with the process. He also commented that he was not in favor of the annexation. He commented that there would be additional traffic around his home. He indicated that he had been working with the County of Riverside to get Lost Road paved. He noted they would not pave it because it turned into a single lane road. He suggested eliminating lot no. 1 of Tract 2910 from the annexation and placing a small bridge connecting the development over Pardee's retention basin into Sugarbush Lane and come out to Lost Road. Gary Andre, 31906 Gruwall Street, Wildomar commented that he was Butterfield Trails Chairman and a member of the Riverside County Trail r-- Committee. He commented that this project would destroy the trail system. He noted the lots needed to be increased to ranch size homes. He commented Agenda Item No. 1 a Page-Lof 39 Page 8 - City Council Meeting Minutes -April 11, 2006 that he had spoken to Councilmember Hickman. He noted that the decision made by Council could sever the relationship 'Yith Lake Elsinore and Wildomar. ~ Sheryl Ade, 35255 Amatista Ave, Wildomar, commented that their Attorney could not attend the meeting and requested that she read a statement into the record. Katherine Celli, 32013 Cottage Glen Drive, commented that she was there on behalf of Irene Gallagar, her grandmother. She noted that they opposed the annexation. She gave a list of reasons why the property owners had no vested rights before the Lake Elsinore City Council. She indicated that the General Plan Advisory Commission did not like the annexation. She noted that the residents ofWildomar opposed the annexation. She commented that she had a petition signed by over 700 Canyon Hills residents that were against Annexation and Zone Change. She indicated that they all requested that their name be entered into the record in opposition to the Trumark petition for annexation. She commented that Canyon Hills residents did not want more cramped development in their backyards. She noted that the signatures would be presented to LAFCO. '--' Gary Lancaster, 23540 Crab Hollow Circle, Wpdomar, commented that he had been the community for 19 years. He commented that he and his wife would like for the area to stay rural. He noted that he could accept development of 5- acre parcels. He commented on Turtle Creek Road and that they would present the road to Council as an. emergency type road. He commented that once people from the upper part of the development realize they could get to Crab Hollow Circle and over to Lemon Street in half the time it would take to travel back through the development, they would begin to take that route. He noted that Crab Hollow Circle was maintained by the property owners. He noted there would be a big increase in traffic. Elmer Wickert, 32003 Cottage Glen Drive, asked questions to the City Council. He commented that he was against the annexation. Deanna Hauser, 32355 Navajo Springs Road, C'ommented that she supported the WIN group and the cityhood ofWildomar. She expressed her concerns that the proposed annexation could affect the changing communities in a negative way. She commented that this decision could affect Wildomar's application for cityhood to LAFCO. She noted that she was in favor of growth '-" Agenda Item No. 1 a Page~of 39 Page 9 - City Council Meeting Minutes --:-Aprilll, 2006 "..- in the community. She also expressed her concerns relating to road improvement. Ed McOrmond, P.O. Box 1476, Wildomar, commented that he was the WIN Director and a resident in the community for 20 years. He noted that they had battled the annexation with Murrieta for the last 3 years. He indicated that the community ofWildomar would stand up to the City of Lake Elsinore and fight the annexation. He commented on the posItive direction Lake Elsinore was headed in. He noted that they had to support tqeir residents as well. He commented on traffic impact. He noted that the WIN committee, Wildomar residents and residents from the Lake Elsinore community opposed the annexation. Phillip Vango, 23450 Crooked Arrow Drive, Wildomar, commented that he retired to Wildomar because it was a semi-rural. He commented that the 2 property owners did not live in the area and was trying to make a quick buck. He commented on a Trumark Tract Map dated March 31, 2006. He commented that Trumark should be required to pave roads in the County area as it related to the development. ~ Rick Estes, 33160 Roberts Street, Wildomar, commented on the presentation that he had presented to the City Council. He commented on the Tentative Tract Map in the packet he had provided to Council. He noted that his main concern was traffic. He commented on sale tax generated from the subdivisions on Railroad Canyon Road. He noted that Wildomar would only receive traffic. Paul Metivier, 32200 Crooked Arrow Drive, Wildomar, suggested that the Council table the item. He commented that he ,submitted a complaint to the District Attorney due to his belief of Brown Act violations. He commented on a Planning Commission meeting. He indicated that he attended a meeting in which the people he was speaking against were solicited for funds and nobody commented until after the vote was taken. Linda Metivier, 32200 Crooked Arrow Drive, Wildomar, commented that she concurred with her husband's comments. She noted that their community was important to them. She indicated that they liked the rural area around their home. She commented that the development would border to her back yard. ~, She requested that Council reject the annexation. Agenda Item No. 1 a Page ~of 39 Page 10 - City Council Meeting Minutes -April 11, 2006 Harv Dykstra, 34860 Western Way, Wildomar, inquired why the property owners or Trumark did not present their plans to the County of Riverside. He indicated that he supported development in Wildomar. He requested that Trumark contact Wildomar and Riverside Cou~ty regarding building in Wildomar and they would be welcomed. Sherry Shirley, 32380 Crooked Arrow Drive, Wildomar, commented that her property was adjacent to the property scheduled for annexation. She commented on a Tract Map. She stressed her concerns on traffic issues on Lost Road and Navajo Springs Road. She commented on children coming to a rural area not knowing about the dangers of the area. She noted that residents had built custom homes because they did not want to be tract dwellers. She suggested an EIR be done. Gino Grammatico, 32485 Crooked Arrow Drive, Wildomar commented that Ms. Shirley was referring to Tract No. 2910. He commented that Trumark bought one tract in 2910 to gain access to their 'project. He questioned if that was legal. He commented that he opposed the annexation. Bob Cashman, 23630 Peggy Lane, Wildomar, commented that he was the Chairman of the WIN committee. He indicated that their cityhood application was in the process. He noted that the decision made by the Council could damage the relationship with Wildomar for a very long time. He noted the boundaries of the unincorporated community. He commented that the City of Lake Elsinore never approached Wildomar in regard to a potential annexation in that area. He indicated that in 1997 LAFCO removed the City's sphere of influence from that area and the area was held in the boundaries of Wildomar. He noted that this was a boundary dispute and the WIN committee would represent the people that opposed the annexation. Kami Sabetadeh, 21260 Circle Vista Way, Wildomar, commented that he agreed with majority of the comments made opposing the annexation. Brenda Schroeder, 2990 Porth Road, Murrieta, commented that she was there on behalf of her father Mr. Gordon Berens and their family. She noted that they owned 160 acres of the 246 acre Canyon Hills Estate project. She indicated that in 1941 her father and grandparents purchased 640 acres in Elsinore as an investment. She commented that do to her father's health issues and the current state of the real estate market, the family felt it was time to sale the remaining property. She noted her father was 82-years old and in failing Agenda Item No. 1 a Page 10 of 39 ~ ~ "'" Page 11 - City Council Meeting Minutes -April 11, 2006 "........ health and requested that his wishes along with Mr. Flanagan and Trumark, be granted in having their property annexed into the City of Lake Elsinore. Kathy Uraine was not present when called upon to address Council. "........ James O'Malley, Trumark Company, 9911 Irvine Center Drive, Irvine commented on job duties. He noted that the vote before Council was to annex the property back into the City of Lake Elsinore. He noted that the vote was not for a land-use plan or tentative map or the impacts of that tentative map. He commented on the February 21 st Planning Commission Meeting. He commented on a letter dated March 13th from the Executive Director of LAFCO. The letter stated that the annexation would not affect Wilodmar's application for city-hood. The letter also stated that the best case time frame regarding an election for the Wildomar efforts was March 2007. Furthermore the letter stated that Trumark's application to LAFCO would not cause the Wildomar efforts to submit a new application or pay any additional fees. Mr. O'Malley commented on roadway improvements on Lost Road to Navajo Springs Road. He commented that they would be providing extensions of Cottonwood Canyon Road. He commented on fire 'protection and utilities for an area that currently did not have protection. He also commented on a public trail system. Councilmember Buckley commented that ifhe,thought this annexation would negatively impact Wildomar's city-hood efforts he would vote against it. He indicated that he was in favor ofWildomar's city-hood. He questioned if Trumark approached the County prior to approaching the City. Mr. O'Malley commented that they did not due to services. Councilmember Buckley questioned if Trumark would still build if they were not annexed into the City of Lake Elsinore. Mr. O'Malley responded that if the annexation was not in the City of Lake Elsinore they would not build. Councilmember Buckley commented that if and when the map was brought before Council, the trails would need to connect. '"' Councilmember Buckley commented on Lake Elsinore government 15 years ago. Agenda Item No. 1 a Page 11 of 39 Page 12 - City Council Meeting Minutes -April 11, 2006 Councilmember Buckley commented that the City of Lake Elsinore had not approached any property owner's to annex into the City out ofWildomar. He noted the City was currently pursuing one annexation, which was located in the area around COSTCO and part of the County near Highway 74. ~ Councilmember Buckley commented that there was currently 2,800 houses left to build in Canyon Hills and he was not sure how another couple hundred would negatively impact the area. Councilmember Buckley noted that ifTrumark decided to build in the County, the sales tax dollars would go to the Canyon Hills shopping center which was located in the City. ' Councilmember Buckley expressed his confidence that this annexation would not have a negative impact on Wildomar's future city-hood. Councilmember Hickman inquired if there would be an assessment if Wildomar became a City to afford Police, Fire ,and Paramedic Services. City Attorney Leibold commented that part of the LAFCO analysis, in respect to the city-hood application, would be if the proposed City could provide adequate municipal services. She noted that there were a variety of mechanisms on how the services were financed. She commented that LAFCO would not approve an incorporation unless adequate municipal services were provided. ~ Councilmember Hickman commented that he had breakfast with the WIN committee and he commented that he was feeling neutral. He commented that later he received threats. He also commented that the annexation would not affect Wildomar's city-hood. He commented that the City backed Wildomar and helped stopped the annexation Murrieta was proposing so they could determine their own future. He commented that, along with Councilmember Buckley, they reformed the City when they were elected into office. Mayor Magee commented that he met with Trumark representatives and with Wildomar representatives. He commented that he visited the site. He requested that City Attorney Leibold address the issue of the Brown Act violation. City Attorney Leibold commented that at the Planning Commission Meeting Agenda Item No. 1 a ~ Page 12 of 39 "........ ~ r--. Page 13 - City Council Meeting Minutes -April 11, 2006 there was no Brown Act violation. She commented that the item was heard and the staff recommendation involved four actions. She indicated that the items were the Mitigated Negative Declaration, General Plan Amendment, Pre- Zone and the Annexation. She explained that the actions were successive and that each action built upon the prior action. She further explained that during the Planning Commission Meeting the actions took place quickly and there was an approval of the Pre-Zone which could not be legally supported because the Mitigated Negative Declaration had not been approved. On that basis, the Assistant City Attorney requested a point of order and commented that on a legal basis there could be not action on the Pre-Zone because the preceding action on the Mitigated Negative Declaration failed to move forward with a 2- 2 vote. She explained that as procedural matter, the Planning Commission was shut down and could not make the necessary findings to take any further action on the project. She commented that the Assistant City Attorney requested that the Planning Commission acknowledge the failure to legally make those subsequent fmdings to support the subsequent actions. She noted that there was not a reopening or reconsideration once the public had left. Mayor Magee commented that the proposal was consistent with existing City development and the City had the ability to provide municipal services stronger than that of the unincorporated County area. He commented that there was a mechanism in place to install a Community Facilities District to provide for additional public safety funds. He commented on an additional TIP fee. He noted that the geography and topography was more conducive to the City of Lake Elsinore. Mayor Magee commented on the concerns of the Wildomar community relating to circulation impact of Tract 2910, Lost Road, Navajo Road and Crooked Arrow Drive. He indicated that if the annexation was successful and a development application moves forward; particular attention needed to be given to those areas to limit any potential impact to the surrounding area. He also noted that their needed to be sensitivity to the grading of the hill top area. He also commented that close attention needed to be given to the view, scale and any proposed density. He commented that he did not see enough space for an attached or high density product in that particular area. He commented that he supported Wildomar's incorporation area and the ability to grow and communicate with Wildomar regardless of the action Council took on the item. He further commented that he supported the annexation. Mayor Pro Tern Schiffuer commented that he was in support of the annexation. Agenda Item No. 1 a Page 13 of 39 Page 14 - City Council Meeting Minutes -April 11, 2006 He commented that he did not believe based on the information provided, that this annexation would affect Wildomar's city-hood. He commented that the owner of the land had some right regarding their property. . ......, Councilmember Kelley commented that she haa been a resident since 1984. She commented that it was a rural community. She expressed her support for personal property rights. She commented that she supported their application for annexation. She indicated that she understood why they wanted to annex into the City. Councilmember Kelley commented that she liv,ed in Canyon Hills. She noted that she had met with Trumark and liked their project. She also noted that the proposed area had 4 different zones on it at this time. Councilmember Kelley commented on the hundreds of signatures on the petition by her neighbors and she could not turn her back on them. She commented that she could not vote in favor of the annexation. Councilmember Buckley commented on the order of voting. City Attorney Leibold explained that the Annexation application must include a Pre-Zoning application. She further explained that the Council could move forward with an annexation and deny this application for Pre-Zone, but a new zoning application would need to come through or the item would need to be continued and brought back to Council. She noted that you could not move forward with the annexation without the Pre-Zone. She commented that the designation that Council was being asked to approve as the appropriate Pre- Zoning designation was for future specific plans. ......, City Attorney Leibold clarified that there was no specific applicable City zoning designation on property. Councilmember Buckley questioned if there was no specific zoning designation on the property and if Council was not setting the density by approving the Pre-Zoning Ordinance. City Attorney Leibold deferred to Community Development Director Preisendanz. ......, Agenda Item No. 1 a Page 14 of 39 Page 15 - City Council Meeting Minutes -April 11, 2006 ".... Mr. Preisendanz replied that there was no proposed density within the Specific Plan designation. Councilmember Buckley clarified that if there was no density in the Specific Plan, the Pre-Zone did not set density. City Attorney Leibold explained that there would be future entitlements that would be processed through the City that would fill in the particulars and would be subject to additional CEQA evaluation and documentation. She clarified that there was no density established by the Pre-Zone to future Specific Plan. City Attorney Leibold explained that the Specific Plan designation did not include a specific density. She commented that it would come forward in .connection with future entitlements, including a tract map application. MOVED BY SCHIFFNER, SECONDED BY HICKMAN AND CARRIED BY A VOTE OF 4-1 WITH KELLEY CASTIN<;; THE DISSENTING VOTE TO ADOPT RESOLUTION NO. 2006-43, ADOPTING MITIGATED /'"""' NEGATIVE DECLARATION NO. 2006-02. MOVED BY SCmFFNER, SECONDED BY HICKMAN AND CARRIED BY A VOTE OF 4-1 WITH KELLEY CASTING A DISSENTING VOTE TO ADOPT RESOLUTION NO. 2006-44 APPROVING GENERAL PLAN AMENDMENT NO. 2005-08. MOVED BY SCHIFFNER, SECONDED BY BUCKLEY TO ADOPT ORDINANCE NO. 1175 UPON FIRST READING BY TITLE ONLY. ORDINANCE NO. 1175 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING ZONE CHANGE (PRE-ZONE) NO. 2005-09 TO CHANGE THE ZONING DESIGNATION OF THE PARCELS SPECIFICALLY DESCRIBED AS APN(S) 365-220-026, 365-230-001, 005, 006, 007, 009, 010, 011, 012, AND 013 TO SP SPECIFIC PLAN SUBJECT TO COMPLETION OF THE ANNEXATION NO. 75 ,.... Agenda Item No. 1 a Page 15 of 39 Page 16 - City Council Meeting Minutes -April 11, 2006 UPON THE FOLLOWING ROLL CALL VOTE: ......, NOES: COUNCILMEMBERS: BUCKLEY, HICKMAN, SCHIFFNER, MAGEE 'KELLEY AYES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE MOVED BY SCHIFFNER, SECONDED BY BUCKLEY AND CARRIED BY A VOTE OF 4-1 WITH KELLEY CASTING A DISSENTING VOTE TO ADOPT RESOLUTION NO. 2006-45 APPROVING ANNEXATION NO. 75. THE REGULAR CITY COUNCIL MEETING WAS RECESSED AT 9:05 P.M. THE REGULAR CITY COUNCIL MEETING RECONVENED AT 9:15 P.M. 22. Public Hearing for consideration of objections to the City's Weed Abatement Program. ......., Mayor Magee introduced the item and deferred to Community Services Director Sapp. Community Services Director commented on the item. He noted that according to the LEMC, two public hearings were required. He noted that the first public hearing was held on February 9th. He commented that over 9,000 notices were sent to property owners informing them of a deadline of May 1st for them to abate their properties. , Mayor Magee opened the public hearing at 9:15 p.m. Kathleen Williams was not present to address Council. MOVED BY KELLY, SECONDED BY SCHIFFNER TO ACCEPT STAFF'S RECOMMENDA TION ~ Agenda Item No. 1 a Page 16 of 39 Page 17 - City Council Meeting Minutes -April 11, 2006 , ",- Councilmember Buckley inquired if letters submitted to Council were considered as part of the objections from residents. Mr. Sapp requested a copy of any letters submitted to Council relating to objections of Weed Abatement Program. THE FOREGOING MOTION CARRIED BY UNANIMOUS VOTE. 23. Adoption of Ordinance granting non-exclusive franchise to provide cable service to Verizon California Inc. Mayor Magee introduced the item and deferred to Administrative Services Director Pressey. ' Administrative Services Director Pressey gave an overview of the item. He commented that it was a 15-year agreement with a 5% franchise fee and their would be a Peg fee that would be incorporated to allow for public education and government channels. He commented that there were three issues raised by Council at the previous Council Meeting. lie commented that one issue r- was the addition ofKZSW a local television station. He noted that Verizon agreed to add KZSW to their basic service line-up. He also commented that the issue of a local office was discussed. He noted that Verizon would have a local payment center; all equipment services would be delivered and picked-up at the customer's address. He further commented that another issue was the broadcasting of the local Council meeting. He noted that if that issue could not be resolved between Verizon and Com cast then Verizon would provide equipment on-site to broadcast the Council meeting. Tim McCallion, 4164 Oak Place Drive, Thousand Oaks commented that he was Verizon's Pacific Region President. He commented on Verizon's fiber optic systems that would be provided in the City. He noted that they did enter into an agreement with KZSW. He also commented on their band width. Kim Cousins, Chamber President, commented that the Chamber Board was in support of the agreement. He noted that it offered competition. MOVED BY SCHIFFNER, SECONDED BY KELLEY TO ADOPT ORDINANCE NO. 1174, UPON FIRST READING, BY TITLE ONLY. ,-- Agenda Item No. 1 a Page 17 of 39 Page 18 - City Council Meeting Minutes -April 11, 2006 , ORDINANCE NO. 1174 """'" AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, GRANTING A NON-EXCLUSIVE FRANCHISE TO PROVIDE CABLE SERVICE TO VERIZON CALIFORNIA INC. UPON THE FOLLOWING ROLL CALL VOTE: AYES: COUNCILMEMBERS: BUCKLEY, HICKMAN, KELLEY, SCHIFFNER, MAGEE NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE 24. Resolution approving the increase in assessments and the levy of assessments for LLMD No. 1 - Zone 5, Phase 2. "'-' Mayor Magee opened the public hearing at 9:25 p.m. City Manager Brady indicated that Administrative Services Director Pressey would be presenting the item. He requested that the City Attorney announce the notice of the item. City Attorney Leibold announced that the notice had been published in accordance with the Landscape and Lighting Act of 1972 and proof of publication was on file in the City Clerk's office. Administrative Services Director Pressey gave an overview of the item. He noted that Council approved a Resolution of Intention on March 14,2006 to increase LLMD No.1 - Zone 5, Phase 2 and approved the Engineer's Report. He noted the report increased the number of street lights in Rosetta Canyon from 96 to 144. He also noted that it increased the annual assessment to $26,956 or $53.59 per dwelling unit. He commented that there was a 2% escalator. '~ Agenda Item No. 1 a Page 18 of 39 Page 19 - City Council Meeting Minutes -AprilU, 200~ .......... Mayor Magee requested testimony from the public. He inquired if there was anyone wishing to speak in favor or against the increase. He also inquired if there was anyone that wished to speak at all. MOVED BY HICKMAN, SECONDED BY SCHIFFNER TO ADOPT RESOLUTION NO. 2006-46 APPROVING THE INCREASE IN ASSESSMENTS. Mayor Magee closed the public hearing at 9:28 p.m. Mayor Magee directed City Clerk Ray to tabulate the ballots and announce if a majority protest had been made. City Clerk Ray tabulated the ballots and announced that there was no majority protest. THE FOREGOING MOTION CARRIED BY UNANIMOUS VOTE. 25. Marina Village Condominiums. /"'"'- Community Development Director Preisendanz commented on the item. He noted the location of the project. He noted that the applicant had agreed to provide a decorative pedestrian bridge. He noted that the Planning Commission recommended approval of the project. Mayor Magee commented that there was no c6ndition that would restrict work on weekends and holidays. He noted that he would not support the project unless the condition was added. He commented that there would also need to be a condition reducing the spacing of street trees from 40 feet to 30 feet. He questioned if the pedestrian bridge was a phased improvement. Mr. Preisendanz commented that it would be tied to the first certificate of occupancy. Councilmember Buckley commented on the revitalization of downtown. He commented that the proposed development was suburban. He commented that the proposal was not the best use of the site. He further commented that he could not support the project as designed. .......... Agenda Item No. 1 a Page 19 of 39 Page 20 - City Council Meeting Minutes -April 11, 2006 MOVED BY SCmFFNER, SECONDED BY KELLEY AND CARRIED BY A VOTE OF 4-1, WITH BUCKLEY CASTING A DISSENTING VOTE, TO ADOPT RESOLUTION NO. 2006-47 APPROVING MITIGATED NEGATIVE DECLARATION NO. 2005-11. ....." MOVED BY SCmFFNER, SECONDED BY HICKMAN AND CARRIED BY A VOTE OF 4-1, WITH BUCKLEY CASTING A DISSENTING VOTE, TO ADOPT RESOLUTION NO. 2006-48 APPROVING TENTATIVE CONDOMINIUM MAP NO. 33820. MOVED BY SCHIFFNER, SECONDED BY KELLEY AND CARRIED BY A VOTE OF 4-1, WITH BUCKLEY CASTING A DISSENTING VOTE, TO ADOPT RESOLUTION NO. 2006-49 APPROVING RESIDENTIAL DESIGN REVIEW NO. 2005-11 WITH CHANGES TO CONDITION NO. 30B CHANGING 40 FEET APART TO 30 FEET APART AND ADDING A CONDITION RELATING TO MUNICIPAL CODE SECTION 17.78.080F RELATING TO CONSTRUCTION AND DEMOLITION ACTIVITIES NOT PERMITTED ON WEEKENDS AND HOLIDAYS. GENERAL CONDITIONS ....." 1. The applicant shall defend (with counsel acceptable to the City), indemnify, and hold harmless the City, its Official, Officers, Employees, and Agents from any claim, action, or proceeding against the City, its Official, Officers, Employees, or Agents to attach, set aside, void, or annul an approval of the City, its advisory agencies, appeal boards, or legislative body concerning the Tentative Condominium Map, Conditional Use Permit and Residential Design Review which action is brought within the J;ime period provided for in California Government Code Sections 65009 and/or 66499.37, and Public Resources Code Section 21167. The City will prompdy notify the Applicant of any such claim, action, or proceeding against the City and will cooperate fully with the defense. If the City fails to prompdy notify the Applicant of any such claim, or proceeding, the Applicant shall not, thereafter, be responsible to defend, indemnify, or hold harmless the City. 2. The applicant shall deliver to the Planning Department a cashier's check or money order made payable to the Riverside County Clerk in ~e amount of One Thousand Three Hundred and Fourteen Dollars ($1,314.00) to enable the City to File the Notice of Determination. Said filing fee shall be provided to the City within 48 hours of project approval. 3. The applicant shall comply with those mitigation measures identified in the Mitigation Monitoring Program adopted with the Mitigated Negative Declaration. "-"" Agenda Item No. 1 a Page 20 of 39 Page 21 - City Council Meeting Minutes -ApriIU, 2006 ~ TENTATIVE CONDOMINIUM MAP NO. 33820 4. Tentative Condominiwn Map No. 33820 will expire two (2) years from date of approval unless within that period of time the CC&R's and an appropriate instrwnent has been filed and recorded with the County Recorder, or an extension of time is granted by the City of Lake Elsinore City Council in accordance with the Subdivision Map Act. 5. The Tentative Condominiwn Map shall comply with the State of California Subdivision Map Act and shall comply with all applicable requirements of the Lake Elsinore Municipal Code, Tide 16 unless modified by approved Conditions of Approval. 6. Prior to the first certificate of occupancy, the applicant shall prepare and record CC&R's against the condominiwn complex. The CC&R's shall be reviewed and approved by the Community Development Director or Designee and the City Attorney. The CC&R's shall include methods of maintaining common areas, parking and drive aisle areas, landscaped areas including parkways, and methods for common maintenance of all underground, and above ground utility infrastructure improvements necessary to support the co~plex. In addition, the CC&R's shall establish methods to address design improvements. 7. No unit in the development shall be sold unless a corporation, association, property owner's group or similar entity has been formed with the right to financially assess all properties individually owned or joindy owned which have any rights or interest in the use of the ,--, common areas and common facilities in the development, such assessment power to be sufficient to meet the expenses of such entity, and with authority to control, and duty to maintain, all said mutually available features of the development. Such entity shall operate under recorded CC&R's which shall include compulsory membership of all owners of lots and/ or dwelling units and flexibility of assessments to meet changing costs of maintenance, repairs, and services. Recorded CC&R's shall permit enforcement by the City for provisions required as Conditions of Approval. The developer shall submit evidence of compliance with this requirement to, and receive approval of, the City prior to making any such sale. This condition shall not apply to land dedicated to the City for public purposes. 8. Provisions to restrict parking upon other than approved and developed parking spaces shall be written into the covenants, conditions and restrictions for each project. 9. Membership in the Home Owner's Association shall be mandatory for each buyer and any successive buyer. 10. Reciprocal covenants, conditions, and restrictions and reciprocal maintenance agreements shall be established which will cause a merging of all development phases as they are completed, and embody one (1) homeowner's association with common area for the total development of the subject project. 11. In the event the association or other legally responsible person(s) fail to maintain said common area in such a manner as to cause same to constitute a public nuisance, said City ~ may, upon proper notice and hearing, institute swnmary abatement procedures and impose a lien for the costs of such abatement upon said common area, individual units or whole Agenda Item No. I a Page 21 of 39 Page 22 - City Council Meeting Minutes -April 11, 2006 thereof as provided by law. ...." 12. Each unit owner shall have full access to commonly owned areas, facilities and utilities. RESIDENTIAL DESIGN REVIEW NO. 2005-11 13. Design Review approval for Residential Design Review No. 2005-11 will lapse and be void unless building permits are issued within one <0 year of City Council approval. 14. Conditions of Approval shall be reproduced on page one of building plans submitted to the Building Division Plan Check. All Conditions of Approval shall be met prior to the issuance of a Certificate of Occupancy and release of utilities. 15. All site improvements approved with this request shall be constructed as indicated on the approved site plan, grading plan and elevations. Revisions to approved site plans, grading plans or building elevations shall be subject to the review of the Community Development Director. All plans submitted for Building Division Plan Check shall conform to the submitted plans as modified by Conditions of Approval, or the Planning Commission/City Council through subsequent action. 16. All roof mounted or ground support air conditioning units or other .mechanical equipment incidental to development shall be architecturally screened or shielded by landscaping so that they are not visible from neighboring property or public streets. Any material covering the roof equipment shall match the primary wall color. ...." 17. All exterior on-site lighting shall be shielded and directed on-site so as not to create glare onto neighboring property and streets or allow illumination above the horizontal plane of the fixture. All light fixtures shall match the architectural style of the building. 18. No exterior roof ladders shall be permitted. 19. Applicant shall use roofing materials with Class "A" fire rating. 20. All exterior downspouts shall be concealed or architecturally screened and painted to match the exterior color of the building. 21. The Planning Division shall approve the location of any construction trailers utilized during construction. All construction trailers shall require a cash bond processed through the Planning Division. 22. Materials and colors depicted on the plans and materials board shall be used unless modified by the Community Development Director or designee. 23. Decorative paving shall be included at the drive entryways and pedestrian crossings and shall be shown on the construction drawings submitted to Building and Safety. "'-' Agenda Item No. 1 a Page 22 of 39 Page 23 - City Council Meeting Minutes -April 11, 2006 '""' 24. On-site surface drainage shall not cross sidewalks. ' 25. Parking stalls shall be double-striped with four-inch (4") lines two feet (2') apart. 26. All exposed slopes in excess of three feet (3') in height shall have a permanent irrigation system and erosion control vegetation installed, approved by the Planning Division. PRIOR TO GRADING PERMITS 27. The applicant shall comply with all requirements' established by the Multiple Species Habitat Conservation Plan (MSHCP) and shall pay the Multi Species Habitat Conservation Plan fee of $859.00 per dwelling unit 28. Prior to issuance of any grading permit or building permits, the applicant shall sign and complete an "Acknowledgement of Conditions" form and shall return the executed original to the Planning Division for inclusion in the case records. , 29. Prior to the commencement of grading operations, the applicant shall provide a map of all proposed haul routes to be used for movement of dirt material. Such routes shall be subject to the review and approval of the City Engineer. A bond may be required to pay for damages to the public right-of -way, subject to the approval of the City Engineer. /""" 30. Three (3) sets of the Final Landscaping/Irrigation Detail Plan shall be submitted, reviewed and approved by the City's Landscape Architect Consultant and the Community Development Director or designee, prior to issuance of building permit. A Landscape Plan Check & Inspection Fee will be charged prior to final landscape approval based on the Consultant's fee plus forty percent (40%) City fee. a) All planting areas shall have permanent and automatic sprinkler system with 1 00% plant and grass coverage using a combination of drip and conventional irrigation methods. b) Applicant shall plant street trees, selected from the City's Street Tree List, a maximum offeFty-thirty feet (4Q 30) apart and at least twenty-four-inch (24") box in size. (Modified by City Council on 4-11-06) c) All planting areas shall be separated from paved areas with a six inch (6") high and six inch (6") wide concrete curb. d) Planting within fifteen feet (15') of ingress/egress points shall be no higher than thirty-six inches (36"). e) Landscape planters shall be planted with an appropriate parking lot shade tree to provide for 50% parking lot shading in fifteen (15) years. /""" f) Any transformers and mechanical or electrical equipment shall be indicated on landscape plan and screened as part of the landscaping plan. Agenda Item No. 1 a Page 23 of 39 Page 24 - City Council Meeting Minutes -April 11, 2006 g) The landscape plan shall provide for ground cover, shrubs, and trees and meet all requirements of the City's adopted Landscape Guidelines. Special attention to the use of Xeriscape or drought resistant plantings with combination drip irrigation system to be used to prevent excessive watering. '-' h) All landscape improvements shall be bonded 100% for material and labor for two years from installation sign-off by the City. Release of the landscaping bond shall be requested by the applicant at the end of the required two years with approval/acceptance by the Landscape Consultant and Community Development Director or Designee. i) All landscaping and irrigation shall be installed within affected portion of any phase at the time a Certificate of Occupancy is requested for any building. j) Final landscape plan must be consistent with approved site plan. , k) Final landscape plans to include planting and irrigation details. 31. An Encroachment Permit shall be obtained for any construction related activities occurring within Riverside County Flood Control District right-of-way or facilities. PRIOR TO ISSUANCE OF A BUILDING PERMIT '-"" 32. Prior to the issuance of any building permit for the 'Project, Developer shall enter into an agreement with the City and the Redevelopment Agency of the City of Lake Elsinore to provide (a) 15% of the units constructed in the Project as affordable housing units in accordance with the requirements of Section 33413(b) (2) of the California Community Redevelopment Law (Health and Safety Code Sections 33000 et seq.), or (b) an alternative equivalent action as determined by the City which may include (without limitation) dedication of vacant land, construction of affordable units on another site, or payment of an in lieu fee at the rate of $2.00 per square foot as assessable space for each dwelling unit in the Project. For purposes of this condition, "assessable space" means all of the square footage within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, detached accessory structure, or similar area. The amount of the square footage within the perimeter of a residential structure shall be calculated by the building department of the City in accordance with the standard practice of the City in calculating structural perimeters. 33. The Home Owner's Association shall be established prior to the occupancy release of the first dwelling unit. I 34. The applicant/developer shall pay the Public Building Impact fee in the amount of $1,234 per dwelling unit. '-' Agenda Item No. 1 a Page 24 of 39 Page 25 - City Council Meeting Minutes -April 11, 2006 I"""""" 35. Applicant shall comply with the requirements of the Elsinore Valley Municipal Water District (EVMWD). Proof shall be presented to the Chief Building Official prior to issuance of building permits and final approval. 36. Prior to issuance of building permits, applicant shall provide assurance that all required fees to the Lake Elsinore Unified School District have been paid. 37. Prior to issuance of building permits, applicant shall pay park-in-lieu fee in effect at time of building permit issuance. ENGINEERING General Requirements: 38. A grading plan signed and stamped by a Calif. Registered Civil Engineer shall be required if the grading exceeds 50 cubic yards or the existing flow pattern is substantially modified as determined by the City Engineer. 39. Prior to commencement of grading operations, applicant to provide to the City with a map of all proposed haul routes to be used for movement of export material. Such routes shall be subject to the review and approval of the City Engineer. ~. 40. All grading shall be done under the supervision of a geotechnical engineer and he shall certify all slopes steeper than 2 to 1 for stability and proper erosion control. All manufactured slopes greater than 30 ft. in height shall be contoured. 41. Tract Phasing Plan shall be approved by the City Engineer. Bond public improvements for each Phase as approved by the City Engineer. Secondary access shall be provided for each phase. 42. An Encroachment Permit shall be obtained prior to any work on City right-of-way. 43. All utilities except electrical over 12 KV shall be placed underground, as approved by the serving utility. Arrangements for relocation of utility company facilities (power poles, vaults, etc.) out of the roadway or alley shall be the responsibility of the property owner or his agent. 44. Underground water rights shall be dedicated to the City pursuant to the provisions of Section 16.52.030 (LEMC), and consistent with the City's agreement with the Elsinore Valley Municipal Water District. 45. The applicant shall install permanent bench marks to Riverside County Standards and at a location to be determined by City Engineer. /"""' 46. Provide fire protection facilities as required in writing by Riverside County Fire. Developer shall provide an approved open space conservation easement for the tracts Agenda Item No. 1 a Page 25 of 39 Page 26 - City Council Meeting Minutes -April 11, 2006 open space with a fuel modification zone for a fire break to be maintained by a homeowner's association. ....., 47. The applicant shall obtain permits from Riverside County Flood Control District for improvements into flood control facilities or maintenance access road. 48. Applicant shall pay all applicable development fees, including but not all inclusive: TUMF, MSHCP, TIF and area drainage fees. 49. 10 year storm runoff shall be contained within the curb and the 100 year storm runoff shall be contained within the street right-of-way. When either of these criteria is exceeded, drainage facilities shall be provided. 50. Applicant shall protect all downstream properties from damages caused by alteration of the drainage patterns, i.e., concentrations or diversion of flow. Protection shall be provided by constructing adequate drainage facilities including enlarging existing facilities and/or by securing a drainage easement. A maintenance mechanism shall be in place 'for any private drainage facilities constructed on-site or off-site. Any grading or drainage onto private off site or adjacent property I shall require a written permission to grade and/or a permission to drain letter from the affected landowner. 51. All drainage facilities in this tract shall be constructed to Riverside County Flood Control District Standards. An access road for maintenance to detention/water quality basins shall be provided. ....., 52. All compaction reports, grade certifications, mOI1ument certifications (with tie notes delineated on 8 WI x 11" Mylar) shall be submitted to the Engineering Division before final inspection of public works improvements will be scheduled and approved. 53. A precise survey with closures for boundaries and all lots shall be provided per the LEMC. 54. Street improvements including street lighting, traffic signals, and traffic signing and striping shall be required as part of this project. The, improvements shall be prepared by a registered civil engineer and shall meet city and/or riverside county standards. 55. Street lighting and landscaping on public right-of-way shall be maintained by a maintenance assessment district or a homeowner's association. 56. All open space and slopes except for public parks and schools and flood control district facilities, outside the public right-of-way will be owned and maintained by either a home owner's association or private property owner. An 'access road for maintenance shall be provided. 57. All waste material, debris, vegetation and other rubbish generated during cleaning, demolition, clear and grubbing or other phases of the construction shall be disposed of at appropriate recycling centers. The applicant should contract with CR&R Inc. for ""'-'" Agenda Item No. 1 a Page 26 of 39 Page 27 - City Council Meeting Minutes -April 11, 2006 r- r~cycling and storage container services, but the applicant may use the services of another recycling vendor. Another recycling vendor, other'than CR&R Inc., cannot charge the applicant for bin rental or solid waste disposal. If the applicant is not using CR&R Inc. for recycling services and the recycling material is either sold or donated to another vendor, the applicant shall supply proof of debris disposal at a recycling center, including verification of tonnage by certified weigh master tickets. 58. In accordance with the City's Franchise Agreement for waste disposal & recycling, the applicant shall be required to contract with CR&R Inc. for removal and disposal of all waste material, debris, vegetation and other rubbish generated during cleaning, demolition, clear and grubbing or all other phases of construction. 59. Protect palm trees in place, or contact the Community Services of City of Lake Elsinore for Palm Tree Preservation Program, LEMC 5.78 Ordinance 1044. 60. On-site drainage shall be conveyed to a public facility, accepted by adjacent property owners by a letter of drainage acceptance, or convey;ed to a drainage easement. 61. All natural drainage traversing the site shall be conveyed through the site, or shall be collected and conveyed by a method approved by the City Engineer. 62. Roof drains shall not be allowed to outlet directly through coring in the street curb. ----- 63. Roofs should drain to a landscaped area. 64. Applicant shall comply with all NPDES requirements in effect; including the submittal of a Water Quality Management Plan (WQMP) as required per the Santa Ana Regional Water Quality Control Board. 65. Education guidelines and Best Management Practices (BMP) shall be provided to residents of the development in the use of herbicides, pesticides, fertilizers as well as other environmental awareness education materials on good housekeeping practices that contribute to protection of storm water quality in the Riverside county NPDES Drainage Area Management Plan. 66. A portion of the project site is in the FEMA 100-yr floodplain. The developer shall comply with the provisions of the City of Lake Elsinore Floodplain Management requirements (Chapter 15.64). Prior to Approval of final Map, unless other timing is indicated, the subdivider shall complete the following or have plans submitted and approved, agreements executed and securities posted: "......... 67. Applicant shall record CC & R's for maintenance of slopes, drainage facilities, and street lighting within the project. The CC & R's shall be approved by the Planning Director prior to recordation of final map. Agenda Item No. 1 a Page 27 of 39 Page 28 - City Council Meeting Minutes -April 11, 2006 68. Applicant shall enter into an agreement with the CitY for the construction of public works improvements and shall post the appropriate bonds prior to final map approval. .....", 69. Applicant shall obtain all necessary off-site easements for off-site grading from the adjacent property owners prior to final map approval. 70. All Public Works requirements shall be complied with as a condition of development as specified in the Lake Elsinore Municipal Code (LEMC) prior to final map approval. / 71. Make an offer of dedication for all public streets and easements required by these conditions or shown on the Tentative Map. All land so offered shall be granted to the City free and clear of all liens and encumbrances and without cost to the city. 72. A Calif. Registered Civil Engineer shall prepare street and drainage improvement plans and specifications. Improvements shall be designed and constructed to Riverside County Road Department Standards, latest edition, and City Codes (LEMC 12.04 and 16.34). Street improvement plans shall show existing and future profiles at centerline of street, at top of curb and at centerline of the alley. The profiles and contours will extend to 50' beyond the property limits. 73. Unless designated as private streets, interior streets shall be dedicated and improved to public residential street standards (40'/60'). Private streets shall be a minimum of 32' unless other widths are approved by the Fire Department. ......, 74. Construct half-width street improvements on Spring Street (60/40) and on Limited Street (60/40) along the project frontage. The improvements shall include ac pavement, curb and gutter, sidewalk, street lighting, signing and striping, and necessary drainage improvements. Note: The improvements on Limited Street shall extend up to the existing improvements on the bridge 75. Construct full-width street improvements on Lakeshore Drive (60/40) along the project frontage. The improvements shall include ac pavement, curb and gutter, sidewalk, street lighting, signing and striping, necessary drainage improvements, and cul-de-sac. 76. Construct a pedestrian bridge over the flood control channel on Lakeshore Drive. The specific design details of the bridge shall be approved by the City Engineer. 77. Drainage curb inlets shall be provided at the comer of Lakeshore Drive and Spring Street and at the end of the cul-de-sac of Lakeshore Drive. 78. Traffic Signing and Striping plans shall be required with the street improvement plans. Signing and striping shall be installed in accordance with the plans approved by the City Traffic Engineer. .....", Agenda Item No. 1 a Page 28 of 39 Page 29 - City Council Meeting Minutes -April 11, 2006 ,...... 79. Contribute on a fair share basis to the cost of traffic improvements on 115 @ Main Street Northbound and Southbound Ramps. Prior to Issuance of a Grading Permit: 80. Submit grading plans with appropriate security, Hydrology and Hydraulic Reports prepared by a Registered Civil Engineer for approval by the City Engineer. Developer shall mitigate any flooding and/or erosion downstream caused by development of the site and/or diversion of drainage. 81. Provide soils, geology and seismic report including street design recommendations. Provide final soils report showing compliance with recommendations. 82. An Alquis-Priolo study shall be performed on the site to identify any hidden earthquake faults and/or liquefaction zones present on-site. 83. The applicant shall obtain all necessary off-site easements for off-site grading and/or drainage acceptance from the adjacent property owners prior to grading permit issuance. 84. Applicant to provide erosion control measures as part of their grading plan. The applicant --- shall contribute to protection of storm water quality and meet the goals of the BMP in Supplement "A" in the Riverside County NPDES Drainage Area Management Plan. 85. Applicant shall provide the city with proof of his having filed a Notice of Intent with the Regional Water Quality Control Board for the National Pollutant Discharge Elimination System (NPDES) program with a storm water pollution prevention plan prior to issuance of grading permits. The applicant shall provide a SWPPP for post construction, which describes BMP's that will be implemented for the development and including maintenance responsibilities. Prior to Issuance of Building Permit: 86. All Public Works requirements shall be complied with as a condition of development as specified in the Lake Elsinore Municipal Code (LEMC) prior to building permit. 87. Street dedications and abandonment shall be processed and approved prior to building permit issuance. 88. Submit a "Will Serve" letter to the City Engineering Division from the applicable water agency stating that water and sewer arrangements have been made for this project and specify the technical data for the water service at the location, such as water pressure and volume etc. Submit this letter prior to applying for a building permit. ,-..~ 89. Pay all Capital Improvement Mitigation Fees and Plan Check fees (LEMC 16.34). Agenda Item No. 1 a Page 29 of 39 Page 30 - City Council Meeting Minutes -April 11, 2006 90. Pay the fair share cost of Traffic Improvements for Main Street and 115 northbound and ,....." southbound ramps. Prior to Occupancy: 91. Pay all fees and meet requirements of an encroachment permit issued by the Engineering Division for construction of public works improvements (LEMCI2.08, Res.83-78). All fees and requirements for an encroachment permit shall be fulfilled before Certificate of Occupancy. ' 92. The improvements specified herein and approved by the Planning Commission and the City Council shall be installed, or agreements for said improvements, shall be submitted to the City for approval by the City Engineer, and all other stated conditions shall be complied with. All uncompleted improvements must be bonded for as part of the agreements. . 93. All compaction reports, grade certifications, monument certifications (with tie notes delineated on 8 1/2" x 11" Mylar) shall be submitted to the Engineering Division before final inspection of off-site improvements will be scheduled and approved. 94. All public improvements shall be completed in accordance with the approved plans to the satisfaction ofthe City Engineer. ,....." 95. All traffic signing and striping shall be completed in accordance with the approved plans to the satisfaction of the City Traffic Engineer. 96. Water and sewer improvements shall be completed in accordance with Water District requirements. 97. The pedestrian bridge as required of this development shall be operational and open to the public. 98. All mitigation fees and fair share costs for traffic improvements shall be paid. COMMUNITY SERVICES DEPARTMENT 99. Developer to pay park fees of $1,600 per unit ($147,200) or receive park credits for channel improvements. 1 OO.All interior landscape, recreation areas, facilities and/or open space to be maintained by the HOA. No park credits. 101.Developer to comply with all NPDES storm water requirements. ,....." Agenda Item No. 1 a Page 30 of 39 Page 31 - City Council Meeting Minutes -April 11, 2006 ".-... I 02. Developer to participate in City-wide LLMD. 103.Developer to annex into LLMD District I for all exterior landscaping to be maintained by the City. I 04. All interior streets and/or roadways to be maintained by the HOA. 105.HOA to maintain all catch basins, collectors, v-ditches or any other related flood control or storm water control device. I 06. Developer to design a multi-family recycling plan through the City and CR&R. 107.Developer to comply with all City Ordinances regarding construction debris removal and recycling as per Section 8.32 of the Lake Elsinore Municipal Code. 108.Developer to install a pre-fabricated steel pedestrian bridge (that meets or exceeds Riverside County Flood Control freeboard requirements) and entry plaza approach to the bridge at the channel. The final bridge design and 'improvements shall be reviewed and approved by the Community Services and Community Development Departments. 109.Developer to improve both sides of the channel to match existing walkways. Developer to utilize park fee credits for the improvements adjacent to the development. City to fund ./'" west side improvements. 110.Developer to meet City curb, gutter and sidewalk requirements for improvements along Spring Street between Limited and Lakeshore and development boundaries along Limited Street. 111.All existing palms (California Fan Palms [12] and Canary Island Date Palms [2]) to be incorporated into the project landscaping or donated to the City and relocated at the developer's expense. 112. Ornamental iron fencing to be consistent with existing wrought iron fencing along the channel between Graham A venue and Sumner Street. 113. City to work with Developer in obtaining Army Corps of Engineers, Fish and Game, and Riverside County Flood Control approvals for channel improvements. City to maintain all channel improvements at its sole expense. 114.Lake Elsinore Historical Society to be contacted during grading to consult on historical artifacts found during construction of the project. D,eveloper agrees to donate all artifacts to the Society in perpetuity. DEPARTMENT OF ADMINISTRATIVE SERVICES ".-... Agenda Item No. I a Page 31 of 39 Page 32 - City Council Meeting Minutes -April 11, 2006 IIS.Prior to approval of the Final Map, Site Development Plan, or Conditional Use Permit (as applicable) the applicant shall annex into Community Facilities District 2003 -I to offset the annual negative fiscal impacts of the project on public safety operations and maintenance issues in the City. '-" I I 6. Prior to approval of the Final Map, Site Development Plan or Conditional Use Permit (as applicable), the applicant shall annex into Lighting and Landscape Maintenance District No. I to offset the annual negative fiscal impacts of the project on public right-of-way landscaped areas to be maintained by the City and for street lights in the public right-of- way for which the City will pay for electricity and a maintenance fee to Southern California Edison. 117. Upon completion of the Fire Station Impact Study and other impact fee studies, developer shall pay impact fee. I I 8. Prior to approval of the Final Map, Site Development Plan, or Conditional Use Permit (~s applicable), the applicant shall annex into the Mello-Roos Community Facilities District to fund the ongoing operation and maintenance of the new parks, parkways, open space and public storm drains constructed within the' development and federal NPDES requirements to offset the annual negative fiscal impacts of the project. RIVERSIDE COUNTY FIRE DEPARTMENT 119.The applicant shall comply with all Riverside County Fire Department conditions and ~ standards (See attached conditions from Fire Department). CONDITIONAL USE PERMIT NO 2005-10 120.Conditional Use Permit No. 2005-10 approved herein shall lapse and shall become void one (I) year following the date on which the use permit became effective, unless prior to the expiration of one year, a building permit is issued and construction commenced and diligently pursued toward completion on the site. 121.The Conditional Use Permit shall comply with the all applicable requirements of the Lake Elsinore Municipal Code; Title 17 unless modified by approved Conditions of Approval. 122.The Conditional Use Permit granted herein shall run with the land and shall continue to be valid upon a change of ownership of the site or structure which was the subject of this approval. 123. The applicant shall at all times comply with Section 17.78 (Noise Control) of the Lake Elsinore Municipal Code which requires noise or sound levels to be below 50 decibels between the hours of 7:00 am to 10:00 pm and below 40 decibels between the hours of 10:00 pm to 7:00 am in nearby residential areas. '-" Agenda Item No. I a Page 32 of 39 Page 33 - City Council Meeting Minutes -April 11, 2006 /"'"' Security lighting shall be required. All exterior on-site lighting shall be shielded and directed on- site so as not to create glare onto neighboring property and streets or allow illumination above the horizontal plane of the fixture. Councilmember Buckley expressed strong objections to the project. BUSINESS ITEMS 31. Report on agreed upon procedures related to certain bond transactions. Administrative Services Director Pressey gave an overview of the item. He commented that the City Treasurer had requested funding for an audit of bond transactions relating to the 2003 Series H and the underlined community development facility district that secured ~at public financing. He noted that the audit was awarded to Vavrinek, Trine, Day & Company. He also noted that Joe Aguilar, a partner with the firm, was present. ~ Mr. Pressey commented on settlement funds in the amount of $2.5 million received by the City relating to CFD 90-3. He noted that it was for the Southshore development. He noted that the Public Finance Authority (PF A) was holding the funds along with funds from the Wasson Canyon Hill settlement. Joe Aguilar commented on the procedures they had performed. He noted that the procedures were in regard to compliance provisions with the Abbacy Holding Company. He commented that the City and developer were in compliance with the agreement provisions. He indicated that his firm was recommending that the City consider policy for component unit financial statements on the larger assessment districts and mello-roos districts. He noted that this would allow for financial tracking of transactions that would occur. City Treasurer Weber gave a presentation regarding the audit. He gave some background information on the history of the bonds. He commented that all the documentation was provided. He noted that the agreements and bond disbursements were in compliance with the law. He thanked the Council for their support. ~ William Arnold, 31556 Sagecrest Drive, thanked the Council for conducting an audit. He noted that people needed to understand what took place. He Agenda Item No. 1 a Page 33 of 39 Page 34 - City Council Meeting Minutes -April 11, 2006 commented that future record keeping will be very important to maintain an audit trail. He commented that the equitable thing to do would be to resolve the bond debt in favor of the Summerhill residents. ......, Councilmember Buckley indicated that the component unit financial statements were a good idea. Mr. Pressey indicated that he had contacted the audit fmn to coordinate an agreement to be brought before Council and/or the Public Finance Authority. , Councilmember Buckley commented that as the PF A Chairman he would like to meet with the City Treasurer, Mayor and the City's financial team to draft a report to bring forward to the second meeting in Mayor first meeting in June. Councilmember Hickman commented that he would like the exact cost brought back to Council. He noted it would h~lp them with their judiciary responsibility to help the Summerhill homeowners. Councilmember Kelley thanked the City Treasurer for completing the audit. ......, MOVED BY KELLEY SECONDED BY HICKMAN TO RECEIVE AND FILE THE AUDIT REPORT. Mayor Magee thanked Administrative Services Director Pressey and his staff for their hard work. He also thanked City Treasurer Weber for his efforts. THE FOREGOING MOTION CARRIED BY UNANIMOUS VOTE. 32. Resolution authorizing the issuance of bonds and approving bond documents for CFD No. 2005-6 (City Center). Administrative Services Director Pressey commented on the item. He noted that the average special tax in this district was $1,611 and the combined tax rate was 1.8%. MOVED BY BUCKLEY, SECONDED BY KE~LEY AND CARRIED BY A UNANIMOUS VOTE TO ADOPT RESOLUTION NO. 2006-50 APPROVING THE ISSUANCE OF CFD 2005-6 (CITY CENTER TOWNHOMES) 2006 SERIES A BONDS, FISCAL AGENT AGREEMENT, ......, Agenda Item No. 1 a Page 34 of 39 Page 35 - City Council Meeting Minutes -April 11, 2006 ,,-... CONTINUING DISCLOSURE AGREEMENT, PURCHASE CONTRACT AND FUNDING, CONSTRUCTION AND ACQUISITION AGREEMENT AND PRELIMINARY OFFICIAL STATEMENTS. 33. Conceptual Plan of the proposed Boys & Girls Club. Community Development Director Preisendanz gave an overview of the item. He gave a description of the facility to be constructed. He noted the location of the project. MOVED BY BUCKLEY, SECONDED BY KELLEY AND CARRIED BY A UNANIMOUS VOTE TO APPROVE IN CONCEPT THE PROPOSED BUILDING WITHIN THE FUTURE ALBERHILL RANCH SPORTS PARK. 34. Ordinance amending Sections 2.46.030 through 2.46.050 of the Lake Elsinore Municipal Code relating to the term of office of the Public Safety Advisory Commission. ",...-... Mayor Magee introduced the item and deferred to City Manager Brady. MOVED BY HICKMAN SECONDED BY SCHIFFNER TO ADOPT ORDINANCE NO. 1176, UPON FIRST READING, BY TITLE ONLY AND APPROVE ALTERNATIVE B TO PROVIDE THE THREE PSAC MEMBER'S TERMS SET TO EXPIRE THIS YEAR WILL BE EXTENDED THREE YEARS UNTIL 2009. SUBSEQUENT TERMS WILL BE FOUR YEARS. THE TWO APPOINTMENTS SET TO EXPIRE IN JULY 2007 WILL REMAIN UNCHANGED. I Councilmember Buckley gave an explanation for the Ordinance change. He noted that the next vacancy for PSAC would be 2007. ,..-.- ORDINANCE NO. 1176 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, AMENDING SECTIONS 2.46.030 THROUGH 2.46.050 OF THE LAKE ELSINORE MUNICIPAL CODE RELATING TO THE MEMBERSHIP, APPOINTMENT AND TERM Agenda Item No. 1 a Page 35 of 39 , Page 36 - City Council Meeting Minutes -April 11, 2006 OF OFFICE OF THE PUBLIC SAFETY ADVISORY COMMISSION ~ UPON THE FOLLOWING ROLL CALL VOTE: AYES: COUNCILMEMBERS: BUCKLEY, HICKMAN, KELLEY, SCHIFFNER, MAGEE NOES: COUNCILMEMBERS: 'NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE 35. Public Safety Advisory Commission recruitment and appointment process. City Attorney Leibold explained that the appropriate course of action would be for Council to direct staff to postpone any advertisement for available seats until the two member's terms expire in 2007. ....., MOVED BY BUCKLEY, SECONDED BY HICKMAN AND CARRIED BY A UNANIMOUS VOTE TO POSTPONE ANY ADVERTISEMENT FOR AVAILABLE SEATS UNTIL THE TWO MEMBER'S TERMS EXPIRE IN 2007. PUBLIC COMMENTS Mayor Magee commented that Jim Anders and Paul Maseca representatives of Home Depot were present to explain the status of road improvements at Central Avenue and Collier Avenue. Mr. Maseca explained the cause of the delays with the improvements. He commented that asphalt was currently on allocations and due to some weather conditionss they had missed several allocations. He commented that there was a 300-foot waterline added during mid construction qecause of a request from EVMWD. He also commented on a well that was discovered. He indicated that conflicts with the street signals and power lines. He also indicated that they had to Agenda Item No. 1 a .~ Page 36 of 39 Page 37 - City Council Meeting Minutes -April 11, 2006 -" receive additional redesign permitting for the street signal. Mr. Anders indicated that he had met with City Engineer Seumalo. He noted the paving on the north side of Central Avenue and the east side of Collier A venue was completed on April 8th. He noted that the cap paving was completed today. He indicated they met with Caltrans today to develop a plan to completely remove the center section of Central Avenue to be completed on April 18th. He commented that they were committing to an April 28th completion date with striping included. Mayor Magee commented that on January 25th staff allowed Home Depot to open without the street improvements being completed. ,He indicated that he had met with Mr. Anders on January 25th. He also indicated that Mr: Anders had committed to him a three week period to have the street improvements completed. He noted that after 11 weeks Home Depot was pushing the completion date to April 28th. Mayor Magee commented that he receive daily phone calls and visitors at his place of business regarding the improvement delays. He'expressed his disappointment with Home Depot in relation to the street improvements. He indicated there had --- been long periods of time in which no work had been done in the public right-of- way. He requested staff provide Council with an enforcement tool, should the project not be completed by April 28th. Councilmember Buckley inquired what action would Council take on April 28th. , Mayor Magee reiterated that staff provides Council with proper enforcement action to be taken if the improvements were not completed. He thanked Home Depot representatives for their update. CITY MANAGER COMMENTS 1) Announced the following upcoming events: April 14th and 15th - April 15th April 220d April 23rd Christian Concert at the Diamond Stadium Children Fair at McVicker Park Unity in the Community 5K walk/run Open Air Farmer's Market -" CITY ATTORNEY COMMENTS Agenda Item No. 1 a Page 37 of 39 Page 38 - City Council Meeting Minutes -April 11, 2006 No comments. .."" COMMITTEE REPORTS None. CITY TREASURER COMMENTS City Treasurer Weber commented on the following: 1) Finance meeting scheduled for April 20th. CITY COUNCIL COMMENTS Councilmember Kelley commented on the following: No comments. Mayor Pro Tem Schiffner commented on the following: , 1) Thanked everyone for coming. ....." Councilmember Hickman commented on the following: 1) Wished everyone a Happy Easter. Councilmember Buckley commented on the following: 1) Requested anyone involved with the Transitional Housing Committee contact Riverside County or Supervisor Buster's Office, to find out if the facility was still scheduled to be built in Lake Elsinore to contact the Council. ....." Agenda Item No. 1 a Page 38 of 39 Page 39 - City Council Meeting Minutes -April 11, 2006 ~ Mayor Magee commented on the following: 1) Thanked everyone for attending. The Regular City Council Meeting was adjourned at 10:16 p.m. ROBERT E. MAGEE, MAYOR CITY OF LAKE ELSINORE ATTEST: FREDERICK RAY, CITY CLERK CITY OF LAKE ELSINORE ~ ~ Agenda Item No. 1 a Page 39 of 39 /"" MINUTES CITY COUNCIL MEETING CITY OF LAKE ELSINORE 183 NORTH MAIN STREET LAKE ELSINORE, CALIFORNIA TUESDAY, MAY 23, 2006 ****************************************************************** CALL TO ORDER , The Regular City Council Meeting was called to order by Mayor Magee at 5 :00 p.m. ROLL CALL PRESENT: COUNCILMEMBERS: KELLEY, HICKMAN, ,MAGEE /""'"' ABSENT: COUNCILMEMBERS: BUCKLEY, SCHIFFNER (Councilmember Buckley arrived at 4:16 p.m.) (Councilmember Schiffner arrived at 4:36 p.m.) Also present were: City Manager Brady, City Attorney Leibold, Administrative Services Director Pressey, Community Services Director Sapp, Community Development Director Preisendanz, Lake & Aquatic Resources Director Kilroy, Information/Communications Manager Dennis, City Engineer Seumalo, Building & Safety Manager Chipman, Public Works Manager Payne, Recreation/Tourism Manager Fazzio, City Treasurer Weber and City Clerk Ray. CLOSED SESSION THE REGULAR CITY COUNCIL MEETING WAS RECESSED INTO CLOSED SESSION AT 6:00 P.M. RECONVENE IN PUBLIC SESSION (7:00 P.M.) /"" PLEDGE OF ALLEGIANCE Agenda Item NO.~ page-1- of a The Pledge of Allegiance was led by City Manager Brady. ....", INVOCA TION - MOMENT OF SILENT PRAYER Mayor Magee led the meeting in a moment of sile~t prayer. ROLL CALL PRESENT: COUNCILMEMBERS: BUCKLEY, HICKMAN, KELLEY, SCHIFFNER, MAGEE (Councilmember Buckley was not present during roll call) ABSENT: COUNCILMEMBERS: NONE Also present were: City Manager Brady, City Attorney Leibold, Administrative Services Director Pressey, Community Development Director Preisendanz, Community Services Director Sapp, Lake & Aquatics Resources Director Kilroy, City Engineer Seumalo, Planning Manager Weiner, Building & Safety Manager Chipman, Recreationffourism Manager Fazzio, Chief of Police Fetherolf, City Treasurer Weber and City Clerk Ray. '-'" CLOSED SESSION A. CONFERENCE WITH LEGAL COUNSEL - EXISTING LITIGATION - Pursuant to subdivision (a) of Gov't Code ~ 54956.9: Wildomar and Lake Elsinore Residents for Responsible Growth v. City of Lake Elsinore (Riverside Co. Superior Court Case No. RIC 449594). B. CONFERENCE WITH LEGAL COUNSEL - ANTICIPATED LITIGATION - Initiation of litigation pursuant to subdivision (c) of Section 54956.9 (1 potential case) CLOSED SESSION REPORT City Attorney Leibold announced the Closed Session discussion items as listed above. She noted that items A and B were discussed and there was no reportable action. ....", Agenda Item NO.Jk.L page~Of~ Page 3 - City Council Meeting Minutes - May 2~, 2006 r'- PRESENTATION/CEREMONIALS A. Certificate of Recognition - Poetry writing winners. Mayor Magee called Barbara Kady forward to join him at the podium. Ms. Kady indicated that the Certificates were for the winners of their 8th Annual Poetry Contest. Mrs. Kady called the winners forward to receive their Certificates. Ms. Kady introduced elementary school winner Gabriel Vega. Gabriel Vega accepted the Certificate of Recognition and read his poem. Ms. Kady introduced middle school winner Amber Pegler. She noted that Sheena Gutierrez was going to read Amber's poem. Sheena Gutierrez read Amber's poem. ~ Ms. Kady noted that Sheena was the 1 st and 2nd place winner for the high school level. Sheena Gutierrez read her 1 st place poem. Ms. Kady noted that the Poetry Contest was led by Elsinore Valley Art's Network. B. Proclamation - Military Appreciation Month Mayor Magee called Paul Espinosa forward to receive the Proclamation. Mayor Magee read and presented the Proclamation to Mr. Espinosa. Mr. Espinosa thanked Mayor Magee and the'Council for the Proclamation on behalf of the American Legion. He noted his appreciation for the support the City has shown for service men. He commented on the upcoming Memorial Day ceremony. C. Presentation - Lake Elsinore Action Sports Festival ~ Agenda Item NO.~ Page 11- of ;). \ Page 4 - City Council Meeting Minutes - May 23, 2006 Mayor Magee called Terry Winnett forward to give his presentation. Mr. Winnett noted that the event would be taking place in June. He thanked the Council, Recreationffourism Manager Fazzio and Lake & Aquatic Resources Director Kilroy for their assistance. Mr. Winnett gave some background on the event. He noted that Mike Metzger would perform at the event. He thanked 74 Motorsports and In Motion Newspaper. ~ D. New Employee Introduction Community Development Director Preisendanz introduced Planning Manager Thomas Weiner and Principal & Environmental Planner Wendy Worthy. Building & Safety Manager Chipman introduced Building Inspector Scott Bums and Building Inspector Danny Rodriguez. Public Works Manager Payne introduced Will Yang, Dan Chadd, Alex Canas and Rick DeSantiago. E. Chamber of Commerce Update ~ Mayor Magee called Kim Cousins forward to give his update. Mr. Cousins commented on the City's current development. Mr. Cousins noted that LEUSD has one of the highest rates of juvenile diabetes among all the school districts in southwest California. He noted that the Chamber partnered with the LEUSD and over the past'weekend they had over 32 individuals representing the City of Lake Elsinore in the Juvenile Diabetes Walk for the Cure. Mr. Cousins congratulated the Boys and Girls Club on their 1 st annual fundraiser. Mr. Cousins commented on upcoming events. He noted the Chamber Mixer would be held at the DiamoJ)d Club on June 29th. PUBLIC COMMENTS - NON-AGENDIZED ITEMS - 1 MINUTE Ruth Atkins, Lake Elsinore Historical Society, commented that she wanted to publicly thank KB Homes for their generous donation of model home furniture. ~ Agenda Item NO.~ Page~ of ~\ Page 5 - City Council Meeting Minutes - May 2~, 2006 ,,-... Donna Franson, Lake Elsinore Citizens Committee, commented on Western States Ski Festival. She noted that they would be hosting the wine and beer booths. She noted that volunteers were welcome. Leonard Leichnitz, LUMOS Communities, commented that his company owned the property that many people know as the former rodeo grounds. He noted that he was present to ask for any help that the City and the Lake Elsinore Police Department could give in regard to the individuals riding recreational vehicles on that property. He noted that he posted signs on the property and the signs were destroyed 4 days after they were posted. He noted that any help that could be provided would be appreciated. , Duane Dodson, 29322 Swan Avenue, commented on the roadways in Country Club Heights. Mayor Magee directed Mr. Dodson to speak to City Engineer Seumalo. ,,-... Mayor Magee indicated that the next 9 spea~ers were present to speak on an unfortunate situation that occurred over the past weekend. He indicated that the Council was very much aware of what transpired. He noted that he had spoken to a couple of the speakers. He noted that he had discussed the situation with the Police Chief who had indicated that the investigation was ongoing. He noted that Council, City Staff and Law Enforcement took the situation very seriously. Claudia Hebromar, 145 South Woodlake Street, noted her concerns with the shooting that had happened over the weekend. She noted that one of the bullets had hit her neighbor's car. She noted that this kind of activity had been occurring for several years. She requested that Council help them before someone was killed. ".... Rod Gehnert noted that he was a Vietnam Veteran and President of a company in town. He noted that he lived on W oodlake Street for 18 years. He noted that he moved out of the City due to the activity on his street. He noted that he was present to support the residents of the street. He noted that the Police had been called 45-50 times that he was aware of. He noted that the house in question had several arrests, but that nothing seemed to be getting accomplished. He requested that CO\lncil help his former neighbors. Agenda Item NO.~ pageB ofd- \ Page 6 - City Council Meeting Minutes - May 23, 2006 Gloria Tanahuvia, 168 South W oodlake Street, noted that she had been in the neighborhood for 16 years. She noted that she was located directly across the street from the house in question. She noted that her son had built a skate board ramp in her backyard some time ago and the City had asked her to remove it since it was considered a nuisance. She indicated that she had removed it and paid the fines. She commented that she and her neighbors had been dealing with the house in question for over 7 years. She noted that she is never able to park in front of her own house since there are always strange cars parked in front of her house and the house in question. She indicated that she had called the Police several times. She noted that that the house in question was endangering the safety of her neighborhood. She commented on the night of the shooting. She noted that she had hoped the City could help them. ' Christine Holland, 133 South Woodlake Street, noted that she was present to comment on the shooting. She noted that she did not want their neighborhood to be a statistic. She noted that her car was the one that was shot at. She requested that revenue that was to be generated from all the new businesses be put toward Law Enforcement, drug enforcement as well as gang and crime prevention. Thomas Smith, 132 South Woodlake Street, noted that he was present to comment on the shooting. He noted 3 people had rebuilt houses in the neighborhood. He commented that Council needed to do something about the situation at hand. He noted that it took the Police Department 30 minutes to respond to the situation. He noted that something needed to be done. Hope Johnston was not available to address Council. Noel Domalaon, 156 South W oodlake Street, commented that he was present to comment on the shooting that took place. He noted that he had lived in the City for 2-1/2 years. He noted that he had seen 2 cars burnt at the house in question. He noted the suspicious activity that had been taking place. He indicated that he moved from San Diego because it was affordable. He noted that now he would not hesitate to sell his house if the City was not able to respond to the situation appropriately. He noted that he feared for his children's safety. He noted that he tried to call 911 three times and it was busy. He requested help from the,Council. Agenda Item NO.l.b- Page t,Q of ,) \ ....., ....., ....., Page 7 - City Council Meeting Minutes - May 23, 2006 "...... Jeannette Stow, 181 South Woodlake Street, commented on the shooting that had taken place. She thanked Councilmember Hickman since he had helped get the house cleaned up in the past. She commented on the Police response time. She noted that she had video of people committing crimes. She further noted that the Police did not want to see the video. She requested that the Police have a better response time. Bruce Holland, 133 South W oodlake Street, commented on the shooting that had taken place. He noted that he was a business and home owner in the City. He noted that nothing had been done about the situation. He noted that something needed to be done before someone got killed. He commented that the children in his neighborhood had not slept for the past 3 days. He commented that it was time to get a Police Force that cared about the City. He requested help from the Council. Mayor Magee commented that on behalf of the Council the comments from the residents had been heard loud and clear. ",-.., Councilmember Buckley inquired if the City, had a disorderly or nuisance house ordinance in the LEMC. City Attorney Leibold noted that she would review the code. She indicated that it was her belief that the City did not have anything beyond the public nuisance provisions of the LEMC. Councilmember Buckley inquired if the house in question was a rental. Councilmember Kelley noted that the house in question has had the same owner for the past 6 years. Mayor Magee noted that the Police Department had an officer that was in charge of Neighborhood Watch. He noted that the phone number to the Police Department was 245-3200. ' ,--. Agenda Item NO.~ Page'" ofJ.\ Page 8 - City Council Meeting Minutes - May 23, 2006 CONSENT CALENDAR ITEMS ""-'" MOVED BY KELLEY, SECONDED BY SCHIFFNER AND CARRIED BY A UNANIMOUS VOTE TO PULL ITEM NO.6 AND ITEM NO. 11 AND APPROVE THE BALANCE OF THE CONSENT CALENDAR AS PRESENTED. 1. The following Minutes were approved: a. Joint City Council/Redevelopment Agency Study Session - April 25, 2006. b. City Council Meeting - April 25, 2006. , c. Joint City COUncil/Redevelopment Agency Study Session - May 9, 2006. 2. Ratified Warrant List for May 15,2006. 3. Adopted Resolution No. 2006-64 initiating the November 7, 2006 General Municipal Election. ""-'" Adopted Resolution No. 2006-65 adopting regulations for candidates. 4. Approved amendment to City Manager's Employment Agreement. 5. Approved Agreement and Escrow Instructions for Purchase and Sale of Real Property . 7. A warded Spring Street Improvements Contract to Roadway Engineering. 8. Approved Professional Services Contract for Code Enforcement Prosecutors with Dapeer, Rosenblit & Litvac. 9. Approved exemption from the bid process. Approved Professional Services Agreement with STK Architecture, Inc. 10. Allocated $3 thousand for advertising fireworks safety and authorized the ~ Agenda Item No.11L- PageY of-&. Page 9 - City Council Meeting Minutes - May 23, 2006 ,..... City Manager to implement the fireworks safety publicity plan during the month of June. 12. Approved the CPI and Landfill Tipping Fee increase. ITEMS PULLED FROM THE CONSENT CALENDAR 6. Special project funding from Lake Maintenance Fund. Lake & Aquatic Resources Director Kilroy commented on the item. He noted that there was no direct cost to the City. He noted that the balance of the fund was almost $3 million. Dan Uhlry, 137 East Graham Avenue, commented on the item. He noted that the funds were set aside for lake water replenishment, not sign poles. He noted that the funds may be needed in case there was ever a drought. .,,-... Pete Dawson, 18010 Grand Avenue, commented that the funds set aside were for supplemental water only. He requested that Council carefully review the item. He noted that it would not be wise to count on natural water flow. He noted Southern California received about 15 inches of rain and the City received 0% from the watershed. Mayor Pro Tern Schiffner concurred with the comments made. He noted the agreement was not specific. He noted that he felt that this was an important Issue. Councilmember Kelley commented that she agreed with the necessity of the expenditures; however, she did not agree with where the fees were coming from. Councilmember Buckley commented on the TMDL Task Force Agreement. He inquired if the amount of money request~d went solely to studies or if it was used toward compliance. ,.",.--. Lake & Aquatic Resources Director Kilroy noted that the amount requested would primarily go toward studies. He noted that the total budget for that item would be an estimated $800 thousand. Agenda Item NO.~ Page~ of~ Page 10 - City Council Meeting Minutes - May 23, 2006 , Councilmember Buckley noted that the fish study and sign poles could possibly be paid for by grant money. ......".. Councilmember Hickman commented that the expenditures should have been included in the budget. Mayor Magee commented that Lake & Aquatic Resources Director Kilroy was following the instructions of the subcommittee of the Water District which was made up of Mayor Magee and Mayor Pro Tern Schiffuer. He noted that it was agreed upon that the City needed to determine what the Lake Management Fund was there for. Mayor Pro Tern Schiffuer noted that the expenditures were mandatory. , MOVED BY BUCKLEY, SECONDED BY MAGEE AND CARRIED BY A UNANIMOUS VOTE TO 1) DENY FUNDING OF THE REQUESTED ITEMS FROM THE LAKE MAINTENANCE FUND, AND 2) TO INCLUDE AN ADDITIONAL BUDGET LINE ITEM IN THE AMOUNT OF $106,000 FROM UNALLOCATED FUNDING TO THE LAKE DEPARTMENT TO COVER THE CITY'S SHARE OF . I THE ESTIMATED COSTS TO COMPLY WITH THE REGULATORY REQUIREMENTS FOR MONITORING AND SPECIAL STUDIES ATTRIBUTABLE TO THE ADDITION OF SUPPLEMENTAL WATER UNDER THE TMDL TASK FORCE AGREEMENT. ......".. 11. Approved Personnel Rules and Regulations. I City Attorney Leibold commented on the requirement of blood testing for accidents involving City property. She noted that there was a provision in the regulations. City Attorney Leibold commented on merit increases. She deferred to Administrative Services Director Pressey. Administrative Services Director Pressey noted that he spoke to the City's labor attorney. He noted that the labor attorney indicated that the City could change the term name or the definition of the existing term. ...., Agenda Item NO.!b- Page \0 of.,) \ Page 11- City Council Meeting Minutes - May 23, 2006 "..-- Councilmember Buckley commented on the 'evaluation system. He suggested having a merit-raise system for outstanding employees. City Attorney Leibold commented on contracting issues with employees and relatives. She noted that Council would like the additional language prohibiting an employee from performing joint duties, sharing responsibility or having authority over an employee that is a family member. Councilmember Buckley noted that relatives of an employee should not have any involvement with payment or hiring. MOVED BY BUCKLEY, SECONDED BY KELLEY AND CARRIED BY A UNANIMOUS VOTE TO APPROVE THE PERSONNEL RULES AND REGULATIONS WITH MODIFICATIONS. ' PUBLIC HEARINGS 21. Tentative Tract Map 25473 - Revision No.1; and Mitigated Negative /"""- Declaration No. 2006-01. Mayor Magee opened the public hearing at 8:24 p.m. Community Development Director Preisendanz commented on the item. He noted that it was originally proposed for over 500 lots. He noted that the Planning Commission recommended approval. MOVED BY SCHIFFNER, SECONDED BY HICKMAN AND CARRIED BY A UNANIMOUS VOTE, WITH COUNCILMEMBER BUCKLEY ABSENT, TO ADOPT RESOLUTION NO. 2006-66 ADOPTING FINDINGS OF CONSISTENCY WITH THE MSHCP. MOVED BY SCHIFFNER, SECONDED BY HICKMAN AND CARRIED BY A UNANIMOUS VOTE, WITH COUNCILMEMBER BUCKLEY ABSENT, TO ADOPT RESOLUTION NO. 2006-67 ADOPTING MND NO. 2006-01. MOVED BY SCHIFFNER, SECONDED BY HICKMAN AND CARRIED ~ BY A UNANIMOUS VOTE, WITH COUNCILMEMBER BUCKLEY ABSENT, TO ADOPT RESOLUTION NO. 2006-68 APPROVING TTM NO. Agenda Item NO_~ pagelL of ~\ Page 12 - City Council Meeting Minutes - May 23, 2006 25473; REVISION NO.1 WITH 113 CONDITIONS OF APPROVAL AS REVISED BY THE PLANNING COMMISSION. ~ Mayor Magee closed the public hearing at 8 :25 p.m. 22. Adoption of Development Impact Fees for fire facilities with an automatic annual ENR adjustment and an Ordinance arpending Chapter 16.74 of the Municipal Code. Administrative Services Director Pressey commented on the item. He noted the dollar amount per square foot. He noted that all the assumptions were supportive of where the fee should be. He noted that the fee study included the 3 new stations and 3 existing stations. Leonard Leichnitz, LUMOS Communities, commented that the Council had increased fees by $7 thousand in the past 12 months for each building permit that needed to be pulled. He commented on a recent presentation given by the head of WRCOG at the Chamber of Commerce. He requested that Council table the item to reevaluate the fees. ~ Mayor Pro Tern Schiffner commented that the community had complained in the past about the lack of fire stations. He noted that he was in favor of construction for the fire stations. City Treasurer Weber thanked Administrative Services Director Pressey for a job well done on the report. He noted that the City only got 7% of house tax money back. He noted that the money h~d to come from future development. He noted that developers should pay for the infrastructure. He suggested showing the accrual from this fund every 6 months. Councilmember Buckley commented on the population that was projected. He inquired if the population went down, if fees would go up. City Attorney Leibold confirmed. Councilmember Kelley noted that the City had to provide public safety. She commented on the current fees and noted that the fees were becoming more unbearable. ...., Agenda Item NO.~ Page \;} of J-.\ Page 13 - City Council Meeting Minutes - May 23, 2006 ,..... Mayor Magee commented that the answer was that the State and Federal Government needed to return tax money to local governments in order to take care of the residents. He noted that the City needed more of their tax money. He noted that the City had to provide for public safety. MOVED BY SCHIFFNER, SECONDED BY BUCKLEY AND CARRIED BY A UNANIMOUS VOTE TO ADOPT RESOLUTION NO. 2006-69 , ADOPTING THE FIRE FACILITIES FEE STUDY AND FEE IN ADDITION TO AN AUTOMATIC ANNUAL ENR ADJUSTMENT. MOVED BY BUCKLEY, SECONDED BY SCIDFFNER TO ADOPT UPON FIRST READING, BY TITLE ONLY, ORDINANCE 1181. ORDINANCE NO. 1181 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, AMENDING CHAPTER 16.74 TO TITLE 16 OF THE LAKE ELSINORE MUNICIPAL CODE -- ESTABLISHING A FIRE FACILITIES FEE FOR DEVELOPMENT PROJECTS WITHIN THE CITY OF LAKE ELSINORE. UPON THE FOLLOWING ROLL CALL VOTE: A YES: COUNCILMEMBERS: BUCKLEY, HICKMAN, KELLEY, SCHIFFNER, MAGEE NOES: COUNCILMEMBERS: , NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE 23. Continuance of proposed Street Vacation of Flint Street. City Engineer Seumalo commented on the item. He noted that it was staff's recommendation to approve the proposed street vacation. ...--. Mayor Magee opened the public hearing at 8:45 p.m. Agenda Item NO.~ Page \; of-.2L Page 14 - City Council Meeting Minutes - May 23, 2006 MOVED BY SCmFFNER, SECONDED BY mCKMAN AND CARRIED BY A UNANIMOUS VOTE TO ADOPT RESOLUTION NO. 2006-62 ORDERING THE VACATION OF A PORTION OF FLINT STREET AND TO DIRECT THE CITY CLERK TO RECORD SAID STREET VACATION WITH THE COUNTY RECORDER. ,.." Mayor Magee closed the public hearing at 8 :46 p.m. BUSINESS ITEMS 31. Resolution repealing Resolution Nos. 99-7,2001-41,2002-09,2002-50 and 2003-54, and approving the designation of the Prima Facie Speed Limit for certain streets. City Engineer Seumalo commented on the item. He noted that the item before Council was a Resolution repealing several prior established speed zones and establishing updated speed limits for several streets in the City. MOVED BY BUCKLEY, SECONDED BY KELLEY AND CARRIED BY A UNANIMOUS VOTE TO ADOPT RESOLUTION NO. 2006-70 REPEALING THE RESOLUTIONS AS LISTED IN THE STAFF REPORT AND ESTABLISHING CITY-WIDE LIMITS. '-' 32. Modifications to Conditions of Approval (COA) No. 102 for Vesting Tentative Tract Map (VTTM) No. 28214 (Murdock Alberhill Ranch Specific Plan). City Manger Brady commented on the discussion from the 4 p.m. study session. He noted that the applicant agreed to continue the item to the June 13th meeting. MOVED BY BUCKLEY, SECONDED BY HICKMAN AND CARRIED BY A UNANIMOUS VOTE TO CONTINUE THE ITEM TO THE JUNE 13, 2006 COUNCIL MEETING. 33. Alberhill Ranch Park Land Reimbursement.' MOVED BY BUCKLEY, SECONDED BY HICKMAN AND CARRIED BY A UNANIMOUS VOTE TO CONTINUE THE ITEM TO THE JUNE 13, ,.." Agenda Item NO.lb- Page \4 of J.\ Page 15 - City Council Meeting Minutes - May 23, 2006 ~ 2006 COUNCIL MEETING. Dan Uhlry, 137 East Graham Avenue, noted that this project had come before him previously when he served on the Planning Commission. He inquired why the tax payers had to pay for the park. He noted that he was not in favor of any park money from CFDs going to developers. He inquired why the homeowners should have to pay for the park. , Mayor Magee noted that the item was being continued to the June 13,2006 meeting. 34. Park Site Implementation Agreement for the Community Park located within the Alberhill Ranch Specific Plan. , MOVED BY BUCKLEY, SECONDED BY mCKMAN AND CARRIED BY A UNANIMOUS VOTE TO CONTINUE THE ITEM TO THE JUNE 13, 2006 COUNCIL MEETING. ~ 35. Lease of Park Property for Boys and Girls Club. MOVED BY BUCKLEY, SECONDED BY HICKMAN AND CARRIED BY A UNANIMOUS VOTE TO CONTINUE THE ITEM TO THE JUNE 13, 2006 COUNCIL MEETING. 36. Change proceedings for CFD 2004-3 (Rosetta Canyon). Administrative Services Director Pressey commented on the item. He noted that this development had a property that was purchased that neighbored the boundary of the current CFD. He noted that the developer had approached the City requesting to be annexed into the CFD. Administrative Services Director Pressey commented on questions asked during the 4 p.m. study session. "..- Dennis Anderson, Harris & Associates, commented that what they were trying to achieve was to amend the rate and method of special tax for improvement area 2 of the CFD to allow for the annexation of the additional property. He noted that amending the rate and method would not affect the special taxes for the existing improvement area. Agenda Item NO.~ Page \5 of a- \ Page 16 - City Council Meeting Minutes - May 23, 2006 MOVED BY BUCKLEY, SECONDED BY SCHIFFNER AND CARRIED BY A UNANIMOUS VOTE TO ADOPT RESOLUTION NO. 2006-72 TO INCUR BONDED INDEBTEDNESS NOT TO EXCEED $33,000,000 WITHIN IMPROVEMENT AREA NO.2 OF LAKE ELSINORE CFD NO. 2004-3. "otrJtII' 3 7 . Appeal of structure abatement and administrative proceedings. City Manager Brady commented on the item.' He noted that an appeal was filed. He noted that the owner had indicated that the property was in escrow which was expected to close July. MOVED BY SCHIFFNER, SECONDED BY KELLEY AND CARRIED BY A VOTE OF 4-1, WITH COUNCILMEMBER BUCKLEY CASTING THE DISSENTING VOTE, TO CONTINUE THE ITEM UNTIL THE JUNE 13, 2006 COUNCIL MEETING. 38. Second Reading - Ordinance No. 1178 - Amending the Transportation Uniform Mitigation Fee Program (TUMF). "otrJtII' MOVED BY KELLEY, SECONDED BY BUCKLEY TO ADOPT UPON SECOND READING, BY TITLE ONLY, ORDINANCE NO. 1178. ORDINANCE NO. 1178 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, AMENDING SECTION 16.83.030 AND SECTION 16.83.040, SUBPART A, OF THE LAKE ELSINORE MUNCIPAL CODE REGARDING ADOPTION OF THE FEES FOR THE TRANSPORTATION UNIFORM MITIGATION FEE PROGRAM. "otrJtII' Agenda Item NO.jL page~ of 2L Page 17 - City Council Meeting Minutes - May 23, 2006 /""' UPON THE FOLLOWING ROLL CALL VOTE: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: BUCKLEY, HICKMAN KELLEY, SCHIFFNER MAGEE NONE NONE 39. Second Reading - Ordinance No. 1179 - Authorizing the levy of a special tax. MOVED BY KELLEY, SECONDED BY SCHIFFNER TO ADOPT UPON SECOND READING, BY TITLE ONLY, ORDINANCE NO. 1179. ,........ ORDINANCE NO. 1179 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTJNG AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-5 (PARKS, OPEN SPACE AND STORM DRAIN MAINTENANCE) AUTHORIZING THE LEVY OF A SPECIAL TAX. UPON THE FOLLOWING ROLL CALL VOTE: A YES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: /""' 'BUCKLEY, HICKMAN KELLEY, SCHIFFNER, MAGEE NONE NONE NONE Agenda Item NO.~ Page \ 1 of J.\ Page 18 - City Council Meeting Minutes - May 23, 2006 40. Second Reading - Ordinance No. 1180 - Authorizing the levy of a special tax. ......", MOVED BY SCHIFFNER, SECONDED BY KELLEY TO ADOPT UPON SECOND READING, BY TITLE ONLY, ORDINANCE NO. 1180. ORDINANCE NO. 1180 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-1 (LAW ENFORCEMENT, FIRE AND PARAMEDIC SERVICES) AUTHORIZING THE LEVY OF A SPECIAL TAX WITHIN ANNEXATIO~ AREA NO. 18 (APNS 377- 231-013 AND -014) ANNEXED TO SAID DISTRICT. UPON THE FOLLOWING ROLL CALL VOTE: AYES: COUNCILMEMBERS: BUCKLEY, HICKMAN KELLEY, SCHIFFNER, ,MAGEE "'-" NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE THE REGULAR CITY COUNCIL MEETING WAS RECESSED AT 9:04 P.M. THE REGULAR CITY COUNCIL MEETING WAS RECONVENED AT 9:05 P.M. PUBLIC COMMENTS No comments. "'-" Agenda Item NO.l1 Page \ ~ of~\ Page 19 - City Council Meeting Minutes - May 23, 2006 ,,--. CITY MANAGER COMMENTS 1) Announced the following upcoming events: I May 2ih-29th - Triple Crown Baseball Tournament May 28th - Open Air Farmer's Market June 2nd_4th - Lake Elsinore Action Sports Festival June 3rd - Household Hazardous Waste Collection June lOth - "Just for Kids" fishing derby CITY ATTORNEY COMMENTS No comments. COMMITTEE REPORTS None. ~ CITY TREASURER COMMENTS No comments. CITY COUNCIL COMMENTS Councilmember Kelley commented on the following: Councilmember Kelley presented a plaque to the Council on behalf of the Boys and Girls Club of Southwest County from the Field of Dreams Event. She thanked Council for being so supportive and allowing the project to move forward. I Mayor Pro Tern Schiffner commented on the following: No comments. Councilmember Hickman commented on the following: 1) Thanked all the people that submitted an application for the Planning Commission. ~ Agenda Item NO.~ page~of ;}-\ Page 20 - City Council Meeting Minutes - May 23, 2006 Councilmember Buckley commented on the following: ......, 1) Commented on his trip to Washington, D.C. for Mosquito Business for the Vector Control. Mayor Magee commented on the following: 1) Noted that he received a letter from Sheriff Bob Doyle requesting that Council appoint someone to the County Child Safety Commission. He noted that Councilmember Kelley had agreed to fulfill the role. He requested that the City Clerk draft a letter for his signature to Sheriff Bob Doyle indicating Council's selection. Chief Fetherolf commented that he had an opportunity during the Council meeting to meet with the group of concerned citizens regarding the shooting incident on W oodlake Street. He noted that they had agreed to meet with the Sheriff s Department at the Police Station to discuss the issues of how they could further protect themselves; and for the Sheriff s Department to inform them how the investigation was going. ......, The Regular City Council Meeting was adjourned at 9:10 p.m. ROBERT E. MAGEE, MAYOR CITY OF LAKE ELSINORE RESPECTFULLY SUBMITTED: MICHELLE SOTO, DEPUTY CITY CLERK ......, Agenda Item NO.-1b- Page:JO of ~i \ /""' ,..-.. ,....... Page 21 - City Council Meeting Minutes - May 23, 2006 ATTEST: FREDERICK RAY, CITY CLERK CITY OF LAKE ELSINORE Agenda Item NO.JL Page c1-bf ;) \ JUNE 15. 2006 CITY OF LAKE ELSINORE WARRANT SUMMAR Y ~ FUND# FUND DESCRIPTION TOTAL 100 GENERAL FUND $ 2,476,695.38 105 MISCELLANEOUS GENERAL PROJECT FUND 59,185.13 110 STATE GAS TAX FUND 316.83 112 TRANSPORTATION/MEASURE A FUND 13,975.28 130 LIGHTING/LANDSCAPE MAINTENANCE FUND 148,802.20 150 C.D.B.G. FUND 271.44 204 SIGNAL C.I.P. FUND 423.81 205 TRAFFIC IMPACT FEE FUND 13,396.80 221 PARK C.I.P. FUND 475.02 231 LIBRARY C.I.P. FUND 2,129.09 254 89-1 RAILROAD CANYON IMPROVEMENT FUND 788.36 369 C.F.D. 2004-3 ROSETTA CANYON DEBT SERVICE FUND 6,750.00 608 TRUST DEPOSIT & PRE-PAID EXPENSE FUND 86,399.00 620 COST RECOVERY SYSTEM FUND 9,728.26 GRAND TOTAL $ 2,819,336.60 ,--. ,--. 6/21/2006 Warrant 061506 1 of 1 AGENDA ITEM NO. J. PAGE / OF 5 JUNE 15, 2006 CHECK# 86025 86206 86207 86208 86209 86210 86211 86212 86213 86214 86215 86216 86217 86218 86219 86220 86221 86222 86223 86224 86225 86227 86228 86229 86230 86231 86232 86233 86234 86235 86236 86237 86238 86239 86240 86241 86242 86243 86244 86245 86246 86247 86248 86249 86250 86251 86252 86253 86254 86255 86256 86257 86258 CITY OF LAKE ELSINORE VENDOR NAME DEPUTY WILLIAM GUIMONT CALIFORNIA P .E.R.S. AL TURA CREDIT UNION I.C.M.A. RETIREMENT TRUST CALIFORNIA P.E.R.S. COSTCO WHOLESALE THE MARK FISHER COMPANY AMERICAN PROBATION & PAROLE ASSOCIATION WYNDHAM SAN DIEGO OF EMERALD PLAZA DEPUTY DAVID SCHELL DEPUTY WILLIAM YOUNG STATE COMPENSATION INSURANCE FUND STANDARD INSURANCE COMPANY FORTIS BENEFITS STANDARD INSURANCE COMPANY CALIFORNIA P.E.R.S. VISION SERVICE PLAN PRE-PAID LEGAL SERVICES, INC. L1UNA LOCAL 777 THE L.I.U. OF N.A. TEMESCAL CANYON GRAD NIGHT VOID A & A JANITORIAL SERVICE ACTIVE MOTORS PORTS ALL PHASE REFRIGERATION & AIR CONDITIONING, INC. AMERICAN ASPHALT SOUTH, INC. AMERICAN FENCE COMPANY, INC. AMERICAN FORENSIC NURSES ERICA ANDERSEN ANIMAL FRIENDS OF THE VALLEY APPLE ONE EMPLOYMENT SERVICES BANK OF AMERICA (0619) CITY MANAGER'S OFFICE BANK OF AMERICA (5392) FIRE STATION #85 BANK OF AMERICA (6673) LAKE & AQUATIC RESOURCES DEPARTMENT BANK OF AMERICA (6707) ADMINISTRATIVE SERVICES & HUMAN RESOURCES BANK OF AMERICA (8314) COMMUNITY SERVICES DEPARTMENT CATHERYNEBARROZO BERRYMAN & HENIGAR, INC. BIO-TOX LABORATORIES BLOOMFIELD GROUP, INC. BOYS & GIRLS CLUB OF AMERICA C. R. & R. DISPOSAL, INC. CALIFORNIA TRUCK EQUIPMENT COMPANY STATE OF CALIFORNIA CCAC SOUTHERN DIVISION LUCY CERVANTES WATINEE CHATTONG CITY & COUNTY SOIL ENGINEERING COAST TO COAST WIRELESS, INC. COMMERCIAL TRANSPORTATION SERVICES COMPUTER ALERT SYSTEMS, INC. KIRT A. COURY HERMILA COVARRUBIAS W ARRANT LIST AMOUNT $ 150.00 ...." 37,289.58 1,075.00 5,004.00 75,784.91 100.00 2,653.00 1,200.00 2,974.00 175.00 175.00 15,516.44 2,134.70 10,012.86 233.26 5,094.67 1,384.05 77.70 1,143.00 2.499.64 1,000.00 0.00 2,400.00 457.86 1,132.92 13,111.00 120.00 ...., 989.25 411.00 7,500.00 4,525.95 126.17 1,020.90 1,629.56 848.05 1,146.58 612.67 13,524.87 1,419.46 4,162.50 7,500.00 172,684.19 17,560.02 700.00 325.00 350.00 385.00 8,320.00 51.89 118.53 7,814.69 4,273.77 500.00 ""'" 6/21/2006 Warrant 061506 1 OF 4 AGENDA ITEM NO. ;J PAGE ,~ OF~ JUNE 15, 2006 CITY OF LAKE ELSINORE "..-CHECK# VENDOR NAME 86259-86260 CUTTING EDGE STAFFING, INC. 86261 D & SELECTRIC 86262 RICK DE SANTIAGO 86263 RAMIRO DELGADO 86264 DEPARTMENT OF MOTOR VEHICLES 86265 L1BRADO DIAZ 86266 DO IT CENTER 86267 CAROLE K. DONAHOE, A.I.C.P. 86268 DOWNS COMMERCIAL FUELING, INC. 86269 D.R. HORTON 86270 DRESCO REPRODUCTION, INC. 86271 DUN & BRADSTREET 86272-86276 ELSINORE VALLEY MUNICIPAL WATER DISTRICT 86277 E.S. BABCOCK & SONS, INC. 86278 ELITE ELEVATOR,INC. 86279 ELSINORE ELECTRICAL SUPPLY, INC. 86280-86283 ELSINORE PIONEER LUMBER CO. 86284 ELSINORE VALLEY RENTALS 86285 EMPIRE ECONOMICS, INC. 86286-86287 EXCEL LANDSCAPE, INC. 86288 EXECUTIVE EVENT SERVICES, L.L.C. 86289 FEDERAL EXPRESS CORPORATION 86290 FERGUSON GROUP, L.L.C. 86291 NITA GERMAN ___86292 GOLF VENTURES WEST 36293 GREENSCAPE LANDSCAPE, INC. 86294 ARLINE GULBRANSEN 86295 H.O.P.E., INC. 86296 LORENA HANCOCK 86297 HARDY & HARPER, INC. 86298 HARRIS & ASSOCIATES, INC. 86299 HARRIS & ASSOCIATES, INC. 86300 HDR ENGINEERING, INC. 86301 HEMET RUBBER STAMP & SIGN CO. 86302 GARY HOFFARTH 86303 IMPACT PROMOTIONAL PRODUCTS 86304 INLAND EMPIRE LOCK & KEY 86305 INTERNATIONAL INSTITUTE OF MUNICIPAL CLERKS 86306 DE JANDA 86307 JOBS AVAILABLE, INC. 86308 JOHNSON POWER SYSTEMS 86309 JONES & STOKES 86310 KETTLE CREEK CORP. 86311 MITCH KROLL 86312 L & M FERTILIZER, INC. 86313 LAKE CHEVROLET 86314 LAKE ELSINORE STORM 86315 LAKE ELSINORE TIRE & AUTO, INC. 86316 LAKE ELSINORE VALLEY CHAMBER OF COMMERCE 86317 LAKELAND MARINE ----- .--86318 LAKE SHORE HOMES & DEVELOPMENT,INC. 36319 NANCY LASSEY W ARRANT LIST AMOUNT 10,987.76 2,045.00 150.00 50.00 4,833.00 500.00 66.57 4,956.10 5,482.03 84,399.00 607.94 989.75 16,304.39 600.00 312.00 950.94 2,076.63 494.05 6,750.00 . 18,228.00 11,758.00 84.90 30.24 156.00 260.57 14.00 372.59 5,000.00 3,624.00 6,320.00 20,707.50 4,275.00 3,445.38 7.33 150.00 946.05 577 .93 125.00 510.75 163.20 757.57 58,436.11 16.05 53.69 2,238.65 2,408.68 50.00 130.65 150.00 30.15 6,188.00 185.37 6/21/2006 Warrant 061506 20F4 AGENDA ITEM NO. ~ PAGE 3 OF 5' JUNE 15, 2006 CITY OF LAKE ELSINORE CHECK# VENDOR NAME 86320 LEMON GROVE RV STORAGE 86321 LIBRARY SYSTEMS & SERVICES, L.L.C. 86322 LOOS & CO., INC. 86323 LOWE'S HOME CENTERS, INC: 86324 THE MARK FISHER COMPANY 86325 SANDRA MASSA-LA VITI 86326 MAYHALL PRINT SHOP 86327 CHEYENNED MCDONALD 86328 JUAN MELENDEZ 86329 MERCHANTS BUILDING MAINTENANCE 86330 LINDA M. MILLER 86331 MK ENTERPRISES 86332 MOBILE SATELLITE VENTURES, L.P. 86333 MORROW PLUMBING, INC. 86334 MORROW PLUMBING, INC. 86335 JAMES NAKAKIHARA 86336 NEIGHBOR'S NEWSPAPER 86337 NETCOMP TECHNOLOGIES, INC. 86338 NORTH COUNTY TIMES 86339 OCB REPROGRAPHICS 86340 OMNIS, INC. 86341 PARDEE HOMES 86342 PETTY CASH 86343 PITNEY BOWES PURCHASE POWER 86344 PREMIUM PALOMAR MOUNTAIN SPRING WATER 86345 . THE PRESS ENTERPRISE 86346-86347 PRUDENTIAL OVERALL SUPPLY 86348 PUBLIC RELATIONS TACTICS 86349-86350 QUILL CORPORATION 86351 QUINLAN PUBLISHING GROUP 86352 QWEST COMMUNICATIONS 86353 RANCHO CALIFORNIA WATER DISTRICT 86354 REBEL RENTS, INC. 86355 REDEVELOPMENT AGENCY FOR THE CITY OF LAKE ELSINORE 86356 REGIONAL CONSERVATION AUTHORITY 86357 RELIABLE CRANE SERVICE 86358 RIGHTW A Y 86359 RIVCOMM, L.L.C. 86360 RIVERSIDE COUNTY SHERIFF 86361 RIVERSIDE COUNTY SHERIFF 86362 COUNTY OF RIVERSIDE DEPARTMENT OF INFORMATION TECHNOLOGY 86363 COUNTY OF RIVERSIDE, BOB DOYLE, SHERIFF 86364 ROBBINS PEST MANAGEMENT, INC. 86365 ANTHONY ROMERO 86366 JESUS ROQUE 86367 ROTARY CLUB OF LAKE ELSINORE 86368 SAFETY-KLEEN SERVICES, INC. 86369-86372 SC SIGNS 86373 SHARE CORP. 86374 ISIDORO SOLARES 86375 DAVID S. SOLOMON 86376 SOUTH WESTERN SEALCOATING, INC. 86377-86378 SOUTHERN CALIFORNIA EDISON CO. W ARRANf LIST AMOUNT 750.00 ......., 2,129.09 167.28 1,167.97 1,685.90 3,240.00 866.31 60.00 500.00 4,438.56 3,520.00 435.00 74.18 112.85 179.99 550.00 550.00 900.00 170.85 608.46 7,200.00 72.55 244.51 3,000.00 222.40 1,232.10 414.03 ......., 100.00 3,006.13 154.97 2,869.16 18,150.00 2,119.50 745,637.53 60,510.20 540.00 822.63 666.49 5,740.80 476,896.63 182.74 213.11 375.00 3,290.00 480.00 210.00 204.94 4,830.00 1,251.07 500.00 2,714.40 10,674.89 30,039.52 ......., 6/21/2006 Warrant 061506 30F4 AGENDA ITEM NO. ;;... PAGE Lj OF S JUNE 15, 2006 CITY OF LAKE ELSINORE W ARRANT LIST ,-..... CHECK# VENDOR NAME 86379 SOUTHERN CALIFORNIA GAS CO. 86380 STAUFFER'S LAWN EQUIPMENT 86381 BOB STOVER, INC. 86382 TARGET SPECIAL TV PRODUCTS 86383-86384 TEAM AUTOAID, INC. 86385 TEMECULA COPIERS 86386 TOMARK SPORTS, INC. 86387 TUSCANY HILLS LANDSCAPE & REC. CO. 86388 UNITED PARCEL SERVICE 86389 UNITED STATES POSTAL SERVICE 86390 VENUS PRINTING 86391 VERIZON CALIFORNIA, INC. 86392 VERIZON ONLINE 86393 VILLAGE EQUIPMENT RENTALS,INC. 86394 KY-ANH VO, AKA TOM VO, JR. 86395 W AXlE SANITARY SUPPLY 86396 WEST COAST ARBORISTS, INC. 86397 WEST COAST TURF 86398 WEST COAST WINDOW CLEANING ~6399 WEST GROUP 86400 WESTERN BANK OF CHINOOK 86401 WESTERN HIGHWAY PRODUCTS,INC. 86402 WESTERN RIVERSIDE COUNCIL OF GOVERNMENTS 86403 WENDY WORTHEY 86404 Z-BEST PAINT /"'"" 86405 ZEE MEDICAL, INC. 86406 ZEP MANUFACTURING COMPANY 86407 ZONES CORPORATE SOLUTIONS AMOUNT 871.75 267.61 6,903.54 6,907.70 414.99 190.00 408.00 90,627.52 35.49 2,300.00 385.93 362.13 165.40 825.00 1,069.65 567.91 5,259.00 463.32 450.00 258.64 2,607.49 2,276.37 232,413.00 6,937.50 310.92 153.00 338.93 4,253.50 TOTAL PIE DATE: $ 2,506,051.19 OS/26/06 05/26/06 06/09/06 06/09/06 PAYROLL TAXES PAYROLL CASH PAYROLL TAXES PAYROLL CASH 46,503.70 108,967.23 46,921.95 110,892.53 GRAND TOTAL $ 2,819,336.60 ".-.. 6/21/2006 Warrant 061506 40F4 AGENDA ITEM NO. () PAGE ,<; OF 5 ~ CITY OF LAKE ELSINORE INVESTMENT REPORT OF POOLED CASH AND INVESTMENTS AS OF MAY 31, 2006 ACTIVE ACCOUNTS BANK DEPOSITS OUTSTANG. BOOK BALANCE IN TRANSIT CHECKS BALANCE $7,155,962.79 2,074,272.43 (1,210,809.16) 8,019,426.06 0.00 115,323.63 (701.34) 114,622.29 7,271,286.42 2,074,272.43 (1,211,510.50) 8,134,048.35 Bank of America - General Reconciling Items Bank of America - Payroll Total Active Accounts INVESTMENTS Local Agency Investment Fund Bank of New York-Trust Sweep Account Federal Home Loan Mortgage Corporation ~ederal Home Loan Bank ederal National Mortgage Association 28,617,046.18 204,399.90 1,000,000.00 8,000,000.00 1,999,750.00 28,617,046.18 204,399.90 1,000,000.00 8,000,000.00 1,999,750.00 Total Investments 39,821,196.08 39,821,196.08 47,092,482.50 2,074,272.43 (1,211,510.50) 47,955,244.43 Cashier Drawers #1 & #2 City of Lake Elsinore Petty Cash Fund 300.00 1,000.00 TOTAL POOLED CASH AND INVESTMENTS $47,956,544.43 I certify that this report accurately reflects all pooled investments and it is in conformity with the investment policy as approved by the City Council on June 28, 2005. A copy of this policy is available in the office of the City Clerk. The pooled investments shown above provide sufficient cash flow liquidity to meet the next six months estimated expenditures. Matt N. Pressey Director of Administrative Se ~p~ ate ~ epared by: N .Lassey, Accountant I AGENDA ITEM NO. PACE I 3 OF 't CITY OF LAKE ELSINORE POOLED CASH AND INVESTMENTS BY FUND AS OF MAY 31, 2006 FlIND NO FUND NAME 100 General Fund 101 Supplemental Law Enforcement Fund 102 Local Law Enforcement Block Grant Fund 103 Office of Traffic Safety Fund 104 Traffic Offender Fund 105 Misc. General Project Fund 106 Affordable Housing In Lieu Fund 107 Developer Agreement Revenue 110 State Gas Tax Fund 112 Transportation Fund 115 Traffic Safety Fund 116 City Hall-Public Works DlF Fund 117 Community Center DlF Fund 118 Lake Side Facility DlF Fund 119 Animal Shelter DlF Fund 130 Lighting & Landscape Maintenance Fund 135 #1 Lighting & Landscape Maintenance Fund 140 Geothermal Fund 150 C.D.B.G. Fund 201 Street C.I.P. Fund 204 Signa1 C.I.P. Fund 205 Traffic Impact Fee Fund 211 Storm Drain C.I.P. Fund 221 Park C.I.P. Fund 231 Library C.I.P. Fund 232 City Fire Protection Fund 254 AD 89-1 Railroad Canyon Rd. Improvement Fund 257 CFD 90-2 Tuscany Hills 259 CFD 90-3 Construction Fund 351 AD 87-2 Debt Service Fund 352 AD 86-1 Debt Service Fund 353 AD 89-1 Debt Service Fund 356 AD 90-1 Debt Service Fund 357 CFD 2003-2 Canyon Hills 358 CFD 91-2 Debt Service Fund 359 CFD 90-3 Debt Service Fund 360 AD 93-1 Debt Service Fund 362 CFD 95-1(96 Srs.E) Debt Service Fund 363 CFD 88-3 11997 Series F Debt Service Fund 364 CFD 88-3 ill B 11997 Series B Debt Service Fund 365 CFD 98-1 Summerhill Improvement fund 366 CFD 2004-1 Debt Service Fund 367 CFD 2005-3 Summerly I Laing 368 CFD 2004-2 Vista Lago 369 CFD 2004-3 Rosetta Canyon 370 CFD 2005-x Camino Del None 371 CFD 2005-1 Serenity 372 CFD 2005-3 Alberhill Ranch 373 CFD 2005-5 Wasson Canyon 374 CFD 2005-4 Lakeview Villas 375 CFD 2005-1 D. Clurman 376 CFD 2005-7 La Strada 377 CFD 2006-X Tessara 378 CFD 2007- TR#31957 379 CFD 2OO7-X Marina Village 604 Endowment Trust Fund 605 Public Improvement Trust Fund 606 Mobile Source Air Polution Fund 608 Trust Deposit & Pre Paid Expense 610 Kangaroo Rat Trust Fund 611 Developer Agreement Trust Fund 616 Fire Station Trust Fund 620 Cost Recovery System Fund 650 CFD 2003-1 Law & Fire Service Fund Total Pooled Cash & Investments AMOUNT $13,205,678.70 86,129.24 5,359.33 48,291.99 74,069.27 159,137.30 782,236.00 813,442.86 381,291.02 722,962.17 167,504.41 182,619.37 106,946.71 152,082.04 67,939.08 1,085,970.28 13,670.39 15,769.50 56,051.73 15,696.43 138,446.75 4,206,062.19 4,426,256.28 1,996,814.40 1,026,432.72 284,151.99 2,470,069.00 (23,325.00) 92,440.37 564,966.60 372,909.28 322,596.47 193,259.80 494,581.01 1,116,072.69 (48,759.00) 1,722,024.98 265,306.54 4,346,507.03 (1,741,225.60) 261,463.85 28,468.32 41,972.74 54,456.55 206,052.97 25,912.72 (3,955.76) 59,004.25 30,416.95 33,624.17 42,899.18 (13,006.70) 63,058.86 65,172.97 65,000.00 19,125.27 475,094.19 151,884.21 2,206,433.15 1,911,460.00 122,223.07 1,652,490.74 RR R'i6 41 $47,956,544.43 AGENDA ITEM NO. .... #It" 1.... ...., ...., ...., 1\1: 3 Q CITY OF LAKE ELSINORE ~ ANNUAL YEAR-TO-DATE INVESTMENT ACTIVITY SUMMARY FOR THE MONTH ENDING MAY 31, 2006 Total outstanding investments as of April 30, 2006 $ 38,769,613.05 PURCHASE MATURITY DAIE DAlE COUPON RATE YIELD TO MATURITY CQSI Investment Purchases: FNMA FNMA 05/18/06 05/30/06 05/18/09 11/30/07 5.700% 5.400% 5.700% 5.417% 1,000,000.00 999,750.00 1,999,750.00 Total Purchases Investment Maturities: Total Maturities -- Investments Called: Total Calls Net increase (decrease) in LAIF Net increase (decrease) in Sweep Account (1,000,000.00) 51,833.03 Total outstanding investments as of May 31, 2006 $ 39,821,196.08 ~. 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II 1l ~] ~ Q.. o.U'l 0. ~ g .... <T < f! !;j IXl ~ 5!;j IXl 6 '" ~ -" ] " e.o!5 6to"8to < "il ~ o .. ...J >= 0'80"'02'''' ~'2'''' '2 .", l1. ~:>O:>O~:>O :>0 e:~ CITY OF LAKE ELSINORE SUMMARY OF POLICY LIMITATIONS AS OF MAY 31,2006 '-' DESCRIPTION U.S. Treasury Bills CURRENT PERCENTAGE BASED ON MARKET VALUE AS OF 5/31/2006 0.00% MAXIMUM PERCENTAGE UNLIMITED U.S. Treasury Notes 0.00% UNLIMITED Federal Agency Issues: FICB FFCB FLB FHLB FNMA FHLMC 0.00% UNLIMITED 0.00% UNLIMITED 0.00% UNLIMITED 19.94% UNLIMITED 5.02% UNLIMITED 2.49% UNLIMITED 0.00% 40.00% 0.00% 25 ......, 0.00% 30.00% 0.00% 15.00% 0.00% 30.00% 0.00% UNLIMITED 0.00% 20.00% 72.03 % UNLIMITED $ 28,617,046.18 0.51% UNLIMITED $ 204,399.90 100.00% 74.89% no less than 25 % 97.49% '-'" ACENDA ITEM NO. 3 PAGE 0 OF~ Banker's Acceptances Certificates of Deposit Negotiable Certificates of Deposits Commercial Paper Medium Term Corporate Notes Repurchase Agreements Reverse Repurchase Agreements LAIF (Local Agency Investment Fund) Current Balance Bank of New York - Trust Sweep Account Current Balance TOTAL % of Portfolio Maturing within one year % of Portfolio Maturing or Callable within one year CITY OF LAKE ELSINORE ,,-.. PERCENT OF PORTFOLIO INVESTED IN FEDERAL AGENCIES JULY 05 THROUGH MAY 06 TOTAL % OF % OF PORTFOLIO BY AGENCY PORTFOLIO IN MONTH FFCB FHLB FHLMC FNMA FEDERAL AGENCIES July 2005 0.00% 0.00% 0.00% 0.00% 0.00% August 2005 0.00% 0.00% 3.33% 0.00% 3.33% September 2005 0.00% 6.23% 3.12% 0.00% 9.35% October 2005 0.00% 14.23% 2.85% 0.00% 17.08 % November 2005 0.00% 18.82 % 2.69% 0.00% 21.51 % December 2005 0.00% 22.92 % 2.86% 0.00% 25.78% January 2006 0.00% 20.74 % 2.59% 0.00% 23.33 % February 2006 0.00% 21.01 % 2.62% 0.00% 23.63 % March 2006 0.00% 20.49% 2.55% 0.00% 23.04 % '-'\pril 2006 0.00% 20.59% 2.57 % 0.00% 23.16 % May 2006 0.00% 19.94% 2.49% 5.02% 27.45 % AVERAGE 0.00% 15.00% 2.52% 0.46% 17.97 % ,-. ACENDA ITEM NO. 3 PACE q OF~ ",-- CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: , MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: CLAIMS AGAINST THE CITY BACKGROUND Claims filed against the City of Lake Elsinore are reviewed and handled by Carl Warren & Company, Claims Administrators. When received, each claim is logg~d in the City Clerk's Office and forwarded to this company for investigation. After initial review and investigation, direction is issued 'to the City to take one of several actions such as rejection, notification of late claim or reservation of action until further information is obtained. ,,-- DISCUSSION The following claims have been recommended for rejection by Carl Warren & Company: CL#2006-08 - Robert Lewis CL#2006-14 - Nicole Reid FISCAL IMPACT None. RECOMMENDATION Reject the claims listed above and direct the City Clerk to send letters informing the claimants of this decision. ,,--. 1-\ ..' AQEN>A lTEM NO.-'- I ^~ 10 REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 PREPARED BY: APPROVED FOR AGENDA BY: ,."", ......, ......, nr.:: ..'J'. .~ ".. " Oc",,,",, 1.\ A...~~."..t,b:. :,- ~~. p.~I".JI.. ,,-",-_.;,:..>;~.-~..!..v.~'\':' ". PAQE~ OF I Di;~ r-- J:I ~ ~~ ~ - - -"- June 6, 2006 TO: The City of Lake Elsinore ATTENTION: Frederick Ray, Risk Manager RE: Claim Claimant D/Event Rec'd Y/Office Our File Reid vs. The City of Lake Elsinore Nicole Reid 5/23/2006 5/31/2006 S-1428104-CKQ We have received and reviewed the above claim and request that you take the action indicated below: CLAIM REJECTION: . Send a standard rejection letter to the claimant. r-- Please provide us with a copy of the notice sent, as requested above. If you have any questions please contact the undersigned. Very truly yours, CARL WARREN & COMPANY cc: CJPIA w/enc. Attn.: Executive Director ",..-.... RECE.\VE.D JU\'-\ \) 9 2000 -rV CLEP$S Qff\Ce. Clll CARL WARREN & CO. CLAIMS MANAGEMENT CLAIMS ADJUSTERS 770 Placentia Avenue, Placentia, CA 92870-6832 Mail: P.O.Box25180.SantaAna.Ca 92799-5180 Phone: (714) 572-5200 . (800) 572-6900 . Fax: (714) 961-8131 /).~2 '-''';C,''"'- .,,,,,,,,..~LJ tiS ~14 {\:;'1~..',;.. :::.,-;:~-;b~ :",....f~~ 3 tJf- JO~ 'I t..~.~P;..~ ','_,'..'_.. ~""_,,,,_~ '. . ~c..,~~~~ .~ .~'- City of ~ake Ef1-ino're "{)ne {!ltyJ~ got dli(O'l:.e.JJ ....., June 2, 2006 Dwight Kunz Carl Warren & Company P.O. Box 25180 Santa Ana CA 92799-5180 Dear Mr. Kunz: Enclosed for your handling is a claim received on May 31, 2006 from Nicole Reid (CL #2006-14). Please keep me advised of appropriate City Council Action. ...." F or further assistance, please contact me at (951) 674-3124 ext. 262. Sincerely, Ltu'cLft ~, FREDERICK RA Y, CITY ~RJ( . CITY OF LAKE ELSINORE Enclosure cc: City Manager '-'" 130 South cflilain St'tu.t} .J:aru. Ef1.ino'tE} Cc::/f 92530 fJE.D:phonE. (951) 674-3124 'Jax (957) 674-23924 www.fakE.-d1.ino'lE..o't:J AQENOA tTEM NO. 4..-~ LJ A".I~ - .CLAlMAGAlNSTTBE CITY OFLAKEEI.SlNORE (J'orDUag.. to.or..raonalProperty) RECEIVED MAY 3 1 2006 CITY CLERKS OFFICE ~ (~tae/Dat. .eceive4) A Cl.imIDU.t.~ filed with the City Cle~kof the City ofLake.l.inQ~.,wlthin .j,.x (6)lDOnth. .fter the incident or .vent occurred. Be .uraYQu~ . claimi. aga,in,t theClty of Lake l:18inore, not .nother public .ntity. Wh.re .p.ce i.. insufficient, pl.... u.e.dcUtion.l paper and identifyinform.tion by paragraph number. COmpleted claims mu.t be "11.d o~ delivered to tlU!~ City Clerk, City of Lak. Elaiilor., 130 Sc>uth HainStr..t:,l.ak. .!alnora, .Californi. 92S30~ TO DB BONORABLI KAYORUD QXf!'3LQOJ1NCIL, ,CI'l'Y Ci)P LU:'~I.Od, CUtt.I'OUIAI ~ The unci.reigned re.pectfully.ubmit8the fOllowing claim and info~t:ion relat.iv. to damage to per. on. .nd/or personal p~ope~ty: 1. NAME OF CLAIHAN'l' a. Addre.s ofCl.imant b. Phone No. qJlJ d. Social Security N .. Driv.rs Lie. No. 2. Name, post office .ddr....nd tel.phone to which claimant de.ir.. notic.s t~ be sent, if other than the above: 3. OCcurrence or event from which this claimeri...: a. Data 6/),~f()0 . .. Mime. _ ~Vl~ o. Plao.(Exaot and epeoifi. looation) 00 1<a:} yq t;I c1 ~ o.pp-ro)C Iry)/lf~-P~/~ {'j ~. .. d. How and under whatci~cum.tance. did dama9... or. i. njury ocCUr? __:S.peCi. fythe P..rticul.r occurrence,.vent, act o:1:'omi..i~n you claim c.u.ed the injury or damage (u.. additional paper if neces.ary). ~ AQlt'~,c'}; jTEM NO"~;:::,==;..",,__. r '.~.'_ __. #11T'::~ ....t.. ~ ,~..- ""' ....~ -"-, ......, 4. Were tilere any injuri...t the time oftlli8 ina~deDt1 "110 In:lu~i.... '(\0 \l(Ij~~l ~ tot ~. ..... aOia1utt.., ~at. " ,'": . , 5. Give the llaJDe(8) of the City eatployeeC8} cau8ingthe daIDIlge or ihju~, ---(~ \100CL,t),(~ P'fY\P.~ 1~)0'N,hlO'rY\~ .:c.~p~ 6. ~~ad~8 ~anCY-ot~;i;r8o11 injured, '. 7. Hame and address o.fthe owner. of any dQlagecl:proparty. 8. Damages elaiJtled: a. Amount claimed a8 of thi8 date b. Estimated amount of future costs c. Total amount Claimed . d. Baai. for computat~onofaDlOwtit. claimed invoices, estimates, ete): I . &t50 .1{:;2.. $ ..... (Include CQpi.. 'oi'all'bill., ......, 9. Hames andaddre.seaof .l~ witne8se8,hC)~J.tal8, eloct.or.,. etc. a. b. c. 10. Any addit.tonal information that might t>ehelpful 1ncQ".iclering th.18 Qla1nu 1rAJUfI1fG: IT :IS ACJt;IK:IHAL OPPJDfSB'1'O I'lL. A PaL.. CI.~t'JU (Penal Code 12/In8urance Code 556.1) I have read the matters and stat81118nt8 made in the above claim and I know tbe .... to be true of my own lti'towledge, excepta. to those matter. stated UPoll 1ntormati~nerbe11ef..t08ueh matters, I believe the 8Q1e to be tiue.I cert-ify underpartaity ofperjurytbat the foregoing i8 T~UEAND CORRECT. M1J..SI.GN..E~ T!f.I'.S .~~S+- . DAy..O..F-=w..... ~. .( [ Si.YJ.fQl-. , CALIFORNIA. .' '- eutlWlT'B~~ ~ SIGNATURE: . . .. . ,:L ~. _ . . . . ',.. . '. . 200 If , '.$t'f _, A'.r ......, 4 AENDA ITEM NO. PAGE b OF 1IL- ~... June 7, 2006 TO: The City of Lake Elsinore AITENTION: Frederick Ray, City Clerk RE: Claim Claimant D/Event Rec'd Y/Office Our File Lewis vs. The City of Lake Elsinore Robert Lewis 3-1-06 3-7-06 S-1420372-RWQ We have reviewed the above captioned claim and request that you take the action indicated below: ,,-... · CLAIM REJECTION: Send a standard rejectio.n letter to. the claimant. Please provide us with a copy of the notice sent, as requested above. If you have any questions please contact the undersigned. ve7r~ C~~&COMPANY Roy Whang cc: CJPIA w/enc. Attn: Executive Director RECElvr,., JUN 0 9 2006 CITY CLERKS OFF,L;E ,,-... CARL WARREN & CO. ACiENDA rTeu No~=,"1 - PAOO'.1:::'o~~~ CLAIMS MANAGEMENT-CLAIMS ADJUSTERS 770 S. Placentia Ave. . Placentia, CA 92870 Mail: P.O. Box25180.SantaAna,Ca 92799-5180 Phone: (714) 572-5200 . (800) 572-6900. Fax: (714) 961-8131 -'-, City of 1!akE E[1-~n.07-E cJfOlne. of the. f):)Lamond ~tadLl.mz. "-" March 7, 2006 Dwight Kunz Carl Warren & Company P.O. Box 25180 Santa Ana CA 92799-5180 Dear Mr. Kunz: Enclosed for your handling is a claim received on March 7,2006 from Robert Lewis (CL #2006-8). Please keep me advised of ~ appropriate City Council Action. For further assistance, please contact me at (951) 674-3124 ext. 262. Sincerely, ~'RA Y, CITY CLERK CITY OF LAKE ELSINORE Enclosure cc: City Manager ~ 130 .south cfl;(aln .she.d, 1!ake. ELj.lnou:, (!c:If 92530 · fJefe.phone.: (909) 674-312A~i lf~lN6:2392 4 ~, _ _ __ 51 __ i il MAR 02 '06 14: 12 FR CITY OF LAKE ELSlNORE909 674 2392 TO 1,~29830053 P.02/03 ,,-. CLAIM AGAINST l'HE CITY OF LAKE ELSINORE (For o.".les to PenoD' or Persoul Property) ~by: j}}. city Represeatativc RECEIVED MAR 0 7 2006 (iilCYDd~.FICE A claim must be filed with tile City Clerk of tile City of Lake ElsiDorf; within Ii,x (6) anoaths after die mcident ~ event oc:curnd. Be sun: yaw c:faUu is gaiDit . City of Lake Bsiaorc. DOt another public:' emil)'. WJae,e space is inlufticiept. pIeueute Mditioaal paper and ideSJtjfJ information by pvaeraph IlLIIDber Completed claims must 'be mailed or delivered to "the City Clerk, City of Lake Elsinore. 130 South Main Sb'eII..Late E1li~ CaJifomIa. 92530. ".-.. TO 11IE HONORABLE MAYOR AND ClI'Y COUNCIL, CITY OF I..AKI ELSINORE, CALIrORNIA: Tbc um:tcrJianed respectfblly submits the (oUowiD. clam and Ulf'otmlliOD relative 10 damage 10 penons llldIor perIOIIaI property: 1. . NAME OF CLAlMANT l?o6€rCr L6 w ~ S. a. AddJ'cssofClaiJDaDt---' I ~ ') b. Pho.ncNo. (qS6. , c. DateofBinb--!ll:. I d. e. DriversLic.No.~ 2. Name. post ofBc:c addrcu lad tclcphoae to which claimant desires DOIiee. to bt 1IDt. if other tIIaft the &bow: 5AA"ie- ItS ..4 t!:>O\/e - 3. ~ence or 8Vmrt ihma wbicb Ibis claim arises: .. Date 03. 01. 6~ b. r. ~ ~ mcific location) LA K. e of: /'110UJJTfhJ0 Tame 2-1 0"3 Houll-S ) C>_~ 2. "t'.~LES . ~Jt5T c. d. How IDd UDder wIJat circumstaoces did dIanqe or ~ 0Q;IU1 SJ*if'y the par1i&:Ullr ~ event, let or omluion 'yog ~ _Mid the iqJwy or damap (uaadditioaal paper it P<<4'1S1I}'). 5E€ A-rTAcAICD tJAtl/LfTlVC e. What pll'liQdlr action by the'City of'jtJ emp~eea. c:ausecJ the aU"" aam.p or injury? (<..O^~ k)oT Pil-oPE(LL-'-I. MAINTAINEQ. ".-.. AENOA ;TEM NO,,,"._~~ " JOA{'~ 9 i"'~ 10 I'lHt( ~O! . ~ lq: 10! 1-1< \.,; I I Y ut-LAKE ELS I NORE'309 674 2392 TO 1~2983ee53 ..~ P.03/03 ~ 4. Were there any injuries at the time of this Il:cidenl? If DOt, sr.Ile "No iDjuries-. JJO .:t.~\.hJe.-,eS S. Giw the Dlme(S) of1hc City employee(.) cauAn8 the damage or injury: NIl'. I 6. NlUIW and address of any penon injured: rJ fA 7. Name and address oftbe OWller orlDY damaged property: ~r ~ - -...... . ~ - .--. 8. Damasea claimed: L b. c. d. . "c) ~TI a...ES I z.. fl,,.., 5 I LA ~olt c.. Amountdaimechsoftbisclate S 2 k~oO., :z.. .It,...., PowOeQ ~A-TI,.JGr Estimated amount of future costs S u ,.s, - BASED ON 1:0.,) Pee... Ilb ,..) Total amotm1 claimed S 2~ t.oo. 0 ~ , Basil fbr computation of'amounts daimcd (Inolude elOpe. f all billa. inwicei. ~Dlatel, ctc): 9. Nama and adcbesses of all witncs-. hospital.. doctor" de: .~ a. /'J/A , I b. tV / /:l I c. rJ/A . 10. Any Idditional information that might be helpfUl in conaiderioS this claim; WARNING: IT'IS A CRIMINAL OJ"FENSE TO FILE A FALSE ClAIM! (pual code 72/Insuraace Code 556.1) I have read the IUtters and _~ mede in the above claim and] knowthe IIUIle to be trUe ormy own knowledge. n:cept as 10 tboIe meUm It8le upon informalion or belief IS to $Ucla matters: I believe tho tame to be true. I cerdfy under pcmaJty of pajury that ~ f~ is nus AND COIUtECT. SIGNED nus 2- DAY OF ;114 /Z..0 H .200 b.AT L AILe CI.AIMANT'S W . ..L "'1-\--& - ~ SlGl'lATIJU: . --. WA-l\ 1" ~ c7-' E:l.-<:>, ,.,Jo/l....r;:. CALU:OKNIA. .n. .....", ** TD;g.!.-.. ~03 .*/k. I J 1~~~rJ'~' 'J~~~ f,nu_".J".S' '" '''".J'^~. J fJ-",> / u "..-. CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27,2006 SUBJECT: ANNUAL ADOPTION OF INVESTMENT POLICY BACKGROUND Government Code Section 53646(a), the City's Investment Policy, the investment policy should be reviewed and adopted by City Council annually. DISCUSSION /""' Upon reviewing the investment policy and comparing it to the current Government Code, the City investment policy was determined to conform. The policy also has all required elements as outlined in the Model Investment Policy of the Municipal Treasurers' Association of the United States & Canada. No changes to the prior year investment policy are being proposed. FISCAL IMPACT No fiscal impact. RECOMMENDATION Staff recommends the City Council approve the City's investment policy. PREPARED BY: ~~~ MATT N. PRESSEY DIRECTOR OF ADMINISTRATIVE SERVICES /""' APPROVED FOR AGENDA BY: ACENDA ITEM NO. PAGE I S OF ;l 7 June 2006 CITY OF LAKE ELSINORE INVESTMENT POLICY 1) POLICY In accordance with the City Council Policy of the City of Lake Elsinore and under authority granted by the City Council, the City Treasurer's function and responsibility for investing the unexpended cash in the City Treasury has been designated to the City Manager. The investment of the funds of the City of Lake Elsinore is directed to the goals of safety, liquidity and yield. The authority governing investments for municipal governments is set forth in the California Government Code (CDC), Sections 53601 through 53659. The primary objective of the investment policy of the City of Lake Elsinore is SAFETY OF PRINCIPAL. Investments shall be placed in those securities as outlined by type and maturity sector in this document. Effective cash flow management and resulting cash investment practices are recognized as essential to good fiscal management and control. The City's portfolio shall be designed and managed in a manner responsive to the public analysis and, as a result the balance between the various investments and maturities may change in order to give the City of Lake Elsinore the optimum combination of necessary liquidity and optimal yield based on cash flow projections. 2) SCOPE The investment policy applies to all financial assets of the City of Lake Elsinore as accounted for in the Comprehensive Annual Financial Report (CAFR). Policy statements outlined in this document focus on the City of Lake Elsinore's pooled funds, but will also apply to all other funds under the City Manager's span of control unless specifically exempted by statute or ordinance. This policy is applicable, but not limited, to all funds listed below: . General Fund Special Revenue Fund Debt Service Fund Capital Project Fund Enterprise Fund Trust and Agency Funds Any new fund created by the City Council unless specifically exempted. . . . . . . A(j'ENDA ITEM NO. PAOE f)- ....." ....." ......." 5 OF)"l~ CITY OF LAKE ELSINORE INVESTMENT POLICY r" Bond proceeds and reserve funds under the direct administration of a third party trustee may have investments that may exceed the five-year policy period and are intended to coincide with liquidity needs. 3) PRUDENCE The standard to be used by investment officials shall be that of a "prudent person" and shall be applied in the context of managing all aspects of the overall portfolio. Investments shall be made with judgment and care, under circumstances then prevailing, which persons of prudence, direction, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. It is the City's full intent, at the time of purchase, to hold all investments until maturity to ensure the return of all invested principal dollars. --- However, it is realized that market prices of securities will vary depending on economic and interest rate conditions at any point in time. It is further recognized, that in a well- diversified investment portfolio, occasional measured losses are inevitable due to economic, bond market, or individual security credit analysis. These occasional losses must be considered within the context of the overall investment program objectives and the resultant long-term rate of return. The City Manager and other individuals assigned to manage the investment portfolio, acting within the intent and scope of the investment policy and other written procedures, an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely manner, and appropriate action is taken to control adverse developments. 4) OBJECTIVES As specified in CGC 53600.5, when investing, reinvesting, purchasing, acqumng, exchanging, selling, and managing public funds, the primary objectives, in priority order, of the investment activities shall be: A) Safety of Principal Safety of principal is the foremost objective of the City of Lake Elsinore. Each investment transaction shall seek to ensure that capital losses are avoided, whether form securities default, broker/dealer default, or erosion of market value. The City shall seek to preserve principal by mitigating the two types of risk, credit risk and market risk. r" Credit Risk, defined as the risk of loss due to failure of the issuer of a security, shall be mitigated by investing in investment-grade securities and by 2 AGENDA ITEM NO. PAGi "3 ,C) OF ~, 11 CITY OF LAKE ELSINORE INVESTMENT POLICY diversifying the investment portfolio so that the failure of anyone issuer does not unduly harm the City's capital base and cash flow. .....", Market Risk, defined as market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by limiting the average maturity of the City's investment portfolio to two years, the maximum maturity of anyone security to five years, structuring the portfolio based on historic and current cash flow analysis eliminating the need to sell securities prior to maturity, and avoiding the purchase of long-term securities for the sole purpose of short-term speculation. B) Liquidity Historical cash flow trends are compared to current cash flow requirements on an ongoing basis in an effort to ensure that the City's investment portfolio will remain sufficiently liquid to enable the City to meet all reasonably anticipated operating requirements. C) Yield The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and the cash flow characteristics ofthe portfolio. ~ 5) PERFORMANCE EVALUATION Investment performance is continually monitored and evaluated by the Director of Administrative Services. Investment performance statistics and activity reports are generated on a monthly basis for presentation to the City Manager, City Council and City Treasurer. 6) DELEGATION OF AUTHORITY Daily management responsibility of the investment program has been delegated to the Director of Administrative Services who shall establish procedures for the operation consistent with this investment policy. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of this policy and the procedures established by the Director of Administrative Services. The Director of Administrative Services shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. Under the provisions of California Government Code 53600.3, the Director of Administrative Services is a trustee and a fiduciary subject to the prudent investor standard. ~ 3 AGENDA IT~ NO. 5 PAGE 1- ,OF a.7 CITY OF LAKE ELSINORE INVESTMENT POLICY ,,-... 7) INVESTMENT PROCEDURES The Director of Administrative Services shall establish written investment procedures and guidelines for the operation of the investment program consistent with this policy. The procedures should include reference to: safekeeping, PSA repurchase agreements, wire transfer agreements, banking service contracts and collateral/depository agreements. Such procedures shall include explicit delegation of authority to persons responsible for investment transactions. No person may engage in an investment transaction except as provided under the terms of the policy and the procedures established by the Director of Administrative Services. 8) ETHICS AND CONFLICTS OF INTEREST Officers and employees involved in the investment process shall refrain from personal business activity that conflicts with proper executions of the investment program, or impairs their ability to make impartial investment decisions. Additionally, the city Officials are required to annually file applicable financial disclosures' as required by the Fair Political Practices Commission (FPPC). 9) SAFEKEEPING AND CUSTODY ,,--.. To protect against fraud or embezzlement of losses caused by collapse of an individual securities dealer, all securities owned by the City shall be held in safekeeping by a third party bank / trust department. All security transactions entered into by the City of Lake Elsinore shall be conducted on delivery-versus-payment (DVP) basis. All securities purchased or acquired shall be delivered to the City of Lake Elsinore by book entry, physical delivery, or by third part custodial agreement as required by CGC 53601. Securities held custody of the City shall be independently audited on an annual basis to verify investment holdings. All exceptions to this safekeeping policy must be approved by the City Manager in written form and included in monthly reporting to the City Council. 10) DIVERSIFICATION ,,--... The City of Lake Elsinore will diversify its investments by security type and institution. It is the policy of the City of Lake Elsinore to diversify its investment portfolio. Assets shall be diversified to eliminate the risk of loss resulting from over concentration of assets in a specific maturity, a specific issuer, or a specific class of securities. Diversification strategies shall be determined and revised periodically. In establishing specific diversification strategies, the following general policies and constraints shall apply: 4 AGENDA ITEM NO.5' PAGE 5 .OF 97 ~ CITY OF LAKE ELSINORE INvESTMENT POLICY (a) Maturities selected shall provide for stability of income and liquidity. ......., (b) Disbursement and payroll dates shall be covered through maturity investments, marketable U.S. treasury bills, or other cash equivalent instruments such as money market mutual funds. 11) INTERNAL CONTROL The investment portfolio and all related transactions are reviewed and balanced to appropriate general ledger accounts by the Finance Staff on a monthly basis. An independent analysis by an external auditor shall be conducted annually to review internal control, account activity, and compliance with policies and procedures and reported to City Council. 12) REPORTING The City Director of Administrative Services shall review and render monthly investment reports to the City Manager, City Council and City Treasurer. The report shall include the face amount of the cash investment, the classification of the investment, the name of . the institution or entity, the rate of interest, the maturity date, the current market value, and accrued interest due for all securities. The report shall also detail all repurchase agreements and reverse repurchase positions and associated liabilities. ......., The report will also. include the source of the portfolio valuation. As specified in CGC 53646 (e), if all funds are placed in LAIF, FDIC-insured accounts, and/or in a county investment pool, the foregoing report elements may be replaced by copies of the latest statements from such institutions. The report must also include a certification that (1) all investment actions executed since the last report have been made in full compliance with the investment policy, and (2) the City of Lake Elsinore will meet its expenditure obligations for the next six months as required by CGC 53646 (b) (2) and (3), respectively. The Director of Administrative Services shall maintain a complete and timely record of all investment transactions. 13) QUALIFIED BROKER DEALERS The City shall transact business only with banks, saving and loans, and with brokers/dealers. For brokers/dealers of government securities and other investments, the standing with the California Department of Securities, the Securities and Exchange Commission, the National Association of Securities Dealers, or other applicable self- regulatory organizations. Before engaging in investment transactions with a broker/dealer, the Director of Administrative Services shall have received from said firm a signed certification form. This form shall attest that the individual responsible for the City of Lake Elsinore's ......, 5 ACENDA ITEM NO. PAGE Cf ..OF CITY OF LAKE ELSINORE INVESTMENT POLICY "..-... account with that firm has reviewed the City of Lake Elsinore's investment policy, and that the firm understands the policy and intends to present investment recommendations and transactions to the City of Lake Elsinore that are appropriate under the terms and conditions of the investment policy. In addition, broker/dealers must supply the Director of Administrative Services the following: . Audited financial statements · Proof of National Association of Security Dealers certification . Proof of state registration . Complete broker/dealer questionnaire An annual review of the [mancial condition and registrations of qualified bidders will be conducted by the Director of Administrative Services. Exceptions will be made only upon written authorization ofthe City Council. 14) AUTHROIZED INVESTMENTS Investment of City funds is governed by the California Government Code sections 53601 et seq. The California Government Code allows the City to invest in the following media: "..-... . Securities of the U.S. Government, or its government sponsored agencies . Small Business Administration loans . Certificates of deposit, placed with commercial banks and savings and loan comparnes . Negotiable certificates of deposit . Bankers acceptances . Commercial paper . Corporate notes and bonds, including medium term notes . Local Agency Investment Fund . Repurchase agreements . Reverse repurchase agreements . Passbook savings account demand deposits . County Treasurer demand deposits . Asset-backed and mortgage-backed securities . Money market mutual funds Within the context of the limitations, the following investments are authorized, as further limited herein. Investment Type Authorization Limit % ~aximum Maturity ~ US Treasury Bond/Notes/Bills US Government Sponsored Agency Issues Banker's Acceptances o to 100% o to 100% o to 40% 5 Years 5 Years 180 Days 6 AGENDA ITEM NO. PAGE I 5 ,9-( - .Of CITY OF LAKE ELSINORE INVESlMENT POLICY Time Certificates of Deposit Negotiable Certificates of Deposit Commercial Paper Medium Term Corporate Notes Repurchase Agreements Reverse Repurchase Agreements Local Agency Investment Fund o to 25% o to 30% o to 15% o to 30% o to 100% o to 20% o to 100% 5 Years 5 Years 270 Days 5 Years 1 Year 92 Days N/A ~ u.s. Treasury Bills - Issued weekly with maturity dates up to one year. They are issued and traded on a discount basis with "interest figured on a 360-day basis, actual number of days. They are issued in amounts of $10,000 and up, in multiples of $5,000. They are a highly liquid security. U.s. Treasury Notes - Initially issued with two- to ten-year maturities. They are actively traded in a large secondary market and are very liquid. The Treasury may issue Note issues with -a minimum of $1,000, however, the average minimum is $5,000. Federal Government Sponsored Agency Issues - Guaranteed directly or indirectly by the United States Government. All agency obligations qualify as legal investments and are acceptable as security for public deposits. They usually provide higher yields than regular Treasury issues with all of the same advantages. Examples include: ~ . FICBs (Federal Intermediate Credit Bank Debentures) - Loans to lending institutions used to finance the short-term and intermediate needs of farmers, such as seasonal production. They are usually issued monthly in minimum denominations of$3,OOO with a nine-month maturity. Interest is payable at maturity and is calculated on a 360-day, 30-day month basis. . FFCBs (Federal Farm Credit Bank) - Debt instruments used to finance the short and intermediate term needs of farmers and the national agricultural industry. They are issued monthly with three- and six -month maturities. The FFCB issues larger issues (one to ten year) on a periodic basis. These issues are highly liquid. . FLBs (Federal Land Bank Bonds) - Long-term mortgage credit provided to farmers by Federal Land Banks. These bonds are issued at irregular times for various maturities ranging from a few months to ten years. The minimum denomination is $1,000. They carry semi-annual coupons. Interest is calculated on a 360-day, 30- day month basis, . FHLBs (Federal Home Loan Bank Notes and Bonds) - Issued by the Federal Home Loan Bank System to help finance the housing industry. The notes and bonds provide liquidity and home mortgage credit to savings and loan associations, mutual savings banks, cooperative banks, insurance companies, and mortgage-lending .....", 7 AGENDA ITEM NO. PAGI <6 S .OF.d1- CITY OF LAKE ELSINORE INVESlMENT POLICY ,.- institutions. They are issued irregularly for various maturities. The minimum denomination is $5,000. The notes are issued with maturities of less than one year and interest is paid at maturity. The bonds are issued with various maturities and carry semi-annual coupons. Interest is calculated on a 360-day, 30-day month basis. . FNMAs (Federal National Mortgage Association) - Used to assist the home mortgage market by purchasing mortgages insured by the Federal Housing Administration and the Farmers Home Administration, as well as those guaranteed by the Veterans Administration. They are issued about four times a year for maturities ranging from a few months to eight years. They are issued in minimum denominations of $10,000. They carry semi-annual coupons. Interest is computed on a 360-day, 30-day month basis. · FHLMCs (Federal Home Loan Mortgage Corporation) - A government-sponsored corporation established to develop the secondary market for conventional home mortgages. Mortgages are purchased solely from the Federal Home Loan Bank System member lending institutions whose deposits are insured by agencies of the United States Government. They are issued for various maturities and in minimum denominations of$IO,OOO. Interest is paid semi-annually and is calculated on a 360- day, 30-day month basis. ,,-.. . Other federal agency issues are Small Business Administration notes (SBAs), Government National Mortgage Association notes (GNMAs), Tennessee Valley Authority notes (TV As), and Student Loan Marketing Association notes (SALLIE- MAEs). As a matter of practice, the City does not invest in these issues as they do not suit our purposes as well as other investment opportunities available. The City limits its investments to no more than 40% of its surplus funds in anyone Federal Agency. Bankers Acceptances - Short-term credit arrangements to enable businesses to obtain funds to finance commercial transactions. They are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the draft at its maturity. An acceptance is a high-grade negotiable instrument. Bankers Acceptances can be purchased in various denominations for 30, 60, or 90 days, but no longer than -180 days. The interest is calculated on a 360-day discount basis similar to Treasury Bills. Local agencies may not invest more than 40% of their surplus funds in bankers acceptances or more than 10% of the agency's surplus funds in bankers acceptances of any one commercial bank. ,,-.., Certificates of Deposit - Time deposits of a bank or savings and loan. They are purchased in various denominations with maturities ranging from 30 to 360 days. The interest is calculated on a 360-day, actual-day month basis and is payable monthly. 8 AGENDA ITEM NO. 5 PAGI.-:L-.OF_ &1 - - CITY OF LAKE ELSINORE INVESTMENT POLICY Negotiable Certificates of Deposit - Unsecured obligations of the financial institution, bank or savings and loan, bought at par value with the promise to pay face value plus accrued ~ interest at maturity. They are high-grade negotiable instruments, paying a higher interest rate than regular certificates of deposit. The primary market issuance is in multiples of $1,000,000; the secondary market usually trades in denominations of $500,000, although smaller lots are occasionally available. As a matter of practice, only the ten largest U.S. banks where there is a secondary market established for continued liquidity are considered for investment. The City's total investment in negotiable certificates of deposit may not exceed 30% of surplus funds. Commercial Paper - Short-term unsecured promissory notes issued by a corporation to raise working capital. These negotiable instruments are purchased at a discount to par value or at par value with interest bearing. Local agencies are permitted by State law to invest in commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided by Moody's Investor's Service, Inc., and/or Standard and Poor's Corporation. Eligible paper is further limited to issuing corporations that are organized and operating within the United States and having total assets in excess of five hundred million dollars ($500,000,000) and having an "A" or higher rating for the issuer's debt other than commercial paper. Commercial Paper issued by an Issuer that has a rating of "A" on their debt other than commercial paper but are on credit watch for a possible downgrade by a nationally recognized rating agency shall not be considered for investment purposes. Purchases of eligible commercial paper may not exceed -270 days maturity nor represent more than 10% of the outstanding paper of an .~ issuing corporation. Purchases of commercial paper may not exceed 15 percent of the portfolio. An additional 15%, for a total of 30 percent of the portfolio, may be invested only if the dollar-weighted average of the entire investment in commercial paper does not exceed 31 days. "Dollar-weighted average maturity" is defined as the sum of the amount of each outstanding commercial paper investment multiplied by the number of days to maturity, divided by the total amount of outstanding commercial paper. Medium Term Corporate Notes - Unsecured promissory notes issued by a corporation organized and operating in the United States. These are negotiable instruments and are traded in the secondary market. Medium term corporate notes can be defined as extended maturity commercial paper. Local agencies are restricted by the Government Code to investments in corporations rated in the top three note categories by Moody's Investors Service, Inc., and/or Standard and Poor's Corporation. For medium-term notes, eligible purchases consist of instruments that have a rating of "A" or better by both Moody's Investors Service, Inc., and Standard and Poor's Corporation. Corporate Notes issued by an issuer that has a rating of "A" but are on credit watch for a possible downgrade by a nationally recognized rating agency shall not be considered for investment purposes. Ifthe security's credit rating falls below "A" by one of these agencies, then awareness is heightened and the security monitored closely to determine if credit risk has been significantly increased. If a security falls below "A" by both rating agencies, then the Director of Administrative Services will evaluate the need to ~ 9 AGENDA ITEM NO.. 5. PAOi 10..OF..JfL.- CITY OF LAKE ELSINORE INVESTMENT POLICY ,,-- sell the security prior to maturity. Further restrictions are a maximum term of five years to maturity and total investments in medium term corporate notes may not exceed 30% of the local agency's surplus funds. Repurchase Agreements - A repurchase agreement is a short-term investment transaction. Banks buy temporarily idle funds from a customer by selling U.S. Government or other securities with a contractual agreement to repurchase the same securities on a future date. Repurchase agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal funds and the maturity of the repurchase agreement. Some banks will execute repurchase agreements for a minimum of $100,000 to $500,000, but most banks have a minimum of $1,000,000. The term of a repurchase agreement may not exceed one year. The market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Repurchase Agreements can only be executed with fmancial institutions or broker/dealers that have signed a Master Repurchase Agreement with the City. ,,-- Reverse Repurchase Agreements - A reverse repurchase agreement is the opposite of a repurchase agreement. The City loans a security to a bank in exchange for cash. The City agrees to payoff the loan with interest on a future date. As this type of investment actually involves a loan arrangement, the City may not invest more than 10% of its surplus funds in reverse repurchase agreements, and must always match its maturities to the reinvestment. Reverse repurchase agreements may be utilized only when either of the following conditions are met: 1. The security was owned or specifically committed to purchase, by the local agency, prior to December 31, 1994, and was sold using a reverse repurchase agreement on December 31,1994. 2. The security: a) to be sold has been owned and fully paid for a minimum of 30 days prior to sale; and b) total of all reverse repurchase agreements owned does not exceed 10 percent of the base value of the portfolio; and c) agreement does not exceed a term of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement and the final maturity date of the same security. ".-- LAIF (Local Agency Investment Fund) - A special fund in the State Treasury which local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $5,000, in multiples of $1 ,000 above that, with a maximum balance of $40,000,000 for any agency. The City is restricted to a maximum of fifteen transactions per month. It offers high liquidity because deposits can be converted to cash in 10 AGENDA ITEM NO. PAGE II 5 .OF_.~j4 CITY OF LAKE ELSINORE INVESTMENT POLICY 24 hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share basis determined by the amounts deposited and the length of time they ....., are deposited. Interest is paid quarterly. The State retains an amount for reasonable costs of making the investments, not to exceed one-quarter of one percent of the earnings. California Government Code ~ 16429.3 states, in part: "money placed with the State Treasurer for deposit in the Local Agency Investment Fund by cities, counties, or special districts shall not be subject to impoundment or seizure by any state official or state agency." Prohibited Investments Under the provisions of CGC 53601.6 and 53631.5, the City of Lake Elsinore shall not invest any funds covered by this investment policy in inverse floaters, range notes, interest-only strips derived from mortgage pools, or any investment that my result in a zero interest accrual if held to maturity. Investment of Bond Proceeds When investing proceeds from the issuance of bonds, the City of Lake Elsinore will follow this Investment Policy when determining allowable investments. Should the trust agreement of a particular bond issue be more or less restrictive than the City's policy on permitted investments, then the trust agreement will take precedence. 15) COLLATERAL REQUIREMENTS ......, Collateral is required for investments in certificates of deposit, repurchase agreements, and reverse repurchase agreements. All certificates of deposit must be collateralized by U.S. Treasury Obligations. Collateral must be held by a third party trustee and valued on a monthly basis. In order to reduce market risk, the collateral level will be set at the maximum allowed by state and federal law . 16) DERIVATIVE INVESTMENTS Derivative investments have value "derived" from a benchmark or index. That benchmark can be almost any financial measure from interest rates to commodity and stock prices. Investing in any derivative investment is prohibited. 17) LEGISLATIVE CHANGES Any State of California legislative action that further restricts allowable maturities, investment type or percentage allocations will be incorporated into the City of Lake Elsinore's investment policy and superseded any and all applicable language. ....., 11 AGENDA ITEM NO" 5 PAGE I d- .OF~ CITY OF LAKE ELSINORE INVESTMENT POLICY ~ 18) INTEREST EARNINGS All moneys earned and collected from investments authorized in this policy shall be allocated quarterly to various fund accounts based on the cash balance in each fund as a percentage ofthe entire pooled portfolio. 19) LIMITING MARKET VALUE EROSION The longer the maturity of securities, the greater their market price volatility. Therefore, it is the general policy of the City to limit the potential effects from erosion in market values by adhering to the following guidelines: All immediate and anticipated liquidity requirements will be addressed pnor to purchasing all investments. Maturity dates for long-term investments will coincide with significant cash flow requirements where possible, to assist with short-term cash requirements at maturity. All long-term securities will be purchased with the intent to hold all investments to maturity under then prevailing economic conditions. However, economic or market conditions may change, making it the City's best interest to sell or trade a security prior to maturity. r-- 20) PORTFOLIO MANAGEMENT ACTIVITY The investment program shall seek to augment returns consistent with the intent of this policy, identified risk limitations, and prudent investment principals. These objectives will be achieved by use ofthe following strategy. Utilize the expert investment professionals ofthe State (Local Agency Investment Fund). 21) POLICY REVIEW The City of Lake Elsinore's investment policy shall be adopted by the City Council on an annual basis. This investment policy shall be reviewed at least annually to insure its consistency with the overall objectives of preservation of principal, liquidity and yield, and its relevance to current law and financial and economic trends. Any amendments to the policy shall be forwarded to the City Council for approval. The current policy of utilizing State Local Agency Investment Funds will continue to be the primary investment instrument ofthe City. 22) GLOSSARY ~ Because this policy is to be available to the public as well as the governing body, it is important that a glossary of related terminology be part of the policy. 12 AOINDA ITEM NO. PAGE I 0 5 .OF_ f).~ - CITY OF LAKE ELSINORE INVESlMENT POUCy Agency: Federal agency securities and lor Government -sponsored enterprises. Bankers' Acceptance (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the Issuer. Broker: A broker brings buyers and sellers together for a commission. California Local Government Debt: Is bonds, notes, warrants, or other evidences of indebtedness of any local agency within California. California local government debt is a pennitted investment under the California Government Code. The Government Code does not specify minimum credit ratings for local government debt in which local agencies may invest. The Authority does not invest in these securities. Certificate of Deposit (CD): A time deposit with a specific maturity evidenced by a certificate. Large-denomination CD's are typically negotiable. Collateral: Securities, evidence of deposit of other property which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies. Comprehensive Annual Financial Report (CAFR): The official annual report for the City of Lake Elsinore. It includes five combine statements for each individual fund and account group prepared in conformity with GAAP. It also includes supporting schedules necessary to demonstrate compliance with finance-related legal and Glossary ......, contractual proVISIOns, introductory material, and Statistical Section. extensive a detailed Coupon: (a) The annual rate of interest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date. DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account. Debenture: A bond secured only by the general credit of the issuer. Delivery versus Payment: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities. ......, Derivatives: (1) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities). Discount: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount. ....", 13 AOENDA ITEM NO. PAGE 11 5 .oF;2.1 CITY OF LAKE ELSINORE INVESTMENT POLICY ~ Diversification: Dividing investment funds among a variety of securities offering independent returns. Federal Credit Agencies: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters. Federal Deposit Insurance Corporation (FDIC): A federal agency that insures bank deposits, currently up to $100,000 per deposit. Federal Funds Rate: The rate of interest at which Fed funds are traded. This rate is currently pegged by the Federal Reserve through open-market operations. -- Federal Home Loan Banks (FHLB): Government sponsored wholesale banks (currently 12 regional banks) which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLB is to liquefy the housing related assets of it's members who must purchase stock in their district Bank. -- Federal National Mortgage Association (FNMA): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest. Federal Open Market Committee (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve and Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Government Securities in the open market as a means of influencing the volume of bank credit and money. Federal Reserve System: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system. Government National Mortgage Association (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Government. Ginnie Mae securities are backed by the FHA, VA or FmHA mortgages. The term "pass-throughs" is often used to describe Ginnie Maes. Issuer: Any corporation, government unit or financial institution which borrows money through the sale of securities. Liquidity: A liquid asset is one that can be converted easily and rapidly into cash 14 c: AGENDA ITEM NO.. .:J PAGE )5 .OF~ CITY OF LAKE ELSINORE INVESTMENT POLICY without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes. Local Agency Investment Fund (LAIF): A special fund in the State Treasury which local agencies may use to deposit funds for investment. All interest is distributed to those agencies participating on a proportionate share determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly via direct deposit to the LAIF account. The State keeps an amount for reasonable costs of making the investments, not to exceed one-quarter of one per cent ofthe earnings. Local Government Investment Pool (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment. Market Value: The price at which a security is trading and could presumably be purchased or sold. Master Repurchase Agreement: A written contract covering all future transactions between the parties to repurchase - reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller-borrower. Maturity: The date upon which the principal or stated value of an investment becomes due and payable. Member: Refers to a governmental entity which is a signatory to the Joint Powers Agreement establishing the California Joint Powers Insurance Authority. ~' Money Market: The market In which short-term debt instruments (bills, commercial paper, bankers' acceptances, etc.) are issued and traded. Mutual Funds: Referred to in the Government Code, Section 53601(k) as "shares of beneficial interest issued by diversified management companies." The Mutual Fund must be restricted by its by- laws to the same investments as the local agency by the Government Code. These investments are Treasury issues, Federal Agency issues, State of California and City (within California) debt obligations, Bankers Acceptances, Commercial Paper, Certificates of Deposit, Negotiable Certificates of Deposit, Repurchase Agreements, Reverse Repurchase Agreements, and Medium Term Corporate Notes. The quality rating and percentage restrictions in each investment category applicable to the local agency also apply to the Mutual Fund. ~ Negotiable: Term used to designate a security, the title to which is transferable by delivery. Offer: The price asked by a seller of securities. (When you are buying securities, you ask for an offer). See Asked and Bid. Open Market Operations: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's ~ 15 (7' AGENDA ITEM NO" :1 pAGE / l,OF,~l_ CITY OF LAKE ELSINORE INVESTMENT POLICY ~ most important and most flexible monetary policy tool. Portfolio: Collection of securities held by an investor. Primary Dealer: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers included Securities and Exchange Commission (SEC) - registered securities broker-dealers, banks, and a few unregulated firms. Principal: Describes the original cost of a security. It represents the amount of capital or money which the investor pays for the investment. /""'. Prudent Person Rule: An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state - the so-called legal list. In other states the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital. Qualified Public Depositories: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits. /"'" Rate of Return: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return. Repurchase Agreement (RP or Repo): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing r RP, it is lending money, that is, increasing bank services. Safekeeping: A servIce to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection. Secondary Market: A market made for the purchase and sale of outstanding Issues following the initial distribution. Securities & Exchange Commission: Agency created by Congress to protect investors in securities transactions by administering securities legislation. SEC Rule 15C3-1: See Uniform Net Capital Rule. Structured Notes: Notes issued by Government Sponsored Enterprises (FHLB, FNMA, SLMA, etc.) and Corporations which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve. 16 AOENDA ITEM NO. 5 PAGE '7 OF -w J-7. CITY OF LAKE ELSINORE INVESlMENT POLICY Treasury Bills: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year. Treasury Notes: Medium-term coupon- bearing U.S. Treasury securities issued as direct obligations of the U.S. Govermnent and having initial maturities from two to ten years. Uniform Net Capital Rule: Securities and Exchange Commission requirement that member firms as well as nonmember broker- dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to 1; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among member of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash. Yield: The rate of annual income return on an investment, expressed as a percentage. (a) Income Yield is obtained by dividing the current dollar income by the current market price for the security. (b) Net Yield or Yield to Maturity is the current income yield minus any premium abQve par or plus any discount from par in. purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity ofthe bond. ....." ....." ......" 17 AGENDA ITEM NO. S PAGE 1$ OF-J21.- ",..... CITY OF LAKE ELSINORE INVESTMENT PROCEDURES, GUIDELINES AND STRATEGY I. PROCEDURES AND GUIDELINES - Procedures and guidelines are established to direct and control activities in such a manner that previously established goals are achieved and policies are followed. 1. Investment Selection. Every investment transaction must be authorized by City Council and reviewed by the Director of Administrative Services. The Director of Administrative Services reviews how much of the cash balance is available for investment as determined by the Finance Manager and selects the area of the yield curve that most closely matches the required maturity date. A review of some of the flowing sources should be made to determine whether the investments should be placed to match projected expenditures or shorter, or to take advantage of current and expected interest rate environments: ---- a) b) c) d) e) Wall Street Journal or similar daily business publication. Input from approved broker/dealers. Input from depository banks. Publications on general trends of economic statistics. Input from data services (Telerate, Bloomberg, Reuters, etc.) 2. Pooled Cash. Whenever practical, local agency cash is consolidated into one bank account and invested on a pooled concept basis. Interest earnings are allocated quarterly according to month-end cash and investment balances for each fimd. 3. Competitive Bids. Purchase and sales of securities are made on the basis of competitive offers and bids when practical. 4. Cash Forecast. The cash flow for the City is analyzed with the receipt of revenues and maturity of investments scheduled so that adequate cash will be available to meet disbursement requirements. 5. Liauiditv. The marketability of a security is considered at the time of purchase, as the security may have to be sold at a later date to meet unanticipated cash demands. 6. Diversification. The portfolio should consist of a mix of various types of securities, issuers, and maturities. -- 18 (""" AGENDA ITEM NO. ~) PAGE"" ,"L 0; OF-.a::L- INVESTMENT PROCEDURES, GUIDELINES AND STRATEGY (Continued) ....., 7. Purchasing an Investment Establish with whom the City of Lake Elsinore is going to transact business. This should be accomplished through the use of a questionnaire, which helps provide the following evaluation: a) Financial condition, strength and capability to fulfill commitments. b) Overall reputation with other dealers and investors. c) Regulatory status of the broker/dealer (providers). d) Background and expertise of the individual representative. The following must be determined prior to contacting the providers: a) Settlement - cash, regular (next day), corporate (3 business days) or when- issued of a new issue. Amount - either par value or total dollars to be invested. Type of security to be purchased, or type to be excluded. Targeted maturity, or maturity range. Time limit to show offering - 5 minutes, 15 minutes, etc. "" b) c) d) e) Before concluding the transaction, the Director of Administrative Services should validate the following: a) The security selected for purchase meets all criteria, including portfolio diversification, collateralization (if appropriate) and maturity. If the security has any imbedded options such as call provisions or coupon adjustments, these should also be reviewed. b) Yield calculations should be verified. c) Total purchase cost (including accrued interest) does not exceed funds available for investment. d) Advise the successful provider that their offering has been selected for purchase. e) After confirmation of the purchase, as a courtesy, notify the other broker/dealers that you have placed the investment. Best price may be disclosed, if you choose. After consummation of the transaction, and prior to settlement date, the Director of Administrative Services and the provider should exchange and review the following information to ensure prompt, and uninterrupted settlement: a) Name of third-party safekeeping agent. "" 19 AQ&NOA tTEM NO. S Jl PAOE dO OF.2.J.... ~ INVESTMENT PROCEDURES, GUIDELINES AND STRATEGY (Continued) b) ABA number of safekeeping agent. c) Safekeeping account number. d) Reconfirm amount of transaction. e) Reconfirm settlement date. f) Acquire CUSIP number of security, if applicable. 8. Evaluate Certificates ofDeoosit a) Certificates of Deposit shall be evaluated in terms of FDIC coverage. For deposits in excess of the insured maximum of $100,000, approved collateral at full market value shall be required. (California Government Code Section 53652 and/or 5365l(m) and 5365l.2(a)(1). b) Negotiable Certificates of Deposit shall be evaluated in terms of the credit worthiness of the issuer, as these deposits are uninsured and uncollateralized promissory notes. /"'"' 9. Settlement & Follow-through The Director of Administrative Services should forward to the safekeeping agent a report of the investment transaction. The report may be verbal, but a written form should be sent and acknowledged. When applicable, the following should be verified: a) Provision of receipt of disbursement of funds. b) Internal transfer or wiring of funds. c) Validation of written "safekeeping receipt" d) Notification of discrepancy prior to acceptance or rejection of the transaction. e) Immediate notification if a fail has occurred: by provider if they are responsible, by safekeeping agent ifthey are responsible. 10. Safekeeping: All transactions will be handled on a Delivery Verses Payment (DVP) using a third party safekeeping custodian. 11. Repurchase agreements, wire transfer agreements. banking service contracts and collateral/depository agreements: All investing agreements will be reviewed by the City Attorney, managed by the Director of Administrative Services, and executed by the City Manager. ~, 20 AGENDA ITEM NO._ 5 PAGE /)/ .0'_ d:-l _ CITY OF LAKE ELSINORE '-" INVESTMENT PROCEDURES, GIDDELINES AND STRATEGY (Continued) II. STRATEGY - Strategy refers to the ability to manage financial resources in the most advantageous manner. 1. Economic Forecasts. Economic Forecasts are obtained periodically from economists and financial experts through bankers and brokers to assist the Director of Administrative Services with the formulation of an investment strategy for the local agency. 2. Implementing Investment Strategy. Investment transactions are executed which conform with anticipated interest rate trends and the .current investment strategy plan. 3. Preserve Portfolio Value. Field standards are developed in order to maintain earnings near the market and to preserve the value of the portfolio. ....., ~ 21 ~rrEMNO. 5 < PAGe ;:):J OF~ r--. CITY OF LAKE ELSINORE INVESTMENT PROCEDURES INTERNAL CONTROL - GUIDELINES OBJECTNES OF INTERNAL CONTROL Internal control is the plan of organization and all the related systems established by the management's objective of ensuring, as far as practicable: . The orderly and efficient conduct of its business, including adherence to management policies. . The safeguarding of assets. . The prevention or detection of errors and fraud. . The accuracy and completeness of the accounting records. . The timely preparation of reliable financial.information. r-- LIMITATIONS OF INTERNAL CONTROL No internal control system, however elaborate, can by itself guarantee the achievement of management's objectives. Internal control can provide only reasonable assurance that the objectives are met, because of its inherent limitations, including: . Management's usual requirement that a control be cost-effective. . The direction of most controls at recurring, rather than unusual, types of transactions. . Human error due to misunderstanding, carelessness, fatigue, or distraction. . Potential for collusion that circumvents controls dependent on the segregation of functions. . Potential for a person responsible for exercising control abusing that responsibility; a responsible staff member could be in a position to override controls which management has set up. /"'"" 22 AGENDA ITa. NO. 5 PAOE if 3 OF~ CITY OF LAKE ELSINORE ~ INVESTMENT PROCEDURES INTERNAL CONTROL - GUIDELINES (Continued) ELEMENTS OF INTERNAL CONTROL Elements of a system of internal control are the means by which an organization can satisfy the objectives of internal control. These elements are: 1. ORGANIZATION Specific responsibility for the performance of duties should be assigned and lines of authority and reporting clearly identified and understood. 2. PERSONNEL Personnel should have capabilities commensurate with their responsibilities. Personnel selection ahd training policies together with the quality and quantity of supervision are thus important. 3. SEGREGATION OF FUNCTIONS Segregation of incompatible functions reduces the risk that a person is in a position both to perpetrate and conceal errors or fraud in the normal course of duty. If two parts of a transaction are handled by different people, collusion is necessary to conceal errors or fraud. In particular, the functions that should be considered when evaluating segregation of functions are authorization, execution, recording, custody of assets, and performing reconciliations. ~ 4. AUTHORIZATION All transactions should be authorized by an appropriate responsible individual. The responsibilities and limits of authorization should be clearly delineated. The individual or group authorizing a specific transaction or granting general authority for transactions should be in a position commensurate with the nature and significance of the transactions. Delegation of authority to authorize transactions should be handled very carefully. 5. CONTROLS OVER AN ACCOUNTING SYSTEM Controls over an accounting system include the procedures, both manual and computerized, carried out independently to ascertain that transactions are complete, valid, authorized, and properly recorded. ....., 23 AGENDA ITEM NO.. . <) - pAGE ()I../ OF.J!L- ~ CITY OF LAKE ELSINORE CASH CONTROLS PROCEDURES PERFORMED BY EXTERNAL AUDITORS WITH RESPECT TO CASH RECEIPTS A. City procedures and controls are reviewed. Some of the system strengths are: 1. 2. 3. 4. 5. 6. ~ 7. 8. 19 Receipts are controlled upon receipt by proper registration devices. Receipts are reconciled on a daily basis. Amounts are deposited intact. Bank reconciliations are reviewed. Prompt posting of cash receipt entries in books. Proper approval required for write-offs of customer accounts. Checks are restrictively endorsed upon receipt or when run through cash register. Adequate physical security over cash. Individuals that handle cash do not post to customer account records or process billing statements. 10. Adequate supervision of Finance Department operations. B. Significant revenues are confirmed directly with payer and compared with City books to make sure amounts are recorded properly. C. Cash balances are substantiated by confirming all account balances recorded in books. Bank reconciliations are reviewed for propriety and recalculated by the auditor. All significant reconciling items on bank reconciliations are verified as valid reconciling items by proving to subsequent bank statements. ~ 24 5 OF ....aD- AGENDA ITEM NO. PAGE ;;;.5 CITY OF LAKE ELSINORE SEGREGATION OF RESPONSIBILITIES OF THE TREASURY FUNCTIONS Function Responsibilitv 1. Formal Investment Policy should be: * Prepared By: Director of Administrative Services * Approved By: City Council 2. Investment Plan with specific investments in mind City Council 3. Investment Transactions for execution of Investment Plan should be approved by Director of Administrative Services 4. Execution of investment transactions Finance Manager 5. Timely recording of investment transactions: Finance Manger (but reviewed by Director) Recording of investment transactions in the City's records Finance Manger (but reviewed by Director) Recording of investment transactions in the accounting records Account Specialist 6. Verification of investment, i.e., match broker confirma- tion to City's records Director of Administrative Services 7. Safeguarding of Assets and Records: Reconciliation of City's records to the accounting records Finance Manger Reconciliation of City's records to bank statements and safekeeping records Finance Manager (but reviewed by Director) 25 AGENDA ITEM NO" PAGE ;)..(p ,..., ,..., ,..., S OF ".;n "T 4, ""....... CITY OF LAKE ELSINORE SEGREGATION OF RESPONSIBILITIES OF THE TREASURY FUNCTIONS (Continued) Function ResJ)onsibilitv 8. Safeguarding of Assets and Records (continued): Annual review of (a) financial institution's financial condition, (b) safety, liquidity, and potential yields of investment instruments. Director of Administrative Services 9. No less than an annual review of investment portfolio as prepared by Director of Administrative Services Independent Auditors ,;---- . ,..-- 26 AOENDA ITEM NO. S _ PAoeJ1-or ~1 - CITY OF LAKE ELSINORE ,,-... REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: CITYWIDE LIGHTING AND LANDSCAPING MAINTENANCE DISTRICT AND THE LANDSCAPE AND LIGHTING MAINTENANCE DISTRICT NO.1 FOR THE FISCAL YEAR 2006-07 - APPROVAL OF ENGINEER'S REPORTS AND RESOLUTIONS OF INTENTION BACKGROUND ~ The City Council established a Citywide Landscaping and Lighting District in 1988 for the purpose of maintaining those facilities in accordance with the Landscaping and Lighting Act of 1972. Detail of the streetlight inventory and projected landscaping to be accepted and maintained by the City has been incorporated in the District Engineer's Annual Report. With the passage of Proposition 218, in November, 1996, park facilities are not exempt per the Constitutional Amendment. The Citywide LLMD will only include those facilities found to be exempt by the Proposition. The cost of park maintenance now falls under the General Fund. The Landscape and Street Lighting Maintenance District No.1 was formed in 2003. There are currently 10 zones that have been annexed into the district. Zones 1 through 7 collected the reserve amount in FY 2005-06 and therefore the reserve is not included in the assessment for FY 2006-07. Zone 5 (Phase II), Zone 9 and Zone 10 will not be assessed since no improvements have been completed. Zone 8 will be completed in FY 2006-07 and therefore full costs will be assessed. Zone 11 will only be assessed the reserve amount and administration cost. ,,-.. ACENDA ITEM NO. ~ b PACE-L-OF 1J __ REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 ""'" DISCUSSION Attached hereto are two Resolutions of Fiscal Year 2006-07 accepting the Engineer's Report for both districts, as presented by the District Engineer; and two Resolutions declaring the City's intent to provide for an Annual Levy and Collection of Assessments in both Districts. FISCAL IMPACT None RECOMMENDATION Adopt the following Resolutions: 1. Resolution No. 2006 - 12. Approving the Engineer's Report for the Citywide LLMD 2. Resolution No. 2006 - fi Declaring Council's intention to provide for an Annual Levy and Collection of Assessments in the Citywide LLMD and setting a public hearing for July 25,2006 3. Resolution No. 2006 - ~ Approving the Engineer's Report for the LLMD No.1 4. Resolution No. 2006 - 'fiL Declaring its intention to provide for an Annual Levy and Collection of Assessments in the LLMD No. 1 and setting a public hearing for July 25, 2006 ""'" MATT N. PRESSEY DIRECTOR OF ADMI PREPARED BY: APPROVED FOR AGENDA BY: ""'" AGENDA ITEM NO._ .fu PACE 1- OF qQ - r' RESOLUTION NO. 2006 - ~ I A RESOLUTION OF THE CITY COUNCIL APPROVING THE ENGINEER'S "REPORT" FOR THE ANNUAL LEVY OF ASSESSMENTS FOR FISCAL YEAR 2006-07 IN A DISTRICT WITmN SAID CITY. WHEREAS, the City Council of the City of Lake Elsinore, California, pursuant to the provisions of Division 15, Part 2 of the Streets and Highways Code of the State of California, did, by previous Resolution, order the preparation of an Engineer's "Report" for the annual levy of assessments, consisting of plans and specifications, an estimate of the cost, a diagram of the district, and an assessment relating to what is now known and designated ."..--. as CITY OF LAKE ELSINORE CITYWIDE LANDSCAPING AND STREET LIGHTING DISTRICT (hereinafter referred to as the "District"); and WHEREAS, there has now been presented to this City Council the "Report" as required by said Division 15 of the Streets and Highways Code and as previously directed by Resolution; and WHEREAS, this City Council has now carefully examined and reviewed the "Report" as presented, and is satisfied with each and all of the r' items and documents set forth therein, and is satisfied that the assessments on AGENDA ITEM......:. PAGE .~ & OF <dJ ~ a preliminary basis, have been spread in accordance with the benefits received ~ from the maintenance to be performed as set forth in said "Report". NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Lake Elsinore, does hereby resolve, determine and order as follows: SECTION 1. That the above recitals are all true and correct. SECTION 2. That the "Report" as presented, consisting of the following: A. Plans and specifications; B. Estimate of cost; C. Diagram of the District; ~ D. Assessment of the estimated cost; Is hereby approved on a preliminary basis, and is ordered to be file in the Office of the City Clerk as a permanent record and to remain open to public inspection. SECTION 3. That the City Clerk shall certify to the passage and adoption of this Resolution, and the minutes of this meeting shall so reflect the presentation of the Engineer's "Report". PASSED, APPROVED AND ADOPTED this 27th day of June, 2006. ~ AGENDA ITEM fo b .. PAGE OF t:(j) -- -"'" A YES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: /"'" Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore /"'" AGENDA ITEM NO. & PAGE t5 Of ~ -- RESOLUTION NO. 2006 - 1-6 ~ A RESOLUTION OF THE CITY COUNCIL DECLARING ITS INTENTION TO PROVIDE FOR AN ANNUAL LEVY AND COLLECTION OF ASSESSMENTS FOR CERTAIN MAINTENANCE IN AN EXISITNG DISTRICT, PURSUANT TO THE PROVISIONS OF DIVISION 15, PART 2 OF THE STREETS AND HIGHWAYS CODE OF THE STATE OF CALIFORNIA, AND SETTING A TIME AND PLACE FOR THE PUBLIC MEETING AND PUBLIC HEARING THEREON. WHEREAS, the City Council of the City of Lake Elsinore, California has previously formed a street lighting district pursuant to the terms and provisions of the "Landscaping and Lighting Act of 1972", being Division 15, ......, Part 2 of the Streets and Highways Code of the State of California, in that is known and designated as CITY OF LAKE ELSINORE CITYWIDE LANDSCAPING AND STREET LIGHTING DISTRICT (hereinafter referred to as the "District"); and WHEREAS, at this time, this City Council is desirous to take proceedings to provide for the annual levy of assessments for the next ensuing fiscal year, to provide for the costs and expenses necessary for continual ......, ACENDA ITEM NO. PACE Lt ~ OF 3J ~ ,-- maintenance of those improvements exempt pursuant to California Constitution Article XIIID within said District; and WHEREAS, at this time there has been presented and approved by this City Council, the Engineer's "Report" as required by law, and this City Council is desirous of proceeding with the proceedings for said annual levy. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Lake Elsinore, does hereby resolve, determine and order as follows: SECTION 1. That the above recitals are all true and correct. PUBLIC INTEREST ~ SECTION 2. That the public interest and convenience requires, and it IS the intention of this City Council, to undertake proceedings for the annexation of additional territory and for the annual levy and collection of special assessments for the continual maintenance of certain improvements, all to serve and benefit said District as said area is shown and delineated on a map previously approved by this City Council and on file in the Office of the City Clerk, open to public inspection, and therein so referenced and made a part hereof, and proposed changes thereto are set forth in the "Report" of the Engineer, incorporated herein as a part hereof. ,-- REPORT AGENDA ITEM NO. ~ PACE -; OF ~ ~ SECTION 3. That the "Report" of the Engineer regarding the ...., annexation of additional territory and the annual levy for said District, which "Report" is for maintenance for the fiscal year 2006-07 is hereby approved and is directed to be file in the Office of the City Clerk. ASSESSMENT SECTION 4. That the public interest and convenience requires, and it is the intention of this City Council to order the annual assessment levy for the District as set forth and described in said Engineer's "Report" and further it is determined to be in the best public interest and convenience to levy and collect annual assessments to pay the costs and expense of said maintenance and improvement as estimated in said "Report". ...., DESCRIPTION OF MAINTENANCE SECTION 5. The assessments levied and collected shall be for the maintenance of certain street lighting and landscaping improvements, as set forth in the Engineer's "Report", referenced and so incorporated herein. COUNTY AUDITOR SECTION 6. The County Auditor shall enter on the County Assessment Roll the amount of the assessments, and shall collect said assessments at the time and in the same manner as County taxes are collected. After collection by the County, the net amount of the assessments, after the ...., ACENDA 1TEMlJO. ~ PAce 'i OF .~___ .....-. deduction of any compensation due to the County for collection, shall be paid to the Treasurer for purposes of paYing for the costs and expenses of said District. SPECIAL FUND SECTION 7. That all monies collected shall be deposited in a special fund known as "SPECIAL FUND, CITY OF LAKE ELSINORE CITYWIDE LANDSCAPING AND STREET LIGHTING DISTRICT". PayIpent shall be made out of said fund only for the purpose provided for in this Resolution, and in order to expedite the making of this maintenance and improvement, the City Council may transfer into said funds as it may deem .....- necessary to expedite the proceedings. Any funds shall be repaid out of the proceeds of the assessments provided for in this Resolution. BOUNDARIES OF DISTRICT SECTION 8. Said contemplated maintenance work has been determined previously, in the opinion of this City Council, to be exempt from the provisions of California Constitution Article XIIID, and further of direct benefit to the properties within the boundaries of the District, and this City Council hereby declares to be the district benefited by said improvement and maintenance, and to be further assessed to pay the costs and expenses thereof. ",.,.-. Said District shall include each and every parcel of land within the boundaries AGENDA ITEM NO. PACE '1 ~ OF .P __ of said District, as said District is shown on a map as approved by this City .....", Council and on file in the Office of the City Clerk and so designated by the name of the District. PUBLIC PROPERTY SECTION 9. Any lots or parcels of land known as public property, as the same are defined in Section 22663 of Division 15, Part 2 of the Streets and Highways Code of the State of California, which are included within the boundaries of the District, shall be omitted and exempt from any assessment to be made under these proceedings to cover any of the costs and expenses of said improvement and maintenance work. PUBLIC HEARING .....", SECTION 10. NOTICE IS HEREBY GIVEN THAT TUESDAY, THE 25TH DAY OF JULY, 2006, AT THE HOUR OF 7:00 O'CLOCK P.M. IN THE CITY COUNCIL CHAMBERS LOCATED AT 183 NORTH MAIN STREET, LAKE ELSINORE, IS THE TIME AND PLACE FIXED BY THIS CITY COUNCIL FOR THE HEARING OF PROTESTS OR OBJECTIONS IN REFERENCE TO THE ANNUAL LEVY OF ASSESSMENTS, TO THE EXTENT OF THE MAINTENANCE, AND ANY OTHER MATTERS CONTAINED IN THIS RESOLUTION BY THOSE PROPERTY OWNERS AFFETED HEREBY. ANY PERSONS WHO WISH TO OBJECTTO THE .....", ACENDAITEMNO.~ PACE ID OF <KJ _ ~ PROCEEDINGS FOR THE ANNUAL LEVY SHOULD FILE A WRITTEN PROTEST WITH THE CITY CLERK PRIOR TO THE TIME SET AND SCHEDULED FOR SAID PUBLIC HEARING. NOTICE SECTION 11. That the City Clerk is hereby authorized and directed to publish, pursuant to Government Code Section 6061, a notice of the Public Hearing in the Riverside Press Enterprise, a newspaper of general circulation within said City, said initial publication to be not less than ten (10) days before the date set for said Public Hearing. Said notice shall include that information required pursuant to Government Code Section 54954.6(2). "........ SECTION 12. That the City Clerk is further directed to cause a copy of the Resolution of Intention and said notice to be posted upon the official bulletin board customarily used for the posting of notices. EFFECTIVE DATE SECTION 13. That this Resolution shall take effect immediately upon its adoption. PROCEEDINGS INQUIRIES SECTION 14. For any and all information relating to the proceedings, protest procedure, any documentation and/or information of a procedural or "....- AGENDA ITEM NO. PACE /1 o OF '7:P technical nature, your attention is directed to the below listed person at the ......, local agency or department so designated: Director of Administrative Services City of Lake Elsinore, City Hall 130 South Main Street Lake Elsinore, CA 92530 ......, ......, AGENDA ITEM NO. ~ PAGE J)- OF qp .... I"""'" PASSED, APPROVED AND ADOPTED this 27th day of June, 2006. AYES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: ~ Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore .-- ACENDA ITEM NO. PACE I'; ~ OF 1!J ~ RESOLUTION NO. 2006 - ~ -..."." A RESOLUTION OF THE CITY COUNCIL APPROVING THE ENGINEER'S "REPORT" FOR THE ANNUAL LEVY OF ASSESSMENTS FOR FISCAL YEAR 2006-07 IN A DISTRICT WITmN SAID CITY. WHEREAS, the City Council of the City of Lake Elsinore, California, pursuant to the provisions of Division 15, Part 2 of the Streets and Highways Code of the State of California, did, by previous Resolution, order the preparation of an Engineer's "Report" for the annual levy of assessments, consisting of plans and specifications, an estimate of the cost, a diagram of the district, and an assessment relating to what is now known and designated as ....., CITY OF LAKE ELSINORE LANDSCAPING AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 (hereinafter referred to as the "District"); and WHEREAS, there has now been presented to this City Council the "Report" as required by said Division 15 of the Streets and Highways Code and as previously directed by Resolution; and WHEREAS, this City Council has now carefully examined and reviewed the "Report" as presented, and is satisfied with each and all of the '-'" ACENDA ITEM Nq. Co PAOE 1'1 OF 7lJ __ /""""- items and documents set forth therein, and is satisfied that the assessments on a preliminary basis, have been spread in accordance with the benefits received from the maintenance to be performed as set forth in said "Report". NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of Lake Elsinore, does hereby resolve, determine and order as follows: SECTION 1. That the above recitals are all true and correct. SECTION 2. That the "Report" as presented, consisting of the following: A. Plans and specifications; ",........ B. Estimate of cost; C. Diagram of the District; D. Assessment of the estimated cost; Is hereby approved on a preliminary basis, and is ordered to be file in the Office of the City Clerk as a permanent record and to remain open to public inspection. SECTION 3. That the City Clerk shall certify to the passage and adoption of this Resolution, and the minutes of this meeting shall so reflect the presentation of the Engineer's "Report". /""""- PASSED, APPROVED AND ADOPTED this 27th day of June, 2006. ACENOAIT. EM NO._fo ~ PAGE 1'5 OF AYES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: "-'" ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: Frederick Ray, City Clerk City of Lake Elsinore '-' APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore '-' AGENDA ITEM NO. 10 J:ACE (c, OF?P __ '" RESOLUTION NO. 2006 - .912. A RESOLUTION OF THE CITY COUNCIL DECLARING ITS INTENTION TO PROVIDE FOR AN ANNUAL LEVY AND COLLECTION OF ASSESSMENTS FOR CERTAIN MAINTENANCE IN AN EXISITNG DISTRICT, PURSUANT TO THE PROVISIONS OF DIVISION 15, PART 2 OF THE STREETS AND mGHWAYS CODE OF THE STATE OF CALIFORNIA, AND SETTING A TIME AND PLACE FOR THE PUBLIC MEETING AND PUBLIC HEARING THEREON. WHEREAS, the City Council of the City of Lake Elsinore, California has previously formed a landscape and street lighting maintenance district .--' pursuant to the terms and provisions of the "Landscaping and Lighting Act of 1972", being Division 15, Part 2 of the Streets and Highways Code of the State of California, and Article XIIID of the California State Constitution, in that is known and designated as CITY OF LAKE ELSINORE LANDSCAPING AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 (hereinafter referred to as the "District"); and WHEREAS, at this time, this City Council is desirous to take proceedings to provide for the annual levy of assessments for the next ensuing .--' fiscal year, to provide for the costs and expenses necessary for continual ACENDA ITEM NO. /? PACE (1 OF 10 -- maintenance of public landscape and street lighting within the boundaries of "'-tIll' the District; and WHEREAS, at this time there has been presented and approved by this City Council, the Engineer's "Report" as required by law, and this City Council is desirous of proceeding with the proceedings for said annual levy. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Lake Elsinore, does hereby resolve, determine and order as follows: SECTION 1. That the above recitals are all true and correct. PUBLIC INTEREST SECTION 2. That the public interest and convenience requires, and it "'-tIll' IS the intention of this City Council, to undertake proceedings for the annexation of additional territory and for the annual levy and collection of special assessments for the continual maintenance of certain improvements, all to serve and benefit said District as said area is shown and delineated on a map previously approved by this City Council and on file in the Office of the City Clerk, open to public inspection, and therein so referenced and made a part hereof, and proposed changes thereto are set forth in the "Report" of the Engineer, incorporated herein as a part hereof. REPORT ~ AGENDA ITEM NO..-J, PACE I~ .. OF "7P __ ,..-. SECTION 3. That the "Report" of the Engineer regarding the annexation of additional territory and the annual levy for said District, which "Report" is for maintenance for the fiscal year 2006-07 is hereby approved and is directed to be file in the Office of the City Clerk. ASSESSMENT SECTION 4. That the public interest and convenience requires, and it is the intention of this City Council to order the annual assessment levy for the District as set forth and described in said Engineer's "Report" and further it is determined to be in the best public interest and convenience to levy and collect annual assessments to pay the costs and expense of said maintenance /'""-. and improvement as estimated in said "Report". DESCRIPTION OF MAINTENANCE SECTION 5. The assessments levied and collected shall be for the maintenance of certain street lighting and landscaping improvements, as set forth in the Engineer's "Report", referenced and so incorporated herein. COUNTY AUDITOR SECTION 6. The County Auditor shall enter on the County Assessment Roll the amount of the assessments, and shall collect said assessments at the time and in the same manner as County taxes are collected. ,..-. After collection by the County, the net amount of the assessments, after the ACENDA ITEM NO. PAGE fI ~ OF go __ deduction of any compensation due to the County for collection, shall be paid ....., to the Treasurer for purposes of paYing for the costs and expenses of said District. SPECIAL FUND SECTION 7. That all monies collected shall be deposited in a special fund known as "SPECIAL FUND, CITY OF LAKE ELSINORE LANDSCAPING AND STREET LIGHTING MAINTENANCE DISTRICT NO.1". Payment shall be made out of said fund only for the purpose provided for in this Resolution, and in order to expedite the making of this maintenance and improvement, the City Council may transfer into said funds as it may deem necessary to expedite the proceedings. Any funds shall ~ be repaid out of the proceeds of the assessments provided for in this Resolution. BOUNDARIES OF DISTRICT SECTION 8. Said contemplated maintenance work has been determined previously, in the opinion of this City Council, to be of direct benefit to the properties within the boundaries of the District, and this City Council hereby declares to be the district benefited by said improvement and maintenance, and to be further assessed to pay the costs and expenses thereof. Said District shall include each and every parcel of land within the boundaries AOENDA ITEM NO. ~ tJACE JO _OF ~ ...., ~ r- of said District, as said District is shown on a map as approved by this City Council and on file in the Office of the City Clerk and so designated by the name of the District. PUBLIC PROPERTY SECTION 9. Any lots or parcels of land known as public property, as the same are defined in Section 22663 of Division 15, Part 2 of the Streets and Highways Code of the State of California, which are included within the boundaries of the District, shall be assessed as described within the Report, in compliance with the provisions on Article XIIID of the California State Constitution. /"'"' PUBLIC HEARING SECTION 10. NOTICE IS HEREBY GIVEN THAT TUESDAY, THE 25TH DAY OF JULY, 2006, AT THE HOUR OF 7:00 O'CLOCK P.M. IN THE CITY COUNCIL CHAMBERS LOCATED AT 183 NORTH MAIN STREET, LAKE ELSINORE, IS THE TIME AND PLACE FIXED BY THIS CITY COUNCIL FOR THE HEARING OF PROTESTS OR OBJECTIONS IN REFERENCE TO THE ANNUAL LEVY OF ASSESSMENTS, TO THE EXTENT OF THE MAINTENANCE, AND ANY OTHER MATTERS CONTAINED IN THIS RESOLUTION BY THOSE PROPERTY OWNERS /'"' AFFETED HEREBY. ANY PERSONS WHO WISH TO OBJECT TO THE ACENDA ITEM NO. !o PACE J- ( OF &b -' PROCEEDINGS FOR THE ANNUAL LEVY SHOULD FILE A WRITTEN ......., PROTEST WITH THE CITY CLERK PRIOR TO THE TIME SET AND SCHEDULED FOR SAID PUBLIC HEARING. NOTICE SECTION 11. That the City Clerk is hereby authorized and directed to publish, pursuant to Government Code Section 6061, a notice of the Public Hearing in the Riverside Press Enterprise, a newspaper of general circulation within said City, said initial publication to be not less than ten (10) days before the date set for said Public Hearing. Said notice shall include that information required pursuant to Gov'ernment Code Section 54954.6(2). SECTION 12. That the City Clerk is further directed to cause a copy ......., of the Resolution of Intention and said notice to be posted upon the official bulletin board customarily used for the posting of notices. EFFECTIVE DATE SECTION 13. That this Resolution shall take effect immediately upon its adoption. PROCEEDINGS INQUIRIES SECTION 14. For any and all information relating to the proceedings, protest procedure, any documentation and/or information of a procedural or ......., ACENDA ITEM NO. ~- - - PACE ~;y OF ~ ~ "".-- technical nature, your attention is directed to the below listed person at the local agency or department so designated: Director of Administrative Services City of Lake Elsinore, City Hall 130 South Main Street Lake Elsinore, CA 92530 ",..---. "".-- AOENDA ITEM NO. " PACE ;;3 OF 19 PASSED, APPROVED AND ADOPTED this 27th day of June, 2006. ",., AYES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: Frederick Ray, City Clerk City of Lake Elsinore ,.."" APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore '-' ACENDA ITEM ~p. C. PACE )1- OF 5P ~ Engineer's Report City of Lake ELsinore Citywide Landscape and Street Lighting District Fiscal Year 2006-07 Prepared by: . Harris & Associates June 16, 2006 ACENDA ITEM NO. ~ _~ PACE !)- '5 Of_ ~ .JI ENGINEER'S REPORT CITY OF LAKE ELSINORE CITYWIDE LANDSCAPE AND STREET LIGHTING DISTRICT Fiscal Year 2006-07 Robert Magee Mayor Robert Shiffner Mayor Pro- Tem Genie Kelley Council Member Thomas Buckley Council Member Daryl Hickman Council Member Robert Brady City Manager Ken Seumalo City Engineer Frederick Ray City Clerk Peter Weber City Treasurer Barbara Leibold City Attorney Jeffrey M. Cooper, P.E. Assessment Engineer Harris & Associates AGENDA ITEM NO. fo PAGE a.v OF @ J J J - ,,--.. ENGINEER'S REPORT CITY OF LAKE ELSINORE CITYWIDE LANDSCAPE & STREET LIGHTING DISTRICT Fiscal Year 2006-07 TABLE OF CONTENTS I. INTRODUCTION Page 1 II. ENGINEER'S REPORT 3 Part I Description of Improvements 5 Part II Estimate of Cost 6 Part III Assessment Roll 8 Part IV Method of Apportionment of Assessment 9 ,,--.. Exhibit I - Summary of Parcel Data Exhibit II - Summary of Zone-EDU Data Exhibit III - Zone Assessment Summary 18 18 Part V Property Owners List 16 Part VI Assessment Diagram 17 APPENDIX A County Use Code Information APPENDIX B Zone Map Under Separate Cover APPENDIX C Assessment Roll Under Separate Cover ,,--.. ACiENDA ITEM NO. ~ PACiE-4L-OF c,p ~ ENGINEER'S REPORT cm OF LAKE ELSINORE CI1YWIDE LANDSCAPE & STREET LIGHTING DISTRICT Fiscal Year 2006-07 ~. The undersigned respectfully submits the enclosed report as directed by the City Council. Jeffrey M. Cooper R.C.E. No. 31572 DATED: June 16, 2006 By: Harris & Associates I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Assessment Diagram thereto attached, was filed with me on the _ day of , 2006. Frederick Ray, City Clerk City of Lake Elsinore Riverside County, California ~ By: I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Assessment Diagram thereto attached, was approved and confirmed by the City Council of the City of Lake Elsinore, California on the _ day of ,2006. Frederick Ray, City Clerk City of Lake Elsinore Riverside County, California By: I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Assessment Diagram thereto attached, was filed with the County Auditor of the County of Riverside, on the _ day of , 2006. Frederick Ray, City Clerk City of Lake Elsinore Riverside County, California By: ~ .l\(jENDA ITEM 19. 0 PACE !)~ OF qp -- ~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 SECTION I INTRODUCTION ENGINEER'S REPORT CITY OF LAKE ELSINORE CITYWIDE LANDSCAPE & STREET LIGHTING DISTRICT Fiscal Year 2006-07 The City Council of the City of Lake Elsinore approved the formation of an Assessment District with Resolution No. 88-27 on June 28, 1988. The District was formed pursuant to the requirements of the Landscaping and Lighting Act of 1972. ~ The District was formed to provide a source of funds for the installation, servicing, maintenance, repair and operation of landscaping, lighting and appurtenant facilities within the District. Prior to the fiscal year 1997-98, the boundaries of the District were coincidental with the boundaries of the City. The Engineer's Report, which was approved by the City Council when the District was formed and as amended, sets forth the methodology to be used in apportioning the assessment to the different land use types and benefit zones within the City based upon the benefit they receive. Based on the proceedings in Fiscal Year 1997-98 and the provisions of Proposition 218, the District is exempt from the requirements of Proposition 218, unless there is an increase in the assessment rates. At the time the District was formed, several benefit zones were established. Citywide benefit zones were established to insure a source of funds for the ongoing maintenance of landscaping and lighting improvements which are of benefit to all parcels or lots within the City. This includes landscaping and street lighting along major thoroughfares, and a portion of the secondary arterials as defined in the Circulation Element of the City's General Plan and on other City owned properties. Several special benefit zones were established to provide a source of funding for the maintenance of improvements that are of local benefit. Currently there are twenty-one (21) special benefit zones, lettered A through U (see Appendix A, Figure 1 - Zone Map). In response to Proposition 218, passed November 5, 1996 and as now provided by California Constitution Article XIIID Section 5(a), this Assessment District will only finance the capital costs, maintenance and operation expenses for sidewalks, streets, flood control and drainage. All other maintenance that is not exempt from Proposition 218 has been removed from this District. The City has determined that by removing the non-exempt costs that the remaining improvements may continue to be paid for through the assessment district without being subjected to the procedures and requirements of Proposition 218. The City has determined that all of the remaining improvements and maintenance are exempt from requirements of Proposition 218. ~, Q:\ELSINORE\LLMD\fY06-07\reports\L.E. Citywide LLMD engrep06.doc 1 ACENDA ITEM NO. PACe ;}.q " OF 7P --" City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 The City will not increase the assessment district rates for Fiscal Year 2006-07. To the extent ~ any parcel changes its land use, thereby placing the parcel in a different rate category is not deemed to be an increase in rates. Parcels or lots within these special benefit zones are assessed for the maintenance of local improvements including but not limited to tree maintenance, site specific street lighting and site specific landscaping. These improvements provide a special benefit to those parcels due to their nature and location. In addition to their proportionate share of the cost for the maintenance of these local improvements, those parcels within a special benefit zone are also assessed for those improvements designated as of Citywide benefit. As required by the Landscaping and Lighting Act of 1972, this Engineer's Report describes the improvements to be maintained by the District for FY 2006-07, provides an estimated budget by benefit zone, and lists the assessments to be levied upon each assessable lot or parcel within the District. '-' .~ Q:\ELSINORE\LLMD\fY(l6-07\reports\L.E. Citywide LLMD engrep06.doc 2 AGENDA ITEM ~~ PACE ~U OF ~ ",...... City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 SECTION II ENGINEER'S REPORT PREPARED PURSUANT TO THE PROVISIONS OF THE LANDSCAPING AND LIGHTING ACT OF 1972 SECTION 22500 THROUGH 22679 OF THE CALIFORNIA STREETS AND HIGHWAYS CODE CITY OF LAKE ELSINORE CITYWIDE LANDSCAPE & STREET LIGHTING DISTRICT Fiscal Year 2006-07 Pursuant to Part 2 of Division 15 of the Streets and Highways Code of the State of California, and in accordance with Resolution No. 88-27, adopted by the Council of the City of Lake Elsinore, State of California, in connection with the proceedings for: CITY OF LAKE ELSINORE LANDSCAPE AND STREET LIGHTING ASSESSMENT DISTRICT Herein after referred to as the "Assessment District", I, Jeffrey M. Cooper, P.E., the duly appointed ENGINEER OF WORK, submit herewith the "Report" consisting of six (6) parts as follows: --- PART I Plans and specifications for the proposed improvements are filed herewith and made a part hereof. Said plans and specifications are on file in the Office of the Clerk of the City. PART II An estimate of the cost of the proposed improvements, including incidental costs and expenses in connection therewith, is as set forth on the lists thereof, attached hereto, and are on file in the Office of the Clerk of the City. PART III An assessment of the estimated cost of the improvements on each benefited lot or parcel of land within the Assessment District. ,,-.. Q:\ELSINORE\LLMD\fY06-07\reports\L.E. Citywide LLMD engrep06.doc AGENDA ITEM ~O. h -~ PAGE?f OF 'fY - City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 PART IV A proposed assessment of the total amount of the costs and expenses of the improvements upon the several lots and parcels of land within the Assessment District, in proportion to the estimated benefits to be received by such lots and parcels, is set forth upon the assessment roll filed herewith and made part hereof. Contains a description of the work for the proposed improvements and description of all rights-of-way, easements and lands to be acquired, if necessary. PART V A list of the names and addresses of the owners of real property within this Assessment District, as shown on the last equalized roll of the Assessor of the County of Riverside, or as known to the Clerk. The list is keyed to the records of the County of Assessor of the County of Riverside, which are incorporated herein by reference. PART VI A diagram of the Assessment District Boundaries, showing the exterior boundaries of the Assessment District and the boundaries of any zones within the Assessment District, has been submitted to the Clerk of the City, and is incorporated herein by reference. The lines and dimensions of each lot or parcel within the Assessment District are those lines and dimensions shown on the maps of the Assessor of the County of Riverside for the year in which this Report was prepared, and are incorporated herein by reference and made part of this Report. Q:\ELSINORE\LLMD\ty06-07\reports\L.E. Citywide LLMD engrep06.doc 4 AGENDA ITEM NO. PACE 3'7 ~ ~ ~ {o OF '75> ~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 .r- PART I DESCRIPTION OF 1M PROVEM ENTS The facilities to be maintained and serviced are more generally described as follows: DESCRIPTION OF IMPROVEMENTS FOR CITY OF LAKE ELSINORE CITYWIDE LANDSCAPE AND STREET LIGHTING ASSESSMENT DISTRICT Improvements to be performed are: installation, construction, operation and/or maintenance of street lights and landscaping, including but not limited to personnel, electrical energy, utilities such as water, materials, contracting services' and other items necessary for the satisfactory operation of these services. No detailed plans and specifications are provided herein. STREET UGHTING Street lighting improvements include but are not limited to: the current payments to Southern California Edison Company (SCE) for electrical energy, installation, maintenance, and operation of approximately 2,422 total lights and 17 traffic signals. LANDSCAPING .r- Landscaping improvements include but are not limited to: irrigation, cultivation, installation and replacement of plant material, tree trimming, and other necessary supplies; personnel, utility, and equipment costs; contract services where applicable; care and maintenance of approximately fifteen (15) acres of lake beaches, and approximately thirty-four (34) acres of streetscapes. .r- Q:\ELSINORE\LLMD\fy06-07\reports\L.E. Citywide LLMD engrep06.doc 5 AGENDA ITEM N!). PAOE '~/S OF ~ ~.,. City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 PART II ...., ESTIMATE OF COST The 2006-07 fiscal year expenditures (or costs) for the proposed distnct are estimated as follows: STREET LIGHTING The City is currently paying for the operation of approximately 2,422 street lights; 185 are City- owned lights and 2,237 are utility-owned lights. Street lighting also includes costs for maintaining 17 traffic signal lights and traffic signal maintenance within the City. It has been determined that all properties within the City benefit from lighting and signalization on major streets; therefore, a proportional share of the cost are spread to all parcels in the City. It has further been determined that street lights on secondary streets benefit all properties within the City and adjacent local benefit areas. Therefore, these costs are split evenly, half going to major street lighting and the other half to local lighting benefit areas. Therefore, the total amounts to be spread for the Major Street direct benefit of street lighting and for each of the level of services are as follows: MAJOR STREET LIGHTING AND TRAFFIC SIGNALIZATION TO BE SPREAD: Light Expenses $71,120 Traffic Signals $52,430 Administrative Costs $33,710 Capital Improvements: Street Light Installation - Samuel A venue Total Major Street Light Expenses = ...., $30,000 $187,260 WESTSIDE AREA LIGHTING TO BE SPREAD: Light Expenses $56,760 MID-TOWN AREA LIGHTING TO BE SPREAD: Light Expenses $42,800 AREA "e" LIGHTING TO BE SPREAD: Light Expenses $3,210 AREA "D" LIGHTING TO BE SPREAD: Light Expenses $11,300 EASTSIDE AREA LIGHTING TO BE SPREAD: Light Expenses $8,210 The total amount that is required for street lighting and traffic signalization in the 2006-07 fiscal year is $309,540. '-' Q:\ELSINORE\LLMD\fy06-07\reports\L.E. Citywide LLMD engrep06.doc AGENDA l'lE;:r~ ~ PACE, OF . ,-... City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 LANDSCAPING It has been determined that wetlands, landscaping and erosion protection for a levee, major street landscaping, beaches and beach water testing, benefits all properties within the City; therefore, a proportional share of the cost are spread to all parcels in the City whether or not there is local street landscaping. The cost of local site-specific street landscaping not on a major street is spread to those areas that have a local benefit from the site-specific street landscaping. The total amounts to be spread for the Citywide direct benefit of landscaping and for local site specific areas of landscaping ~re as follows: MAJOR STREET DIRECT BENEFIT LANDSCAPING TO BE SPREAD: Major Street & Admin. Beach, Levee & Wetlands Capital Improvements: Median Landscaping - Grand Avenue $393,630 $125,130 $50,000 Total Major Street Landscaping $568,760 SITE-SPECIFIC LANDSCAPING AREAS TO BE SPREAD: -- AREA A AREA B AREA C AREAD AREA E AREA F AREAG AREAH AREA I $2,500 $5,160 $2,790 $4,200 $3,430 $256,800 $3,060 $10,260 $0 Total Site-Specific Landscaping Expenses $288,200 STREET TREE MAINTENANCE AREAS TO BE SPREAD: AREA 1 AREA 2 AREA 3 AREA 4 AREA 5 $10,090 $45,700 $23,150 $4,570 $2,560 Total Tree Maintenance Landscaping Expenses $86,070 The total amount required for landscaping assessment in the 2006-07 fiscal year is $943,030. ,-.. Q:\ELSINORE\LLMD\fY06-07\reports\LE. Citywide LLMD engrep06.doc AGENDA ITEM NO. ~ PAGE.~ :F_ ~ ~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 PART III ....." ASSESSMENT ROLL The proposed assessment and the amount of assessment for Fiscal Year 2006-07 apportioned to each lot or parcel, as shown on the latest roll at the Assessor's Office are appended herein and submitted separately as Appendix C of the City of Lake Elsinore Engineer's Report for Citywide Landscape & Street Lighting District, Fiscal Year 2006-07. The description of each lot or parcel is part of the records of the Assessor of the County of Riverside and these records are, by reference, made part of this Report. The total assessment for the 2006-07 Fiscal Year is $1,252,570. ....., ....." Q:\ELSINORE\LLMD\Jy06-07\reports\L.E. Citywide LLMD engrep06.doc 8 ACENDA fTEM NO. ",.vL ~'3lf ~ :!-r,~ ~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 /'"' PART IV METHOD OF APPORTIONMENT OF ASSESSMENT A. GENERAL Part 2 of Division 15 of the Streets and Highways Code, the Landscaping and Lighting Act of 1972, permits the establishment of assessment districts by cities for the purpose of providing certain public improvements which includes installation, construction, and maintenance and operation of street lights and street landscaping. The 1972 Act requires that the assessments be levied according to benefit rather than according to assessed value. Section 22573 provides that: "The net amount to be assessed upon lands within an assessment district may be apportioned by any formula or method which fairly distributes the net amount among a~l assessable lots or parcels in proportion to the estimated benefit to be received by each such lot or parcel from the improvements." /"""', The Act also permits the designation of zones of benefit within any individual assessment district if "by reasons or variations in the nature, location, and extent of the improvements, the various areas will receive different degrees of benefit from the improvement" (S&H 22574). Thus, the 1972 Act requires the levy of a true "assessment" rather than a "special tax." Excepted from the assessment would be the areas of all public streets, public avenues, public lanes, public roads, public drives, public courts, public alleys, all public easements and rights of way, all public parks, greenbelts and parkways and all public school property, other public property, mineral rights, and designated open space. Public utility owned properties would be included in the assessment district and assessed in accordance with benefits received. B. PARCEL CLASSIFICATION Since the assessment will be levied on the owners of properties as shown on the tax rolls, the final charges must be assigned by Assessor's Parcel Number. If assessments were to be spread by parcel in various zones, not considering land use, this would not be equitable, because a single family parcel would be paying the same as a 50-unit apartment parcel or a large commercial establishment in a similar zone. /'"' Q:\ELSINORE\LLMD\fY06-07\reports\L.E. Citywide LLMD engrep06.doc 9 AGENDA ITEM NO. ~ PAGE 31 OF' . .~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 It has been determined that the residential parcels will be assessed by the number of ......" dwelling units on each parcel; commercial and industrial property by the area of the parcel. The single family parcel has been selected as the basic unit for calculation of the assessments. Parcels of other land uses are reduced to Equivalent Dwelling Units (EDU), in the manner described below: 1. Multiple Residential parcels, including mobile homes, are adjusted in accordance with a multiple residential factor, determined by statistical proportion of relative trip generation from various types of residential uses, in combination with population density per unit. Studies have found that in multiple residential areas, the primary beneficiaries of street lighting are the tenants rather than the property owners because of increased safety and security. It was concluded that it is proper to "pass through" such an assessment to renters. Therefore, although benefit assessments are normally property related, it is deemed valid to equate a portion of the assessment methodology to the population density of the dwelling units. Based on data from representative cities in Southern California, the multiple residential factor is 80 percent. For example, a 100 unit apartment parcel would be assessed 80 times a single family unit parcel; rather than 100 times. 2. Condominium parcels are adjusted in accordance with the multiple residential factor of 80 percent because of the high population density of dwelling units. 3. Commercial and Industrial parcels are assessed on the basis of the area of the parcel. Seven thousand two hundred (7,200) square feet of land has been equated to one EDU based on the minimum lot size for single family parcels. Therefore, one acre is equivalent to 6 EDU. ......" 4. Nonprofit or Property Tax Exempt parcels such as churches, private schools, private hospitals, boys' clubs, women's clubs, YMCA, etc., receive equal benefits from this type of district and are assessed. 5. Public Utility Owned parcels such as office buildings, plants and yards will be assessed the same as other similar land uses. 6. Vacant parcel assessments are adjusted by a factor of 20 percent. All vacant parcels will receive 0.2 EDDs for the first acre and 1.2 EDDs (6 * 0.2) for each additional acre. ......" Q:\ELSINORE\LLMD\Jy06-07\reports\L.E. Citywide LLMD engrep06.doc IO~ AGENDA ITEM NO. PAGE ?<J OF City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006' /""" In summary, Equivalent Dwelling Units have been determined to be as follows: Single Family Residential I DU = I EDU Multiple Residential, Mobile Homes, Condominiums I DU=0.8EDU CommerciallIndustrial (minimum of I EDU per parcel) 1 AC=6EDU Agricultural (minimum of I EDU per parcel) I AC=6EDU Vacant (minimum of 0.2 EDU per parcel) I AC = 0.2 EDU, 1.2 EDU/each add'l acre. Therefore, as previously stated, it is proposed to spread assessments by the number of dwelling units on a parcel in residential areas, and by the area of the parcel in commercial and industrial areas. c. CATEGORIES OF BENEm /""" Street Lighting A portion of the benefits for certain improvements may be spread over all parcels of the City on an equitable basis. This applies to street lighting and traffic signals on major streets, since vehicles emanating from all parcels throughout the City use these streets and receive a benefit from the additional safety and security provided by the lights. The cost of street lights on secondary streets are split evenly, half going to Major streets and the other half going to local lighting benefit areas based upon levels of service. The balance of the street lighting costs, which are spread as a benefit assessment to parcels, depend upon levels of service. The levels of service, relative to local lighting benefits, are broken down into six separate categories: W estside Lighting westside areas with street lights Eastside Lighting eastside areas with street lights Midtown Lighting midtown and southside areas with street lighting Area "C" street lights serving Tract 19402 Units 1 & 2 Area "D" street lights serving Tract 18719 Units 1 - 5. No lighting street lights are spaced over 300 feet apart. In areas where there is no lighting, there is no local benefit assessment levied. /""" Q:\ELSINORE\LLMD\J)'06-07\reports\L.E. Citywide LLMD engrep06.doc II AGENDA ITEM NO. PACE 3'1 (d Of ~ ~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 Landscaping Maintaining the street trees and street medians protects the street from erosion, depth and from tree limbs from falling into or blocking the roadway. The costs of landscaping on major streets, wetlands, levee beaches and beach water testing are spread as a direct benefit assessment to all parcels. Costs associated with landscaping on secondary streets are spread both Citywide and to the parcels that receive local benefits. Those costs are split evenly, half going to Citywide and the other half to the site-specific street landscape area. The street landscaping costs on the remaining streets are spread to all parcels in the neighborhoods with local benefits. ....., Major streets are defined as Arterial (110') and Major Streets (100') per City of Lake Elsinore General Plan, they are: Highway 74, Lakeshore Drive, Main Street, Riverside Drive, Robb Road, Grand Avenue, Mission Trail, Railroad Canyon Road, Diamond Drive, Corydon Street, Summerhill Drive from Railroad Canyon Road to Riverside Street, Tuscany Hills Parkways, and Grape Street. Per the "City of Lake Elsinore General Plan 1992 Land Use Map", the following existing streets are classified as secondary (88'): Machado Street from Grand Avenue to Lakeshore Drive, Dexter A venue, Sixth Avenue from Casino Drive to Lakeshore Drive, Terra Cotta Road from Lakeshore Drive to Nichols Road, Lincoln Street from Lakeshore Drive to Nichols Road, Lincoln Street from Grand Avenue to Riverside Drive, Lincoln from Machado Street to Shore Cliff Drive, Chaney Street from Lakeshore Drive to Dexter A venue, Graham A venue from Lakeshore Drive to Main Street, and Pottery Street from Main Street to Franklin A venue. The remaining City streets are classified below the secondary street level. ......, There are nine areas with specific local benefits due to landscaping. They are as follows: Area "A" landscaping along Machado at the Grand Ave intersection Area "B" landscaping along Madison & Garfield Streets Area "C" landscaping in Tract 19402 Area "D" landscaping along Terra Cotta Road Area "E" landscaping in Tract 19344 - Serenity Area "F" landscaping and slope maintenance adjacent to Summerhill Drive, but not in the road right-of-way Area "G" landscaping along east side of Machado Street between Lincoln and Lakeshore Area "H" landscaping at Orange Grove Way Area "I" landscaping along Lincoln A venue ....., Q:\ELSINORE\LLMD\Jy06-07\reports\L.E. Citywide LLMD engrep06.doc AGENDA11ro. <.- PAGE () OF ~- City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 /'"' The costs of the Assessment District's incidental expenses are spread as a Citywide direct benefit assessment. The costs for the maintenance of trees in designated areas are spread to the parcels that receive local benefit. See Appendix A, Figure 4 - Tree Maintenance Areas, for the delineation of the five tree maintenance zones. D. BENEm ZONES A system of zones, encompassing both street lighting and street landscaping levels of service, has been developed. These zones, combined with an assigned land use based on the County-assigned use code for each parcel, have been used as the methodology for spreading the assessments to each parcel within the City. The County-assigned use codes and a brief description of them are shown in Appendix B. The zones are as follows (See Appendix A, Figures 1-4): ZONE A ZONE B ZONE C ,.,,-- ZONE D ZONE E ZONE F ZONE G ZONE H ZONE I ZONE J Major street lighting and Major Street landscape benefits only. Major street lighting, Major Street landscape benefits, and site- specific lighting (midtown area), and tree maintenance Area 1. Major street lighting, Major Street landscape benefits, and tree maintenance Area 1. Major street lighting, Major street landscape benefits, site-specific lighting (midtown area), and tree maintenance Area 2. Major street lighting, Major street landscape benefits, and tree maintenance Area 3. Major street lighting, Major street landscaping benefits, and tree maintenance Area 4. Major street lighting, Major street landscaping benefits, and site- specific lighting (Westside Area). Major street lighting, Major street landscaping benefits, site- specific lighting (Wests ide Area), and tree maintenance Area 5. Major street lighting, Major street landscaping benefits, and tree maintenance Area 5. Major street lighting, Major street landscaping benefits, site. specific lighting (Westside Area), site specific landscaping Area A, and tree maintenance Area 5. /'"' Q:\ELSINORE\LLMD\fy06-07\reports\L.E. Citywide LLMD engrep06.doc AGEN~~. OF & 'iJt'> ... City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 ZONE K Major street lighting, Major street landscaping benefits, site specific lighting (Westside Area), site specific landscaping Area B, and tree maintenance Area 5. ..." ZONE L Major street lighting, Major street landscaping benefits, site specific landscaping Area C, site specific lighting Area C, and tree maintenance Area 5. ZONE M Major street lighting, Major street landscaping benefits, site specific lighting Area D, and site specific landscape Area D. ZONE N Major street lighting, Major street landscaping benefits, site specific landscaping Area E. Major street lighting, Major street landscaping benefits, and site specific landscaping Area F. ZONE 0 ZONE P Major street lighting, Major street landscaping benefits, site specific lighting (Westside Area), site specific landscaping Area G, and tree maintenance Area 5. ZONE Q Major street lighting, Major street landscaping benefits, site specific landscaping Area G, and tree maintenance Area 5. Major street lighting, Major street landscaping benefits, site specific lighting, Area D and site specific landscaping Area H. ..." ZONE R ZONE S Major street lighting, Major street landscaping benefits, site specific lighting (Westside Area) and tree maintenance Area 3. ZONE T Major street lighting, Major street landscaping benefits, site specific lighting (Eastside) and site specific landscaping Area F. Major street lighting, Major street landscaping benefits, site specific lighting (Westside Area) and site specific landscaping Area I. ZONE U E. ASSESSMENT RATES The following tables (Exhibits I, II and III) summarize the parcel information and assessment rates for the budgets shown in Part II for FY 2006-07. Exhibits I and II summarize the parcel data for the District based upon the information obtained from the County of Riverside Assessor's Office and the calculation of EDUs using the methodology described in Section II, Part IV. Exhibit III is a summary of the rates per improvement and benefit zone for determining the assessment rate to be levied per EDU based upon the proposed budget for FY 2006-07. See Appendix C (Assessment Roll) for the preliminary assessments per parcel. ~ Q:\ELSINORE\LLMD\fy06-07\reports\L.E. Citywide LLMD engrep06.doc 14 AGENDA ITEM NO. V PACE lf~ OF ~ _ ~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 F. ADMINISTRATION It is recognized that using the information on the County Assessor's tapes as the primary source for the assessment formula may lead to circumstances and errors that do not fit the intent of this program when dealing with specific parcels. Where such circumstances are discovered, either by the persons administrating this program or by the owners of the properties affected, such circumstances shall be reported to the Director of Administrative Services, who may make such final corrections or adjustments as are consistent with the concept, intent and parameters of the programs set forth herein. ,..--... ~ Q:\ELSINORE\LLMD\fy06-07\reports\L.E. Citywide LLMD engrep06.doc ACENDA l1iiu~o.~ PAGE if., OF 5P City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 . PART V PROPERTY OWNERS LIST June 16, 2006 ......" The property owner list with the names and addresses of each property owner of each lot or parcel, as shown on the Assessment Diagram in Part VI herein, is the list of property owners shown on the last equalized roll of the County Assessor of the County of Riverside and is, by reference, made part of this report (see Part III, Assessment Roll). Q:\ELSINORE\LLMD\fY<)6-07\reports\LE. Citywide LLMD engrep06.doc ......, ....., 16 ACENDA ITEM, ~'_ ~ PACE~OF <19 - """' ,..--, ,,--, City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 PART VI ASSESSMENT DIAGRAM An Assessment Diagram for the Assessment District has been submitted to the Clerk of the City in the format required under the provision of the Act. The lines and dimensions of each lot or parcel within the Assessment District are those lines and dimensions shown on the maps of the County Assessor of the County of Riverside, for the year when this Report was prepared, and are incorporated by reference herein and made part of this Report. Q:\ELSINORE\LLMD\Jy06-07\reports\L.E. Citywide LLMD engrep06.doc 17 AGENDA ~~. (0 PACe' OF ~ City of Lake Elsinore Citywide Landscape & Street Lighting District Engineer's Report - FY 2006-07 June 16, 2006 EXHIBIT I ~ SUMMARY OF PARCEL DATA Single Family Residential 9,210 N/A 9,210.00 Multiple Residential/ Mobile Homes 295 N/A 568.80 Apartments / Condominiums 428 N/A 1,346.40 Commercial/Industrial 468 703.20 4,270.94 Vacant Parcels 10,773 12,009.02 14,643.57 Utility Parcels 20 50.38 310.08 Exem t Parcels 1,493 N/A TOTAL 22,687 12,762.60 30,349.79 EXHIBIT II SUMMARY OF ZONE - EDU DATA '-' A 18,252.35 H 1,670.12 0 1,163.12 B 210.80 I 630.85 P 42.00 C 1,360.33 J 63.00 Q 43.20 0 1,776.28 K 234.94 R 341.00 E 1,401.44 L 126.00 S 118.66 F 436.54 M 246.53 T 213.77 G 1,711.87 N 89.00 U 218.00 30,349.79 ~ Q:\ELSINORE\LLMD\f)t06-07\reports\L.E. Citywide LLMD engrep06.doc ACENDA ITEM ~O. f.tJ PACE-1:Ue-OF )1) --- '" <:> <:> N .,; .. U c:: ::s .., ,... 0 . \0 0 0 N ~ ~ - < - X - t= x --- III ::::I - VI ::c .... ~ Z .... X VI In VI ~ .... 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" ii! :J e~ Iii ~ ~ 'i m :Eg N 0; .. ti.. Ie .. .. Ie .. .. ~ ~~ ... ... ... ... iii -:. -:. -:. -:. -:. -:. .. f:l!l ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ui ,.; .,; .,; .,; .,; .,; .,; ,.; .,; .,; .,; .,; .,; .,; .,; .,; .,; .,; .,; .,; .,; .. U) 0 ... .. ~ ~ ... ~ U) 8 ct 8 .., 8 ~ 8 0 0 ~ ... 8 i1! ... .. ... N ., .. U) N 0 ... ... '" ~ ~ ~ s 0 l!l 0 a :;i ;,; .. .,; ~ ~. ~ ,.; :i .. g ~ * :I 0 ~ N Cli ... .. N ~ ... ... N ~ ~ ~ ; .. ..J Z < III <.> 0 .. ... " :r - .., '" ..J :I Z 0 0- a '" rn .... ::> ~ N 0 t N g ~ I ! ACENDA ITE~O. PAGE),f I ~ OF c,p ......, Engineer's Report for Lake Elsinore . ......, Landscape and Street Lighting Maintenance District No.1 City of lake Elsinore Riverside County, California Prepared by: . Harris & Associates June 16, 2006 '~ AGENDA ITE~ NO. ~ PAGE '1~ OF W City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page i ,........ ENGINEER'S REPORT LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 The undersigned respectfully submits the enclosed report as directed by the City Council. The undersigned certifies that she is a Professional Engineer, registered in the State of California. DATED: June 16, 2006 BY: Joan E. Cox R.C.E. No. 41965 I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Diagram thereto attached, was filed with me on the _ day of . 2006. City Clerk, City of Lake Elsinore Riverside County, California /"""' By I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Rolland Diagram thereto attached, was approved and confrrmed by the City Council of the City of Lake Elsinore, California, on the _ day of . 2006. City Clerk, City of Lake Elsinore Riverside County, California By ~ Q:\ELSINORE\LLMD1\fy06-07\Reports 06.o7\L.E. LLMD1 Engineer's Report06.doc _H I Harris & Associates (# ACENDR'llTEM NO... . . . .>- PACE 1'1 . OF q0-c City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page ii ENGINEER'S REPORT LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 TABLE OF CONTENTS Certificates......................................................................................................... i Report.............................. ................................................................................. 1 Part A - Plans and Specifications .........................................................3 Part B - Estimate of Cost...................................................................... 5 Part C - Assessment Roll ................................................................... 11 Part D - Method of Apportionment of Assessment............................ 12 Part E - Property Owner List.............................................................. 19 Part F - Assessment District Boundary .............................................. 19 ......, ......, ......, ACEN:!~Hb.& Associates PACE 60 OF Q:\ELSINOREIlLMD1\fy06-07\Reports 06-07\L.E. LLMD1 Enginee(s Report06.doc City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 1 ,..-..- CITY OF LAKE ELSINORE ENGINEER'S REPORT Prepared Pursuant to the Provisions of the Landscaping and Lighting Act of 1972 (California Streets and Highways Code Section 22500 through 22679), Article XIIID of The California Constitution, and The Proposition 218 Omnibus Implementation Act (California Government Code Section 53750 Et Seq.) Pursuant to Part 2 of Division 15 of the Streets and Highways Code of the State of California, Article XmD of the California Constitution, the Proposition 218 Omnibus Implementation Act and in accordance with the Resolution of Initiation adopted by the Council of the City of Lake Elsinore, State of California, in connection with the proceedings for: CITY OF LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 hereinafter referred to as the "Assessment District" or "District", I, Joan E. Cox, P.E., the authorized representative of Harris & Associates, the duly appointed ENGINEER OF WORK, submit herewith the "Report" consisting of six (6) parts as follows: ,--. PART A Plans and specifications for the improvements showing and describing the general nature, location and extent of the improvements. PART B An estimate of the cost of the proposed improvements for FY 2006-07, including incidental costs and expenses in connection therewith. PARTC An assessment of the estimated cost of the improvements on each benefited lot or parcel of land within the Assessment District. ,..-..- Q:\ELSINORE\LLMD11fy06-07\Reports 06-07\L.E. LLMD1 Engineer's ReportOG.doc ACENDA;;J.HarriS & Assodate~ ~O. PACE t? \ OF c,p City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 2 PARTD The method of apportionment of assessments, indicating the proposed assessment of the total amount ~ of the costs and expenses of the improvements upon the several lots and parcels of land within the Assessment District, in proportion to the estimated benefits to be received by such lots and parcels. PART E A list of the names and addresses of the owners of real property within the Assessment District, as shown on the last equalized roll of the Assessor of the County of Riverside. PART F The Diagram of the Assessment District Boundaries showing the exterior boundaries of the Assessment District, the boundaries of any zones within the Assessment District and the lines and dimensions of each lot or parcel of land within the Assessment District. ......, Q:IELSINOREILLMD1\ty06-07\Reports 06-07\L.E. LLMD1 Engineer's Report06.doc . ......, .11 I HarrbO& Assodates(o ACENDR'I[EM NI . . PACE e?" OF )p--= City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 3 ,,-.. PART A PLANS AND SPECIFICATIONS The facilities will be operated, serviced and maintained as generally described as follows: DESCRIPTION OF IMPROVEMENTS, FY 2006-07 The facilities to be maintained and serviced include landscaping for the specific Maintenance District as described herein. Facilities include but are not limited to: landscaping, planting, shrubbery, trees, turf, irrigation systems, hardscapes, fixtures, and appurtenant facilities, in public rights-of-way, parkways, slopes and dedicated easements within the boundaries of said Maintenance District. Zone 1 (original District) - Encompasses the Water Ridge Development and funds landscape and street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include approximately 10,039 square feet of landscaping and 49 street lights. Zone 2 (Annexation No.1) - Encompasses the Elsinore Homes Development and funds landscape and street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include approximately 5,850 square feet of landscaping and 16 street lights. Zone 3 (Annexation No.2) - Encompasses the Pepper Grove Development and funds landscape and street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include approximately 22,560 square feet of landscaping and 4 street lights. ,,---- Zone 4 (Annexation No.3) - Encompasses the Serenity Development and funds landscape and street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include approximately 630 square feet of landscaping and 63 street lights. Zone 5 (Annexation No.4) - Encompasses the Rosetta Canyon Development and funds street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include 215 street lights. Zone 6 (Annexation No.5) - Encompasses the La Laguna Phase 3 Development and funds street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include 28 street lights. Zone 7 (Annexation No.6) - Encompasses Tract 28214 of the Alberhill Ranch Development and funds street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include 244 street lights. Zone 8 (Annexation No.7) - Encompasses Tract 32670 of the Belcaro Development and funds landscape maintenance and operations. The. facilities within the public right-of-way that are to be maintained and serviced include approximately 1,080 square feet of landscaping. ~ Zone 9 (Annexation No.8) - Encompasses Tract 32077 of the La Strada Development and funds street lighting maintenance and operations. The facilities within the public right-of-way that are to be m~intained and serviced include 36 street lights. Q:\ELSINORE\lLMD1\fy06-07\Reports 06-07\l.E. LLMD1 Engineer's Report06.doc AGENDA ~~~S & ~.s at:. PACE OF City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 4 Zone 10 (Annexation No.9) - Encompasses Tracts 30698 and 32129 of the Clurman-owned development and funds street lighting maintenance and operations. The facilities within the public ......, right-of-way that are to be maintained and serviced include 38 street lights. Zone 11 (Annexation No. 10) - Encompasses Tract 31920-1 of the SummerIy Development and funds park landscaping and street lighting maintenance and operations. The facilities within the public right-of-way that are to be maintained and serviced include approximately 4.77 acres of landscaping and 464 street lights. Maintenance for landscaping means the furnishing of services and materials for the ordinary and usual maintenance, operation and servicing of the landscaping and appurtenant facilities, including repair, removal or replacement of all or part of any of the landscaping or appurtenant facilities; providing for the life, growth, health and beauty of the landscaping, including cultivation, irrigation, trimming, spraying, fertilizing and treating for disease or injury; the removal of trimmings, rubbish, debris and other solid waste; and the cleaning, sandblasting, and painting of walls and other improvements to remove or cover graffiti. Maintenance for street lights means the furnishing of services and materials for the ordinary and usual maintenance, operation and servicing of the street lights and appurtenant facilities, including repair, removal or replacement of all or part of any of the street lights or appurtenant facilities. Servicing means the furnishing of water for the irrigation of the landscaping and the maintenance of any of the lighting facilities or appurtenant facilities and the furnishing of electric current or energy, gas or other illuminating agent for the lighting facilities, or for the lighting or operation of the landscaping or appurtenant facilities. The plans and specifications for the improvements, showing and describing the general nature, ....., location, and the extent of the improvements, are on file in the office of the Director of Public Works and are incorporated herein by reference. Q:\ELSINORE\lLMD1\fy06-07\Reports 06-07\l.E. LLMD1 Engineer's Report06.doc ....., III Harri, & Assoc;e' AGENDA ITE~ ~o._ PAGE~OF ~ v City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 5 ,-.... PART B ESTIMATE OF COST The estimated cost of the operation, servicing and maintenance of the street and sidewalk improvements for Fiscal Year 2006-07, as described in Part A, are summarized herein and described below. LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 ProDosed Bude:et - Fiscal Year 2006-07 Zone 1 (Water Ridge) Landscaping: Operations and Maintenance Reserve (10%) Sub-Total $3,341.76 $334.18 $3,675.94 Street Lighting Operations and Maintenance Reserve (10%) Sub-Total $8,853.80 $885.38 $9,739.18 Total Estimated Costs $13,415.12 /'""' 2006 Fund Balance (Reserve) ($1.219.56) Total Assessment FY 2006/2007 $12,195.56 Zone 2 (Elsinore Homes) Landscaoing Operations and Maintenance Reserve (50%) Sub-Total $1,904.64 $952.32 $2,856.96 Street Lighting Operations and Maintenance Reserve (50%) Sub- Total $2,827.12 $1.413.56 $4,240.68 $936.36 District Administration Total Estimated Costs $8,034.00 2006 Fund Balance (Reserve) ($2.365.88) ,-.... Total Assessment FY 2006/2007 $5,668.12 Q:\ElSINORE\LlMD1\fy06-07\Reports 06-07\L.E. llMD1 Enginee~s Report06.doc IJ Harris & At:;'ciates AOEND M NO. PACiE tOt:) OF g:;> City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 Zone 3 (Pepper Grove) June 16, 2006 Page 6 Landscaoing Operations and Maintenance Reserve (50%) Sub-Total Street Lighting Operations and Maintenance Reserve (50%) Sub-Total District Administration Total Estimated Costs 2006 Fund Balance (Reserve) Total Assessment FY 2006/2007 Zone 4 (Serenity) Landscaoing Operations and Maintenance Reserve (50%) Sub-Total Street Lighting Operations and Maintenance Reserve (50%) Sub-Total District Administration Total Estimated Costs 2006 Fund Balance (Reserve) Total Assessment FY 2006/2007 Q:\ELSINORE\L.LMD1Ify06-07\Reports 06-07\L..E. LLMD1 Engineer's Report06.doc $7,363.58 $3.681.79 $11,045.37 $708.90 $354.45 $1,063.35 $918.00 $13,026.72 ($4,036.24) $8,990.48 $201.60 $100.80 $302.40 $] 1,2]4.00 $5.607.00 $16,821.00 $900.00 $18,023.40 ($5,707.80) $12,315.60 ...." ~ ...." iJ Harris & ~~odates ACEND M NO. "!Q PACE t:S~ OF ~ - City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 7 ~ Zone 5 (Rosetta Canyon) Phase 1 Operations and Maintenance Reserve (50%) Sub-Total $21,182.00 $10.591.00 $31,773.00 Phase 2 Operations and Maintenance Reserve (50%) Sub-Total $0.00 $ 0.00 $0.00 District Administration $900.00 Total Estimated Costs $32,673.00 2006 Fund Balance (Phase I Reserve) ($10,591.00) Total Assessment FY 2006/2007 $22,082.00 Zone 6 (La Laguna - Phase 3) /'""' Operations and Maintenance Reserve (50%) Sub-Total $4,984.00 $ 2.492.00 $ 7,476.00 District Administration $900.00 Total Estimated Costs $8,376.00 2006 Fund Balance (Reserve) ($2,492.00) Total Assessment FY 2006/2007 $5884.00 Zone 7 (Alberhill Ranch) Operations and Maintenance Reserve (50%) Sub-Total $39,683.08 $21.716.00 $61,399.08 District Administration $900.00 Total Estimated Costs $62,299.08 2006 Fund Balance (Reserve) ($21,716.00) Total Assessment FY 2006/2007 $40,593.08 ~. Q:\ELSINOREIlLMD1\fy06-07\Reports 06-071l.E. LLMD1 Enginee(s Report06.doc III Harris & Associates I ACENDA iTEM NO. Y PACE ~ OF ~t> City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 8 Zone 8 (Belcaro) Operations and Maintenance Reserve (50%) Sub-Total ....., $356.40 $178.20 $534.60 District Administration $500.00 Total Estimated Costs $1,034.60 2006 Fund Balance $0.00 Total Assessment FY 2006/2007 $1,034.60 Zone 9 (La Strada) Operations and Maintenance Reserve (50%) Sub-Total $ 0.00 $ 0.00 $ 0.00 $0.00 $0.00 $0.00 ....., $0.00 District Administration Total Estimated Costs 2006 Fund Balance Total Assessment FY 2006/2007 Zone 10 (Tracts 30698 & 32129) Operations and Maintenance Reserve (50%) Sub-Total $ 0.00 $ 0.00 $ 0.00 District Administration $ 0.00 Total Estimated Costs $ 0.00 2006 Fund Balance $0.00 Total Assessment FY 2006/2007 $ 0.00 Q:\ELSINORE\LLMD1\fy06-07\Reports 06-07\L.E. LLMD1 Engineer's Report06.doc = I Harris & Associates ACiENDAlTE~ NO. ~ _ PAGE 9g OF ~ ....., City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 9 r-. Zone 11 (Summerly) Park LandscaDing Operations and Maintenance Reserve Administration Sub-Total Street Lighting Operations and Maintenance Reserve Administration Sub-Total Total Estimated Costs 2006 Fund Balance Total Assessment FY 2006/2007 ~.... Summary FY 2006-07 Zone Assessment I 2 3 4 5 6 7 8 9 10 11 Total $12,195.56 $5,668.12 $8,990.58 $12,315.60 $22,080.42 $5,884.00 $40,593.08 $1,034.60 $0.00 $0.00 $78,194.00 $186,955.96 $ 0.00 $ 34,441.81 $ 500.00 $34,941.81 $ 0.00 $ 42,752.19 $ 500.00 $43,252.19 $78,194.00 $0.00 $78,194.00 . For Zones I through 7, the Reserve amount was collected in FY 2005-06 and therefore is not included in the assessment for FY 2006-07. . For Zone 5 (Phase II), Zone 9 and Zone 10, no assessment will be collected for FY 2006-07 since no improvements have been completed. . For Zone 8, the full costs assessed for FY 2006-07 include the Reserve amount and Administration cost. . For Zone 11, the costs assessed for FY 2006-07 only include the Reserve amount and Administration cost since no improvements have been completed, however construction has begun. ,-.... Q:\ELSINORE\LLMD1\fy06-o7\Reports 06-o7\LE. LLMD1 Engineer's Report06.doc ~ Harris &. ~sociates AGEND M rtO.~ .k2 PAGE 6"\ . OF ~ -- City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 10 · The 1972 Act requires that a special fund be set up for the revenues and expenditures of the District. Funds raised by assessment shall be used only for the purpose as stated herein. A ...." contribution to the District by the City may be made to reduce assessments, as the City Council deems appropriate. Any balance or deficit remaining on July I must be carried over to the next fiscal year. """" ......, Q:\ELSINORE\LLMD1\ty06-07\Reports 06-07\L.E. LLMD1 Enginee~s Report06.doc :: I Harris & ~ssociates ACENDA iteM NO. 'P PAGE le 0 OF gt/ City of Lake Elsinore Landscape and Street lighting Maintenance District No.1 June 16, 2006 Page 11 /""" PART C ASSESSMENT ROLL The proposed assessment and the amount of assessment for Fiscal Year 2006-07 apportioned to each lot or parcel, as shown on the latest roll at the Riverside County Assessor's Office, are appended herein and submitted separately as Appendix C of the City of Lake Elsinore Engineer's Report for Landscape and Street Lighting Maintenance District No.1, Fiscal Year 2006-07. The description of each lot or parcel is part of the records of the Assessor of the County of Riverside and these records are, by reference, made part of this Report. ~. /""" Q:\ELSINOREILLMD1\fy06-07\Reports 06-07\L.E. LLMD1 Engineer's Report06.doc ;J Harris & todates AGEN EM NO. PACE LQ \ OF liD ~ City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 12 PART D METHOD OF APPORTIONMENT OF ASSESSMENT ......, GENERAL Part 2 of Division 15 of the Streets and Highways Code, the Landscaping and Lighting Act of 1972, permits the. establishment of assessment district by cities for the purpose of providing certain public improvements which include construction, operation, maintenance and servicing of street lights, traffic signals and landscaping. Section 22573 of the Landscaping and Lighting Act of 1972 (the 1972 Act) requires that maintenance assessments be levied according to benefit rather than according to assessed value. This section states: "The net amount to be assessed upon lands within an assessment district may be apportioned by any formula or method which fairly distributes the net amount among all assessable lots or parcels in proportion to the estimated benefits to be received by each such lot or parcel from the improvements." The 1972 Act permits the designation of zones of benefit within any individual assessment district if "by reason of variations in the nature, location, and extent of the improvements, the various areas will receive different degrees of benefit from the improvements." (Sec. 22574). Thus, the 1972 Act requires the levy of a true "assessment" based on the actual benefit rather than a "special tax." In addition, Proposition 218, the "Right to Vote on Taxes Act" which was approved on the November 1996 Statewide ballot and added Article XIIm to the California Constitution, requires that a parcel's assessment may not exceed the reasonable cost of the proportional special benefit conferred on that ......, parcel. Article XIIm provides that only special benefits are assessable and the City must separate the general benefits from the special benefits. Article XIIm also requires that publicly owned property which benefit from the improvements be assessed. REASON FOR THE ASSESSMENT The assessment is proposed to be levied to pay for the costs of the construction, servicing and maintenance of landscaping, street lighting and appurtenant improvements within the District. SPECIAL BENEFIT ANALYSIS Street Landscaping, Slopes and Greenbelts. Trees, landscaping, hardscaping and appurtenant facilities, if well maintained, provide beautification, shade and enhancement of the desirability of the surroundings, and therefore increase property value. In Parkways and Land Values, written by John Nolan and Henry V. Hubbard in 1937, it is stated: "... there is no lack of opinion, based on general principals and experience and common sense, that parkways do infact add value to property, even though the amount cannot be determined exactly.... Indeed, in most cases where public money has been spent for parkways the assumption has been definitely made that the proposed parkway will show a provable financial profit to the City. It has been believed that the establishment of parkways causes a rise in real estate values throughout the City, or in parts of the City,..." Q:\ELSINORE\lLMD1\ty06-Q7\Reports 06-Q7\l.E. LLMD1 Engineer's Report06.doc ACENDA~'&A~ PACE OF - .......,. City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 13 ,-.... It should be noted that the defmition of "parkways" above may include the roadway as well as the landscaping along side the roadway. The ongoing operation and maintenance of the street landscaping, slopes and greenways within the individual district, as identified in Part A of this Report, provide beautification to the areas that result in a special benefit to the parcels within the tracts adjacentto the improvements. If these landscaped areas were not properly maintained, the tract would be blighted. The City of Lake Elsinore considers the maintenance and upkeep of parkways and adjacent slopes to be the responsibility of the adjacent development due to the added beautification of the local community which extends to the perimeter of the development. Street Lighting. Proper maintenance and operation of the streetlights benefit all properties within the District by providing security, safety and community character and vitality as outlined below. Streetlights provide only incidental benefits to motorists traveling to, from or through the area. BENEFITS OF STREET LIGHTING Security and Safety . Mitigates crime . Alleviates the fear of crime . Enhances safe ingress/egress to property Community Character and Vitality . Promotes social interaction . Promotes business and industry . Contributes to a positive nighttime visual image /""' Improvements that provide a special benefit to an isolated group of parcels of land located within the District are considered to be a localized benefit, and the costs associated with these improvements are assessed to all assessable parcels receiving the localized benefit. Localized benefits include the construction, operation, servicing and maintenance of the improvements that only benefit the parcels located within the localized areas. Localized Improvements - Parcels that have localized landscaping such as entryway landscaping, parkway landscaping, etc., and street lighting adjacent to or near their parcels directly benefit from the improvements and are assessed for the costs of the localized improvements. ASSESSMENT METHODOLOGY The maximum annual maintenance assessments shall be increased each year by 2%. The actual assessments levied in any fiscal year will be as approved by the City Council and may not exceed the maximum assessment rate without receiving property owner approval for the increase. To establish the special benefit to the individual parcels within the District, an Equivalent Dwelling Unit system is used. Each parcel of land is assigned Equivalent Dwelling Units ("EDU's") in proportion to the estimated special benefit the parcel receives relative to the other parcels within the District from landscaping and/or streetlights. The single-family detached (SFD) residential parcel has been selected as the basic unit for calculation of assessments; therefore, the SFD residential parcel is defined as one. Equivalent Dwelling Unit (EDU). A methodology has been developed to relate all other land uses within each zone to the SFD residential land use as described below. ,..- Q:\ELSINOREIlLMD1\fy06-07\Reports 06-07\l.E. LLMD1 Engineer's Report06.doc -= I Harris & ACENDA ITEM NO. PACE v:3 City of lake Elsinore landscape and Street lighting Maintenance District No.1 June 16, 2006 Page 14 Zone 1 The parcels of land in the District are single family residential (SFR) lots, with each of these lots ....., benefiting equally from the improvements being maintained. Therefore, the costs associated with the landscaping and street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 1. EDU's 133 Max. Maint. Asmt per EDU $102.89 Actual Asmt per EDU $91.70 Total Asmt For District $12,195.56 Zone 2 The parcels of land in Zone 2 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the landscaping and street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 2. EDU's 50 Max. Maint. Asmt per EDU $163.90 Actual Asmt per EDU $113.36 Total Asmt For District $5,668.12 Zone 3 The parcels of land in Zone 3 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the landscaping and street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 3. '-' EDU's 29 Max. Malnt. Asmt per EDU $458.19 Actual Asmt per EDU $310.02 Total Asmt For District $8,990.48 Zone 4 The parcels of land in Zone 4 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the landscaping and street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 4. EDU's 233 Max. Malnt. Asmt per EDU $78.89 Actual Asmt per EDU $52.86 Total Asmt For District $12,315.60 '-' Q:\ELSINOREILLMD1\fy06-07\Reports 06-071L.E. LLMD1 Engineer's Report06.doc = I Harris & Associates AOENDA ITEM NO. ~ PAOE &<-f OF ~ City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 15 r- Zone 5 The parcels of land in Zone 5 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 5. Phase 1 2 I EDU's 509 o Max. Mainl Asmt per EDU $64.67 $52.80 Actual Asmt per EDU $43.38 $0.00 Total Asmt For District $22,082.00 $0.00 Zone 6 The parcels of land in Zone 6 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 6. EDU's 98 Max. Maint. Asmt per EDU $87.17 Actual Asmt per EDU $60.04 Total Asmt For District $5,884.00 ---- Zone 7 Equivalent Dwelling Units To establish the special benefit to the individual parcels within Zone 7 of the District, an Equivalent Dwelling Unit system is used. Each parcel of land is assigned Equivalent Dwelling Units ("EDU's") in proportion to the estimated special benefit the parcel receives relative to the other parcels within the District from the streetlights. The single-family detached (SFD) residential parcel has been selected as the basic unit for calculation of assessments; therefore, the SFD residential parcel is defined as one Equivalent Dwelling Unit (EDU). A methodology has been developed to relate all other land uses to the SFD residential land use as described below. Condominiums. Condominiums will be assessed equivalent to a single-family detached; therefore 1 EDU per unit. Multi-family Residences (Apartments). Multi-family residential parcel equivalencies are determined by multiplying the number of dwelling units on each parcel by 0.75, due to the relative population density of this type of dwelling unit and reduced unit size compared to the typical density and size of an SFD. Studies have consistently shown that the average apartment unit impacts infrastructure approximately 75% as much as a single-family residence. (Sources: Institute of Transportation Engineers Informational Report Trip Generation, Fifth Edition, 1991; Metcalf & Eddy, ",-. Wastewater Engineering Treatment, Disposal, Reuse, Third Edition, 1991). Trip generation and Q:\ELSINORE\LLMDWy06-07\Reports 06-07\L.E. LLMD1 Engineer's Report06.doc ;J Hams ACENDA NO. PACE (oS OF City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 16 wastewater usage are a function of population density. Based on this, it is concluded that other infrastructure will be similarly impacted at a reduced level. The smaller average unit size of multiple- """""'" residential parcels result in a lesser enhancement per unit to property values. Developed Non-Residential (Non-Res). Developed non-residential properties are defmed as improved commercial, industrial and institutional properties (such as school property or churches). In converting these properties to EDU's, the size of the parcels are compared to the average size of a single-family residential lot, which is 7,200 square feet. This equals approximately 6 SFR lots per acre of land. Therefore, developed non-residential parcels are assigned EDU's at a rate o~ 6 EDU's per acre. Vacant/Parks. Parcels that are designated for parks or parcels that are developable but do not have a fmalized development map are assessed based upon the acreage of the parcel. These properties receive special benefits based on their land, as this is the basis of their value. Based upon the opinions of professional appraisers, appraising current market property values for real estate in Southern California, the land value portion of a property typically ranges from 20 to 30 percent of the property's total value. Additionally, the utilization of vacant property is significantly less than improved property and vacant property has a traffic generation rate of O. Therefore, vacant parcels (and park parcels) will be assessed at the rate of25% of Non-Res properties, or 1.5 EDU's per acre or any portion thereof. Open Space. Parcels designated as open space do not receive special benefits from the Improvements and are therefore exempt from the assessment. The table below provides the FY 2006-07 assessment apportionment for Zone 7. Max. Malnt. Asmt Actual Asmt Total Asmt Landuse Acreage EDU's per EDU per EDU For District SFR -- 157.00 $64.52 $64.52 $10,129.64 Vacant 314.77 472.16 $64.52 $64.52 $30,463.44 $40,593.08 ......, Zone 8 The parcels of land in Zone 8 are condominium lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the landscaping within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 8. EDU's 144 Max. Maint. Asmt per EDU $7.32 Actual Asmt per EDU $7.18 Total Asmt For District $1,034.60 Zone 9 Equivalent Dwelling Units To establish the special benefit to the individual parcels within Zone 9 of the District, an Equivalent Dwelling Unit system is used. Each parcel of land is assigned Equivalent Dwelling Units ("EDU's") in proportion to the estimated special benefit the parcel receives relative to the other parcels within the District from the streetlights. .....,; Q:\ELSINORE\lLMD11fy06-07\Reports 06-07\l.E. LLMD1 Engineer's Report06.doc B I Harrit ~ Associates ACENDA ITEM NO. I.(:J PAGE UV OF '6D City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 17 ~ The single-family detached (SFD) residential parcel has been selected as the basic unit for calculation of assessments; therefore, the SFD residential parcel is defined as one Equivalent Dwelling Unit (EDU). A methodology has been developed to relate all other land uses to the SFD residential land use as described below. Developed Non-Residential (Non-Res). Developed non-residential properties are defmed as improved commercial, industrial and institutional properties (such as school property or churches). In converting these properties to EDU's, the size of the parcels are compared to the average size of a single- family residential lot, which is 7,200 square feet. This equals approximately 6 SFR lots per acre of land. Therefore, developed non-residential parcels are assigned EDU's at a rate of 6 EDU's per acre. Vacant/Parks. Parcels that are designated for parks or parcels that are developable but do not have a finalized development map are assessed based upon the acreage of the parcel. These properties receive special benefits based on their land, as this is the basis of their value. Based upon the opinions of professional appraisers, appraising current market property values for real estate in Southern California, the land value portion of a property typically ranges from 20 to 30 percent of the property's total value. Additionally, the utilization of vacant property is significantly less than improved property and vacant property has a traffic generation rate of O. Therefore, vacant parcels (and park parcels) will be assessed at the rate of 25% of Non-Res properties, or 1.5 EDU per acre or any portion thereof. Open Space/Basins. Parcels designated as open space or basins do not receive special benefits from the Improvements and are therefore exempt from the assessment. ~ The table below provides the FY 2006-07 assessment apportionment for Zone 9 EDU's 86.85 Max. Maint. Asmt per EDU $81.13 Actual Asmt Der EDU $0.00 Total Asmt For District $0.00 Zone 10 The parcels of land in Zone 10 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the FY 2006-07 assessment apportionment for Zone 10 EDU's o Max. Maint. Asmt per EDU $63.26 Actual Asmt Der EDU $0.00 Total Asmt For District $0.00 ~ Q:\ElSINOREILlMD1\fy06-07\Reports 06-07IL.E. llMD1 Engineer's Report06.doc JIll I Hanis Assodates ACENDA ITEM NO. PACE ttI City of take Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 18 Zone 11 '-' Equivalent Dwelling Units To establish the special benefit to the individual parcels within Zone 11 of the District, an Equivalent Dwelling Unit system is used. Each parcel of land is assigned Equivalent Dwelling Units ("EDU's") in proportion to the estimated special benefit the parcel receives relative to the other parcels within the District from the streetlights. The single-family detached (SFD) residential parcel has been selected as the basic unit for calculation of assessments; therefore, the SFD residential parcel is defined as one Equivalent Dwelling Unit (EDU). A methodology has been developed to relate all other land uses to the SFD residential land use as described below. Developed Non-Residential (Non-Res). Developed non-residential properties are defined as improved commercial, industrial and institutional properties (such as school property or churches). In converting these properties to EDU's, the size of the parcels are compared to the average size of a single-family residential lot, which is 7,200 square feet. This equals approximately 6 SFR lots per acre of land. Therefore, developed non-residential parcels are assigned EDU's at a rate of 6 EDU's per acre. Vacant/Parks. Parcels that are designated for parks or parcels that are developable but do not have a finalized development map are assessed based upon the acreage of the parcel. These properties receive special benefits based on their land, as this is the basis of their value. Based upon the opinions of professional appraise~, appraising current market property values for real estate in Southern California, the land value portion of a property typically ranges from 20 to 30 percent of the ~ property's total value. Additionally, the utilization of vacant property is significantly less than improved property and vacant property has a traffic generation rate of O. Therefore, vacant parcels (and park parcels) will be assessed at the rate of 25% of Non-Res properties, or 1.5 EDU per acre or any portion thereof. Open Space/Basins. Parcels designated as open space or basins do not receive special benefits from the Improvements and are therefore exempt from the assessment. The golf course associated with the development on the northwest side does not have any localized improvements and is not included within the boundaries of the District. The table below provides the FY 2006-07 assessment apportionment for Zone II. Facili Landscaping Street Li htin Landuse Vacant Vacant Acrea e 377.32 377.32 EDU's 565.98 565.98 Max. Maint. Asmt er EDU $65.00 $76.42 Actual Asmt er EDU $61.74 $76.42 Total Asmt For District $34,941.81 $43,252.19 Q:\ELSINOREIlLMD1\ty06-07\Reports 06-071l.E. LLMD1 Engineer's Report06.doc ......., = I Harris & Associates ACENDA ITEM NO.~ PACE &g _OF~ City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 16, 2006 Page 19 .-. PART E PROPERTY OWNER LIST A list of names and addresses of the owners of all parcels within this District is shown on the last equalized Property Tax Roll of the Assessor of the County of Riverside, which by reference is hereby made a part of this report. This list is keyed to the Assessor's Parcel Numbers as shown on the Assessment Roll, Part C of this Report. PART F ASSESSMENT DISTRICT BOUNDARIES Diagrams showing the exterior boundaries of the District and the lines and dimensions of each lot or parcel of land within the District are provided on the following page. The lines and dimensions of each lot or parcel within the District are those lines and dimensions shown on the maps of the Assessor of the County .of Riverside for Fiscal Year 2006-07. The Assessor's maps and records are incorporated by reference herein and made part of this report. .-. .-. Q:\ELSINORE\lLMD1\ty06-07\Reports 06-07\l.E. LLMD1 Engineer's Report06.doc :: I Harris & AGENDA ntM NO. PACE <P1 OF 36~-03 1If~.Ii'... -., ,.,. ..,. ' ~ &0,., 'f 0 0 0~ ~ t 'lI .. .~ $Aea- $A~.i $Ac~ ) ~ t 1II_.~__.tfI ~ .I~,o." S @) 0 @ @) ~ j! ~ $.. $A~ $ Ae.olt $AC'.lt 6_'.' r"" U47 @ @ @ @ , @ @ . ,.. If e i ~ .. S ~ S Ae ,.. $ Al'.:t SAc.~ Sk~ SAC'.* IAc.* . , H,.7" ... . It . .. JU",/, 71. The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2003-04. Zone 1 of the Landscape and Street Lighting Maintenance District No. 1 Assessment Diagram ACENDA ITEM NO. PACE I {) ,..., ,..., "-' ~ OF iO ,.--.. ---- --- .. ~ @ ZONE 2 379-03 ...,. I~-.." 57: @ ~ . ~ :. 01 -.r7M The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2003-04. --- Zone 2 of the Landscape and Street Lighting Maintenance District No.1 Assessment Diagram AGENDA ITEM NO. (//.. .... ."" PACiE-71 . .~o~~__ 373-20 ~ ~ PARK WAY @ r-.... ~ Gi :::> .0::( CD RAILROAD AVE ~. "'I The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2003-04. N.T.S. Zone 3 of the Landscape and Street Lighting Maintenance District No. 1 ~ Assessment Diagram 0 ACENDA\TEMNO.- - gv - PACE_,1- OF - -- ,..-.. 370-412-021 370-415-006 370-415-(lO7 370-415-006 370-415-009 370-415-010 370-415-011 370-415-012 370-415-013 370~415-014 370-415-015 \ APN: 370-120-004 370-120-014 370-120-050 370-120-052 370-120-0:16 ~ \IICINITY MAP NO SCAlE uwm DlS1IIICT _AllY The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2004-05. ,....... Zone 4 of the Landscape and Street Lighting Maintenance District No. 1 Assessment Diagram ACENDA ITEM NO. PACE '7 ~ ~ OF 5lb PHASE 1 A.....or P.rceI No.. 347.11~027 347.12~017 347.1~018 347.1~020 347.1~021 347.1~023 347.33~m 347.33~048 347.34~002 347.34~006 347.34~OO7 347.34~010 347-34~013 t PHASE 2 TRACT 25477 ......., As.III<< Parcel No.. 34&-240.069 349;400-020 34~oo.021 349;410.001 34~10.002 34~1~OO3 34~1~ 34~1~016 ~001 34~0.002 34f.4~006 34~30-014 34~30-016 34~018 The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of ......., Riverside for Fiscal Year 2004-05. TRACT 25478 TRACT 25476 ~ -.... .. ... WEIll -- -- Zone 5 of the Landscape and Street Lighting Maintenance District No. 1 Assessment Diagram ......., c, Of ~ ~ AOENDA ITEM NO. PAOE 1'1 ..0:. , ,-- .--.. LEGEND: DISTRICT BOUNDARY ~.I/It, VICINITY MAP NO SCALE The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2004-05. "..... Zone 6 of the Landscape and Street Lighting Maintenance District No. 1 Assessment Diagram ACENDA ITEM NO. & PAGE 75 OF go "- o ~ "\ '" A.P.M.'. 1. JlII02OO34 2. 3IlIOllOOO2 3. JIlIOtOOOI ... JIIOIlOOO2 5. :JIIOlIO(llIJ .. JetOIOOO4 7. 318121001 I. 311t121002 .. 318121003 10. 311I122001 11. 3lIt122002 12. 311t122OO3 13. JlItI22004 14. JlItl~ 15. 3lIlll22OOt 1.. JlIt122OO7 '7. JlIt122010 ,.. JUDIOClDlI LEGEND: ..." l- (/) 0::: w W CD ....J o o KINGS HWY ..." VICINITY MAP NO SCALE DISTRICT BOUNDARY The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2004-05. Zone 7 of the Landscape and Street Lighting Maintenance District No.1 Assessment Diagram ......, AGENDA ITEM NO. PACE 7 Y & OF RD__ ,.,..- I I -I SI!i II ~ ~ PMCEL ..... ~22I--4lI7 AID ~22I-032 i II1lr'1nrE .~ I II1lr'1tt21"t 112O.4Z' I , ~ ~--- ~ 'IfF ])JS'l'JUCf BOUNDARY ,...... The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2004-05. ---- Zone 8 of the Landscape and Street Lighting Maintenance District No.1 f _ Assessment Diagram ACENDA ITEM NO. Y; PACE.J 7 _OF X (J ~ ~ APN: 363-020-008 ~ @-4 / i: _tTV MAP NO sc..u LEGEtIll QIS1IIC1' - .. The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. Zone 9 of the Landscape and Street Lighting Maintenance District No. 1 ~ Assessment Diagram AGENDA ITEM NO. &- PAOE '7 ~ OF 5(6 -- .,..---,..~ - ",-., TENTATIVE TRACT 32129 APN: 347-110.021 TRACT 30698 APN'S: 347 -110.022 347-110.024 347 -110.025 347 -110.026 r' . IUS VlONlTY MAP NO SCALE 1SlElQ ImRlCT IIOUIIlARY The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. Zone 10 of the Landscape and Street Lighting Maintenance District No.1 Assessment Diagram ITEM NO & AGENDA ~. &6 PACE ;1 Of ~ ,-.... ~ LMI'8 \ 1. ......, -~ 'Il'MCT MO. 31 ~211ll-1 Assessor"s Pan::e1 Nos. 37~>>OO7 371~021 37~10 371~022 37~11 371-0>>025 37~12 371~1 37lHl3G-OOl 371~ 37()'03G-002 371-040-003 371~OO3 371..().4().()()4 371~009 371..().4().005 371~010 371-0<40-006 371~11 371-040-007 l.AICE B.aIClAE ......, w::IIIY IMP .... ~ _ DISTRICT BOUNDARY The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. Zone 11 of the Landscape and Street Lighting Maintenance District No. 1 Assessment Diagram ......, AGENDA ITEM NO. 0 ... PACE fp OF gi) ",-... TO: FROM: DATE: SUBJECT: /"""' BACKGROUND CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL MAYOR AND CITY COUNCIL ROBERT A. BRADY, CITY MANAGER JUNE 27,2006 RESOLUTION INITIATING PROCEEDINGS AND APPROVING THE ENGINEER'S REPORT FOR THE ANNEXATION OF CERTAIN TERRITORY KNOWN AS TRACT 31957 INTO THE CITY OF LAKE ELSINORE LANDSCAPE AND STREET LIGHTING DISTRICT NO. 1, AS LLMD ANNEXATION NO. 11 (TRACT 31957), DECLARING THE CITY'S INTENTION TO ORDER THE ANNEXATION AND TO LEVY AND COLLECT ASSESSMENTS, DETERMINING THAT THESE PROCEEDINGS SHALL BE TAKEN PURSUANT TO THE LANDSCAPING AND LIGHTING ACT OF 1972 AND THE RIGHT TO VOTE ON TAXES ACT, AND OFFERING A TIME AND PLACE FOR HEARING OBJECTIONS THERETO As a condition of approval, the City has required the Tract 31957 development to be annexed into the Landscape and Street Lighting District No.1. New developments are annexed into Landscape and Street Lighting District No. 1 if a development will have public right-of-way landscaped areas maintained by the City, neighborhood parks, or if there are more than three street lights in the public right-of-way. DISCUSSION Attached is the Engineer's report for the Lake Elsinore Landscape and Street Lighting Maintenance District Annexation No. 11 (Tract 31957) prepared by AGENDA ITEM NO. 1 _ - PAGE_l OF 'd0 ~ ~ " REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 ...." Harris and Associates. The district annexation includes the Tract 31957 development which contains approximately 24 street lights. The total annual cost of operations and maintenance for Landscaping is estimated at $28,053.70 or $280.54 per dwelling unit. The total annual cost of operations and maintenance for Street Lighting is estimated at $4,925.80 or $49.26 per dwelling unit. The estimated landscaping cost for the first year includes a 50% reserve of$13,776.85, bringing the total to $41,830.55 or $418.31 per dwelling unit. The estimated street lighting cost for the first year includes a 50% reserve of $2,212.90, bringing the total to $7,138.70 or $71.39 per dwelling unit. The 1972 Act requires that a special fund be set up for the revenues and expenditures of the District and each annexation or zone tracked separately. Any balance or deficit remaining on July 1 must be carried over to the next fiscal year. The City Council may approve up to a two percent (2%) fixed rate adjustment annually. The rat~ adjustment will adjust the Maximum rate but not necessarily the assessment rate. If costs begin to exceed assessment revenue, the City Council may increase the assessment up to the Maximum. ....., FISCAL IMPACT The City is not negatively impacted by the annexation or continuation of the district. In addition to the operating costs of the district, the special tax would be levied annually to sufficiently finance the costs of administering the levy, collection of the special tax and all other costs of the levy of the special tax. The City will be, however, positively impacted with the funding for electricity and street lighting maintenance. PROCESS The annexation of the Landscape and Street Lighting District Annexation No. 11 (Tract 31957) requires a specific process as outlined in the attached resolution. The City Council will need to hold a public hearing on the annexation of certain ...." '1 ACENDA ITEM NO. PACE_~ OF ~ - /"'" REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 3 territory into LLMD No. 1 and the participating property owner will have the opportunity to vote. The public hearing can be scheduled for August 8, 2006. RECOMMENDATION It is recommended that City Council: 1. Approve the Engineer's Report for Annexation No. 11 (Tract 31957) to LLMD No. 1 2. Adopt the Resolution 2006 - ilL of Intention to Annex into LLMD No. 1 3. Schedule the public hearing on the District Formation for August 8, 2006 /"'" PREPARED BY: MATT N. PRESSEY DIRECTOR OF AD INISTRATIVE SERVICES APPROVED FOR AGENDA BY: r'- ACENDA ITEM NO. PACE :3 7 OF ;? 5 "'WIll INTCRsTA 1F 15 ~ SCALE: 1W. 200' ~ I IIf>>(rMI Sf VICINITY MAP NO SCAI.L TRACT 31957 ~~ ~~ iii N'N'S: 391-790-002 39t-790-003 WJEtm llIS1llICT IIOUNOARY ...." The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2005-06, Annexation No. 11 to the Landscape and Street Lighting Maintenance District No.1 Assessment Diagram Page 1 of 1 """"'" ........ RESOLUTION NO. 2006-~ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, INITIATING PROCEEDINGS AND APPROVING THE ENGINEER'S REPORT FOR THE ANNEXATION OF CERTAIN TERRITORY KNOWN AS TRACT 31957 INTO THE CITY OF LAKE ELSINORE LANDSCAPE AND STREET LIGHTING DISTRICT NO.1, AS ANNEXATION NO. 11 (TRACT 31957) TO THE LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1, DECLARING THE CITY'S INTENTION TO ORDER THE ANNEXATION AND TO LEVY AND COLLECT ASSESSMENTS, DETERMINING THAT THESE PROCEEDINGS SHALL BE TAKEN PURSUANT TO THE LANDSCAPING AND LIGHTING ACT OF 1972 AND THE RIGHT TO VOTE ON TAXES ACT, AND OFFERING A TIME AND PLACE FOR HEARING OBJECTIONS THERETO ........ WHEREAS, the City Council of the City of Lake Elsinore, pursuant to the provisions of the Landscaping and Lighting Act of 1972 being Division 15 of the Streets and Highways Code of the State of California (the "Act"), desires to initiate proceedings for the annexation of certain territory (the "Annexed Area") to the Landscape and Street Lighting District No. I (the "District"), and declares the City's intention to order the annexation of the Annexed Area for the levy and collection of annual assessment within the Annexed Area for Fiscal Year 2006/2007 for the purposes provided therefore in the Act; and WHEREAS, Lake Elsinore 80 SFR LLC (hereinafter referred to as the "Developer") is the sole owner of that certain real property located in the City of Lake Elsinore, County of Riverside, State of California, more particularly described as follows: Legal Description: Tract 31957, in the City of Lake Elsinore, County of Riverside, State of California, currently known as Assessor Parcel No.'s 391-790-002 and 391-790- 003; and ........ WHEREAS, the Developer is developing the Property as a single family residential development (hereinafter referred to as the "Project"); and AGENDA ITEM NO. 7 PACE c; OF 'd-C:; CITY COUNCIL RESOLUTION NO. 2006- Page 2 ofS WHEREAS, the improvements to be installed, constructed, or maintained ....." within the proposed Annexed Area may include installation, construction, or maintenance of any authorized improvements under the Act, including, but not limited to, landscaping and streetlight improvements and any facilities which are appurtenant to any of the aforementioned or which are necessary or convenient for the maintenance or servicing thereof; and WHEREAS, Section 22608 of the Act limits the requirement for the resolutions, Engineer's Report, notices of hearing, and right of majority protest under the Act to the territory included within the annexation and waives these requirements with the written consent of all of the owners of property within the territory to be annexed; and . WHEREAS, Proposition 218, the Right to Vote on Taxes Act, does hereby require that a notice of the proposed assessment along with a ballot shall be mailed to all owners of identified parcels within the Annexed Area and that the agency shall conduct a public hearing not less than 45 days after the mailing of said notice; and WHEREAS, the Annexation consists of the development known as Assessor Parcel No.'s 391-790-002 and 391-790-003; and "'-'" WHEREAS, the developer has submitted a petition to the City requesting to have the development annexed into the Landscape and Street Lighting District No. 1; and WHEREAS, the developer, as stated in the petition, may waive all statutory notices of hearing and rights of majority protest by any interested property owners within the Annexation; and WHEREAS, the City has prepared a diagram attached as Exhibit "A," which is designated Proposed Annexation No. 11 (Tract 31957) to the Lake Elsinore Landscape and Street Lighting Maintenance District No. 1 and an assessment showing the proposed boundaries of the territory to be annexed into the District, which is benefited by the construction of the improvements and the amount to be assessed against each of the parcels within the proposed annexation to the District; and "'-'" ACENDA ITEM NO. PACE ~ '7 OF ')-5 CITY COUNCIL RESOLUTION NO. 2006- Page 3015 ,,- WHEREAS, the City has ordered the preparation of an Engineer's Report in accordance with Article 4 (commencing with Section 22565) of Chapter 1 of the Streets and Highways Code giving a description of the annexation; and WHEREAS, the Engineer's Report, diagram, and assessments have been approved and filed with the City Clerk and are open to public inspection and may be referred to for all details regarding the improvements, the boundary of the proposed annexation, the assessments, total costs, and description of the parcels to be assessed; and WHEREAS, this City Council has examined and considered the Engineer's Report, diagram, assessments, and the proceedings prior thereto. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. That the above recitals are true and correct. /'""' SECTION 2. The City Council hereby finds (1) that the public interest, convenience, and necessity require the maintenance of a landscaping and street lighting system; and (2) declares its intention to order the formation of the Annexation and to levy and collect assessments against the assessable lots and/or parcels of land within such Annexation for that portion of the fiscal year commencing July 1, 2006 and ending June 30, 2007, to pay the costs and expenses of the maintenance of improvements described below. If the assessments proposed by this resolution ,are approved by the property owners pursuant to a mailed ballot election conducted in accordance with Article XIII D of the California Constitution, the City Council in subsequent fiscal years may thereafter impose the assessment at any rate or amount that is less than or equal to the amount authorized for Fiscal Year 2006/2007, without conducting another mailed ballot election. SECTION 3. That the City Council hereby proposes to annex to Landscape and Street Lighting District No. 1 the Annexed Area located at Tract 31957, also known as Assessor Parcel No.'s 391-790-002 and 391-790-003, and to levy annual assessments thereon to provide for the following work: Installation, construction, or maintenance of any authorized improvements under the Act, including, but not limited to, landscaping and streetlight ,,-.. improvements and any facilities which are appurtenant to any of the AGENDA ITEM NO. PACiE 1 7 OF ~ CITY COUNCIL RESOLUTION NO. 2006-_ Page 4 of 5 aforementioned or which are necessary or convenient for the maintenance or servicing thereof. ,....", The distinctive designation for the proposed Annexed Area shall be "Annexation No. 11 (Tract 31957) to the Lake Elsinore Landscape and Street Lighting Maintenance District No.1", when referred to separately and upon annexation will be included in the designation of Landscape and Street Lighting District No. 1. SECTION 4. That the Property Owner has provided the City Council of the City of Lake Elsinore a petition fully signed and notarized, waiving all statutory notices of hearing and notice periods, granting the City the right to maintain and service the improvements and gives consent to the establishment of an assessment for the proposed annexation of the property into the District in an amount reasonably determined by tne City to cover all costs and expenses incurred for the continued maintenance, operation, and servicing of the improvements. SECTION 5. A Diagram for the District (Section 22570 of the Streets and Highways Code) and an assessment (Section 22572 of the Streets and Highways Code) showing the area to be annexed, benefited, and assessed for the improvements has been prepared as Exhibit "A." The diagram, assessment, and ,....", improvement plans have been filed with the City Clerk. SECTION 6. The diagram, which indicates by a boundary line the extent of the territory proposed to be annexed into the District, is hereby declared to describe the proposed boundaries of the proposed annexation to the District and shall govern for all details as to the extent and location of said annexation. SECTION 7. That the City Council is satisfied with the correctness of the diagram and assessment, including the proceedings and all matters relating thereto. SECTION 8. That notice is hereby given that on the 8th day of August, 2006, at the hour of7:00 p.m., or as soon thereafter as possible, in the City Council Chambers, in the City of Lake Elsinore, the City will hold a public hearing to receive and tabulate all ballots with reference to the Annexed Area pursuant to the Right to Vote On Taxes Act. SECTION 9. The City Clerk shall certify to the adoption of this Resolution. ,....", AGENDA ITEM NO. 7 PACE 15 OF;;l s- CITY COUNCIL RESOLUTION NO. 2006-_ Page 5 of5 ,.- SECTION 10. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED AND ADOPTED this 27th day of June, 2006, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore -- ATTEST: Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore ,.-- ACENDA ITEM NO. 7 PACE ~ OF;;S EXIDBIT A """'" ANNEXATION NO. 11 (TRACT 31957) TO LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 IffTENST'A 1F 15 SCALE: '.w 200' ~ ~ I IIlJMrNII S1 VICINITY MAP tRACT 31957 ~I NO SCAU: :s6 APN'S: 39t-790-OO2 391-700-003 61 J..EllEW. DIS11\ICT 8CUIlONIY """" """'" AGENDA ITEM NO. "7 PAGE /6 OF d5 Engineer's Report for Annexation No. 11 to the Lake Elsinore Landscape and Street Lighting Maintenance District No.1 (Tract 31957) City of Lake ELsinore Riverside County, California Prepared by: . Harris & Assodates June 14, 2006 AOENDA ITEM NO. 7 PACE {( OF 9'5 Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page i ENGINEER'S REPORT ANNEXATION NO. 11 to the LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 J The undersigned respectfully submits the enclosed report as directed by the City Council. The undersigned certifies that she is a Professional Engineer, registered in the State of California. DATED: June 14,2006 BY: Joan E. Cox R.C.E. No. 41965 I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Diagram thereto attached, was filed with me on the _ day of , 2006. City Clerk, City of Lake Elsinore Riverside County, California By I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Diagram thereto attached, was approved and confirmed by the City Council of the City of Lake Elsinore, California, on the _ day of , 2006. J City Clerk, City of Lake Elsinore Riverside County, California By J q:\elsinore\lImd1\formation\new district\annex no. 11 IImd engineer's report.doc AGENDA ITEM NO. 7 PAGE 'r OF ;b - Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page ii ,-.. ENGINEER'S REPORT ANNEXATION NO. 11 to the LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 TABLE OF CONTENTS Certificates......................................................................................................... i Report.......... .............................................................. ....... ................................ 1 Part A - Plans and Specifications .........................................................3 Part B - Estimate of Cost...................................................................... 5 Part C - Assessment Roll .....................................................................6 Part D - Method of Apportionment of Assessment.............................. 0 Part E - Property Owner List.............................................................. 10 Part F - Assessment District Boundary .............................................. 10 ,-- Exhibit: Improvements to be maintained ,-.. q:\elsinore~lmd1\formation\new district\annex no. 1111md engineer's report. doc AGENDA ITEM NO. PAGE I? / OF ~ Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 1 CITY OF LAKE ELSINORE ......, ENGINEER'S REPORT Prepared Pursuant to the Provisions of the Landscaping and Lighting Act of 1972 (California Streets and Highways Code Section 22500 through 22679), Article XIIID of The California Constitution, and The Proposition 218 Omnibus Implementation Act (California Government Code Section 53750 Et Seq.) Pursuant to Part 2 of Division 15 of the Streets and Highways Code of the State of California, Article XmD of the California Constitution, the Proposition 218 Omnibus Implementation Act and in accordance with the Resolution of Initiation adopted by the Council of the City of Lake Elsinore, State of California, in connection with the proceedings for: CITY OF LAKE ELSINORE ANNEXATION NO. 11 to the LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 hereinafter referred to as the "Assessment District" or "District", I, Joan E. Cox, P.E., the authorized representative of Harris & Associates, the' duly appointed ENGINEER OF WORK, submit herewith the "Report" consisting of six (6) parts as follows: ,......, PART A Plans and specifications for the improvements showing and describing the general nature, location and extent of the improvements. PART B An estimate of the cost of the proposed improvements for FY 2006-0q including incidental costs and expenses in connection therewith. PARTC An assessment of the estimated cost of the improvements on each benefited lot or parcel of land within the Assessment District. ,......, q:\elsinore\lImd1\fonnation\new district\annex no. 11 IImd engineer's report.doc ACENDA ITE~ _~. PACE IL( 1 OF ?S Annexation No. 11, City of lake Elsinore landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page.2 ~ PARTD The method of apportionment of assessments, indicating the proposed assessment of the total amount of the costs and expenses of the improvements upon the several lots and parcels of land within the Assessment District, in proportion to the estimated benefits to be received by such lots and parcels. PART E A list of the names and addresses of the owners of real property within the Assessment District, as shown on the last equalized roll of the Assessor of the County of Riverside. PARTF The Diagram of the Assessment District Boundaries showing the exterior boundaries of the Assessment District, the boundaries of any zones within the Assessment District and the lines and dimensions of each lot or parcel of land within the Assessment District. ,.--. ",- q:\elsinore\lImd1\formation\new district\annex no. 1111md engineer's report.doc ACENDA ITEM NO. PACE Iv; 1 OF :P5 Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 3 PART A PLANS AND SPECIFICATIONS '-'III' The facilities will be operated, serviced and maintained as generally described as follows: DESCRIPTION OF IMPROVEMENTS, FY 2006-07 The facilities to be maintained and serviced include landscaping for the specific Maintenance District as described herein. Facilities include but are not limited to: landscaping, planting, shrubbery, trees, turf, irrigation systems, hardscapes, fixtures, and appurtenant facilities, in public rights-of-way, parkways, slopes and dedicated easements within the boundaries of said Maintenance District. Zone 1 (the original District) - Encompasses the Water Ridge Development and funds landscape and street lighting maintenance and operations. Zone 2 (Annexation No.1) - Encompasses the Elsinore Homes Development and funds landscape and street lighting maintenance and operations. Zone 3 (Annexation No.2) - Encompasses the Pepper Grove Development and funds landscape and street lighting maintenance and operations. Zone 4 (Annexation No.3) - Encompasses the Serenity Development and funds landscape and street lighting maintenance and operations. Zone 5 (Annexation No.4) - Encompasses the Rosetta Canyon Development and funds street lighting maintenance and operations. '-'III' Zone 6 (Annexation No.5) - Encompasses the La Laguna Phase 3 Development and funds street lighting maintenance and operations. Zone 7 (Annexation No. 6) - Encompasses Tract 28214 of the Alberhill Ranch Development and funds street lighting maintenance and operations. Zone 8 (Annexation No.7) - Encompasses Tract 326m of the Belcaro Development and funds landscape maintenance and operations. Zone 9 (Annexation No.8) - Encompasses Tract 320m of the La Strada Development and funds street lighting maintenance and operations. Zone 10 (Annexation No.9) - Encompasses Tracts 30698 and 32129 of the Clurman-owned development and funds street lighting maintenance and operations. Zone 11 (Annexation No. 10) - Encompasses Tract 31920-1 of the Summerly Development and funds park landscaping and street lighting maintenance and operations. ......, q:\elslnorelllmd1Ifonnalion\new dislricl\annex no. 11 IImd engineer's report.doc AGENDA ITEM NO. PAGE t {j7 _p -:J OF :>5 Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 4 r-- Zone 12 (Annexation No. 11) - Encompasses Tract 31950 of the development owned by Lake Elsinore 80 SFR LLC and funds landscaping and street lighting maintenance and operations. The facilities in Zone 12 are specifically described as follows: . Landscaping within the public right-of-way, approximately 116,531 square feet including: - Parkways, approximately 43,098 square feet Water quality basin, approximately 30,966 square feet 15' wide decomposed granite recreation trail, approximately 42,46 0 square feet . Street lights within the public right-of-way (24 street lights) Maintenance means the furnishing of services and materials for the ordinary and usual maintenance, operation and servicing of the landscaping and appurtenant facilities, including repair, removal or replacement of all or part of any of the landscaping or appurtenant facilities; providing for the life, growth, health and beauty of the landscaping, including cultivation, irrigation, trimming, spraying, fertilizing and treating for disease or injury; the removal of trimmings, rubbish, debris and other solid waste; and the cleaning, sandblasting, and painting of walls and other improvements to remove or cover graffiti. ~ Servicing means the furnishing of water for the irrigation of the landscaping and the maintenance of any of the lighting facilities or appurtenant facilities and the furnishing of electric current or energy, gas or other illuminating agent for the lighting facilities, or for the lighting or operation of the landscaping or appurtenant facilities. The plans and specifications for the improvements, showing and describing the general nature, location, and the extent of the improvements, are on file in the office of the Director of Public Works and are incorporated herein by reference. ,,-.. q:\elsinore\llmd1\formation\new districtlannex no. 1111md engineer's report.doc AOENDA ITEM NO. PAOE n 7 OF ?5 Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 5 PART B ESTIMATE OF COST The estimated cost of the operation, servicing and maintenance of the landscaping and street light improvements for Fiscal Year 2006-00 as described in Part A, are summarized herein and described below. ANNEXATION NO. 11 to the LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 ProDosed Bud2et - Fiscal Year 2006-07 Zone 12, Fiscal Year 2006-0 o Estimated Costs Landscaping Operations and Maintenance Reserve (50%) Administration Sub-Total $ 20553.[0 $ 13,IT6.85 $ 500.00 $ 41,830.55 Street Lighting Operations and Maintenance Reserve (50%) Administration Sub-Total $ 4,425.80 $ 2,212.90 $ 500.00 $ 0138.[0 Total Estimated Costs $ 48,969.25 The 19 [2 Act requires that a special fund be set up for the revenues and expenditures of the District. Funds raised by assessment shall be used only for the purpose as stated herein. A contribution to the District by the City may be made to reduce assessments, as the City Council deems appropriate. Any balance or deficit remaining on July 1 must be carried over to the next fiscal year. q:\elsinore\llmd1\formation\new districtlannex no. 1111md engineer's report.doc ACENDA ITEM NO. PACE 1$ ......" ......" ......" 7 /' OF ;:n Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 6 ,-. PART C ASSESSMENT ROLL The total proposed assessment for Fiscal Year 2006-00 and the amount of the total proposed assessment apportioned to each lot or parcel within Zone 12 of the District, as shown on the latest assessment roll at the Riverside County Assessor's Office, are contained in the Assessment Roll provided below. The description of each lot or parcel is part of the Riverside County assessment roll and this roll is, by reference, made part of this Report. Assessor's Parcel Number Facilitv 391-C90-002} 391-C90-003 Landscaping Street Lighting Grand Total: EDU's FY 2006-00 Max. Asmt 100.00 100.00 $41,831.00 $0139.00 $48,9rn.00 *The maximum assessment is $0. CD more than the estimated budget due to rounding of the assessment per dwelling unit. ~ ,-. q:\elsinorelllmd1\formationlnew district\annex no. 11 IImd en9inee~s report.doc AGENDA ITEM NO. 1 PAGE /q OF ~ Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 7 PART D METHOD OF APPORTIONMENT OF ASSESSMENT GENERAL Part 2 of Division 15 of the Streets and Highways Code, the Landscaping and Lighting Act of 19 [2, permits the establishment of assessment district by cities for the purpose of providing certain public improvements which include construction, operation, maintenance and servicing of street lights, traffic signals and landscaping. Section 22503 of the Landscaping and Lighting Act of 19[2 (the 19[2 Act) requires that maintenance assessments be levied according to benefit rather than according to assessed value. This section states: "The net amount to be assessed upon lands within an assessment district may be apportioned by any formula or method which fairly distributes the net amount among all assessable lots or parcels in proportion to the estimated benefits to be received by each such lot or parcel from the improvements. " The 19 [2 Act permits the designation of zones of benefit within any individual assessment district if "by reason of variations in the nature, location, and extent of the improvements, the various areas will receive different degrees of benefit from the improvements." (Sec. 225m). Thus, the 19[2 Act requires the levy of a true "assessment" based on the actual benefit rather than a "special tax." In addition, Proposition 218, the "Right to Vote on Taxes Act" which was approved on the November 1996 Statewide ballot and added Article xmD to the California Constitution, requires that a parcel's assessment may not exceed the reasonable cost of the proportional special benefit conferred on that parcel. Article XIIID provides that only special benefits are assessable and the City must separate the general benefits from the special benefits. Article xmD also requires that publicly owned property which benefit from the improvements be assessed. REASON FOR THE ASSESSMENT The assessment is proposed to be levied to pay for the costs of the construction, servicing and maintenance of landscaping, street lighting and appurtenant improvements within the District. SPECIAL BENEFIT ANALYSIS Street Landscaping, Slopes and Greenbelts. Trees, landscaping, hardscaping and appurtenant facilities, if well maintained, provide beautification, shade and enhancement of the desirability of the surroundings, and therefore increase property value. In Parkwavs and Land Values, written by John Nolan and Henry V. Hubbard in 193q it is stated: "... there is no lack of opinion, based on general principals and experience and common sense, that parkways do in fact add value to property, even though the amount cannot be determined exactly.... Indeed, in most cases where public money has been spent for parkways the assumption has been definitely made that the proposed parkway will show a provable q:\elsinore\Jlmd1\formatlon\new district\annex no. 11 IImd en9inee~s report.doc ACENDA ITEM NO. PAGE ()D ~ "-'" ......, 7 OF ;n Annexation No. 11, City of lake Elsinore landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 8 /""" financial profit to the City. It has been believed that the establishment of parkways causes a rise in real estate values throughout the City, or in parts of the City,..." It should be noted that the defmition of "parkways" above may include the roadway as well as the landscaping along side the roadway. The ongoing operation and maintenance of the street landscaping, slopes and greenways within the individual district, as identified in Part A of this Report, provide beautification to the areas that result in a special benefit to the parcels within the tracts adjacent to the improvements. If these landscaped areas were not properly maintained, the tract would be blighted. The City of Lake Elsinore considers the maintenance and upkeep of parkways and adjacent slopes to be the responsibility of the adjacent development due to the added beautification of the local community which extends to the perimeter of the development. Street Lighting. Proper maintenance and operation of the streetlights benefit all properties within the District by providing security, safety and community character and vitality as outlined below. Streetlights provide only incidental benefits to motorists traveling to, from or through the area. BENEFITS OF STREET LIGHTING ,--. Security and Safety . Mitigates crime · Alleviates the fear of crime · Enhances safe ingress/egress to property Community Character and Vitality · Promotes social interaction · Promotes business and industry · Contributes to a positive nighttime visual image Improvements that provide a special benefit to an isolated group of parcels of land located within the District are considered to be a localized benefit, and the costs associated with these improvements are assessed to all assessable parcels receiving the localized benefit. Localized benefits include the construction, operation, servicing and maintenance of the improvements that only benefit the parcels located within the localized areas. Localized Improvements - Parcels that have localized landscaping such as entryway landscaping, parkway landscaping, etc., and street lighting adjacent to or near their parcels directly benefit from the improvements and are assessed for the costs of the localized improvements. ASSESSMENT METHODOLOGY Zone 12 The parcels of land in Zone 12 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the landscaping and street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the assessment apportionment for Zone 12. ~ q:lelsinore\llmd1lforrnationlnew district\annex no. 1111md engineer's reporldoc ACENDA ITEM NO. 7 PAGEA-OF ?) Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 9 The table below provides the assessment apportionment for Zone 12. EDU's 100.00 100.00 ,....." Total Max. Asmt For District $41,831.00 $7,139.00 $48,970.00 * The maximum annual maintenance assessments shall be increased each year by 2%. The actual assessments levied in any fiscal year will be as approved by the City Council and may not exceed the maximum assessment rate without receiving property owner approval for the increase. ,....." ........, q:\elsinore\llmd1\fonnalion\new dislricl\annex no. 1111md enginee~s report.doc &c~NilM'fEtII NO._ '122 DAGE_d-d: _OF___ v- Annexation No. 11, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 10 ,--. PART E PROPERTY OWNER LIST A list of names and addresses of the owners of all parcels within this District is shown on the last equalized Property Tax Roll of the Assessor of the County of Riverside. which by reference is hereby made a part of this report. This list is keyed to the Assessor's Parcel Numbers as shown on the Assessment Roll. Part C of this Report. PART F ASSESSMENT DISTRICT BOUNDARIES Diagrams showing the exterior boundaries of the District and the lines and dimensions of each lot or parcel of land within the District are provided on the following page. The lines and dimensions of each lot or parcel within the District are those lines and dimensions shown on the maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. The Assessor's maps and records are incorporated by reference herein and made part of this report. /""" "...- q:lelsinorelllmd1lfonnationlnew districtlannex no. 1111md engineer's report.doc ACENDA ITEM NO. 7 PACE ?7;J OF ~ - INTERSrATE' 15 SCALE: ,". 200' IIlJJIITNII $r VICINITY MAP NO SCALE WlEtQ D1SlNCT IICIUIlDMY TRACT 31957 APN'S: 391-790-002 39' -790-003 i ! j The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. Annexation No. 11 to the Landscape and Street Lighting Maintenance District No. 1 Assessment Diagram Page 1 of 1 ....., ~~ ~s li~ ....., """" 7 OF (JCj-- ..--. ~, ,-., I I / QUANTITIES _ RECREAnONAl TRAil: -------- 42,467 5.. - 4' WIDE PARKWAY lANDSCAPING:-- 43,098S.F. - WATER QUALITY BASIN:-------- 30,966 5.. .. STREET lIGHTS:------------- 24 EA. , , / ~ I r.-U ,~ ~ 1--80' I I / I I / 93 I I / 92 ,.. I I I / 91 I I 90 / 89 / / I I / 88 87 88 85 I 84 I I / 93 82 81 80 I , / , , 74 75 PREPARCO BY: PR(pAlfCl) FOft. r~KELLER CON$U\.riNG iNG ""-- """''''''~;--''-=~I &iiiiII FORTLAND, INC. 67U__ ....'''.-.1_ .......0._ _NI.....tQl .c.t. NO. C ...", ~ TO: FROM: DA TE: SUBJECT: ,,--, BACKGROUND CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL MAYOR AND CITY COUNCIL ROBERT A. BRADY, CITY MANAGER JUNE 27,2006 RESOLUTION INITIATING PROCEEDINGS AND APPROVING THE ENGINEER'S REPORT FOR THE ANNEXATION OF CERTAIN TERRITORY KNOWN AS TRACT 33370 INTO THE CITY OF LAKE ELSINORE LANDSCAPE AND STREET LIGHTING DISTRICT NO. 1, AS LLMD ANNEXATION NO. 12 (TESSERA), DECLARING THE CITY'S INTENTION TO ORDER THE ANNEXATION AND TO LEVY AND COLLECT ASSESSMENTS, DETERMINING THAT THESE PROCEEDINGS SHALL BE TAKEN PURSUANT TO THE LANDSCAPING AND LIGHTING ACT OF 1972 AND THE RIGHT TO VOTE ON TAXES ACT, AND OFFERING A TIME AND PLACE FOR HEARING OBJECTIONS THERETO As a condition of approval, the City has required the Tessera development to be annexed into the Landscape and Street Lighting District No.1. New developments are annexed into Landscape and Street Lighting District No.1 if a development will have public right-of-way landscaped areas maintained by the City or if there are more than three street lights in the public right-of-way. DISCUSSION Attached is the Engineer's report for the Lake Elsinore Landscape and Street Lighting Maintenance District Annexation No. 12 (Tessera) prepared by Harris and Associates. The district annexation includes the Tessera development which ACENDA ITEM NO. q PAGE I OF?l(--t. ~, REPORT TO CITY COUNCIL JUNE 27,2006 PAGE 2 ....." contains approximately 7 street lights. The total annual cost of operations and maintenance for Landscaping is estimated at $4,842.91 or $53.81 per dwelling unit. The total annual cost of operations and maintenance for Street Lighting is estimated at $1,790.86 or $19.90 per dwelling unit. The estimated landscaping cost for the first year includes a 50% reserve of $2, 171.46, bringing the total to $7,014.37 or $77.94 per dwelling unit. The estimated street lighting cost for the first year includes a 50% reserve of $645.43, bringing the total to $2,436.29 or $27.08 per dwelling unit. The 1972 Act requires that a special fund be set up for the revenues and expenditures of the District and each annexation or zone tracked separately. Any balance or deficit remaining on July 1 must be carried over to the next fiscal year. The City Council may approve up to a two percent (2%) fixed rate adjustment annually. The rate adjustment will adjust the Maximum rate but not necessarily the assessment rate. If costs begin to exceed assessment revenue, the City Council may increase the assessment up to the Maximum. ....." FISCAL IMPACT The City is not negatively impacted by the annexation or continuation of the district. In addition to the operating costs of the district, the special tax would be levied annually to sufficiently finance the costs of administering the levy, collection of the special tax and all other costs of the levy of the special tax. The City will be, however, positively impacted with the funding for electricity and street lighting maintenance. PROCESS The annexation of the Landscape and Street Lighting District Annexation No. 12 (Tessera) requires a specific process as outlined in the attached resolution. The City Council will need to hold a public hearing on the annexation of certain territory into LLMD No. I and the participating property owner will have the opportunity to vote. The public hearing can be scheduled for August 8, 2006. ......" AGENDA ITEM NO. PAGE ?- 6 OF -2:L ---- REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 3 RECOMMENDATION It is recommended that City Council: 1. Approve the Engineer's Report for Annexation No. 12 (Tessera) to LLMD No.1 2. Adopt the Resolution 2006 -~ of Intention to Annex into LLMD No. 1 3. Schedule the public hearing on the District Formation for August 8, 2006 PREPARED BY, ~. MATT N. PRESSEY DIRECTOR OF ADMINISTRATIVE SERVICES ---, APPROVED FOR AGENDA BY: /"""" ACENDA ITEM NO. r PACE 3 OF 2:L ......., TRACT 33370 APH: 373-(171-018 ......., t; I >t ~.. SCALE: TO. 7S' INIDHIJIIE fJII \/lClNlTY MAP NO SCALE WIEtQ OlSlRICT IlQlIlDNlY The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. Annexation No. 12 to the Landscape and Street Lighting Maintenance District No.1 Assessment Diagram Page 1 of 1 ......., ~ - /""" RESOLUTION NO. 2006-~ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, INITIATING PROCEEDINGS AND APPROVING THE ENGINEER'S REPORT FOR THE ANNEXATION OF CERTAIN TERRITORY KNOWN AS TRACT 33370 INTO THE CITY OF LAKE ELSINORE LANDSCAPE AND STREET LIGHTING DISTRICT NO.1, AS ANNEXATION NO. 12 (TESSERA) TO THE LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1, DECLARING THE CITY'S INTENTION TO ORDER THE ANNEXATION AND TO LEVY AND COLLECT ASSESSMENTS, DETERMINING THAT THESE PROCEEDINGS SHALL BE TAKEN PURSUANT TO THE LANDSCAPING AND LIGHTING ACT OF 1972 AND THE RIGHT TO VOTE ON TAXES ACT, AND OFFERING A TIME AND PLACE FOR HEARING OBJECTIONS THERETO WHEREAS, the City Council of the City of Lake Elsinore, pursuant to the provisions of the Landscaping and Lighting Act of 1972 being Division 15 of the Streets and Highways Code of the State of California (the "Act"), desires to initiate proceedings for the annexation of certain territory (the "Annexed Area") to the Landscape and Street Lighting District No. 1 (the "District"), and declares the City's intention to order the annexation of the Annexed Area for the levy and collection of annual assessment within the Annexed Area for Fiscal Year 2006/2007 for the purposes provided therefore in the Act; and WHEREAS, MVV, L.P. (hereinafter referred to as the "Developer") is the sole owner of that certain real property located in the City of Lake Elsinore, County of Riverside, State of California, more particularly described as follows: Legal Description: Tract 33370, in the City of Lake Elsinore, County of Riverside, State of California, currently known as Assessor Parcel No. 373-071-018; and WHEREAS, the Developer is developing the Property as a single family residential development (hereinafter referred to as the "Project"); and WHEREAS, the improvements to be installed, constructed, or maintained within the proposed Annexed Area may include installation, construction, or ACENDA ITEM NO. PACE 5 g OF~ CITY COUNCIL RESOLUTION NO. 2006- Page 2 of5 maintenance of any authorized improvements under the Act, including, but not .....,. limited to, landscaping and streetlight improvements and any facilities which are appurtenant to any of the aforementioned or which are necessary or convenient for the maintenance or servicing thereof; and WHEREAS, Section 22608 of the Act limits the requirement for the resolutions, Engineer's Report, notices of hearing, and right of majority protest under the Act to the territory included within the annexation and waives these requirements with the written consent of all of the owners of property within the territory to be annexed; and WHEREAS, Proposition 218, the Right to Vote on Taxes Act, does hereby require that a notice of the proposed assessment along with a ballot shall be mailed to all owners of identified parcels within the Annexed Area and that the agency shall conduct a public hearing not less than 45 days after the mailing of said notice; and WHEREAS, the Annexation consists of the development known as Assessor Parcel No. 373-071-018; and WHEREAS, the developer has submitted a petition to the City requesting to ....,. have the development annexed into the Landscape and Street Lighting District No. 1; and WHEREAS, the developer, as stated in the petition, may waive all statutory notices of hearing and rights of majority protest by any interested property owners within the Annexation; and WHEREAS, the City has prepared a diagram attached as Exhibit "A," which is designated Proposed Annexation No. 12 (Tessera) to the Lake Elsinore Landscape and Street Lighting Maintenance District No. I and an assessment showing the proposed boundaries of the. territory to be annexed into the District, which is benefited by the construction of the improvements and the amount to be assessed against each of the parcels within the proposed annexation to the District; and WHEREAS, the City has ordered the preparation of an Engineer's Report in accordance with Article 4 (commencing with Section 22565) of Chapter I of the Streets and Highways Code giving a description of the annexation; and ,..., AGENDA ITEM NO.J--;::-r- PAGE LR OF )y - CITY COUNCIL RESOLUTION NO. 2006-_ Page 3 of5 ".-- WHEREAS, the Engineer's Report, diagram, and assessments have been approved and filed with the City Clerk and are open to public inspection and may be referred to for all details regarding the improvements, the boundary of the proposed annexation, the assessments, total costs, and description of the parcels to be assessed; and WHEREAS, this City Council has examined and considered the Engineer's Report, diagram, assessments, and the proceedings prior thereto. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. That the above recitals are true and correct. ~ SECTION 2. The City Council hereby finds (1) that the public interest, convenience, and necessity require the maintenance of a landscaping and street lighting system; and (2) declares its intention to order the formation of the. Annexation and to levy and collect assessments against the assessable lots and/or parcels of land within such Annexation for that portion of the fiscal year commencing July 1,2006 and ending June 30, 2007, to pay the costs and expenses of the maintenance of improvements described below. If the assessments proposed by this resolution are approved by the property owners pursuant to a mailed ballot election conducted in accordance with Article XIII D of the California Constitution, the City Council in subsequent fiscal years may thereafter impose the assessment at any rate or amount that is less than or equal to the amount authorized for Fiscal Year 2006/2007, without conducting another mailed ballot election. SECTION 3. That the City Council hereby proposes to annex to Landscape and Street Lighting District No.1 the Annexed Area located at Tract 33370, also known as Assessor Parcel No. 373-071-018, and to levy annual assessments thereon to provide for the following work: Installation, construction, or maintenance of any authorized improvements under the Act, including, but not limited to, landscaping and streetlight improvements and any facilities which are appurtenant to any of the aforementioned or which are necessary or convenient for the maintenance or servicing thereof. ".-- ACENDA ITEM NO, PACE 1 1 OFK CITY COUNCIL RESOLUTION NO. 2006- Page 4 of5 The distinctive designation for the proposed Annexed Area shall be ......, "Annexation No. 12 (Tessera) to the Lake Elsinore Landscape and Street Lighting Maintenance District No.1", when referred to separately and upon annexation will be included in the designation of Landscape and Street Lighting District No.1. SECTION 4. That the Property Owner has provided the City Council of the City of Lake Elsinore a petition fully signed and notarized, waiving all statutory notices of hearing and notice periods, granting the City the right to maintain and service the improvements and gives consent to the establishment of an assessment for the proposed annexation of the property into the District in an amount reasonably determined by the City to cover all costs and expenses incurred for the continued maintenance, operation, and servicing of the improvements. SECTIO.N 5. A Diagram for the District (Section 22570 of the Streets and Highways Code) and an assessment (Section 22572 of the Streets and Highways Code) showing the area to be annexed, benefited, and assessed for the improvements has been prepared as Exhibit "A." The diagram, assessment, and improvement plans have been filed with the City Clerk. SECTION 6. The diagram, which indicates by a boundary line the extent of the territory proposed to be annexed into the District, is hereby declared to describe '--' the proposed boundaries of the proposed annexation to the District and shall govern for all details as to the extent and location of said annexation. SECTION 7. That the City Council is satisfied with the correctness of the diagram and assessment, including the proceedings and all matters relating thereto. SECTION 8. That notice is hereby given that on the 8th day of August, 2006, at the hour of7:00 p.m., or as soon thereafter as possible, in the City Council Chambers, in the City of Lake Elsinore, the City will hold a public hearing to receive and tabulate all ballots with reference to the Annexed Area pursuant to the Right to Vote On Taxes Act. SECTION 9. The City Clerk shall certify to the adoption of this Resolution. SECTION 10. This Resolution shall take effect from and after the date of its passage and adoption. '--' ACENDA ITEM NO. l' PAGE <)5 OF;;1-l.{--, CITY COUNCIL RESOLUTION NO. 2006-_ Page 5 of5 r"' PASSED, APPROVED AND ADOPTED this 27th day of June, 2006, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ATTEST: ",-. Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore ,,-., Robert E. Magee, Mayor City of Lake Elsinore ACENDA ITEM NO. PAOE CJ r I OF Jl( EXHIBIT A """"" ANNEXATION NO. 12 (TESSERA) TO LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 tRACT 33370 APN: 373-071-018 """'" PROJECT SITE OI! ~~ i ~ SCAlE; 1"- 75' INID/ICIIE l1li V1QNlTY MAP NO SCALE WiEtIIl _r_ """'" ACENDA ITEM NO. i PACE ID~ Engineer's Report for Annexation No. 12 to the Lake Elsinore Landscape and Street Lighting Maintenance District No.1 (Tessera) City of Lake Elsinore Riverside County, California Prepared by: . Harris & Assodates June 14, 2006 AGENDA ITEM NO. <{ PACE 1/ OF J-l4 = Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page i ENGINEER'S REPORT ANNEXATION NO. 12 to the LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 J The undersigned respectfully submits the enclosed report as directed by the City Council. The undersigned certifies that she is a Professional Engineer, registered in the State of California. DATED: June 14,2006 BY: Joan E. Cox R.C.E. No. 41965 I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Diagram thereto attached, was filed with me on the _ day of , 2006. City Clerk, City of Lake Elsinore Riverside County, California By I HEREBY CERTIFY that the enclosed Engineer's Report, together with Assessment Roll and Diagram thereto attached, was approved and confirmed by the City Council of the City of Lake Elsinore, California, on the _ day of , 2006. J City Clerk, City of Lake Elsinore Riverside County, California By J q:\elsinore~lmd1\formation\new district\annex no. 12 IImd engineer's report.doc AGENDA ITEM NO. PACE (1- 1 OF ~L( _ Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page ii I""""" ENGINEER'S REPORT ANNEXATION NO. 12 to the LAKE ELSINORE LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 TABLE OF CONTENTS Certificates...................................................... .............................. ..................... i Report.................................................................. ....................... ...................... 1 Part A - Plans and Specifications .........................................................3 Part B - Estimate of Cost...................................................................... 5 Part C - Assessment Roll ..................................................................... 6 Part D - Method of Apportionment of Assessment.............................. 0 Part E - Property Owner List.............................................................. 10 Part F - Assessment District Boundary .............................................. 10 ~ I""""" q:\elsinore\lImd1\formalion\new dislricl\annex no. 12 IImd engineer's report.doc AGENDA ITEM NO. PAGE I 3 <t OF ~ c.f Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 1 CITY OF LAKE ELSINORE ,...., ENGINEER'S REPORT Prepared Pursuant to the Provisions of the Landscaping and Lighting Act of 1972 (California Streets and Highways Code Section 22500 through 22679), Article XIIID of The California Constitution, and The Proposition 218 Omnibus Implementation Act (California Government Code Section 53750 Et Seq.) Pursuant to Part 2 of Division 15 of the Streets and Highways Code of the State of California, Article XIIID of the California Constitution, the Proposition 218 Omnibus Implementation Act and in accordance with the Resolution of Initiation adopted by the Council of the City of Lake Elsinore, State of California, in connection with the proceedings for: CITY OF LAKE ELSINORE ANNEXATION NO. 12 to the LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 hereinafter referred to as the "Assessment District" or "District", I, Joan E. Cox, P.E., the authorized representative of Hams & Associates, the duly appointed ENGINEER OF WORK, submit herewith the "Report" consisting of six (6) parts as follows: ~ PART A Plans and specifications for the improvements showing and. describing the general nature, location and extent of the improvements. PART B An estimate of the cost of the proposed improvements for FY 2006-0q including incidental costs and expenses in connection therewith. PARTC An assessment of the estimated cost of the improvements on each benefited lot or parcel of land within the Assessment District. q:\elsinorelllmd1\formationlnew district\annex no. 12 IImd engineer's report.doc AGENDA ITEM NO. PACE /4- i OF J. <-L ...., Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 2 ,-.... PART D The method of apportionment of assessments, indicating the proposed assessment of the total amount of the costs and expenses of the improvements upon the several lots and parcels of land within the Assessment District, in proportion to the estimated benefits to be received by such lots and parcels. PART E A list of the names and addresses of the owners of real property within the Assessment District, as shown on the last equalized roll of the Assessor of the County of Riverside. PARTF The Diagram of the Assessment District Boundaries showing the exterior boundaries of the Assessment District, the boundaries of any zones within the Assessment District and the lines and dimensions of each lot or parcel of land within the Assessment District. ,-.... ,-- q:lelsinorelllmd1lformationlnew dislricllannex no. 12 IImd engineer's report.doc ACENOA ITEM NO. <J' PACE /5 OF :1-4 - Annexation No. 12, City of lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 3 PART A PLANS AND SPECIFICATIONS ""'" The facilities will be operated, serviced and maintained as generally described as follows: DESCRIPTION OF IMPROVEMENTS, FY 2006-07 The facilities to be maintained and serviced include landscaping for the specific Maintenance District as described herein. Facilities include but are not limited to: landscaping, planting, shrubbery, trees, turf, irrigation systems, hardscapes, fixtures, and appurtenant facilities, in public rights-of-way, parkways, slopes and dedicated easements within the boundaries of said Maintenance District. Zone 1 (the original District) - Encompasses the Water Ridge Development and funds landscape and street lighting maintenance and operations. Zone 2 (Annexation No.1) - Encompasses the Elsinore Homes Development and funds landscape and street lighting maintenance and operations. Zone 3 (Annexation No.2) - Encompasses the Pepper Grove Development and funds landscape and street lighting maintenance and operations. Zone 4 (Annexation ,No.3) - Encompasses the Serenity Development and funds landscape and street lighting maintenance and operations. Zone 5 (Annexation No.4) - Encompasses the Rosetta Canyon Development and funds street ""'" lighting maintenance and operations. Zone 6 (Annexation No. S) - Encompasses the La Laguna Phase 3 Development and funds street lighting maintenance and operations. Zone 7 (Annexation No.6) - Encompasses Tract 28214 of the Alberhill Ranch Development and funds street lighting maintenance and operations. Zone 8 (Annexation No.7) - Encompasses Tract 326m of the Belcaro Development and funds landscape maintenance and operations. Zone 9 (Annexation No.8) - Encompasses Tract 320m of the La Strada Development and funds street lighting maintenance and operations. Zone 10 (Annexation No.9) - Encompasses Tracts 30698 and 32129 of the Clurman-owned development and funds street lighting maintenance and operations. Zone 11 (Annexation No. 10) - Encompasses Tract 31920-1 of the Summerly Development and funds park landscaping and street lighting maintenance and operations. ""'" q:lelsinorelllmd1lformationlnew districtlannex no. 12 IImd enginee~s report.doc AGENDA ITEM NO. <{ PAGE / (p O~ Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 4 .r- Zone 12 (Annexation No. 11) - Encompasses Tract 31950 of the development owned by Lake Elsinore 80 SFR LLC and funds landscaping and street lighting maintenance and operations. Zone 13 (Annexation No. 12) - Encompasses Tract 333 CD of the Tessera Development and funds landscaping and street lighting maintenance and operations. The facilities in Zone 13 are specifically described as follows: . Landscaping within the public right-of-way, approximately 13,100 square feet including: . Street lights within the public right-of-way (Ostreet lights) Maintenance means the furnishing of services and materials for the ordinary and usual maintenance, operation and servicing of the landscaping and appurtenant facilities, including repair, removal or replacement of all or part of any of the landscaping or appurtenant facilities; providing for the life, growth, health and beauty of the landscaping, including cultivation, irrigation, trimming, spraying, fertilizing and treating for disease or injury; the removal of trimmings, rubbish, debris and other solid waste; and the cleaning, sandblasting, and painting of walls and other improvements to remove or cover graffiti. Servicing means the furnishing of water for the irrigation of the landscaping and the maintenance of any of the lighting facilities or appurtenant facilities and the furnishing of electric current or energy, gas or other illuminating agent for the lighting facilities, or for the lighting or operation of the landscaping or appurtenant facilities. /""' The plans and specifications for the improvements, showing and describing the general nature, location, and the extent of the improvements, are on file in the office of the Director of Public Works and are incorporated herein by reference. "....... q:lelsinorelllmd1lformationlnew districtlannex no. 12 IImd engineer's reportdoc <( AGENDA ITEM NO._ ~ PACE_ r7 OF _d- - If Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 5 PART B ESTIMATE OF COST ....., The estimated cost of the operation, servicing and maintenance of the landscaping and street light improvements for Fiscal Year 2006-0q as described in Part A, are summarized herein and described below. ANNEXATION NO. 12 to the LANDSCAPE AND STREET LIGHTING MAINTENANCE DISTRICT NO.1 ProDosed Bud2et - Fiscal Year 2006-07 Zone 13, Fiscal Year 2006-0 o Estimated Costs Landscaping Operations and Maintenance Reserve (50%) Administration Sub-Total $ 4,342.91 $ 2,101.46 $ 500.00 $ q014.30 Street Lighting: Operations and Maintenance Reserve (50%) Administration Sub-Total $ 1,290.86 $ 645.43 $ 500.00 $ 2,436.29 ....., Total Estimated Costs $ 9,450.66 The 19 rn Act requires that a special fund be set up for the revenues and expenditures of the District. Funds raised by assessment shall be used only for the purpose as stated herein. A contribution to the District by the City may be made to reduce assessments, as the City Council deems appropriate. Any balance or deficit remaining on July 1 must be carried over to the next fiscal year. q:lelsinore\llmd1Ifonnationlnew district\annex no. 1211md engineer's report.doc ....., AGENDA ITEM NO. rf. PAGE 1$ ~ Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 6 ,,-..- PART C ASSESSMENT ROLL The total proposed assessment for Fiscal Year 2006-00 and the amount of the total proposed assessment apportioned to each lot or parcel within Zone 13 of the District, as shown on the latest assessment roll at the Riverside County Assessor's Office, are contained in the Assessment Roll provided below. The description of each lot or parcel is part of the Riverside County assessment roll and this roll is, by reference, made part of this Report. Assessor's Parcel Number 3CB-oa-018 Facilitv Landscaping Street Lighting Grand Total: EDU's FY 2006-00 Max. Asmt 90.00 90.00 $0014.60 $2,43020 $9,451.80 *The maximum assessment IS $1.14 more than the estimated budget due to rounding of the assessment per dwelling unit. --- /""""- q:\elsinorelllmd1\formation\new district\annex no. 12 IImd enginee~s report.doc AGENDA ITEM NO. <6' PAGE 11 OF d-l.\ Annexation No. 12, City of lake Elsinore landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 7 PART D METHOD OF APPORTIONMENT OF ASSESSMENT ......" GENERAL Part 2 of Division 15 of the Streets and Highways Code, the Landscaping and Lighting Act of 19 [2, permits the establishment of assessment district by cities for the purpose of providing certain public improvements which include construction, operation, maintenance and servicing of street lights, traffic signals and landscaping. Section 22503 of the Landscaping and Lighting Act of 19[2 (the 19[2 Act) requires that maintenance assessments be levied according to benefit rather than according to assessed value. This section states: "The net amount to be assessed upon lands within an assessment district may be apportioned by any formula or method which fairly distributes the net amount among all assessable lots or parcels in proportion to the. estimated benefits to be received by each such lot or parcel from the improvements. " The 19 [2 Act permits the designation of zones of benefit within any individual assessment district if "by reason of variations in the nature, location, and extent of the improvements, the various areas will receive different degrees of benefit from the improvements." (Sec. 225m). Thus, the 19[2 Act requires the levy of a true "assessment" based on the actual benefit rather than a "special tax." In addition, Proposition 218, the "Right to Vote on Taxes Act" which was approved on the November 1996 Statewide ballot and added Article XIIID to the California Constitution, requires that a parcel's ......" assessment may not exceed the reasonable cost of the proportional special benefit conferred on that parcel. Article xmD provides that only special benefits are assessable and the City must separate the general benefits from the special benefits. Article xmD also requires that publicly owned property which benefit from the improvements be assessed. REASON FOR THE ASSESSMENT The assessment is proposed to be levied to pay for the costs of the construction, servicing and maintenance of landscaping, street lighting and appurtenant improvements within the District. SPECIAL BENEFIT ANALYSIS Street Landscaping, Slopes and Greenbelts. Trees, landscaping, hardscaping and appurtenant facilities, if well maintained, provide beautification, shade and enhancement of the desirability of the surroundings, and therefore increase property value. In Parkwavs and Land Values, written by John Nolan and Henry V. Hubbard in 193q it is stated: "... there is no lack of opinion, based on general principals and experience and common sense, that parkways do in fact add value to property, even though the amount cannot be determined exactly.... Indeed, in most cases where public money has been spent for parkways the assumption has been definitely made that the proposed parkway will show a provable ......" q:\elsinorelllmd1\formation\new district\annex no. 12 IImd engineer's report.doc AOENDA ITEM NO. PACE ~ <6 OF ?l\ Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 8 ,....- financial profit to the City. It has been believed that the establishment of parkways causes a rise in real estate values throughout the City, or in parts of the City,..." It should be noted that the defmition of "parkways" above may include the roadway as well as the landscaping along side the roadway. The ongoing operation and maintenance of the street landscaping, slopes and greenways within the individual district, as identified in Part A of this Report, provide beautification to the areas that result in a special benefit to the parcels within the tracts adjacent to the improvements. If these landscaped areas were not properly maintained, the tract would be blighted. The City of Lake Elsinore considers the maintenance and upkeep of parkways and adjacent slopes to be the responsibility of the adjacent development due to the added beautification of the local community which extends to the perimeter of the development. Street Lighting. Proper maintenance and operation of the streetlights benefit all properties within the District by providing security, safety and community character and vitality as outlined below. Streetlights provide only incidental benefits to motorists traveling to, from or through the area. BENEFITS OF STREET LIGHTING ~ Security and Safety . Mitigates crime . Alleviates the fear of crime . Enhances safe ingress/egress to property Community Character and Vitality . Promotes social interaction · Promotes business and industry · Contributes to a positive nighttime visual image Improvements that provide a special benefit to an isolated group of parcels of land located within the District are considered to be a localized benefit, and the costs associated with these improvements are assessed to all assessable parcels receiving the localized benefit. Localized benefits include the construction, operation, servicing and maintenance of the improvements that only benefit the parcels located within the localized areas. Localized Improvements - Parcels that have localized landscaping such as entryway landscaping, parkway landscaping, etc., and street lighting adjacent to or near their parcels directly benefit from the improvements and are assessed for the costs of the localized improvements. ASSESSMENT METHODOLOGY Zone 13 The parcels of land in Zone 13 are single family residential (SFR) lots, with each of these lots benefiting equally from the improvements being maintained. Therefore, the costs associated with the landscaping and street lighting within and directly adjacent to the development, as shown in Part B of this report, will be apportioned on a residential lot basis. The table below provides the assessment apportionment for Zone 13. ~, AOENDA ITEM NO. PACE J-I t OF~ q:lelsinorelllmd1lformationlnew districl\annex no. 1211md engineer's report.doc Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 9 The table below provides the assessment apportionment for Zone 13. EDU's 90.00 90.00 '''''' Facili Landscaping Street Li htin Total Max. Asmt For District $7,014.60 $2,437.20 $9,451.80 * The maximum annual maintenance assessments shall be increased each year by 2%. The actual assessments levied in any fiscal year will be as approved by the City Council and may not exceed the maximum assessment rate without receiving property owner approval for the increase. ......., q:lelsinorelllmd1lformationlnew districtlannex no. 12 IImd engineer's report.doc ......., ACENDA ITEM NO-_ ~ PACEJ /' OF ' Annexation No. 12, City of Lake Elsinore Landscape and Street Lighting Maintenance District No.1 June 14, 2006 Page 10 ,-- PART E PROPERTY OWNER LIST A list of names and addresses of the owners of all parcels within this District is shown on the last equalized Property Tax Roll of the Assessor of the County of Riverside, which by reference is hereby made a part of this report. This list is keyed to the Assessor's Parcel Numbers as shown on the Assessment Roll, Part C of this Report. PART F ASSESSMENT DISTRICT BOUNDARIES Diagrams showing the exterior boundaries of the District and the lines and dimensions of each lot or parcel of land within the District are provided on the following page. The lines and dimensions of each lot or parcel within the District are those lines and dimensions shown on the maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. The Assessor's maps and records are incorporated by reference herein and made part of this report. - ,-- q:\elsinore\lImd1\formalion\new dislrict\annex no. 1211md engineer's report.doc ACENDA ITEM NO. PACE ~? 1 OF at.{ ....., TRACT 33370 APH: 373-071-018 '"' l;; I :o! PROJECT SITE I/IIIQIfIFf lilY I ~ SCALE: 1"- 75' INIDHtJIIE IJII \/IQNlTY MAP NO SCAl.E I.EllEI!ID. -,- The parcel numbers above correspond to the Assessor's maps of the Assessor of the County of Riverside for Fiscal Year 2005-06. Annexation No. 12 to the Landscape and Street Lighting Maintenance District No. 1 Assessment Diagram Page 1 of 1 ....., PACE . y ~ CITY OF LAKE ELSINORE /""'" REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27,2006 SUBJECT: RESOLUTION OF INTENTION TO ANNEX PROPERTY INTO COMMUNITY FACILITIES DISTRICT NO. 2003-1 (LAW ENFORCEMENT, FIRE AND PARAMEDIC SERVICES) AND TO AUTHORIZE THE LEVY OF A SPECIAL TAX WITmN ANNEXATION AREA NO. 20 (TESSERA) BACKGROUND ____ On August 12,2003 the City Council approved Resolution 2003-37 establishing Community Facilities District No. 2003-1 (Law Enforcement, Fire, and Paramedic Services). The district levies a special tax for public safety costs above what already exist in the district. The City is requiring undeveloped parcels within the City that are developed with four or more residential dwelling units to be annexed into the service district. As a condition of approval, the City has required the project located on APN 373- 071-018, also known as Tessera, to be annexed into the Community Facilities District No. 2003-1. DISCUSSION A special tax will be levied in the amount of$159.18 per multi-family dwelling unit for fiscal year 2006-07. The amount of the special tax assessment maximum increases two percent annually. The Tessera project will add 90 attached multi-family dwelling units to the existing district boundary and generate about $14,326.20 annually once all the homes are ,-. built. The map of the proposed boundary is attached. ACENDA ITEM NO. PACE I q OF --W-.. REPORT TO THE CITY COUNCIL JUNE 27, 2006 PAGE 2 ......, FISCAL IMPACT The cost of law enforcement and fire services is approximately $750 per single- family dwelling unit. For each dwelling unit, only about $100 to $150 of property tax dollars will be generated. Property tax and other revenues that will be generated from the residents are not sufficient to fund the cost of public safety services and therefore the CFD 2003-1 special tax levy of$159.18 will assist the funding of the increased public safety service where the property tax is deficient. PROCESS The annexation into the district requires a specific process as outlined in the attached resolution. The City Council will need to hold a public hearing on the . annexation into CFD 2003-1 and the participating property owner will have the opportunity to vote. The public hearing can be scheduled for August 8, 2006. RECOMMENDATION ......, It is recommended that City Council: 1. Adopt the resolution of intention to Annex Property from Annexation Area No. 20 (Tessera) into the CFD 2003-1 2. Schedule the public hearing on Annexation Area No. 20 (Tessera) for August 8, 2006 PREPARED BY: ~~ MATT N. PRESSEY DIRECTOR OF ADMINISTRATIVE SER VICES CI APPROVED FOR AGENDA BY: AGENDA ITEM NO. 9 PAGE V OF II """"" -- ,,-.. ~ SCAlE: \.. 75' t; I >! ~q. r-. Wii:tIIl PROPOSED BOUNDARY OF ANNEXATION NO. 20 TO COMMUNITY FACILITIES DISTRICT No. 2003-1 OF THE CITY OF LAKE ELSINORE (LAW ENFORCEMENT. FIRE AND PARAMEDIC SERVICES) COUNTY OF RIVERSIDE. STATE OF CAUFORNIA ~sT LM/DIIIIIE .. lIIaNlTY MAP NO SCAU: IlISIIICT IIllUIIlMT TRACT 33370 APH: 373-071-018 fUD II lHE OffICE Of' lHE aTY CURK Of' lHE aTY Of' lAKE IlSINClRI: lIIS ---PAy Of' ---. aTY CUIlI( Of' lHE QlY Of' lAKE nsNllRE I HEIlEaY CElllIN _T lHE ._ _ _ lHE _ -.wa Of' ANNOA_ NO. 20 10 lX*MNTY 'ACIU1l[S IlIS1IlICT NO. _t, QlY Of' lAKE ~ CCIUNlY Of' 11I-' STAtE Of' ~ WAS -- 8Y lHE aTY CllUNClI. Of' lHE aTY Of' lAKE a-. AT A _Y SCHIJlUU]) ~ _Of', HELD ON lHE _ DAY Of' 2OOlI.. BT liS IlfSllWlION No. CITY CUM Of' lHE aTY Of' LNU: ELSIHORE FUD 1115 _ DAY Of' _ 2OOlI.. AT 1H[ ItClUIt Of' 0U0CIL..1I. II IIOOIt- Of' IIN'S Of' ~T Nfl) CllIlIlUNITY 'ACIU1l[S IlI51RIC1S PNI/E NOS.-lHROUGtt.....- AS _T NO IN 1H[ OffICE Of' 1H[ COUNTY _ II 1H[ CCIUNlY Of' RI1oOSIIlE, STAtE Of' ~ caJNlY ~ f1F 1HI' ClDUNlY Of" ,.ftIUII& m: ____ IlInIlfHCI: 1H[ __ COUNTY ~ IIIAPS fat A IlETAUD IlDCIIlI'1lON Of' PAlIUL IllES Nfl) __ PROPOSED BOUNDARY MAP _HARRIS Ie ASSOC1ATES :w___t5O _........CA ta,. (M) a-_ . FAX (M) 15S-3H5 ........tloD No. 20 to Commwdt,J raowUea DI8trict No. ZOO3-1 of u.. Ctt,J 01 lAke ........... (taw BDIorcemeDt, PInt &a. P.......lHlIc Sanl_) Count,> 01 Rl~~ Nli. _ 1 UP 1 q I I ~ RESOLUTION NO. 2006-~ RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, TO ANNEX PROPERTY INTO COMMUNITY FACILITIES DISTRICT NO. 2003-1 (LAW ENFORCEMENT, FIRE AND PARAMEDIC SERVICES) AND TO AUTHORIZE THE LEVY OF A SPECIAL TAX WITHIN ANNEXATION AREA NO. 20 (TESSERA) """'" WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has established City of Lake Elsinore Community Facilities District No. 2003-1 (Law Enforcement, Fire and Paramedic Services) (the "District") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, commencing with Section 53311 of the Government Code of the State of California (the "Act"); and WHEREAS, the District will finance law enforcement, fire and paramedic services that are in addition to those provided in the territory within the District prior to the formation of the District and do not supplant services already available within the territory proposed to be included in the District through the formation of the District subject to the levy of a special tax to pay for such services, being approved at an election to be held within the boundaries of the District; and WHEREAS, the Council has provided for the annexation in the future of territory (the "Future Annexation Area") to the District pursuant to the terms and provisions of the Act; and WHEREAS, the City has received a Consent and Waiver from MVV, L.P. requesting annexation of property owned by MVV, L.P., which constitutes a portion of the Future Annexation Area, into the District. """'" NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Council hereby determines to institute proceedings for the annexation of Annexation Area No. 20 (Tessera) ("Annexation Area No. 20") into the District under the terms of the Act. The exterior boundaries of the area to be annexed (Annexation Area No. 20) are hereby specified and described to be as shown on that certain map now on file in the office of the City Clerk entitled "Proposed Boundaries, City of Lake Elsinore, Community Facilities District No. 2003-1 (Law Enforcement, Fire and Paramedic Services), Annexation Area No. 20 (Tessera)," which map indicates by a boundary line the extent of the territory """'" ACENDA tTEM NO. PAGE . 4- 1 OF~ "...... ".-.. "....-, CITY COUNCIL RESOLUTION NO. 2006-_ Page 2 of5 included in Annexation Area No. 20 and shall govern for all details as to the extent of Annexation Area No. 20. On the original and one copy of the map of such Annexation Area No. 20 on file in the City Clerk's office, the City Clerk shall endorse the certificate evidencing the date and adoption of this Resolution. The City Clerk shall file the original of such map in his office and, within fifteen (15) days after the adoption of this Resolution, the City Clerk shall file a copy of such map so endorsed in the records of the County Recorder, County of Riverside, State of California. SECTION 2. The map showing Annexation Area No. 20, which area is to be subject to a special tax to be levied, is hereby approved and adopted. A certificate shall be endorsed on the original and on at least one copy of the map of Annexation Area No. 20, evidencing the date and adoption of this resolution. The City Clerk shall file the original of such map in his office and, within fifteen (15) days after the adoption of this Resolution, the City Clerk shall file a copy of such map so endorsed in the records of the County Recorder, County of Riverside, State of California. SECTION 3. The name of the proposed annexation area shall be "City of Lake Elsinore Community Facilities District No. 2003-1 (Law Enforcement, Fire and Paramedic Services), Annexation Area No. 20 (Tessera).H SECTION 4. Except where funds are otherwise available, it is the intention of the City Council to levy annually in accordance with procedures contained in the Act a special tax (the "Special TaxH) sufficient to finance law enforcement, fire and paramedic services that are in addition to those provided in the territory within Annexation Area No. 20 prior to the annexation of Annexation Area No. 20 into the District and do not supplant services already available within the territory proposed to be included in the District, the costs of administering the levy and collection of the Special Tax and all other costs of the levy of the Special Tax, including any foreclosure proceedings, legal, fiscal, and financial consultant fees, election costs, and all other administrative costs of the tax levy. The Special Tax will be secured by recordation of a continuing lien against all non-exempt real property in the proposed Annexation Area No. 20. The schedule of the rate and method of apportionment and manner of collection of the Special Tax is described in detail in Exhibit "AH attached hereto and by this reference incorporated herein. The annexation of Annexation Area No. 20 will not result in any change to the special tax rates levied in the District prior to such annexation. 9 AGENDA ITEM NO._ PAGE _ 6 OF ----LL- CITY COUNCIL RESOLUTION NO. 2006- Page 3 of5 The Special Tax is apportioned to each parcel on the foregoing basis ....., pursuant to Section 53325.3 of the Act and such Special Tax is not on or based upon the ownership of real property. The maximum Special Tax applicable to a parcel to be used for private residential purposes, as set forth in Exhibit A, is specified as a dollar amount which shall be calculated and established not later than the date on which the parcel is first subject to tax because of its use for private residential purposes, and such amount shall not be increased over time by an amount in excess of 2 percent per year. Under no circumstances will the Special Tax to be levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within the proposed Annexation Area No. 20 by more than 10 percent. As specified by the Act, for purposes of this paragraph, a parcel shall be considered "used for private residential purposes" not later than the date on which an occupancy permit for private residential use is issued. SECTION 5. A public hearing (the "Hearing") on the annexation of Annexation Area No. 20 and the proposed rate and method of apportionment of the Special Tax shall be held on August 8, 2006, at 7:00 o'clock p.m., or as soon thereafter as practicable, at the chambers of the City Council of the City of Lake Elsinore, 183 North Main Street, Lake Elsinore, California 92530. ~ SECTION 6. At the time and place set forth above for the hearing, any interested person, including all persons owning lands or registered to vote within the proposed Annexation Area No. 20, may appear and be heard. SECTION 7. Each City officer who is or will be responsible for the District, if it is established, is hereby directed to study the proposed Annexation Area No. 20 and, at or before the time of the above-mentioned Hearing, file a report with the City Council, which is to be made a part of the record of the Hearing, containing a brief description of Annexation Area No. 20 and his or her estimate of the cost of providing additional law enforcement, fire and paramedic services within the boundary of Annexation Area No. 20. The City Manager is directed to estimate the fair and reasonable cost of all incidental expenses, including all costs associated with the annexation of Annexation Area No. 20, determination of the amount of any special taxes, collection of any special taxes, or costs otherwise incurred in order to cany out the authorized purposes of the City with respect to the District. SECTION 8. The City may accept advances of funds from any sources, including private persons or private entities, and is authorized and directed to use such funds for any authorized purpose, including any cost incurred by the City in ~ ACENDA ITEM NO. c; PACE .tr OF I ( ~ CITY COUNCIL RESOLUTION NO. 2006-_ Page 4 of5 ~ annexing the proposed Annexation Area No. 20. The City may enter into an agreement to repay all of such funds as are not expended or committed for any authorized purpose at the time of the election on the levy of the Special Tax, if the proposal to levy such tax should fail, and to repay all of such funds advanced if the levy of the Special Tax shall be approved by the qualified electors of Annexation Area No. 20. -~ SECTION 9. The City Clerk is hereby directed to publish a notice ("Notice") of the Hearing pursuant to Section 6061 of the Government Code in a newspaper of general circulation published in the area of the proposed Annexation Area No. 20. Such Notice shall contain the text of this Resolution, state the time and place of the Hearing, a statement that the testimony of all interested persons or taxpayers will be heard, a description of the protest rights of the registered voters and landowners in the proposed Annexation Area No. 20 as provided in Section 5339.5 of the Act and a description of the proposed voting procedure for the election required by the Act. Such publication shall be completed at least 7 days prior to the date of the Hearing. SECTION 10. The voting procedure with respect to the establishment of the District and the imposition of the special tax shall be by mailed ballot election. SECTION 11. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED AND ADOPTED this 27th day of June, 2006, by the following vote. AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ~ AGENDA ITEM NO. If PACE.-1.-0F II -- CITY COUNCIL RESOLUTION NO. 2006- Page 5 of5 ATTEST: Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore ACiENDA ITEM NO. q ~ACE ~ OF II ....., ...." ....." .- EXHIBIT A ~ RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX /"', ,,-. AOENDA ITEM NO. 9' PAOE~OF 1/ -- CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-1 (LAW ENFORCEMENT, FIRE AND PARAMEDIC SERVICES) RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX ....". Introduction Special taxes shall be annually levied on all Developed Residential Property and Developed Multi-Family Property (as hereinafter defined) in the City of Lake Elsinore Community Facilities District No. 2003-1 (Law Enforcement, Fire and Paramedic Services) (the "District"), in accordance with the rate and method of apportionment of speci~l taxes hereinafter set forth. All of the property within the District that is not Developed Residential or Developed Multi-Family Residential Property shall be exempt from the Maximum Annual Special Taxes of the District. Definitions Assessor's Parcel. A parcel of land in the District designated and assigned a discrete identifying number on a map of the County Assessor of the County of ...." Riverside. City. City of Lake Elsinore, California. Developed Multi-Family Property. Assessor's Parcels in the District for which a building permit has been issued by the City on or prior to March 1 preceding the Fiscal Year for the construction of a Unit that is located or shall be located within a building in which each individual Units has or shall have at least one common wall with another Unit. Developed Residential Property. All other Assessor's Parcels in the District for which a building permit has been issued by the City on or prior to March 1 preceding any Fiscal Year for the construction of a Unit that is not Developed Multi-family Property. Fiscal Year. The period beginning on July 1 and ending on the following June 30. --' ~CENDA ITEM NO.~ PAOE-lO OF...J.L- Maximum Annual Special Taxes. The maximum annual special taxes levied ,-... within the District for any Fiscal Year. Unit. Each separate residential dwelling unit, which comprises an independent facility capable of conveyance or use separate from adjacent dwelling units. Rate and Method of Apportionment of Maximum Annual Special Taxes As of July 1 of each Fiscal Year, commencing July 1, 2003, the City shall determine which of the Assessor's Parcels within the District constitute Developed Residential Property or Developed Multi-Family Property. Beginning in Fiscal Year 2003-04, and all subsequent Fiscal Years, the City shall levy the Maximum Annual Special Taxes on each Assessor's Parcel of Developed Residential Property in the amount of $300 and on each Assessor's Parcel of Developed Multi- Family Property in the amount of $150 per Unit. The amount of Maximum Annual Special Taxes shall be increased annually by 2%, commencing in Fiscal Year 2004-05, and each Fiscal Year thereafter. Duration of the Maximum Annual Special Taxes .- The Maximum Annual Special Taxes shall be levied in perpetuity so long as Law Enforcement, Fire and Paramedic Services are being provided within the District. The Maximum Annual Special Taxes levied in each Fiscal Year shall be collected in the same manner as ordinary ad valorem property taxes are collected and shall be subject to the same penalties and the same procedure, sale, and lien priority in case of delinquency as is provided for ad valorem taxes. The Maximum Annual Special taxes when levied shall be secured by the lien imposed pursuant to Section 3115.5 of the Streets and Highways Code. This lien shall be a continuing lien and shall secure each levy of Maximum Annual Special Taxes. The lien of Maximum Annual Special Taxes shall continue in force and effect until the Special Tax ceases to be levied in the manner provided by Section 53330.5 of the Government Code. ,-... ,I\CENDA ITEM NO,_ 9 PACE If OF f( ~ CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: RESOLUTION APPROVING A JOINT COMMUNITY FACILITIES AGREEMENT, A DEPOSIT AND REIMBURSEMENT AGREEMENT, AND TWO FEE DEPOSIT AND REIMBURSEMENT AGREEMENTS, RESOLUTION OF INTENTION TO ESTABLISH COMMUNITY FACILITIES DISTRICT NO. 2006-6 (TESSERA) AND RESOLUTION OF INTENTION TO INCUR BONDED INDEBTEDNESS ;--- BACKGROUND MVV, L.P. (the "Developer") submitted an application (including a finance plan) for the establishment of a Community Facilities District for their development, "Tessera", located near Franklin Street and Bancroft Way. DISCUSSION The Developer plans to develop 90 multi-family residential units (the "Project"). Build out is projected in the tax spread analysis in 2008-2009. Joint Community Facilities Agreement A Joint Community Facilities Agreement ("JCFA") will be entered into between the City, EVMWD and the developer due to the inclusion of EVMWD facilities and fees. Deposit and Reimbursement Agreement According to the City's policy on forming CFD's and according to the Mello-Roos Community Facilities Act of 1982, the City Council may approve an agreement to receive a deposit for the cost incurred by the City in creating the CFD and issuing ".-. ACENDA ITEM NO. lb PACE \ OF qu --w- REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 "'" special tax bonds. The developer has submitted a deposit of $65,000 per the agreement Fee Deposit and Reimbursement Agreements Development costs are only eligible for reimbursement with CFD funding if paid after the bonds are issued. Given the nature of the proposed reimbursable costs and the timing of when bonds will be issued, two Fee Deposit and Reimbursement agreement are necessary for the fees to be reimbursed from the CFD bond proceeds: City and MVV, L.P. - Under the agreement, the City will hold as a fee deposit, the equivalent amount of the developer fees. The City will be paid the developer fees from the future bond proceeds and the deposit collected from the developer would be reimbursed to the developer. If the bonds do not go forward, the fee deposit will be released to the City. City, MVV, L.P. and EVMWD - Since EVMWD is participating in the proposed CFD, a Fee Deposit and Reimbursement Agreement between the City, EVMWD and the Developer is necessary. The agreement before you for approval relates to EVMWD fees. Under the agreement, the City will hold as a fee deposit, the equivalent amount of the developer fees paid for EVMWD fees. EVMWD will be paid the fees from the future bond proceeds and the deposit collected from the developer will be reimbursed to the developer. If the bonds do not go forward, the fee deposit will be released to EVMWD. .....", Special Tax The average residential special tax is estimated at $2,967. The annual CFD Special Taxes, when combined with all other property taxes applicable to the Project, have been established so as not to exceed 2.0% of the anticipated residential home prices within the project, which is within the 2% City CFD guidelines. The 2% maximum tax rate includes estimates for the City development impact fees ("City Fees"), EVMWD sewer and water capacity fees ("EVMWD Fees") and, if sufficient bonding capacity is available, City improvements (collectively, "City Facilities") and EVMWD improvements (collectively, "EVMWD Facilities"). "'" IV ACENDA ITEM NO. PACE ~ OF qo ,-.. REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 3 The Mello-Roos Community Facilities Act of 1982 ("the Mello-Roos Act") was specifically drafted to assist agencies with the impacts of new developments. In addition to providing a mechanism to fund the construction of public infrastructure, the Mello-Roos Act allows an agency to fund the incremental increase in cost of services due to the new development. Bond Issue In order to finance the facilities it is necessary to incur bonded indebtedness. The not to exceed amount is $5,000,000. The bond issue is expected to be approximately $4.0 million. Parks, Open Space and Storm Drains Operation and Maintenance Built into the rate and method of apportionment (RMA) is a special tax to cover a portion of the increased cost of maintaining parks, open space and storm drains as a result of the new development. ,-.. The Mello-Roos Community Facilities Act of 1982 ("the Mello-Roos Act") was specifically drafted to assist agencies with the impacts of new developments. In addition to providing a mechanism to fund the construction of public infrastructure, the Mello-Roos Act allows an agency to fund the incremental increase in cost of services due to the new development. These services include police, fire (including paramedic), maintenance of parks, open space and storm drains. A park, open space and storm drain maintenance component of the RMA is proposed and is being recommended for all new facilities CFD's as a part of the RMA. As presented on page 20 of the RMA, residential property will be assessed $246.84 per single family unit and $123.42 per multifamily unit for FY 2006-07. FISCAL IMPACT Annual administrative expenses may be funded through bond fund earnings and the special annual tax levy. ,-.. AGENDA ITEM NO. 10 PAGE ') OF eft) REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 4 """""" Repayment of the bonds is secured by the special taxes levied on all property within the district, other than those properties that are exempt as provided in the respective rate and method of apportionment. RECOMMENDATION The following is recommended to the City Council: 1. Adopt Resolution No. 2006- ~ 11 approving a Joint Community Facilities Agreement, a Deposit and Reimbursement Agreement, and two Fee Deposit and Reimbursement Agreements 2. Adopt Resolution of Intention No. 2006 - q ) to establish Community Facilities District No. 2006-6 (Tessera) and calling a Public Hearing for August 8, 2006 3. Adopt Resolution of Intention No. 2006-.3(, to incur bonded indebtedness with proposed CFD No. 2006-6 (Tessera) """""" PREPARED BY: MATT N. PRESSEY DIRECTOR OF AD INISTRATIVE SERVICES CI APPROVED FOR AGENDA BY: """" AGENDA ITEM It 10 PAGE OF. t1 () - ",.,.- "".-" SCALE: 10- 75' t; I 'II! ~~ ",.,.- I..EGEWl PROPOSED BOUNDARY OF COMMUNITY FACILITIES DISTRICT No. 2006~6 OF THE CITY OF LAKE ELSINORE (TESSERA) COUNTY OF RIVERSIDE, STATE OF CALIFORNIA UI/IDIIIIIIE (J// "'ClNITY YAP NO SCIU DlS1IlICT _, TRACT 33370 APN: 373-071-018 FUD IN '!HE oma: OF !HE aTY CUIlK OF !HE alY CF LAIC[ D.5lNOR[ 1HIS ---PAy OF --2flOI. aTY CUIlK OF !HE aTY OF LAIC[ D.5lNOR[ I HOIE8Y CEII'/IN tHAT !HE __ MAP _ !HE _ __ OF COlAIUNIlY FAClLIlES IlISlIIICT NO. _. ClESSIJIlA). aTY OF LAIC[ n-. alUNTY OF IIl\ERSIIlE. $TA~ OF ~ WAS _ 8Y !HE alY caN:lL OF !HE alY OF LAIC[ El$IN(lII[: AT A IlECUlAN.Y SCHEIlUUD ~ _. HElD ON lHE _ DAY OF _ IIY 115 RDOW1lOH No. alY QDII( OF '!HE alY OF LAkE D.5lNOR[ FUD 1HIS _ DAY OF _~, AT '!HE IlClUIt OF O'Q.OCIL.Il. IN IIOCIC..- OF IIAP$ OF ASSESSIIEHT AND CXlIIIIUNIlY rACllJJIES IIlS1IlfC1S PAIl( ~1Ill!OUGIl- AS INSlIIUIoIDtT NO. IN !HE _ OF !HE COUNlY _ IN lHE COUNYY OF 111__. STA~ OF CALJFOIlHIA. COUfjlY IlfCClllOllt OF lHE COUfjlY OF IIIWRSIllE m: L-- Il!1'lIIfNa lHE RlYDlSlDf: COUfjlY ASSESSllR'S IIAP$ f'CR A orTAUD DE5CM'1lOH OF PN1C4 lJICS _ _ PROPOSED BOUNDARY MAP _ KARRIS Ie ASSOCIATES 3f~-'_'50 _hi.. CA ..... (14t) 155-_ . FAll (141) W-m5 CommUDI\7 racWUa Da.ta'lct No. zooe-8 01 the ctt,y of Lake El8lnore (Te8ftDIn4. m:u NO. COUDt7 of Rbfi\Ydt.''\!"''afiloHda _1 or PACE 5 RESOLUTION NO. 2006- q'l ~ RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE APPROVING A JOINT COMMUNITY FACILITIES AGREEMENT, A DEPOSIT AND REIMBURSEMENT AGREEMENT AND TWO FEE DEPOSIT AND REIMBURSEMENT AGREEMENTS RELATING TO THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-6 (TESSERA) WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has heretofore adopted Resolution No. 2006-_ ("Resolution of Intention") stating its intention to form City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) (the "CFD") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"); and WHEREAS, Section 533114.9 of the Act provides that, at any time either before or after the formation of a community facilities district, the legislative body may accept advances of funds from any source, including, but not limited to, private persons or private entities and may provide, by resolution, for the use of those funds for any authorized purpose, including, but not limited to, paying any "-' cost incurred by the local agency in creating a community facilities district (including the issuance of bonds thereby); and WHEREAS, the City and the developers with respect to the CFD (the "Developers") desire to enter into an agreement in accordance with Section 53314.9 of the Act in order to provide for the advancement of funds by the Developer to be used to pay costs incurred in connection with the formation of the CFD and issuance of special tax bonds for the CFD (the "Bonds"), and to provide for the reimbursement to the Developers of such funds advanced, without interest, from the proceeds of any Bonds; and WHEREAS, Section 53316.2 of the Act states that a community facilities district may finance facilities to be owned or operated by an entity other than the agency that created the district only pursuant to a joint community facilities agreement or a joint exercise of powers agreement; and WHEREAS, certain facilities and capital fees to be financed by the CFD include those facilities and capital fees to be owned or operated by the Elsinore Valley Municipal Water District; and ~ 45788915.1 AGENDA 'TEM NO. I P PAGE " OF q V CITY COUNCIL RESOLUTION NO. 2006- Page 2 of2 ~ WHEREAS, the Developers intends to make a security deposit with the City and Elsinore Valley Municipal Water District ("EVMWD") to cover certain City and EVMWD capital fees, which are eligible for refund upon the sale of the Bonds and the paYment of such City and EVMWD capital fees from the proceeds of such Bonds. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The City Council hereby approves the Joint Community Facilities Agreement in substantially the form presented to the City Council at this meeting. The Mayor, the City Manager and the Director of Administrative Services are hereby authorized to execute the Joint Community Facilities Agreement with such revisions, amendments and completions as shall be approved by the officer executing the same, such approval to be conclusively evidenced by the execution and delivery thereof. ~ SECTION 2. The City Council hereby approves the Deposit and Reimbursement Agreement in substantially the form presented to the City Council at this meeting. The Mayor, the City Manager and the Director of Administrative Services are hereby authorized to execute the Deposit and Reimbursement Agreement with such revisions, amendments and completions as shall be approved by the officer executing the same, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 3. The City Council hereby approves the Fee Deposit and Reimbursement Agreements in substantially the forms presented to the City Council at this meeting. The Mayor, the City Manager and the Director of Administrative Services are hereby authorized to execute the Fee Deposit and Reimbursement Agreements with such revisions, amendments and completions as shall be approved by the officer executing the same, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 4. This Resolution shall take effect from and after the date of its passage and adoption. ~ 45788915.1 AGENDA ITEM NO. 10 PA(jE~OF Cfl:>_ -4 CITY COUNCIL RESOLUTION NO. 2006- Page 2 of2 PASSED, APPROVED AND ADOPTED. this 27th day of June, 2006, by ~ the following vote: A YES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: ....", Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore ....." 45788915.1 jD AOENOA ITEM NO. b & . PAOE_1. OF q .... .-' ,......, /"' r-- JOINT COMMUNITY FACILITIES AGREEMENT by and among CITY OF LAKE ELSINORE, ELSINORE VALLEY MUNICIPAL WATER DISTRICT AND MVV, L.P. RELATING TO CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-6 (TESSERA) Dated as of [_ _],2006 AGENDA ITEM NO. PNiE ~ Ii) OFO)D JOINT COMMUNITY FACILITIES AGREEMENT BY AND AMONG CITY OF LAKE ELSINORE, ELSINORE VALLEY MUNICIPAL WATER DISTRICT AND MVV, L.P. City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) THIS JOINT COMMUNITY FACILITIES AGREEMENT ("Agreement") is made and entered into as of the Uth day of r 1, 2006, by and among the ELSINORE VALLEY 'MUNICIPAL WATER DISTRICT, County of Riverside, State of California, a municipal water district ("EVMWD") organized and operating pursuant to the Municipal Water District Law of 1911 as set forth in the California Water Code, the CITY OF LAKE ELSINORE, a municipal corporation ("City"), and MVV, L.P. ("Property Owner"), with respect to Community Facilities District No. 2006-6 (Tessera) ofthe City (the "CFD"). RE C! T AL~: A. Property Owner is the owner of certain real property located within the boundaries of EVMWD and the City and depicted in Exhibit A hereto (the "Property"). The Property consists of approximately 9.12 developable acres within Tentative Tract Map No. 33370. B. Property Owner intends to develop the Property for residential purposes and has obtained or intends to obtain the necessary development approvals to construct approximately 90 residential units on the Property, as such development may be modified from time to time (the "Project"). C. The Project will require the payment, pursuant to the rules and regulations of EVMWD, as amended frpm time to time ("EVMWD Rules and Regulations"), of certain EVMWD Charges (defined below). An amount equal to all or a portion of the EVMWD Charges may be paid directly to EVMWD from time to time out of Bond Proceeds (defined below) pursuant to this Agreement. D. The Project will also benefit, in whole or in part, from the construction of certain Acquisition Facilities (defined below and described on Exhibit B attached hereto). EVMWD and the Property Owner agree that any Acquisition Facilities to be constructed by Property Owner or constructed prior to the date hereof shall be eligible for acquisition by EVMWD and the costs thereof shall be eligible for reimbursement out of Bond Proceeds pursuant to this Agreement. AGENDA ITEM NO. PAGe.J b ~ ~ '-" ID .OF~ "......, E. In conjunction with the recording of the final subdivision map for the Project, the issuance of building permits for the construction of homes within the Project and/or receipt of water meters for such homes, it may be necessary for Property Owner, or its successors or assigns, to provide a security deposit for EVMWD Charges to EVMWD (the "Deposits") before any Bond Proceeds are available to pay for EVMWD Charges. In such case, Property Owner shall be entitled to (i) reimbursement of such Deposits and (ii) credit for payments made to EVMWD from Bond Proceeds for EVMWD Charges which would otherwise be due to EVMWD in conjunction with the Project, all as further described herein. F. The Project will also require certain public improvements to be owned, operated or maintained by the City, or to which the City contributes revenue (the "City Improvements"), which will also be eligible for financing through the CFD. G. Pursuant to the request of the Property Owner, the City Council of the City intends to form the CFD pursuant to the Act (defined below) to provide financing of the EVMWD Charges, Acquisition Facilities, and City Improvements through the levy of special taxes and issuance of bonds. H. City and EVMWD are authorized by Section 53313.5 of the Act to pay for or finance, by means of the CFD, the EVMWD Charges, Acquisition Facilities and City Improvements. This Agreement constitutes a "joint community facilities agreement" within the meaning of Section 53316.2 of the Act by and among EVMWD, the City and Property Owner, pursuant to which the CFD, when formed, will be authorized to finance the City Improvements, "......, EVMWD Charges, and to finance the construction and acquisition of Acquisition Facilities. As provided by Section 53316.6 of the Act, responsibility for providing and operating the Acquisition Facilities is delegated to EVMWD to the extent set forth herein and responsibility for constructing, providing and operating the City Improvements is delegated to the City. I. The provision of the City Improvements, Acquisition Facilities and EVMWD Charges is necessitated by the Project, and the parties hereto find and determine that the residents of the City and EVMWD will be benefited by the payment of EVMWD Charges and construction and acquisition of the Acquisition Facilities and the City Improvements and that this Agreement is beneficial to the interests of such residents. ARTICLE I GENERAL PROVISIONS Section 1.1 Recitals. The above recitals are true and correct and are hereby incorporated by this reference. Section 1.2 Definitions. Unless the context clearly otherwise requires, the terms defined in this Section shall, for all purposes of this Agreement, have the meanings herein specified. "......, (a) "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, commencing with California Government Code Section 53311, et seq. 2 AGENDA ITEM NO. PACE II II) OF q6 (b) "Acquisition Facility or Facilities" means those sewer and water facilities listed on Exhibit B hereto, which are eligible to be constructed by the Property Owner or have been constructed prior to the date hereof by the Property Owner, acquired by EVMWD and paid for with Bond Proceeds. """ (c) "Acquisition Price" means the amount to be paid out of Bond Proceeds for an Acquisition Facility. (d) "Actual Costs" with respect to an Acquisition Facility includes: (i) the actual hard construction costs including labor, materials and equipment costs, (ii) the costs incurred in design, engineering and preparation of plans (iii) the fees paid to consultants and government agencies in connection with and for obtaining permits, licenses or other required governmental approvals, (iv) a construction management fee of 5% of the costs described in clause (i) above, (v) professional costs such as engineering, legal, accounting, inspection construction staking, materials testing and similar professional services, (vi) costs of payment, performance of maintenance bonds, and insurance costs (including the costs of any title insurance) and (vii) the value of any real property or interests therein that (1) are required for the construction or operation of the Acquisition Facility such as pump station and reservoir sites, temporary construction easements, haul roads, etc. and (2) are required to be conveyed with such Acquisition Facility in an amount equal to the fair market value of such real property or interests therein. (e) "Agreement" means this Joint Community Facilities Agreement. (f) "Bond Proceeds" or "Proceeds of the Bonds" shall mean those net funds generated by the sale ofthe Bonds. """ (g) "Bond Resolution" means that Resolution, Resolution Supplement, Fiscal Agent Agreement, Indenture of Trust or other equivalent document(s) providing for the issuance of the Bonds. (h) "Bonds" shall mean those bonds, or other securities, issued by, or on behalf ofthe CFD, as authorized by the qualified electors within the CFD. (i) 2006-6 (Tessera). "CFD" means City of Lake Elsinore Community Facilities District No. (j) "Deposits" means a deposit of EVMWD Charges made by the Property Owner prior to the disbursement of Bond Proceeds to EVMWD for EVMWD Charges (k) "Engineer" means the engineering firm or in-house personnel used by EVMWD to determine the value of an Acquisition Facility to be acquired with Bond Proceeds. (1) "EVMWD Charges" means water connection fees, sewer connection fees, annexation fees, sewer treatment capacity charges and all components thereof of EVMWD imposed upon the Project to pay for the provision of water and sewer services to and the construction of EVMWD water and sewer facilities required to serve the Project. """ 3 AGENDA ITEM NO. /D PACE f?" OF 1t) ~ If ---- (m) "EVMWD Facilities Fund" means the fund, account or sub-account of the CFD (regardless of its designation within the Bond Resolution) into which a portion of the Bond Proceeds may be deposited in accordance with the Bond Resolution and Funding Agreement to finance the construction and acquisition of the Acquisition Facilities and to pay EVMWD Charges. (n) "EVMWD Representative" means the EVMWD Chief Engineer or his Designee. (0) "Facilities" means the City Improvements, Acquisition Facilities and EVMWD Charges. (P) "Field Engineer" shall have the meaning ascribed to the term in Section 3. (q) "Funding Agreement" shall mean the Funding, Construction and Acquisition Agreement between City and Property Owner relating to the CFD, as it may be amended from time to time. (r) "Party" or "Parties" shall mean anyone or all of the parties to this Agreement, including the CFD which, upon its formation, shall be considered to be a party to this Agreement and bound by its provisions. --- (s) "Plans and Specifications" shall mean the plans and specifications for the design and construction of an Acquisition Facility as approved by EVMWD, which approval shall not be unreasonably withheld. (t) "Rate and Method" means the Rate and Method of Apportionment of the Special Tax authorizing the levy and collection of special taxes pursuant to proceedings undertaken for the formation of the CFD pursuant to the Act. (u) "State" means the State of California. (v) "Special Taxes" means the special taxes authorized to be levied and collected pursuant to the Rate and Method. (w) "Substantially Complete" or "Substantial Completion" with respect to an Acquisition Facility means that such Acquisition Facility is substantially complete in accordance with its Plans and Specifications and is available for use by the public for its intended purpose, notwithstanding any final "punch list" items still required to be completed, unless such items are required for the safe operation of such Acquisition Facility, and shall be based upon approval of EVMWD's inspectors, which shall not be unreasonably withheld. ",..- 4 AGENDA ITEM lfO. / D PAGE Ij OF qD_ ARTICLE II FORMATION OF CFD AND ISSUANCE OF BONDS ......" Section 2.1 Proposed Formation of the CFD. The City, pursuant to the written request of the Property Owner, has initiated proceedings pursuant to the Act for the formation of the CFD, the authorization of the Special Taxes and the authorization of Bonds on behalf ofthe CFD. Nothing contained herein shall be deemed to limit the discretion of the City in that regard and the City shall have no liability to EVMWD if the CFD is not formed or ifthe Special Taxes and Bonds are not authorized by the qualified electors. Section 2.2 Issuance and Sale of Bonds. In the event the CFD is formed and the Special Taxes and Bonds are authorized, the City Council of the City, acting as the legislative body of the CFD, may, in accordance with its adopted policies and the Funding Agreement, adopt the Bond Resolution and issue the Bonds to finance the Facilities. Section 2.3 Bond Proceeds. Upon the issuance and sale of each series of Bonds, and receipt of the Bond Proceeds, the City and Property Owner shall determine the amount of the Bond Proceeds allocable to finance construction and acquisition of Acquisition Facilities and to pay EVMWD Charges in accordance with the Funding Agreement, and shall deposit such amount in the EVMWD Facilities Fund. ......" In conjunction with the recording of the final subdivision maps for the Property, the issuance of building permits for the construction of homes within the Property and/or receipt of water meters for such homes, it may be necessary for Property Owner, or its successors or assigns, to make Deposits before Bonds are issued or Bond Proceeds are disbursed to EVMWD. Upon and following the issuance and sale of the Bonds, Property Owner may execute and submit a payment request to the CFD in the format and meeting the requirements as set forth in the Funding Agreement requesting disbursement of an amount equal to all Deposits from the EVMWD Facilities Fund. Within thirty (30) days after EVMWD's receipt of funds pursuant to such disbursement request, EVMWD shall return the Deposits to Property Owner and credit Property Owner for EVMWD Charges in an amount equal to such disbursement. In the event Bonds are not issued and sold within twelve (12) months after the date of any Deposit to EVMWD, any such Deposit may at the written direction of EVMWD be applied to pay EVMWD Charges and, if so applied, shall not be reflected as a Deposit on the accounts of EVMWD. From time to time following the issuance and sale of the Bonds, Property Owner shall authorize EVMWD in writing to request a disbursement from the EVMWD Facilities Fund to fund EVMWD Charges. Upon such notice and EVMWD's receipt of such disbursement, Property Owner shall be deemed to have satisfied the applicable EVMWD Charges with respect to the number of dwelling units or lots for which the EVMWD Charges would otherwise have been required in an amount equal to such disbursement. ......" 5 AOENUA ITEM ~ Ii:) PACE I OF 1 () - ,.,-- Section 2.4 Responsibility for EVMWD Chan!:es and Acquisition Facilities. (a) The Parties hereto acknowledge and agree that the final responsibility for the payment of the EVMWD Charges and the design, construction and dedication of Acquisition Facilities to be constructed by Property Owner lies with the Property Owner. (b) If the amounts derived from Bond Proceeds deposited in the EVMWD Facilities Fund, including investment earnings thereon, if any, are not sufficient to fund the total cost of the EVMWD Charges and Acquisition Facilities to be constructed by Property Owner, the parties hereto agree that all responsibility and liability for the amount of such shortfall shall be and remain with the Property Owner and shall not lie with the City, CFD or EVMWD. (c) In addition to financing the EVMWD Charges described above, the Parties acknowledge that EVMWD may require the Property Owner, pursuant to the EVMWD Rules and Regulations, to design, construct and dedicate to EVMWD Acquisition Facilities as a condition to providing water and sewer service to the Property. The Parties also agree and acknowledge that all responsibility and obligation for the design, construction and dedication of such Acquisition Facilities to EVMWD, in accordance with all applicable statutes and the EVMWD Rules. and Regulations, shall be and remain the responsibility ofthe Property Owner. (d) EVMWD agrees to utilize or apply funds provided to it by the CFD, in accordance with the Act and other applicable law, and as set forth herein, for the EVMWD Charges and Acquisition Facilities to be constructed by Property Owner. ~ ( e) Property Owner shall indemnify, defend, and hold harmless, the City, CFD, and EVMWD, their respective officers, employees and agents, and each and every one of them from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subjected or put, caused by Property Owner's design, engineering, construction, and transfer of ownership to EVMWD of the Acquisition Facilities, including any action or investigation by the Department of Industrial Relations and Property Owner indemnifying EVMWD with respect to any fines, penalties, or debarment imposed by the Department of Industrial Relations with respect to EVMWD Facilities. Property Owner, or Contractor, shall provide a bond to guarantee the repair of any defect or damage to any Acquisition Facility for 1 year after the acceptance by EVMWD. (f) EVMWD shall indemnify, defend, and hold harmless, the City, CFD and Property Owner, their respective officers, employees and agents, and each and every one of them from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subjected or put, caused by EVMWD's design, engineering, construction, and acquisition of facilities constructed with the proceeds of the EVMWD Charges. Section 2.5 Responsibility for Debt Service or Special Taxes. EVMWD shall have no obligation, responsibility, or authority with respect to the issuance and sale of the Bonds, the Bond Proceeds available to finance the construction and acquisition of the Acquisition Facilities and to pay EVMWD Charges, the payment of the ",-... principal and interest on the Bonds, or for the levy of the Special Taxes to provide for the 6 AGENDA l1EM 110, ( 0 b PAGE_ /5 OF Cf payment of principal and interest thereon. The CFD shall have the sole authority and responsibility for all such matters. The Parties hereto specifically agree that the liabilities of the CFD, including liabilities, if any, of the CFD pursuant to the documents providing for the issuance of Bonds, including the Bond Resolution, shall not be or become liabilities ofEVMWD. Section 2.6 Administration of the CFD. The City shall have the power and duty to provide for the administration of the CFD once it is formed, subject to the terms hereof and the Funding Agreement, including employing and compensating all consultants and providing for the various other administration duties set forth in this Agreement. It is understood and agreed by Parties hereto that EVMWD will not be considered a participant in the proceedings relative to formation of the CFD or the issuance of the Bonds, other than as a Party to this Agreement. ARTICLE III CONSTRUCTION AND ACQUISITION OF ACQUISITION FACILITIES Section 3.1 Construction of Acquisition Facilities bv Property Owner. The following provisions of this Article ill shall apply solely with respect to those Acquisition Facilities to be constructed by the Property Owner and acquired by EVMWD with Bond Proceeds: (a) The Property Owner will complete the Plans and Specifications for su~h Acquisition Facilities. The Plans and Specifications shall include EVMWD's standard specifications and shall be subject to EVMWD approval, which shall not be unreasonably withheld. EVMWD agrees to process any Plans and Specifications for approval with reasonable diligence and in a timely manner. The Property Owner may proceed with the construction of any such Acquisition Facilities in accordance with the provisions of Section 3.2 hereof. A qualified engineering firm (the "Field Engineer") shall be employed by Property Owner to provide all field engineering surveys determined to be reasonably necessary by the EVMWD inspection personnel. The Field Engineer shall promptly furnish to EVMWD a complete set of grade sheets listing all locations, offsets, etc., in accordance with good engineering practices, and attendant data and reports resulting from the Field Engineer's engineering surveys and/or proposed facility design changes. EVMWD shall have the right, but not the obligation, to review, evaluate and analyze whether such results comply with applicable specifications. (b) A full-time soils testing firm, reasonably approved by EVMWD, shall be employed by Property Owner to conduct soil compaction testing and certification. Property Owner shall promptly furnish results of all such compaction testing to EVMWD for its review, evaluation and decision as to compliance with applicable specifications. In the event the compaction is not in accordance or compliance with applicable specifications, Property Owner shall be fully liable and responsible therefor. A final report shall be 7 A<i1:NOA ITEM NO. PACE lit Of 10 qD ...." ...." ...." "....... required fully certifying trench compaction efforts prior to acceptance of each of the Acquisition Facilities. (c) The cost of all surveying, compaction testing and report costs associated with such Acquisition Facilities furnished and constructed by any contractors or sub- contractors (collectively, "Contractors") shall be paid for by the Property Owner and the costs of such work shall be eligible to be reimbursed from the EVMWD Facilities Fund. (d) EVMWD shall not be responsible for conducting any environmental, archaeological, biological, or cultural studies or any mitigation requirements related to the Acquisition Facilities to be constructed by Property Owner that may be requested by appropriate Federal, State, and/or local agencies. Any such work shall be paid for and such work shall be conducted by, or on behalf of Property Owner and the costs of such work shall be eligible to be reimbursed from the EVMWD Facilities Fund. Section 3.2 Public Works Requirements. In order to insure that the Acquisition Facilities to be constructed by the Property Owner, completed after formation of the CFD and acqUired with Bond Proceeds will be constructed as if they had been constructed under the direction and supervision, or under the authority of, EVMWD, so that they may be acquired by EVMWD pursuant to Government Code Section 53313.5, the Property Owner shall comply with all of the following requirements: ...-- (a) The Property Owner shall obtain bids for the construction of such Acquisition Facilities in conformance with the standard procedures and requirements of EVMWD with respect to its public works projects or in a manner which is approved by the EVMWD Representative. (b) The contract or contracts for the construction of such Acquisition Facilities shall be awarded to the responsible bidder(s) submitting the lowest responsive bid(s) for the construction of such Acquisition Facilities. (c) The Property Owner shall require, and the specifications and bid and contract documents shall require all such Contractors to pay prevailing wages and to otherwise comply with applicable provisions of the Labor Code, the Government Code and the Public Contract Code relating to public works projects and as required by the procedures and standards ofEVMWD with respect to the construction of its public works projects. ...-- (d) Said Contractors shall be required to furnish labor and material payment bonds and contract performance bonds in an amount equal to 100 percent of the contract price naming the Property Owner and EVMWD as obligees and issued by insurance or surety companies approved by the EVMWD Representative. All such bonds shall be in a form approved by the EVMWD Representative. Rather than requiring its Contractors to provide such bonds, the Property Owner may elect to provide the same for the benefit of its Contractors. Furthermore, Property Owner or Contractor shall post a bond pursuant to Section 2.4(e) and 3.8 hereof. 8 AOENDA ITEM NO.. / b PACE 11 OF ql)- (e) All such Contractors shall be required to provide proof of insurance coverage throughout the term of the construction of such Acquisition Facilities which they will construct in conformance with EVMWD's standard procedures and requirements. ......" (f) The Property Owner and all such Contractors shall comply with such other requirements relating to the construction of such Acquisition Facilities which EVMWD may reasonably impose by written notification delivered to the Property Owner and each such Contractor at any time either prior to the receipt of bids by the Property Owner for the construction of such Acquisition Facilities or, to the extent required as a result of changes in applicable laws, during the progress of construction thereof. In accordance with this Section 3.2, the Property Owner shall be deemed the awarding body and shall be solely responsible for compliance and enforcement of the provisions of the Labor Code, Government Code, and Public Contract Code of the State of California. The Property Owner shall provide proof to EVMWD, at such intervals and in such form as the EVMWD Representative may require, that the foregoing requirements have been satisfied as to all of the Acquisition Facilities constructed by Property Owner, acquired by EVMWD and paid for with Bond Proceeds. If any Acquisition Facility is constructed by Owner and completed prior to the formation of the CFD, EVMWD may accept such Acquisition Facilities, provided, however, that Property Owner shall indemnify and hold harmless EVMWD and the City for any investigation or inquiry by the Department of Industrial Relations and shall defend any action by the Department of Industrial Relations with respect to the construction of the Acquisition Facilities. Furthermore, the Property Owner shall indemnify and hold harmless EVMWD and the City from and against all damages, claims, losses or expenses of every type arising out of such investigation or inquiry and any action brought by a Contractor in connection therewith. ......" Section 3.3 Insvection: Comvletion of Construction. EVMWD shall have primary responsibility for providing inspection of the construction of the Acquisition Facilities constructed by the Property Owner to insure that the construction is accomplished in accordance with the Plans and Specifications. EVMWD's personnel shall have access to the site of the work at all reasonable times for the purpose of accomplishing such inspection. Upon Substantial Completion of the construction of such Acquisition Facilities by Property Owner, the Property Owner shall notify the EVMWD Representative in writing that the construction of such Acquisition Facilities has been Substantially Completed. Upon receiving such written notification from the Property Owner, and upon receipt of written notification from its inspectors that construction of any of the Acquisition Facilities by Property Owner has been Substantially Completed, EVMWD shall in a timely manner notify the Property Owner in writing that the construction of such Acquisition Facilities has been satisfactorily completed. Upon receiving such notification, the Property Owner shall forthwith file with the County Recorder of the County of Riverside a Notice of Completion pursuant to the provisions of Section 3093 of the Civil Code. The Property Owner shall furnish to the EVMWD Representative a duplicate copy of each such Notice of Completion showing thereon the date of filing with the County Recorder. Any actual costs reasonably incurred by EVMWD in inspecting and approving the construction of any Acquisition Facilities by Property Owner not previously paid by the Property Owner shall be eligible to be reimbursed from the EVMWD Facilities Fund. ......" 9 ACENDAITEM NO. /0 PACE.--1.LOF ?D ~ Section 3.4 Liens. Upon the expiration of the time for the recording of claim of liens as prescribed by Sections 3115 and 3116 of the Civil Code, the Property Owner shall provide to the EVMWD Representative such evidence or proof as EVMWD shall require that all persons, firms and corporations supplying work, labor, materials, supplies and equipment on behalf of Property Owner for the construction of any Acquisition Facilities have been paid, and that no claims of liens have been recorded by or on behalf of any such person, firm or corporation. Rather than await the expiration of the said time for the recording of claims of liens, the Property Owner may elect to provide to EVMWD a title insurance policy or other security acceptable to the EVMWD Representative guaranteeing that no such claims of liens will be recorded or become a lien upon the Property with priority over the lien of the special taxes to be levied thereon in the proceedings for the formation ofthe CFD. Section 3.5 Acquisition. Acquisition Price: Source of Funds. Provided the Property Owner has complied with the requirements of this Agreement, EVMWD agrees to acquire the Acquisition Facilities from the Property Owner. The price to be paid by the CFD for the acquisition of such Acquisition Facilities by EYMW"p (the "Acquisition Price") shall be the lesser of (i) the value of the Acquisition Facilities or (ii) the total of the Actual Costs of the Acquisition Facilities. The Property Owner shall transfer ownership of the Acquisition Facilities to EVMWD by grant deed, bill of sale or such other documentation as the EVMWD Representative may require. Upon the transfer of ownership of the Acquisition Facilities or any portion thereof from the Property Owner to EVMWD, EVMWD shall be responsible for the maintenance ofthe Acquisition Facilities or the portion transferred. ~ For purposes of determining the Acquisition Price to be paid by the CFD for the acquisition of the Acquisition Facilities by EVMWD, the value of such improvements shall be the amount determined by the engineering firm retained by EVMWD for such purpose (the "Engineer"), to be the value of the Acquisition Facilities based on the Actual Costs submitted by the Property Owner, as hereinbefore specified; provided, however, that if the Engineer reasonably determines that such Actual Costs, or any of them, are excessive and that the value of the Acquisition Facilities is less than the total amount of such Actual Costs, the Acquisition Price to be paid by the CFD for the acquisition of the Acquisition Facilities shall be the value thereof as determined by the Engineer. Upon completion of the construction of any Acquisition Facilities by Property Owner, the Property Owner shall deliver to EVMWD copies of the contract(s) with the Contractor(s) who have constructed the Acquisition Facilities or other relevant documentation with regard to the payments made to such Contractor(s) for the construction of such Acquisition Facilities, and shall also provide to EVMWD copies of all invoices and purchase orders with respect to all supplies and materials purchased for the construction of such Acquisition Facilities. EVMWD shall require the Engineer to complete its determination of the value of the Acquisition Facilities as promptly as is reasonably possible. The Acquisition Price of any Acquisition Facilities may be determined and paid out of the EVMWD Facilities Fund prior to transfer of ownership of the Acquisition Facilities to ~ EVMWD upon a determination of Substantial Completion of such Acquisition Facility. Property Owner shall submit a payment request form to the CFD in the format and with the information 10 ACENDA ITEM NO. /D PAGE / q OF 10 ... required by the Funding Agreement, which must also contain therewith approval of EVMWD, which approval shall not be unreasonably withheld. """'" Some of the Acquisition Facilities anticipated to be constructed are included in EVMWD Charges. Property Owner shall be entitled to full credit against all applicable EVMWD Charge(s) based upon Property Owner's construction of such Acquisition Facilities whether or not the Acquisition Price of such Acquisition Facilities is funded out of the EVMWD Facilities Fund. Notwithstanding the preceding provisions of this section, the sole source of funds for the acquisition by EVMWD of the Acquisition Facilities or any portion thereof shall be the Bond Proceeds made available by the CFD pursuant to Section 2.3 above and the City reserves the right to make an independent and final determination of the Acquisition Price of each Acquisition Facility in accordance with the Funding Agreement. If for any reason beyond EVMWD's control, the proceedings for the formation of the CFD are not completed or the Bonds are not sold, EVMWD shall not be required to acquire any Acquisition Facilities from the Property Owner. In such event, the Property Owner shall complete the design and construction and offer to EVMWD ownership of such portions of Acquisition Facilities as are required to be constructed by the Property Owner as a condition to recordation of subdivision maps for the Property or any other agreement between Property Owner and EVMWD, but need not construct any portion of the Acquisition Facilities which it is not so required to construct. Section 3.6 Easements. ....., The Property Owner shall, at the time EVMWD acquires the Acquisition Facilities as provided in Section 3.2 hereof, grant to EVMWD, by appropriate instruments prescribed by EVMWD, all easements on private property or fee title to private property which may be reasonably necessary for the proper operation and maintenance of such Acquisition Facilities, or any part thereof. Section 3.7 Maintenance. Prior to the transfer of ownership of an Acquisition Facility by the Property Owner to EVMWD, as provided in Section 3.5 hereof, the Property Owner shall be responsible for the maintenance thereof and shall maintain and transfer such Acquisition Facility to EVMWD in as good condition as the Acquisition Facility was in at the time the Property Owner notified the EVMWD Representative that construction of same had been completed in accordance with the Plans and Specifications. The Parties agree that the construction and acquisition of the Acquisition Facilities to be constructed by Property Owner is a matter between Property Owner and EVMWD only, and that the City and the CFD shall have no responsibility for on-site inspection or monitoring or for certifying that the provisions of Article III of this Agreement be satisfied. Property Owner or Contractor shall provide a bond to guarantee the repair of (i) any damage to the Acquisition Facility caused as a result of such party's actions prior to or after acceptance by ......, 11 'lJ ,ACENDA ITEM NO. I V; D PACE ,-j...O OF ~ EVMWD and (ii) any defect in the Acquisition Facility, for one (1) year after the acceptance by EVMWD. ARTICLE IV TERM AND TERMINATION Section 4.1 Effective Date. This Agreement shall become effective and of full force and effect as of the date set forth in the first paragraph of this Agreement ("Effective Date") provided it is approved by the Property Owner, the City Council of the City and governing board of EVMWD, to be confirmed by the execution hereof by the authorized representatives of the Parties hereto. Section 4.2 Termination. If the CFD is unable to complete the sale of the first series of Bonds prior to July 1, 2010, this Agreement shall thereafter automatically terminate and be of no further force or effect, unless extended by mutual agreement of the Parties. ARTICLE V ADDITIONAL GENERAL PROVISIONS Section 5.1 Recordkeepine:: Inspection of Records. /""'- EVMWD hereby agrees to keep and maintain full and accurate records of all amounts, and investment earnings, if any, paid to EVMWD for the EVMWD Charges and the City hereby agrees to keep and maintain full and accurate records of all amounts, and investment earnings, if any, expended from the EVMWD Facilities Fund. Each Party further agrees to make such records available to any other Party hereto, including Property Owner, during normal business hours upon reasonable prior notice. All such records shall be kept and maintained by the appropriate Party as provided by applicable law and their respective policies. Each of EVMWD and Property Owner agree that they will cooperate with the CFD and the City in providing documentation, reports or other data reasonably required and requested by the City or the CFD in meeting the reporting requirements of the CFD under California Senate Bill (SB) No. 165, Chapter 535 ofthe Statutes of2000. Section 5.2 Disclosure of Special Tax: Calculation of Special Tax Requirement. (a) Delivery of Notice. From and after the date of this Agreement, Property Owner and its successors and assigns shall give a "Notice of Special Tax" (as defined in Section 5 .2(b) below) to each prospective purchaser of a parcel in the CFD and shall deliver a fully executed copy of each notice to EVMWD. Property Owner and its successor and assigns shall (i) maintain records of each Notice of Special Tax for a period of five (5) years, and (ii) shall provide copies of each notice to EVMWD promptly following the close of escrow for the sale of each parcel for which such notice was given. Property Owner and its successors and assigns shall include the Notice of Special Tax in all Property Owner's and its successors and assigns' applications for Final Subdivision Reports required by the Department of Real Estate ("DRE") which are filed after the formation ofthe CFD. ,-- 12 ACENDA ITEM NO. IIJ PACE ;?-' OF q D Property Owner and its successors and assigns shall require, as a condition precedent to close an escrow for the sale of real property to a developer acquiring lots (a "Residential Developer") that such Residential Developer shall (i) maintain records of each Notice of Special Tax for a period of five (5) years, (ii) provide copies of each notice to EVMWD promptly following the close of escrow for the sale of each parcel for which such notice was given, and (iii) include the Notice of Special Tax in all of such Residential Developer's applications for Final Subdivision Reports required by DRE. ..."",., (b) Notice of Special Tax. With respect to any parcel, the term "Notice of Special Tax" means a notice in the form prescribed by California Government Code Section 53341.5 which is calculated to disclose to the purchaser thereof (i) that the property being purchased is subject to the special tax of the CFD, (ii) the land use classification of such property; (iii) the maximum annual amount of the special tax and the number of years for which it will be levied; (iv) if available at the time such notice is delivered, an indication of the amount of special tax to be levied on such property for the following fiscal year; and (v) the types of facilities or services to be paid for or with the proceeds ofthe special tax. ( c) Notice to Subsequent Purchasers. Upon formation of the CFD it is expected that the City will file with the Riverside County Recorder a notice of special tax lien that gives notice of the existence of the CFD and the levy of the special tax on property within the CFD for the benefit of subsequent property owners, pursuant to requirements of Section 3114.5 of the Streets and Highways Code. (d) Information Sheet and Sample Propertv Tax Bill. Property Owner and its successors and assigns shall provide each purchaser of property with a sample property tax bill in .....", a form approved by EVMWD. Property Owner and its successors and assigns shall provide prospective purchasers of homes an information sheet in the sales office in the form set forth in Exhibit C attached hereto and incorporated herein by this reference. Section 5.3 Partial Invalidity. If any part of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent reasonably possible. Section 5.4 Successors and Assiens. Property Owner may assign its rights pursuant to this Agreement to a purchaser of the Property, or any portion thereof, who shall be the owner of any Acquisition Facilities or payer of any EVMWD Charges or Deposits and to whom Property Owner shall assign the right to receive payment of the Acquisition Price for such Acquisition Facilities or other rights under this Agreement with respect to EVMWD Charges. Such a purchaser and assignee shall enter into an assignment agreement with EVMWD and the City, in a form acceptable to EVMWD and the City, whereby such purchaser agrees, except as may be otherwise specifically provided therein, to assume the obligations of Property Owner pursuant to this Agreement and to be bound thereby and whereby Property Owner shall be released from such obligations. This Agreement shall be binding upon and inure to the benefit of the successors and assigns ofthe Parties hereto. ..."",., 13 AGENDA ITEM NO. 10 PAOE 1)/ OF _ ~V - ,,- Section 5.5 Notice. Any notice, payment or instrument required or permitted by this Agreement to be given or delivered to any Party or other person shall be deemed to have been received when personally delivered or three (3) business days after deposit of the same in the United States Post Office registered or certified, postage prepaid, or by overnight delivery addressed as follows: City: City of Lake Elsinore 130 S. Main Street Lake Elsinore, CA 92530 Attention: City Manager EVMWD: Elsinore Valley Municipal Water District 31315 Chaney Street Lake Elsinore, CA 92530 Attention: General Manager Property Owner: MVV, L.P. C/o LUMOS Communities LLC 30713 Riverside Drive, Suite 201 Lake Elsinore, CA 92530 Attention: Leonard Leichnitz "..-- Each Party can change its address for delivery of notice by delivering written notice of such change or address to the other parties within ten (10) calendar days prior to such change. Section 5.6 Cautions. The captions to Sections used herein are for convenience purposes only and are not part of this Agreement. Section 5.7 Governine: Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California applicable to contracts made and performed in such State. Section 5.8 Entire Ae:reement. This Agreement contains the entire agreement between the parties with respect to the matters provided for herein and supersedes all prior agreements and negotiations between the Parties with respect to the subject matter of this Agreement. Section 5.9 Amendments. "...... This Agreement may be amended or modified only in writing executed by the authorized representative(s) of each of the Parties hereto. 14 ACENDA ITEM NO. I (} PACE J-?:J OF qo . Section 5.10 Waiver. The failure of any Party hereto to insist on compliance within any of the terms, covenants or conditions of this Agreement by any other Party hereto, shall not be deemed a waiver of such terms, covenants or conditions of this Agreement by such other Party, nor shall any waiver constitute a relinquishment of any other right or power for all or any other times. '-' Section 5.11 Cooperation and Execution of Documents. The Parties hereto agree to complete and execute any further or additional documents which may be necessary to complete or further the terms of this Agreement. Section 5.12 Attornevs' Fees. In the event of the bringing of any action or suit by any Party against any other Party arising out of this Agreement, the Party in whose favor final judgment shall be entered shall be entitled to recover from the losing Party all costs and expenses of suit, including reasonable attorneys' fees. Section 5.13 Exhibits. The following exhibits attached hereto are incorporated into this Agreement by reference. Exhibit A B C Description CFD Boundary Map Acquisition Facilites Description Form of Home buyer CFD Information Sheet ......., Section 5.14 Signatories. The signatories hereto represent that they have been appropriately authorized to enter into this Agreement on behalf of the party for whom they sign. Section 5.15 Execution in Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original. [Remainder of this page is blank] '-' 15 AGENDA I~ Hp._IO PAGE~OF q-o ~ IN WITNESS WHEREOF, the parties hereto have executed this Joint Community Facilities Agreement as ofthe day and year written alongside their signature below. CITY OF LAKE ELSINORE Date: APPROVED AS TO FORM VAN BLARCOM, LEffiOLD, MCCLENDON & MANN, P.C. By: Barbara Leibold ATTEST: By: City Clerk ELSINORE VALLEY MUNICIPAL WATER DISTRICT -- By: General Manager of the Elsinore Valley Municipal Water District Date: MVV, L.P. By: LUMOS Communities LLC Its: Property Manager, Authorized Agent By: Leonard Leichnitz Managing Member ---- 16 10 AGENDA'T~!f'- qO_ PAoe~} _OF_ EXHmIT A PROPERTY DESCRIPTION ......" LEGAL DESCRIPTION THE NORTHWEST QUARTER OF THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER SECTION 8, TOWNSHIP 6 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN; EXCEPTING THEREFROM THAT PORTION THEREOF CONVEYED TO THE STATE OF CALIFORNIA FOR HIGHWAY PURPOSES BY DEED RECORDED mLY 26, 1955 IN BOOK 1772 PAGE 9 OF OFFICIAL RECORDS OF RNERSIDE COUNTY, CALIFORNIA; ALSO EXCEPTING THEREFROM THAT PORTION CONVEYED TO THE CITY OF ELSINORE BY DEED RECORDED ruNE 29, 1957 IN BOOK 2111 PAGE 62 OF OFFICIAL RECORDS OF RNERSIDE COUNTY, CALIFORNIA. CONTAINING 9.12 ACRES MORE OR LESS ....." ......" AOENDA ITEM NO~ Iv PAGE J-(.tJ OF qi) ,--., BOUNDARY MAP -- ,--. AGENDA ITEM NO. /tJ PAGE -;tl OF q 0 EXHillIT B ACQUISITION FACILITIES DESCRIPTION ACENDAITEM NO. ;0 PAOE :lb . OF q-o --' ....., ....., "...- EXHffiIT C FORM OF HOMEBUYER CFD INFORMATION SHEET COMMUNITY FACILITIES DISTRICT NO. 2006-6 CITY OF LAKE ELSINORE 1. WHAT IS COMMUNITY FACILITIES DISTRICT (CFD) NO. 2006-6? CFD No. 2006-6 was formed pursuant to the "Mello-Roos Community Facilities Act of 1982" to finance 2. WHO IS RESPONSIBLE TO PAY THE SPECIAL TAX AND HOW IS IT BILLED? The Property Owner is responsible for paying the CFD No. 2006-6 special tax, which will appear as a separate line item on your property tax bill along with your regular property taxes. 3. HOW MUCH WILL MY SPECIAL TAX BE? The maximum special tax applicable to your lot is the great~r of the assigned special tax or backup special tax. The assigned and backup special taxes for CFD No. 2006-6 for the 2006-07 Fiscal Year are summarized below. It is expected that the actual special tax levied each year will be the assigned special tax and the backup special tax would only be levied where there has been very signifcant delinquencies or changes in the development. ~ Classification Home Size Assi2ned Special Tax 1 $ Idwelling unit 2 $ Idwelling unit 3 $ Idwelling unit 4 $ Idwelling unit 4. HOW LONG WILL I HAVE TO PAY THE CFD NO. 2006-6 SPECIAL TAX? The CFD No. 2006-6 special tax will not be collected after calendar year 20_. s. CAN THE SPECIAL TAXES BE PREPAID? Homeowners have the option of prepaying their CFD No. 2006-6 special tax anytime. For prepayment information please contact the City. 6. WHERE CAN I GET MORE INFORMATION? For more information in regards to CFD No. 2006-6, contact the City of Lake Elsinore at "...- ACENDA ITEM NO. J () PACE dq OF C/o DEPOSIT AND REIMBURSEMENT AGREEMENT THIS DEPOSIT AND REIMBURSEMENT AGREEMENT (this "Deposit Agreement"), dated .as of k"'1 16.. . ' 2Q06fQr identificatiQuPl.lI'Pc>ses only, is by and between tbe City of Lake EIsinore,Califomia(the i'City") and MVV, L.P. (the "Owner"). RECITALS WHEREAS, tbe City bas determined to initiate proceedings to create a community facilities district designated "City of Lake Elsinore CommUnity Facilities District No. 2006-6 (Tess era) (the "Community Facilities District") under the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"); and WHEREAS, Owner is the owner of the real property within tbe proposed Community Facilities District; and WHEREAS, in accordance. witb City's policy regarding use of tbe Act, the Owner~s required to compensate the City foraH costs reasonably incurred in the fonnation of the Community Facilities District and issuance .ofbonds for the Community Facilities District; and WHEREAS, Section 53314.9 of the Act provides tbat, at any time either before or after the formation of a community facilities distric~, the legislative body may accept advances of funds from any source, including, but not limited to, private persons or private entities and may provide, by resolution, for the use ofthos.etlmds for any autborized purpose, including, but not limited to, paying any cost incurred by.the local agency in creating a connnunity facilities district (including the issuance of bonds thereby); and WHEREAS, Section 53314.9 of the. Act further provides that the legislative body may enter into an agreement, by resolution, with the person or entity advancing the funds, to repayaJlor a portion of the funds advanced, as determined by the legislative body, with or without interest under all of the following conditions: (a) the proposal to repay the funds is included in botb the resolution of intention to establish a community facilities district adopted pursuant to Section 53521 of the Act and in the resolution of fonnation to establish the community facilities district pursuant to Sectio.n 53325.1 of the Act (including the issuance of bonds thereby), (b) any proposed special tax is approved by the qualified electors of the community facilities district pursuant to the A.ct, and (c) any agreement shall specifY that if the qualified electors of the community facilities district do not approve the proposed special tax, the local agency shall return any funds whicbhave not been committed for any authorized purpose by the time of the election to the person or entity advancing the funds; and WHEREAS, the City and the Owner desire to enter into this Deposit Agreement in accordance witb Section 53314.9 of the Act in .order to provide for the advancement of funds by the Owner to be used to pay costs incurred in connection witb the formation of the Community Facilities District and issuance of special tax bonds for the Community Facilities District (the "Bonds"), and to provide for the reimbursement to tbe Owner of such funds advanced, without interest, from the proceeds of the Bonds; AGENDA IlEM NO. to PACE_3D OF 90_ ...." .....", .....", ~ ~ r- NOW, THEREFORE, for and in co~iderationof tbe mutualpt'OnUses and covenants herein contained, the parties hereto agree as follows: Section 1. The Denosits and ADnlication Thereof. (a) The Owner bas previously deposited with the City the amount of$aO~O()() (the "Initial Deposit"). The City, by its execution hereof, acknowledges receipt of" and .accepts. the Initial Deposit. (b) City hereby agrees and Owner hereby acknowledges that Union Bank of California, N.A. ("Union BanlC') shall hold the Initial Deposit and any sUbsequent depositS pursuant to (c) hereof as agent for the City. City shall, concurrently with .the execution hereQ( deposit the Initial. Deposit in an account ("Deposit Account") at Union Bank, 1208. San .Pedro Street, 4th Floor, Los Angeles, California 90012. Upon its receipt of the Initial Deposit, Union Bank shall be entitled to deduct therefrom its fee for holding and disbursing the Initial Deposit and any subsequent deposits pursuant to the terms ofthis Deposit Agreement. (c) The Initial Deposit, together. with any subsequent deposit required to be made by the Owner pursuant to the terms hereof (collectively, the "Deposits"), are to be used to pay for any costs incurred for any authorized. purpose. in connection with the formation of the Community Facilities District and the issuance of the Bonds including, without limitation, (i)the fees and expenses olany conswtants to the City employed in connectionwitl1 the formation of the Community Facilities District and the issuance of the Bonds, including an engineer; special tax consultant, financial advisor, bond counsel, disclosure counsel and issuer's counsel. and.any other. consllltant reasonably deemed necessary or advisable by the City, (ii)thecostsof appraisals. market absorptionandlor feasibility studies and other reports reasonably deemed necessary or advisable by the City in connection with the formati<m of the Community Facilities District and issuance of the Bonds, (Hi) the costs of publication of notices., pteparation and mailing of ballots and other costs related to any hearing, election or other action Qrproceeding undertaken in connection with the formation of the Community Facilities District and issuance of the Bonds, (iv) reasonable charges for City staff time incurred in connection with the formation of the Community Facilities District and the issuance of the Bonds by the CommunityFa~ilities District, including a teasonableallocation of City overhead expense related thereto, and (v) any and aU other actual costs and expenses incurred by the City in connection withthe formation of the Community Facilities District and the issuance of the Bonds (coUevtively, the "Initial Costs"). The City may draw upon the. Deposits from time to time to pay the Initial Costs. Union Bank shall have no duty or responsibility to confirm that amounts withdrawn at the direction of the City have been or will be spent on Initial Costs. (d) At such time the Owner requests the City to initiate proceedings to issue Bonds. the Owner shall make an additional deposit in the amount determined by the City. If,. at any time. the unexpended and unencumbered balance of the Deposits is less than $10,.00.0., the City may request, in writing, that the Owner make an additional deposit in an amount estimated to be sufficient, together with any such unexpended and unencumbered balance, to pay for all Initial Costs. The Owner shall make sucb additional deposit witb tbe City within two weeks of the receipt by the Owner of the City's written request therefor. If the Owner fails to make any 2 I/? OF ~-o ACENDA ITEM NO" PAGE ~ \ such additional defi)Qsit within such two week period, the City may cease all work related to the issuance of the Bauds. '-' (e) The Deposits shall be kept separately at Union Bank and shan be invested in a money market fund selected by the City and the City shall at all times maintain recotdsas to the expenditure of the Deposits. (f) The City shan draw upon the Deposits to pay the Initial Costs by presentation of a disbursement request (the "Request"). to Union Bank in the form attached heretO as Exhibit A and by this reference incotporatedherein. The City shall.cause Union Bank to pay such Initial COsts pursuant to the Request. (g) The City shall provide the Owner with a written monthly summary of expenditures madeftOm the Deposits, and the unexpended balance thereof,within ten business days of receipt of the City of a written request therefor submitted by the Owner. The cost of providing any such summary shall be charged to the Deposits. Secti.on z. Return of Deposits: Rehnbursernent. (a) As provided in Section 53314.9 of the Act, the approval by the qualified electOrS of the Community Facilities DistrictQf the proposed special tax to beJevied therein isa condition<tothe repayment to the Owner of the funds advanced by the OWnerpursuant hereto. Therefore, if the qualified electors of the Community Facilities District do not approve the proposed special tax to be levied thereon, the City shall have no obligation to repay the OWller any portion of the Deposits expended or encumbered to pay Initial Costs. In accordance with ......, Section 53314.9 of the Act, if the qualified electors of the Community Facilities District do not approve the proposed special tax to be levied therein. the City shall cause Union Bank to return to the Owner any portion of the Deposits which have not been expended or encumbered to pay Initial Costs by the time of the election on said proposed special tax. (15) Ifproceedings forthe issuance of the Bonds are terminated~ the City shall, within ten business days after official action by the City or the Community Facilities District to terminate said proceedings,. cause Union Bank to return the then unexpended and unencumbered portion (lfthe Deposits to the Owner, without interest. (c) If the Bonds are issued by the Community Facilities District, the City shall reimburse the Owner, without interest, for the portion of the Deposits that has been expended or encumbeted~ said reimbursement to be made within ten business days after the issuance of such Bonds, solely from the proceeds of such Bonds and only to the .extent otherwise permitted under the Act. The City shall, within ten business days after the issuance of such Bonds, return the then unexpended and unencumbered portion of the Deposits to the Owner, without interest. Section 3. Abandonment ofProceediu1!'s. The Owner acknowledges and agrees that the issuance of the Bonds shall be in the sole discretion of the City. No provision of this Deposit Agreement shall be construed as an agreement. promise or warranty of the City to issue the Bonds. ......, 3 ACENDA ITEM NO. PACE '0)'. tD Of q{) - - Sedion 4... Deposit. A~reement.No.t .Debt ~r LiabUitvof CUy. . .As provided in Section 53314.9(b) of the Act, this Deposit Agreement does not constitute a debt or liability of the City, but shall constitute a debt and liability of the Community Facilities District upon its formation. The City shall not be obligated to advance any of its oWn funds to pay Initial Costs or any other costs incurred. in connection with the formatlonofthe CFD and issuance oitheBonds. No member of the City Council of the City and nO. officer, employee or agent oithe City shall to any extent be personally liable hereunder. Section 5. Notices. Any notices, requests, demands, documents, approvals or disapprovals given or sent under this Deposit Agreement from one Party to another (collectively, ''Notices'') may be personally delivered, transmitted by facsimile (FAX) transmission, or deposit with the United States Po~tal Setvice for mailing, postage prepaid, to the address of the other Party as stated in this Section,. and shall be deemed to have been given or sent at the time of personal delivery or FAX transmisSion or, if mailed, .seventy4wo hours following the date of deposit in the course of transmission with the. United States Postal Service. Notices shall be sent as follows: - Ifto City: City of Lake Elsinore Attn: Director of Administrative Services 130 S. Main Street Lake Elisllore, CA 92530 FAX No. (951)674~2392 With oopiesto: Leibold, McClendon & Mann, P.C. Attn: Barbara Zeid Leibold, City Attorney 23422 Mill Creek Drive, Suite 105 Laguna Hills,CA 92653 FAXNo. (949) 457~6305 If to Owner: MVV, L.P. C/o LUMOS Communities LLC Attention: Leonard Leichnitz 30713 Riverside Drive, Suite 20 I Lake Elsinore, CA 92530 ,,-, 4 AGENDA ITEM NO. III PACE '3~ OF q () -- lfto Union Bank: ~ UniQl'lBank ofCalifonria, N.A. Atn: CotporateTmstDept. 1208. Satl Pedro Street, 4lhFloor Los Angeles, CaIifomia90012 FAXNo. (213)972-5694 Each such notice) statement) demand) consent, approval, authorization, offer) designation) request or other communication hereunder shall be deemed delivered to'the party to whom it is addressed (a) if personally served or delivered, upon delivery) (b) if given by electronic communication, whether by telex, telegram or telecopier upon the sender's receipt of an appropriate answerback or other written acknowledgement, (c) if given by registered or certified mail) return receiptrequested, deposited witb the United States mail postage prepaid, 72 hours after such notice is.depositedwith the United States mail) (d) if given by overnight courier, with courier charges prepaid, 24hoursafterdeliverytQ said overnight courier, or (e) if given by any other means, upondelivery.attheaddress specified in this Section. Section 6. California Law. This Depo~it Agreement shall be governed and construed inaccotdat1cewith the laws of the State of California. The Parties shall be entitled to seek any remedy available at law and inequity. All legal actions must be instituted in the Superior Courtof the County of Riverside) State of Calif011lia, in an appropriate municipal court in Riverside County) or in the United States District Court for the District of California in which Riverside County is located. ~ Section 7. SucceSsors and Asshms. Tbis Deposit Agreement shall be binding upon and inure to the benefit oHhesuceessors.and assigns of the parties hereto. Section 8. Counterparts. Tbis Deposit Agreement may be executed in counterparts) eacb of which shall be deemed an original and all of which shall constitute but one and the same instrument. Section 9. Other Aere.emeuts. Tbe obligations of tbe Owner hereunder sball be tbat ofa party bereto. Nothingberein shall be construed as affecting the City's or Owner)s rights, or duties to perform their respective obligations) under other agreements, use regulations or subdivision requirements. relating to the development. Tbis Deposit Agreement shan not confer any additional rigbts, or waive any rights given, by either party hereto under any development or other agreement to which they are a party. Section lO. Titles and Ca.ptions. Titles and captions are for convenience of reference only and do not define) describe or limit tbe scope or tbe intent of this Deposit Agreement or of any of its terms. Reference to section numbers are to sections in tbis Deposit Agreement, unless expressly stated otberwise. Section 11. Interpretation. As used in this Deposit Agreement, masculine, feminine or neuter gender and the singular or plural number shan each be deemed to include the others ~ 5 ACENDA ~ t.. 0 PACE' OF qo ~ r- where and when the context. so dictates. The word "including" shall .~ construed as if followed by the words "without limitation." Tbis Deposit Agreement shall be interpreted as though prepared jointly by both Parties" Section 12. No Waiver. A waiver by either Party ofabreach of any of the covenants, conditions or agreement~ under this Deposit Agreement to be performed by the other Party shall not be construed . asa waiver of any succeeding breach . of the same or other covenants, agreements, restrictions Of conditions of this Deposit Agreement. Section 13. Modifications. Any alteration, change or modification of or to this Deposit Agreement, in order to become effective, shall be maLlein writing and in each instance signed onbehalf of each Party. "..--.. Section 14. Severability. If any term, provision, condition or covenant of this Deposit Agreement or its application to any party or circumstances shallbe<held, to any extent, invalid or unenforceable, the remainder of this Deposit Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, andsbaU be valid and enforceable to the fullest extent permitted by law. Section 15. Lee:al Advice. Each Party represents and warrants to the other the following: they bavecar~fullyread this Deposit .t\greement,and in signing this Deposit Agreement, tbey do so with full knowledge of any right which tbeymay have; they have received independent legal advice from their respective legal counsel as to the matters set forth in this Deposit Agreement, or have knowingly cbosen nottoconsl.1lt lega.lcol.1ns.el as to the matters set forth in this. Deposit Agreement; and, they have freely signed this Deposit Agreement without any reliance upon any agreement, promise, statementor representation by or on behalf of the other Party, or their respective agents, employees, orattoml'>Ys, except as specifically set forth in this Deposit Agreement, and without duress or coercion, whether economic or otherwise. Section 16 Cooperation. Each Party agrees to cOQperate with the other in this transaction and, in that regard, to sign any and all documents which may be reasonably necessary, helpful, or appropriate to carry out the purposes and intent of this Deposit Agreement including, but not limited to, releases or additional agreements. Section 17. Conflicts of Interest. No member, official or employee of City shall have any personal interest, direct or indirect, in this Deposit Agreement, nor shall any such member, official or employee participate in any decision relating to the Deposit Agreement which affects his personal interests or the interests of any corporation, partnership or association in which he is directly or indirectly interested. Section 18. Ree:ardin2 the Ae:ent. In acting hereunder, Union Bank is acting solely as agent for the City and not in its proprietary capacity. The duties . and responsibilities of Union Bank shall be limited to those expressly set forth in this Deposit Agreement. In no event shall the Union Bank be liable for any special, indirect or consequential damages. Union Bank will not be liable for any action taken or neglected to be taken by it in good faith in any exercise of ,-. reasonable care and believed by it to be within the discretion of power conferred upon it by this 6 ACENDA ITEM NO. PACE 30 /0 OF 0^ - Deposit Agr~m~nt> in~lUdingwithQ~tlffuit3ti~, disb~efnent ofi}mds . from the Deposit Account upon receipt of instructions reasonably. believed. by Union Bank to have been executed b}l the person set forth therein.. Union Bank shall r~i'Vecompensationfor itss~icesasagre~d between Uni(>nB~andthe~ity. Tcrthe extent. permitted b,law> the City agrees to indemnify and hold Union Bank harmless from all loss, cost, damages, expenses> liabilities, judgments and atto:meys' fees. (including without limitation,allocatedcost$ of iri~holls.e counsel) suffered Of incUIted by Union Barikansingoutoforin connection with this Deposit Agreement, except that this indemnity obligation . shall not apply in the event of. the gross negligence or willful misconducfof the indemnified parties or any of them. This indenmity obligation shall survive tehnination6fthis DepoSit Agteem~nt. This Deposit Agreement will terminate upon the earlier ofdishursementofall funds in the Deposit AccQuntor upon thedirect1on'ofthe City. '-' ......", ......", 7 ACENDA ITEM NO. / l? PAGE 3 It OF qlJ -. ,-.. IN WITNESS WHERE()F, the Parties have executed this Deposit Agreement as of the date set forth on the nrstpage hereof. "CITY" CITY OF LAKE ELSINORE, a municipal corporatioJ) By: Title: "OWNER" MVV,L.P. By: LUMOS Communities LLC Its: Property Manage . zed Agent eQ Leonard Leichri Managing Member By: ---. ACCEPTED BY: UNION BANK OF CALIFORNIA, N.A. By: Title: Authorized Officer - 8 .:~0ENOA iTEM we. PACE :r1 /0 OF qb ExmBIT A ....." City of Lake Elsinore Community FitciJities District No. 2006-6 (Tessera) WRITTEN ImQUESTNO.. .FOR DISBURSEMENTS<PURSUANT TO THE DEPOSIT AND REIMBURSEMENT AGREEMENT The undersigned hereby states and certifies: (1) that he/she is the duly qualified City Manager of the City of Lake Elsinore, a municipal corporation duly organized and existing under the laws of the State of California (the "CitY") and as such, is familiar with the facts herein certified and is authorized and qualified to execute and deliver this certificate; (2) that he is authorized pursuant to the Deposit and Reimbursement Agreement, dated as of ,2006 (the "Agreement'), by and between the City of Lake Elsinore and MVV L.P. relating to the formation of Cityo! Lake Elsinore Community Facilities District No. 2006-6 (Tessera) (the "CFD"); (3) that pursuant to Section lee) ofthe Agreement, Union Bank is hereby directed to disburse tbis date from Account No. (the "Account") to the payees, designated on Exhibit I attacbed hereto and by this reference incorporated herein, the respective sums set forth opposite sucb payees, in payment of certain expenses related to the CFD; ~ (4) that each obligation shown on Exhibit 1 bas been properly incurred and is a proper cbarge against the Account; (5) that no item to be paid pursuant to this Written Request has been previously paid or reimbursed from the Account; and (6) tbat capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Agreement. Dated: CITY OF LAKE ELSINORE, a municipal corporation By: Title: City Manager ....." AC.ENDA ITEM NO. /0 PAGE ":29 Of 96 - ,..... ,..... ,..... FEE DEPOSIT AND REIMBURSEMENT AGREEMENT by and between CITY OF LAKE ELSINORE and MVV, L.P. relating to CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-6 (TESSERA) 45788920.1 AGENDA f1EM ffO. /1) PACE 30{ OF ql:> FEE DEPOSIT AND REIMBURSEMENT AGREEMENT ~ THIS FEE DEPOSIT AND REIMBURSEMENT AGREEMENT (the "Agreement") is entered into effective as of the 27th day of June, 2006, by and between the CITY OF LAKE ELSINORE, a city duly organized and existing under the laws of the State of California ("City"), and MVV, L.P., a [California] limited partnership ("Property Owner"), and relates to the proposed formation by City of a community facilities district to be known as "City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera)" (the "CFD"). RECITALS: A. The property described and depicted in Exhibit "A" hereto (the "Property") is proposed to constitute the land within the boundaries of the CFD. B. Property Owner intends to develop the Property for residential purposes and has obtained or intends to obtain the necessary development approvals to construct approximately 168 residential units on the Property, as such development may be modified from time to time (the "Project"). C. The Project will require the payment, pursuant to the land use entitlements, conditions of approval, existing City ordinances and resolutions and development agreement for and applicable to the Project (the "Project Conditions"), of certain City Fees (defined below). D. In conjunction with the recording of the final subdivision map(s) for the Project, applicable to issuance of grading permits and/or the issuance of building permits for the construction of homes within the Project, Property Owner, or its successors or assigns, may elect to provide a security deposit to cover City Fees to the City (the "Deposit") before any Bond Proceeds are available to pay the City Fees. In such case, Property Owner shall be entitled to (i) reimbursement of such Deposits and (ii) credit for payments made to the City from Bond Proceeds of the City Fees which would otherwise be due to the City in conjunction with the Project, all as further described herein. ~ AGREEMENT NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows: 1. Recitals. Each of the above recitals is incorporated herein and is true and correct. 2. Definitions. Unless the context clearly otherwise requires, the terms defined in this Section shall, for all purposes of this Agreement, have the meanings herein specified. (a) "Act" means the Mello-Roos Community Facilities Act of 1982, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code. ~ 45788920.1 1 ACENDA '181 NO. I () Pl~.CE_ q 0 ~OF.. q 7J "..... (b) "Bond Proceeds" or "Proceeds of the Bonds" shall mean those net funds generated by the sale of the Bonds and investment earnings thereon. (c) "Bonds" shall mean those bonds, or other securities, issued by, or on behalf of, the CFD in one or more series, as authorized by the qualified electors within the CFD. (d) "City Fees" means the fees and charges and all components thereof imposed by the City upon the Project pursuant to the Project Conditions. ( e) "Deposits" means an amount deposited with the City by Property Owner as security for City Fees and which are eligible for refund by the City upon the sale of Bonds. (f) "Party" or "Parties" shall mean anyone or all of the parties to this Agreement. (g) "State" means the State of California. 3. Proposed Formation of the CFD. City will undertake to analyze the appropriateness of forming the CFD. City will retain, at the expense of the Property Owner, the necessary consultants to analyze the proposed formation ofthe CFD. 4. Sale of Bonds and Use of Proceeds. In the event that the CFD is formed, the City Council acting as the legislative body of the CFD may, in its sole discretion, finance, among other things, the City Fees by issuing the Bonds. -- As required by the Project Conditions, it may be necessary for Property Owner, or its successors or assigns, to make Deposits before Bonds are issued. Upon the issuance and sale of the Bonds, Property Owner may execute and submit a payment request, in substantially the form attached hereto as Exhibit "B", to the CFD requesting disbursement to the City of an amount equal to all Deposits from Bond Proceeds. Within ten (10) business days of the City's receipt of funds pursuant to such disbursement request, the City shall return the Deposits to Property Owner. In the event Bonds are not issued within twelve (12) months of the date of any Deposit, such Deposit may be applied to pay the City Fees, and shall no longer be reflected as a deposit on the accounts of the City. 5. Indemnification. Property Owner shall assume the defense of, indemnify and save harmless, City and the CFD, their respective officers and employees, and each and every one of them, from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subjected or put, by reason of, or resulting from, any act or omission of Property Owner with respect to this Agreement; provided, however, that Property Owner shall not be required to indemnify any person or entity as to damages resulting from negligence or willful misconduct of such person or entity or their officers, agents or employees. 6. Amendment and Assignment. This Agreement may be amended at any time but only in writing signed by each party hereto. This Agreement may be assigned, in whole or in part, by the Property Owner to the purchaser of any parcel of land within the Property provided, however, such assignment shall not be effective unless and until the City has been notified, in writing, of such assignment. -- 45788920. I 2 ACENDA ITEM ~ 10 PACE 11 . OF '90 7. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the matters provided for herein and supersedes all prior agreements and negotiations between the parties with respect to the subject matter of this Agreement. -' 8. Notices. Any notice, payment or instrument required or permitted by this Agreement to be given or delivered to either party shall be deemed to have been received when personally delivered or seventy-two hours following deposit of the same in any United States Post Office in California, registered or certified, postage prepaid, addressed as follows: City: City of Lake Elsinore 130 S. Main Street Lake Elsinore, California 92530 Attn: City Manager Property Owner: MVV, L.P. c/o LUMOS Communities LLC 30713 Riverside Drive, Suite 201 Lake Elsinore, California 92530 Attn: Leonard Leichnitz Each party may change its address for delivery of notice by delivering written notice of such change of address to the other party hereto. 9. Attorneys' Fees. In the event of the bringing of any action or suit by any Party against any other Party arising out of this Agreement, the Party in whose favor final judgment shall be entered shall be entitled to recover from the losing Party all costs and expenses of suit, including reasonable attorneys' fees. -' 10. Severability. If any part of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent reasonably possible. 11. Governing Law. This Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California. 12. Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by the other party hereto, or the failure by a party to exercise its rights upon the default of another party, shall not constitute a waiver of such party's right to insist and demand strict compliance by such other party with the terms of this Agreement thereafter. 13. No Third Party Beneficiaries. No person or entity other than the CFD, when and if formed, shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement (either express or implied) is intended to confer upon any person or entity, other than the City, the CFD, and Property Owner (and their respective successors and assigns, exclusive of individual homebuyers), any rights, remedies, obligations or liabilities under or by reason of this Agreement. -' 45788920.1 3 ACENDA ITEM NO. /0 P,ACE~OF erD ~ 14. Singular and Plural: Gender. As used herein, the singular of any word includes the plural, and terms in the masculine gender shall include the feminine. 15. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute but one instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year written above. CITY OF LAKE ELSINORE, a municipal corporation By: Mayor ATTEST: FREDERICK RAY, CITY CLERK By: FREDERICK RAY __- APPROVED AS TO FORM: LEIBOLD, McCLENDON & MANN, P.C. City Attorney By: BARBARA ZEID LEffiOLD MVV, L.P., a [California] limited partnership By: LUMOS Communities LLC, a [California] limited liability company Its: Property Manager, Authorized Agent By: Leonard Leichnitz Managing Member --- 45788920.\ 4 AGENDA ITEM NO. / () PACE 4) OF qD EXHIBIT A DESCRIPTION OF PROPERTY LEGAL DESCRIPTION 45788920.1 AOENDA~. /IJ PAGE "~qD ~ "-' "-' ~. .-...' -- .--.. BOUNDARY MAP 45788920.\ ACENDAITEMNO. /0 PAGE Lf'7 OF q D EXHffiIT B DISBURSEMENT REQUEST FORM 1. City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) ("CFD") is hereby requested to pay from the CFD bond proceeds to the City of Lake Elsinore (the "City"), as Payee, the sum set forth in 3 below. 2. The undersigned certifies that the amount requested for City Fees is due and payable and has not formed the basis of prior request or payment. 3. Amount requested: $ For Lot Nos: 4. The amount set forth in 3 above is authorized and payable pursuant to the terms of the Fee Deposit and Reimbursement Agreement by and between the CITY OF LAKE ELSINORE and MVV, L.P., dated as of June 27,2006 (the "Agreement"). Capitalized terms not defined herein shall have the meaning set forth in the Agreement. MVV, L.P., a [California] limited partnership By: LUMOS Communities LLC, a [California] limited liability company Its: Property Manager, Authorized Agent By: Leonard Leichnitz Managing Member Date: cc: City of Lake Elsinore Finance Dept. 45788920.1 AGENDA ITEM NO.. i L) DACE '-f~ ,OF ~D .....", ....., ....., - ,-- -- ,..-.. FEE DEPOSIT AND REIMBURSEMENT AGREEMENT by and among CITY OF LAKE ELSINORE, ELSINORE VALLEY MUNlCIP AL WATER DISTRICT and MVV, L.P. relating to CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-6 (TESSERA) AOENDA ITEM NO.. /0 PACE L(l OF 90 ~ FEE DEPOSIT AND REIMBURSEMENT AGREEMENT -' THIS FEE DEPOSIT AND REIMBURSEMENT AGREEMENT (the "Agreement") is entered into effective as of the LJth day of r ',2006, by and among the CITY OF LAKE ELSINORE, a city duly organized and existing under the laws of the State of California ("City"), ELSINORE VALLEY MUNICIPAL WATER DISTRICT, County of Riverside, State of California, a municipal water district ("EVMWD"), and MVV, L.P. ("Property Owner"), and relates to the proposed formation by City of a community facilities district to be known as "City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera)" (the "CFD"). RECITALS: A. The property described and depicted in Exhibit "A" hereto (the "Property") is proposed to constitute the land within the boundaries ofthe CFD. B. Property Owner intends to develop the Property for residential purposes and has obtained or intends to obtain the necessary development approvals to construct approximately 90 residential units on the Property, as such development may be modified from time to time (the "Project"). C. The Project will require the payment, pursuant to the rules and regulations of EVMWD, as amended from time to time, applicable to the Project (the "Project Conditions") of certain EVMWD Charges (defined below). D. In conjunction with the recording of the final subdivision map(s) for the Project, the issuance of building permits for the construction of homes within the Project and/or receipt of water meters for such homes, Property Owner, or its successors or assigns, may elect to provide a security deposit to cover EVMWD Charges to EVMWD (the "Deposit") before any Bond Proceeds are available to pay the EVMWD Charges. In such case, Property Owner shall be entitled to (i) reimbursement of such Deposits and (ii) credit for payments made to EVMWD from Bond Proceeds of the EVMWD Charges which would otherwise be due to EVMWD in conjunction with the Project, all as further described herein. ....., AGREEMENT NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows: 1. Recitals. Each of the above recitals is incorporated herein and is true and correct. 2. Definitions. Unless the context clearly otherwise requires, the terms defined in this Section shall, for all purposes of this Agreement, have the meanings herein specified. (a) "Act" means the Mello-Roos Community Facilities Act of 1982, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code. ....., 1 AGENDA ITEM NO. ItJ PAOE t./~ OF?fi>- /""' (b) "Bond Proceeds" or "Proceeds of the Bonds" shall mean those net funds generated by the sale of the Bonds and investment earnings thereon. (c) "Bonds" shall mean those bonds, or other securities, issued by, or on behalf of, the CFD in one or more series, as authorized by the qualified electors within the CFD. (d) "Deposits" means an amount deposited with EVMWD by Property Owner as security for EVMWD Charges and which are eligible for refund by EVMWD upon the sale of Bonds. ( e) "EVMWD Charges" means water connection fees, sewer connection fees, annexation fees, sewer treatment capacity charges and all components thereof of EVMWD imposed upon the Project to pay for the provision of water and sewer services to and the construction ofEVMWD water and sewer facilities required to serve the Project. (f) "Party" or "Parties" shall mean anyone or all of the parties to this Agreement. (g) "State" means the State of California. 3. Proposed Formation of the CFD. City will undertake to analyze the appropriateness of forming the CFD. City will retain, at the expense of the Property Owner, the necessary consultants to analyze the proposed formation ofthe CFD. --- 4. Sale of Bonds and Use of Proceeds. In the event that the CFD is formed, the City Council acting as the legislative body of the CFD may, in its sole discretion, finance, among other things, the EVMWD Charges by issuing the Bonds. As required by the Project Conditions, it may be necessary for Property Owner, or its successors or assigns, to make Deposits before Bonds are issued. Upon the issuance and sale of the Bonds, Property Owner may execute and submit a payment request, in substantially the form attached hereto as Exhibit "B", to the CFD requesting disbursement to EVMWD of an amount equal to all Deposits from Bond Proceeds. Within thirty (30) business days of EVMWD's receipt of funds pursuant to such disbursement request, EVMWD shall return the Deposits to Property Owner. In the event Bonds are not issued within twelve (12) months of the date of any Deposit, such Deposit may be applied to pay the EVMWD Charges, and shall no longer be reflected as a deposit on the accounts ofEVMWD. 5. Indemnification. Property Owner shall assume the defense of, indemnify and save harmless, the City, the CFD and EVMWD, their respective officers and employees, and each and every one of them, from and against all actions, damages, claims, losses or expenses of every type and description to which they may be subjected or put, by reason of, or resulting from, any act or omission of Property Owner with respect to this Agreement; provided, however, that Property Owner shall not be required to indemnify any person or entity as to damages resulting from negligence or willful misconduct of such person or entity or their officers, agents or employees. --- 2 AGENDAITEM~. /f/ PAGE 4q OfI1D:r 6. Disclosure of Special Tax; Calculation of Special Tax Requirement. (a) Delivery of Notice. From and after the date of this Agreement, Property Owner and its successors and assigns shall give a ''Notice of Special Tax" (as defined in Section 6(b) below) to each prospective purchaser of a parcel in the CFD and shall deliver a fully executed copy of each notice to the CFD. Property Owner and its successors and assigns shall (i) maintain records of each Notice of Special Tax for a period of five (5) years, and (ii) shall provide copies of each notice to the CFD promptly following the giving of such notice. Property Owner and its successors and assigns shall include the Notice of Special Tax in all Property Owner's and its successors' and assigns' applications for Final Subdivision Reports required by the Department of Real Estate ("DRE") which are filed after the effective date of this Agreement. ~ Property Owner and its successors and assigns shall require, as a condition precedent to close an escrow for the sale of real property to a developer acquiring lots (a "Residential Developer"), that such Residential Developer shall (i) maintain records of each Notice of Special Tax for a period of five (5) years, (ii) provide copies of each notice to the CFD promptly following the giving of such notice, and (iii) include the Notice of Special Tax in all of such Residential Developer's applications for Final Subdivision Reports required by DRE. (b) Notice of Special Tax. With respect to any parcel, the term "Notice of Special Tax" means a notice in the form prescribed by California Government Code Section 53341.5 which is calculated to disclose to the purchaser thereof (i) that the property being purchased is subject to the special tax of the CFD; (ii) the land use classification of such property; (iii) the maximum annual amount of the special tax and the number of years for which ~ it will be levied; (iv) if available at the time such notice is delivered, an indication of the amount of special tax to be levied on such property for the following fiscal year; and (v) the types of facilities or services to be paid for with the proceeds of the special tax. (c) Notice to Subsequent Purchasers. The CFD will file with the Riverside County Recorder a notice of special tax lien that gives notice of the existence of the CFD and the levy ofthe special tax on property within the CFD for the benefit of subsequent property owners, pursuant to requirements of Section 3114.5 ofthe Streets and Highways Code. (d) Information Sheet and Sample Propertv Tax Bill. Property Owner and its successors and assigns shall provide each purchaser of property with a sample property tax bill in a form approved by the CFD. Property Owner and its successors and assigns shall provide prospective purchasers of homes an information sheet in the sales office in the form set forth in Exhibit C attached hereto and incorporated herein by this reference. 7. Amendment and Assignment. This Agreement may be amended at any time but only in writing signed by each party hereto. This Agreement may be assigned, in whole or in part, by the Property Owner to the purchaser of any parcel of land within the Property provided, however, such assignment shall not be effective unless and until the City and EVMWD have been notified, in writing, of such assignment. 3 ......, ~GEN[)A~ta\~ /P BACE, 9)' OF q-l';5r ~, t'f-'t.....J<...." _ _ -4 --- 8. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the matters provided for herein and supersedes all prior agreements and negotiations between the parties with respect to the subject matter of this Agreement. 9. Notices. Any notice, payment or instrument required or permitted by this Agreement to be given or delivered to either party shall be deemed to have been received when personally delivered or seventy-two hours following deposit of the same in any United States Post Office in California, registered or certified, postage prepaid, addressed as follows: City: City of Lake Elsinore 130 S. Main Street Lake Elsinore, California 92530 Attn: City Manager EVMWD: Elsinore Valley Municipal Water District 31315 Chaney Street Lake Elsinore, California 92530 Attn: General Manager Property Owner: MVV, L.P. C/o LUMOS Communities LLC 30713 Riverside Drive, Suite 201 Lake Elsinore, California 92530 Attn: Leonard Leichnitz --- Each party may change its address for delivery of notice by delivering written notice of such change of address to the other party hereto. 10. Attorneys' Fees. In the event of the bringing of any action or suit by any Party against any other Party arising out of this Agreement, the Party in whose favor final judgment shall be entered shall be entitled to recover from the losing Party all costs and expenses of suit, including reasonable attorneys' fees. 11. Severability. If any part of this Agreement is held to be illegal or unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be given effect to the fullest extent reasonably possible. 12. Governing Law. This Agreement and any dispute arising hereunder shall be governed by and interpreted in accordance with the laws of the State of California. 13. Waiver. Failure by a party to insist upon the strict performance of any of the provisions of this Agreement by the other party hereto, or the failure by a party to exercise its rights upon the default of another party, shall not constitute a waiver of such party's right to insist and demand strict compliance by such other party with the terms of this Agreement thereafter. ~. 14. No Third Partv Beneficiaries. No person or entity other than the CFD, when and if formed, shall be deemed to be a third party beneficiary hereof, and nothing in this Agreement 4 AGENDA n&I NO. PAGE V5l /D OF qo ~ - (either express or implied) is intended to confer upon any person or entity, other than the City, the CFD, EVMWD and Property Owner (and their respective successors and assigns, exclusive of individual homebuyers), any rights, remedies, obligations or liabilities under or by reason of this Agreement. .....", 15. Singular and Plural; Gender. As used herein, the singular of any word includes the plural, and terms in the masculine gender shall include the feminine. 16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute but one instrument. ....., ...., 5 AOENDA IltM NO. /0 PACE 5;1- _OF 16 - ,....... IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year written above. CITY OF LAKE ELSINORE, a municipal corporation By: Mayor ATTEST: FREDERICK RAY, CITY CLERK By: FREDERICK RAY APPROVED AS TO FORM: VAN BLARCOM, LEIBOLD, McCLENDON & MANN, P.C. City Attorney /""- By: BARBARA ZEID LEIBOLD ELSINORE VALLEY MUNICIPAL WATER DISTRICT By: General Manager of the Elsinore Valley Municipal Water District MVV, L.P. By: LUMOS Communities LLC Its: Property Manager, Authorized Agent By: Leonard Leichnitz Managing Member /""- 6 ACENDA ITEM NO. /lJ PAOE ~6 Of 16 ~ EXHIBIT A DESCRIPTION OF PROPERTY --' LEGAL DESCRIPTION THE NORTHWEST QUARTER OF THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER SECTION 8, TOWNSHIP 6 SOUTH, RANGE 4 WEST, SAN BERNARDINO BASE AND MERIDIAN; EXCEPTING THEREFROM THAT PORTION THEREOF CONVEYED TO THE STATE OF CALIFORNIA FOR HIGHWAY PURPOSES BY DEED RECORDED JULY 26, 1955 IN BOOK 1772 PAGE 9 OF OFFICIAL RECORDS OF RNERSIDE COUNTY, CALIFORNIA; ALSO EXCEPTING THEREFROM THAT PORTION CONVEYED TO THE CITY OF ELSINORE BY DEED RECORDED JUNE 29, 1957 IN BOOK 2111 PAGE 62 OF OFFICIAL RECORDS OF RNERSIDE COUNTY, CALIFORNIA. CONTAINING 9.12 ACRES MORE OR LESS --' --' AGENDA ITEM_ ~~._ /0 PACe...:t!-OF Cj 0 r.,. ,-... BOUNDARY MAP -- /'""'"' AGENDA ITEM NO. / D PAGE Cd? OF 10 ... EXHIBIT B DISBURSEMENT REQUEST FORM ....., 1. City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) ("CFD") is hereby requested to pay from the CFD bond proceeds to the Elsinore Valley Municipal Water District ("EVMWD"), as Payee, the sum set forth in 3 below. 2. The undersigned certifies that the amount requested for EVMWD Charges is due and payable and has not formed the basis of prior request or payment. 3. Amount requested: $ For Lot Nos: 4. The amount set forth in 3 above is authorized and payable pursuant to the terms of the Fee Deposit and Reimbursement Agreement by and among the CITY OF LAKE ELSINORE, ELSINORE VALLEY MUNICIPAL WATER DISTRICT and MVV, L.P. dated as of [ 1 [.-:], 2006 (the "Agreement"). Capitalized terms not defined herein shall have t~e meaning set forth in the Agreement. MVV, L.P. By: LUMOS Communities LLC Its: Property Manager, Authorized Agent .....", By: Leonard Leichnitz Managing Member cc: City of Lake Elsinore Finance Dept. ...., ACENDA ITEM NO. l () PACE 5tt OF 1'D - --- EXHffiIT C FORM OF INFORMATION SHEET COMMUNITY FACILITIES DISTRICT NO. 2006-6 CITY OF LAKE ELSINORE 1. WHAT IS COMMUNITY FACILITIES DISTRICT (CFD) NO. 2006-6? CFD No. 2006-6 was formed pursuant to the "Mello-Roos Community Facilities Act of 1982" to finance 2. WHO IS RESPONSIBLE TO PAY THE SPECIAL TAX AND HOW IS IT BILLED? The Property owner is responsible for paying the CFD No. 2006-6 special tax, which will appear as a separate line item on your property tax bill along with your regular property taxes. 3. HOW MUCH WILL MY SPECIAL TAX BE? The maximum special tax applicable to your lot is the greater of the assigned special tax or backup special tax. The assigned and backup special taxes for CFD No. 2006-6 for the 2006-07 Fiscal Year are summarized below. It is expected that the actual special tax levied each year will be the assigned special tax and the backup special tax would only be levied where there has been very signifcant delinquencies or changes in the development. /'"'- Classification Home Size Asshmed Snecial Tax 1 $ Idwelling unit 2 $ Idwelling unit 3 $ Idwelling unit 4 $ Idwelling unit 4. HOW LONG WILL I HAVE TO PAY THE CFD NO. 2006-6 SPECIAL TAX? The CFD No. 2006-6 special tax will not be collected after calendar year 20_. S. CAN THE SPECIAL TAXES BE PREPAID? Homeowners have the option of prepaying their CFD No. 2006-6 special tax anytime. For prepayment information please contact the City. 6. WHERE CAN I GET MORE INFORMATION? For more information in regards to CFD No. 2006-6, contact the City of Lake Elsinore at /'"'- _ 1 ACENDA ITEM NO. 10 PAce--51-- OF 'f't> _ RESOLUTION NO. 2006- crs ~ RESOLUTION OF INTENTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, TO ESTABLISH CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-6 (TESSERA) WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has received a petition (the "Petition") requesting the institution of proceedings for (i) formation of a community facilities district (the "CFD") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), (ii) authorization of issuance of bonds for the CFD, and (iv) establishment of an appropriations limit for the CFD; and WHEREAS, the Council has determined that the Petition complies with the requirements of Government Code Section 53318( c) and now intends to initiate such proceedings; and WHEREAS, it is .the intention of the Council to finance parks, open space and storm drains maintenance services that are in addition to those provided in the territory within the CFD prior to the formation of the CFD and do not supplant services already available within the territory proposed to be included in the CFD through the formation of the CFD subject to the levy of a special tax to pay for such services, being approved at an election to be held within the boundaries of the CFD; and ~ WHEREAS, it is also the intention of the Council to finance the acquisition and construction of the Facilities (as defined below) or any combination thereof through the formation of the CFD, subject to the authorization of bonds and the levy of a special tax to pay lease paYments, installment purchase paYments or other paYments, or principal and interest on bonds, being approved at an election to be held within the boundaries of the CFD. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Council hereby determines to institute proceedings for the formation of a community facilities district under the terms of the Act. The exterior boundaries of the CFD are hereby specified and described to be as shown on that certain map now on file in the office of the Clerk entitled "Proposed ~ 45788904.1 ACENDA ITE~ ~. It; PAGE -::>~ OF 7'0.. CITY COUNCIL RESOLUTION NO. 2006-_ Page 2 of6 ,....... Boundary of Community Facilities District No. 2006-6 of the City of Lake Elsinore (Tessera)," which map indicates by a boundary line the extent of the territory included in the proposed community facilities district and shall govern for all details as to the extent of the CFD. On the original and one copy of the map of such CFD on file in the City Clerk's office, the City Clerk shall endorse the certificate evidencing the date and adoption of this resolution. The City Clerk shall file the original of such map in her office and, within fifteen (15) days after the adoption of this Resolution, the City Clerk shall file a copy of such map so endorsed in the records of the County Recorder, County of Riverside, State of California. SECTION 2. The name of the proposed CFD shall be "City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera)." SECTION 3. Except where funds are otherwise available, it is the intention of the Council to levy annually in accordance with procedures contained in the Act a special tax (the "Services Special Tax") sufficient to finance a portion of the cost of providing parks, open space and storm drains maintenance services (the "........ "Services") that are in addition to those provided in the territory within the CFD prior to the formation of the CFD and do not supplant services already available within the territory proposed to be included in the CFD, the costs of administering the levy and collection of the Services Special Tax and all other costs of the levy of the Services Special Tax, including any foreclosure proceedings, legal, fiscal, and financial consultant fees, election costs, and all other administrative costs of the tax levy. The Services Special Tax will be secured by recordation of a continuing lien against all real property in the CFD. The schedule of the rate and method of apportionment and manner of collection of the Services Special Tax is described in detail in Exhibit A attached hereto and by this reference incorporated herein. The Services Special Tax is apportioned to each parcel on the foregoing basis pursuant to Section 53325.3 of the Act. SECTION 4. The facilities proposed to be financed by the CFD are public infrastructure facilities and other governmental facilities with an estimated useful life of five years or longer, which the CFD is authorized by law to construct, own or operate and that are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within the proposed CFD, including but not limited to City street and storm drain improvements, EVMWD water and sewer facilities, City capital facilities fees, EVMWD water and sewer ,....... 45788904.1 AGENDA ITEM NO._ 10. '() pAGE....5:L-Of ~ v- CITY COUNCIL RESOLUTION NO. 2006- Page 3 of6 capital facilities fees, and related costs including designs, inspections, professional fees, annexation fees, connection fees and acquisition costs (the "Facilities"). Such Facilities need not be physically located within the CFD. SECTION 5. Except where funds are otherwise available, it is the intention of the Council to levy annually in accordance with procedures contained in the Act a special tax (the "Special Tax") sufficient to pay for the costs of financing the acquisition and/or construction of the Facilities, including the principal of and interest on the bonds proposed to be issued to finance the Facilities and other periodic costs, the establishment and replenishment of reserve funds, the remarketing, credit enhancement and liquidity fees, the costs of administering the levy and collection of the Special Tax and all other costs of the levy of the Special Tax and issuance of the bonds, including any foreclosure proceedings, architectural, engineering, inspection, legal, fiscal, and financial consultant fees, discount fees, interest on bonds due and payable prior to the expiration of one year from the date of completion of facilities (but not to exceed two years), election costs and all costs of issuance of the bonds, including, but not limited to, fees for bond counsel, disclosure counsel, financing consultants and printing costs, and all other administrative costs of the. tax levy and bond issue. The Special Tax will be secured by recordation of a continuing lien against all real property in the CFD. In the first year in which such a Special Tax is levied, the levy shall include a sum sufficient to repay to the City all amounts, if any, transferred to the CFD pursuant to Section 53314 of the Act and interest thereon. The schedule of the rate and method of apportionment and manner of collection of the Special Tax is described in detail in Exhibit A attached hereto and by this reference incorporated herein. The Special Tax is based upon the cost of financing the Facilities in the CFD, the demand that each parcel will place on the Facilities and the benefit (direct and/or indirect) received by each parcel from the Facilities. The Special Tax is apportioned to each parcel on the foregoing basis pursuant to Section 53325.3 of the Act. In the event that a portion of the property within the CFD shall become for any reason exempt, wholly or partially, from the levy of the Special Tax, the Council shall, on behalf of the CFD, increase the levy to the extent necessary upon the remaining property within the CFD which is not delinquent or exempt in order to yield the required payments, subject to the maximum tax. Under no circumstances, however, shall the Special Tax levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within the CFD by more than 10 percent. Furthermore, the maximum special tax 45788904.1 AGENDA nEM NO.._ /0 90 pAGE (ntJ Of ........ ..., ....", .....", ,,-... .~ ,-. CITY COUNCIL RESOLUTION NO. 2006- Page 4 of6 authorized to be levied against any parcel used for private residential purposes shall not be increased over time in excess of 2 percent per year. SECTION 6. The Council hereby finds that the proposed Facilities are necessary to meet increased demands put upon the City as a result of the new development or rehabilitation within the proposed CFD. SECTION 7. A public hearing (the "Hearing") on the establishment of the CFD and the proposed rate and method of apportionment of the Services Special Tax and the Special Tax shall be held on August 8, 2006, at 7:00 p.m., or as soon thereafter as practicable, at the Lake Elsinore Cultural Center located at 183 North Main Street, Lake Elsinore, California 92530. SECTION 8. At the time and place set forth above for the hearing, any interested person, including all persons owning lands or registered to vote within' the proposed CFD, may appear and be heard. SECTION 9. Each City officer who is or will be responsible for the Services and the Facilities to be financed by the CFD, if it is established, is hereby directed to study the proposed CFD and, at or before the time of the above- mentioned Hearing, file a report with the Council, and which is to be made a part of the record of the Hearing, containing a brief description of the Services and the Facilities by type which will in his or her opinion be required to adequately meet the needs of the CFD and his or her estimate of the cost of providing the Services and the Facilities. The City Manager is directed to estimate the fair and reasonable cost of all incidental expenses, including the cost of planning and designing the Facilities to be financed pursuant to the Act, including the cost of environmental evaluations of such facilities, all costs associated with the creation of the CFD, issuance of bonds, determination of the amount of any special taxes, collection of any special taxes, or costs otherwise incurred in order to carry out the authorized purposes of the City with respect to the CFD, and any other expenses incidental to the construction, completion and inspection of the authorized work to be paid through the proposed financing. SECTION 10. The City may accept advances of funds from any sources, including private persons or private entities, and is authorized and directed to use such funds for any authorized purpose, including any cost incurred by the City in creating the CFD. The City may enter into an agreement to repay all of such funds as are not expended or committed for any authorized purpose at the time of the 45788904.1 AGENDA ITEM NO. /1J PAGE.-1d- OF 7 () .,.. CITY COUNCIL RESOLUTION NO. 2006- Page 5 of6 election on the levy of the Services Special Tax and the Special Tax, if the proposal to levy such tax should fail, and to repay all of such funds advanced if the levy of the Services Special Tax and the Special Tax shall be approved by the qualified electors of the CFD. SECTION 11. The City Clerk is hereby directed to publish a notice (''Notice'') of the Hearing pursuant to Section 6061 of the Government Code in a newspaper of general circulation published in the area of the proposed CFD. Such Notice shall contain information set forth in Section 53322 of the Act. Such publication shall be completed at least 7 days prior to the date of the Hearing. SECTION 12. The Clerk may send a copy of the Notice by first-class mail, postage prepaid, to each registered voter and to each landowner within proposed CFD as shown on the last equalized assessment roll. Said mailing shall be completed not less than fifteen (15) days prior to the date of the Hearing. SECTION 13. Pursuant to Section 53344.1 of the Act, the Council hereby reserves to itself, in its sole discretion, the right and authority by subsequent resolution to allow any owner of property within the CFD, subject to the provisions of Section 53344.1 of the Act and those conditions as it may impose, and any applicable prepayment penalties as prescribed in the bond indenture or comparable instrument or document, to tender to the CFD treasurer in full payment or part payment of any installment of the special taxes or the interest or penalties thereon which may be due or delinquent, but for which a bill has been received, any bond or other obligation secured thereby, the bond or other obligation to be taken at par and credit to be given for the accrued interest shown thereby computed to the date of tender. SECTION 14. The voting procedure with respect to the establishment of the CFD and the imposition of the special tax shall be by hand delivered or mailed ballot election. SECTION 15. This Resolution shall take effect from and after the date of its passage and adoption. 45788904.1 AGENDA ITEM NO. /0 PAGE ~ r OF q () .:J. --" --" -'" - CITY COUNCIL RESOLUTION NO. 2006- Page 6 of6 ,,-- PASSED, APPROVED AND ADOPTED this 27th day of June, 2006. AYES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: --- Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore --- 45788904.1 AGENDA ITEM NO. 10 PAGE (p 3 OF CJ6 -. 45788904.1 EXHIBIT A RATE AND METHOD OF APPORTIONMENT --' ...." ...." ACENDA ITEM ~ I () . PACE &1 OF 90 -" ,,-.. RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2006-6 (TESSERA) A Special Tax shall be levied on all Assessor's Parcels in City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) ("CFD No. 2006-6") and collected each Fiscal Year commencing in Fiscal Year 2006-2007, in an amount determined through the application of this Rate and Method of Apportionment as described below. . All of the real property in CFD No. 2006-6, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: ---- "Acre or Acreage" means the land area of an Assessor's Parcel as shown on or determined from the applicable Assessor's Parcel Map. Notwithstanding the foregoing, the Acreage attributable to a Condominium shall be computed by the CFD Administrator by dividing the total Acreage for the Final Subdivision in which the Condominium is located, less the Acreage for any Property OWner Association Property and/or Public Property, by the total number of Condominiums to be constructed within such Final Subdivision as determined from the applicable Condominium Plan. "Act" means the Mello- Roos Community Facilities Act of 1982, being Chapter 2.5, Part 1, Division 2 of Title 5 of the California Government Code. r- "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2006-6: the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2006-6 or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2006-6 or any designee thereof of complying with disclosure requirements of the City, CFD No. 2006-6 or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax City of Lake Elsinore Community Facilities District No. 1006-6 (Tessera) AGENDA ITEM fife 6, 1006 ID }I-Co! 1 PAlII: [P.'5 Of' q D _ disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2006-6 or any designee thereof related to '-' an appeal of the Special Tax; the costs associated with the release of funds from an escrow account; and the City's annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2006-6 for any other administrative purposes ofCFD No. 2006-6, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Assessor's Parcel" means a lot or parcel, including but not limited to Condominiums, to which an Assessor's parcel number is assigned as determined from an Assessor's Parcel Map or the applicable assessment roll. "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. "Assigned Special Tax for Facilities" means the Special Tax for Facilities for each Land Use Class of Developed Property, as determined in accordance with Section C.l.(b) below. '-' "Authorized Facilities" means those facilities eligible to be funded by CFD No. 2006-6. "Backup Special Tax for Facilities" means the Special Tax for Facilities applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.I.( c) below. "Certificate of Occupancy" means a certificate issued by the City that authorizes the actual occupancy of a dwelling unit for habitation by one or more residents. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement for Facilities, the Special Tax Requirement for Services as determined in accordance with Section I below, and providing for the levy and collection of the Special Taxes. "CFD No. 2006-6" means City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera). '-' City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) ACENDA'TEM N(ltne 6, 2006 10 age 2 -70.. /"" "CFD No. 2006-6 Bonds" means any bonds or other debt (as defined in Section 53317( d) ofthe Act), whether in one or more series, issued by CFD No. 2006-6 and secured solely by the Special Tax for Facilities levy on property within the boundaries of CFD No. 2006-6 under the Act. "City" means the City of Lake Elsinore. "Condominium" means a unit meeting the statutory definition of a condominium contained in the California Civil Code, Section 1351, and for which a condominium plan has been recorded pursuant to California Civil Code, Section 1352. "Condominium Plan" means a condominium plan as set forth in the California Civil Code, Section 1352. "Council" means the City Council of the City of Lake Elsinore, acting as the legislative body ofCFD No. 2006-6. "County" means the County of Riverside. -- "Developed Property" means, with respect to the Special Tax for Facilities, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January I of the prior Fiscal Year and a building permit for new construction was issued on or before May I of the Fiscal Year preceding the Fiscal Year for which the Special Tax for Facilities is being levied. "Final Subdivision" means a subdivision of property by recordation of (i) a final map, or portion thereof, approved by the City pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) that creates individual lots for which building permits may be issued, or (ii) lot line adjustment approved by the City. "Fiscal Year" means the period starting July I and ending on the following June 30. ./"" "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2006-6 Bonds are issued, as modified, City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) AGENDA ITEM N'8pe 6, 2006(71 qo___ amended and/or supplemented from time to time, and any instrument replacing or supplementing the same....." "Land Use Class" means any of the classes listed in Table I below. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilities, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction of one or more non-residential units or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2006-6 Bonds which are deemed to be outstanding under the Indenture. . "Property Owner Association Property" means, for each Fiscal Year, (i) any property within the boundaries of CFD No. 2006-6 that was owned by a property owner association, including any master or sub-association, as of January 1 of the prior Fiscal Year, (ii) any property located in a Final Subdivision that was recorded as of the May 1 preceding the Fiscal Year in which the Special Tax is being levied and which, as determined from such Final Subdivision, is or will be open space, a common area recreation facility, or a private street, or (iii) any property which, as of the May I preceding the Fiscal Year for which the Special Tax is being levied, has been conveyed, irrevocably dedicated, or irrevocably offered to a property owner's association, including any master or sub-association, provided such conveyance, dedication, or offer is submitted to the CFD Administrator by May I preceding the Fiscal Year for which the Special Tax is being levied. Notwithstanding the preceding, Property Owner Association Property shall not include any property on which Condominiums are or will be located. "Proportionately" means for Developed Property that the ratio of the actual Special Tax for Facilities levy to the Assigned Special Tax for Facilities is equal for all Assessor's Parcels of Developed Property. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax for Facilities levy per Acre to the Maximum Special Tax for Facilities per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section D below. City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) AOeNDA ITEM tta.e 6, 2006 . ') . 90--, ...." .....", r-- "Public Property" means property within the boundaries ofCFD No. 2006-6 owned by, irrevocably offered or dedicated to, or over, through or under which an easement for purposes of public use has been granted, to the federal government, the State, the County, the City, or any local government or other public agency, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use. "Residential Floor Area" means all of the square footage ofliving area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to the building permit(s) issued for such Assessor's Parcel. "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. ~ "Special Tax" means any of the special taxes authorized to be levied by CFD No. 2006-6 pursuant to the Act. "Special Tax for Facilities" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property to fund the Special Tax Requirement for Facilities. - "Special Tax Requirement for Facilities" means that amount required in any Fiscal Year for CFD No. 2006-6 to: (i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs on the CFD No. 2006-6 Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2006-6 Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay a proportionate share of Administrative Expenses; (iv) pay any amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax for Facilities delinquencies based on the delinquency rate for the Special Tax for Facilities levy in the previous Fiscal Year; (vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax for Facilities levy on Undeveloped Property; less (vii) a credit for funds available to reduce City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) AGENDA ITat NO!une 6, 2006/ D {g9 b rage;J '?b fl.. . the annual Special Tax for Facilities levy, as determined by the CFD Administrator pursuant to the Indenture. --' "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundaries of CFD No. 2006-6 which are not exempt from the Special Tax for Facilities pursuant to law or Section E below. "Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Property that are not exempt pursuant to Section E below. "Taxable Public Property" means all Assessor's Parcels of Public Property that are not exempt pursuant to Section E below. "Trustee" means the trustee or fiscal agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Property Owner Association Property, or Taxable Public Property. ....."" B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2006-6 shall be classified as Developed Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject to the Special Tax for Facilities in accordance with this Rate and Method of Apportionment determined pursuant to Sections C and D below. Residential Property shall be assigned to Land Use Classes 1 through 3 as listed in Table 1 below based on the Residential Floor Area for each unit. Non-Residential Property shall be assigned to Land Use Class 4. With respect to Residential Property, the Residential Floor Area shall be determined from the most recent building permit issued prior to the issuance of a Certificate of Occupancy for such Assessor's Parcel. C. MAXIMUM SPECIAL TAX FOR FACILITIES Prior to the issuance of CFD No. 2006-6 Bonds, the Assigned Special Tax for Facilities on Developed Property (set forth in Table 1), and the Backup Special ....."" City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) AGENDA I'rfM'iR..2006 II) n)l~ce 6 -- t'Aut:t6 ut 90 ~ ~ Tax for Facilities attributable to a Final Subdivision, may be reduced in accordance with, and subject to the conditions set forth in this paragraph. If it is reasonably determined by the CFD Administrator that the overlapping debt burden (as defined in the Statement of Goals and Policies for the Use of the Mello-Roos Community Facilities Act of 1982 adopted by the Council, the "Goals and Policies") calculated pursuant to the Goals and Policies based upon the Assigned Special Tax for Facilities on Developed Property exceeds the City's maximum level objective set forth in such document, the Assigned Special Tax for Facilities on Developed Property, and the Backup Special Tax for Facilities attributable to a Final Subdivision, may be reduced to the amount necessary to satisfy the City's objective with respect to the maximum overlapping debt burden level with the written consent of the CFD Administrator. The reductions permitted pursuant to this paragraph shall be reflected in an amended notice of Special Tax lien which the City shall cause to be recorded by executing a certificate in substantially the form attached hereto as Exhibit "A". 1. Developed ProlJerty ~ (a) Maximum Special Tax for Facilities The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax for Facilities or (ii) the amount derived by application of the Backup Special Tax for Facilities. (b) Assigned Special Tax for Facilities The Fiscal Year 2006-2007 Assigned Special Tax for Facilities for each Land Use Class is shown below in Table 1. ~ City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) _lr.l'l.~.6, 2006 17'-1 ACENDA ITCM 11Up.g.s '7 /l/ PAOe......:::z..L:Ot' 9 () ... TABLEt Assigned Special Tax for Facilities for Developed Property Community Facilities District No. 2006-6 Fiscal Year 2006-2007 1 2 Residential Property More than 1,775 sq. ft. Residential Property 1,625 - 1,775 sq. ft. Residential Property Less than 1,625 sq. ft. Non-Residential Property NA $3,033 per unit $2,953 per unit $2,914 per unit $43,732 per Acre 3 4 ( c) Backup Special Tax for Facilities The Fiscal Year 2006-2007 Backup Special Tax for Facilities attributable to a Final Subdivision will equal $48,640 multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed by dividing the Backup Special Tax for Facilities attributable to the applicable Final Subdivision by the number of Assessor's Parcels and/or residential units for which building permits for residential construction have or may be issued (i.e., the number or residential lots and/or units). The Backup Special Tax for Facilities for each Assessor's Parcel of Non-Residential Property therein shall equal $48,640 multiplied by the Acreage of such Assessor's Parcel. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for Facilities for each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Parcels of property for which building permits for non-residential construction may be issued. City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) AGENDA ITEM NO. June 6, 2006 A) '1,.. 8F Page 8 ~ PM!.... ....", ...."" .....", ~ Notwithstanding the foregoing, if all or any portion of the Final Subdivision( s) described in the preceding paragraphs is subsequently changed or modified by recordation of a lot line adjustment or similar instrument, and only if the CFD Administrator determines that such change or modification results in a decrease in the number of Assessor's Parcels of Taxable Property for which building permits for residential construction have or may be issued within such Final Subdivision, then the Backup Special Tax for Facilities for each Assessor's Parcel of Developed Property that is part of the lot line adjustment or similar instrument for such Final Subdivision shall be a rate per Acre as calculated below. The Backup Spe~ial Tax for Facilities previously determined for an Assessor's Parcel of Developed Property that is not a part of the lot line adjustment or similar instrument for such Final Subdivision shall not be recalculated. 1. Determine the total Backup Special Tax for Facilities anticipated to apply to the changed or modified portion of the Final Subdivision area prior to the change or modification. ~ 2. The result of paragraph I above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified portion of the Final Subdivision area, as reasonably determined by the CFD Administrator. 3. The result of paragraph 2 above shall be the Backup Special Tax for Facilities per Acre which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified portion of the Final Subdivision area for all remaining Fiscal Years in which the Special Tax for Facilities may be levied. (d) Increase in the Assigned Special Tax for Facilities and Backup Special Tax for Facilities r- The Fiscal Year 2006-2007 Assigned Special Tax for Facilities, identified in Table I above, and Backup Special Tax for Facilities shall increase thereafter, commencing on July I, 2007 and on July I of each Fiscal Year City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) me6,2006 JO AGENDA ITEM IN. "~gf! P PAGE l~ Of qD thereafter, by an amount equal to two percent (2%) of the amount in effect for the previous Fiscal Year. --' (e) Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Classes located on that Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Taxable Property Owner Association Property. Taxable Public Pro1Jertv. and Undeveloped Property The Fiscal Year 2006-2007 Maximum Special Tax for Facilities for Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property shall be $49,527 per Acre and shall increase thereafter, commencing on July 1,2007 and on July I of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax for Facilities in effect for the previous Fiscal Year. ~ D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES Commencing with Fiscal Year 2006-2007 and for each following Fiscal Year, the Council shall determine the Special Tax Requirement for Facilities and levy the Special Tax for Facilities until the amount of Special Tax for Facilities levy equals the Special Tax Requirement for Facilities. The Special Tax for Facilities shall be levied each Fiscal Year as follows: First: The Special Tax for Facilities shall be levied on each Assessor's Parcel of Developed Property in an amount equal to 100% of the applicable Assigned Special Tax for Facilities; Second: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property at up to 100% of the Maximum Special Tax for Facilities for Undeveloped Property; ~ City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) r- Third: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, then the levy of the Special Tax for Facilities on each Assessor's Parcel of Developed Property whose Maximum Special Tax for Facilities is determined through the application of the Backup Special Tax for Facilities shall be increased in equal percentages from the Assigned Special Tax for Facilities up to the Maximum Special Tax for Facilities for each such Assessor's Parcel; Fourth: If additional monies are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or Taxable Public Property. -- Notwithstanding the above, the Council may, in any Fiscal Year, levy Proportionately less than 100% ofthe Assigned Special Tax for Facilities in step one (above), when (i) the Council is no longer required to levy the Special Tax for Facilities pursuant to steps two through four above in order to meet the Special Tax Requirement for Facilities; (ii) all authorized CFD No. 2006-6 Bonds have already been issued or the Council has covenanted that it will not issue any additional CFD No. 2006-6 Bonds (except refunding bonds) to be supported by the Special Tax for Facilities; and (iii) all Authorized Facilities have been constructed and/or acquired and all reimbursements to the developer for the construction and/or acquisition of such facilities have been paid as permitted by law. Further notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Parcel of Residential Property for which a Certificate of Occupancy has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2006-6. E. EXEMPTIONS r- No Special Tax for Facilities shall be levied on up to 3.1 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-6. Tax- exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt ~ status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special Tax for Facilities under this section shall be subject to the levy of the Special Tax for Facilities and shall be taxed Proportionately as part of the fourth step in Section D above, at up to 100% of the Maximum Special Tax for Facilities for Taxable Property Owner Association Property or Taxable Public Property. F. MANNER OF COLLECTION The Special Tax for Facilities shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No. 2006-6 may directly bill the Special Tax for Facilities, may collect the Special Tax for Facilities at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. G. PREPAYMENT OF SPECIAL TAX FOR FACILITIES ......". The following additional definitions apply to this Section G: "Buildout" means, for CFD No. 2006-6, that all expected building permits have been issued, as reasonably determined by the CFD Administrator. "CFD Public Facilities" means either $3,485,000 in 2006 dollars, which shall increase by the Construction Inflation Index on July I, 2007, and on each July I thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide funding for all of the Authorized Facilities, or (ii) shall be determined by the Council concurrently with a covenant that it will not issue any more CFD No. 2006-6 Bonds (except refunding bonds) to be supported by the Special Tax for Facilities levy under this Rate and Method of Apportionment as described in Section D above. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably ......". City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) June 6, 2006 -0 TEJIIttICl2 PAGE ., (p OF 1D AI ,...-. comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus (i) costs of Authorized Facilities previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund available to pay costs of Authorized Facilities, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance the cost of Authorized Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct Authorized Facilities. "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. 1. Prepayment in Full ,--.. Only an Assessor's Parcel of Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid. The obligation of the Assessor's Parcel to pay the Special Tax for Facilities may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax for Facilities obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner of the prepayment amount for such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of CFD No. 2006-6 Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax for Facilities Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): ,..... Bond Redemption Amount plus Redemption Premium City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) AGENDA ITEM NO. r;Hil; 77 OF qz> plus plus plus less less Total: equals Future Facilities Amount Defeasance Amount Administrative Fees and Expenses Reserve Fund Credit Capitalized Interest Credit Special Tax for Facilities Prepayment Amount ~ As of the proposed date of prepayment, the Special Tax for Facilities Prepayment Amount shall be calculated as follows: Parae:raph No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. 2. For Assessor's Parcels of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. ~ 3. (a) Divide the Assigned Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Assigned Special Tax for Facilities for the entire CFD No. 2006-6 based on the Developed Property Special Tax for Facilities which could be levied in the current Fiscal Year on all expected development through Buildout ofCFD No. 2006-6, excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax for Facilities computed pursuant to paragraph 2 by the total estimated Backup Special Tax for Facilities at Buildout for the entire CFD No. 2006-6, excluding any Assessor's Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount"). .~ City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) A ITE- JINJe 6, 2006/0 AOEND M lW1t\.sc; ]>, ~ " PAGE 1 ~O, eft) _ J:: ~ 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price- 100%), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). 6. Compute the current Future Facilities Costs. 7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3 (b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal paYment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax for Facilities levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. ,,--... 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax for Facilities PrepaYment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepaYment until the redemption date for the Previously Issued Bonds to be redeemed with the prepaYment. 11. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount"). ~ 12. The administrative fees and expenses of CFD No. 2006-6 are as calculated by the CFD Administrator and include the costs of computation of the prepaYment, the costs to invest the prepaYment proceeds, the costs of redeeming CFD No. 2006-6 Bonds, and the costs of recording any notices to evidence the prepaYment and the redemption (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepaYment, or (b) the amount derived by City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the -' prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture). 14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment (the "Capitalized Interest Credit"). 15. The Special Tax for Facilities prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Special Tax for Facilities Prepayment Amount"). " From the Special Tax for Facilities Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire CFD No. 2006-6 Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No. 2006-6. The Special Tax for Facilities Prepayment Amount may be insufficient to redeem a full $5,000 increment of CFD No. 2006-6 Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of CFD No. 2006-6 Bonds or to make debt service payments. ~ City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) M NOJune 6, 2006 It> ACENDA ITE .. Ft.5'" I II L2 PACE ~ Of q,~ /"'" As a result of the payment ofthe current Fiscal Year's Special Tax for Facilities levy as determined under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax for Facilities levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax for Facilities and the release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax for Facilities shall cease. Notwithstanding the foregoing, no Special Tax for Facilities prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Tax for Facilities that may be levied on Taxable Property within CFD No. 2006-6 (after excluding 3.1 Acres of Property Owner Association Property and/or Public Property in CFD No. 2006-6 as set forth in Section E) both prior to and after the proposed prepayment is at least equal to the sum of (i) the Administrative Expenses, as defined in Section A above, and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds. r-, 2. Prepayment in Part The Special Tax for Facilities on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section G.1; except that a partial prepayment shall be calculated according to the following formula: PP = [CPE - A) x F] + A These terms have the following meaning: PP= PE= the partial prepayment. the Special Tax for Facilities Prepayment Amount calculated according to Section G .1. the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax for Facilities. the Administrative Fees and Expenses calculated according to Section G.!. F= /"'" A= City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special ...""" Tax for Facilities and the percentage by which the Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for Facilities for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the Council shall (i) distribute the funds remitted to it according to Section G.l, and (ii) indicate in the records of CFD No. 2006-6 that there has been a partial prepayment of the Special Tax for Facilities and that a portion ofthe Special Tax for Facilities with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax for Facilities, shall continue to be levied on such Assessor's Parcel pursuant to Secti<;ln D above. H. TERM OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be levied for a period not to exceed forty years commencing with Fiscal Year 2006-2007, provided however that the Special Tax for Facilities will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2006-6 Bonds have been paid; (ii) all Authorized Facilities have been constructed and/or acquired and all reimbursements to the developer for the construction and/or acquisition of such facilities have been paid as permitted by law; and (iii) all other obligations ofCFD No. 2006-6 have been satisfied. ...""" I. SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section I: "Developed Multifamily Unit" means a residential dwelling unit within a building in which each of the individual dwelling units has or shall have at least one common wall with another dwelling unit and a building permit has been issued by the City for such dwelling unit on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. "Developed Single Family U nit" means a residential dwelling unit other than a Developed Multifamily Unit on an Assessor's Parcel for which a building ...""" City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) _ JIJP"e 6, 2006 ;;) 'GENOA ITEM NOPIlK" l' I PACE <6)- OF 1'D ~ permit has been issued by the City on or prior to May I preceding the Fiscal Year in which the Special Tax for Services is being levied. "Maximum Special Tax for Services" means the maximum Special Tax for Services that can be levied by CFD No. 2006-6 in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for CFD No. 2006-6 for any Fiscal Year to pay for the actual costs of maintenance related to the Service Area, and the applicable Administrative Expenses. "Operating Fund Balance" means the amount of funds in the Operating Fund at the end of the preceding Fiscal Year. "Service Area" means parks, open space, and storm drains. "Special Tax for Services" means any of the special taxes authorized to be levied within CFD No. 2006-6 pursuant to the Act to fund the Special Tax Requirement for Services. ~ "Special Tax Requirement for Services" means the amount determined in any Fiscal Year for CFD No. 2006-6 equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) pay a proportionate share of Administrative Expenses, and (iii) anticipated Special Tax for Services delinquencies based on the delinquency rate for the Special Tax for Services levy in CFD No. 2006-6 for the previous Fiscal Year, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services ----- Commencing with Fiscal Year 2006-2007 and for each subsequent Fiscal Year, the Council shall levy the Special Tax for Services on (i) all Assessor's Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor's Parcels of Non-Residential Property, up to the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services. City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) ACENDA ITEM rlff.e 6, 2:~: I~ PAGE <t ~ ~ q The Maximum Special Tax for Services for Fiscal Year 2006-2007 shall be $246.84 per Developed Single Family Unit, $123.42 per Developed Multifamily .....", Unit, and $555.90 per Acre for each Assessor's Parcel of Non-Residential Property . On each July 1, commencing July 1, 2007, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. 2. Duration of the Special Tax for Services The Special Tax for Services shall be levied in perpetuity to fund the Special Tax Requirement for Services, unless no longer required as determined at the sole discretion of the Council. 3. Collection of the Special Tax for Services The Special Tax for Services shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-6 may collect the Special Tax for Services at a different time or in a different manner if necessary to meet its funding requirements. --' J. APPEALS AND INTERPRETATIONS Any landowner or resident who' feels that the amount of the Special Tax levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2006-6. The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the amount of the Special Tax levied shall be appropriately modified. The Council may interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the Council shall be final and binding as to all persons. --' City of Lake Elsinore Community Facilities District No. 2006-6 (Tessera) June 6, 2006 ACENDA ITEM PAGE .-.. EXHIBIT A CERTIFICATE TO AMEND SPECIAL TAX FOR FACILITIES -- -- ACENDA ITEM NO. 10 . PAGE= <60 OF ~O CITY OF LAKE ELSINORE AND CFD No. 2006-6 CERTIFICATE --' 1. Pursuant to Section C of the Rate and Method of Apportionment, the City of Lake Elsinore ("City") and City of Lake Elsinore Community Facilities District No. 2006-6 ("CFD No. 2006-6") hereby agree to a reduction in the Assigned Special Tax for Facilities for Developed Property, and the Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No. 2006-6: (a) The information in Table 1 relating to the Assigned Special Tax for Facilities for Developed Property within CFD No. 2006-6 shall be modified as follows: I Residential Property More than 1,775 sq. $ _ per unit 2 Residential Property 1,625 - 1,775 sq. ft. $ _ per unit 3 Residential Property Less than 1,625 sq. ft. $ _ per unit 4 N on-Residential Property NA $ _ per Acre ~ (b) The Backup Special Tax for Facilities attributable to a Final Subdivision within CFD No. 2006-6, as stated in Section C.l.( c), shall be reduced from $48,640 per Acre to $ per Acre. 2. The Special Tax for Facilities may only be modified prior to the first issuance of CFD No. 2006-6 Bonds. 3. Upon execution of the Certificate by the City and CFD No. 2006-6, the City shall cause an amended notice of Special Tax lien for CFD No. 2006-6 to be recorded reflecting the modifications set forth herein. By execution hereof, the undersigned acknowledges, on behalf of the City and CFD No. 2006-6, receipt of this Certificate and modification of the Rate and Method of Apportionment as set forth in this Certificate. --' AGENDA ITEM NO. PACE ~<p It) OF crt') ,.... ,.... ,-- CITY OF LAKE ELSINORE By: Date: CFD Administrator COMMUNITY FACILITIES DISTRICT NO. 2006-6 OF THE CITY OF LAKE ELSINORE By: Date: AGENDA ITEM NO. ID PAGE ~ OF 9Z> RESOLUTION NO. 2006- ~ RESOLUTION OF INTENTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, TO INCUR BONDED INDEBTEDNESS IN THE AMOUNT NOT TO EXCEED $5,000,000 WITHIN THE PROPOSED CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-6 (TESSERA) WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has heretofore adopted Resolution No. 2006- , stating the Council's intention to form Community Facilities District No. 2006-6 (Tessera) (the "CFD"), pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, (the "Act"), to finance the purchase, construction, expansion or rehabilitation of certain real and other tangible property with an estimated useful life of five years or longer, including public infrastructure facilities and other governmental facilities, which are necessary to .meet increased demands placed upon the City as a result of development or rehabilitation occurring within the proposed CFD (the "Facilities"); and ~ WHEREAS, in order to finance the Facilities it is necessary to incur bonded indebtedness in the amounts not to exceed $5,000,000, the repayment of which is to be secured by special taxes levied in accordance with Section 53340 et seq. of the Act on all property within the CFD, other than those properties exempted from taxation as provided in the respective rate and method of apportionment attached as Exhibit A to Resolution No. 2006- NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The above recitals are true and correct. SECTION 2. It is necessary to incur bonded indebtedness within the proposed CFD in the amounts not to exceed $5,000,000 to finance the costs of the Facilities. SECTION 3. The indebtedness will be incurred for the purpose of financing the costs of designing, constructing and acquiring the Facilities, the acquisition of necessary equipment and property therefor and fulfilling contractual commitments ....., 45788910.1 AOENDA ITEM NO. PAOE ~ )0 OF 90 ..-- ,,-- .....- CITY COUNCIL RESOLUTION NO. 2006- Page 2 of3 and carrying out the powers and purposes of the CFD, including, but not limited to, the financing of the costs associated with the issuance of the bonds and all other costs necessary to finance the Facilities which are permitted to be financed pursuant to the Act. SECTION 4. It is the intent of the Council to authorize the sale of bonds in one or more series, in the maximum aggregate principal amounts not to exceed $5,000,000 at a maximum interest rate not in excess of 12 percent per annum or such rate not in excess of the maximum rate permitted by law at the time the bonds are issued. The term of the bonds shall be determined pursuant to a resolution of the Council authorizing the issuance of the bonds, but such term shall in no event exceed 40 years or such longer term as is then permitted by law. SECTION 5. A public hearing (the "Hearing") on the proposed debt issue shall be held August 8, 2006 at 7:00 p.m. or as soon thereafter as practicable, at the Lake Elsinore Cultural Center located at 183 North Main Street, Lake Elsinore, California 92530. SECTION 6. At the Hearing at the time and place set forth above, any interested persons, including all persons owning land within the proposed CFD, may appear and be heard at the Hearing. ' SECTION 7. The proposition to incur bonded indebtedness in the maximum aggregate principal amounts not to exceed $5,000,000 shall be submitted to the qualified electors of the CFD. A special community facilities district election shall be conducted on August 8, 2006. The special election shall be conducted by hand delivered or mailed ballot election. The ballots shall be returned to the office of the election officer no later than 11 :00 0' clock p.m. on August 8, 2006. SECTION 8. The Clerk is hereby directed to publish a copy of this resolution, which shall serve as notice ("Notice") of the Hearing and the special bond election, pursuant to Section 6061 of the Government Code in a newspaper of general circulation in the proposed CFD. SECTION 9. The Clerk may send a copy of the Notice of the Hearing by first-class mail, postage prepaid, to each registered voter and to each landowner within the proposed CFD as shown on the last equalized assessment roll. SECTION 10. This Resolution shall take effect from and after the date of its passage and adoption. AGENDA ITEM NO. 10 PAGE~OF ~C> CITY COUNCIL RESOLUTION NO. 2006- Page 3 of3 PASSED, APPROVED AND ADOPTED this 27th day of June, 2006. ...., AYES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore ...., ...., AOENDA ITeM NO. 10. . PAOE 1'D OF qD CITY OF LAKE ELSINORE ;--. REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: FISCAL YEAR END BUDGET ADJUSTMENTS BACKGROUND It is the City's practice to adjust both revenue and expenditure budgets at year end as a clean up measure. DISCUSSION ~ The attached reports reflect revenue and expenditures as of May 31, 2006 and take into account June activity through June 20, 2006. The proposed budget adjustments anticipate activity through the end of the year. Staff is proposing an increase of General Fund budgeted revenue of $1 ,567,100 and no changes to the budgeted expenditures. All departments will be within budget and savings will be realized at year end. FISCAL IMPACT The proposed year-end budget adjustments result in an increase in unallocated revenue of$1,567,100. RECOMMENDATION Staff recommends that the City Council approve the fiscal year end budget adjustments as provided in this report. ;-- AGENDA ITEM NO. PAGE / 1/ OF /J REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 '-' MATT N. PRESSEY DIRECTOR OF ADMINI PREPARED BY: CIT APPROVED FOR .AGENDABY: .....,. --'. AGENDA ITEM NO. J J PACE a OF II ~ w cu ~j o zi ....> ~~ w ~" ,e Jj j~ I&.RJ Om ~i u" ,-- :g c:>>~ 00e( !::!~::> ~a::1- ~~~ g gio ~l!!m o:!~ ~i5.... COOCl) O~...J o ... e( ~-- ... g ~ ~~~ COOl- gww N_ CI) (!) -0 ~~::> ~a::m anol offia! 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'Y' \0 o <:) N - ...-f f'I ....." 1/ OF II CITY OF LAKE ELSINORE Budget Report Eleven Months Ending May 31, 2006 Fr- Divi Unencumb. % Exp I nd uept. sion Type Line Item Budget Actual Encumb. Balance Encum. PERSONNEL SERVICES Total - 16,196.19 - (16,196.19) 100% CONTRACTUAL SERVICES Total 84,000.00 97,443.65 - (13,443.65) 116% MATERIALS & SUPPLIES Total - 6,517.02 2,759.48 (9,276.50) 100% CAPITAL OUTL YAY Total 84,000.00 - - 84,000.00 0% 0000-0 Total I 168,000.00 120,156.86 2,759.48 45,083.66 73% PERSONNEL SERVICES Total 180,000.00 - - 180,000.00 0% CONTRACTUAL SERVICES Total 51,200.00 187,993.21 - (136,793.21 ) 367% FIXED CHGS,INTST,DEBT.RDM Total 984,800.00 976,181.69 - 8,618.31 99% 4990-L1TIGATION SETTLEMENTS Total 1,216,000.00 1,164,174.90 - 51,825.10 96% ITRANSFERS OUT Total 1,216,800.00 - - 1,216,800.00 0% 4999-TRANSFERS Total 1,216,800.00 - - 1,216,800.00 0% NON-DEPARTMENTAL Total 2,600,800.00 1,284,331.76 2,759.48 1,313,708.76 49% PERSONNEL SERVICES Total 57,900.00 56,142.37 - 1,757.63 97% CONTRACTUAL SERVICES Total 346,100.00 231,703.39 67,955.94 46,440.67 87% MATERIALS & SUPPLIES Total 3,000.00 1,906.31 - 1,093.69 64% 4110-CITY COUNCIL Total 407,000.00 289,752.07 67,955.94 49,291.99 88% CONTRACTUAL SERVICES Total 12,000.00 377 .30 - 11,622.70 3% MATERIALS & SUPPLIES Total - 172 .40 - (172.40) 100% 4112-PUB.SFTY.ADV.COMMITTEE Total 12,000.00 549.70 - 11,450.30 5% CITY COUNCIL Total I 419,000.00 290,301.77 67,955.94 60,742.29 86% PERSONNEL SERVICES Total 14,900.00 13,304.59 - 1,595.41 89% CONTRACTUAL SERVICES Total 2,500.00 1,499.97 - 1,000.03 60% 4118-CITY TREASURER Total 17,400.00 14,804.56 - 2,595.44 85% CITY TREASURER Total 17,400.00 14,804.56 - 2,595.44 85% I CONTRACTUAL SERVICES Total 400,000.00 346,508.79 - 53,491.21 87% -/___ 14116-CITY ATTORNEY Total 400,000.00 346,508.79 - 53,491.21 87% Y ATTORNEY Total 400,000.00 346,508.79 - 53,491.21 87% - PERSONNEL SERVICES Total 432,200.00 376,277.57 - 55,922.43 87% CONTRACTUAL SERVICES Total 88,200.00 45,973.64 - 42,226.36 52% MATERIALS & SUPPLIES Total 9,000.00 6,924.86 - 2,075.14 77% CAPITAL OUTLYAY Total 2,000.00 - - 2,000.00 0% 4120-CITY MANAGER Total 531,400.00 429,176.07 - 102,223.93 81% PERSONNEL SERVICES Total 359,300.00 311,756.65 - 47,543.35 87% CONTRACTUAL SERVICES Total 316,700.00 175,948.48 7,114.43 133,637.09 58% MATERIALS & SUPPLIES Total 161,200.00 61,706.42 77,497.37 21,996.21 86% 4351-INFORMATION SYSTEMS Total 837,200.00 549,411.55 84,611.80 203,176.65 76% CITY MANAGER Total I 1,368,600.00 978,587.62 84,611.80 305,400.58 78% PERSONNEL SERVICES Total 197,400.00 133,070.13 - 64,329.87 67% CONTRACTUAL SERVICES Total 45,200.00 38,870.45 - 6,329.55 86% MATERIALS & SUPPLIES Total 8,500.00 5,257.89 - 3,242.11 62% 4117-CITY CLERK Total 251,100.00 177,198.47 - 73,901.53 71% CITY CLERK I HUMAN RESOURCES Total 251,100.00 177,198.47 - 73,901.53 71% PERSONNEL SERVICES Total 683,400.00 555,174.53 - 128,225.47 81% CONTRACTUAL SERVICES Total 114,700.00 162,375.20 36,009.00 (83,684.20) 173% MATERIALS & SUPPLIES Total 7,700.00 6,759.22 - 940.78 88% 4131-FINANCE DEPARTMENT Total 805,800.00 724,308.95 36,009.00 45,482.05 94% CONTRACTUAL SERVICES Total 350,200.00 347,093.15 - 3,106.85 99% 4133-RISK MANAGEMENT Total 350,200.00 347,093.15 - 3,106.85 99% PERSONNEL SERVICES Total 153,400.00 95,717.26 - 57,682.74 62% CONTRACTUAL SERVICES Total 12,400.00 21,590.35 - (9,190.35) 174% MATERIALS & SUPPLIES Total 700.00 1,016.16 - (316.16) 145% CAPITAL OUTL YAY Total 600.00 - - 600.00 0% 4134-HUMAN RESOURCES DIVISION Total 167,100.00 118,323.77 - 48,776.23 71% ADMINISTRATIVE SERVICES DEPARTMENT Total 1,323,100.00 1,189,725.87 36,009.00 97,365.13 93% " CONTRACTUAL SERVICES Total 6,455,100.00 4,504,348.23 - 1,950,751.77 70% I-- MATERIALS & SUPPLIES Total 8,000.00 1,915.57 - 6,084.43 24% 4211-GENERAL LAW ENFORCEMENT Total 6,463,100.00 4,506,263.80 - 1,956,836.20 70% Page 1 of 3 ACENDA ITEM NO. PACE <1 1/ _ OF /1 CITY OF LAKE ELSINORE Budget Report Eleven Months Ending May 31, 2006 Fu DivI Unencumb. %'-~ nd Dept. sion Type Line Item Budget Actual Encumb. Balance Encum. GENERAL LAW ENFORCEMENT DEPARTMENT Total 6,463,100.00 4,506,263.80 - 1,956,836.20 70% CONTRACTUAL SERVICES Total 2,815,700.00 1,006,299.76 - 1,809,400.24 36% MATERIALS & SUPPLIES Total - 26,148.81 - (26,148.81 ) 100% CAPITAL OUTLYAY Total 125,000.00 213,711.68 19,641.50 (108,353.18) 187% 4221-FIRE SERVICES Total 2,940,700.00 1,246,160.25 19,641.50 1,674,898.25 43% FIRE DEPARTMENT Total 2,940,700.00 1,246,160.25 19,641.50 1,674,898.25 43% PERSONNEL SERVICES Total 9,900.00 4,523.22 - 5,376.78 46% CONTRACTUAL SERVICES Total 2,600.00 1,917.09 - 682.91 74% MATERIALS & SUPPLIES Total 500.00 227.30 - 272.70 45% 4111-PLANNING COMMISSION Total 13,000.00 6,667.61 - 6,332.39 51% PERSONNEL SERVICES Total 772,800.00 479,812.54 - 292,987.46 62% CONTRACTUAL SERVICES Total 513,600.00 472,756.68 21,790.71 19,052.61 96% MATERIALS & SUPPLIES Total 7,000.00 7,427.75 - (427.75) 106% CAPITAL OUTLYAY Total 20,000.00 1,636.72 - 18,363.28 8% 4310-PLANNING & ZONIING Total 1,313,400.00 961,633.69 21,790.71 329,975.60 75% PERSONNEL SERVICES Total 889,000.00 772,487.74 - 116,512.26 87% CONTRACTUAL SERVICES Total 401,500.00 254,217.18 126,268.40 21,014.42 95% MATERIALS & SUPPLIES Total 10,200.00 7,581.21 - 2,618.79 74% 4320-BUILDING & SAFETY Total 1,300,700.00 1,034,286.13 126,268.40 140,145.47 89% PERSONNEL SERVICES Total 315,300.00 268,061.04 - 47,238.96 85% CONTRACTUAL SERVICES Total 69,800.00 98,650.36 5,788.50 (34,638.86) 150% MATERIALS & SUPPLIES Total 2,500.00 4,203.19 - (1,703.19) 168% 4330-CODE ENFORCEMENT Total 387,600.00 370,914.59 5,788.50 10,896.91 97% PERSONNEL SERVICES Total 718,800.00 316,767.02 - 402,032.98 44% CONTRACTUAL SERVICES Total 1,239,900.00 1,259,833.60 187,549.88 (207,483.48) 117% MATERIALS & SUPPLIES Total 5,000.00 4,751.55 - 248.45 9F~' CAPITAL OUTL YAY Total 3,500.00 - - 3,500.00 ( 4412-ENGINEERING Total 1,967,200.00 1,581,352.17 187,549.88 198,297.95 90~ COMMUNITY DEVELOPMENT DEPARTMENT Total 4,981,900.00 3,954,854.19 341,397.49 685,648.32 86% I CONTRACTUAL SERVICES Total 2,000.00 41.85 - 1,958.15 2% I MATERIALS & SUPPLIES Total 12,000.00 4,328.11 4,369.40 3,302.49 72% 4123-EMERGENCY SERVICES Total 14,000.00 4,369.96 4,369.40 5,260.64 62% PERSONNEL SERVICES Total 375,600.00 227,268.48 - 148,331 .52 61% CONTRACTUAL SERVICES Total 49,800.00 34,879.09 15,588.77 (667.86) 101% MATERIALS & SUPPLIES Total 7,200.00 10,140.43 - (2,940.43) 141% 4340-WEED ABATEMENT Total 432,600.00 272,288.00 15,588.77 144,723.23 67% PERSONNEL SERVICES Total 234,600.00 206,705.13 - 27,894.87 88% CONTRACTUAL SERVICES Total 5,000.00 1,378.13 3,000.00 621.87 88% MATERIALS & SUPPLIES Total 2,800.00 1,597.00 - 1,203.00 57% 4413-PUBLlC WORKS ADMNSTRTN. Total 242,400.00 209,680.26 3,000.00 29,719.74 88% PERSONNEL SERVICES Total 385,100.00 242,827.73 - 142,272.27 63% CONTRACTUAL SERVICES Total 906,400.00 307,734.44 183,575.23 415,090.33 54% MATERIALS & SUPPLIES Total 54,500.00 70,456.01 - (15,956.01 ) 129% 4421-STREET & SIDEWALK MAl NT. Total 1,346,000.00 621,018.18 183,575.23 541,406.59 60% PERSONNEL SERVICES Total 67,600.00 46,636.47 - 20,963.53 69% CONTRACTUAL SERVICES Total 5,500.00 601.94 - 4,898.06 11% MATERIALS & SUPPLIES Total 6,480.00 7,931.95 - (1,451.95) 122% CAPITAL OUTLYAY Total 6,520.00 6,514.79 - 5.21 100% 4422-GRAFITTI MAINTENANCE Total 86,100.00 61,685.15 - 24,414.85 72% PERSONNEL SERVICES Total 166,200.00 127,866.54 - 38,333.46 77% CONTRACTUAL SERVICES Total 511,300.00 492,741.33 30,416.00 (11,857.33) 102% MATERIALS & SUPPLIES Total 40,000.00 18,187.22 - 21,812.78 45% 4433-PARKS MAINTENANCE Total 717,500.00 638,795.09 30,416.00 48,288.91 93% PERSONNEL SERVICES Total 88,400.00 112,697.15 - (24,297.15) 127% CONTRACTUAL SERVICES Total 5,500.00 150.00 - 5,350.00 ~ MATERIALS & SUPPLIES Total 7,000.00 2,477.55 - 4,522.45 3~ CAPITAL OUTL YAY Total 3,900.00 - - 3,900.00 0% Page 2 of 3 ACENDA ITEM NO. PACE 10 OF /I /1 CITY OF lAKE ELSINORE Budget Report Eleven Months Ending May 31, 2006 ~ Divi Unencumb. % Exp I ntl LJ~ sion Type Line Item Budget Actual Encumb. Balance Encum. 4434-PARKS & OPEN SPACE ADMIN. Total 104.800.00 115.324.70 - (10.524.70) 11 0% PERSONNEL SERVICES Total - 189.147.48 - (189.147.48) 100% CONTRACTUAL SERVICES Total 384.000.00 214.352.91 19,074.50 150.572.59 61% MATERIALS & SUPPLIES Total 17.000.00 21.699.53 - (4.699.53) 128% CAPITAL OUTL YAY Total 41,400.00 42.575.67 3.940.00 (5,115.67) 112% 4441-PUB.WKS.FACILITY MAlNT. Total 442,400.00 467,775.59 23.014.50 (48.390.09) 111% PERSONNEL SERVICES Total 167,900.00 123,173.05 - 44,726.95 73% CONTRACTUAL SERVICES Total 185,800.00 204,446.40 7,440.59 (26,086.99) 114% MATERIALS & SUPPLIES Total 31,000.00 40,789.54 - (9.789.54) 132% CAP IT AL OUTL YAY Total 90.000.00 41,608.50 64,631.00 (16,239.50) 118% 4451-VEHICLE & EQUIP. MAl NT. Total 474,700.00 410,017.49 72,071.59 (7,389.08) 102% PERSONNEL SERVICES Total 447,100.00 393,909.35 - 53,190.65 88% CONTRACTUAL SERVICES Total 78,200.00 19,624.93 1.645.00 56.930.07 27% MATERIALS & SUPPLIES Total 5,700.00 1,890.74 - 3,809.26 33% FIXED CHGS,INTST,DEBT.RDM Total 985,300.00 815,622.71 41.199.72 128,477.57 87% 4510-ADMINISTRATION Total 1.516,300.00 1,231,047.73 42.844.72 242,407.55 84% PERSONNEL SERVICES Total 160,800.00 134,064.96 - 26,735.04 83% CONTRACTUAL SERVICES Total 80,400.00 100,516.44 4.196.00 (24.312.44) 130% MATERIALS & SUPPLIES Total 3,500.00 6,084.67 - (2.584.67) 174% CAPITAL OUTL Y AY Total 15,000.00 - - 15.000.00 0% 4520-COMMUNITY CENTER Total 259,700.00 240,666.07 4.196.00 14.837.93 94% PERSONNEL SERVICES Total 104,500.00 83.654.10 - 20.845.90 80% CONTRACTUAL SERVICES Total 28,800.00 34,760.47 4,016.00 (9.976.47) 135% MATERIALS & SUPPLIES Total 1.500.00 4,497.54 - (2.997.54) 300% 4530-SENIOR CENTER Total 134,800.00 122,912.11 4.016.00 7.871.89 94% -/'..... PERSONNEL SERVICES Total - 4.359.22 - (4.359.22) 100% CONTRACTUAL SERVICES Total 69.500.00 24,613.92 - 44,886.08 35% - MATERIALS & SUPPLIES Total 8,000.00 3,101.30 - 4,898.70 39% 4541-ENVIRONMENTAL SERVICES Total 77 ,500.00 32,074.44 - 45,425.56 41% I CONTRACTUAL SERVICES Total 90.000.00 82,500.00 - 7,500.00 92% 4550-ANIMAL CONTROL Total 90,000.00 82,500.00 - 7.500.00 92% PERSONNEL SERVICES Total 138.600.00 85.046.09 - 53,553.91 61% CONTRACTUAL SERVICES Total 532,700.00 493.549.58 25,320.00 13,830.42 97% MATERIALS & SUPPLIES Total 49.000.00 64.628.78 - (15.628.78) 132% CAPITAL OUTLYAY Total 81.200.00 59.680.58 - 21.519.42 73% 4580-ST ADIUM-AMPHITHEATER Total 801.500.00 702.905.03 25,320.00 73,274.97 91% COMMUNITY SERVICES DEPARTMENT Total 6,740,300.00 5,213.059.80 408,412.21 1.118.827.99 83% PERSONNEL SERVICES Total 438.800.00 373,415.30 - 65,384.70 85% CONTRACTUAL SERVICES Total 476,200.00 367,985.21 24,163.51 84.051.28 82% MATERIALS & SUPPLIES Total 47,800.00 51,777.88 17.036.21 (21,014.09) 144% CAPITAL OUTLYAY Total 22,500.00 22,444.32 - 55.68 100% 4500-lAKE ADMINISTRATION Total 985,300.00 815,622.71 41.199.72 128,477.57 87% PERSONNEL SERVICES Total 61,600.00 46,199.44 - 15,400.56 75% CONTRACTUAL SERVICES Total 29,000.00 10,977.23 - 18,022.77 38% MATERIALS & SUPPLIES Total 2,500.00 157.99 - 2.342.01 6% CAPITAL OUTL YAY Total 16.700.00 - - 16,700.00 0% 4516-LAKE DESTRATIFICATION SYS Total 109,800.00 57,334.66 - 52,465.34 52% ICONTRACTUAL SERVICES Total 23,300.00 25.785.12 - (2,485.12) 111% I MATERIALS & SUPPLIES Total 4,200.00 2,436.08 - 1,763.92 58% 4517.BOAT LAUNCH FACILITY Total 27,500.00 28,221.20 - (721.20) 103% lAKE OPERATIONS AND AQUATICS Total 1,122,600.00 901,178.57 41,199.72 180.221.71 84% 100-GENERAL FUND Total 28,628,600.00 20,102,975.45 1,001,987.14 7.523,637.41 74% /'"'" Page 3 of 3 AGENDA ITEM NO. PAGE 1/ II OF II "...... CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DA TE: JUNE 27, 2006 SUBJECT: HOUSEHOLD HAZARDOUS WASTE COLLECTION AGREEMENT - COUNTY OF RIVERSIDE WASTE MANAGEMENT DEPARTMENT BACKGROUND In 1995, the city offered a Household Hazardous Waste Collection program, for city residents only, in partnership with the San Bernardino County Fire ,,-, Department Hazardous Materials Division. In 2000, the County of Riverside Department of Environmental Health took over the collection program for Riverside County. This allowed the program to be available to all Riverside County residents and increased the participation numbers by approximately 60%. This change also allowed us to increase the types of materials collected i.e.: used oil, sharps, propane tanks and e-waste. Through this partnership, the HHW facility was expanded and additional paving and drains were added. The city currently operates the HHW collection program on the first Saturday of every month from 9:00 a.m. to 2:00 p.m., except in December and January. During fiscal year 2005/06, almost 1,700 people deposited HHW at our facility. On May 11, 2006, staff received a letter from the Director of the County of Riverside Department of Environmental Health advising that the County Board of Supervisors approved the transfer of the HHW Collection program from the Department of Environmental Health to the Waste Management Department as of July 1,2006. "...... AC=[~::A ITErJi NO. I;J. }"'A:"':: I OF / ~ REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 '-' DISCUSSION The County of Riverside prepared a new agreement for the HHW collection program. It has some minor changes from the original agreement with the Department of Environmental Health. The agreement has been reviewed by the City Attorney and County Counsel. The transfer of the program from the County Department of Environmental Health to the County Waste Management Department should not have any effect on the collection program. In fact, staff has been in discussions with County Waste Management staff to expand the facility to allow for a separate collection of E-waste through a joint grant. The next HHW collection date in Lake Elsinore is July 1,2006. The approval of the agreement will allow this collection to be held as scheduled. FISCAL IMPACT ~ No fiscal impact RECOMMENDA TION Staff recommends that City Council approve the agreement with the County of Riverside Waste Management Department for collection of Household Hazardous Waste. PREPARED BY: {~~~ ~ TERI FAZZ , ECREATIO ITOURISM MANAGER .--,/ APPROVED BY :/../' C C-../ /1>A VID W. SAPP, DIR SERVICES APPROVED FOR AGENDA BY: ......" AG;;ri:>~, iTEr',: NO. IJ- PA2a; eX OF I J.. COUNTY OF RIVERSIDE · COMMUNITY HEALTH AGENCY DEPARTMENT OF ENVIRONMENTAL HEALTH /""" May 11,2006 Teri Fazzio, llliW Contact 130 So. Main St Lake Elsinore, CA, 92530 Dear Teri Fazzio, We would like to advise you that per the Riverside County Board of Supervisors action dated March 21, 2006, the Riverside County Household Hazardous Waste (HHW) Collection Program will be transferred from the Riverside County Department of Environmental Health to the Riverside County Waste Management Department on July 1, 2006. ~ If you contracted with us in the past, the V! aste Management Department HHW Program staff will be contacting your staff to coordinate the establishment of new HHW Program agreements and schedule for HHW events for the Fiscal Year 2006/2007. This program will continue to serve all County and City residents and it is the goal of both Departments that the transition be seamless for your residents and staff. All permanent llliW collection and Antifreeze, Battery, Oil and Paint (ABOP) sites will also be turned over to the Waste Management Department on July 1,2006. If you have any questions or concerns regarding this program transfer, please feel free to contact Diane Christensen, Waste Management Department at (951) 486-3282. Sincerel y, )4~ Zwf Gary Root Director GR:rz cc: Hans Kernkamp, General Manager - Chief Engineer Waste Management Department All Incorporated City Managers All Incorporated City Recycling Managers A"'''''"\~~. 'T"'~' ~l,O ~ V'':'C,,}l':':~\ L ~ l;:,!.l ."t. . P" .... ~ nr.: J;).. "!"\t...;..':' '- v" ~ ~ Gary Root, Director 4065 County Circle Drive. Riverside, CA 92503 . Phone (951) 358-5316 · FAX (951) 358-5017 (Mailing Address - PO. Box 7600 . Riverside, CA 92513-7600 . Web Site - www.rivcoeh.org) 1 AGREEMENT BETWEEN COUNTY OF RIVERSIDE AND CITY OF LAKE ELSINORE ....." 2 HOUSEHOLD HAZARDOUS WASTE COLLECTION PROGRAM 3 4 This Agreement is made and entered into by and between the City of Lake Elsinore, 5 hereinafter called "CITY," and the County of Riverside through the Waste Management 6 Department, hereinafter called "COUNTY," to establish the responsibilities of each party in 7 implementing COUNTY'S Household Hazardous Waste ("11lIW'') Collection Program in CITY. 8 RECITALS 9 A. WHEREAS, CITY ~d COUNTY recognize that it is in the public interest to 10 establish and implement waste diversion and separation programs to prevent disposal of 11 hazardous waste, including household hazardous waste, in landfills; and, 12 B. WHEREAS, COUNTY has a well-developed and established HHW Collection ....",' 13 Program, for the purpose of diverting and properly managing household hazardous waste; and, 14 C. WHEREAS, CITY has a permanent HHW collection facility (''PHHWCF'') 15 located on land owned by CITY at 521 North Langstaff Street in CITY, suitable for conducting 16 household hazardous waste collection for the benefit of CITY and COUNTY citizens. 17 NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions 18 herein contained, the Parties mutually agree as follows: 19 1. COUNTY'S DUTffiS 20 1.1 COUNTY agrees to provide and/or perform the following duties to 21 implement COUNTY'S HHW Collection Program in CITY: 22 1.1.1 Operate the CITY owned and permitted PHHWCF at 521 North 23 Langstaff Street, on behalf of CITY. ,...." 24 25 ",:., :J. J:J- rA,.:___~~(:;~.J~a..-=- -1- pd #42676 /'"' 1 1.1.2 Obtain and fund the services of a state-certified, licensed, bonded 2 and insured hazardous waste transportation and disposal company through the competitive 3 bidding process, with all costs for disposal of residentially generated waste, staffing, and 4 implementation of the program remaining the responsibility of COUNTY. 5 1.1.3 Provide regional advertising of PIllIWCF and IllIW collection 6 schedule and events. 7 1.1.4 Provide liability coverage and indemnification to the extent 8 specified in Section 5, with insurance coverage provided through COUNTY'S self-insurance 9 program. 10 1.1.5 Determine that the hazardous waste disposal company contracted 11 for the PIllIWCF has obtained appropriate certificates of insurance that meet the criteria as ,/'"'"', 12 established in the Code of Federal Regulations. Title 49, California Health and Safety Code. and 13 for Workers' Compensation coverage. 14 1.1.6 Clean up any spills at the designated site associated with the 15 PIllIWCF and, upon completion of the operating day, clean up the designated site to the 16 condition existing prior to the beginning of the operating day. 17 1.1.7 Prepare all of the necessary permit and variance applications for 18 signature by City and submit to the State of California, Environmental Protection Agency, 19 Department of Toxic Substances Control and COUNTY's Community Health Agency, 20 Department of Environmental Health, Certified Unified Program Agency known as the CUP A. 21 1.1.8 During operations, ensure that staffing to assist in site security and 22 in the receiving, classifying, packaging, and transportation off-site of HHW received will be /'"' 23 provided. either by COUNTY or the contracted disposal company, or by a representative from 24 CITY supervising the activities at the PIllIWCF. 25 -2- AC::['JS;~\ m::r.!i NO. fa- PAC: -' OF /~ pd #42676 1 1.1.9 Ensure that the contracted hazardous waste disposal company ......", 2 completes the off-site transportation and ultimate recycling or disposal of the hazardous waste~ in 3 accordance With State and Federal hazardous waste management and transportation laws. 4 1.1.10 Purchase equipment necessary to manage and run the HHW site. 5 1.1.11 Act as an independent contractor in the performance of its 6 obligations hereunder, being subject to the control or direction of CITY merely as to the result to 7 be accomplished by the services hereunder~ and not as to the means and methods for 8 accomplishing the results. COUNTY assumes exclusively the responsibility for its acts~ and the 9 acts of its employees or agents as they relate to the services to be provided under this Agreement; 10 COUNTY shall not be entitled to any benefits payable to employees of CITY, including CITY 11 workers' compensation benefits, and hereby holds CITY harmless from any and all claims that 12 may be made against CITY based upon any contention by any third party that an employer- ..."" 13 employee relationship exists by reason of this Agreement. 14 2. CITY'S DUTIES 15 2.1 CITY agrees to provide properly permitted~ City-owned site, currently 16 located at 521 North Langstaff Street, Lake Elsinore~ CA 92530, satisfactory to COUNTY that 17 meets the following requirements: 18 2.1.1 Safety considerations. 19 2.1.2 Convenient to the public. 20 2.1.3 Safe and convenient traffic flow. 21 2.1.4 Available work space for handling, packaging~ and transportation 22 of hazardous waste. 23 2.1.5 Covered concrete or asphalt work area. ..."" 24 -3- ACr:NDA ITEM NO. PA:~ ~ {J- OF /~ 25 pd #42676 ,-.- 1 2.1.6 Access to gates, water, electrical, and restroom facilities for the 2 duration of the pHHWCF operating day(s). 3 2.2 CITY shall be responsible for the following activities: 4 2.2.1 Advertising of the PHHWCF to CITY's residents through local 5 news media, distribution of printed flyers and/or posters, and community service organizations at 6 CITY ~xpense; 7 2.2.2 May obtain the use of volunteers for specific tasks such as traffic 8 control, handing out of flyers, surveys, etc. with any personnel within the PHHWCF subject to 9 COUNTY approval. 10 2.2.3 Ensure that a representative from CITY operates the Waste 11 Exchange and oversees the PHHWCF operating daY(l)) activities. ~ 12 2.2.4 Provide keys to PHHWCF location to COUNTY for access during 13 non-operation hours. 14 3. JOINT PROVISIONS 15 3.1 COUNTY and CITY shall undertake joint responsibility for planning and 16 coordination meetings with CITY'S City Manager's office, COUNTY'S Waste Management 17 Department, CITY'S Fire Department, and other departments or agency representatives, as 18 necessary. 19 3.2 All equipment purchased by COUNTY will remain property of COUNTY, 20 and all equipment purchased by CITY will remain property of CITY at conclusion of agreement. 21 3.3 The days and hours of operation for the PHHWCF will be 9:00 am to 2:00 22 pm on the first Saturday of each month (excluding December and January, and holiday ,,-- 23 weekends). If the PHHWCF's operating day falls on a holiday weekend, a mutually agreed upon 24 date will replace the holiday date. 25 -4- AGGNC/\ ITHt. NO. I )/ PAC: 7 OF ----Lt4- pd #42676 1 4. HHW COLLECTION PROGRAM ...." 2 4.1 The PHHWCF shall meet the following operation standards: 3 4.1.1 Traffic cones will be set up to control traffic flow and minimize 4 traffic congestion through the collection facility. 5 4.1.2 All participants' vehicles will have trunks open upon entering the 6 restricted zone, and occupant will participate in a survey to be designed for both CITY and 7 COUNTY use. Only authorized, trained personnel will be allowed in the restricted waste 8 handling areas. The restricted areas will include the following: 9 4.1.2.1 Vehicle unloading area; 10 4.1.2.2 Categorization and waste packaging area; 11 4.1.2.3 Area for processing ''unknown'' wastes to determine hazard 12 class. ~ 13 4.1.3 Trained, contracted or coUNtY staff will segregate wastes 14 according to hazard class, package compatible materials into Federal Department of 15 Transportation approved hazardous materials shipping containers, and fill with inert, moisture 16 absorbent, granular, packing material as appropriate. Each shipping container will be labeled 17 and marked in accordance with State and Federal laws and regulations. 18 4.1.4 Shipping papers will consist of written Hazardous Waste Manifests 19 and Bills of Lading according to the appropriate waste stream profile. 20 4.1.5 COUNTY shall retain copies of each Hazardous Waste Manifest 21 and/or Bill of Lading for a minimum of three years as prescribed by law. 22 4.1.6 All waste classification, packaging, labeling, marking, manifesting, 23 and transportation, for recycling and/or disposal of hazardous waste shall be done in accordance ~ 24 -5- AC::NCl-\ ITEM NO. PAC:'; r I'J- OF---LL 25 pd #42676 r" 1 with all applicable Federal and State laws and regulations pertaining to household hazardous 2 waste. 3 4.1.7 COUNTY will have the responsibility concerning the disposition 4 of the hazardous waste collected from the HHW Collection Program, with concurrence of the 5 contracted hazardous waste transportation and disposal company. 6 4.1.8 Reuse and recycling, rather than disposal, will be considered as the 7 primary waste management methods for material that can be reused or recycled in a timely and 8 cost effective manner. 9 4.1.9 Treatment methods of detoxification and/or incineration will be 10 considered before Class I landfill disposal. 11 4.1.10 All final recycling, treatment, and disposal facilities considered r" :2 must be authorized by the appropriate State and/or Federal regulatory agencies and found 13 without substantial violations. 14 4.1.11 Effort will be made to recycle water-based paint so that it can be 15 utilized for graffiti abatement projects or other useful purposes. 16 4.1.12 COUNTY or contracted personnel will remain on-site until all 17 hazardous waste is properly packaged, stowed and removed from the PHHWCF site in secured 18 trailers to prevent the potential for spills or release to the PHHWCF site, unless prior 19 arrangements are made with CITY. 20 4.1.13 During the operating days, COUNTY'S Community Health 21 Agency, Department of Environmental Health/County Fire Department Hazardous Materials 22 Emergency Response Team will be on call. r"'B 4.1.14 COUNTY requires that this program be open and available to any 24 resident of COUNTY and that non-residentially generated waste is excluded from acceptance. -6- f-"o'"'" (,c:o-,; 1/l ~ AGI,;I'ol",x 'h.~.__ PA'~<: q OF I ~ '-'-----t--- __0L- 25 pd #42676 1 4.1.15 COUNTY will provide a report to CITY that will quantify the ~ 2 amount and types ofHHW collected at the PHHWCF. 3 5. HOLD HARMLESS 4 5.1 CITY shall indemnify and hold harmless COUNTY, its Agencies, 5 Districts, Special Districts and Departments, their respective directors, officers, Board of 6 Supervisors, elected and appointed officials, employees, agents and representatives (the 7 "COUNTY'S Indemnified Parties'') from any liability whatsoever, including but not limited to, 8 property damage, bodily injury, or death, based or asserted upon any services of CITY, its 9 officers, employees, subcontractors, agents or representatives arising out of or in any way 10 relating to this Agreement and CITY shall defend at its sole expense and pay all costs and fees, 11 including but not limited to, attorney fees, cost of investigation, defense and settlements or 12 awards, on behalf of the COUNTY'S Indemnified Parties in any claim or action based upon such ......, 13 liability. 14 5.2 COUNTY shall indemnify and hold harmless CITY, its officers, 15 employees, subcontractors, agents or representatives (the "CITY'S Indemnified Parties") from 16 any liability whatsoever, including but not limited to, property damage, bodily injury, or death, 17 based or asserted upon any services of COUNTY, its Agencies, Districts, Special Districts and 18 Departments, their respective directors, officers, Board of Supervisors, elected and appointed 19 officials, employees, agents and representatives arising out of or in any way relating to this 20 Agreement and COUNTY shall defend at its sole expense and pay all costs and fees, including 21 but not limited to, attorney fees, cost of investigation, defense and settlements or awards, on 22 behalf of the CITY'S Indemnified Parties in any claim or action based upon such liability. 23 5.3 With respect to any action or claim subject to indemnification herein, the ....., 24 indemnifying party shall, at their sole cost, have the right to use counsel of their choice and shall -7- AGr:' ,,~'\ np':: ~F! l/}'" ~~''i;t-l'';'"'' ,~\,....;....~ 1",\", ..______.~.,__/_..__. ...,,,..' , {D 1.:J rr.....--':k',__..~_~_* .~,-~ -..V) 25 pd #42676 r-- 1 have the right to adjust, settle, or compromise any such action or claim without the prior consent 2 of the indemnified party; provided, however, that any such adjustment, settlement or 3 compromise in no manner whatsoever limits or circumscribes the indemnifying party's 4 obligation to indemnify as set forth herein. 5 5.4 Indemnifying party's obligation hereunder shall be satisfied when they 6 have provided the indemnified party the appropriate form of dismissal relieving the indemnified 7 party from any liability for the action or claim involved. 8 5.5 In the event there is conflict between this clause and California Civil Code 9 Section 2782, this clause shall be interpreted to comply with Civil Code 2782. Such 10 interpretation shall not relieve the indemnifying party's obligation to provide indemnification to 11 the fullest extent allowed by law. r-- 2 5.6 The provisions of this section shall survive the term of this Agreement. 13 6. ADMlNISTRATION 14 6.1 COUNTY'S Waste Management Department General Manager-Chief 15 Engineer, or designee, shall administer this Agreement on behalf of COUNTY. 16 6.2 CITY'S City Manager, or designee, shall ~minister this Agreement on 17 behalf of CITY. 18 7. ALTERATION 19 7.1 No alteration or variation of the terms of this Agreement shall be valid 20 unless made in writing and signed by the parties hereto, and no oral understanding or agreement 21 not incorporated herein, shall be binding on any of the parties hereto. Only COUNTY'S Board 22 of Supervisors or COUNTY'S Purchasing Agent may authorize the alteration or revision of this r--'B Agreement. The parties expressly recognize that COUNTY personnel are without authorization 24 to either change or waive any requirements of this Agreement. -8- AG!2r\)C,:l, ITEM NO. ()/ PAC: J / OF / d... 25 pd #42676 1 8. TERM OF AGREEMENT '--' 2 8.1 This Agreement shall be effective as of July 1, 2006 and continue in effect 3 through June 30, 2007, unless terminated by either party, without cause, upon thirty (30) days 4 written notice served on the other party. 5 9. ENTlRE AGREEMENT 6 9.1 This Agreement contains the entire agreement between the parties with 7 respect to the subject matter hereof. and supersedes all prior negotiations, understandings, or 8 agreements both oral and written. This Agreement may be amended in writing with the 9 concurrence of both parties. lOIN WITNESS WHEREOF, the Parties have caused their duly authorized representatives 11 to execute this Agreement on the date written below. 12 ....." 13 RECOMMENDED FOR APRPOV AL: ley B. .. , Solid Waste Planning Manager 15 Planning and Recycling Division Dated:~~oo(q 14 16 CITY OF LAKE ELSINORE COUNTY OF RNERSIDE 17 18 By 19 Title 20 Date: 21 22 23 24 By General Manager-Chief Engineer Waste Management Department FORM A~~l COUNTY cou...... ....." -9- 8Y ACENDA ITEM i L~. }.y PAC: I~ OF I d., , 25 pd #42676 r- CITY OF LAKE ELSINORE REPORT TO THE CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27,2006 SUBJECT: PLANNING DIVISION CONTRACT STAFF PERSONAL & PROFESSIONAL SERVICE CONTRACTS BACKGROUND The City of Lake Elsinore has been utilizing contract persomiel to assist in the performance and provision of specialized planning duties in the Community Development Department for over a decade. ".--.. DISCUSSION As established in the previous Fiscal Year (FY) 2005-2006, the contracts for the Planners commence, expire and coincide with the City's budget cycle. The contracts, if approved, would extend their contracts through FY 2006- 2007 and would come up for renewal in June 2007. Notably, three (3) of the Contracts are requesting an increase from their previous contract of FY 2005-2006, with the exception that both Sandra Massa-Lavitt and Wendy Worthey remain at the rate recently approved under the contracts for FY 2005-06 (See Proposed and Existing Contracts Attached). Although the proposed increases for Carole Donahoe, Kirt Coury and Linda Miller are more than a "flat" CPI adjustment, staff confirmed that planning consulting firms in the area generally charge significantly more than the hourly rate requested by the City's contract staff. The following contract staff members are included: r- . Carole Donahoe, Planning Consultant . Kirt Coury, Planning Consultant . Linda Miller, Planning Consultant . Sandra Massa-Lavitt, Planning Consultant . Wendy Worthey, Principal Environmental Planner ACENDA iTEM NO. .l.L- PAOE-L~-. REPORT TO CITY COUNCIL June 27, 2006 Page 2 of2 ~ FISCAL IMPACT The proposed planning contracts will generate minimal fiscal impact to the City in that Kirt Coury, Linda Miller and Wendy Worthey will be approximately 80% billable and 20% non-billable. Carole Donohoe is currently the only planner that will continue to be 100% billable through the City's Cost Recovery System (CRS). Sandra Massa-Lavitt will be the only Planning Consultant that is 100% non-billable, since she has been assigned to assist in managing the General Plan Update, which is not billable through the City's Cost Recovery System (CRS). Finally, it is anticipated, with the approval of the new Budget, that the project planners (with the exception of Sandra Massa-Lavitt) become increasingly billable through the City's Cost Recovery System (CRS) as new staff members are hired (i.e. Community Development Technician, Planning Intern and the position upgrade from Office Specialist II to Planning Technician). Finally, the requested contract hourly rates are still less than that allowed in the approved Operating Budget for FY 2006-07. RECOMMENDATION ~ It is recommended that the City Council authorize the City Manager to prepare and enter into contract with the above contract staff to provide specialized planning services on an annual basis. ATTACHMENTS 1. FY 2005-2006 Current Contracts 2. FY 2006-2007 Proposed Contracts PREPARED BY: Rolfe M. Preisendanz Director of Community Development APPROVED FOR AGENDA BY: ~ ACENDA ITEM NO. lJ PACE ;)- -oF32--. PERSONAL SERVICES CONTRACT **~~******************************************************************************************************* THIS AGREEMENT made and entered into on June 27 ,2006 . by the City of Lake Elsinore, a municipal 9"""""<lration, party of the fITSt part, hereinafter referred to as CITY, and (;uNTRACTOR FOR USE BY CITY MANAGER'S OFFICE ONLY S:llndT:ll M:ll....:ll-T:llvit-t- S.SIE.I.N. NO. Vendor # Amount $ Acet. Purchase Order # Obj. Code MAILING ADDRESS 49271 Taylor Street CITY, STATE, ZIP PHONE NUMBER (760 ) 342-082~ City Division ACCT. To Be Chgd. Document Preparer Date Ext. or Telephone # Tndin. ~A 91101 party of the second part, hereinafter ref~rred to as CONTRACTOR. CONTRACTPE~OD: From Jub'_l. __ ,2006 TO June 30 .20a7. WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other related expenses; ~pp Rplnw ($) Task Statement: (Please describe the responsibilities of the contractor in one or two sentences or attach a Scope of Services description as Exhibit "An.) Interim Plannin~ Hana~er. A rate of $90.00 per hour and $0.405 per mile (for ,--.. mflpagp fnrllTTPd nnCit-y busiuess), based on providing:.:1;ip t:o;,~O heurs per week. TiJBe to:include "port to port" two way. TERMS AND CONDITIONS 1. INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR, in the perfonnance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any such rights... 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY hannless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission, or neglect of CONTRACTOR 3. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICA nON OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books, records, documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7 . TERMINATION - This agreement may be terminated by CITY immediately for cause or by either party without cause upon thirty (30) days' written notice of tennination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. 8. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad internal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole righlto use such materials in its discretion without further compensation to CONTRACTOR or to any other party. ,--.. (Signatures follow on next page) AGENDA ITEM NO.~. PAGE 3. ~ *********************************************************************************************************** RETIJRN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 ATIN: CITY MANAGER ....., IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of .20_ CITY OF LAKE ELSINORE CONTRACTOR City Manager (Contractor Must Sign Here) Qepartment Director *********************************************************************************************************** '--' NON-DISCRIMINA nON CLAUSE The City of Lakt! Elsinore, in conq>liance with Title VI and Title VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on the basis of race, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. ,....." AGENDA ITEM NO. J j PAGE......!L....OF '3d--' ~. . City of Lake Elsinore Community Development Department Planning Division EXHIBIT "A" Scope of Service~ City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore~s Community Development Department as directed by the Planning Manager and/or the Director of Community Development as. set forth below. It is understood based on the representations made by the Consultant that helshe'is specially . trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it. is understood that the coilsultant. possesses the skil1~ experience, ability, background, certification and knowledge to provide the services and the~erms and conditions described herein: ~ 1. Review and process Planning, Land Use, and Zoning applications as assigned by the PlaIining Manager and/or Director of-Community Development based on-the level of complexity and expertise possessed by the Consultant which may. inch~de .but is not limite~ to. Annexations, Design Review(s), Tentative Tract & Parcel ~aps (snbdivisiQns), Specific Plans, Specific Plan Amendments, Zo~ing Code Amendments, Zone Changes, General Plan, Amendments~ Variances, Conditiont:ll ' Use Permits and extensions of time for the above applications. . 2. Prepare or caUSe to be prepa!ed by processing, managing, and monitoring the p.rep~tion of attY environmental clearance document. pursuant to' the California' . Environmentat . Quality Act and related to the processing of any' of the above referenced appli~tiotis. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission arid City Council. 4. Respond to, inquiries, both orally and in writing, Interpret planriing policies, state laws, and local ordinances, explains division and department procedures. 5. Perform fieldi~pections" and attend conferences and nieetings or 'other public functions as an' ex-officio member of city's staff. ~ 6. If determined necessary, provide assistance at the public counter. U:\a~\miscfiJe\Exbibit A PJaiming COnsulting SC!Vices.doc July 20. 2004 ACENDA ITEM NO. ':3 p," s OF ~r PERSONAL SERVICES CONTRACT **~******************************************************************************************************** TIllS AGREEMENT made and entered into on Karch 28 , 20 06 . by the City of Lake Elsinore, a municipal corporation, party of the first part, hereinafter referred to as CITY, and CONTRACTOR ~..ntlr.. M..~~..-T..vit-.... FOR USE BY CITY MANAGER'S OFFICE ONLY ... S.SfE.LN. NO. Vendor # Amount $ Acct. Purchase Order # Obj. Code MAILING ADDRESS 49271 Taylor Street CITY, STATE, ZIP PHONE NUMBER (760 ) ).U-oS24 City Division ACCT. To Be Chgd. Docwnent Preparer DateExt. or Telephone # Tndin. CA 9??OI party oftbe second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From January 30 , 2006 TO June 30 ,2<06 WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other related expenses; . ~PP Rp1nw ($) Task Statement: (Please describe the responsibilities of the contractor in one or two sentences or attach a Scope of Services description as Exlnbit "A".) Interim PlanninR ManaRer. A rate of $90.00 per hour and $0.405 per mile (f=or milp:lgp inrnrrptl nn Cit"y b.uduein;)~ based OR providiDg~~ t:9;:~O houro per week. Tue to~include "port to port" two wav. ......., c TERMS AND CONDITIONS 1. INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR, in the perfonnance of the work and services agreed to be performed, shall act as and be an independent conlJ'actor and shall not act as an agent or employee of CITY. CONTRACTORshall obtain no rights to retirement benefits or other benefits whicb accrue to CITY's employees, and CONTRACTOR bereby expressly waives any claim it may bave to any such rights... 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and bold the CITY bannless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission, or neglect of CONTRACTOR 3. NON-ASSIGNMENT -It is understood and agreed tbat CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies thathe/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books, records, documents, aCcounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINATION - This agreement may be terminated by CITY immediately for cause or by either party without cause upon thirty (30) days' written notice of termination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. 8. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad internal documents, sball become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. (Signatures follow on next page) ....." AGENDAlliM ~O, PAGE to I~ OF,:? .)- *********************************************************************************************************** }JUURN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 ATfN: CITY MANAGER IN WfINESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of .20_ CITY OF LAKE ELSINORE CONTRAcrOR City Manager (Contractor Must Sign Here) Qepartment Director *********************************************************************************************************** ~ NON-DISCRIMINATION CLAUSE The City of Lake Elsinore, in compliance with Title VI and Title VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Aniericans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on the basis ofrace, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or pnK:edures. This includes but is not limited to employment and the provision of municipal services. ~ AGENDA ITEM NO. PAGE I /3 OF ,3 J.-- _ City of Lake Elsinore Community Development Department Planning Division .....", EXHIBIT" A" Scope"ofServiees City Planning Consultant Services Consultant agrees to provideprofession~l urban planning and related consulting services for the City of Lake ~lsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community J;>evelopment as.set forth below. It is understood based on the representations made by the..<;;onsultant that helshe.is specially "trained, experienced, and competent to perform the special" services which 'Yill be required by this scope" of services. In addition, it. is understood that the consultant possesses the skill, experience, ability, background~ certification and knowledge to provide the services and the terms and conditions described herein: 1. Review and process Planning, Land Use, and Zoning applications as assigned by the PlaIining Manager and/or Director of Community Development based oD:the level of complexity and expertise possessed by the Consultant .which may incl~de .but is riot limite~ to Annexations, Design Reyiew(s), Tentative Tract &. Parcel ~aps (subdivisions), Specific Plans, Specific Plan Amendments, Zo~ng Code Amendments, Zone Changes, General Plan. Amendments, Variances, Condition~l - Use Permits and extensions of time for the above applications. . .....", 2. Prepare or cause to be. prepa!ed by processing, managing, and monitoring the P.cepaI1lti.on of allY environmental clearance docUment. pursuant to. the California. . Environmental Quality Act and related to. the. processing. of any of the above" referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission arid City Council. 4. Respond to. inquiries, both orally and in writing, interpret plamiing policies, state laws, and local ordinances, explains division and department procedures. . . 5. Perform field in~pecti~ns,. and attend conferences and nieetings or other public functions as an ex-officio member of city's staff. 6. If determined necessary, provide assistance at the public- counter. .....", U:\a'Vil1a\miscfiJe\Exhibil A PJailning COnsulting ~ces_doc July 20. 2004 " . ,~ . r'''>fn ~ ~'r""~" 1\'1"\ j~'~!r':,~\<""'E"~. ~ ~::[;JJ Ii ,'~. lUil''- ;6 ",~ .3 I--- ", ,. ':, :.~: \ ""i.' er. ~., ~'. ", ~~'';'''- '40<:'.11..' ~""~ .::_ -~- *********************************************************************************************************** PERSONAL SERVICES CONTRACT THIS AGREEMENT made and entered into on June 27_~ ,ZQOJ~.. by the City of Lake Elsinore, a municipal /""'" oration, party of the first part, hereinafter referred to as CITY, and CONTRACTOR Linda M. Miller FOR USE BY CITY MANAGER'S OFFICE ONLY S.S/E.I.N. NO. 'i61-'iR-'i6~8 Vendor # Acct. Purchase Order # Amount $ MAILING ADDRESS J1R'i4 C-he 1 sea Way Obj. Code CITY, STATE, ZIP Mllrri et:l. CA q~,)62 PHONE NUMBER(951 ) 677-1237 City Division ACCT. To Be Chgd. Document Preparer Date Ext. or Telephone # party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From .July 1 , _ 2906 TO June 30 , , 2007 WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other related expenses; See Below ($ Task Statement: (Please describe the responsibilities of the contractor in one or two sentences or attach a Scope of Services description as Exhibit "An.) . A rate of $65.001 per hour and $.405 per mile (for mileage incurred on Cit business, based on rovidin u to 32 hours per week. Additional hours may be al"'""lable and necessary to carry out project loads contingent upon approval 0 t e Director 0.. {\mm1Jnify npuplopmpnt P:lyment: processing will begin upon presentation of a timesheet (format as provided and approved by the City), and invoice for services rendered. Task stAtement. (Please. gee attached Be6l'c af Scr.~ice() dcoerifltiElH 3..& Exhibit "An) TERMS AND CONDITIONS I. INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR, in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and C~NTRACTOR hereby expressly waives any claim it may have to any such rights... 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission, or neglect of CONTRACTOR. 3. NON-ASSIGNMENT -It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICATION OF EMPLOYMENTST A TUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books, records, documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINATION - This agreement may be terminated by CITY irrnnediately for cause or by either party without cause upon thirty (30) days' written notice of termination. Upon tennination, CONTRACTOR shall be entitled to compensation for services perfonnedup to the effective date of termination. 8. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the courseofimplementing this agreement, except working notepad internal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. /""'" (Signatures follow on next page) AGENDA ITEM NO. PAGE ~l l3 OF 3;}-- *********************************************************************************************************** RETURN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 ATfN: CITYMANAGER "'-' IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of , 20_ CITY OF LAKE ELSINORE . CONTRACTOR City Manager (Contractor Must Sign Here) Department Director *********************************************************************************************************** '-' NON-D1SCRIMlNA TION CLAUSE The City of Lake Elsinore, in coinpliance with Title VIand Title VU of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on the basis of race, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. """ AGENDA ITEM NO. PAGE I 0 13 OF ;].)- ,-.. City of Lake Elsinore Community Development Department Planning Division EXHIBIT "A" Scope of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development as set forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, .experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: ,-.. I. Review and process Planning, Land Use, and. Zoning applications as assigned by the Planning Manager and/or Director of Community Development based on the level of complexity and expertise possessed.by the.Consultant which may include but is not limited to Annexations, Design Review(s), Tentative Tract & Parcel Maps (subdivisions), Specific Plans, Specific Plan Amendments, Zoning Code Amendments, Zone Changes, General Plan Amendments, Variances, Conditional Use Permits and extensions of time for the above applications. 2. Prepare or cause to be prepared by processing, managing, and monitoring the preparation of any environmental clearance document pursuant to the California Environmental Quality Act and related to the processing of any of the above referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respond to inquiries, both orally and in writing, interpret planning policies, state laws, and local ordinances, explains division and department procedures. 5. Perform field inspections, and attend conferences and meetings or other public functions as an ex-officio member of city's staff. "....... 6. If determined necessary, provide assistance at the public counter. U:\avilla\miscfile\Exhibit A Planning Consulting Services.doc July 20, 2004 1.,1 AGENDA ITEM NO. __ PAGE /1 OF_3).- PERSONAL SERVICES CONTRACT *********************************************************************************************************** THIS AGREEMENT made and entered into onAugust 23 , 20~. by the City of Lake Elsinore, a mnnicipal corporation, party of the first part, hereinafter referred to as CITY, and CONTRACTOR Linda M. Miller .-."., FOR USE BY CITY MANAGER'S OFFICE ONLY S.S/E.I.N. NO. '1n1-'1R-'1678 Vendor # Acct. Purchase Order # Amount $ MAILING ADDRESS 71R'i4 Chelsea Way Obj. Code CITY, STATE, ZIP Mllrri eta, CA 92'i62 PHONE NUMBER (951 ) 677-1237 City Division ACCT. To Be Chgd. Document Preparer Date Ext. or Telephone # party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From August 23 ,2005 TO June 30. ,2006 WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other related expenses; See Below ($ Task Statement: (Please describe the responsibilities of the contractor in one or two sentences or attach a Scope of Services description as Exhibit '~A".) . A rate of $55.00 per hour and $.405 per mile (for mileage incurred on eit business , .based on rovidin u to 32 hours per week. Additional hours may be available and necessary to carry out.project loads contingent upon approval 0 t e D1rector 01' Cnmm1tnify npvf'lnpmpnt- Payment: processing will begin upon presentation of a timesheet ....., (format as provided and approved by the City), and invoice for services rendered. Task statem~nt. (Please seeattaCfte6 Scope af Ser.deeo dcoerifltion aElExhibit "An). TERMS AND CONDITIONS I. INDEPENDENT CONTRACfOR - It is understood that CONTRACTOR. in the perfonnance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and C~NTRACTOR hereby expressly waives any claim it may have to any such rights... 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or res.ult from any act, omission, or neglect of CONTRACTOR. 3. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTlFICA TION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This .agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books, records, documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinote. 7. TERMlNA TlON - This agreement may be terminated by CITY immediately for cause or by either party without cause upon thirty (30) days' written notice of tennination. Upon termination, CONTRACTOR shall be entitled to compensation for services perfonned up to the effective date of termination. 8. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the couJ:se of implementing this agreement, except working notepad internal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. (Signatures follow on next page) "" AGENDA ITEMlO. /3.._ - PAGE ~~ *********************************************************************************************************** ""-"URN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 ATfN: CITY MANAGER IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of .20_ CITY OF LAKE ELSINORE CONTRACTOR City Manager (Contractor Must Sign Here) Department Director ~****************************************************************************************************** NON-DISCRIMINATION CLAUSE The City of Lake Elsinore, in compliance with Title VI and Title VII of the Civil Rights Act of 1964, Title IX of the Education Ameridments of 1972, Section 504 of the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and rcguJali!ms, does not discriminate on the basis of race, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to cmployrUent and the provision of municipal services. ,-. AGENDA ITEM NO. PAGE I 3 J3 ~Of '3;)--- ... City of Lake Elsinore Community Development Department Planning Division ~ EXHIBIT "A" Scope of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development as set forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: L Review and process Planning, Land Use, and Zoning applications as assigned by the Planning Manager and/or Director of Community Development based on the level of complexity and expertise possessed by the. Consultant which may include but is not limited to Annexations, Design Review(s), Tentative Tract & Parcel Maps (subdivisions), Specific Plans, Specific Plan Amendments, Zoning Code Amendments, Zone Changes, General Plan Amendments, Variances, Conditional Use Permits and extensions of time for the above applications. ,...., 2. Prepare or cause to be prepared by processing, managing, and monitoring the preparation of any environmental clearance document pursuant to the California Environmental Quality Act and related to the processing of any of the above. referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respond to inquiries, both orally and in writing, interpret planning policies, state laws, and local ordinances, explains division and. department procedures. 5. Perform field inspections, and attend conferences and meetings or other public functions as an ex-officio member of city's staff. 6. If determined necessary, provide assistance at the public counter. ....., U:\avilIa\miscfile\Exhibit A Planning Consulting Services.doc July 20, 2004 AGENDA ITEM NO. . / j PAGEJ.:::[:..OF 7d:: PERSONAL SERVICES CONTRACT *********************************************************************************************************** THIS AGREEMENT made and entered into on June 27 , 2099 . by the City of Lake Elsinore, a municipal /""" oration, party of the frrst part, hereinafter referred to as CITY,and CONTRACTOR Kirt A. Coury FOR USE BY CITY MANAGER'S OFFrCE ONLY S.S/E.I.N. NO. 'ihR-7Q- J 161 Vendor # Acct. Purchase Order # Amount $ MAILING ADDRESS S7it Calle Polvorosa Obj. Code CITY, STATE, ZIP San Clemente. CA 91763 PHONE NUMBER ( 949) 369-9434 City Division ACCT. To Be Chgd. Document Preparer Date Ext. or Telephone # party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From July 1- 2006 TO June 30 2007 WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful perfonnance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and aU other related expenses; See Below . ($) Task Statement: (Please describe the respo!lSibilities of the contractor in one or two sentences or attach a Scope of Services description as Exhibit "A".).': . A rate of $75.00 per hour and $.405/mile (for mileage incurred on City business), based on providing up to 36 hours Per week. Additional hours may be available /""", necessary to carry out project loads contingent upon approval of the Director of - dllll.y.llity I>Quelopment Payw"nt prnr"",,,,inguiJlhpgin upon presentation ofa timesheet (format as provided and approved by the City), and invoice for services rendered. Task -> .. E .......... "AU) ::;lalt:wt:ul. (Fle<1>>O: bee dttad.eJ Scope of Serviccs ...cscr1pt10R as uu1u1_ .... . TERMS AND CONDITIONS I. INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR, in the perfonnance of the work and services agreed to be performed, shall act as and be an independC/lt contractor and shan not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any ~uch rights... 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act. omission, or neglect of CONTRACTOR. 3. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTlFICA TION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books. records, documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINA TlON - This agreement may be tenninated by CITY immediately for cause or by either party without cause upon thirty (30) days. written notice of termination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. 8. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad internal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. /""" (Signatures follow on next page) AGENDA ITEM NO. PAGE 15 /-3 OF (.5;;- *********************************************************************************************************** RETURN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 A TIN: CITY MANAGER "" IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day . of ,20 CITY OF LAKE ELSINORE CONTRACTOR City Manager (Contractor Must Sign Here) ,. Department Director *********************************************************************************************************** ......., N'ON-DISCRIMINA TION ClAUSE The City of lake Elsinore, in compliance with Title VI and TItle vn of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on thebas~ ofrace, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. ....., (<GENOA ITEM NO.J~> . . PACE_I b _OF.... - /"", City of Lake Elsinore Community Development Department Planning Division EXHIBIT "A" Scope'of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development asset forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: /"'"' 1. Review and process Planning, Land Use, and Zoning applications as assigned by the Planning Manager and/or Director of Community Development based on the level of complexity and expertise possessed by the Consultant which may include but is not limited to Annexations, Design Review(s), Tentative Tract & Parcel Maps (subdivisions), Specific Plans, Specific Plan Amendments, ZOJ.1ing Code Amendments, Zone Changes; General Plan Amendments, Variances, Conditional Use Permits and extensions of time for the above applications. 2. Prepare or cause to be prepared by processing, managing, and monitoring the preparation of any environmental clearance document, pursuant to the California Environmental Quality Act and related to the processing of any of the above referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respond to inquiries, both orally and in writing, interpret planning policies, state laws, and local ordinances, explains division and department procedures. 5. Perform field inspections, and attend conferences and meetings or other public functions as an ex-officio member of city's staff. /""" 6. If determined necessary, provide assistance at the public counter. U:\aviUa\miscfiJe\Exhibit A Planning Consulting Services.doc July 20, 2004 AGENDA ITEM NO. PAGE II 1'3 OF , 3;;- PERSONAL SERVICES CONTRACT *********************************************************************************************************** THIS AGREEMENT made and entered into on Augus t 23 . 20 jlL. by the City of Lake Elsinore, a municipal corporation, party of the first part, hereinafter referred to as CITY, and ,...." CONTRACTOR Kirt A. Coury FOR USE BY CITY MANAGER'S OFFICE ONLY S.SlE.I.N. NO. 'l6R-7 q-1161 Vendor # Acet. Purchase Order # Amount $ MAIUNG ADDRESS 5711 Calle Polvorosa Obj. Code CITY, STATE, ZIP San Clemei\te, CA 91763 PHONE NUMBER ( 949) 369-9434 City Division ACCT. To Be Chgd. Document Preparer Date Ext. or Telephone # party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From August 23 ,2005 TO June 30 ,2006 WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other related expenses; See Below ($ Task Statement: (Please describe the respo!lSibiIities of the contractor in one or two sentences or attach a Scope of Services description as .Exlubit UA"4):' ,.', . A rate of $60.00 per hour and $.405/mile (for mileage incurred on City business), based onprov!ding up to 36. hours per week. Additional hours may be available and necessary to carry out project loads contingent upon approval of the Director of C011llllYuity Ih~"elopmeut Pay"'.'.nt- rr,",rp~~ingTJi J lhpgin npon presentation of a timesheet ....."" (format as provided.andapproved by the City), and invoice for services rendered. Task iHC1l~JJlo;:hl. (Fled.".. see attAched Scope of Serv ices deseriptiaa ao E1chibit "An)_ TERMS AND CONDITIONS I. INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR, in the perfonnance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not .act as an agent Or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any ~uch rights... 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission, or neglect of CONTRACTOR. 3. NON-ASSIGNMENT - It is understood aild agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreCment with the City of Lake Elsinore, CONTRACTOR agrees that books, reCords, documents, accounting procedures, practices, or any other items of the service providerreJevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINATION - This agreement may be terminated by CITY immediately for cause or by either party without cause upon thirty (30) days' written notice of termination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. 8. DOCUMENTS - All plans, studies.; documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except Working notepad internal documents; shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. (Signatures follow on next page) ......." AGENDA ITEM NO. PAGE J <6 13 OF ,3J-: *********************************************************************************************************** r-- URN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 ATTN: CITY MANAGER IN WITNESS WHEREOF, the parties hereto have hereWlto set their hand to this contract this day . of ,20 .CITY OF LAKE ELSINORE CONTRACTOR City Manager (Contractor Must Sign Here) ,. Department Director ,....... . '****************************************************************************************************** NON-DlSCRJMINA TION CLAUSE The City or Lake Elsinore, in compliance with Title VI and Title va of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation ~ of 1973, Section 4()2 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not disCriminate on the basis of race, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in anyofils policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. /""'"'" AGENDA ITEM NO. _ PAGE (t:) 13 OF 3;;)- T . City of Lake Elsinore Community Development Department Planning Division ""'" EXHIBIT" A" Scope of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development asset forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: 1. Review and process Planning, Land Use, and Zoning applications as assigned by the Planning Manager and/or Director of Community Development based on the level of complexity and expertise possessed by the Consultant which may include but is not limited to Annexations, Design Review(s), Tentative Tract & Parcel ""'" Maps (subdivisions), Specific Plans, Specific Plan Amendments, Zo~ing Code Amendments, Zone Changes, General Plan Amendments, Variances, Conditional Use Permits and extensions of time for the above applications. 2. Prepare or cause to be prepa.red by processing, managing, and monitoring the preparation orany environmental clearance document pursuant to the California Environmental Quality Act and related to the processing of any of the above referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respond to inquiries, both orally and in writing, interpret planning policies, state laws, and local ordinances, explains division and department procedures. 5. Perform field inspections, and attend conferences and meetings or other public functions as an ex-officio member of city's staff. 6. If determined necessary, provide assistance at the public counter. ....." U:'.avi~\miscfile\Exbibit A Planning Consulting Services.doc July 20, 2004 ACENDA ITEM NO. J 3 . PACE -;}-O OF. ~)- PERSONAL SERVICES CONTRACT *********************************************************************************************************** THlS AGREEMENT made and entered into on June 27 , :?006 . by the City of Lake Elsinore, a municipal I""' '}oration, party of the first part, hereinafter referred to as CITY, and CONTRACTOR Carole K. Donahoe FOR USE BY CITY MANAGER'S OFFICE ONLY S.S1E.I.N. NO. 56l-64-6437 Vendor # Acet. Purchase Order # Amount $ MAILING ADDRESS 22993 Rosemont Ct. Obj. Code CITY, STATE, ZIP Murrieta, CA 92562 PHONE NUMBER ( 95l) 600-0051 City Division ACCf. To Be Chgd. Document Preparer Date Ext. or Telephone # party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From July 1 ,2~ TO 'June 30 ,_Z007 WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of aU covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and aU other related expenses; See Below ($ Task Statement: (Please describe the responsibilities of the contractor in one or two sentences or attach a Scope of Services description as Exhibit "A".) . . . . . A r.ate of $75.00 per hour and $.405 per m1le (for m1leage ,1ncurred on Cit business), u to 24 hours per week. Additional hours may be available and necessary ~carry out project loads contingent upon approval of the Director 0 Communty eve opment. .n~n" pro('~!;!;ing will begin upon presentation of a timesheet (format as provided and approved by the City), and invoice for services reIidered. Task statement: (Please see attached Scope of ScrdeC8. deoeriptioR ao Exhibit "A'l).. TERMS AND CONDITIONS l. INDEPENDENT CONTRAcrOR -It is understood that CONTRACTOR. in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any such rights". 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission. or neglect,of;CONTRACTOR. 3.. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of lake Elsinore. . 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of lake Elsinore, CONTRACTOR agrees that books, records. documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINATION - This agreement may be tenninated by CITY inunediately for cause or by either party without cause upon thirty (30) days' written notice of termination. Upon termination, CONTRACTOR shall be entided to compensation for services performed up to the effective date of termination. 8. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad intemaldocuments, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR Or to any other party. I""' (Signatures follow on next page) AGENDA ITEM NO. . t3 '. PAGE ~( OF~-)r- *********************************************************************************************************** RETURN TO: CITY OF LAKE ELSINORE 130 S. MAlN STREET LAKE ELSlNORE, CA 92530 A TfN: CITY MANAGER ......, IN WIlNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of ,20_ CITY OF LAKE ELSlNORE CONTRACfOR City Manager (Contractor Must Sign Here) Department Director *********************************************************************************************************** "'" NON-DISCRIMINA nON CLAUSE The City of Lake Elsinore, in compliance with Title VI and Title vn of the Civil Rights Act of 1964. Title IX of the Education Amendments of 1972. Section 504 of the Rehabilitation Act of 1913, Section 402 of the Readjustment Assistlince Act of t 974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on the basis of race; color. etbnicity, national origin, sex, age. religion. disability. political affiliation. or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to employmc:nt and the provision of municipal services. ......, AGENDA ITEM NO. r3 PACE )-- Y OF. 3d- ~ City of Lake Elsinore Community Development Department Planning Division EXHIBIT "A" Scope of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development as set forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: ---- 1. Review and process Planning, Land Use, and Zoning applications as assigned by the Planning Manager and/or Director of Community Development based on the level of complexity and expertise possessed by the Consultant which may include but is not limited to Annexations, Design Review(s), Tentative Tract & Parcel Maps (subdivisions), Specific Plans, Specific ,Plan Amendments, Zoning Code Amendments, Zone Changes, General Plan Amendments, Variances, Conditional Use Permits and extensions of time for the above applications. 2. Prepare or cause to be prepared by processing, managing, and moni~oring the preparation of any environmental clearance document pursuant to the California Environmental Quality Act and related to the processing of any of the above. referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respond to inquiries, both orally and in writing, interpret planning policies, state laws, and local ordinances, explains division and department procedures. 5. Perform field inspections, and attend conferences and meetings or other public functions as an ex-officio member of city's staff. ~ 6. If determined necessary, provide assistance at the public counter. U:\avil1a\miscfi1e\Exhibit A Planning Consulting Services.doc July 20, 2004 AGENDA ITEM NO. 13 PACE ;:}-:) OF 3z PERSONAL SERVICES CONTRACT *********************************************************************************************************** THIS AGREEMENT made and entered into on Au~ust .23 , 2oQL. by the City of Lake Elsinore, a municipal corporation, party of the first part, hereinafter referred to as CITY, and CONTRACTOR Carole K. Donahoe ......", FOR USE BY CITY MANAGER'S OFFICE ONLY S.SIE.I.N. NO. 561-64-6437 Vendor # Acct. Purchase Order # AmountS MAILING ADDRESS 22993 Rosemont Ct. Obj. Code CITY, STATE, ZIP Murrieta, CA 92562 PHONE NUMBER ( 951) 600-0051 City Division ACCT. To Be Chgd. Document Preparer Date Ext. or Telephone # party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From Augus t 23 ,20 05 TO . June 30 .2006 WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amOunt which includes travel and aU other related expenses; See Below ($ Task Statement: (Please describe the responsibilities of the contractor in one or two sentences or attach a Scope of Services . description as Exlul>it "A".) . . ... A t.ate of $65.00 per hour and $.405 per m1le (for m1leage 1ncurred on City business), up to 24 hours per week. Additional hours may be available and necessary to carry out project loads contingent upon approval of the Director of Community Developmep P:Jympnt: prorel':l':ing will begin upon presentation of a timesheet (forlliat as provided and ......", approved by the City), and invoice for services reddered. Task statement: (Please see attdcRCB Seope of 8crvieea Elcoaription ao Exhibit: "A'l).. TERMS AND CONDITIONS I. INDEPENDENT CONTRACTOR -It is understood that CONTRACTOR. in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any c1aiin it may have to any such rights... 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property. injury to persons, and loss, expense, iliconvenience, and delay that may be caused by or result from any act, omission, or neglect.ofCONTRACTOR. 3. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign. sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books, records, documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINATION - This agreement may be tenninated by CITY immediately for cause or by either party without cause upon thirty (30) days' written notice of termination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. 8. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad iniernal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. (Signatures follow on next page) ""-'" ACEND-A ITEM NO. PACE ;)L( /3 OF ~:;}- - *********************************************************************************************************** r'. I JRN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 A TfN: CITY MANAGER IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of ,20_____ CITY OF LAKE ELSINORE CONTRACTOR City Manager (Contractor Must Sign Here) Department Director r' * ~***************************************************************************************************** NON-D1SCRlMINA nON CLAUSE The City of Lake Elsinore, in compliance with Title VI and Title VU of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 o'f the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on the basis of race, color, ethnicity, national Origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. r' ACENDA ITEM NO. PACE :J.-5 13 OF?r City of Lake Elsinore Community Development Department Planning Division '-" EXHIBIT "A" Scope of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development as set forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: 1. Review and process Planning, Land Use, and Zoning applications as assigned by the Planning Manager and/or Director of Community Development based on the level of complexity and expertise possessed by the Consultant which may include but is not limited to Annexations, Design Review(s), Tentative Tract & Parcel "-'" Maps (subdivisions), Specific Plans, Specific Plan Amendments, Zoning Code Amendments, Zone Changes, General Plan Amendments, Variances, Conditional Use Permits and extensions of time for the above applications. 2. Prepare or cause to be prepared by processing, managing, and monitoring the preparation. of any environmental clearance document pursuant to the California Environmental Quality Act and related to the processing of any of the above. referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respond to inquiries, both orally and in writing, interpret planning policies, state laws, and local ordinances, explains division aIld department procedures. 5. Perform field inspections, and attend conferences and meetings or other public functions as an ex-officio member of city's staff. 6. If determined necessary, provide assistance at the public counter. ...., U:\avilla\miscfile\Exhibit A Planning Consulting Services.doc July 2Q, 2004 AGENDA ITEM NO. PAGE ;)- b IS OF3~ PERSONAL SERVICES CONTRACT t********************************************************************************************************** TIllS AGREEMENT made and enteredinto on June 27 .20-06.-. by the City of Lake Elsinore, a municipal :o~on, party of the first part, hereinafter referred to as CITY, and :::ONTRACTOR Wendy Worthy FOR USE BY CITY MANAGER'S OFFICE ONLY ;.S/EJ.N. NO. 494-74-8620 Vendor # Amount $ Acct. Purchase Order # Obj. Code dAILING ADDRESS 7895. Lake Andrita Ave ~ITY, STATE, ZIP SandDieKo,Ca 92119 'HONE NUMBER ()19 ) 890-2762 City Division ACCT. To Be Chgd. Document Preparer Date Ext. or Telephone # ,arty of the second part, hereinafter referred to as CONTRACTOR. ~ONiRACTPERIOD: From Julv 1 ,2006 TO June 30 20DJ WITNESSETH: That in.consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACfOR f all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other elated expenses; See ~el ov ($) 'ask Statement: (please desctibe the responsibilities of the contractor in one or two sentences or attach a Scope of Services escription as Exhibit "A".) A rate of $75.00 per hour and $0.405. per mile (for mileage incurred on City business), based on providinR: UJ)to 40 hours. per week. Addi I:i ona 1 hOllr~. may np ::nr:li 1 :In 1". ..nd n~c~ssary to e~ out project loads contingent. upon approval of the Director of Community Develop.ent. ....1.. ~n~ prn"P9sing willbegi.R ~gR:;pre6e1KatieB of a timt:sh:eL~ (format.,as I"Lvv.ldedc1Ud ...pproved by the City), and invoice for services rendered. Task statement: (please see attached scope of SeLv.l':'cb dc~tL1.pLluu cUi exh.tbll: "A"). TERMS AND CONDITIONS INDEPENDENT CONTRACTOR - It is understood tluit CONTRACTOR. in the performance of the work and services agreed to be perfonned, shall act as and be JP independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any such rights... -HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay tluit may be caused by or result from any act, omission, or neglect of CONTRACTOR. NON-ASSIGNMENT -It is IUIderstood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/sbe is not an employee of the City of Lake Elsinore. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees tluit books, records, documents, accounting procedures, practices, or any other items of the seTVice provider relCM!J1t to the agreement are subject to examination by the City of Lake Elsinore. TERMINATION - This agreement may be terminated by CITY immediately for cause or by either party without cause upon thirty (30) days' written notice of tennination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. DOCUMI:NTS - All plans, studies, documents and other writin~ prepared by and for CONTRACTOR in the course of implementing this agreement. except working notepad intcmal documents, shalf become the property of CITY upon payment to CONTRACTOR for such work, and CITY sball have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. .,...... (Signatures follow on next page) AGENDA ITEM NO. PAGE ;;7 13 OF '3;;.-- ********.************************************************************************************************** RETURN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE. CA 92530 ATfN: CITY MANAGER "will IN WITNEss WHEREOF, the parties hereto have hereunto set their hand to this contract this day of . 20 CITY OF LAKE ELSINORE CONTRACTOR City Manager (Contractor Must Sign Here) Department Director ********...................*......****.**.**.***.***........******.**.*.............**.....*******.*****..* '-" NON-DISCRlMINA nON CLAUSE The City ofLakc Elsinore. in compliance with Title VI and Title VB of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section S04 of the Rehabilitation Ar:t of t 973. Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and rcguJatioos. does DOt discriminate on the basis of race, color. ctlmicity, national origin, sex. age, religion, disability. political affiliation, or status as a veteran. in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. '-till AGENDA ITEM NO. 1[3 PACE :J-::/ OF, 3;r' ,-... . City of Lake Elsinore Community Development Department Planning Division EXHIBIT "A" Scope of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development ~sset forth below. It is understood based on the representations m~deby the Consultant that he/sheis specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it. is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: . 1. Review and process Planning, Land Use, and Zoning applications as assigned by the PlaIining Manager and/or Director of Community Development based on." the level of complexity and expertise possessed by the Consultant which may include '-"'but is not Iimite4 to Annexations, Design Review(s), Tentative Tract & Parcel ~aps (subdivisions), Specific Plans, Specific Plan Amendments, Zo~ing Code Amendments, Zone Changes, General Plan Amendments, Variances, Conditional . Use Permits and extensions of time for the above applications. 2. Prepare or cause to be prepa!ed by processing, managing, and monitoring the preparation of any environmental clearance document, pursuant to the California Environmental Quality Act and related to the processing of any of the above referenced applications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respond to inquiries, both orally and in writing, interpret planning policies, state laws, and local ordinances, explains division and department procedures. 5. Perform field in~pections, and attend conferences and meetings or other public functions as an ex-officio member of city's staff. ,-... 6. If determined necessary, provide assistance at the public counter. U:\aViI1a\misdile\Exhibit A Planning Consulting Services.doc . July 20. 2004 ACENDA ITEM NO. /3 PAGE;J!1 Of ,~;)-- :...~ . PtRSONAL SERVICES CONTRACT .********************************************************************************************************** TIIIS AGREEMENf made and entered into on M,.rl-h ~8 . 20~. by the City of Lake Elsinore, a municipal :orporation, party of the first part, hereinafter referred to as CITY, and ~ONTRAerOR Wendy WOTt:hy ......, FOR USE BY CITY MANAGER'S OFFICE ONLY :.SIE.I.N. NO. 494-74-8620 Vendor # Acct. Purchase Order # Amount $ ,fAILING ADDRESS 7895, Lake Andrita Ave Obj. Code ~ITY, STATE, ZIP SandDieKo, Ca 92119 HONENUMBER~19 ) 890-2762 City Division ACer. To Be Chgd. Document Preparer Date En. or Telephone # arty of the second part, hereinafter referred to as CONTRAerOR. ONfRAer PERIOD: From Harch 28 , 2006 TO June 30 . 20 06 WITNESSETII: That inconsideration of the covenants and agreements herein expressed and of the faithful performance by CONTRAerOR f all covenants and agreements, the CITY agrees to pay CONTRAerOR the following amount which includes travel and all other :lated expenses; ~e~~~ ~) ask Statement (please describe the responsibilities of the contractor in one or two sentences or attach a Scope of Services ~s~tion as Exhibit'"A".) A rate of $75.00 per hour and $0.405. per aile (for mi1eage incurred on City business), based .on providinKuPto 40 hours per week~ Addit:ioo~l hnI1T~.may h.. ,.v,.il"b]~ and recessary to earry out project loads contingent upon approval of the Director of CoDimunity Develop.ent. Pay-Of" prn""Q~i"'8 w.illbegia u,p9il::preseBt:a1deB af a U:lIlt:sltae.t: (fontat:':45 provide:dc:uad dpprov'frtf' by the City), and invoice for services rendered. Task statement: (please see attached Scope of 5eLv1.<.o::b do::~b.ipllull as ~.tb1.1: "AM). TERMS AND CONDITIONS INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR. in the performance of the work and services agreed to be perfonned, shalt act as and be.!!P independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retiremi:nt benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any such rights... . HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission, or neglect of CONTRACTOR. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City oflake Elsinore. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. AUDIT CLAUSE - In accepting this agreement with the City of lake Elsinore, CONTRACTOR agrees that books, records, documents, accounting procedures, practices, or any other items of the service provider releYl!nt to the agreement are subject to examination by the City of lake Elsinore. TERMINATION - This agreement may be terminated by CITY inunediately for cause or by either party without cause upon thirty (30) days' written notice of termination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad internal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. (Signatures follow on next page) ....., ACENDA ITEM NO. PAGE .)D 13 OF 3 'J.-- *****.******.****......**.***..*******.***********************************************************.*.**...* r- m..JRN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 AnN: CITY MANAGER IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of .20 CITY OF LAKE ELSINORE CONTRACfOR City Manager (Contractor Must Sign Here) Deparbnent Director ~****.*.**********************************.************************************************************** NON-DISCRlMINA nON CLAUSE The City of Lake Elsinore, in compliance with Title VI and TItle VB of the Civil Rights Act of 1964. TItle IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973. Section 402 of the Readjustment Assistance Act of 1914, Americans With Disabilities Act and othec Fcderallaws and reguIatioos and California law and regulations, does not discriminate on the basis ofrace, color, etJmicity, national origin, sex. age, n:ligioo, disability, political affiliation, or status as a veteran. in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. ,,-.. AGENDA ITEM NO. PAGE 3 I /3 OF "r ,City of Lake Elsinore Community Development Department Planning Division ""'" EXHIBIT "A" Scope of Services City Planning Consultant Services Consultant agrees to provide professional urban planning and related consulting services for the City of Lake Elsinore's Community Development Department as directed by the Planning Manager and/or the Director of Community Development asset forth below. It is understood based on the representations made by the Consultant that helshe'is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it, is understood that the cOilsultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: 1. Review and process Planning, Land Use, and Zoning applications as assigned by the Planning Manager and/or Director of Community Development based onthe level of complexity and expertise possessed by the Consultant which may include ,but is not limited to Annexations, Design Review(s), Tentative Tract & Parcel Maps (subdivisions), Specific Plans, Specific Plan Amendments, Zoning Code ~endments, Zone Changes, General Plan Amendments, Variances, Conditional ' Use Permits and extensions of time for the above applications. """ 2. Prepare or cause to be prepa.red by processing, managing, and monitoring the preparation of any environmental clearance document'pursuant to',the California' Environmental Quality Act and related to the processing of any of the above, referenced appiications. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Planning Manager, Director of Community Development, Planning Commission and City Council. 4. Respo~d to, inquiries, both orally and in writing, intetpret plamiing policies, state laws, and local ordinances, explains division and department procedures. 5. Perform field inspections" and attend conferences and meetings or other public functions as an ex-officio member of city's staff. 6. If determined necessary, provide assistance at the public counter. "" U:\aVi11a\miscfiJe\Exbibil A Planning Consulting Services,doc July 20. 2004 AGENDA ITEM, NO. /3,' '- -- PAGE ,3.).---~' ,- CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: FINAL MAP NO. 31792 APPLICANT: LENNAR HOMES REQUEST Approval of Final Map No. 31792 which consists. of approximately 59.41 acres that are being subdivided into one hundred and ninety (190) residential lots, seventeen (17) lettered lots. ,- LOCATION The proposed Final Map is located on the southwest side of Rosetta Canyon Drive southeast of Central Avenue (State Route 74) in the Ramsgate Specific Plan Area. BACKGROUND At their regularly scheduled meeting of September 28, 2004 the City Council approved Tentative Tract Map No. 31792. DISCUSSION Staff has reviewed the Final Map and finds that it substantialbr conforms to Tentative Tract Map No. 31792 and that all Conditions of Approval relative to the Final Map approval have been completed. ,- AOEKJA ITEM NO. ] L} "" PAGE I OF 3 REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 ......, FISCAL IMPACT None. RECOMMENDA TION 1. Staff Recommends the following: . That the City Council Approve Final Map No. 31792 subject to the City Engineer's acceptance as being true and correct; and . That the City Council authorize the City Clerk to accept all dedications, sign the map and arrange for the recordation; and PREPARED BY: KEN A. SEUMALO, CITY ENGINEER rJ6 '--' APPROVED FOR AGENDA BY: Attachment: Vicinity Map ......., AGENDA ITEM NO. J LJ ". PAOE ~ OF 3 /"'" VICINITY MAP FINAL MAP NO. 31792 ----1 /"'" / // ,/ I"~ ~ ., , / \ X .__J ./" ,/ Y/ ',< /' / / ! I I I 0 ....~_._.~_......J._..O:::. . /' I '"", /'\ 0 'y ) Z , <( "! Cl: o -l o / /' ~ // " / /'/ ,/ I __L___ I I I .. ~-'---J I "n~ --t"--- ---" I I I I ,- I I ! r-- CITY COUNCIL i ! ..._ ..1_.__ AGENDA ITEM NO. ] LJ PAGE 3 OF 3 ~ CITY OF LAKE ELSINORE REPORT TO THE CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DA TE: JUNE 27,2006 SUBJECT: PROFESSIONAL ENGINEERING SERVICES - DAVID SOLOMON BACKGROUND Mr. Solomon has been involved in processing projects and implementing the Capital Improvement Program with the City of Lake Elsinore since 2004. He brings over 20-years of Engineering experience to this position, most of which was in the public sector. ---, DISCUSSION As a matter of routine, the Engineering Division for the City conducts an informal evaluation of a contract employee prior to the contract renewal. Mr. Solomon has worked well with the general public, contractors and City Staff. As the 2005-2006 contract will expire at the end of June, the Engineering Division is supporting the renewal of his contract. FISCAL IMPACT No direct fiscal impact to the City's General Fund will result from this contract. Projects to which Mr. Solomon will be assigned are budgeted through the Capital Improvement Program projects themselves under "Administration". ~ AGENDA ITEM NO. IS PAGE-L OF S REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 RECOMMENDATION ....."" It is recommended that the City Council authorize the City Manager to enter into contract with the above consultant to provideengineering services on an as needed basis. ATTACHMENTS Personal Services Contract: . David Solomon PREPARED BY: Ken Seumalo, City Engineer~ APPROVED FOR AGENDA BY: ....."" ~ U:\engr\City Council Reports\06-27-06\Professional Engineering Services.Solomon.doc /5 AGENDA ITEM NO. " PAOE?- OF r w" CITY OF LAKE ELSINORE PERSONAL SERVICES CONTRACT *********************************************************************************************************** /""""'- THIS AGREEMENT made and entered into on ,20_. by the City of Lake Elsinore, a municipal . poration, party of the fIrst part, hereinafter referred to as CITY, and CONTRACTOR David Solomon FOR USE BY THE ADMINISTRATIVE SERVICES DEPT. S.SIE.I.N. NO. Vendor # MAILING ADDRESS Purchase Order # CITY, STATE, ZIP Community Development Department, Engineering Division PHONE NUMBER ( ) Document Preparer: Ken Seumalo, City Engineer Date 06/05/06 Ext. or Telephone # 951/674-3124 x244 party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From: July 01, 2006 - TO: June 30,2007. WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other related expenses; A rate of $71.25 per hour. Based on providing up to 40 hours per week. Additional hours may be available contingent upon approval of the Director of Community Development Department. Payment processing will begin upon presentation of a time sheet (format as provided and approved by City), and invoice for services rendered. Task Statement: (Please see attached Scope of Services Ascription as Exhibit "A".) EXHIBIT "A" ATTACHED I. TERMS AND CONDITIONS INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR, in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any such rights.. 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission, or neglect of CONTRACTOR. 3. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books, records, documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINATION - This agreement may be terminated by CITY immediately for any cause or by either party without cause upon thirty (30) days' written notice oftermination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. ",.-. DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad internal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. AGENDA ITEM NO. PAGE.3 OF }5 ~- (Signatures follow on next page) *********************************************************************************************************** RETURN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 A TIN: CITY MANAGER ......." IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of ,20_ CITY OF LAKE ELSINORE CONTRACTOR City Manager Contractor Director of Community Development Department *********************************************************************************************************** ......" NON-DISCRIMINATION CLAUSE The City of Lake Elsinore, in compliance with Title VI and Title VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on the basis of race, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. '-" AGENDA ITEM NO. PAGE 1- OF /5 s- "....-.- CITY OF LAKE ELSINORE COMMUNITY DEVELOPMENT DEPARTMENT ENGINEERING DIVISION Scope of Services - Engineering Consultant Consultant agrees to provide project management and related consulting services for the City of Lake Elsinore Community Development Department as directed by the Director of Community Development and/or City Engineer as set forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: 1. Review and process Engineering design for streets, storm drains or public works projects as assigned by the Director of Community Development and/or City Engineer. ",.--. 2. Prepare or cause to be prepared by processing, managing, and monitoring the preparation of any County State or Federal documents related to project development or processing. 3. Prepare interoffice memoranda, prepare routine staff reports and recommendations to the Director of Community Development and/or City Engineer. 4. Respond to inquiries, both orally and in writing, interpret Engineering policies, state laws, and local ordinances, explain division and department procedures. 5. Perform field inspections, and attend meetings or other public functions as an ex-officio member of City Staff. 6. Consultant shall provide his/her own automobile and pager/cell phone. 7. If determined necessary, provide assistance at the public counter. ,..... AGENDA ITEM NO. J l) PAGE S- Of ) ,......., CITY OF LAKE ELSINORE REPORT TO THE CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: ENGINEERING INSPECTION SERVICES - BOB STOVER BACKGROUND Mr. Stover has been involved with private development and public works inspections with the City of Lake Elsinore since 1994. He brings over 20- years of inspection field experience to this position from both the public and . private sector. ,......., DISCUSSION As a matter of routine, the Engineering Division for the City conducts an informal evaluation of a contract employee prior to the contract renewal. Mr. Stover has worked well with the general public, contractors and City Staff. As the 2005-2006 contract will expire at the end of June, the Engineering Division is in support of the renewal of his contract. FISCAL IMPACT No direct fiscal impact to the City's General Fund will result from this contract. Projects to which Mr. Stover will be assigned are a function of the private development cost recovery system or they are budgeted through the Capital Improvement Program projects themselves under "Administration". ,......., AGeNDA ITEM NO. J 6 PAOE I Of S- REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 RECOMMENDA TION .~ It is recommended that the City Council authorize the City Manager to enter into contract with the above consultant to provile inspection services on an as needed basis. ATTACHMENTS Personal Services Contract: . Bob Stover PREPARED BY: Ken Seumalo, City Engineer '{Jb APPROVED FOR AGENDA BY: ......, ......, AGENDA ITEM NO..J6 " . PAGE 2..- OF S- CITY OF LAKE ELSINORE PERSONAL SERVICES CONTRACT *********************************************************************************************************** r-- TIllS AGREEMENT made and entered into on ,20_. by the City of Lake Elsinore, a municipal ;poration, party of the frrst part, hereinafter referred to as CITY, and CONTRACTOR Bob Stover, Incorp FOR USE BY TIlE ADMINISTRATIVE SERVICES DEPT. S.S/E.I.N. NO. Vendor # MAILING ADDRESS Purchase Order # CITY, STATE, ZIP Community Development Department, Engineering Division PHONE NUMBER ( ) Document Preparer: Ken Seumalo, City Engineer Date 06/05/06 Ext. or Telephone # 951/674-3124 x244 party of the second part, hereinafter referred to as CONTRACTOR. CONTRACT PERIOD: From: July 01, 2006 - TO: June 30, 2007. WITNESSETH: That in consideration of the covenants and agreements herein expressed and of the faithful performance by CONTRACTOR of all covenants and agreements, the CITY agrees to pay CONTRACTOR the following amount which includes travel and all other related expenses; A rate of $57.5 per hour. Based on providing up to 40 hours per week. Additional hours may be available contingent upon approval of the Director of Community Development Department. Payment processing will begin upon presentation of a time sheet (format as provided and approved by City), and invoice for services rendered. Task Statement: (please see attached Scope of Services Ascription as Exhibit "A".) EXHIBIT "A" ATTACHED TERMS AND CONDITIONS 1. INDEPENDENT CONTRACTOR - It is understood that CONTRACTOR, in the performance of the work and services agreed to be performed, shall act as and be an independent contractor and shall not act as an agent or employee of CITY. CONTRACTOR shall obtain no rights to retirement benefits or other benefits which accrue to CITY's employees, and CONTRACTOR hereby expressly waives any claim it may have to any such rights.. 2. HOLD HARMLESS - CONTRACTOR shall be responsible for and hold the CITY harmless from all damage to property, injury to persons, and loss, expense, inconvenience, and delay that may be caused by or result from any act, omission, or neglect of CONTRACTOR. 3. NON-ASSIGNMENT - It is understood and agreed that CONTRACTOR shall not assign, sublet, or transfer any interest in this agreement without written consent of CITY. 4. CERTIFICATION OF EMPLOYMENT STATUS - By signing this agreement, CONTRACTOR certifies that he/she is not an employee of the City of Lake Elsinore. 5. APPLICABLE LAW - This agreement shall be governed by and construed in accordance with the laws of the State of California. 6. AUDIT CLAUSE - In accepting this agreement with the City of Lake Elsinore, CONTRACTOR agrees that books, records, documents, accounting procedures, practices, or any other items of the service provider relevant to the agreement are subject to examination by the City of Lake Elsinore. 7. TERMINATION - This agreement may be terminated by CITY immediately for any cause or by either party without cause upon thirty (30) days' written notice oftermination. Upon termination, CONTRACTOR shall be entitled to compensation for services performed up to the effective date of termination. r-- DOCUMENTS - All plans, studies, documents and other writings prepared by and for CONTRACTOR in the course of implementing this agreement, except working notepad internal documents, shall become the property of CITY upon payment to CONTRACTOR for such work, and CITY shall have the sole right to use such materials in its discretion without further compensation to CONTRACTOR or to any other party. (Signatures follow on next page) AGENDA ITEM NO. PAOE 3 )6 OF 5" *********************************************************************************************************** RETURN TO: CITY OF LAKE ELSINORE 130 S. MAIN STREET LAKE ELSINORE, CA 92530 ATTN: CITY MANAGER "'-' IN WITNESS WHEREOF, the parties hereto have hereunto set their hand to this contract this day of ,20______ CITY OF LAKE ELSINORE CONTRACTOR . City Manager Contractor Director of Community Development Department **********************************************************************************************************~ ......, NON-DISCRIMINATION CLAUSE The City of Lake Elsinore, in compliance with Title VI and Title VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, Section 504 of the Rehabilitation Act of 1973, Section 402 of the Readjustment Assistance Act of 1974, Americans With Disabilities Act and other Federal laws and regulations and California law and regulations, does not discriminate on the basis of race, color, ethnicity, national origin, sex, age, religion, disability, political affiliation, or status as a veteran in any of its policies, practices, or procedures. This includes but is not limited to employment and the provision of municipal services. AGeNDA ITEM NO. PAGE 1- OF ""-'" J6 s- ,...... CITY OF LAKE ELSINORE COMMUNITY DEVELOPMENT DEPARTMENT ENGINEERING DIVISION Scope of Services - Engineering Inspection Consultant Consultant agrees to provide private development, public works project inspections and related services for the City of Lake Elsinore Community Development Department as directed by the Director of Community Development and/or City Engineer as set forth below. It is understood based on the representations made by the Consultant that he/she is specially trained, experienced, and competent to perform the special services which will be required by this scope of services. In addition, it is understood that the consultant possesses the skill, experience, ability, background, certification and knowledge to provide the services and the terms and conditions described herein: 1. Provide inspection services for streets, storm drains, parks or other projects related to both private development and public works as assigned by the Director of Community Development and/or City Engineer. ~ 2. Maintain daily logs of all construction activities both private and public. All logs shall be kept in chronological order in the Engineering Division or other designated location for future reference. 3. Prepare interoffice memoranda, project reports and recommendations to the Director of Community Development and/or City Engineer as needed. 4. Respond to inquiries, both orally and in writing, interpret construction policies, state laws, and local ordinances, explain division and department procedures. 5. Perform field inspections, and attend meetings or other public functions as an ex-officio member of City Staff. 6. Consultant shall provide his/her own automobile and pager/cell phone. 7. Ensure compliance to all permits related to the functions of the Engineering Division. ,...... AGeNDA ITEM NO. -I {) PAGE S- OF 5- ,-. CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DA TE: JUNE 27, 2006 SUBJECT: AMENDMENT TO CITY'S TREE MAINTENANCE AGREEMENT WITH WEST COAST ARBORIST BACKGROUND On March 23,2004 the City Council authorized staff to execute a 10 year extension agreement with West Coast Arborist (WCA) for tree maintenance services. The agreement locked in tree maintenance services including trimming and removals at existing prices until the year 2014. ,..-- DISCUSSION Our existing agreement with WCA contains line items for compensation for specific work types. However, at times the City may require extraordinary services not specified in the original agreement. Therefore, staff would like to amend the agreement to allow for the performance of additional work items. These items will also be "locked in" at the rates quoted below for the balance of the agreements. Amendments to be added are as follows: 15. Palm Tree Transplanting - Transplanting crew will consist of three (3) men, equipment and all necessary hand tools. Billed at $100.40 per hour 16. 30 Ton Crane with Operator - Billed at $100.40 per hour 17. 95 Foot Aerial Tower with Operator - Billed at $100.40 per hour ,,-... 18. Other Services - Services not specified in the agreement to be billed at time and materials cost and will be negotiated and agreed upon prior to start of work. AGENDA ITEM NO. 17 P~.'"": I nr. 13 K-.J. ".'----1. """, ~ l - I REPORT TO CITY COUNCIL JUNE 27,2006 PAGE 2 ....., FISCAL IMPACT No additional fiscal impact would occur over and above current budget allocations RECOMMENDATION Staff recommends that the City Council authorize the City Manager to execute an amendment to the existing agreement with West Coast Arborist to include the four (4) amendments listed in this re -- ,.- MANAGER APPROVED BY: OR OF COMMUNITY SERVICES APPROVED FOR AGENDA BY: ....., ....., ACENDA ITEM NO. 1'7 PA." ,- /) ,'" r L3-' ~~',," c:x.-. ,..,,:'~ ~ -_.---~_... --,-. - Thomas Buckley Mayor Genie Kelley Mayor Pro Tern . Daryl Hickman Councilman Robert E. Magee Councilman Robert Schiffner Councilman City of 1!akE Ef1-ino7-E "cDne {!It!/1- got d1I{o'teJl April 15, 2004 Mr. Frank Quinn West Coast Arborists 2200 E. Via Burton Street Anaheim, CA 92806 Dear Mr. Quinn: Enclosed for your use is a copy of the fully executed Agreement for Maintenance Services, in the City of Lake Elsinore. Richard:\\'.atenpaugh City Manager ,,-.., If you have any questions, or need additional information, please don't hesitate to contact me. 2riL VICKI KA~' CITY CLERK! HUMAN RESOURCES DIRECTOR CITY OF LAKE ELSINORE Enclosure - "~~i~P'arKs:)~~:Sp$-eiManager ~ ".-- 130 ~outh o11ain ~bl.ut, ~akE. Ef~ino'l.E.1 (lei!- 92530 ClefephonE. (909) 674-3124 'Jax (909) 674-2392 www.fake~c,f~ino'tE..O'l.9 " .... AGENDA ITEM NO. / PAC;:: (3 Or- 11 fO) rg(grgDWrg ~ IIll MAR 30.2004 LU/ CITY CLERKS OFFICr THE CITY OF LAKE ELSINORE, hereinafter referred to as CITY, AND AGREEMENT FOR MAINTENANCE SERVICES West Coast Arborist, hereinafter referred to as CONTRACTOR,. hereby agree as follows: 1. PROJECT: The CONTRACTOR shall perform services in the nature of Tree maintenance within the City of Lake Elsinore. 2. SCOPE OF SERVICES: The CONTRACTOR shall furnish own toolsl equipment, and vehicle at his own expense. 3 . TIME FOR PERFORMANCE: The CONTRACTOR shall commence performance of service forthwith .upon the execution of this Agreement and upon written direction to commence.from the City. 4. TERM OF AGREEMENT: This Agreement shall be for a ......., term of one (1) year commencing from the date of execution, and can be extendable in one (1) year increments, with approval of t~e City ,Manager. 5. COMPENSATION: Compensation shall be as outlined in Item F of the "Proposal for Annual Tree Maintenance" submitted to the City of Lake Elsinore on May 31,2000. 6. LICENSES: The CONTRACTOR, its employees, agents, contractors, and subcontractors shall maintain professional licenses required by the laws of the State of California, and a City Business License at all times while performing services under the Agreement~ '-' . AGENDA ITEM NO. I ~ _-... PACCE-+-OF ./~ __ /'"" /'"" ,..-- , . 7'. PERMITS AND RIGHTS OF ENTRY: The CITY will provide. any and all necessary permit and rights of entry as required to .perform the proposed services. The CONTRACTOR will prosecute the work in a manner to minimize inconvenience and any possible hazard to the City. 8. WORKERS COMPENSATION INSURANCE: The CONTRACTOR certifies that he is aware of the laws of the State of California requiring employers to be insured against liability for Workers Compensation and shall comply with such laws during the term of this Agreement. 9. CONTRACTOR'~ LIABILITY: The CONTRACTOR shall indemnify and hold the CITY, its officers, employees, and agents free and harmless from any liability whatsoever, including wrongful death, based or asserted upon act or omission of the CONTRAC~R, its employees, subcontractors, and agents relating to or in anyway connected wi th the accomplishment of the work or performance of service under this Agreement. As part of the foregoing indenmi ty ,the CONTRACTOR agrees to protect and defend at his own expense, including attorney fees, the CITY, its offices, agents, and employees in any legal action based upon any such alleged acts or omission. ACEtJDA ITEM.NO. PAC';; /) 17 :Of {0 PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE The CONTRACTOR shall furnish to the CITY and maintain during. the life of the contract a public l~abili ty policy in which the CITY is named as an addi tional insured. The policy shall also hold harmless the CITY, its officers, and employees while acting within the scope of their duties, against all claims arising out of or in connection with the work to be performed. The policy shall provide for not less than the following amounts: Insurance Coverage Requirements Limit Requirements Comprehensive General Liability Comprehensive Automobile Liability Contractual Liability $ 1,000,000 $ 1,000,000 $ 1,000,000 CONTRACTOR shall not commence work under this contract until all required insurance has been approved by the CITY. CONTRACTOR shall not allow any subcontractor to commence work until all similar required insurance has been approved by the CITY. Insurance policies carried by the CONTRACTOR and Subcontractors shall bear an endorsement or shall have attached a rider providing that in the event of cancellation or proposed cancellation of such policies for any reason whatsoever, the CITY shall be ---' ---' notified by registered mail. ~ AGENDA ITEM NO. . PACE ~! 17 OF (3 " ~ 10. WORK PRODUCT: Work Shall be considered complete upon inspection and approval of the Public Works Department. . 11. TERMINATION: This Agreement may be terminated by ei ther the CONTRACTOR or the CITY upon thirty (30) day written notice to other party in the event of substantial failure of performance by the other party, or in the event the CITY shall elect to abandon or indefinitely postpone the project and gives notice of termination. The CITY shall make payment for all services having been performed as of the date of written notice pursuant to the Compensation Schedule in Section r-- Five. 12 . INDEPENDENT CONTRACTOR: CONTRACTOR .and his agents, servants, and employees shall act at all times in an. independent capacity during the term of this Agreement and in the performance of the services to be rendered, hereunder , and shall not act as, and shall not be, and shall not in any manner be considered to be agents, officers, or employees of the CITY. 13. EMERGENCY SERVICES: The CONTRACTOR shall provide the CITY with at least two (2) forms of contact that can be called by CITY representatives when emergency maintenance conditions occur during hours when the ,"-" CONTRACTOR'S normal work force is not present. ACENDA ITEM NO.~ PACE 7 [ OF I ~ The CITY shall call for such assistance only in the event of a. genuine and substantial emergency. The CONTRACTOR shall provide a maximum of one-hour personnel response time upon notification. 14. PERSONNEL ATTIRE AND EQUIPMENT: The CONTRACTOR shall require each of his employees to adhere tb basic Public Works standards of working attire. These are basically uniforms, proper shoes and other gear required by State Safety Regulations, and proper wearing of.the clothing. Shirts shall be worn at all times, buttoned and tucked in. CONTRACTOR shall display the name of his firm ort any vehicles used by the CONTRACTOR 'S employees to carty supplies and equipment. The firm name shall be in letters large enough to be easily legible. from a distance to one-hundred (100) feet" In addition, CONTRACTOR shall display directly below vehicle's company identification, a magnetic sticker with the following message: nUnder contract with the City of Lake Elsinore" . The CONTRACTOR is responsible fOr the purchase of required number of magnetic stickers. The City will provide a sample sticker to CONTRACTOR. ACENDA ITEM NO. PACiE r: ....., ....., ......., : /7 OF J 3 _ ~ 17. NON-DISCRIMINATION: CONTRACTOR shall not discriminate at its recruiting, hiring, promotion, demotion,. or termination practices on the basis of race, religious creed, color, national origin, ancestry, physical handicap, medical condition, marital status or sex in the performance of this contract, and, to the extent they shall be found to be applicable hereto, shall comply with the provisions of the California Fair Employment Practices Act (commencing with Section 1410 of the Labor Code), and the Federal Civil Rights Act of 1964 (P.L. 88-352). ""..-- Manager .3 - ~O -' c> tf Date Contractor 3-~()-()Y Date ~ AGENDA ITEM NO. PACf ~ . OF CITY OF LAKE ELSINORE CO~TRACTOR'S ,CERTIFICATE REGARDING WORKER'S COMPENSATION INSURANCE ......, Section 3700 of the Labor Code provides in part as follows: "Every employer except the State shall secure the payment of compensation in one or more of the following ways: A) By being insured compensation with authorized to write state. against liability to one or more insurers compensation insurance in pay duly this B) By securing from the Director of Industrial Relations a certificate of consent to self-insure, which may be given upon furnishing proof satisfactory to the Director of Industrial Relations of ability ~o self- insure, and to pay any compensation that may become due to his employees;.." The undersigned is aware of the provisions of Section 3700 of the Labor Code whiGh require every employer to be ,insured against liability for worker's compensation or to undertake self~insurance in accordance with the provisions of that code, and will comply wi th such provisions before commencing the perf 0=:: the?:J..:hi~::;::t. DATE. ~ _ JO-o'f PRINTED NAME ~~ Qv\ ^J~ TITLE hl-6~ M;f},V ,{J-t;-PrL- COMPANY --.lAle~ (' ~1as..Y- tfJrt-htl/l/sk " ;rA/C-c / ADDRESS ;}.-:rOO F~ Ih/a ~dG-~)^) s.tf'_ AtJ~'n ,~fM C--Id . '9 J--~cJ b '" I ....." (In accordance, with Article 5, cbmmencing at Section 1860, Chapter 1, Part 7, Division' 2 of the Labor, Code, the above Certificate must be signed by the Contractor and filed with the awarding body prior to the Contractor performing any work under this contract.) ""'" AGENDA ITEM NO, 17 PACE fr>,. OF t3 .,__ ,...... CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL .TO: MAYOR AND CITY COUNCIL FROM: RICHARD J. WATENPAUGH,.CITY MANAGER DATE: March 23, 2004 SUBJECT: Ten Year Extension for Tree Trimming Agreement BACKGROUND The City Council is being asked to consider a ten- year extension to the City's Tree Maintenance Agreement with West Coast Arborist (WCA) who has been the City's contractor for the last five years. The existing Agreement is set to expire on June 30, 2004. WCA approached the City with a request to extend the existing agreement for a ten-year term on the same terms. All existing financial provisions in the agreement would remain unchanged. Therefore, if approved, the agreementwithWCA would be extended through June 30, 2014, with no cost increase. r-'J)ISCUSSION A ten year extension would lock in tree maintenance services (trimming and removals) at existing prices, which are very competitive. The current Agreement includes a provision. which allows either party to terminate the Agreement upon a 30- day's written notice, with or without cause. Should the City wish, at anytime in the future, it can solicit tree maintenance cost proposals 'and select a new contractor. There appears to be no risk to the City fot extending the Agreement's term. The benefit includes maintaining the low, 'competitive prices we now have. Assuming the CUrrent CPI over the next ten years, the City would save $17,348.00 dollars. West Coast Arborist's performance has been very good.. They have responded quicIdy and courteously to staff and resident inquires and work orders. They have prepared a City- wide inventory of all City maintained trees. The data is kept current by both WCA and City Staffon a monthly basis. WCA also has several Certified Arborists on staff wilting to assist.the City with tree evaluations at no additional cost. FISCAL IMPACT r.. . No additional fiscal impact would occur. (See list attached for service pricing) over and above curreht budget allocations. AQENOA ~TEM NO.L 7. -" PAGE.iL'OF--13- IN WITNESS WHEREOF> .the 'PartiIeS have executed this Amenchne:qt. as of the . . . respective dates set forthbelow. ,....., ."CITY" CITY OF LAKE ELSlNORJ!, a municipal . . . corPoration' Dated: March ~ 2004 . By: ATTEST: "City Manager VICKIKASAD, CITY CLERK By: VICKI KASAD APPROVED AS TO FORM: VAN BLARCOM, LEIDOLD, McCLENDON & MANN, P;C. City Attorney ",' ~y: BARBARA ZEID LEIDOLD . "CONTRACTOR" WEST-COAST ARBORIST Dated: March ---> 2004 By: Its: '" Page 2 of2 '7 AGENDA ITEM NO. .1 . ". ru r-.- I c9.. r'lE= I ~ / :' ........ , . -' r-- City :of La.keEls~n()re: . Fiscal Year 200212003 proposed CPlprice adju~tment Proposed .:2001-2002. 2002-2003 \i . Prices Pri~e$ 1 Grid Trimming Each ," $ 39~90 $ 41.00 2 service Request Each $ 39.90 $ 41.00 3 . Tree Raising each $ 20.00. $ 20.60 . 4 Tree and Stump Remo~al Inch $ 13.30 $ 13.70 5- Tree Only Removal. Inch '$' 9.30 $ 9.60 6 Stump Only Removal Inch $ 4.10 $ 4.20 7 Plant 15 gal .tree wlo HB . Each $. 81.90 $ - 84.20. 8 Plant 15 gal tree With RB Each $ 97.30 $ 100.00 9 Plant 24" Box tree wlo RB Each $ 163.80 $ 1()8.~0 10 Plant 24~ Box tree with HB Each $. 199.70 $ 205;30 11 Root Pll!nihg' FQot $ 7.20 "$ 7.40- 12 Crew Rental- 3 man crew Hour $ 97.70 $ 100.40 13 Emergency Crew Rental Hour. $ 204.80 $ .210.50 ". r--14 Watering. . \,..; The 200212003 price refJectsa 2.8% and has. been round to the nearest tenth of a dollar. The increase is derived from the Consumer Price Index for Urban Consumers based for Los Ang.el~s-River~ide-Orange County areas. .'.~ 1"- / ) AGENDA ITEM NO~. I ) -. PAGE--1.3.. OF I ~ ,..- CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: CHANGE PROCEEDINGS FOR CFD 2004-3 (ROSETTA CANYON) BACKGROUND On December 28, 2004, the City adopted a resolution of intention to form Community Facilities District (CFD) No. 2004-3 (Rosetta Canyon) and a resolution of intention to incur bonded indebtedness to finance public facilities. ,..- On March 22, 2005, the City held a noticed public hearing, heard testimony pertaining to the formation of the CFD, adopted Resolution No. 2005-38 establishing the CFD and adopted Resolution No. 2005-39 which called an election within the CFD. A landowner election was held within the CFD in which the eligible electors approved by more than two-thirds vote the proposition of incurring bonded indebtedness, levying a special tax, and setting an appropriations limit in Improvement Areas I and 2 of the CFD. On May 23, 2006, the City adopted a resolution of intention to alter the existing rate and method of apportionment of special taxes for Community Facilities District (CFD) No. 2004-3 (Rosetta Canyon) and a resolution of intention to incur bonded indebtedness to finance public facilities for Improvement Area 2. DISCUSSION A change in the development plan within Improvement Area 2 necessitates an amendment to the Rate and Method of Apportionment of Special Taxes for Improvement Area 2, as well as an increase in the bond authorization for Improvement Area 2. ,..- ~\ AGENDA ITEM NO. ~ PACE I OF.5" ~ --& REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 ,....." Rate and Method of Apportionment of Special Taxes The developer (Centex Homes) is in the process of annexing into the City 3 properties (APNs 349-400-005, 349-430-011, and 340-430-012) that will become part of the Rosetta Canyon development. Once the annexation into the City occurs, the developer has requested that the 3 parcels be annexed into Improvement Area 2 of CFD No. 2004-3. It is anticipated that the 3 parcels will develop into approximately 60 single-family residences. The Rate and Method of Apportionment for Improvement Area No.2 will need to be amended to allow for the additional taxable territory. . There will be no change in the per unit taxes previously approved. Bond Authorization With the anticipated inclusion of approximately 60 single-family residences, the developer has petitioned for an increase in the bond authorization for Improvement Area 2. The authorization is requested to increase from $28,000,000 to """ $33,000,000. FISCAL IMPACT The administrative cost of forming the district incurred by the City will be paid by a deposit made by the developer. Repayment of the bonds are secured by the special taxes levied on all property within the district, other than those properties that are exempt as provided in the respective rate and method of apportionment. The City will, however, be faced with a long-term obligation going forward to maintain the City public facilities constructed as part of the development. ....", AGENDA ITEM NO. ,,\ PAGE 7- OF "54- ..... ,,-... REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 3 RECOMMENDATION This is an advertised Public Hearing. The following is recommended to the City Council: ".-... 1. Open the Public Hearing and call for testimony 2. Close the Public Hearing 3. Adopt Resolution No. 2006 - '1, determining validity of the prior proceedings 4. Adopt Resolution No. 2006 - <=t~ to incur bonded indebtedness and calling a special election 5. Direct the City Clerk to open sealed ballot(s), tally vote(s), announce the vote tally and state whether 2/3 of the voters are in favor 6. Adopt Resolution No. 2006 - q <) ordering canvassing of the election results 7. Conduct first reading of the Ordinance No. 1.\ ~3 authorizing the levy of special tax PREPARED BY: MATT N. PRESSEY DIRECTOR OF AD NISTRATIVE SERVICES APPROVED FOR AGENDA BY: ,,-... AOENDA ITEM NO. ~, PACE? OF 5~ s::: "'U ;;u o ~ s::: l'T'J Z -l )> ;;u l'T'J )> .......... ;ti )>N 00 -lZ ",l'T'J ~'" ......., CO .......... II If~~ I~J; S;llA ....1' tI) i: t~ 'P -:!:i .! l!I:;: , ~ n ~ B :? [ ~ !r4^ ~ _\I: o g:'O r) r.. !!4^a i '":?:: :.. s~~ ... ... It s: ~ g lll'l D 5 --,.. ~ a- z o 0 .. . It '" g .,. I '" N o Z rn ~ 3: "'U ;;u o ~ s::: l'T'J Z -l )> ;;u l'T'J )> '" .......... ;ti )>N 00 -lz ",l'T'J 01__ ~ ......., to .......... VI n ~ ::.~ u' '" ~ .......... ;ti )>N 00 -lz ",l'T'J ~'" ......., Ol .......... I ! I I I I I I ~ ~ '" " ~ ~ " ~ ......, () o ~ ~ OC "Z -t -t~ I (Tl" )> (') () () (J) 0,..... _ _ );!c~-tr rr1~(/)~-tN -< fT1 F"n 0 o =10"'z ." ~ )> "en fT1 () 0 ~ )>:;;O~r_)> C r;; z )> en ." b:;;oaA-t :;;0 (/) z (Tl :::0 zo_ _ )> fT1 F"n () - r-t enZ Zo O. :::01\.) (TlO o ..f:ll. I VI ......, .......... -l ;;u )>N 00 -lz ",l'T'J 01__ ~ ......., ......., .......... ......, ~ RESOLUTION NO. 2006- en RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DETERMINING mE VALIDITY OF PRIOR PROCEEDINGS WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has heretofore adopted Resolution No. 2006-72 ("Resolution of Intention") stating its intention to incur bonded indebtedness in the amount not to exceed $33,000,0000 within Improvement Area No.2 of the City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon) (the "CFD") and to consider alteration of the existing rate and method of apportion of special taxes, all pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"); and WHEREAS, a copy of the Resolution of Intention is on file with the City Clerk and incorporated herein by reference; and WHEREAS, pursuant to the Act and in accordance with applicable laws, /"- this Council held a public hearing on the incurring of bonded indebtedness with respect to Improvement Area No.2 of the CFD and the alteration of the rate and method of apportionment of the special taxes; and WHEREAS, at said hearing all persons not exempt from the Special Tax desiring to be heard on all matters pertaining to the incurring of bonded indebtedness and alteration of the rate and method of apportionment of special taxes were heard and a full and fair hearing was held; and WHEREAS, at said hearing evidence was presented to the Council on said matters before it, and this Council at the conclusion of said hearing is fully.advised in the premises. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. Pursuant to Section 53325.1 (b) of the Government Code, the Council finds and determines that the proceedings prior hereto were valid and in conformity with the requirements of the Act. /"- 45790890.1 AGENDA ITEM NO. ~ \ PAGE t5. OF 54_ CITY COUNCIL RESOLUTION NO. 2006- Page 2 of6 SECTION 2. The map of the boundaries of the CFD has been recorded in the Office of the County Recorder of Riverside County, California (Book 60 of Maps of Assessment and Community Facilities District at pages 46 through 47 and as Instrument No. 2005-0006006). SECTION 3. The facilities proposed to be financed by the CFD are public infrastructure facilities and other governmental facilities with an estimated useful life of five years or longer, which the CFD is authorized by law to construct, own or operate and that are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within Improvement Area No.2 of the CFD, including but not limited to streets, streetscape, storm drain, water and sewer facilities, fire station, fire equipment, City fees and fees of the Elsinore Valley Municipal Water District, and related costs including designs, inspections, professional fees, annexation fees, connection fees and acquisition costs (the "Facilities"). Such Facilities need not be physically located within Improvement Area No.2 of the CFD. SECTION 4. Except where funds are otherwise available, it is the intention of the Council to levy annually in accordance with procedures contained in the Act a special tax (the "Special Tax") sufficient to pay for the costs of financing the acquisition and/or construction of the Facilities, including the principal of and interest on the bonds proposed to be issued to finance the Facilities and other periodic costs, the establishment and replenishment of reserve funds, the remarketing, credit enhancement and liquidity fees, the costs of administering the levy and collection of the Special Tax and all other costs of the levy of the Special Tax and issuance of the bonds, including any foreclosure proceedings, architectural, engineering, inspection, legal, fiscal, and financial consultant fees, discount fees, interest on bonds due and payable prior to the expiration of one year from the date of completion of facilities (but not to exceed two years), election costs and all costs of issuance of the bonds, including, but not limited to, fees for bond counsel, disclosure counsel, financing consultants and printing costs, and all other administrative costs of the tax levy and bond issue. The Special Tax will be secured by recordation of a continuing lien against all real property in Improvement Area No.2 of the CFD. In the first year in which such a Special Tax is levied, the levy shall include a sum sufficient to repay to the City all amounts, if any, transferred to the CFD pursuant to Section 53314 of the Act and interest 45790890.1 ""'" ......" ......" I.\CENDA ITEM NO. ~~ PACE l.p OF....2/.- ~. CITY COUNCIL RESOLUTION NO. 2006- Page 3 of6 thereon. The schedule of the rate and method of apportionment and manner of collection of the Special Tax is described in detail in Exhibit A attached hereto and by this reference incorporated herein. The Special Tax is based upon the cost of financing the Facilities in the CFD, the demand that each parcel will place on the Facilities and the benefit (direct and/or indirect) received by each parcel from the Facilities. ,...... The Special Tax is apportioned to each parcel on the foregoing basis pursuant to Section 53325.3 of the Act. In the event that a portion of the property within Improvement Area No.2 of the CFD shall become for any reason exempt, wholly or partially, from the levy of the Special Tax, the Council shall, on behalf of the CFD, increase the levy to the extent necessary upon the remaining property within Improvement Area No. 2 of the CFD which is not delinquent or exempt in order to yield the required payments, subject to the maximum tax. Under no circumstances, however, shall the Special Tax levied against any parcel used for private residential purposes be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within Improvement Area No.2 of the CFD by more than 10 percent. Furthermore, the maximum special tax authorized to be levied against any parcel used for private residential purposes shall not be increased over time in excess of 2 percent per year. SECTION 5. Upon recordation of a Notice of Special Tax Lien pursuant to Section 3114.5 of the Streets and Highways Code, a continuing lien to secure each levy of the Special Tax shall attach to all real property in Improvement Area No.2 of the CFD, and this lien shall continue in force and effect until the Special Tax obligation is prepaid or otherwise permanently satisfied and the lien canceled in accordance with law or until collection of the Special Tax by the CFD ceases. SECTION 6. The proposed Special Tax to be levied in Improvement Area No.2 of the CFD has not been precluded by protests by owners of one-half or more of the land in the territory included in Improvement Area No.2 of the CFD pursuant to Government Code Section 53324. SECTION 7. Pursuant to and in compliance with the provisions of Government Code Section 50075.1, the Council hereby establishes the following accountability measures pertaining to the levy by the CFD of the Special Tax: ,...... 45790890.1 AGENDA ITEM ~ ;;l. \ PAGE~OF~ CITY COUNCIL RESOLUTION NO. 2006- Page 4 of6 ....." (a) Such Special Tax shall be levied for the specific purposes set forth herein. (b) The proceeds of the levy of such Special Tax shall be applied only to the specific purposes set forth herein. . (c) The CFD shall establish an account or accounts into which the proceeds of such Special Tax shall be deposited. (d) The City Manager, or his or her designee, acting for and on behalf of the CFD, shall annually file a report with the Council as required pursuant to Government Code Section 50075.3. SECTION 8. The City Manager, 130 S. Main Street, Lake Elsinore, California 92530, (951) 674-3124, or his designee, is designated to be responsible for preparing or causing to be prepared annually a current roll of the Special Tax levy obligations by assessor's parcel number and for estimating future Special Tax levies pursuant to Section 53340.1 of the Government Code. SECTION 9. The voting procedure with respect to the imposition of the Special Tax, incurring bonded indebtedness and establishing an appropriations limit of the CFD shall be by hand delivered or mailed ballot election. SECTION 10. The City Clerk is directed to certify and attest to this Resolution and to take any and all necessary acts to call, hold, canvass and certify an election or elections on the incurring bonded indebtedness, the levy of the Special Tax, and the establishment of the appropriation limit. SECTION 11. This Resolution shall take effect from and after the date of its passage and adoption. ....." 45790890. ) ....." AGENDA ITEM NO. ~\ PAGE ~ ,OF 54 ,-... CITY COUNCIL RESOLUTION NO. 2006- Page 5 of6 PASSED, APPROVED AND ADOPTED this 27th day of June, 2006, by the following vote: A YES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ---- ATTEST: Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore ---- 45790890.1 RobertE. Magee, Mayor City of Lake Elsinore 2\ AGENDA ITEM NO. PAGE qOF 5'-1 EXHIBIT A ....." RATE AND METHOD OF APPORTIONMENT ....." '-' 45790890.1 ?-\ AGENDA ITEM NO. PAGE ,b OF 51- ,-.. AMENDED RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2004-3 IMPROVEMENT AREA No.2 (ROSETTA CANYON) A Special Tax shall be levied on all Assessor's Parcels in City of Lake Elsinore Community Facilities District No. 2004-3 (Improvement Area No.2) (Rosetta Canyon) ("CFD No. 2004-3 (IA No.2)") and collected each Fiscal Year commencing in Fiscal Year 2005-2006, in an amount determined through the application ofthe Rate and Method of Apportionment as described below. All ofthe real property in CFD No. 2004-3 (IA No.2), unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: " Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, Division 2 of Title 5 of the California Government Code. ..-- "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration ofCFD No. 2004-3 (IA No.2): the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs ofremitting the Special Taxes to the Trustee; the costs ofthe Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2004-3 (IA No.2) or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2004-3 (IA No. 2) or any designee thereof of complying with disclosure requirements of the City, CFD No. 2004-3 (IA No.2) or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2004-3 (IA No.2) or any designee thereof related to an appeal ofthe Special Tax; the costs associated with the release of funds from an escrow account; and the City's annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2004-3 (IA No.2) for any other administrative purposes of CFD No. 2004-3 (IA No.2), including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. ~ "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor's Parcel number. City of Lake Elsinore CFD No. 1004-3 (IA No.1) December 16,1004 (Amended MqylJ,..ltrlN ACENDA II9'Ap~ PACE 'I ;2A OF ~~ "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. ~ "Assigned Special Tax" means the Special Tax for each Land Use Class of Developed Property in each Zone, as determined in accordance with Section C.1.b. below. "Authorized Facilities" means those authorized improvements, as listed on Exhibit "A" to the Resolution of Formation. "Backup Special Tax" means the Special Tax applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.l.d. below. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of the Special Taxes. "CFD No. 2004-3" means City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon). "CFD No. 2004-3 (IA No.2)" means Improvement Area No.2 of CFD No. 2004-3, as identified on the boundary map for CFD No. 2004-3. "CFD No. 2004-3 (IA No.2) Bonds" means any bonds or other debt (as defined in Section 53317( d) ofthe Act), whether in one or more series, issued by CFD No. 2004-3 and secured solely by Special Taxes levied on property within the boundaries ofCFD No. 2004-3 (IA No. 2) under the Act. ~ "City" means the City of Lake Elsinore. "City Council" means the City Council ofthe City of Lake Elsinore, acting as the legislative body of CFD No. 2004-3 (IA No.2). "County" means the County of Riverside. "Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the priot Fiscal Year and a building permit for new construction was issued after January 1,2004 and on or before May 1 ofthe Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied. "Final Subdivision" means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 that creates individual lots for which building permits may be issued without further subdivision. ......, City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16,2004 (Amended A!ay fi.rj,OP22 2\ ACENDA I/N-. PAGESZ:-. OF, t5t.f ~ "Fiscal Year" means the period starting July 1 and ending on the following June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2004-3 (IA No.2) Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. "Land Use Class" means any of the classes listed in Table 1. "Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction of one or more non-residential units or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2004-3 (IA No.2) Bonds which are deemed to be outstanding under the Indenture. "Property Owner Association Property" means, for each Fiscal Year, any property within the boundaries of CFD No. 2004-3 (IA No.2) that was owned by a pr~perty owner association, including any master or sub-association, as ofJanuary 1 of the prior Fiscal Year. ,,-- "Proportionately" means for Developed Property that the ratio of the actual Special Tax levy to the Assigned Special Tax is equal for all Assessor's Parcels of Developed Property, or where the Backup Special Tax is being levied, that the ratio ofthe actual Special Tax levy to the Maximum Special Tax is equal for all Assessor's Parcels upon which a Backup Special Tax is being levied. For Undeveloped Property, "Proportionately" means that the ratio ofthe actual Special Tax levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section D below. "Public Property" means property within the boundaries of CFD No. 2004-3 (IA No.2) owned by, irrevocably offered or dedicated to, or over, through or under which an easement for purposes of public right-of-way has been granted, to the federal government, the State, the County, the City, or any local government or other public agency, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use. "Residential Floor Area" means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to the building permit(s) issued for such Assessor's Parcel. ~ City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16,2004 (Amended May 23,2006) :2-\ I\(jENDA~3 PAGE J:? OF---5i- "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. ....." "Resolution of Formation" means the Resolution of Formation for CFD No. 2004-3 (IA No.2). "Special Tax" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property to fund the Special Tax Requirement. "Special Tax Requirement" means that amount required in any Fiscal Year for CFD No. 2004-3 (IA No.2) to: (i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs on the CFD No. 2004-3 (IA No.2) Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2004-3 (IA No.2) Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay Administrative Expenses; (iv}payany amounts required to establish or replenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax delinquencies based on the delinquency rate for the Special Tax levy in the previous Fiscal Year; (vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax levy on Undeveloped Property; less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Indenture. ~ "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundaries ofCFD No. 2004-3 (IA No.2) which are not exempt from the Special Tax pursuant to law or Section E below. "Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Property that are not exempt pursuant to Section E below. "Taxable Public Property" means all Assessor's Parcels of Public Property that are not exempt pursuant to Section E below. "Trustee" means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Property Owner Association Property, or Taxable Public Property. "Zone" means Zone I or Zone 2, as applicable. "Zone 1" means the land geographically identified within the boundaries of zone I as delineated in Exhibit A to this Rate and Method of Apportionment. ~ City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (AmeneC~:~A~. ;;t\ PAGE 14 OF..2i- ~ "Zone 2" means the land geographically identified within the boundaries of zone 2 as delineated in Exhibit A to this Rate and Method of Apportionment. B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2004-3 (IA No.2) shall be assigned to a Zone and further classified as Developed Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject. to Special Taxes in accordance with this Rate and Method of Apportionment determined pursuant to Sections C and D below. Residential Property shall be assigned to Land Use Classes 1 through 11 as listed in Table 1 below based on the Residential Floor Area for each unit. Non-Residential Property shall be assigned to Land Use Class 12. C. MAXIMUM SPECIAL TAX RATE 1. Developed Property a. Maximum Special Tax /"'"' The Maximum Special Tax for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax or (ii) the amount derived by application of the Backup Special Tax. b. Assigned Special Tax The Assigned Special Tax for each Land Use Class is shown below in Table 1. "...... City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16,2004 (Amended May 23,2006) , I":s::NDA ITSM,IlIO. PAGE 15 :;u OF-i:L TABLEt Assigned Special Taxes for Developed Property Community Facilities District No. 2004-3 Improvement Area No.2 Fiscal Year 2005-2006 ......", 1 Residential Property > 3,950 s.f. $3,271.79 per unit $3,565.47 per unit 2 Residential Property 3,701 - 3,950 s.f. $3,174.02 per unit $3,504.87 per unit 3 Residential Property 3,451 - 3,700 s.f. $3,076.25 per unit $3,443.77 per unit 4 Residential Property 3,201 - 3,450 s.f. $2,978.48 per unit $3,290.64 per unit 5 Residential Property 2,951 - 3,200 s.f. $2,880.71 per unit $3,172.60 per unit 6 Residential Property 2,701- 2,950 s.f. $2,727.85 per unit $3,055.06 per unit 7 Residential Property 2,451 - 2,700 s.f. $2,659.26 per unit $2,975.78 per unit 8 Residential Property 2,201 - 2,450 s.f. $2,590.67 per unit $2,844.10 per unit 9 Residential Property 1,951 - 2,200 s.f. $2,411.94 per unit $2,770.55 per unit .~ 10 Residential Property 1,700 - 1,950 s.f. $2,353.03 per unit $2,688.11 per unit 11 Residential Property < 1,700 s.f. $2,294.11 per unit $2,590.62 per unit 12 Non-Residential Property NA $17,817 per Acre $16,754 per Acre c. Increase in the Assigned Special Tax The Assigned Special Taxes identified in Table 1 above shall be applicable for Fiscal Year 2005-2006, and shall increase thereafter, commencing on July 1,2006 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Assigned Special Tax for the previous Fiscal Year. d. Backup Special Tax City of Lake Elsinore CFD No. 1004-3 (IA No.1) The Fiscal Year 2005-2006 Backup Special Tax attributable to a Final Subdivision in Zone 1 or Zone 2 will equal $19,868 multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax for each Assessor's Parcel of Residential Property shall be computed by dividing the Backup Special Tax attributable to the applicable Final Subdivision by the number of Assessor's Parcels for which building permits for residential construction have or may be issued (i.e., the number or December 16, 1004 (Amended May 13, 1006) ;t \ AGENDA ,..ftO. ~ PAOeJIL....Of 5" 'WI' "..-.. residential lots ). The Backup Special Tax for each Assessor's Parcel of Non- Residential Property therein shall equal $19,868 multiplied by the Acreage of such Assessor's Parcel. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Parcels of property for which building permits for non-residential construction may be issued. Notwithstanding the foregoing, if all or any portion of the Final Subdivision( s) described in the preceding paragraphs is subsequently changed or modified, then the Backup Special Tax for each Assessor's Parcel of Developed Property in such Final Subdivision area that is changed or modified shall be a rate per square foot of Acreage calculated as follows: 1. Determine the total Backup Special Taxes anticipated to apply to the changed or modified Final Subdivision area prior to the change or modification. ,-.. 2. The result of paragraph 1 above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Subdivision area, as reasonably determined by the CFD Administrator. 3. The result of paragraph 2 above shall be divided by 43,560. The result is the Backup Special Tax per square foot of Acreage which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified Final Subdivision area for all remaining Fiscal Years in which the Special Tax may be levied. 1. Release of Obligation to Pay and Disclose Backup Special Tax "..-.. All Assessors' Parcels within CFD No. 2004-3 (IA No.2) will be relieved simultaneously and permanently from the obligation to pay and disclose the Backup Special Tax if the CFD Administrator determines that the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special Taxes that may be levied against all Assessors' Parcels of Developed Property result in 110% debt service coverage (i.e., the Assigned Special Taxes that may be levied against all Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2004-3 (IA No.2) is at least equal to the sum of (i) the Administrative City of Lake Elsinore CFD No. 1004-3 (IA No.1) December 16,1004 (Amended May 13,1006) :;L \ A.GENDA ITEM ~.ee 7 PACE.--L:1.-oF~ Expenses and (ii) 1.10 times maximum annual debt service, in each....., remaining Fiscal Year on the Outstanding Bonds). e. Increase in the Backup Special Tax On each July I, commencing on July 1, 2006, the Backup Special Tax shall be increased by an amount equal to two percent (2%) ofthe Backup Special Tax for the previous Fiscal Year. f. Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for all Land Use Classes located on that Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 2. Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property The Fiscal Year 2005-2006 Maximum Special Tax for Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property in Zone I or Zone 2 shall be $19,868 per Acre, and shall increase thereafter, commencing on '-" July 1, 2006 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2005-2006 and for each following Fiscal Year, the City Council shall levy the Special Tax until the amount of Special Taxes levied equals the Special Tax Requirement. The Special Tax shall be levied each Fiscal Year as follows: First: The Special Tax shall be levied on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 in an amount equal to 100% of the applicable Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone I and Zone 2 at up to 100% of the applicable Maximum Special Tax for Undeveloped Property; Third: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the levy ofthe Special Tax on each Assessor's Parcel of Developed Property in Zone I and Zone 2 whose Maximum Special Tax is determined through the application of the Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor's Parcel; '-" City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (Amended May 23, 2006) :;2. \ '\r:~NnA ITEr.f_.8 - PACE I~ Of~ 51 - ~ Fourth: If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property in Zone 1 and Zone 2 at up to the applicable Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property. Notwithstanding the above the City Council may, in any Fiscal Year, levy Proportionately less than 100% ofthe Assigned Special Tax in step one ( above), when (i) the City Council is no longer required to levy the Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement; and (ii) all authorized CFD No. 2004-3 (IA No.2) Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2004-3 (IA No.2) Bonds (except refunding bonds) to be supported by the Special Tax. Further notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residenti"al Property for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2004-3 (IA No.2). ~ E. EXEMPTIONS The City shall classify Property Owner Association Property and/or Public Property in CFD No. 2004-3 (IA No.2) as exempt property, provided that no such classification would reduce the Acreage of all Taxable Property to less than 75.86 Acres. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special Taxes under this section shall be subject to the levy of the Special Tax and shall be taxed Proportionately as part ofthe fourth step in Section D above, at up to 100% ofthe applicable Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property. F. MANNER OF COLLECTION ~ The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No. 2004-3 (IA No.2) may directly bill the Special Tax, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (Amended May 23,2006) ~ GENOA 11E1tH. PACE 1 '1 ~\ OF 5 If G. APPEALS ......, Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2004-3 (IA No.2). The CFD Administrator shall review the appeal and if the CFD Administrator concurs, the amount of the Special Tax levied shall be appropriately modified. The City Council may interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the City Council shall be final and binding as to all persons. H. PREPAYMENT OF SPECIAL TAX The following definitions apply to this Section H: "Buildout" means, for CFD No. 2004-3 (IA No.2), that all expected building permits have been issued. "CFD Pub,lic Facilities" means either $27,000,000 in 2006 dollars, which shall increase by the Construction Inflation Index on July 1, 2007, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the public facilities to be provided by CFD No. 2004-3 (IA No.2) under the authorized bonding ......, program for CFD No. 2004-3 (IA No.2), or (ii) shall be determined by the City Council concurrently with a covenant that it will not issue any more CFD No. 2004-3 (IA No.2) Bonds (except refunding bonds) to be supported by the Special Taxes levied under this Rate and Method of Apportionment as described in Section D. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as ofthe calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance the cost of CFD Public Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct CFD Public Facilities eligible under the Act. ......, City of Lake Elsinore CFD No. 1004-3 (IA No.1) 2\ F ~~.2t{ '" "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. 1. Prepayment in Full Only an Assessor's Parcel of Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid. The obligation ofthe Assessor's Parcel to pay any Special Tax may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only if there are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner ofthe prepayment amount for such Assessor's Parcel. The CFD Administrator may charge a reasonable fe~ for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of CFD No. 2004-3 (IA No.2) Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. ,,- The Special Tax Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount plus plus plus plus less less Total: equals Redemption Premium Future Facilities Amount Defeasance Amount Administrative Fees and Expenses Reserve Fund Credit Capitalized Interest Credit Prepayment Amount As ofthe proposed date of prepayment, the Special Tax Prepayment Amount shall be calculated as follows: Paral!raph No.: 1. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. 2. For Assessor's Parcels of Developed Property, compute the Assigned Special Tax and Backup Special Tax. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Assigned Special Tax and Backup Special Tax for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. ,,- City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (Amended MaYMl006) ;;t l AGENDA n r;p16JiQ., PAGE rl- J .OF...i.L '-" 3. (a) Divide the Assigned Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Special Taxes for the entire CFD No. 2004-3 (IA No.2) based on the Developed Property Special Taxes which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 2004-3 (IA No.2), excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax computed pursuant to paragraph 2 by the total estimated Backup Special Taxes at Buildout for the entire CFD No. 2004-3 (IA No. 2), excluding any Assessor's Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount"). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 by the applicable redemption premium (e.g., the redemption price-100%), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). 6. Compute the current Future Facilities Costs. 7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future '-" Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. II. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount"). 12. The administrative fees and expenses ofCFD No. 2004-3 (IA No.2) are as calculated by the CFD Administrator and include the costs of computation ofthe prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2004-3 '--' City of Lake Elsinore CFD No. 1004-3 (IA No.1) December 16,1004 (Amended May 13,1006) .;Ll A(jENnArmt~ PAGE ~ r1" =:oF.-Zr- ,...... (IA No.2) Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% of the reserve requirement (as defined in the Indenture). 14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall ~e calculated by multiplying the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment (the" Capitalized Interest Credit"). r- 15. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Prepayment Amount"). From the Prepayment Amount, the amounts computed pursuant to paragraphs 4, 5, 11, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire CFD No. 2004-3 (IA No.2) Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No. 2004-3 (IA No.2). The Special Tax Prepayment Amount may be insufficient to redeem a full $5,000 increment ofCFD No. 2004-3 (IA No.2) Bonds. In such cases, the increment above $5,000 or integral multiple thereofwill be retained in the appropriate fund established under the Indenture to be used with the next prepayment ofCFD No. 2004-3 (IA No.2) Bonds or to make debt service payments. ~ As a result ofthe payment ofthe current Fiscal Year's Special Tax levy as determined under paragraph 9 (above), the CFD Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment ofthe Special Tax and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax shall cease. City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (An;e;#.N:,~iti_~ 2\ PACE r"3 OF-2C ~ Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Taxes that may be levied on Taxable Property within CFD No. 2004-3 (IA No.2) both prior to and after the proposed prepayment is at least equal to the sum of (i) the Administrative Expenses and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds. 2. Prepayment in Part The Special Tax on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1; except that a partial prepayment shall be calculated according to the following formula: PP = [(PE - A) x F] + A These terms have the following meaning: PP= PE= F= the partial prepayment. the Special Tax Prepayment Amount calculated according to Section H.I. the percentage, expressed as a decimal, by which the owner ofthe Assessor's Parcel is partially prepaying the Special Tax. the Administrative Fees and Expenses calculated according to Section H.I. ""'-" A= The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax and the percentage by which the Special Tax shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section H.I, and (ii) indicate in the records of CFD No. 2004-3 (IA No.2) that there has been a partial prepayment of the Special Tax and that a portion of the Special Tax with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax, shall continue to be levied on such Assessor's Parcel pursuant to Section D. I. TERMOFSPECIALTAX The Special Tax shall be levied for a period not to exceed forty years commencing with Fiscal Year 2005-2006, provided however that Special Taxes will cease to be levied in an earlier Fiscal Year ifthe CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2004-3 (IA No.2) Bonds have been paid; and (ii) all Authorized Facilities have been constructed. ~ City of Lake Elsinore CFD No. 1004-3 (IA No.1) December 16,1004 (Amended May 13,1006) \ \6tN8A~ ~ PAGE Of. 5 ~ "..- "..- RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2004-3 IMPROVEMENT AREA No.2 (ROSETTA CANYON) EXHIBIT A MAP OF ZONE 1 AND ZONE 2 I\CENDA ITEM ~ PAGE -:1-0 OF J,~ S~ RESOLUTION NO. 2006- q<o ~ RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE TO INCUR BONDED INDEBTEDNESS IN THE AMOUNT NOT TO EXCEED $33,000,000 WITHIN IMPROVEMENT AREA NO. 2 OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2004-3 (ROSETTA CANYON) AND CALLING A SPECIAL ELECTION WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has received a petition from the landowner of Improvement Area No. 2 of the City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon) (the "CFD") to institute proceedings to increase the amount of bonded indebtedness authorized to be incurred within Improvement Area No.2 from $28,000,000 to $33,000,000, the proceeds of which will be used to finance the acquisition and/or construction of public infrastructure facilities, all pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, commencing with Section 53311 of ,the Government Code of the State of California (the "Act"), and to alter the existing rate and method of apportionment of special taxes with respect ...." to Improvement Area No.2 of the CFD; and WHEREAS, the Council has heretofore adopted Resolution No. 2006-_ ("Resolution of Intention") stating its intention to incur bonded indebtedness in the amount not to exceed $33,000,0000 within Improvement Area No. 2 of the CFD and to consider alteration of the existing rate and method of apportion of special taxes; and WHEREAS, a copy of the Resolution of Intention is on file with the City Clerk and incorporated herein by reference; and WHEREAS, on June 27, 2006, the Council held a noticed hearing as required by law relative to the proposed levy of the Special Tax and incurrence of bonded indebtedness within Improvement Area No.2 of the CFD; and WHEREAS, the Council adopted Resolution No. 2006-_ (the "Resolution Determining Validity of Prior Proceedings") determining the validity of prior proceeding. 45790991.1 ...." 2\ '\CENOA ITEM NO. w PAGE ;:;-<..j OF.:...2i- r- CITY COUNCIL RESOLUTION NO. 2006- Page 2 of5 /'""' /'""' NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The above recitals are true and correct. SECTION 2. It is necessary to incur bonded indebtedness in the amount not to exceed $33,000,000 to fmance the costs of the Facilities. SECTION 3. The indebtedness will be incurred for the purpose of financing the costs of acquiring the Facilities, the financing of the costs associated with the issuance of the bonds and all other costs necessary to finance the Facilities which are permitted to be financed pursuant to the Act. SECTION 4. The bonds shall be issued in one or more series at a maximum interest rate not to exceed 12 percent per annum or such rate not in excess of the maximum rate permitted by law at the time the bonds are issued, and payable annually or semiannually as determined by the Council. The term of the bonds shall be determined pursuant to a resolution of the Council authorizing the issuance of the bonds, but such term shall in no event exceed 40 years or such longer term as is then permitted by law. SECTION 5. Pursuant to and in compliance with the provisions of Article 1.5 (commencing with Section 53410) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code, the Council hereby establishes the following accountability measures pertaining to any bonded indebtedness incurred by or on behalf of the City: (a) Such bonded indebtedness shall be incurred for the specific purposes set forth in Section 3 above. (b) The proceeds of any such bonded indebtedness shall be applied only to the specific purposes identified in Section 3 above. (c) The document or documents establishing the terms and conditions for the issuance of any such bonded indebtedness shall provide for the 45718818.1 "l r;ENDA ITEM NO. PACE 9-' OF ~\ tJf CITY COUNCIL RESOLUTION NO. 2006- Page 3 of5 ~ creation of an account or accounts into which the proceeds of such bonded indebtedness shall be deposited. (d) The City Manager, or his or her designee, acting for and on behalf of the City, shall annually file a report with the Council as required by Government Code Section 53411. SECTION 6. Pursuant to Government Code Section 53353.5, the Council hereby determines to submit to the qualified electors of Improvement Area No. 2 of the CFD a combined proposition (the "Proposition") to: (1) levy special taxes on property within Improvement Area No. 2 of the CFD in accordance with the rate and method of apportionment of special tax specified in the Resolution Determining Validity of Prior Proceedings; (2) incur bonded indebtedness in the amount not to exceed $33,000,000; and (3) establish an appropriations limit as defined by subdivision (h) of Section 8 of Article XIIIB of the California Constitution, for Improvement Area No.2 of the CFD. Said appropriations limit shall equal the maximum amount of bonded indebtedness authorized to be incurred for Improvement Area No.2 of the CFD. The form of the Proposition is attached ~ as Exhibit "A." SECTION 7. A special election is hereby called for Improvement Area No. 2 of the CFD on the Proposition set forth in Section 6 above. SECTION 8. The time for notice having been waived by the qualified electors, the date of the special election for the CFD on the Proposition shall be on the 27th day of June, 2006. There being no registered voters residing within the territory of Improvement Area No.2 of the CFD at the time of the protest hearing and ninety (90) days prior thereto, there being only one landowner in Improvement Area No.2 of the CFD, and the requirements of Section 53326 of the Government Code having been waived by the landowner, the ballot for the special election shall be hand delivered or mailed to the landowner within Improvement Area No. 2 of the CFD. The voter ballot shall be returned to the City Clerk at 130 S. Main Street, Lake Elsinore, California 92530, no later than 11 :00 o'clock p.m. on June 27, 2006. However, the election may be closed within the concurrence of the City Clerk, as soon as the ballot is returned. 45718818.1 ~ ..u AGENDA ITEM NO. 5' ,- PAGE 9- ~ OF ::L.-~ ~ /"'""', ~ CITY COUNCIL RESOLUTION NO. 2006- Page 4 of5 SECTION 9. Notice of said election and written argument for or against the measure have been waived by the landowner. SECTION 10. Improvement Area No. 2 of the CFD shall cohstitute a single election precinct for the purpose of holding said special election. SECTION 11. The Council hereby directs that the special election be conducted by the City Clerk, as the elections official. SECTION 12. This Resolution shall take effect from and after the date of its passage and adoption. 45718818.1 ~\ AGENDA ITEM NO.. PAGE_2:f1-0F 5~ CITY COUNCIL RESOLUTION NO. 2006- Page 5 of 5 ...., PASSED, APPROVED AND ADOPTED this 27th day of June, 2006, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: ...., Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore 45718818.1 ...., AGENDA ITEM NO. ;U PAGE ;? 0 OF 51 r-- /""'"' /""'"' EXHIBIT A OFFICIAL BALLOT CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2004-3 (ROSETTA CANYON) IMPROVEMENT AREA NO.2 SPECIAL TAX ELECTION June 27, 2006 To vote, mark an "X" in the voting square after the word "YES" or after the word "NO." All marks otherwise made are forbidden. This ballot is provided to , as owner or authorized representative of such owner of land within Improvement Area No. 2 of the City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon) and represents _ vote(s). If you wrongly mark, tear, or deface this ballot, return it to the City Clerk of the City of Lake Elsinore at 130 S. Main Street, Lake Elsinore, California 92530. PROPOSITION: Shall Improvement Area No. 2 of the City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon) (the "CFD"), subject to the accountability measures provided for in the Resolution Calling a Special Election adopted on June 27, 2006 ("Resolution Calling Special Election"), incur an indebtedness and be authorized to issue bonds in an amount not to exceed $33,000,000 with interest at a rate or rates established at such time as the bonds are sold in one or more series at fixed or variable interest rates, however not to exceed any applicable statutory rate for such bonds, the proceeds of which will be used to finance the certain public facilities (the "Facilities") as described in the Resolution Determining Validity of Prior Proceedings adopted on June 27, 2006 ("Resolution Determining Validity of Prior Proceedings"); and, subject to the accountability measures provided for in the Resolution Determining Validity of Prior Proceedings, shall a special tax be levied to pay the principal of and interest on such indebtedness and bonds and to otherwise finance the Facilities; and shall an appropriations limit be established for Improvement Area No. 2 of the CFD pursuant to Article XIIIB of the California Constitution, said appropriations limit to be equal to the maximum amount of bonded indebtedness authorized to be incurred for Improvement Area No.2 ofthe CFD? 45790991.1 A-I YES NO :2~ .AGENDA ITEM NO. PAGE "3 I OF ~ q ~....... RESOLUTION NO. 2006- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE CANVASSING THE RESULTS OF THE SPECIAL ELECTION HELD WITHIN IMPROVEMENT AREA NO. 2 OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2004-3 (ROSETTA CANYON) ....., WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has previously conducted proceedings pertaining to the authorization of indebtedness in the amount not to exceed $33,000,000 within Improvement Area No.2 of the City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon) (the "CFD"), the rate and method of apportionment for the levy and collection of special taxes (the "Special Tax") to pay the principal and interest on bonds issued or other debt, and the establishment of an appropriations limit, and the calling of an election in regard to the foregoing; and WHEREAS, on June 27, 2006, a special election was held within Improvement Area No.2 of the CFD relative to the authorization of not to exceed $33,000,000 of indebtedness within Improvement Area No.2 of the CFD, the rate ....., and method of apportionment of the Special Tax, and the establishment of an appropriations limit; and WHEREAS, at such special election the proposal for the incurring the bonded indebtedness, the rate and method of apportionment and manner of collection of the Special Tax and establishing an appropriations limit for Improvement Area No.2 of the CFD were approved by the requisite 2/3 of the votes cast by qualified electors of Improvement Area No.2 of the CFD. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. It is hereby determined that the special election conducted within Improvement Area No.2 of the CFD was duly and validly conducted. SECTION 2. The Council, acting as the legislative body of the CFD, is authorized to levy the Special Tax on behalf of the CFD, as specified in the Resolution Determining Validity of Prior Proceedings adopted on June 27, 2006. ....., 45791061.1 AOENDA ITEM NO. :2.,\ PAGE ~;} OF'5t.f. CITY COUNCIL RESOLUTION NO. 2006- Page 2 of3 /"'" SECTION 3. The Council is authorized to incur indebtedness on behalf of Improvement Area No.2 of the CFD in the maximum amount of $33,000,000. SECTION 4. The City is authorized to establish an appropriations limit for Improvement Area No.2 of the CFD. SECTION 5. The City Clerk is hereby directed and authorized to record notice of the special tax of the CFD by recording a Notice of Special Tax Lien of the CFD pursuant to Section 3117.5 of the California Streets and Highways Code. SECTION 6. This Resolution shall take effect from and after the date of its passage and adoption. /"'" ",--.. 45791061.1 ;t,\ AOENOAfI'EM NO.. PAGE. '33 ,OF ~-= CITY COUNCIL RESOLUTION NO. 2006- Page 3 of3 PASSED, APPROVED AND ADOPTED this 27th day of June, 2006, by the following vote: ....." A YES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ATTEST: Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore 45791061.1 Robert E. Magee, Mayor City of Lake Elsinore ....." ....." AGENDA ITI::IVI 1'40. :). \ PAGE~~ /"" ORDINANCE NO. ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE AUTHORIZING THE LEVY OF A SPECIAL TAX /'"' WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has received a petition from the landowner of Improvement Area No. 2 of the City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon) (the "CFD") to institute proceedings to increase the amount of bonded indebtedness authorized to be incurred within Improvement Area No.2 from $28,000,000 to $33,000,000, the proceeds of which will be used to finance the acquisition and/or construction of public infrastructure facilities, all pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, commencing with Section 53311 of the Government Code of the State of California (the "Act"), and to alter the existing rate and method of apportionment of special taxes with respect to Improvement Area No.2 of the CFD; and WHEREAS, on May 23, 2006, the City Council (the "Council") of the City of Lake Elsinore (the "City") adopted Resolution No. 2006-_ stating its intention to incur bonded indebtedness in the amount not to exceed $33,000,0000 within Improvement Area No.2 of the CFD and to consider alteration of the existing rate and method of apportion of special taxes; and WHEREAS, notice was published as required by law relative to the intention of the Council to incur bonded indebtedness in the amount not to exceed $33,000,0000 within Improvement Area No. 2 of the CFD and to consider alteration of the existing rate and method of apportion of special taxes; and WHEREAS, on June 27, 2006 this Council held a noticed public hearing as required by law relative to the rate and method of apportionment and manner of collection of the special tax to be levied within Improvement Area No. 2 of the CFD to pay the principal and interest on the proposed bonded indebtedness of Improvement Area No. 2 of the CFD, and relative to the necessity for authorizing the bonds, the purpose for which the bonds are to be issued, the amount of the proposed debt, the maximum term of the bonds and the maximum annual rate of interest to be paid; and WHEREAS, at said hearing all persons not exempt from the Special Tax desiring to be heard on all matters pertaining to the incurring of bonded ,...... AGENDA ITEM NO. a-\ PAOE 3':7 OF ~ L\- CITY COUNCIL ORDINANCE NO. Page 2 of 4 indebtedness and alteration of the rate and method of apportionment of special taxes were heard and a full and fair hearing was held; and WHEREAS, the Council subsequent to said hearing adopted Resolution No. 2006- determining the validity of prior proceedings; and WHEREAS, the Council subsequent to said hearing adopted Resolution No. 2006- which called an election within Improvement Area No. 2 of the CFD for June 27, 2006 on the proposition of incurring bonded indebtedness, levying a special tax and setting an appropriations limit; and WHEREAS, on June 27, 2006, an election was held within Improvement Area No. 2 of the CFD in which the eligible electors approved by more than two- thirds vote the proposition of incurring bonded indebtedness, levying a special tax, and setting an appropriations limit. THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES ORDAIN AS FOLLOWS: SECTION 1. A special tax (the "Special Tax") is levied within the boundaries of Improvement Area No. 2 of the CFD pursuant to the formulas set forth in Exhibit "A" attached hereto and incorporated by reference in an amount necessary to pay all of the costs of providing the Facilities, periodic costs, and costs of the tax levy and collection, and all other costs including amounts payable with respect to the bonded indebtedness. SECTION 2. This legislative body is hereby further authorized each year, by resolution adopted as provided in section 53340 of the Act, to determine the specific special tax rate and amount to be levied for the then current or future tax years, except that the special tax rate to be levied shall not exceed the maximum rate set forth in Exhibit "A". SECTION 3. All of the collections of the Special Tax shall be used as provided for in the Act and Resolution No. 2006- (Resolution Determining Validity of Prior Proceedings). SECTION 4. The above authorized Special Tax shall be collected in the same manner as ordinary ad valorem taxes are collected and shall be subject to the same penalties and the same procedure and sale in cases of delinquency and provided for ad valorem taxes; provided, however, the CFD may collect the 45791084.1 '--' '--' ...." 2,\ AGENDA ITEM NO. PACE ,1 <..e OF 5Y CITY COUNCIL ORDINANCE NO. Page 3 of 4 ~ Special Tax at a different time or in a different manner if necessary to meet its financial obligations. SECTION 5. The Mayor shall sign this ordinance and the City Clerk shall attest to such signature. The City Clerk is directed to cause the title and summary or text of the this ordinance, together with the vote thereon, to be published within . fifteen (15) days after its passage at least once in a newspaper of general circulation published and circulated within the territorial jurisdiction of the City, and to post at the main office of the City a certified copy of the full text of the adopted ordinance along with the names of the council Members voting for and against the ordinance. SECTION 6. This ordinance relating to the levy of the Special Tax takes effect and shall be in force from and after 30 days from the date of final passage. A copy of this ordinance shall be transmitted to the Clerk of the Board of Supervisors of Riverside County, the Assessor and the Treasurer-Tax Collector of Riverside County. /'"' INTRODUCED AND APPROVED UPON FIRST READING this 27th day of June, 2006, upon the following roll call vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ~ 45791084.1 AGENDA ITEM NO~ PAGE ~ 1 ~l OF 6Lf CITY COUNCIL ORDINANCE NO. Page 4 of 4 ,...." PASSED, APPROVED AND ADOPTED UPON SECOND READING this _ day of , 2006, upon the following roll call vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert Magee, Mayor City of Lake Elsinore ATTEST: "-' Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore '"""" 45791084.1 ;;L\ AGENDA ITEM NO. PAGE 3~ OF 6tf - /""'" EXHIBIT" A" RATE AND METHOD OF APPORTIONMENT /'"" /'"" AGENDA ITEM NO. 2\ PAGE~OF D4 AMENDED RATE AND METHOD OF APPORTIONMENT FOR CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2004-3 IMPROVEMENT AREA No.2 (ROSETTA CANYON) A Special Tax shall be levied on all Assessor's Parcels in City of Lake Elsinore Community Facilities District No. 2004-3 (Improvement Area No.2) (Rosetta Canyon) ("CFD No. 2004-3 (IA No. 2)") and collected each Fiscal Year commencing in Fiscal Year 2005-2006, in an amount determined through the application ofthe Rate and Method of Apportionment as described below. All ofthe real property in CFD No. 2004-3 (IA No.2), unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent and in the manner herein provided. A. DEFINITIONS The terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map. "Act" means the Mello-Roos Community Facilities Act of 1982, being Chapter 2.5, Division 2 of Title 5 of the California Government Code. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2004-3 (IA No.2): the costs of computing the Special Taxes and preparing the annual Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Taxes to the Trustee; the costs of the Trustee (including its legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2004-3 (IA No.2) or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2004-3 (IA No. 2) or any designee thereof of complying with disclosure requirements of the City, CFD No. 2004-3 (IA No.2) or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2004-3 (IA No.2) or any designee thereof related to an appeal ofthe Special Tax; the costs associated with the release of funds from an escrow account; and the City's annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2004-3 (IA No.2) for any other administrative purposes of CFD No. 2004-3 (IA No.2), including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Assessor's Parcel" means a lot or parcel shown in an Assessor's Parcel Map with an assigned Assessor's Parcel number. City of Lake Elsinore CFD No. 2004-3 (IA No.2) ...., ....., ......, December 16, 2004 (Amended May 23, 2006) ? \ ACENDA ITEV_) ~ . PAGE JfO OF 54 - /'"' "Assessor's Parcel Map" means an official map of the County Assessor of the County designating parcels by Assessor's Parcel number. "Assigned Special Tax" means the Special Tax for each Land Use Class of Developed Property in each Zone, as determined in accordance with Section C.l.b. below. "Authorized Facilities" means those authorized improvements, as listed on Exhibit "A" to the Resolution of Formation. "Backup Special Tax" means the Special Tax applicable to each Assessor's Parcel of Developed Property, as determined in accordance with Section C.I.d. below. "CFD Administrator" means an official of the City, or designee thereof, responsible for determining the Special Tax Requirement and providing for the levy and collection of the Special Taxes. "CFD No. 2004-3" means City of Lake Elsinore Community Facilities District No. 2004-3 (Rosetta Canyon). "CFD No. 2004-3 (IA No.2)" means Improvement Area No.2 of CFD No. 2004-3, as identified on the boundary map for CFD No. 2004-3. /'"' "CFD No. 2004-3 (IA No.2) Bonds" means any bonds or other debt (as defined in Section 53317( d) ofthe Act), whether in one or more series, issued by CFD No. 2004-3 and secured solely by Special Taxes levied on property within the boundaries ofCFD No. 2004-3 (IA No. 2) under the Act. "City" means the City of Lake Elsinore. "City Council" means the City Council of the City of Lake Elsinore, acting as the legislative body of CFD No. 2004-3 (IA No.2). "County" means the County of Riverside. "Developed Property" means, for each Fiscal Year, all Taxable Property, exclusive of Taxable Public Property and Taxable Property Owner Association Property, for which the Final Subdivision was recorded on or before January 1 of the prior Fiscal Year and a building permit for new construction was issued after January 1,2004 and on or before May 1 ofthe Fiscal Year preceding the Fiscal Year for which the Special Taxes are being levied. ~ "Final Subdivision" means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation ofa condominium plan pursuant to California Civil Code 1352 that creates individual lots for which building permits may be issued without further subdivision. City of Lake Elsinore CFD No. 2004-3 (IA No.2) December16, 2004 (Am~~MHrE~ tf~ ;2,1 OF~ "Fiscal Year" means the period starting July 1 and ending on the following June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which CFD No. 2004-3 (IA No.2) Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. ......" "Land Use Class" means any of the classes listed in Table 1. "Maximum Special Tax" means the maximum Special Tax, determined in accordance with Section C below, that can be levied in any Fiscal Year on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction of one or more non-residential units or facilities has been issued by the City. "Outstanding Bonds" means all CFD No. 2004-3 (IA No.2) Bonds which are deemed to be outstanding under the Indenture. "Property Owner Association Property" means, for each Fiscal Year, anypropertywithin the boundaries of CFD No. 2004-3 (IA No.2) that was owned by a property owner association, including any master or sub-association, as of January 1 of the prior Fiscal Year. "Proportionately" means for Developed Property that the ratio ofthe actual Special Tax levy to the Assigned Special Tax is equal for all Assessor's Parcels of Developed Property, or where the Backup Special Tax is being levied, that the ratio ofthe actual Special Tax levy to the Maximum Special Tax is equal for all Assessor's Parcels upon which a Backup Special Tax is being levied. For Undeveloped Property, "Proportionately" means that the ratio of the actual Special Tax levy per Acre to the Maximum Special Tax per Acre is equal for all Assessor's Parcels of Undeveloped Property. The term "Proportionately" may similarly be applied to other categories of Taxable Property as listed in Section D below. ......" "Public Property" means property within the boundaries of CFD No. 2004-3 (IA No.2) owned by, irrevocably offered or dedicated to, or over, through or under which an easement for purposes of public right-of-way has been granted, to the federal government, the State, the County, the City, or any local government or other public agency, provided that any property leased by a public agency to a private entity and subject to taxation under Section 53340.1 of the Act shall be taxed and classified according to its use. "Residential Floor Area" means all of the square footage of living area within the perimeter of a residential structure, not including any carport, walkway, garage, overhang, patio, enclosed patio, or similar area. The determination of Residential Floor Area for an Assessor's Parcel shall be made by reference to the building permit( s) issued for such Assessor's Parcel. ....., City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (Ame~tfJJA1'9. ;tt PAOE 'I j OF 5f- .~ "Residential Property" means all Assessor's Parcels of Developed Property for which a building permit permitting the construction thereon of one or more residential dwelling units has been issued by the City. "Resolution of Formation" means the Resolution of Formation for CFD No. 2004-3 (IA No.2). "Special Tax" means the special tax to be levied in each Fiscal Year on each Assessor's Parcel of Developed Property, Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property to fund the Special Tax Requirement. /""'" "Special Tax Requirement" means that amount required in any Fiscal Year for CFD No. 2004-3 (IA No.2) to: (i) pay debt service on all Outstanding Bonds due in the calendar year commencing in such Fiscal Year; (ii) pay periodic costs on the CFD No. 2004-3 (IA No.2) Bonds, including but not limited to, credit enhancement and rebate payments on the CFD No. 2004-3 (IA No.2) Bonds due in the calendar year commencing in such Fiscal Year; (iii) pay Administrative Expenses; (iv) pay any amounts required to establish orreplenish any reserve funds for all Outstanding Bonds; (v) pay for reasonably anticipated Special Tax delinquencies based on the delinquency rate for the Special Tax levy in the previous Fiscal Year; (vi) pay directly for acquisition or construction of Authorized Facilities to the extent that the inclusion of such amount does not increase the Special Tax levy on Undeveloped Property; less (vii) a credit for funds available to reduce the annual Special Tax levy, as determined by the CFD Administrator pursuant to the Indenture. "State" means the State of California. "Taxable Property" means all of the Assessor's Parcels within the boundaries ofCFD No. 2004-3 (IA No.2) which are not exempt from the Special Tax pursuant to law or Section E below. "Taxable Property Owner Association Property" means all Assessor's Parcels of Property Owner Association Property that are not exempt pursuant to Section E below. "Taxable Public Property" means all Assessor's Parcels of Public Property that are not exempt pursuant to Section E below. "Trustee" means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means, for each Fiscal Year, all Taxable Property not classified as Developed Property, Taxable Property Owner Association Property, or Taxable Public Property. "Zone" means Zone 1 or Zone 2, as applicable. r" "Zone 1" means the land geographically identified within the boundaries of zone I as delineated in Exhibit A to this Rate and Method of Apportionment. City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16,2004 (Amended May 23,2006) 2A AOENDA ITEM ~ 4 PACE c/? OF 54- "Zone 2" means the land geographically identified wit4in the boundaries of zone 2 as delineated in Exhibit A to this Rate and Method of Apportionment. """"" B. ASSIGNMENT TO LAND USE CATEGORIES Each Fiscal Year, all Taxable Property within CFD No. 2004-3 (IA No.2) shall be assigned to a Zone and further classified as Developed Property, Taxable Public Property, Taxable Property Owner Association Property, or Undeveloped Property, and shall be subject to Special Taxes in accordance with this Rate and Method of Apportionment de~ermined pursuant to Sections C and D below. Residential Property shall be assigned to Land Use Classes 1 through 11 as listed in Table 1 below based on the Residential Floor Area for each unit. Non-Residential Property shall be assigned to Land Use Class 12. C. MAXIMUM SPECIAL TAX RATE 1. Developed Property- a. Maximum Special Tax The Maximum Special Tax for each Assessor's Parcel classified as Developed Property shall be the greater of (i) the amount derived by application of the Assigned Special Tax or (ii) the amount derived by application ofthe Backup Special Tax. """"" b. Assigned Special Tax The Assigned Special Tax for each Land Use Class is shown below in Table 1. """"" City of Lake Elsinore CFD No. 1004-3 (IA No.1) December 16,1004 (Amended May 13,1006) AGENDA ~ PAGE .;tl OF S-~ ",-... TABLEt Assigned Special Taxes for Developed Property Community Facilities District No. 2004-3 Improvement Area No.2 Fiscal Year 2005-2006 1 Residential Property > 3,950 s.f. $3,271.79 per unit $3,565.47 per unit 2 Residential Property 3,701 - 3,950 s.f. $3,174.02 per unit $3,504.87 per unit 3 Residential Property 3,451 - 3,700 s.f. $3,076.25 per unit $3,443.77 per unit 4 Residential Property 3,201 - 3,450 s.f. $2,978.48 per unit $3,290.64 per unit 5 Residential Property 2,951 - 3,200 s.f. $2,880.71 per unit $3,172.60 per unit 6 Residential Property 2,701 - 2,950 s.f. $2,727.85 per unit $3,055.06 per unit 7 Residential Property 2,451 - 2,700 s.f. $2,659.26 per unit $2,975.78 per unit 8 Residential Property 2,201 - 2,450 s.f. $2,590.67 per unit $2,844.10 per unit. ",-... 9 Residential Property 1 ,951 - 2,200 s.f. $2,411.94 per unit $2,770.55 per unit 10 Residential Property 1,700 - 1,950 s.f. $2,353.03 per unit $2,688.11 per unit 11 Residential Property < 1,700 s.f. $2,294.11 per unit $2,590.62 per unit 12 Non-Residential Property NA $17,817 per Acre $16,754 per Acre c. Increase in the Assigned Special Tax The Assigned Special Taxes identified in Table 1 above shall be applicable for Fiscal Year 2005-2006, and shall increase thereafter, commencing on July 1, 2006 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Assigned Special Tax for the previous Fiscal Year. d. Backup Special Tax The Fiscal Year 2005-2006 Backup Special Tax attributable to a Final Subdivision in Zone 1 or Zone 2 will equal $19,868 multiplied by the Acreage of all Taxable Property, exclusive of any Taxable Property Owner Association Property and Taxable Public Property, therein. The Backup Special Tax for each Assessor's Parcel of Residential Property shall be ",...... computed by dividing the Backup Special Tax attributable to the applicable Final Subdivision by the number of Assessor's Parcels for which building permits for residential construction have or may be issued (i.e., the number or City of Lake Elsinore December 16, 1004 (Ame~~ft lJr.JjJglf)". ;)...; \ CFD No. 1004-3 (IA No.1) 11.1jJfJg'1'd. t'AUII: IJ~ OF~ residential lots). The Backup Special Tax for each Assessor's Parcel of Non- ~ Residential Property therein shall equal $19,868 multiplied by the Acreage of such Assessor's Parcel. If a Final Subdivision includes Assessor's Parcels of Taxable Property for which building permits for both residential and non-residential construction may be issued, exclusive of Taxable Property Owner Association Property and Taxable Public Property, then the Backup Special Tax for each Assessor's Parcel of Residential Property shall be computed exclusive of the Acreage and Assessor's Parcels of property for which building permits for non-residential construction may be issued. Notwithstanding the foregoing, if all or any portion of the Final Subdivision( s) described in the preceding paragraphs is subsequently changed or modified, then the Backup Special Tax for each Assessor's Parcel of Developed Property in such Final Subdivision area that is changed or modified shall be a rate per square foot of Acreage calculated as follows: 1. Determine the total Backup Special Taxes anticipated to apply to the changed or modified Final Subdivision area prior to the change or modification. 2. The result of paragraph 1 above shall be divided by the Acreage of Taxable Property which is ultimately expected to exist in such changed or modified Final Subdivision area, as reasonably determined by the CFD Administrator. '-' 3. The result of paragraph 2 above shall be divided by 43,560. The result is the Backup Special Tax per square foot of Acreage which shall be applicable to Assessor's Parcels of Developed Property in such changed or modified Final Subdivision area for all remaining Fiscal Years in which the Special Tax may be levied. 1. Release of Obligation to Pay and Disclose Backup Special Tax All Assessors' Parcels within CFD No. 2004-3 (IA No.2) will be relieved simultaneously and permanently from the obligation to pay and disclose the Backup Special Tax if the CFD Administrator determines that the annual debt service required for the Outstanding Bonds, when compared to the Assigned Special Taxes that may be levied against all Assessors' Parcels of Developed Property result in 110% debt service coverage (i.e., the Assigned Special Taxes that may be levied against all Developed Property in each remaining Fiscal Year based on then existing development in CFD No. 2004-3 (IA No.2) is at least equal to the sum of (i) the Administrative .~ City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16,2004 (Amended May 23,2006) AGENDA I'f8ItNO. PIa 1<( ;;t\ OF~ /""' Expenses and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds). e. Increase in the Backup Special Tax On each July 1, commencing on July 1, 2006, the Backup Special Tax shall be increased by an amount equal to two percent (2%) of the Backup Special Tax for the previous Fiscal Year. f. Multiple Land Use Classes In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Class. The Maximum Special Tax levied on an Assessor's Parcel shall be the sum ofthe Maximum Special Tax for all Land Use Classes located on that Assessor's Parcel. The CFD Administrator's allocation to eac~ type of property shall be final. 2. Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property /""' The Fiscal Year 2005-2006 Maximum Special Tax for Taxable Property Owner Association Property, Taxable Public Property, and Undeveloped Property in Zone 1 or Zone 2 shall be $19,868 per Acre, and shall increase thereafter, commencing on July 1, 2006 and on July 1 of each Fiscal Year thereafter, by an amount equal to two percent (2%) of the Maximum Special Tax for the previous Fiscal Year. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2005-2006 and for each following Fiscal Year, the City Council shall levy the Special Tax until the amount of Special Taxes levied equals the Special Tax Requirement. The Special Tax shall be levied each Fiscal Year as follows: First: The Special Tax shall be levied on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 in an amount equal to 100% of the applicable Assigned Special Tax; Second: If additional monies are needed to satisfy the Special Tax Requirement after the first step has been completed, the Special Tax shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property in Zone 1 and Zone 2 at up to 100% of the applicable Maximum Special Tax for Undeveloped Property; "...-- Third: If additional monies are needed to satisfy the Special Tax Requirement after the first two steps have been completed, then the levy of the Special Tax on each Assessor's Parcel of Developed Property in Zone 1 and Zone 2 whose Maximum Special Tax is determined through the application ofthe Backup Special Tax shall be increased Proportionately from the Assigned Special Tax up to the Maximum Special Tax for each such Assessor's Parcel; City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (Amended May 23, 2006) .:L\ AGENDA ITE~ PAGi 47 . OF 5 ~ '-" Fourth: If additional monies are needed to satisfy the Special Tax Requirement after the first three steps have been completed, then the Special Tax shall be levied Proportionately on each Assessor's Parcel of Taxable Property Owner Association Property and Taxable Public Property in Zone 1 and Zone 2 at up to the applicable Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property. Notwithstanding the above the City Council may, in any Fiscal Year, levy Proportionately less than 100% ofthe Assigned Special Tax in step one ( above), when (i) the City Council is no longer required to levy the Special Tax pursuant to steps two through four above in order to meet the Special Tax Requirement; and (ii) all authorized CFD No. 2004-3 (IA No.2) Bonds have already been issued or the City Council has covenanted that it will not issue any additional CFD No. 2004-3 (IA No.2) Bonds (except refunding bonds) to be supported by the Special Tax. Further notwithstanding the above, under no circumstances will the Special Tax levied against any Assessor's Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by the owner of any other Assessor's Parcel within CFD No. 2004-3 (IA No.2). E. EXEMPTIONS '-" The City shall classify Property Owner Association Property and/or Public Property in CFD No. 2004-3 (IA No.2) as exempt property, provided that no such classification would reduce the Acreage of all Taxable Property to less than 75.86 Acres. Tax-exempt status will be assigned by the CFD Administrator in the chronological order in which property becomes Property Owner Association Property or Public Property. However, should an Assessor's Parcel no longer be classified as Property Owner Association Property or Public Property, its tax-exempt status will be revoked. Property Owner Association Property or Public Property that is not exempt from Special Taxes under this section shall be subject to the levy of the Special Tax and shall be taxed Proportionately as part of the fourth step in Section D above, at up to 100% ofthe applicable Maximum Special Tax for Taxable Property Owner Association Property or Taxable Public Property. F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes; provided, however, that CFD No. 2004-3 (IA No.2) may directly bill the Special Tax, may collect Special Taxes at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. '-" City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16,2004 (Amended May 23,2006) ACENDA rr~.'PAGE ~ ~ ~\ OF~ ~ G. APPEALS Any landowner or resident who feels that the amount of the Special Tax levied on their Assessor's Parcel is in error may submit a written appeal to CFD No. 2004-3 (IA No.2). The CFD Administrator shall review the appeal and if the CFD Administrator concUrs, the amount of the Special Tax levied shall be appropriately modified. The City Council may interpret this Rate and Method of Apportionment for purposes of clarifYing any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or resident appeals. Any decision of the City Council shall be final and binding as to all persons. H. PREPAYMENT OF SPECIAL TAX The following definitions apply to this Section H: "Buildout" means, for CFD No. 2004-3 (IA No.2), that all expected building permits have been issued. /"'"'"" "CFD Public Facilities" means either $27,000,000 in 2006 dollars, which shall increase by the Construction Inflation Index on July 1, 2007, and on each July 1 thereafter, or such lower number as (i) shall be determined by the CFD Administrator as sufficient to provide the public facilities to be provided by CFD No. 2004-3 (IA No.2) under the authorized bonding program for CFD No. 2004-3 (IA No.2), or (ii) shall be determined by the City Council concurrently with a covenant that it will not issue any more CFD No. 2004-3 (IA No.2) Bonds (except refunding bonds) to be supported by the Special Taxes levied under this Rate and Method of Apportionment as described in Section D. "Construction Inflation Index" means the annual percentage change in the Engineering News Record Building Cost Index for the City of Los Angeles, measured as of the calendar year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the CFD Administrator that is reasonably comparable to the Engineering News Record Building Cost Index for the City of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus (i) public facility costs previously paid from the Improvement Fund, (ii) moneys currently on deposit in the Improvement Fund, and (iii) moneys currently on deposit in an escrow fund that are expected to be available to finance the cost of CFD Public Facilities. "Improvement Fund" means an account specifically identified in the Indenture to hold funds which are currently available for expenditure to acquire or construct CFD Public Facilities eligible under the Act. ,-. City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16,2004 (Ame__.".".. )..J PM(age~j~ OF Stf "Previously Issued Bonds" means, for any Fiscal Year, all Outstanding Bonds that are ..." deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. 1. Prepayment in Full Only an Assessor's Parcel of Developed Property, or Undeveloped Property for which a building permit has been issued, may be prepaid. The obligation ofthe Assessor's Parcel to pay any Special Tax may be permanently satisfied as described herein, provided that a prepayment may be made with respect to a particular Assessor's Parcel only ifthere are no delinquent Special Taxes with respect to such Assessor's Parcel at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such written notice, the CFD Administrator shall notify such owner ofthe prepayment amount for such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of CFD No. 2004-3 (IA No.2) Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Special Tax Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): ..." Bond Redemption Amount plus plus plus plus less less Total: equals Redemption Premium Future Facilities Amount Defeasance Amount Administrative Fees and Expenses Reserve Fund Credit Cauitalized Interest Credit Prepayment Amount As ofthe proposed date of prepayment, the Special Tax Prepayment Amount shall be calculated as follows: Paral!raph No.: I. Confirm that no Special Tax delinquencies apply to such Assessor's Parcel. 2. For Assessor's Parcels of Developed Property, compute the Assigned Special Tax and Backup Special Tax. For Assessor's Parcels of Undeveloped Property for which a building permit has been issued, compute the Assigned Special Tax and Backup Special Tax for that Assessor's Parcel as though it was already designated as Developed Property, based upon the building permit which has already been issued for that Assessor's Parcel. ....., City of Lake Elsinore CFD No. 1004-3 (IA No.1) Decemberl6,2004(~) .2.\ . . p~ ~Vp,. sC ~ 3. (a) Divide the Assigned Special Tax computed pursuant to paragraph 2 by the total estimated Assigned Special Taxes for the entire CFD No. 2004-3 (IA No.2) based on the Developed Property Special Taxes which could be levied in the current Fiscal Year on all expected development through Buildout of CFD No. 2004-3 (IA No.2), excluding any Assessor's Parcels which have been prepaid, and (b) Divide the Backup Special Tax computed pursuant to paragraph 2 by the total estimated Backup Special Taxes at Buildout for the entire CFD No. 2004-3 (IA No. 2), excluding any Assessor's Parcels which have been prepaid. 4. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the Previously Issued Bonds to compute the amount of Previously Issued Bonds to be retired and prepaid (the "Bond Redemption Amount"). 5. Multiply the Bond Redemption Amount computed pursuant to paragraph 4 ~y the applicable redemption premium (e.g., the redemption price-l00%), if any, on the Previously Issued Bonds to be redeemed (the "Redemption Premium"). 6. Compute the current Future Facilities Costs. ,-.... 7. Multiply the larger quotient computed pursuant to paragraph 3(a) or 3(b) by the amount determined pursuant to paragraph 6 to compute the amount of Future Facilities Costs to be prepaid (the "Future Facilities Amount"). 8. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Previously Issued Bonds. 9. Determine the Special Tax levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 10. Compute the minimum amount the CFD Administrator reasonably expects to derive from the reinvestment of the Special Tax Prepayment Amount less the Future Facilities Amount and the Administrative Fees and Expenses (defined below) from the date of prepayment until the redemption date for the Previously Issued Bonds to be redeemed with the prepayment. II. Add the amounts computed pursuant to paragraphs 8 and 9 and subtract the amount computed pursuant to paragraph 10 (the "Defeasance Amount"). 12. The administrative fees and expenses ofCFD No. 2004-3 (IA No.2) are as calculated by the CFD Administrator and include the costs of computation ofthe prepayment, the costs to invest the prepayment proceeds, the costs of redeeming CFD No. 2004-3 ".... City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 ~ J..\ stf r , (IA No.2) Bonds, and the costs of recording any notices to evidence the prepayment .....", and the redemption (the "Administrative Fees and Expenses"). 13. The reserve fund credit (the "Reserve Fund Credit") shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Previously Issued Bonds as a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Previously Issued Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date, but in no event shall such amount be less than zero. No Reserve Fund Credit shall be granted if the amount then on deposit in the reserve fund for the Previously Issued Bonds is below 100% ofthe reserve requirement (as defined in the Indenture). 14. If any capitalized interest for the Previously Issued Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 3( a) or 3(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment (the "Capitalized Interest Credit"). . 15. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to paragraphs 4, 5, 7, 11 and 12, less the amounts computed pursuant to paragraphs 13 and 14 (the "Prepayment Amount"). .....", From the Prepayment Amount, the amounts computed pursuant to paragraphs 4,5, II, 13 and 14 shall be deposited into the appropriate fund as established under the Indenture and be used to retire CFD No. 2004-3 (IA No.2) Bonds or make debt service payments. The amount computed pursuant to paragraph 7 shall be deposited into the Improvement Fund. The amount computed pursuant to paragraph 12 shall be retained by CFD No. 2004-3 (IA No.2). The Special Tax Prepayment Amount may be insufficient to redeem a full $5,000 increment ofCFD No. 2004-3 (IA No.2) Bonds. In such cases, the increment above $5,000 or integral multiple thereofwill be retained in the appropriate fund established under the Indenture to be used with the next prepayment ofCFD No. 2004-3 (IA No.2) Bonds or to make debt service payments. As a result ofthe payment ofthe current Fiscal Year's Special Tax levy as determined under paragraph 9 ( above), the CFD Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid, the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment ofthe Special Tax and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay the Special Tax shall cease. ....., City of Lake Elsinore CFD No. 2004-3 (IA No.2) ,.,- Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless, at the time of such proposed prepayment, the amount of Maximum Special Taxes that may be levied on Taxable Property within CFD No. 2004-3 (IA No.2) both prior to and after the proposed prepayment is at least equal to the sum of (i) the Administrative Expenses and (ii) 1.10 times maximum annual debt service, in each remaining Fiscal Year on the Outstanding Bonds. 2. Prepayment in Part The Special Tax on an Assessor's Parcel of Developed Property or an Assessor's Parcel of Undeveloped Property for which a building permit has been issued may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.I; except that a partial prepayment shall be calculated according to the following formula: PP = [(PE - A) x F] + A These terms have the following meaning: /"" PP= PE= F= the partial prepayment. the Special Tax Prepayment Amount calculated according to Section H.I. the percentage, expressed as a decimal, by which the owner of the Assessor's Parcel is partially prepaying the Special Tax. the Administrative Fees and Expenses calculated according to Section H.I. A= The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax and the percentage by which the Special Tax shall be prepaid. The CFD Administrator shall provide the owner with a statement ofthe amount required for the partial prepayment of the Special Tax for an Assessor's Parcel within 30 days of the request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section H.I, and (ii) indicate in the records of CFD No. 2004-3 (IA No.2) that there has been a partial prepayment of the Special Tax and that a portion of the Special Tax with respect to such Assessor's Parcel, equal to the outstanding percentage (1.00 - F) of the remaining Maximum Special Tax, shall continue to be levied on such Assessor's Parcel pursuant to Section D. I. TERM OF SPECIAL TAX /"" The Special Tax shall be levied for a period not to exceed forty years commencing with Fiscal Year 2005-2006, provided however that Special Taxes will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2004-3 (IA No.2) Bonds have been paid; and (ii) all Authorized Facilities have been constructed. City of Lake Elsinore CFD No. 2004-3 (IA No.2) December 16, 2004 (Amended MI9!. ~.06) ;J.. \ ACENDAITEM 14 PACE t):? OF 6 L.f RATE AND METHOD OF APPORTIONMENT FOR ......" CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2004-3 IMPROVEMENT AREA No.2 (ROSETTA CANYON) EXHIBIT A MAP OF ZONE 1 AND ZONE 2 ......" ,....., AGEIVDA ITEM NO~ ;). , PAGi 6~ ~ r"'- , ORDINANCE NO. 1182 ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE AUTHORIZING THE LEVY OF A SERVICES SPECIAL TAX AND A SPECIAL TAX WHEREAS, on January 24, 2006, the City. Council (the "Council") of the City of Lake Elsinore (the "City") adopted Resolution No. 2006-10 stating its intention to form the City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) (the "CFD") pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), to finance a portion of the cost of providing parks, open space and storm drains maintenanc,e services (the "Services") that are in addition to those provided in the territory within the CFD prior to the formation of the CFD, and to finance the purchase, construction, expansion or rehabilitation of certain real and other tangible property with an estimated useful life of five years or longer, including public infrastructure facilities and other governmental facilities, which the City is authorized by law to construct, own or operate (the "Facilities"); and ""' WHEREAS, on January 24,2006, the Council also adopted Resolution No. 2006-11 stating its intention and the necessity to incur bonded indebtedness in the amount not to exceed $12,800,000 to be issued for the purpose of financing the purchase, construction, expansion or rehabilitation of the Facilities; and WHEREAS, notice was published as required by law relative to the intention of the Council to form the CFD and to incur bonded indebtedness in the amount not to exceed $12,800,000 within the boundaries of the CFD; and WHEREAS, on February 28, 2006, which original public hearing date was continued to March 28, 2006 and further continued to June 13, 2006 due to the complexity of the CFD, this Council held a noticed public hearing as required by law relative to the determination to proceed with the formation of the CFD, the rate and method of apportionment and manner of collection of the special tax to be levied within the CFD to pay for the Services and the rate and method of apportionment and manner of collection of the special tax to be levied within the CFD to pay the principal and interest on the proposed bonded indebtedness of the CFD, and relative to the necessity for authorizing the bonds, the purpose for which the bonds are to be issued, the amount of the proposed debt, the maximum term of the bonds and the maximum annual rate of interest to be paid; and r"'- AaENDA lTEU NO. 6 I PA"'~ J n~,1~c/~~ CITY COUNCIL ORDINANCE NO. 1182 Page 2 of 4 WHEREAS, at said hearing all persons desiring to be heard on all matters pertaining to the formation of the CFD and the incurring of bonded indebtedness ..." by the CFD were heard and a full and fair hearing was held; and WHEREAS, the Council subsequent to said hearing adopted Resolution No. 2006-79 determining the validity of prior proceedings and established the CFD; and WHEREAS, the Council subsequent to said hearing adopted Resolution No. 2006-80 which called an election within the CFD for June 13, 2006 on the proposition of incurring bonded indebtedness, levying a special tax and setting an appropriations limit; and WHEREAS, on June 13, 2006, an election was held within the CFD in which the eligible electors approved by more than two-thirds vote the proposition of incurring bonded indebtedness, levying a special tax, and setting an appropriations limit. ' THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES ORDAIN AS FOLLOWS: SECTION 1. A special tax (the "Services Special Tax") is levied within the ....., boundaries of the CFD pursuant to the formula set forth in Exhibit "A" attached hereto and incorporated by reference in an amount'necessary to pay all of the costs of providing the Services, periodic costs, and costs of the tax levy and collection, and all other costs. SECTION 2. A special tax (the "Special Tax") is levied within the boundaries of the CFD pursuant to the formulas set forth in Exhibit "A" attached hereto and incorporated by reference in an amount necessary to pay all of the costs of providing the Facilities, periodic costs, and costs of the tax levy and collection, and all other costs including amounts payable with respect to the bonded indebtedness. SECTION 3. This legislative body is hereby further authorized each year, by resolution adopted as provided in section 53340 of the Act, to determine the specific special tax rate and amount to be levied for the then current or future tax years, except that the special tax rate to be levied shall not exceed the maximum rate set forth in Exhibit "A". ..." 9,l"...","",=~ PAGE ~_,_ Of' ~~~ CITY COUNCIL ORDINANCE NO. 1182 Page 3 of 4 .I""'" SECTION 4. All of the collections of the Services Special Tax and Special Tax shall be used as provided for in the Act and Resolution No. 2006-79 (Resolution of Formation). SECTION 5. The above authorized Services Special Tax and the Special Tax shall be collected in the same manner as ordinary ad valorem taxes are collected and shall be subject to the same penalties and the same procedure and sale in cases of delinquency and provided for ad valorem taxes; provided, however, the CFD may collect the Services Special Tax and the Special Tax at a different time or in a different manner if necessary to meet its financial obligations. SECTION 6. The Mayor shall sign this ordinance and the City Clerk shall attest to such signature. The City Clerk is directed to cause the title and summary or text of the this ordinance, together with the vote thereon, to be published within fifteen (15) days after its passage at least once in a newspaper of general . circulation published and circulated within the territorial jurisdiction of the City, and to post at the main office of the City a certified copy of the full text of the adopted ordinance along with the names of the council Members voting for and against the ordinance. ~ SECTION 7. This ordinance relating to the levy of the Services Special Tax and the Special Tax takes effect and shall be in force from and after 30 days from the date of final passage. A copy of this ordinance shall be transmitted to the Clerk of the Board of Supervisors of Riverside County, the Assessor and the Treasurer- Tax Collector of Riverside County. ~ 3\ ;h3c,~, 3 ,...,.,..'... CITY COUNCIL ORDINANCE NO. 1182 Page 4 of 4 INTRODUCED AND APPROVED UPON FIRST READING this 13 '-'" day of June, 2006, upon the following roll call vote: AYES: COUNCILMEMBERS: BUCKLEY, IDCKMAN, KELLEY, SCIDFFNER, MAGEE NOES: COUNCILMEMBERS: NONE ABSENT: COUNCILMEMBERS: NONE ABSTAIN: COUNCILMEMBERS: NONE PASSED, APPROVED AND ADOPTED, UPON SECOND READING this 27 day of June, 2006, upon the following roll call vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: '-'" ABSENT: COUNCILMEMBERS: ' ABSTAIN: COUNCILMEMBERS: Robert Magee, Mayor City of Lake Elsinore ....., AGENDA ITEM NO. 2> \ PAGEL OF ?'1 r- /"'"' r- CITY COUNCIL ORDINANCE NO. 1182 Page 5 of 4 ATTEST: Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore :b\ AQENO'A iTEM NO, ~cc,.,,'_""- '" PAGE S ...- OF,d3.-.- EXHIBIT "A" ......" RATE AND METHOD OF APPORTIONMENT ......" ......" ~\ M1ENDA \TEM NO.- _. __'"= ,,_~ 0\=13 .- ,-~.. - ,-... EXHIBIT" A" RATE AND METHOD OF APPORTIONMENT ,-... ,..... .'. ~, AQtr~0r\, I f C;~Vf 1;i;\J, UAi.,,,",,__ ". PAGE 7 OF~~ RATE AND METHOD OF APPORTIONMENT FOR COMMUNITY FACILITIES DISTRICT NO. 2006-3 OF THE CITY OF LAKE ELSINORE (La Strada) ....." The following sets forth the Rate and Method of Apporti9nment for the levy and collection of Special Taxes of the City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) ("CFD No. 2006-3"). The Special Tax shall be levied on and collected each Fiscal Year, in an amount determined through the application of the Rate and Method of Apportionment described below. All of the real property within CFD No. 2006-3 unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. SECTION A DEFINITIONS The terms hereinafter set forth have the following meanings: "Acre or Acreage" means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, condominium plan, or other recorded County parcel map or instrument. The square footage of an Assessor's Parcel is equal to the Acreage multiplied by 43,560. "Act" means the Mello-Roos Communities Facilities Act of 1982, as amended, being Chapter 2.5, '"-" Part 1 of Division 2 of Title 5 of the Government Code of the State ofCalifomia. "Administrative Expenses" means the following actual or reasonably estimated costs directly related to the administration of CFD No. 2006-3: the costs of computing the Special Taxes and preparing the Special Tax collection schedules (whether by the City or designee thereof or both); the costs of collecting the Special Taxes (whether by the City or otherwise); the costs of remitting the Special Taxes for Facilities to the Trustee; the costs of the Trustee (including legal counsel) in the discharge of the duties required of it under the Indenture; the costs to the City, CFD No. 2006-3 or any designee thereof of complying with arbitrage rebate requirements; the costs to the City, CFD No. 2006-3 or any designee thereof of complying with disclosure requirements of the City, CFD No. 2006-3 or obligated persons associated with applicable federal and state securities laws and the Act; the costs associated with preparing Special Tax disclosure statements and responding to public inquiries regarding the Special Taxes; the costs of the City, CFD No. 2006-3 or any designee thereof related to an appeal ofthe Special Tax; the costs associated With the release offunds from an escrow account; and the City's annual administration fees and third party expenses. Administrative Expenses shall also include amounts estimated by the CFD Administrator or advanced by the City or CFD No. 2006-3 for any other administrative purposes ofCFD No. 2006-3, including attorney's fees and other costs related to commencing and pursuing to completion any foreclosure of delinquent Special Taxes. "Apartment Property" means all Assessor's Parcels of Residential Property on which one or more Apartment Units are constructed. ' ....." City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 3t AGENDA freA NO. --'.' q ':J"? /"""'"' "Apartment Unit" means a dwelling unit within a building comprised of attached residential units available for rental by the general public, not for sale to an end user, and under common management. "Approved Property" means all Assessor's Parcels of Taxable Property: (i) that are included in a Final Map that was recorded prior to the January 1 st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) that have not been issued a building permit on or before May 1 st preceding the Fiscal Year in which the Special Tax is being levied. "Assessor's Parcel" means a lot or parcel ofland designated on an Assessor's Parcel Map with an assigned Assessor's Parcel Number. "Assessor's Parcel Map" means an official map of the Assessor of the County designating parcels by Assessor's Parcel Number. "Assessor's Parcel N um ber" means that number assigned to an Assessor's Parcel by the County for purposes of identification. "Assigned Special Tax for Facilities" means the Special Tax of that name described in Section D below. "Backup Special Tax for Facilities" means the Special Tax of that name described in Section E 'below. r--. "Bonds" means any obligation to repay a sum of money, including obligations in the form of bonds, notes, certificates of participation, long-term leases, loans from government agencies, or loans from banks, other financial institutions, private businesses, or individuals, or long-term contracts, or any refunding thereof, to which Special Taxes for Facilities within CFD No. 2006-3 have been pledged. "Building Square Footage" or "BSF" means the square footage of assessable internal living space, exclusive of garages or other structures not used as living space, as determined by reference to the building permit application for such Assessor's Parcel. "Calendar Year" means the period commencing January 1 of any year and ending the following December 31. "CFD Administrator" means an official of the City, or designee thereof, responsible for (i) determining the Special Tax Requirement for Facilities, (ii) determining the Special Tax Requirement for Services, as defined in Section L, as applicable, and (iii) providing for the levy and collection of the Special Taxes. "CFD No. 2006-3" means Community Facilities District No. 2006-3 (La Strada) established by the City under the Act. "City" means the City of Lake Elsinore. r-- "City Council" means the City Council of the City of Lake Elsinore, acting as the Legislative Body ofCFD No. 2006-3, or its designee. I City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 A;JENOA fige:~ '"'-". . ..-- 9.. ... ti'il..~ ,v~l,.......... i'e ~1 "County" means the County of Riverside. "Developed Property" means all Assessor's Parcels of Taxable Property that: (i) are included in a Final Map that was recorded prior to the January 1 st preceding the Fiscal Year in which the Special Tax is being levied, and (ii) a building permit for new construction was issued on or before May 1 st preceding the Fiscal Year in which the Special Tax is being levied. '-II' "Exempt Property" means all Assessor's Parcels designated as being exempt from Special Taxes as provided for in Section J. "Final Map" means a subdivision of property by recordation of a final map, parcel map, or lot line adjustment, pursuant to the Subdivision Map Act (California Government Code Section 66410 et seq.) or recordation of a condominium plan pursuant to California Civil Code 1352 that creates individual lots for which building permits may be issued without further subdivision. "Fiscal Year" means the. period commencing on July 1 of any year and ending the following June 30. "Indenture" means the indenture, fiscal agent agreement, resolution or other instrument pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the. same. "Land Use Type" means any of the types listed in Table 1 of Section D. "Maximum Special Tax for Facilities" means the maximum Special Tax for Facilities, determined ......" in accordance with Section C, that can be levied by CFD No. 2006-3 in any Fiscal Year on any Assessor's Parcel. "Non-Residential Property" means all Assessor's Parcels of Developed Property for which a building permit was issued for any type of non-residential use. e , "Partial Prepayment Amount" means the amount required to prepay a portion of the Special Tax for Facilities obligation for an Assessor's Parcel, as described in Section H. "Prepayment Amount" means the amount required to prepay the Special Tax for Facilities obligation in full for an Assessor's Parcel, as described in Section G. "Proportionately" means that the ratio ofthe actual Special Tax for Facilities levy to the applicable Assigned Special Tax for Facilities is equal for all applicable Assessor's Parcels. In case of Developed Property subject to the apportionment of the Special Tax for Facilities under step four of Section F, "Proportionately" in step four means that the quotient of (a) actual Special Tax for Facilities less the Assigned Special Tax for Facilities divided by (b) the Backup Special Tax for Facilities less the Assigned Special Tax for Facilities, is equal for all applicable Assessor's Parcels. "Provisional Undeveloped Property" means all Assessor's Parcels of Taxable Property that would otherwise be classified as Exempt Property pursuant to the provisions of Section J, but cannot be classified as Exempt Property because to do so would reduce the Acreage of all Taxable Property below the required minimum Acreage set forth in Section J. City of Lake Elsinore Community Facilities District No. 200~3 (La Strada) ......, May 25, 2006 AQEN)AIttUI NO. 0\ ~. _.__ IV nr:: 2~ "Residential Property" means all Assessor's Parcels of Developed Property for which a building ,,-.. permit has been issued for purposes of constructing one or more residential dwelling units. "Single Family Property" means all Assessor's Parcels of Residential Property other than Apartment Property. "Single Family Unit" means a residential dwelling unit other than an Apartment Unit. "Special Tax" means any of the special taxes authorized to be levied by CFD No. 2006-3 pursuant to the Act. "Special Tax for Facilities" means any of the special taxes authorized to be levied within CFD No. 2006-3 pursuant to the Act to fund the Special Tax Requirement for Facilities. "Special Tax Requirement for Facilities" means the amount required in any Fiscal Year to pay: (i) the debt service or the periodic costs on all outstanding Bonds due in the Calendar Year that commences in such Fiscal Year, (ii) Administrative Expenses, (iii) the costs associated with the release of funds from an escrow account, (iv) any amount required to establish or replenish any reserve funds established in association with the Bonds, (v) an amount equal to any anticipated shortfall due to Special Tax for Facilities delinquencies in the prior Fiscal Year, and (vi) the collection or accumulation of funds for the acquisition or construction of facilities authorized by CFD No. 2006-3 provided that the inclusion of such amount does not cause an increase in the levy of Special Tax for Facilities on Undeveloped Property as set forth in Step Three of Section F., less r" (vii) any amounts available to pay debt service or other periodic costs on the Bonds pursuant to the Indenture. "Taxable Property" means all Assessor's Parcels within CFD No. 2006-3, which are not Exempt Property . "Trustee" means the trustee, fiscal agent, or paying agent under the Indenture. "Undeveloped Property" means all Assessor's Parcels of Taxable Property which are not Developed Property, Approved Property or Provisional Undeveloped Property. SECTION B CLASSIFICATION OF ASSESSOR'S PARCELS Each Fiscal Year, beginning with Fiscal Year 2006-07, each Assessor's Parcel within CFD No. 2006-3 shall be classified as Taxable Property or Exempt Property. In addition, each Assessor's Parcel of Taxable Property shall be further classified as Developed Property~ Approved Property, Undeveloped Property or Provisional Undeveloped Property. In addition, each Assessor's Parcel of Developed Property shall further be classified as Residential Property or Non-Residential Property. Lastly, each Assessor's Parcel of Residential Property shall further be classified as a Single Family Property or Apartment Property, and each Assessor's Parc~l of Single Family Property shall be ,.... assigned to its appropriate Assigned Special Tax for Facilities rate based on its Building Square Footage. City of Lake Elsinore Community Facilities District No. 200~3 (La Strada) May 25, 2006 AQENDA~ NO.:r",~~1 A ij.A~ J I iie.::2~ SECTION C MAXIMUM SPECIAL TAX FOR FACILITIES ....." 1. Developed Propertv The Maximum Special Tax for Facilities for each Assessor's Parcel of Single Family Property in any Fiscal Year shall be the greater of (i) the Assigned Special Tax for Facilities or (ii) the Backup Special Tax for Facilities. The Maximum Special Tax for Facilities for each Assessor's Parcel of Apartment Property or Non-Residential Property shall be the applicable Assigned Special Tax for Facilities described in Table 1 of Section D. Prior to the issuance of Bonds, the Assigned Special Tax for Facilities on Developed Property set forth in Table 1 may be reduced in .accordance with, and subject to the conditions set forth in this paragraph. If it is reasonably determined by the CFD Administrator that the overlapping debt burden (as defined in the Statement of Goals and Policies for the Use of the Mello-Roos Community Facilities Act of 1982 adopted by the City Council, the "Goals and Policies") calculated pursuant to the Goals and Policies exceeds the City's maximum level objective set forth in such document, the Maximum Special Tax for Facilities on Developed Property may be reduced (by modifying Table 1) to the amount necessary to satisfy the City's objective with respect to the maximum overlapping debt burden level with the written consent of the CFD Administrator. In order to reduce the Maximum Special Tax for Facilities on Developed Property it may be necessary to reduce the Maximum Special Tax for Facilities for Undeveloped Property. The reductions permitted pursuant to this paragraph shall be reflected in an amended Notice of Special Tax Lien which the City shall cause to be recorded by executing a certificate in substantially the form attached hereto as Exhibit "A". '-' 2. Multiple Land Use Tvpe In some instances an Assessor's Parcel of Developed Property may contain more than one Land Use Type. The Maximum Special Tax for Facilities levied on an Assessor's Parcel shall be the sum of the Maximum Special Tax for Facilities for all Land Use Types located on the Assessor's Parcel. The CFD Administrator's allocation to each type of property shall be final. 3. Approved Propertv. Undeveloped Propertv and Provisional Undeveloped Propertv The Maximum Special Tax for Facilities for each Assessor's Parcel classified as Approved Property, Undeveloped Property, or Provisional Undeveloped Property in any Fiscal Year shall be the applicable Assigned Special Tax for Facilities. ......" City of Lake Elsinore Community Facilities District No. 200~3 (La Strada) May 25, 2006 3) AGENOAPllEM NO. _.. _.- I:J.- nr:~]! r-- SECTION D ASSIGNED SPECIAL TAX FOR FACILITIES 1. Developed Property Each Fiscal Year, each Assessor's Parcel of Single Family Property, Apartment Property, or Non-Residential Property shall be subject to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities applicable to an Assessor's Parcel of Developed Property for Fiscal Year 2006-07 shall be determined pursuant to Table 1 below. TABLE 1 ASSIGNED SPECIAL TAX FOR FACILITIES RATES FOR DEVELOPED PROPERTY FOR FISCAL YEAR 2006-07 Land Use T e Single Family Property Buildin S uare Foota e Greater than or equal to 3,301 3,101 - 3,300 2,901 - 3,100 Less than or e ual to 2,900 N/A N/A Rate $4,946 per Single Family Unit ,,-, Unit Unit Unit 2. Approved Property. Undeveloped Property and Provisional Undeveloped Property Each Fiscal Year, each Assessor's Parcel of Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be subject to an Assigned Special Tax for Facilities. The Assigned Special Tax for Facilities rate for an Assessor's Parcel classified as Approved Property, Undeveloped Property and Provisional Undeveloped Property for Fiscal Year 2006-07 shall be $27,741 per Acre. 3. Increase in the Assie:ned Special Tax for Facilities On each July 1, commencing July 1,2007, the Assigned Special Tax for Facilities rate for Developed Property, Approved Property, Undeveloped Property and Provisional Undeveloped Property shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. SECTION E BACKUP SPECIAL TAX FOR FACILITIES r-- At the time a Final Map is recorded, the Backup Special Tax for Facilities for all Assessor's Parcels of Developed Property classified or reasonably expected to be classified as a Single Family Property within such Final Map area shall be determined by (i) multiplying (a) the Maximum Special Tax for Facilities rate for Undeveloped Property by (b) the total Acreage of Taxable Property in such Final City of Lake Elsinore Community Facilities District No. 200~3 (La Strada) May 25, 2006 c ... .~... !lNC' ~\ "",._c,.;" .. ..' . . _. ,-0'_"'_. '~Yif-~\!t l,A . '...~ .,,0 ...c........... '. :;.::~~ /3 ~~ Map area, excluding Acreage classified as Provisional Undeveloped Property, Acreage classified or reasonably expected to be classified as Apartment Property or Non-Residential Property, and any Acreage reasonably expected to be classified as Exempt Property in such Final Map area, and (ii) dividing the results in (i) by the total number of Single Family Units reasonably expected to be constructed within such Final Map area. The resulting quotient shall be the Backup Special Tax for Facilities for each Assessor's Parcel of Single Family Property within such Final Map area. ..., The Backup Special Tax for Facilities shall not apply to Npn-Residential Property or Apartment Property . Notwithstanding the foregoing, if Assessor's Parcels of Developed Property which are classified or to be classified as Single Family Property are subsequently changed or modified by recordation of a lot line adjustment or similar instrument, then the Backup Special Tax for Facilities for the area that has been changed or modified shall be recalculated, based on the methodology above, to equal the amount of Backup Special Tax for Facilities that would have been generated if such change did not take place. On each July 1, commencing July 1, 2007, the Backup Special Tax for Facilities rate shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. SECTION F METHOD OF APPORTIONMENT OF THE SPECIAL TAX FOR FACILITIES I Commencing Fiscal Year 2006-07 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Facilities on all Taxable Property in accordance with the following steps: ..., Step One: The Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Developed Property at up to 100% of the applicable Assigned Special Tax for Facilities rates in Table 1 to satisfy the Special Tax Requirement for Facilities. Step Two: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first step has been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Approved Property at up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Three: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first two steps have been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Undeveloped Property up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Step Four: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first three steps have been completed, then the Special Tax for Facilities on each Assessor',s Parcel of Developed Property whose Maximum Special Tax for Facilities is the Backup Special Tax for Facilities shall be increased Proportionately '-' City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 AGENOA~~ NO. 6 l nane ILJ ~ ~ "..... from the Assigned Special Tax for Facilities up to 100% of the Backup Special Tax for Facilities as needed to satisfy the Special Tax Requirement for Facilities. Step Five: If additional moneys are needed to satisfy the Special Tax Requirement for Facilities after the first four steps have been completed, the Special Tax for Facilities shall be levied Proportionately on each Assessor's Parcel of Provisional Undeveloped Property up to 100% of the Maximum Special Tax for Facilities applicable to each such Assessor's Parcel as needed to satisfy the Special Tax Requirement for Facilities. Notwithstanding the above, under no circumstances will the Special Tax for Facilities levied against any Assessor's Parcel of Residential Property for which an occupancy permit for private residential use has been issued be increased by more than ten percent as a consequence of delinquency or default by owner of any other Assessor's Parcel within CFD No. 2006-3. SECTION G PREPAYMENT OF SPECIAL TAX FOR FACILITIES The following additional definitions apply to this Section G: r- "CFD Public Facilities" means $7,990,000, expressed in 2006 dollars, which shall increase by the Construction Inflation Index on July 1,2007, and on each July 1 thereafter, or such lower amount (i) determined by the City Council as sufficient to provide the public facilities under the authorized bonding program for CFD No. 2006-3, or (ii) determined by the City Council concurrently with a covenant that it will not issue any more Bonds to be supported by Special Taxes for Facilities levied under this Rate and Method of Apportionment. "Construction Fund" means an account specifically identified in the Indenture or functionally equivalent to hold funds, which are currently available for expenditure to acquire or construct public facilities eligible under CFD No. 2006-3. "Construction Inflation Index" means the annual percentage change in the Engineering News- Record Building Cost Index for the city of Los Angeles, measured as of the Calendar Year which ends in the previous Fiscal Year. In the event this index ceases to be published, the Construction Inflation Index shall be another index as determined by the City that is reasonably comparable to the Engineering News-Record Building Cost Index for the city of Los Angeles. "Future Facilities Costs" means the CFD Public Facilities minus public facility costs available to be funded through existing construction or escrow accounts or funded by the Outstanding Bonds, and minus public facility costs funded by interest earnings on the Construction Fund actually earned prior to the date of prepayment. ",--.-. City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 ..{GENI>,;;, lU:{~' 19'...._ '" ~..;;~e 875 . _"--.'.~ "1~~.' ....A~_~-.J4"'~ "Outstanding Bonds" means all previously issued Bonds is~ued and secured by the levy of Special Taxes for Facilities which will remain outstanding after the first interest and/or principal payment date following the current Fiscal Year, excluding Bonds to be redeemed at a later date with the proceeds of prior prepayments of Special Taxes for Facilities. "-fII' The Special Tax for Facilities obligation of an Assessor's Parcel of Developed Property, or an Assessor's Parcel of Approved Property or Undeveloped Property for which a building permit has been issued or is expected to be issued, or an Assessor's Parcel of Provisional Undeveloped Property may be prepaid in full, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time the Special Tax for Facilities obligation would be prepaid. The Prepayment Amount for an Assessor's Parcel eligible for prepayment shall be determined as described below. An owner of an Assessor's Parcel intending to prepay the Special Tax for Facilities obligation shall provide the CFD Administrator with written notice of intent to prepay. Within 30 days of receipt of such notice the CFD Administrator shall notify such owner of the Prepayment Amount of such Assessor's Parcel. The CFD Administrator may charge a reasonable fee for providing this service. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Trustee pursuant to the Indenture. The Prepayment Amount for each applicable Assessor's Parcel shall be calculated according to the following formula (capitalized terms defined below): "-fII' plus plus plus plus less less equals Bond Redemption Amount Redemption Premium Future Facilities Amount Defeasance Cost Administrative Fee Reserve Fund Credit Capitalized Interest Credit Prepayment Amount As of the date of prepayment, the Prepayment Amount shall be calculated as follows: 1. For an Assessor's Parcel of Developed Property, compute the Assigned Special Tax for Facilities and Backup Special Tax for Facilities, if any, applicable to the Assessor's Parcel. For an Assessor's Parcel of Approved Property or Undeveloped Property, c'ompute the Assigned Special Tax for Facilities and the Backup Special Tax for Facilities as though it was already designated as Developed Property based upon the building permit issued or expected to be issued for that Assessor's Parcel. For an Assessor's Parcel of Provisional Undeveloped Property compute the Assigned Special Tax for Facilities for that Assessor's Parcel. ......" City of Lake Elsinore Community Facilities District No. 200~3 (La Strada) May 25, 2006 2. ~ ""'" ~ For each Assessor's Parcel of Developed Property, Approved Property, Undeveloped Property or Provisional Undeveloped Property to be prepaid, (a) divide the Assigned Special Tax for Facilities computed pursuant to paragraph 1 for such Assessor's Parcel by the sum of the estimated Assigned Special Tax for Facilities applicable to all Assessor's Parcels of Taxable Property at buildout, as reasonably determined by the City, and (b) divide the Backup Special Tax for Facilities computed pursuant to paragraph 1 for such Assessor's Parcel by the sum of the estimated Backup Special Tax for Facilities applicable to all Assessor's Parcels of Taxable Property at buildout, as reasonably determined by the City. 3. Multiply the larger quotient computed pursuant to paragraph 2(a) or 2(b) by the Outstanding Bonds. The product shall be the "Bond Redemption Amount". 4. Multiply the Bond Redemption Amount by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed with the proceeds of the Bond Redemption Amount. This product is the "Redemption Premium. " 5. Compute the Future Facilities Cost. 6. Multiply the larger quotient computed pursuant to paragraph 2(a) or 2(b) by the amount determined pursuant to paragraph 5 to determine the Future Facilities Cost to be prepaid (the "Future Facilities Amount"). 7. Compute the amount needed to pay interest on the Bond Redemption Amount to be redeemed with the proceeds of the Prepayment Amount until the earliest redemption date for the Outstanding Bonds. 8. Determine the actual Special Tax for Facilities levied on the Assessor's Parcel in the current Fiscal Year which has not yet been paid. 9. Estimate the amount of interest earnings to be derived from the reinvestment of the Bond Redemption Amount plus the Redemption Premium until the earliest redemption date for the Outstanding Bonds. 10. Add the amounts computed pursuant to paragraph 7 and 8 and subtract the amount computed pursuant to paragraph 9. This difference is the "Defeasance Cost." ' 11. Estimate the administrative fees and expenses associated with the prepayment, including the costs of computation of the Prepayment Amount, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption. This amount is the "Administrative Fee." City of Lake Elsinore Community Facilities District No. 200~3 (La Strada) May 25, 2006 ,.t.l~:'I\\"'" ."., 0) 1~~~"'1,,1" . ~t {.;.;- '. "'''PagA.4:1' ,.u =~-==-= ", pA(~ (7 OF d3 12. Calculate the "Reserve Fund Credit" as the lesser of: (a) the expected reduction in the applicable reserve requirements, if any, associated with the redemption of Outstanding Bonds as' a result of the prepayment, or (b) the amount derived by subtracting the new reserve requirements in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the applicable reserve funds on the prepayment date. Notwithstanding the foregoing, if the reserve fund requirement is satisfied by a surety bond or other instrument at the time of the prepayment, then no Reserve Fund Credit shall be given. Notwithstanding the foregoing, the Reserve Fund Credit shall in no event be less than O. "-"" 13. If any capitalized interest for the Outstanding Bonds will not have been expended as of the date immediately following the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the larger quotient computed pursuant to paragraph 2( a) or 2(b) by the expected balance in the capitalized interest fund or account under the Indenture after such first interest and/or principal payment. This amount is the "Capitalized Interest Credit." 14. The Prepayment Amount is equal to the sum of the Bond Redemption Amount, the Redemption Premium, the Future Facilities Amount, the Defeasance Cost, and the Administrative Fee, less the Reserve Fund Credit and the Capitalized Interest Credit. ~ 15. From the Prepayment Amount, the ~ounts computed pursuant to paragraphs 3,4, 10, 12, and 13 shall be deposited into the appropriate fund as established under the Indenture and used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to paragraph 6 shall be deposited into the Construction Fund. The amount computed pursuant to paragraph 11 shall be retained by CFD No. 2006-3. The Special Tax for Facilities prepayment amount may be insufficient to redeem a full $5,000 increment of Bonds. In such cases, the increment above $5,000 or integral multiple thereof will be retained in the appropriate fund established under the Indenture to be used with the next prepayment of Bonds or to make debt service payments. With respect to a Special Tax for Facilities obligation that is prepaid pursuant to this Section G, the City Council shall indicate in the records ofCFD No. 2006-3 that there has been a prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such prepayment to indicate the prepayment of the Special Tax for Facilities obligation and the release of the Special Tax for Facilities lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pay such Special Taxes for Facilities shall cease. ~ City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 ~, ; QE~,~~1',1.p!lgEl~ /\;(} c~_.~=~~ / f("",;A1~ ;"'" Notwithstanding the foregoing, no prepayment will be allowed unless the amount of Special Tax for Facilities that may be levied on Taxable Property, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principaJ payments on all currently Outstanding Bonds in each future Fiscal Year. SECTION H PARTIAL PREPAYMENT OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities obligation of an Assessor's'Parcel of Developed Property, or an Assessor's Parcel of Approved Property or Undeveloped Property for which a building permit has been issued or is expected to be issued, or and Assessor's Parcel of Provisional Undeveloped Property, as calculated in this Section H below, may be partially prepaid, provided that there are no delinquent Special Taxes, penalties, or interest charges outstanding with respect to such Assessor's Parcel at the time the Special Tax for Facilities obligation would be prepaid. The Partial Prepayment Amount shall be calculated according to the following formula: , PP = (Po-A) x F + A The terms above have the following meanings: ,,-.... PP= Po= F= the Partial Prepayment Amount. the Prepayment Amount calculated according to Section G. the percent by which the owner of the Assessor's Parcel is partially prepaying the Special Tax for Facilities obligation. the Administrative Fee calculated according to Section G. A= The owner of any Assessor's Parcel who desires such prepayment shall notify the CFD Administrator of such owner's intent to partially prepay the Special Tax for Facilities and the percentage by which the Special Tax for Facilities shall be prepaid. The CFD Administrator shall provide the owner with a statement of the amount required for the partial prepayment of the Special Tax for Facilities for an Assessor's Parcel within 30 days of$e request and may charge a reasonable fee for providing this service. With respect to any Assessor's Parcel that is partially prepaid, the City Council shall (i) distribute the funds remitted to it according to Section G, and (ii) indicate in the records ofCFD No. 2006-3 that there has been a partial prepayment of the Special Tax for Facilities obligation and shall cause a suitable notice to be recorded in compliance with the Act within thirty (30) days of receipt of such partial prepayment of the Special Tax for Facilities obligation to indicate the obligation of such Assessor's Parcel to pay such prepaid portion ofthe Special Tax for Facilities shall cease. Notwithstanding the foregoing, no partial prepayment will be allowed unless the amount of Special Tax for Facilities that may be levied on Taxable Property after such partial prepayment, net of Administrative Expenses, shall be at least 1.1 times the regularly scheduled annual interest and principal payments on all currently Outstanding Bonds in each future Fiscal Year. ;""'. City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 AaEt&>.\>lIFM NO. -01 DArn: /9 OF..a3.- SECTION I TERMINATION OF SPECIAL TAX "'-'" For each Fiscal Year that any Bonds are outstanding the Special Tax for Facilities shall be levied on all Assessor's Parcels subject to the Special Tax for Facilities. The Special Tax for Facilities shall cease not later than the 2044-2045 Fiscal Year, however, the Special Taxes for Facilities will cease to be levied in an earlier Fiscal Year if the CFD Administrator has determined (i) that all required interest and principal payments on the CFD No. 2006-3 Bonds have been paid; (ii) all authorized facilities for CFD No. 2006-3 have been acquired and all reimbursements to the developer have been paid, (iii) no delinquent Special Taxes for Facilities remain ~collected and (iv) all other obligations of CFD No. 2006-3 have been satisfied. . SECTION J EXEMPTIONS The City shall classify as Exempt Property, in order of priority, (i) Assessor's Parcels which are. owned by, irrevocably offered for dedication, encumbered by or restricted in use by the State of California, Federal or other local governments, including school districts, (ii) Assessor's Parcels which are used as places of worship and are exempt from ad valorem property taxes because they are owned by a religious organization, (iii) Assessor's Parcels which are owned by, irrevocably offered for dedication, encumbered by or restricted in use by a homeowners' association, (iv) Assessor's Parcels with public or utility easements making impractical their utilization for other than the purposes set forth in the easement, (v) Assessor's Parcels which are privately owned and are ...." encumbered by or restricted solely for public uses, or (vi) Assessor's Parcels restricted to other types of public uses determined by the City Council, provided that no such classification would reduce the sum of all Taxable Property to less than 21.75 Acres. Notwithstanding the above, the City Council shall not classify an Assessor's Parcel as Exempt Property if such classification would reduce the sum of all Taxable Property to less than 21.75 Acres. Assessor's Parcels which cannot be classified as Exempt Property because such classification would reduce the Acreage of all Taxable Property to less than 21.75 Acres will be classified as Provisional Undeveloped Property, and will be subject to Special Taxes pursuant to Step Five in Section F. SECTION K MANNER OF COLLECTION OF SPECIAL TAX FOR FACILITIES The Special Tax for Facilities shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-3 may collect Special Taxes for Facilities at a different time or in a different manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on delinquent Assessor's Parcels as permitted by the Act. ~ City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 AQEN)AplI~t~ N(;',. ..c.~~,._.,~ ~. panr:: ~O OF _23_ /"""" SECTION L SPECIAL TAX FOR SERVICES The following additional definitions apply to this Section L: "Developed Multifamily Unit" means a residential dwelling unit within a building in which each of the individual dwelling units has or shall have at least one common wall with another dwelling unit and a building permit has been issued by the City for such dwelling unit on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Serv~ces is being levied. "Developed Single Family Unit" means a residential dwelling unit other than a Developed Multifamily Unit on an Assessor's Parcel for which a building permit has been issued by the City on or prior to May 1 preceding the Fiscal Year in which the Special Tax for Services is being levied. "Maximum Special Tax for Services" means the maximum Special Tax for Services that can be levied by CFD No. 2006-3 in any Fiscal Year on any Assessor's Parcel. "Operating Fund" means a fund that shall be maintained for CFD No. 2006-3 for any Fiscal Year to pay for the actual costs of maintenance related to the Service Area, and the applicable Administrative Expenses. ~ "Operating Fund Balance" means the amount of funds in the Operating Fund at the end of the preceding Fiscal Year. "Service Area" means parks, open space, and storm drains: "Special Tax for Services" means any of the special taxes authorized to be levied within CFD No. 2006-3 pursuant to the Act to fund the Special Tax Requirement for Services. 44Special Tax Requirement for Services" means the amount determined in any Fiscal Year for CFD No. 2006-3 equal to (i) the budgeted costs directly related to the Service Area, including maintenance, repair and replacement of certain components of the Service Area which have been accepted and maintained or are reasonably expected to be accepted and maintained during the current Fiscal Year, (ii) Administrative Expenses, and (iii) anticipated delinquent Special Taxes for Services based on the delinquency rate in CFD No. 2006-3 for the previous Fiscal Year, less (iv) the Operating Fund Balance, as determined by the CFD Administrator. 1. Rate and Method of Apportionment of the Special Tax for Services Commencing Fiscal Year 2006-2007 and for each subsequent Fiscal Year, the City Council shall levy Special Taxes for Services on (i) all Assessor's Parcels containing a Developed Single Family Unit or Developed Multifamily Unit and (ii) all Assessor's Parcels of Non-Residential Property, up to the applicable Maximum Special Tax for Services to fund the Special Tax Requirement for Services. ~ City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 >lite.' pa~~~~ "-'"~~ :"~:JL_# <(cO 23." ,_ The Maximum Special Tax for Services for Fiscal Year 2006-2007 shall be $246.84 per Developed Single Family Unit, $123.42 per Developed Multifamily Unit, and $555.90 per Acre for each Assessor's Parcel of Non-Residential Property., ....", On each July 1, commencing July 1, 2007, the Maximum Special Tax for Services shall be increased by two percent (2.00%) of the amount in effect in the prior Fiscal Year. 2. Duration of the Svecial Tax for Services The Special Tax for Services shall be levied in perpetuity to fund the Special Tax Requirement for Services, unless no longer required as determined at the sole discretion of the City Council. 3. Collection of the Svecial Tax for Services The Special Tax for Services shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No. 2006-3 may collect the Special Tax for Services at a different time or in a different manner if necessary to meet its funding requirements. SECTION M . APPEALS Any property owner claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the CFD Administrator not later than twelve months after having paid the first installment of the Special Tax that is disputed. The CFD Administrator shall promptly review the appeal, and if necessary, meet with the property oWner, consider written and oral evidence regarding the amount of the Special Tax, and rule on the appeal. If the CFD Administrator's decision requires that the Special Tax for an Assessor's Parcel be modified or changed in favor of the property owner, a cash refund shall not be made (except for the last year of levy), but an adjustment shall be made to the Special Tax on that Assessor's Parcel in the subsequent Fiscal Year(s). ......., The City Council may interpret this Rate and Method of Apportionment for purposes of clarifying any ambiguity and make determinations relative to the annual administration of the Special Tax and any landowner or residents appeals. Any decision of the City' Council shall be final and binding as to all persons. ....", City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 AQENO~!IFM NO. ~l DA~r: M. ns: :A.~" EXHIBIT" A" ,..... CITY OF LAKE ELSINORE AND CFD NO. 2006-3 CERTIFICATE 1. Pursuant to Section _ of the Rate and Method of Apportionment of Special Tax (the "RMA"), the City of Lake Elsinore (the "City") and Community Facilities District No. 2006-3 of the City of Lake Elsinore ("CFD No. 2006-3 ") hereby agree to a reduction in the Maximum Special Tax for Facilities for Developed Property [within CFD No. 2006-3J: (a) The information in Table 1 relating to the Maximum Special Tax for Facilities for Developed Property and/or Undeveloped Property within [CFD No. 2006-3 J shall be modified as follows: [insert Table 1 showing effective change to special tax rates and/or insert change to special tax rates for Undeveloped Property J 2. Table 1 may only be modified prior to the issuance of Bonds. , 3. Upon execution of the Certificate by the City and CFD No. 2006-3 the City shall cause an amended Notice of Special Tax Lien ffor the CFD No. 2006-3 J to be recorded reflecting the modifications set forth herein. ,..... By execution hereof, the undersigned acknowledges, on behalf of the City of Lake Elsinore and CFD No. 2006-3, receipt of this Certificate and modification of the RMA as set forth in this Certificate. CITY OF LAKE ELSINORE By: Date: CFD Administrator COMMUNITY FACILITIES DISTRICT NO. 2006-3 OF THE CITY OF LAKE ELSINORE By: Date: ,..... City of Lake Elsinore Community Facilities District No. 2006-3 (La Strada) May 25, 2006 A~NOAJ~~Y6NO,~- ;?l.__ PAGE~3 Of"~? ,...... CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: RESOLUTION AUTHORIZING THE ISSUANCE OF BONDS AND APPROVING BOND DOCUMENTS FOR COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) - IMPROVEMENT AREA B BACKGROUND In January, 2004, the City-adopted the necessary resolutions and ordinances forming ,-. Lake Elsinore Community Facilities District (CFD) 2003-2 (Canyon Hills) and authorizing the levy of a special tax. The developer plans to build 3,206 residential dwelling units. In February, 2004, the City issued the $12,235,000 Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area A) 2004 Series A. Since the issuance of those bonds, the CFD has acquired approximately $7 million in public improvements. DISCUSSION Bond Issue In order to finance the facilities it is necessary to incur bonded indebtedness. The not to exceed amount is $37,000,000. Before you is the resolution authorizing the issuance of bonds and the related bond documents. The bond issue has been sized at $20,095,000. The resolution approves the following bond documents: 1. Fiscal Agent Agreement (Pages 9 to 59 of 347) 2. Continuing Disclosure Agreement (Pages 60 to 69 of 347) ,-. 3. Purchase Contract (Pages 70 to 97 of 347) 4. Preliminary Official Statement (Pages 98 to 347 of 347) ACENDA ITEM NO. PAGE I 'Or OF J 1(7 REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 '"'" Special Tax The average residential special tax in Improvement Area B of the CFD is estimated at $1,600. The annual CFD tax amount, when combined with all other property taxes applicable to the project, is estimated to be within the 2% total tax rate policy within the City CFD guidelines. Facilities The proposed facilities list is attached. The list totals approximately $88 million. The list includes $9,000,000 in City of Lake Elsinore impact fees, as well as public improvements, including storm drains, streets and parks. The list also includes over $30,000,000 ofEVMWD impact fees and improvements. FISCAL IMPACT Repayment of the bonds are secured by the special taxes levied on all property '"'" within the district, other than those properties that are exempt as provided in the respective rate and method of apportionment. Responsibility for the construction of the improvements is born by the developer. The cost of acquiring the improvements is paid by the CFD bond proceeds. RECOMMENDATION It is recommended that City Council adopt Resolution No. 2006 - /ft; which approves the following: 1. Issuance ofCFD 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A 2. Fiscal Agent Agreement 3. Continuing Disclosure Agreement 4. Purchase Contract 5. Preliminary Official Statement '"'" ACENDA ITEM NO. 2J r PAOE ?- OF 3~ _ ,-. REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 3 PREPARED BY: MATT N. PRESSEY DIRECTOR OF ADMIN STRATIVE SERVICES CI APPROVED FOR AGENDA BY: r- r- AGENDA ITEM NO. :!Xr PACE ~ OF;4)-- City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Facilities List ""'" Facilities Cost Estimate Storm Drain Improvements $ 4,210,478 Street Improvements $ 14,645,768 Streetscape Improvements $ 3,856,472 Fire Station $ 2,400,000 City Fees $ 9,000,000 Parks Neighborhood Park No. 1 $ 1,571,280 Neighborhood Park No.2 $ 500,000 Parkway Park $ 450,000 PA-18 Community Park $ 2,880,000 EVMWD - Water $ 12,892,966 EVMWD - Sanitary Sewer $ 10,613,967 ""'" EVMWD - Reclaimed Water $ 695,014 EVMWD Fees (net of credits) $ 24,000,000 Total Estimated Construction Cost $ 87,715,945 ""'" AGENDA ITE~O. .3,;) PACE OF ?J-{ 7 _ ~ RESOLUTION NO. 2006- \0::> RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE AUTHORIZING THE ISSUANCE OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON mLLS) SPECIAL TAX BONDS (IMPROVEMENT AREA B) 2006 SERIES A AND THE EXECUTION AND DELIVERY OF A FISCAL AGENT AGREEMENT, A CONTINUING DISCLOSURE AGREEMENT, A PURCHASE CONTRACT, AND AN OFFICIAL STATEMENT AND APPROVING A PRELIMINARY OFFICIAL STATEMENT IN CONNECTION THEREWITH WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), to form the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "CFD"), to authorize the levy of special taxes upon the land within Improvement ~ Area B of the CFD, and to issue bonds secured by said special taxes, the proceeds of which are to be used to finance the purchase, construction, expansion or rehabilitation of certain real and other tangible property with an estimated useful life of five years or longer, including public infrastructure facilities and other government facilities, which are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within Improvement Area B of the CFD (the "Facilities"); and WHEREAS, the Council intends to issue bonds designated "City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A" (the "Bonds"); and WHEREAS, there have been submitted to this Council certain documents providing for the issuance of the Bonds and this Council, with the aid of its staff, has reviewed said documents and found them to be in proper order; and WHEREAS, all conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of said Bonds and the levy of said special taxes as contemplated by this Resolution and the documents referred to herein, exist, have happened and have been performed in ~ 45733499. I AGENDA ITEM NO. 2> r PAGE t::) OF g'l/; CITY COUNCIL RESOLUTION NO. 2006- Page 2 of 4 due time, form and manner as required by the laws of the State of California, including the Act. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Council hereby authorizes the issuance of the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A (the "Bonds") in an amount not to exceed $21,000,000 for the purpose of financing the Facilities. SECTION 2. The Council hereby approves the Fiscal Agent Agreement in substantially the form annexed. hereto. The Mayor, City Manager or Administrative Services Director (each, a "Responsible Officer"), are hereby authorized to execute the Fiscal Agent Agreement in substantially the form annexed hereto, with such revisions, amendments and completions as shall be approved by any Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 3. The Council hereby approves the Continuing Disclosure Agreement in substantially the form anpexed hereto. Any Responsible Officer is hereby authorized to execute the Continuing Disclosure Agreement in substantially the form annexed hereto, with such revisions, amendments and completions as shall be approved by any Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 4. The Council hereby approves the Preliminary Official Statement relating to the Bonds, substantially in the form annexed hereto, with such revisions, amendments and completions as shall be approved by any Responsible Officer with the advice of Bond Counsel, in order to make the Preliminary Official Statement final as of its date, except for the omission of certain information, as permitted by Section 240.15c2-12(b)(1) of Title 17 of the Code of Federal Regulations ("Rule 15c2-12"), and any certificate relating to the finality of the Official Statement under Rule 15c2-12. Any Responsible Officer is authorized and directed to execute and deliver a final Official Statement in substantially the form hereby approved, with such additions and changes as may be approved by Bond Counsel and any Responsible Officer executing the same, such approval to be conclusively evidenced by the execution and delivery thereof. 45733499.1 .." ...., ,...."" AGENDA ITEM NO. 3") PAOE le..... OF '5;/1-; CITY COUNCIL RESOLUTION NO. 2006- Page 3 of 4 ,,-.. SECTION 5. The Council hereby approves the Purchase Contract, in substantially the form annexed hereto. Any Responsible Officer is hereby authorized to execute the Purchase Contract, in substantially the form annexed hereto, with such revisions, amendments and completions as shall be approved by any Responsible Officer, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof, provided that, the Purchase Contract shall provide for an interest rate on the Bonds not greater than 6.0%, and an underwriter's discount not greater than 2.0% of the principal amount of Bonds. SECTION 6. Each Responsible Officer is hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all other actions, including the obtaining of municipal bond insurance and the publication of any notices necessary or desirable in connection with the sale of the Bonds and execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, deem necessary or advisable in order to consummate the lawful issuance and sale of the Bonds and the /""" consummation of the transactions as described herein. SECTION 7. This Resolution shall take effect from and after the date of its passage and adoption. "...... 45733499.1 AGENDA ITEM NO. PACE 7 ~:;1 OF )<.17 __ CITY COUNCIL RESOLUTION NO. 2006- Page 4 of 4 PASSED, APPROVED AND ADOPTED this 27th day of June, """" 2006. A YES: NOES: COUNCILMEMBERS: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: Robert E. Magee, Mayor City of Lake Elsinore ATTEST: Frederick Ray, City Clerk City of Lake Elsinore ....." ( APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore '""" 45733499.1 AGENDA ITEM NO. b J. PAGE ~ OF ;.'r;- r"'" /'"' /'"' /'"' FISCAL AGENT AGREEMENT BETWEEN CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2- (CANYON HILLS) AND UNION BANK OF CALIFORNIA, N.A., as Fiscal Agent DATED AS OF 1,2006 RELATING TO $ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON IDLLS) SPECIAL TAX BONDS (IMPROVEMENT AREA B) 2006 SERIES A 45733359.1 AGENDA ITEM NO. ~ r PAGE? OF~ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS.. .......... .......... ....... ...... ..................... .... ......... ............... ..................... ......... 1 Section 1.1. Definitions ........ ...... ...... .......... ........... ........... .... ..... .................. ....... .......... ............ 1 ARTICLE n GENERAL AUTHORIZATION AND BOND TERMS ................................................ 10 Section 2.1. Amount, Issuance, Purpose and Nature of Bonds .............................................. 10 Section 2.2. Type and Nature of Bonds ................................................................................. 10 Section 2.3. Equality of Bonds and Pledge of Special Taxes................................................. 10 Section 2.4. Description of Bonds; Interest Rates.................................................................. 11 Section 2.5. Place and Form of Payment ............................................................................... 11 Section 2.6. Form of Bonds............................. ................... ......................... .......... ........ ......... 12 Section 2.7. Execution and Authentication ............................................................................ 12 Section 2.8. Bond Register................... ........................... ............................ ................ ...... ..... 12 Section 2.9. Registration of Exchange or Transfer ................................................................ 13 Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds ...................................................... 13 Section 2.11. Validity of Bonds..... .................... ........ ...................... ........... ...... ......... ..... ......... 13 Section 2.12. Book-Entry System ....... ......................... ................................ .................. .......... 14 Section 2.13. Representation Letter.. ...... ............... ........ ........ ........ ................ ...... .................... J 4 Section 2.14. Transfers Outside Book-Entry System............................................................... 15 Section 2.15. Payments to the Nominee................................................................................... 15 Section 2.16. Initial Depository and Nominee ......................................................................... 15 Section 2.17. Conditions for the Issuance of Parity Bonds ...................................................... 15 ARTICLE m CREATION OF FUNDS AND APPLICATION OF SPECIAL TAXES....................... 17 Section 3.1. Creation of Funds; Application of Proceeds ...................................................... 17 Section 3.2. Deposits to and Disbursements from Special Tax Fund .................................... 18 Section 3.3. Interest Account and Principal Account ofthe Special Tax Fund ..................... 18 Section 3.4. Redemption Account of the Special Tax Fund .................................................. 19 Section 3.5. Reserve Account of the Special Tax Fund ......................................................... 20 Section 3.6. Administrative Expense Account of the Special Tax Fund ............................... 21 Section 3.7. Surplus Fund......... ......... .......... ....................... .............................. ..................... 21 Section 3.8. Acquisition and Construction Fund.................................................................... 21 Section 3.9. Investments. .................... ............. ..... ..... ..... ........ ........................... ............. ....... 22 ARTICLE N REDEMPTION OF BONDS .......................................................................................... 23 Section 4.1. Redemption of Bonds......................................................................................... 23 Section 4.2. Selection of Bonds for Redemption ................................................................... 24 Section 4.3. Notice of Redemption... ..... ....... ......... .......... ........ ........ ...................................... 24 Section 4.4. Partial Redemption of Bonds ............................................................................. 25 Section 4.5. Effect of Notice and Availability of Redemption Money.................................. 25 ARTICLE V COVENAN'fS AND WARRANTY ............................................................................... 26 Section 5 .1. Warranty.................... ..... .................. .............. ........... ....................... .................. 26 Section 5.2. Covenants..... .................................... ............... ............ ..................... ...... ..... ....... 26 ARTICLE VI AMENDMENTS TO FISCAL AGENT AGREEMENT ............................................... 31 Section 6.1. Supplemental Fiscal Agent Agreements or Orders Not Requiring Bondowner Consent............... ................. ........ ............................................. ...... 31 Section 6.2. Supplemental Fiscal Agent Agreements or Orders Requiring Bondowner Consent.......... ..................................................................................................... 32 Section 6.3. Notation of Bonds; Delivery of Amended Bonds .............................................. 33 ARTICLE VII FISCAL AGENT .............................. ........ ............ ...................... ........... ......................... 33 Secti on 7 .1. Fiscal Agent ....................................................................................................... 33 Section 7.2. Removal of Fiscal Agent......................................................... ......... .....~............ 34 45733359.1 AGENDA ITEM NO. ~ d- PAGE ID OF~ ....." ......,. ....." TABLE OF CONTENTS (continued) ,-... Page Section 7.3. Resignation of Fiscal Agent ............................................................................... 34 Section 7.4. Compensation and Liability of Fiscal Agent...................................................... 34 Section 7.5. Merger or Consolidation .................................................................................... 35 ARTICLE vrn EVENTS OF DEFAULT; REMEDIES .......................................................................... 36 Section 8.1. Events of Default......... ............ ............. ............. ........ .... ....... ............. .... ..... ........ 36 Section 8.2. Remedies of Owners .......................................................................................... 36 ARTICLE IX DEFEASANCE .................. ................... ........... ....... ......... .................... ........... ....... ..... .... 37 Section 9.1. Defeasance............. ............................ ................................... ............ ..... ...... ...... 37 ARTICLE X MISCELLANEOUS ..... ............ ................. ......................................... ............................ 38 Section 10.1. Cancellation of Bonds ....... ........ ........ .............. ....... ............. ...... ......................... 38 Section 10.2. Execution of Documents and Proof of Ownership............................................. 39 Section 10.3. Unclaimed Moneys .... ............. ........... ........ .............. ........................... ...... ......... 39 Section 10.4. Provisions Constitute Contract....... ............ ...... ...... ...... ......... ............ ........ ......... 40 Section 10.5. Future Contracts... ....... .................. ........ ............. ................................... ............. 40 Section 10.6. Further Assurances.. ......... ......... ............... ........... ............................ ........... ........ 40 Section 10.7. Severability .... ......... ......... ................... .................... ...... ....... ........ ...................... 40 Section 10.8. Notices....... ...... ............ ......................... ........ ...............;............... ..... ................. 40 Section 10.9. General Authorization ........................................................................................ 40 Section 10.10. Execution in Counterparts.................................................................................. 40 /"'" Exhibit A - Form of Bond....... ...... ........................ .................... ................ ........... ................. ............. ..... A-1 Exhibit B - Requisition No.1.................. ...................................................... ...... ........... .......... .............. B-1 ~ 45733359.1 11 AGENDA ITEM NO. 5~ PAOE---LL-OF "'$'-17 __ mSCALAGENTAGREEMENT ...., THIS FISCAL AGENT AGREEMENT, dated as of 1,2006, between the City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent") governs the terms of the City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A. RECITALS: WHEREAS, the City Council of the City of Lake Elsinore (the "Council"), located in Riverside County, California, has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) (the "CFD") pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the "Act"); and WHEREAS, the Council has heretofore adopted Resolution No. 2003-50 designating a portion of the CFD as Improvement Area B; and WHEREAS the qualified electors within the Improvement Area B have approved the levy of a special tax and the issuance of bonds by the CFD and the CFD has authorized the issuance of bonds in one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $37,000,000; and WHEREAS, the Council intends to accomplish the financing of the purchase, construction, expansion or rehabilitation of certain real and other tangible property with an estimated useful life of five years or longer, including public infrastructure facilities or capital fees and other governmental facilities ~ or capital fees, which are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within Improvement Area B (collectively, the "Facilities") through the issuance of bonds in an aggregate principal amount of $ designated as the "City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A" (the "Bonds"); and WHEREAS, all requirements of the Act for the issuance of the Bonds have been satisfied; NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the CFD does hereby covenant and agree, for the benefit of the Owners of the Bonds (as defined herein) which may be issued hereunder from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. Unless the context requires, the following terms shall have the following meanings: "Acquisition and Construction Fund" means the fund by such name created and established pursuant to Section 3.1 hereof. .~ 45733359.1 AGENDA ITEM NO. 3:;J PACE I ~ OF 3c../1 -4!' "........ "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code. "Administrative Expense Account" means the account by such name in the Special Tax Fund created and established pursuant to Section 3.1 hereof. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Fiscal Agent, any fees for credit enhancement for the Bonds which are not otherwise paid as Costs of Issuance, any costs related to the CFD's compliance with State and federal laws requiring continuing disclosure of information concerning the Bonds and Improvement Area B, and any other costs otherwise incurred by the City's staff on behalf of the CFD in order to carry out the purposes of the CFD as set forth in the Resolution of Formation and any obligation of the CFD hereunder. "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. "Authorized Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (1) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America ("Direct Obligations"). ",..-. (2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): U.S. Export-Import Bank ("Eximbank") Direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration ("FmHA") Certificates of beneficial ownership Federal Financing Bank Federal Housing Administration Debentures ("FHA") General Services Administration Participation certificates Government National Mortgage Association ("GNMA" or "Ginnie Mae") r--- GNMA-guaranteed mortgage-backed bonds GNMA-guaranteed pass-through obligations 45733359.1 2 3)- AGENDA ITEM NO. PAGE {3 OF 3'17 --" U.S. Maritime Administration Guaranteed Title XI financing ,...." U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.s. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds (3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself: Federal Home Loan Bank System Senior debt obligations Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") Participation certificates Senior debt obligations '-'" Federal National Mortgage Association ("FNMA" or "Fannie Mae") Mortgage-backed securities and senior debt obligations Student Loan Marketing Association ("SLMA" or "Sallie Mae") Senior debt obligations Resolution Funding Corp. ("REFCORP") obligations Farm Credit System CM. - Consolidated system-wide bonds and notes (4) Money market funds registered under the Federal Inyestment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and haYing a rating by Standard & Poor's of AAAm-G, AAAm or AAm, and, if rated by Moody's, rated Aaa, Aal or Aa2 (including those of the Fiscal Agent and its affiliates). (5) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral. '-'" 45733359.1 3 AOENDA ITEM .1)10. j;). PACE /4 OF 3-f7 -- ~ (6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or which are with a bank rated AA or better by Standard & Poor's and Aa or better by Moody's (including those of the Fiscal Agent and its affiliates). (7) Investment Agreements with any corporation, including banking or [mancial institutions, provided that (a) the long-term debt of the provider of any such investment agreement is rated, at the time of investment, at least "AA" and "Aa" by the Rating Agency (without regard to gradations of plus or minus within such category), and (b) any such investment agreement is collateralized with United States Treasury or agency obligations which at least equal 102% of the principal amount invested thereunder, and (c) any such agreement shall include a provision to the effect that, in the event the long-term debt rating of the provider of such agreement is downgraded below "AA-" or below "Aa" by the applicable Rating Agency, the CFD has the right to withdraw or cause the Fiscal Agent to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to this Fiscal Agent Agreement. (8) Commercial paper rated, at the time of purchase, "Prime - I" by Moody's and "A-I" or better by Standard & Poor's. (9) Bonds or notes issued by any state or municipality which are rated by Moody's and Standard & Poor's in one of the two highest rating categories assigned by such agencies. ~ (10) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - I" or "A3" or better by Moody's and "A-I" or "A" or better by Standard & Poor's. (11) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-I" or "A3" or better by Moody's, and "A-I" or "A-" by Standard & Poor's; provided: (a) a master repurchase agreement or specific written repurchase agreement governs the transaction; and (b) the securities are held free and clear of any lien by the Fiscal Agent or an independent third party acting solely as agent ("Agent") for the Fiscal Agent, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 mIllion, or (iii) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Fiscal Agent shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Fiscal Agent; and ",.-- (c) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created for the benefit of the Fiscal Agent; and 45733359.1 4 AGENDA ITEM NO. Ba. ?Lf PACE J es OF I --' (d) the repurchase agreement has a term of 180 days or less, and the Fiscal Agent or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation; and ......, (e) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103% (12) Local Agency Investment Fund ("LAlF") of the State of California. (13) Any other investment which the CFD is permitted by law to make. "Authorized Representative of the CFD" means the Mayor, City Manager, Administrative Services Director, or any other person or persons designated by the Council and authorized to act on behalf of the CFD by a written certificate signed on behalf of the CFD by the Mayor or the City Manager and containing the specimen signature of each such person. "Bond Counsel" means an attorney at law or a firm of attorneys selected by the CFD of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Fiscal Agent shall keep or cause to be kept on wh~ch the registration and transfer of the Bonds shall be recorded. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. ......, "Bonds" means the CFD's $ Special Tax Bonds (Improvement Area B) 2006 Series A and any Parity Bonds issued pursuant to this Fiscal Agent Agreement. "Bond Year" means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds shall begin on the Delivery Date and end of the first September 1 which is not more than 12 months after the Delivery Date. "Business Day" means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Fiscal Agent is located, are not required or authorized to remain closed. "Certificate of Authorized Representative of the CFD" means a written certificate or warrant request executed by an Authorized Representative of the CFD. "CFD" means the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) established pursuant to the Act and the Resolution of Formation. "City" means the City of Lake Elsinore, California. "Code" means the Internal Revenue Code of 1986 and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. ......, 45733359.1 5 AGENDA ITEM NO.6;). PACE I (; OF .:?t.fl.-, ".- "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Fiscal Agent and its counsel, legal fees and expenses, costs of printing the Bonds and the preliminary and final official statements for the Bonds, fees of financial consultants and all other related fees and expenses, as set forth in a Certificate of Authorized Representative of the CFD. "Costs of Issuance Account" means the account by such name In the Acquisition and Construction Fund created and established pursuant to Section 3.1 hereof. "Defeasance Securities" means any of the following: (a) Cash (b) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series -- "SLGS") (c) Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury itself, e.g., CATS, TIGRS and similar securities. (d) The interest component of Resolution Funding Corp. strips which have been stripped by request to the Federal Reserve Bank of New York and are in book-entry form. (e) & Poor's. Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard ".- (f) Obligations issued by the following agencies which are backed by the full faith and credit of the United States: U.S. Export-Import Bank - direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration - certificates of beneficial ownership Federal Financing Bank General Services Administration - participation certificates U.S. Maritime Administration - guaranteed Title XI financing U.S. Department of Housing and Urban Development muD) - Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds. "Council" means the City Council of the City of Lake Elsinore. "Delivery Date" means, with respect to the Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof. ~ "Depository" shall mean The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Certificates, or any other securities depository acting as Depository under Article II hereof. 45733359.1 6 ACiENDA ITEM NO.~ ~A(jE 17 _OF~ "Fiscal Agent" means Union Bank of California, N.A., a national banking association duly organized and existing under and by virtue of the laws of the United States of America, at its principal corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3 and any successor thereto. -....; "Fiscal Agent Agreement" means this Fiscal Agent Agreement, together with any Supplemental Fiscal Agent Agreement approved pursuant to Article 6 hereof. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next following June 30. "Improvement Area B" means that portion of the CFD designated as Improvement Area B. "Independent Financial Consultant" means a financial consultant or special tax consultant or firm of either such consultants generally recognized to be well qualified in the financial consulting or special tax consulting field, appointed and paid by the CFD, who, or each of whom: (1) is, in fact, independent and not under the domination of the CFD; (2) does not have any substantial interest, direct or indirect, in the CFD; and (3) is not connected with the CFD as a member, officer or employee of the CFD, but who may be regularly retained to make annual or other reports to the CFD. "Interest Account" means the account by such name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. ~ "Interest Payment Date" means each March 1 and September 1, commencing 1, 200-, provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next preceding such date. "Investment Agreement" means one or more agreements for the investment of funds of the CFD complying with the criteria therefor as set forth in Subsection (7) of the definition of Authorized Investments herein. "Maximum Annual Debt Service" means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Moody's" means Moody's Investors Service, its successors and assigns. "Nominee" shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.16 hereof. "Outstanding" or "Outstanding Bonds" means all Bonds theretofore issued by the CFD, except: """'" 45733359.1 7 AGENDA ITEM NO. .3 d- PAGE l~ OF ?/t.Jl ..; ~ (1) 10.1 hereof; Bonds theretofore cancelled or surrendered for cancellation in accordance with Section (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Fiscal Agent Agreement; and (3) Bonds which have been surrendered to the Fiscal Agent for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof. "Parity Bonds" means all bonds, notes or other similar evidences of indebtedness hereafter issued, payable out of the Special Taxes and which, as provided in this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, rank on a parity with the Bonds. "Participants" shall mean those broker-dealers, banks and other fmancial institutions from time to time for which the Depository holds Bonds as securities depository. "Person" means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. "Principal Account" means the account by such name in the Special Tax Fund created and established pursuant to Section 3.1 hereof. /'" "Principal Office of the Fiscal Agent" means the office of the Fiscal Agent located in Los Angeles, California or such other office or offices as the Fiscal Agent may designate from time to time, or the office of any successor Fiscal Agent where it principally conducts its business of serving as Fiscal Agent under indentures pursuant to which municipal or governmental obligations are issued. "Project" means those public facilities described in the Resolution of Formation which are to be acquired or constructed within Improvement Area B, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the CFD from time to time. "Project Costs" means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds, including, but not limited to, remarketing, credit enhancement, Fiscal Agent and other fees and expenses relating to the issuance of the Bonds and the formation of the. CFD, and to pay any other "incidental expenses" of the CFD, as such term is defined in the Act. "Rating Agency" means Moody's and Standard & Poor's, or both, as the context requires. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. "Redemption Account" means the account by such name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. ,-... "Regulations" means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to section 103 of the Code. 45733359.1 8 AGENDA ITEM NO. .3 J- PACE /1 OF '3tfC: "Representation Letter" shall mean the Blanket Letter of Representations from the CFD to the Depository as described in Section 2.13 hereof. ~ "Reserve Account" means the account by such name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. "Reserve Requirement" means, as of any date of calculation, an amount equal to the lowest of (1) 10% of the issue price (as defmed pursuant to section 148 of the Code), or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual Debt Service of the Outstanding Bonds. "Resolution of Formation" means Resolution No. 2004-6 adopted by the Council on January 13, 2004, pursuant to which the Council formed the CFD. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedule set forth in this Fiscal Agent Agreement. "Special Taxes" means the taxes authorized to be levied by the CFD on parcels within Improvement Area B in accordance with the Resolution of Formation, the Act and the voter approval obtained at the January 13, 2004 election in Improvement Area B and any additional special taxes authorized to be levied by the CFD from time to time which are pledged by the CFD to the repayment of the Bonds, together with prepayments thereof and the proceeds collected from the sale of property pursuant to the foreclosure provisions of this Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses. "Special Tax Fund" means the fund by such name created and established pursuant to Section 3.1 ~ hereof. "Standard & Poor's" means Standard & Poor's, a division of McGraw-Hill, its successors and aSSIgns. "Supplemental Fiscal Agent Agreement" means any supplemental fiscal agent agreement amending or supplementing this Fiscal Agent Agreement. "Surplus Fund" means the fund by such name created and established pursuant to Section 3.1 hereof. "Tax Certificate" means the certificate by that name to be executed by the CFD on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Term Bonds" means the Bonds maturing on September 1,20_. "Underwriter" means the institution or institutions, if any, with whom the CFD enters into a purchase contract for the sale of the Bonds. "Written Request of the CFD" means a request in writing executed by the Mayor, City Manager, City Treasurer, or written designee, on behalf of the CFD. '-' 45733359.1 9 AGENDA ITEM N9, .3 k PACE () 6 OF ,,-... ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1. Amount, Issuance, Purpose and Nature of Bonds. Under and pursuant to the Act, the Bonds in the aggregate principal amount of $ shall be issued for the purpose of financing the Project, provided that the aggregate principal amount of the Bonds shall not exceed the total indebtedness presently authorized or subsequently authorized by the qualified electors of the CFD in accordance with the Act. The Bonds shall be and are limited obligations of the CFD and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Special Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expense Account). /""' Section 2.2. Type and Nature of Bonds. Neither the faith and credit nor the taxing power of the City, the State of California or any political subdivision thereof other than the CFD is pledged to the payment of the Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City nor general obligations of the CFD, but are limited obligations of the CFD payable solely from certain amounts deposited by the CFD in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), as more fully described herein. The CFD's limited obligation to pay the principal of, premium, if any, and interest on the Bonds from amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds may compel the exercise of the taxing power by the CFD (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any ofthe CFD's property, or upon any of its income, receipts or revenues, except the Special Taxes and other amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) which are, under the terms of this Fiscal Agent Agreement and the Act, set aside for the payment of the Bonds and interest thereon, and neither the members of the Council nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. Notwithstanding anything to the contrary contained in this Fiscal Agent Agreement, the CFD shall not be required to advance any money derived from any source of income other than the Special Taxes for the payment of the interest on or the principal of the Bonds, or for the performance of any covenants contained herein. The CFD may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3. Equality of Bonds and Pledge of Special Taxes. Pursuant to the Act and this Fiscal Agent Agreement, the Bonds shall be equally payable from the Special Taxes and other amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) without priority for number, date of the Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Special Taxes and other amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), which are hereby set aside for the payment of the Bonds. Amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) shall constitute a trust fund held for the benefit of the Owners to be applied to the ,,-... payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Fiscal Agent 45733359. I 10 AOENDA ITEM NO. J> PAGEE-OF .-2i::O--- Agreement or any Supplemental Fiscal Agent Agreement. Notwithstanding any provision contained in this Fiscal Agent Agreement to the contrary, Special Taxes transferred to the Administrative Expense --' Account of the Special Tax Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds, and none of the Surplus Fund or the Administrative Expense Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of the Owners. Nothing in this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement shall preclude, subject to the limitations contained hereunder, the redemption prior to maturity of any Bond subject to call and redemption and payment of said Bond from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California. Section 2.4. Description of Bonds; Interest Rates. The Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Bonds of each issue shall be numbered as desired by the Fiscal Agent. The Bonds shall be designated "CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON HILLS) SPECIAL TAX BONDS (IMPROVEMENT AREA B) 2006 SERIES A." The Bonds shall be dated their Delivery Date and shall mature and be payable on September I in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on each Interest Payment Date, commencing I, 200_. Maturity Date (September 1) Principal Amount Interest Rate --' Interest shall be payable on each Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond has been paid; provided, however, that if at the maturity date of any Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Fiscal Agent Agreement, such Bonds shall then cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.5. Place and Form of Payment. The Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Fiscal Agent, or at the designated office of any successor Fiscal Agent. Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest shall be payable from the dated ......, 45733359.1 11 AOENDA ITEM NO. 3d- ... I PAOE ~ OF ?A:'J...., .""" ./""" date of such Bond, as applicable; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Bond, interest on that Bond shall be payable from its dated date. Interest on any Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Fiscal Agent mailed on the Interest Payment Date by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Fiscal Agent on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account within the United States designated by such Owner. Section 2.6. Form of Bonds. The defmitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which forms are hereby appr()ved and adopted as the forms of such Bonds and of the certificate of authentication. Notwithstanding any provision in this Fiscal Agent Agreement to the contrary, the CFD may, in its sole discretion, elect to issue the Bonds in book-entry form. Until definitive Bonds shall be prepared, the CFD may cause to be executed and delivered in lieu of such definitive Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds, except that they may be in any denominations authorized by the CFD. Until exchanged for definitive Bonds, any temporary bond shall be entitled and subject to the same benefits and provisions of this Fiscal Agent Agreement as definitive Bonds. If the CFD issues temporary Bonds, it shall execute and furnish definitive Bonds, without unnecessary delay and thereupon any temporary Bond may be surrendered to the Fiscal Agent at its office, without expense to the Owner, in exchange f()r a definitive Bond of the same issue, maturity, interest rate and principal am()unt in any authorized denomination. All temporary Bonds so surrendered shall be cancelled by the Fiscal Agent and shall not be reissued. Section 2.7. Execution and Authentication. The Bonds shall be signed on behalf of the CFD by the manual or facsimile signature of the Mayor or the City Manager, in their capacity as officers of the CFD, and attested by the signature of the City Clerk. In case anyone or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed have been authenticated and delivered by the Fiscal Agent (including new Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or to lost, stolen, destroyed or mutilated Bonds), such Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds had not ceased to hold such office. Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A hereto shall be entitled to any right or benefit under this Fiscal Agent Agreement, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Fiscal Agent. Section 2.8. Bond Register. The Fiscal Agent will keep or cause to be kept, at its office, sufficient books for the registration and transfer of the Bonds which shall upon reasonable prior notice be open to inspection by the CFD during all regular business hours, and, subject to the limitations set forth in ,,-.. Section 2.9 below, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable 45733359.1 12 AGENDA ITEM NO. ..3;;>' PAGE if ~ OF -- regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds as herein provided. ....." The CFD and the Fiscal Agent may treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of that Bond for any and all purposes, and the CFD and the Fiscal Agent shall not be affected by any notice to the contrary. The CFD and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Fiscal Agent of any change in the Bondowner's address so that the Bond Register may be revised accordingly. Section 2.9. Registration of Exchange or Transfer. Subject to the limitations set forth in the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the. person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the office of the Fiscal Agent, accompanied by delivery of written instrument of transfer in a form approved by the Fiscal Agent and duly executed by the Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the office of the Fiscal Agent for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Fiscal Agent shall not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds shall be surrendered for registration of ~ansfer or exchange, the CFD shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds of the same issue and maturity, for a like aggregate principal amount; provided that the Fiscal Agent shall not be required to register transfers or make exchanges of (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. ....." Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond shall become mutilated, the CFD shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be cancelled by the Fiscal Agent pursuant to Section 10.1 hereof. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence is satisfactory to the Fiscal Agent and, if any indemnity satisfactory to the CFD and the Fiscal Agent shall be given, the CFD shall execute and the Fiscal Agent shall authenticate and deliver, a new Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Fiscal Agent shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds issued hereunder. The Fiscal Agent shall not treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Fiscal Agent may make payment with respect to such Bonds. Section 2.11. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any defect in any proceedings taken by the CFD, or by the invalidity, in whole or in part, of any contracts made by the CFD in connection therewith, and the recital contained '-' 45733359.1 13 AGENDA ITEM NO. (3;l PAGE ?L\ OF-2>.IT /""'- in the Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12. Book-Entry System. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each of the maturities of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered in the registration books kept by the Fiscal Agent in the name of the Nominee as nominee of the Depositoryo Unless the CFD elects to discontinue the use of the book-entry system, all of the Outstanding Bonds shall be registered in the registration books kept by the Fiscal Agent in the name of the Nominee. ~ With respect to Bonds registered in the registration books kept by the Fiscal Agent in the name of the Nominee, the CFD and the Fiscal Agent shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the CFD and the Fiscal Agent shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Fiscal Agent, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are redeemed in part, or (iv) the payment to any Participant oro any other Person, other than an Owner as shown in the registration books kept by the Fiscal Agent, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds. The CFD and the Fiscal Agent may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Fiscal Agent as the holder and absolute owner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Fiscal Agent shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Fiscal Agent, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the CFD's obligations with respect to payment of the principal, premium, if any, and interest due on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Fiscal Agent, shall receive a Bond evidencing the obligation of the CFD to make payments of principal, premium, if any, and interest pursuant to this Fiscal Agent Agreement. Upon delivery by the Depository to the Fiscal Agent and the CFD of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Fiscal Agent Agreement shall refer to such new nominee ofthe Depository. Section 2.13. Representation Letter. In order to qualify the Bonds which the CFD elects to register in the name of the Nominee for the Depository's book-entry system, an authorized representative of the CFD or the Fiscal Agent is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section lO.2 or in any other way impose upon the CFD or the Fiscal Agent any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Fiscal Agent. The Fiscal Agent agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Mayor and any Authorized Representative of the CFD are hereby authorized to take any other actions, not inconsistent with this Fiscal Agent Agreement, to qualify the Bonds for the Depository's book-entry program. ~ 45733359.1 14 AGENDA ITEM NO. 0 ~ PAGE JS ~ Section 2.14. Transfers Outside Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for the Bonds, or (ii) the CFD determines that the Depository shall no longer so act, then the CFD will discontinue the book-entry system with the Depository. If the CFD fails to identify another qualified securities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Fiscal Agent in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof. '-' Section 2.15. Payments to the Nominee. Notwithstanding any other provisions of this Fiscal Agent Agreement to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. Section 2.16. Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. Section 2.17. Conditions for the Issuance of Parity Bonds. The CFD may at any time after the issuance and delivery of the Bonds hereunder issue Parity Bonds payable from the Special Taxes and other amounts deposited in the Special Tax Fund (other than in the Administrative Expense Account therein) and secured by a lien and charge upon such. amounts equal to the lien and charge securing the Outstanding Bonds and any other Parity Bonds theretofore issued hereunder or under any Supplemental Fiscal Agent Agreement. Parity Bonds may be issued subject to the following additional specific conditions, which are hereby made conditions precedent to the issuance of any such Parity Bonds: ......, (1) The CFD shall be in compliance with all covenants set forth in this Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement then in effect and a certificate of the CFD to that effect shall have been filed with the Fiscal Agent; provided, however, that Parity Bonds may be issued notwithstanding that the CFD is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds the CFD will be in compliance with all such covenants. (2) The issuance of such Parity Bonds shall have been duly authorized pursuant to the Act and all applicable laws, and the issuance of such Parity Bonds shall have been provided for by a Supplemental Fiscal Agent Agreement duly adopted by the CFD which shall specify the following: (a) The purpose for which such Parity Bonds are to be issued and the fund or funds into which the proceeds thereof are to be deposited, including a provision requiring the proceeds of such Parity Bonds to be applied solely for the purpose of refunding any Outstanding Bonds or Parity Bonds, including payment of all costs and the funding of all reserves incidental to or connected with such refunding; (b) The authorized principal amount of such Parity Bonds; (c) The date and the maturity date or dates of such Parity Bonds; provided that (i) each maturity date shall fall on an September I, (ii) all such Parity Bonds oflike maturity shall be identical in all respects, except as to number, and (iii) fixed serial maturities or Sinking Fund Payments, or any combination thereof, shall be established to provide for the retirement of all such Parity Bonds on or before their respective maturity dates; ......, 45733359.1 15 AGENDA ITEM NO. 5~ PAGE f}l..f OF -- ",,-.. (d) The description of the Parity Bonds, the place of payment thereof and the procedure for execution and authentication; (e) The denominations and method of numbering of such Parity Bonds; (f) The amount and due date of each mandatory Sinking Fund Payment, if any, for such Parity Bonds; (g) The amount, if any, to be deposited from the proceeds of such Parity Bonds in the Reserve . Account of the Special Tax Fund to increase the amount therein to the Reserve Requirement; (h) The form of such Parity Bonds; and (i) Such other provisions as are necessary or appropriate and not inconsistent with this Fiscal Agent Agreement. (3) The CFD shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the Fiscal Agent (unless the Fiscal Agent shall accept any of such documents bearing a prior date): . (a) A certified copy of the Supplemental Fiscal Agent Agreement authorizing the issuance of such Parity Bonds; (b) A Written Request of the CFD as to the delivery of such Parity Bonds; "".-- (c) An opinion of Bond Counsel and/or general counsel to the CFD to the effect that (a) the CFD has the right and power under the Act to adopt this Fiscal Agent Agreement and the Supplemental Fiscal Agent Agreements relating to such Parity Bonds, and this Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements have been duly and lawfully adopted by the CFD, are in full force and effect and are valid and binding upon the CFD and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights); (b) this Fiscal Agent Agreement creates the valid pledge which it purports to create of the Special Taxes and other amounts as provided in this Fiscal Agent Agreement, subject to the application thereof to the purposes and on the conditions permitted by this Fiscal Agent Agreement; and (c) such Parity Bonds are valid and binding limited obligations of the CFD, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights) and the terms of this Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements thereto and entitled to the benefits of this Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and this Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements; and a further opinion of Bond Counsel to the effect that, assuming compliance by the CFD with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds and any Parity Bonds theretofore issued on a tax-exempt basis, or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued; ",,-.. 45733359.1 16 AGENDA rrEM NO. PACE a-l 0'2 OF~ t(1 ..- (d) A certificate of the CFD containing such statements as may be reasonably necessary to show compliance with the requirements of this Fiscal Agent Agreement; ....., (e) A certificate from one or more Independent Financial Consultants which, when taken together, certify that (i) the amount of the maximum Special Taxes that may be levied by the CFD pursuant to the Act and the applicable resolutions and ordinances of the CFD in each subsequent Fiscal Year on properties that have building permits issued is at least 1.10 times the corresponding Annual Debt Service for each remaining Bond Year on all Outstanding Bonds theretofore issued and the Parity Bonds proposed to be issued, and (ii) the value of all parcels of real property in the CFD subject to the levy ofthe Special Tax and not delinquent in the payment of any Special Taxes due and owing, as determined based on an appraisal performed on a basis generally consistent with the appraisal conducted in connection with the issuance of the Bonds or based on assessed value, is at least times the sum of (a) the aggregate principal amount of all Bonds and Parity Bonds then Outstanding, plus (b) the aggregate principal amount of the series of Parity Bonds proposed to be issued, plus (c) the aggregate principal amount of any fixed assessment liens on the parcels in Improvement Area B, plus (d) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on parcels of property within Improvement Area B (the "Other CFD Bonds") equal to the aggregate principal amount of the Other CFD Bonds multiplied by a fraction, the numerator of which is the amount of special taxes levied for the Other CFD Bonds on parcels of property within Improvement Area B, and the denominator of which is the total amount of special taxes levied for the Other CFD Bonds on all parcels of property which are subject to the levy of such special taxes are levie~ to pay the Other CFD Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other CFD Bonds occurs), based upon information which is available for the then current Fiscal Y ear. For purposes of making the certifications required by this paragraph (e ),the Independent Financial Consultants may rely on reports or certificates of such other persons as may be acceptable to the CFD, the City, Bond Counsel and the Underwriter of the proposed Parity Bonds; ......, (f) Such further documents, money and securities as are required by the provisions of this Fiscal Agent Agreement and the Supplemental Fiscal Agent Agreement providing for the issuance of such Parity Bonds. ARTICLE III CREATION OF FUNDS AND APPLICATION OF SPECIAL TAXES Section 3.1. Creation of Funds; Application of Proceeds. There is hereby created and established and shall be maintained by the Fiscal Agent the following funds and accounts: (1) The Community Facilities District 2003-2 Special Tax Fund (the "Special Tax Fund") (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account and an Administrative Expense Account); (2) The Community Facilities District 2003-2 Surplus Fund (the "Surplus Fund"); and (3) The Community Facilities District 2003-2 Acquisition and Construction Fund (the "Acquisition and Construction Fund") (in which there shall be established a Costs of Issuance Account). ....., 45733359.1 17 AGENDA ITEM NO._ b ;l PACE 'd-1S OF ~tF7 -- ,..... The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Fiscal Agent and the Fiscal Agent shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of this Article ill and shall disburse investment earnings thereon in accordance with the provisions of Section 3.9 hereof. Except as required to be segregated into funds and accounts as described herein, money held by the Fiscal Agent hereunder need not be segregated from other funds except to the extent required by law. At the Written Request of the CFD, the Fiscal Agent may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds. All proceeds of the sale of the Bonds shall be received by the Fiscal Agent on behalf of the CFD and deposited and transferred as follows: (1) $ shall be transferred to the Costs ofIssuance Account of the Acquisition and Construction Fund established hereunder for disbursement in accordance with Section 3.8 below; and (2) $ (which is equal to the initial Reserve Requirement) shall be deposited in the Reserve Account to be disbursed in accordance with Section 3.5 below; and (3) $ shall be transferred to the Interest Account of the Special Tax Fund for disbursement in accordance with Section 3.3 below; and (4) $ shal.l be transferred to the Acquisition and Construction Fund for disbursement in accordance with Section 3.8 below. ",...- Section 3.2. Deposits to and Disbursements from Special Tax Fund. The CFD shall, on each date on which it receives Special Taxes transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund to be held in accordance with the terms of this Fiscal Agent Agreement. The Fiscal Agent shall transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: (a) The Interest Account of the Special Tax Fund; (b) The Principal Account of the Special Tax Fund; (c) The Redemption Account of the Special Tax Fund; (d) The Reserve Account of the Special Tax Fund; (e) The Administrative Expense Account of the Special Tax Fund; and (f) The Surplus Fund. At the maturity of all of the Bonds and, after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Fiscal Agent have been paid in full, moneys in the Special Tax Fund and any accounts therein shall be transferred to the CFD and may be used by the CFD for any lawful purpose. ,..... Section 3.3. Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds until maturity, other than principal due upon redemption, shall 45733359.1 18 AGENDA ITEM NO. 0).. PA(jE~OF~tJl --- be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds will be made when due, at least five Business Days prior to each March I and September I, the Fiscal Agent shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account: (1) To the Interest Account, an amount such that the balance in the Interest Account five Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. (2) To the Principal Account, an amount such that the balance in the Principal Account five Business Days prior to September I of each year, commencing September I, 2006 shall at least equal the principal payment due on the Bonds maturing on such September I and any principal payment due on a previous September I which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds as the same become due at maturity. Section 3.4. Redemption Account of the Special Tax Fund. (1) On each September 1 on which a Sinking Fund Payment is due, after the deposits have been made to the Interest Account and the Principal Account of the Special Tax Fund as required by Section 3.3 hereof, the Fiscal Agent shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account five Business Days prior to each September 1 equal to the Sinking Fund Payment due on any Outstanding Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded, pursuant to Section 3.5 below. Moneys so deposited in the Redemption Account shall be used and applied by the Fiscal Agent to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedule set forth in Section 4.1 hereof. (2) After making the deposits to the Interest Account and the Principal Account of the Special Tax Fund pursuant to Section 3.3 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (1) of this Section, and in accordance with the CFD's election to call Bonds for optional redemption as set forth in Section 4.1(1) hereof, the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the interest, the principal and the premiums, if any, payable on the Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (3) All prepayments of Special Taxes shall be deposited in the Redemption Account to be used to redeem Bonds on the next date for which notice of redemption can timely be given. .~ .....", (4) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal of .....", 45733359.1 19 AGENDA ITEM NO. ~ d... PAce3D ~ ~ and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds and in the case of an optional redemption to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account as set forth above may be used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds may be made by the CFD at public or private sale as and when and at such prices as the CFD may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(1) hereof. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. Section 3.5. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts in the Reserve Account shall be applied as follows: (1) Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on any Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds when due, the Fiscal Agent shall withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund, as applicable, moneys necessary for such purposes. /""' (2) Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in Sections 3.4 and 3.5 above, the Fiscal Agent shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the CFD elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Fiscal Agent determines that such amounts will not be needed to make the deposits required to be made to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the CFD shall include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent ofthe maximum permitted Special Tax rates. (3) In connection with any redemption of the Bonds, or a partial defeasance of the Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this paragraph shall be withdrawn from the Reserve Account on the fifth Business Day before each March 1 and September 1 and transferred to the Acquisition and Construction Fund until the Fiscal Agent receives a Certificate of Authorized Representative of the CFD that all Project Costs have been funded and, thereafter, to the Interest Account of the Special Tax Fund. ~ 45733359.1 20 3]- AGENDA ITEM NO. fC: PAGEl-OF ~ Section 3.6. Administrative Expense Account of the Special Tax Fund. The Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund amounts necessary to make timely payment of Administrative Expenses and shall be disbursed by the Fiscal Agent to pay Administrative Expenses, all as instructed by the CFD pursuant to a Written Request of the CFD. Moneys in the Administrative Expense Account of the Special Tax Fund may be invested in any Authorized Investments as directed by an Authorized Representative of the CFD. """'" Section 3.7. Surplus Fund. After making the transfers required by Sections 3.3, 3.4, 3.5, and 3.6 hereof, as soon as practicable after each September 1, the Fiscal Agent shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, other than amounts in the Special Tax Fund which the CFD directs the Fiscal Agent by Written Request of the CFD to retain because the CFD has included such funds as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(2) hereof. Moneys deposited in the Surplus Fund shall be transferred by the Fiscal Agent at the Written Request of the CFD (i) to any other reserve account established in connection with issuance of bonds for any other improvement area within the CFD to the extent amounts in such reserve account is less than the reserve requirement for that reserve account, and (ii) to the Administrative Expense Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Account of the Special Tax Fund are insufficient to pay Administrative Expenses or, upon the Written Request of the CFD, may be disbursed to the CFD to be expended for any other lawful purpose of the CFD. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds. In the event that the CFD reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, upon the written direction of the CFD, the Fiscal Agent will segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of ....."" computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds which were issued on a tax-exempt basis for federal income tax purposes. Section 3.8. Acquisition and Construction Fund. (1) The moneys in the Acquisition and Construction Fund shall be applied exclusively to pay the Project Costs and Costs of Issuance. Amounts for Project Costs and Costs of Issuance shall be disbursed by the Fiscal Agent from the account in the Acquisition and Construction Fund designated therefor in a requisition signed by an Authorized Representative of the CFD, substantially in the form of Exhibit B hereto, which must be submitted in connection with each requested disbursement. (2) Upon receipt of a Certificate of Authorized Representative of the CFD that all or a specified portion of the amount remaining in the Acquisition and Construction Fund is no longer needed to pay Project Costs or Costs of Issuance, the Fiscal Agent shall redeem Bonds pursuant to Section 4.1 (4) hereof, or transfer all or such specified portion of the moneys remaining on deposit in one or more of the accounts in the Acquisition and Construction Fund to the Special Tax Fund, or to the Surplus Fund if requested in the Certificate and if there shall have been delivered to the Fiscal Agent with such Certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds which were issued on a tax-exempt basis for federal income tax purposes. Upon transfer of the final amounts on deposit in the Acquisition and Construction Fund or either account in such fund, such accounts and fund """" 45733359.1 21 AGENDA ITEM NO. PACE "3 ;).- h::l OF '?lLQ I"""" shall be closed. Notwithstanding the foregoing, any amount remaining in the Costs of Issuance Account of the Acquisition and Construction Fund on the date 180 days from the Delivery Date shall be transferred to the Acquisition and Construction Fund and such account shall be closed. Seotion 3.9. Investments. Moneys held in any of the funds and accounts under this Fiscal Agent Agreement shall be invested at the Written Request of the CFD in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such funds and accounts. Any loss resulting from such Authorized Investments shall be credited or charged to the fund or account from which such investment was made, and any investment earnings on a fund or account shall be applied as follows: (i) investment earnings on all amounts deposited in the Special Tax Fund (exclusive of amounts transferred to the Reserve Account), Surplus Fund, Acquisition and Construction Fund and each Account therein shall be deposited in those respective funds and accounts, and (ii) all other investment earnings shall be deposited in the Interest Account of the Special Tax Fund; provided, however, to the extent moneys in the Reserve Account exceed the Reserve Requirement, such excess amounts shall be deposited and transferred pursuant to Section 3.5(3) hereof. Moneys in the funds and accounts held under this Fiscal Agent Agreement may be invested by the Fiscal Agent at the Written Request of the CFD received at least 2 Business Days prior to the investment date, from time to time, in Authorized Investments subject to the following restrictions: (1) Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so " as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due. I"""" (2) Moneys in the Acquisition and Construction Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the CFD estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition and Construction Fund. Notwithstanding anything herein to the contrary, amounts in the Acquisition and Construction Fund on the Delivery Date for the Bonds shall not be invested at yields greater than those set forth in the Tax Certificate. (3) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than two years from their date of purchase by the Fiscal Agent, and one-half of the amount in the Reserve Account may be invested only in Authorized Investments which mature not more than three years from the date of purchase by the Fiscal Agent; provided that such amounts may be invested in an Investment Agreement to the final maturity of the Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.5 hereof; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the final maturity date of the Bonds. (4) In the absence of Written Request of the CFD providing investment directions, the Fiscal Agent shall invest solely in Authorized Investments specified in clause (4) of the definition thereof. The Fiscal Agent shall sell at the best price obtainable, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the fair market value thereof and marked to market at least annually. Notwithstanding I"""" 45733359.1 22 AGENDA ITEM NO. 2>;t PAGE 33 OF 3D..- anything herein to the contrary, the Fiscal Agent shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Fiscal Agent Agreement. The Fiscal Agent or an affiliate may act as principal or agent in connection with the acquisition or disposition of any Authorized Investments and shall be entitled to its customary fees therefor. Any Authorized Investments that are registrable securities shall be registered in the name of the Fiscal Agent. The Fiscal Agent is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with anyone or more of its affiliates, whether it or such affiliate is acting as an agent of the Fiscal Agent or for any third person or dealing as principal for its own account. ~ ARTICLE IV REDEMPTION OF BONDS Section 4.1. Redemption of Bonds. (1) Optional Redemption. The Bonds are subject to redemption prior to maturity at the option of the CFD on any date on or after , as a whole or in part, by lot, from any available source of funds at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices through through and thereafter 102.0% 101.0 100.0 (2) Special Mandatory Redemption from Special Tax Prepavrnents. The Bonds are subject ......, to mandatory redemption prior to maturity on any date, in part, in a manner determined by the CFD from prepayments of Special Taxes at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices through through and thereafter 103.0% 102.5 As provided for in optional redemption In connection with such redemption, the CFD may also apply amounts in the Reserve Account which will be in excess of the Reserve Requirement as a result of such Special Tax prepayment to redeem Bonds as set forth above. (3) Special Mandatory Redemption. The Bonds are subject to special mandatory redemption on any date from unused proceeds of the Bonds after completion or abandonment of the improvements to be financed with such proceeds, from the deposit of fees with the CFD by a public agency which has accepted facilities serving Improvement Area B and from insurance or condemnation proceeds or other mandatory redemption, without premium, plus accrued interest to the redemption date, all as determined by the CFD. (4) Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 20_ are subject to mandatory redemption, in part by lot, on September 1 in each year, commencing September 1, ......, 45733359.1 23 AGENDA ITE~ rp._ ..3;2 PACE~OF 347 4/ ,,-. 20_, from the Sinking Fund Payments that have been deposited into the Redemption Account at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date of redemption as set forth in the following schedule; provided, however, that (i) in lieu of redemption thereof, the Bonds may be purchased by the CFD and tendered to the Fiscal Agent, and (ii) if some but not all of the Bonds have been redeemed pursuant to Section 4.1(1) through (3) above, the total amount of all future sinking payments will be reduced by the aggregate principal amount of the Bonds so redeemed, to be allocated among such sinking payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the CFD. Bonds Maturing on September I, 20_ Redemption Date (September 1) Principal Amount Redemption Date (September 1) Principal Amount ,--. Section 4.2. Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Fiscal Agent shall treat such Bonds as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The Fiscal Agent shall promptly notify the CFD in writing of the Bonds, or portions thereof, selected for redemption. Section 4.3. Notice of Redemption. When Bonds are due for redemption under Section 4.1 above, the Fiscal Agent shall give notice, in the name of the CFD, of the redemption of such Bonds; provided, however, that a notice of a redemption to be made from other than from Sinking Fund Payments shall be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the Bonds to be redeemed. Such notice of redemption shall (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds of a maturity are subject to redemption, or all the Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds are to be redeemed; (e) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (f) state the date of issue of the Bonds as originally issued; (g) state the rate of interest borne by each Bond being redeemed; and (h) state any other ,,-. descriptive information needed to identify accurately the Bonds being redeemed as shall be specified by the Fiscal Agent. Such notice shall further state that on the date fixed for redemption, there shall become 45733359.1 24 (~,OENDA ITEM NO. 3 ~ PAGE 35 OF ~ tf1 --' due and payable on each Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date, the Fiscal Agent shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond or the original purchaser of any Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. """ In addition to the foregoing notice, further notice shall be given by the Fiscal Agent as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption shall be sent on or before the date notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section by telecopy or registered or certified mail or overnight delivery service to the registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as shall be specified by the CFD to the Fiscal Agent and to the national information services that disseminate notice of redemption of obligations such as the Bonds. Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other "" transfer. Section 4.4. Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the CFD shall execute and the Fiscal Agent shall authenticate and deliver to the Bondowner, at the expense of the CFD, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity. Section 4.5. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3 hereof, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (1) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Fiscal Agent Agreement, anything in this Fiscal Agent Agreement or in the Bonds to the contrary notwithstanding; (2) Upon presentation and surrender thereof at the office of the Fiscal Agent, the redemption price of such Bonds shall be paid to the Owners thereof; (3) As of the redemption date the Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds, or portions thereof, shall cease to bear further interest; and "" 45733359.1 25 AGENDA ITEM No.3). PAGE?/" OF ~l(I -' -""" (4) As of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption, shall be entitled to any of the benefits of this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.1. Warranty. The CFD shall preserve and protect the security pledged hereunder to the Bonds against all claims and demands of all persons. Section 5.2. Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the CFD makes the following covenants with the Bondowners under the provisions of the Act and this Fiscal Agent Agreement (to be performed by the CFD or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the CFD to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (1) Punctual Payment: Against Encumbrances. The CFD hereby covenants that it will receive all Special Taxes in trust and will immediately deposit such amounts with the Fiscal Agent, and the CFD shall have no beneficial right or interest in the amounts so deposited except as provided by this Fiscal Agent Agreement. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the CFD. ~ The CFD covenants that it will duly and punctually payor cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with this Fiscal Agent Agreement to the extent that Special Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and this Fiscal Agent Agreement, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements and of the Bonds issued hereunder. The CFD will not mortgage or otherwise encumber, pledge or place any charge upon any of the Special Taxes except as provided in this Fiscal Agent Agreement, and will not issue any obligation or security having a lien or charge upon the Special Taxes superior to or on a parity with the Bonds. Nothing herein shall prevent the CFD from issuing or incurring indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to the pledge of Special Taxes to repay the Bonds. (2) Levy of Special Tax. Beginning in Fiscal Year 2006-07 and so long as any Bonds issued under this Fiscal Agent Agreement are Outstanding, the CFD hereby covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and the Surplus Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. ,..... (3) Commence Foreclosure Proceedings. The CFD hereby covenants for the benefit of the Owners of the Bonds that it will determine or cause to be determined, no later than March 1 and August 1 45733359.1 26 AOENDA ITEM NO. MOEn 3,;) OF .:3!fL.:, of each year, whether or not any owner of the property within Improvement Area B are delinquent in the payment of Special Taxes and, if such delinquencies exist, the CFD will order and cause to be commenced no later than April 15 (with respect to the March I determination date) or September 1 (with respect to the August 1 determination date), and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due, provided, however, that the CFD shall not be required to order the commencement of foreclosure proceedings if (i) the total Special Tax delinquency in Improvement Area B for such Fiscal Year is less than five percent (5%) of the total Special Tax levied in such Fiscal Year, and (ii) the CFD shall have established from any source oflawfully available funds (other than Special Taxes) an escrow fund to provide for the payment of principal of and interest on the Bonds. Notwithstanding the foregoing, if the CFD determines that any single property owner in Improvement Area B is delinquent in excess often thousand dollars ($10,000) in the payment of the Special Tax, then it will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. ...." Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosure related to delinquent Special Taxes: (a) The CFD or the Fiscal Agent, is hereby expressly authorized to credit bid at any foreclosure sale, without any requirement that funds be set aside in the amount so credit bid, in the amount specified in Section 53356.5 of the Act, or such less amount as determined under clause (b) below or otherwise under Section 53356.6 of the Act. (b) The CFD ~ay permit, in its sole and absolute discretion, property with delinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5 of the Act, if it determines that such sale is in the interest of the Bond Owners. The Bond Owners, by their acceptance ofthe Bonds, hereby consent to such sale for such lesser amounts (as such consent is described in Section 53356.6 of the Act), and hereby release the CFD and the ~ City, and their respective officers and agents from any liability in connection therewith. If such sale for lesser amounts would result in less than full payment of principal of and interest on the Bonds, the CFD will use best efforts to seek approval of the Bond Owners. (c) The CFD is hereby expressly authorized to use amounts in the Special Tax Fund to pay costs of foreclosure. of delinquent Special Taxes. (d) The CFD may forgive all or any portion of the Special Taxes levied or to be levied on any parcel in Improvement Area B so long as the CFD determines that such forgiveness is not expected to adversely affect its obligation to pay principal of and interest on the Bonds as such payments become due and payable. (4) Payment of Claims. The CFD will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Special Taxes or; other funds in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), or which might impair the security of the Bonds then Outstanding; provided that nothing herein contained shall require the CFD to make any such payments so long as the CFD in good faith shall contest the validity of any such claims. (5) Books and Accounts. The CFD will keep proper books of records and accounts, separate from all other records and accounts of the CFD, in which complete and correct entries shall be made of all transactions relating to the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of the Bonds then Outstanding or their representatives authorized in writing. " 45733359.1 27 AGENDA ITEM N9< ~ PAGE S~ OF ,-. (6) Tax Covenants. (a) Special Definitions. When used in this subsection, the following terms have the following meanings: "Code" means the Internal Revenue Code of 1986. "Computation Date" has the meaning set forth in section 1.148-1 (b) of the Tax Regulations. "Gross Proceeds" means any proceeds as defined in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds), and any replacement proceeds as defined in section 1.148-1(c) of the Tax Regulations, of the Bonds. "Investment" has the meaning set forth in section 1.148-1(b) of the Tax Regulations. "Nonpurpose Investment" means any investment property, as defmed in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and that is not acquired to carry out the governmental purposes of that series of Bonds. "Rebate Amount," has the meaning set forth in section 1.148-1 (b) ofthe Tax Regulations. "Tax Regulations" means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code. "Yield" of any Investment has the meaning set forth in section 1.148-5 of the Tax Regulations; /'""' and of any issue of governmental obligations has the meaning set forth in section 1.148-4 of the Tax Regulations. (b) Not to Cause Interest to Become Taxable. The CFD covenants that it shall take all actions necessary in order that interest on the Bonds be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes, and that it shall not use or invest, and shall not permit the use or investment of, and shall not omit to use or invest Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that ifmade or omitted, respectively, could cause the interest on any Bond to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Fiscal Agent receives a written opinion of Bond Counsel to the effect that compliance with such covenant is not necessary to, or that failure to comply with such covenant will not adversely affect, the exclusion of the interest on any Bond from the gross income of the owner thereof for federal income tax purposes, the CFD shall comply with each of the specific covenants in this subsection. (c) Private Use and Private Payments. Except as would not cause any Bond to become a "private activity bond" within the meaning of section 141 of the Code and the Tax Regulations, the CFD shall take all actions necessary to assure that the CFD at all times prior to the final cancellation of the last of the Bonds to be retired: /"'"' (i) exclusively owns, operates and possesses all property the acquisition, construction or improvement of which is to be financed. or refinanced directly or indirectly with Gross Proceeds of the Bonds and not use or permit the use of such Gross 45733359.1 28 AGENDA ITEM NO. PAOE ?fj 3~ OF~ Proceeds (including through any contractual arrangement with terms different than those applicable to the general public) or any property acquired, constructed or improved with ~ such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (ii) does not directly or indirectly impose or accept any charge or other payment by any person or entity (other than a state or local government) who is treated as using any Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds. (d) No Private Loan. Except as would not cause any Bond to become a "private activity bond" within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder, the CFD shall not use or permit the use of Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (i) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal income tax purposes; (ii) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (iii) indirect benefits of such Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a loan. (e) Not to Invest at Higher Yield. Except as would not cause the Bonds to become "arbitrage bonds" within the meaning of section 148 of the Code and the Tax Regulations and rulings thereunder, the CFD shall not (and shall not permit any person to), at any time prior to the final cancellation of the last Bond to be retired, directly or indirectly invest Gross Proceeds in any Investment, if as a result of such investment the Yield of any Investment acquired with Gross Proceeds, whether then held or previously disposed of, would materially exceed the Yield of the Bonds within the meaning of said section 148. '-'" (f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Tax Regulations and rulings thereunder, the CFD shall take or omit to take (and shall not permit any person to take or omit to take) any action that would cause any Bond to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder. (g) Information Report. The CFD shall timely file any information required by section 149(e) of the Code with respect to Bonds with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. (h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Tax Regulations: (i) The CFD shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Bond is discharged. However, to the extent permitted by law, the CFD may commingle (and may allow the CFD to commingle) Gross Proceeds of Bonds with its other monies, provided ~ 45733359.1 29 2>;).. AGENDA 'TE~ nO. ffr'.: ,. L[O Of:!7 ,;.. ~ that it separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (ii) Not less frequently than each Computation Date, the CFD shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Tax Regulations and rulings thereunder. The CFD shall maintain a copy of the calculation with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. (iii) In order to assure the excludability pursuant to 3(a) of the Code of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes, the CFD shall pay to the United States the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of the Final Computation Date as defined in section 1.148-3(e)(2) of the Tax Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, such rebate payments shall be made by the CFD at the times and in the amounts as are or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder for execution and filing by the CFD. Notwithstanding the foregoing, and provided that the CFD takes all steps available to it to cause the provision of such amounts, the monetary obligation of the CFD under this paragraph (3) shall be limited to amounts provided to it for such purpose by the CFD. ,--. (i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Tax Regulations and rulings thereunder, the CFD shall not and shall not permit any person to, at any time prior to the fmal cancellation of the last of the Bonds to be retired, enter into any transaction that reduces the amount required to be paid to the United States pursuant to paragraph (h) of this subsection because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yields on the Bonds not been relevant to either party. (j) Bonds Not Hedge Bonds. (i) The CFD represents that none of the Bonds is or will become a "hedge bond" within the meaning of section 149(g) of the Code. (ii) Without limitation of paragraph (i) above: (A) the CFD reasonably expects that at least 85% of the spendable proceeds of the Bonds will be expended within the three-year period commencing on the date of issuance of the Bonds; and (B) no more than 50% of the proceeds of the Bonds will be invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more. (k) Elections. The CFD hereby directs and authorizes any CFD Authorized Representative to make elections permitted or required pursuant to the provisions of the Code or the Tax Regulations, as such representative (after consultation with Bond Counsel) deems necessary or appropriate in connection with the Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. r- 45733359.1 30 3;1 AGENDA ITa:;N, 0.. T: PAGE Of '?A ~ (I) Closing Certificate. The CFD agrees to execute and deliver in connection with the issuance of the Bonds a Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of the Internal Revenue Code of 1986, or similar document containing additional representations and covenants pertaining to the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes, which representations and covenants are incorporated as though expressly set forth herein. ....". (7) Reduction of Maximum Special Taxes. The CFD hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the CFD hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the CFD below the levels provided in this Section 5.2(7) would interfere with the timely retirement of the Bonds. The CFD determines it to be necessary in order to preserve the security for the Bonds to covenant, and, to the maximum extent that the law permits it to do so, the CFD hereby does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the CFD, unless, in connection therewith, (i) the CFD receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that, on the basis of the parcels ofland and improvements existing in Improvement Area B as of the July 1 preceding the reduction, the maximum amount of the Special Tax which may be levied on then existing Developed Property (as defined in the Rate and Method of Apportionment of Special Taxes then in effect in Improvement Area B) in each Bond Year for any Bonds Outstanding will equal at least 110% of the sum on the estimated Administrative Expenses and gross debt service in that Bond Year on all Bonds to remain Outstanding after the reduction is approved, and (ii) the CFD hereby finds that any reduction made under such conditions will not adversely affect the interests of the Owners of the Bonds. For purposes of estimating Administrative Expenses for the foregoing calculation, the Independent Financial Consultant shall compute the Administrative Expenses for the current Fiscal Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year. ~ (8) Covenants to Defend. The CFD hereby covenants that in the event that any initiative is adopted by the qualified electors in the CFD which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(7) above or to limit the power of the CFD to levy the Special Taxes for the purposes set forth in Section 5.2(2) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (9) Annual Reports to CDIAC. Not later than October 30 of each year, commencing October 30, 2006 and until the October 30 following the final maturity of the Bonds, the CFD shall cause the City to supply the information required by Section 53359.5(b) or (c) of the Act to CDIAC (on such forms as CDIAC may specify). (10) Continuing Disclosure. The CFD hereby covenants to comply with the terms of the Continuing Disclosure Agreement executed by it with respect to the Bonds. ARTICLE VI AMENDMENTS TO FISCAL AGENT AGREEMENT Section 6.1. Supplemental Fiscal Agent Agreements or Orders Not Requiring Bondowner Consent. The CFD may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Fiscal Agent Agreements for any of the following purposes: ...." 45733359.1 31 /~OENDA ITEM ~O. J ;). PAOE 4'}/ ~ "..... (1) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Fiscal Agent Agreement or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners; (2) to add to the covenants and agreements of and the limitations and the restrictions upon the CFD contained in this Fiscal Agent Agreement, other covenants, agreements, limitations and restrictions to be observed by the CFD which are not contrary to or inconsistent with this Fiscal Agent Agreement as theretofore in effect or which further secure Bond payments; (3) to modify, amend or supplement this Fiscal Agent Agreement in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter il} effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; or (4) to modify, alter or amend the rate and method of apportionment of the Special Taxes in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the CFD to an amount which is less than that permitted under Section 5.2(7) hereof; or (5) to modify, alter, amend or supplement this Fiscal Agent Agreement in any other respect which is not materially adverse to the Bondowners. ",..-.. Section 6.2. Supplemental Fiscal Agent Agreements or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Fiscal Agent Agreements described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the adoption by the CFD of such Supplemental Fiscal Agent Agreements as shall be deemed necessary or desirable by the CFD for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Fiscal Agent Agreement; provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon, (c) a preference or priority of any Bond over any other Bond, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplemental Fiscal Agent Agreement, without the consent of the Owners of all Bonds then Outstanding. If at any time the CFD shall desire to adopt a Supplemental Fiscal Agent Agreement, which pursuant to the terms of this Section shall require the consent of the Bondowners, the CFD shall so notify the Fiscal Agent and shall deliver to the Fiscal Agent a copy of the proposed Supplemental Fiscal Agent Agreement. The Fiscal Agent shall, at the expense of the CFD, cause notice of the proposed Supplemental Fiscal Agent Agreement to be mailed, by first class mail, postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Fiscal Agent Agreement and shall state that a copy thereof is on file at the office of the Fiscal Agent for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Fiscal Agent Agreement when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Fiscal Agent shall receive an instrument or instruments purporting to be executed by the Owners of a majority in aggregate principal amount of the Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Fiscal Agent Agreement described in ",..-.. 45733359.1 32 AOENDA ITEM NO.3).. PAGE4~ ~ such notice, and shall specifically consent to and approve the adoption thereof by the CFD substantially in the form of the copy referred to in such notice as on file with the Fiscal Agent, such proposed Supplemental Fiscal Agent Agreement, when duly adopted by the CFD, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any Supplemental Fiscal Agent Agreement, Bonds which are owned by the CFD or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the CFD shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. ~ Upon the adoption of any Supplemental Fiscal Agent Agreement and the receipt of consent to any such Supplemental Fiscal Agent Agreement from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds in instances where such consent is required pursuant to the provisions of this Section, this Fiscal Agent Agreement shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Fiscal Agent Agreement of the CFD and all Owners of Outstanding Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Section 6.3. Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as hereinabove provided, the CFD may determine that the Bonds may bear a notation, by endorsement in form approved by the CFD, as to such action, and in that case upon demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the CFD shall so determine, new Bonds so modified as, in the opinion of the CFD, shall be necessary to cQnform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond at such effective date such new Bonds shall be exchanged at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that purpose, without cost to each Owner of Outstanding Bonds, upon surrender of such Outstanding Bonds. ~ ARTICLE VII FISCAL AGENT Section 7.1. Fiscal Agent. Union Bank of California, N.A., a national banking association shall be the Fiscal Agent for the Bonds unless and until another Fiscal Agent is appointed by the CFD hereunder. The CFD may, at any time, provided that no Event of Default has occurred and is continuing, appoint a successor Fiscal Agent satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the CFD is required to deposit with the Fiscal Agent hereunder and to allocate, use and apply the saine as provided in this Fiscal Agent Agreement. The Fiscal Agent is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Bondowners, to select Bonds for redemption, and to maintain the Bond Register. The Fiscal Agent is hereby authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in this Fiscal Agent Agreement, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Fiscal Agent Agreement; provided, however, that the Fiscal Agent undertakes to perform such duties and only such duties as are set forth in this Fiscal Agent Agreement, and no duties of the Fiscal Agent shall be implied hereunder. Discretionary rights of the Fiscal Agent under this Fiscal Agent Agreement shall not be construed as duties. The Fiscal Agent may ....., 45733359. I 33 AGENDA ITEM ~cr. 3;). PAGE Lf'r OF ?J41 __ ~ execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Fiscal Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care hereunder. The Fiscal Agent shall keep accurate records of all funds administered by it and all Bonds paid, discharged and cancelled by it. The Fiscal Agent may establish such funds and accounts as it deems necessary to perform its obligations hereunder. The Fiscal Agent is hereby authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Fiscal Agent shall cancel all Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. ~ Section 7.2. Removal of Fiscal Agent. Provided that no Event of Default has occurred and is continuing, the CFD may at any time at its sole discretion remove the Fiscal Agent initially appointed, and any successor thereto, by delivering to the Fiscal Agent a written notice of its decision to remove the Fiscal Agent and may appoint a successor or successors thereto; provided that any such successor, other than the Fiscal Agent, shall be a bank or trust company having (or if such bank or trust company is a member of a bank holding company system its bank holding company has) a combined capital (exclusive of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state Authority. Any removal shall become effective only upon acceptance of appointment by the successor Fiscal Agent. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent and notice being sent by the successor Fiscal Agent to the Bondowners of the successor Fiscal Agent's identity and address. Section 7.3. Resignation of Fiscal Agent. The Fiscal Agent may at any time resign by giving written notice to the CFD and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Fiscal Agent. Upon receiving such notice of resignation, the CFD shall promptly appoint a successor Fiscal Agent satisfying the criteria in Section 7.2 above by an instrument in writing. Any resignation or removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent provided, however, that in the event the CFD does not appoint a successor Fiscal Agent within 30 days following receipt of such notice of resignation, the resigning Fiscal Agent may, at the expense of the CFD, petition the appropriate court having jurisdiction to appoint a successor Fiscal Agent. Section 7.4. Compensation and Liability of Fiscal Agent. The CFD shall from time to time, subject to any agreement between the CFD and the Fiscal Agent then in force, pay to the Fiscal Agent compensation for its services, reimburse the Fiscal Agent for all of its advances and expenditures, including, but not limited to, advances to and reasonable fees and expenses of independent accountants and counsel and agents employed by it in the exercise and performance of its powers and duties hereunder. The CFD agrees to indemnify the Fiscal Agent, including its officers, directors, employees and agents for, and hold it harmless against, any loss, claim, liability or expense incurred which does not arise from its own negligence or willful misconduct, arising out of or in connection with the administration of this Fiscal Agent Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties r- hereunder. The Fiscal Agent shall not be liable for any error in judgment made in good faith by a reasonable officer, unless it shall be proved that the Fiscal Agent was negligent in ascertaining the 45733359.] 34 AGEflo;,:'$- ~~?L\1 ~ pertinent facts. Whether or not therein expressly so provided, every provision of this Fiscal Agent Agreement relating to the conduct of or affecting the liability of or affording protection to the Fiscal Agent (acting in its capacity as Fiscal Agent or in its capacity as Dissemination Agent), its officers, directors, employees and agents, shall be subject to the provisions of this Section 7.4. ......,. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any offering documents pertaining to the Bonds shall be taken as statements, promises, covenants and agreements of the CFD, and the Fiscal Agent assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Fiscal Agent Agreement or the Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bonds, or in the certificate of authentication assigned to or imposed upon the Fiscal Agent. The Fiscal Agent shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Fiscal Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Fiscal Agent may consult with counsel, who may be counsel to the CFD, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. The Fiscal Agent may become the owner or pledgee of Bonds, and may otherwise deal with the CFD with the same rights it would have if it were not the Fiscal Agent. Whenever in the administration of its duties under this Fiscal Agent Agreement the Fiscal Agent ......" shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Fiscal Agent, be deemed to be conclusively proved and established by a written certificate of the CFD, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of this Fiscal Agent Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. No provision in this Fiscal Agent Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers. All rights and indemnities of the Fiscal Agent pursuant to this Section 7.4 shall survive the removal or resignation of the Fiscal Agent, the discharge of the Bonds, or the amendment or assignment of this Fiscal Agent Agreement. Section 7.5. Merger or Consolidation. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Fiscal ......" 45733359.1 35 J?- ACENDA ITEM NO. . 4T: PACE f<P Of '7, . r- Agent without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. ARTICLE VIII EVENTS OF DEF AUL T; REMEDIES Section 8.1. "event of default": Events of Default. Anyone or more of the following events shall constitute an (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) Except as described in (a) or (b), default shall be made by the CFD in the observance of any of the agreements, conditions or covenants on its part contained in this Fiscal Agent Agreement or the. Bonds, and such default shall have continued for a period of 30 days after the CFD shall have been given notice in writing of such default by the Fiscal Agent or the Owners of 25% in aggregate principal amount of the Outstanding Bonds. r- The CFD agrees to give notice to the Fiscal Agent immediately upon the occurrence of an event of default under (a) or (b) above and within 30 days of the CFD's knowledge of an event of default under (c) above. The Fiscal Agent shall not be deemed to have knowledge of any event of default described in Section 8.1 (c) unless a responsible officer shall have actual knowledge thereof or the Fiscal Agent shall have received written notice at its Principal Office. Section 8.2. Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (1) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the CFD and any of the members, officers and employees of the CFD, and to compel the CFD or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Fiscal Agent Agreement; (2) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (3) By a suit in equity to require the CFD and its members, officers and employees to account as the fiscal agent of an express trust. Nothing in this Article or in any other provision of this Fiscal Agent Agreement or the Bonds shall affect or impair the obligation of the CFD, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners thereof at the respective dates of maturity, as herein provided, out of the Special Taxes and other amounts pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in this Fiscal Agent Agreement. ~ 45733359.1 36 3iJ- AOENDAITE~~P.~ PAGE I--( f _OF~ A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default orbreach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. '-' If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the CFD and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Fiscal Agent after an event of default pursuant to Section 8.I(a) or (b) shall be insufficient to pay in full the whole amount so owing and unpaid upon the Outstanding Bonds, then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. ARTICLE IX DEFEASANCE "-'" Section 9.1. Defeasance. If the CFD shall payor cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, then the Owner of such Bond shall cease to be entitled to the pledge of Special Taxes, and, other than as set forth below, all covenants, agreements and other obligations ofthe CFD to the Owner of such Bond under this Fiscal Agent Agreement shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds pursuant to this Section, the Fiscal Agent shall execute and deliver to the CFD all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal Agent shall pay over or deliver to the CFD's general fund all money or securities held by it pursuant to this Fiscal Agent Agreement which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds. Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond is paid in anyone or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Fiscal Agent at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; or "-'" 45733359.1 37 J;~ AGENDA'TEM ~.~ PACE3-~ Of - ~ ~ (c) by depositing with the Fiscal Agent or another escrow bank appointed by the CFD noncallable Defeasance Securities, in which the CFD may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the Principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; ~ then, at the election of the CFD, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the CFD under this Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement; with respect to such Bond shall cease and terminate, except for the obligation of the Fiscal Agent to payor cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the CFD contained in Section 5.2(6) or any covenants in a Supplemental Fiscal Agent Agreement relating to compliance with the Code. Notice of such election shall be filed with the Fiscal Agent not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Fiscal Agent. In connection with a defeasance under (b) or (c) above, there shall be provided to the CFD a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Fiscal Agent or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with this Fiscal Agent Agreement and any applicable Supplemental Fiscal Agent Agreement. If a forward supply contract is employed in connection with an advance refunding to be effected under (c) above, (i) such verification report shall expressly state that the adequacy of the amounts deposited with the bank under (c) above to accomplish the refunding relies solely on the initial escrowed investments and the maturity principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement executed to effect an advance refunding in accordance with (c) above shall provide that, in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement, the terms of the escrow agreement shall be controlling. Upon a defeasance, the Fiscal Agent, upon request of the CFD, shall release the rights of the Owners of such Bonds which have been defeased under this Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement and execute and deliver to the CFD all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds, the Fiscal Agent shall pay over or deliver to the CFD any funds held by the Fiscal Agent at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of, premi~, if any, or interest on the Bonds when due. The Fiscal Agent shall, at the written direction of the CFD, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased, in the form directed by the CFD, stating that the defeasance has occurred. ARTICLE X MISCELLANEOUS Section 10.1. Cancellation of Bonds. All Bonds surrendered to the Fiscal Agent for payment upon maturity or for redemption shall be upon payment therefor, and any Bond purchased by the CFD as authorized herein and delivered to the Fiscal Agent for such purpose shall be, cancelled forthwith and ,--.. shall not be reissued. The Fiscal Agent shall destroy such Bonds, as provided by law, and, upon request of the CFD, furnish to the CFD a certificate of such destruction. 45733359.1 38 AGENDA ITE~ ~o. 3).. PAGE tfq:OF~ Section 10.2. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Fiscal Agent Agreement to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of this Fiscal Agent Agreement (except as otherwise herein provided), if made in the following manner: '-"" (1) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company or other eligible guarantor located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his Authority. (2) As to any Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the CFD nor the Fiscal Agent shall be affected by any notice to the contrary . Nothing contained in this Fiscal Agent Agreement shall be construed as limiting the Fiscal Agent or the CFD to such proof, it being intended that the Fiscal Agent or the CFD may accept any other evidence of the matters herein stated which the Fiscal Agent or the CFD may deem sufficient. Any ....." request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Fiscal Agent or the CFD in pursuance of such request or consent. Section 10.3. Unclaimed Moneys. To the extent permitted by law, anything in this Fiscal Agent Agreement to the contrary notwithstanding, any money held by the Fiscal Agent for the payment and discharge of any of the Outstanding Bonds which remain unclaimed for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date when such Outstanding Bonds have become due and payable, if such money was held by the Fiscal Agent at such date, or for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date of deposit of such money if deposited with the Fiscal Agent after the date when such Outstanding Bonds become due and payable, shall be repaid by the Fiscal Agent to the CFD, as its absolute property, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look only to the CFD for the payment of such Outstanding Bonds; provided, however, that, before being required to make any such payment to the CFD, the Fiscal Agent at the written request of the CFD or the Fiscal Agent shall, at the expense of the CFD, cause to be mailed by first-class mail, postage prepaid, to the registered Owners of such Outstanding Bonds at their addresses as they appear on the registration books of the Fiscal Agent a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the CFD. The Fiscal Agent shall not be liable to the CFD or any Owner for interest on uninvested funds held by it for the payment and discharge of the principal, premium or interest on any of the Bonds to any Owner. ....." 45733359.1 39 AGENDA JTEM NO. ,;). PAGE~ ~ ~ Section 10.4. Provisions Constitute Contract. The prOVISIOns of this Fiscal Agent Agreement shall constitute a contract between the CFD and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Fiscal Agent, then the CFD, the Fiscal Agent and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Fiscal Agent Agreement shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Fiscal Agent Agreement, but to no greater extent and in no other manner. Section 10.5. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the CFD from making contracts or creating bonded or other indebtedness payable from a pledge of the Special Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the CFD or from taxes or any source other than the Special Taxes and other amounts pledged hereunder . Section 10.6. Further Assurances. The CFD will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Fiscal Agent Agreement, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Fiscal Agent Agreement. r- Section 10.7. Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Fiscal Agent Agreement, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Fiscal Agent Agreement and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Fiscal Agent Agreement, the Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8. Notices. Any notices required to be given to the CFD with respect to the Bonds or this Fiscal Agent Agreement shall be mailed, first class, postage prepaid, or personally delivered to the Mayor of the City of Lake Elsinore, 130 South Main Street, Lake Elsinore, California 92530, and all notices to the Fiscal Agent in its capacity as Fiscal Agent shall be mailed, first class, postage prepaid, or personally delivered to the Fiscal Agent, Union Bank of California, N.A., 120 South San Pedro Street, Suite 400, Los Angeles, California 90012, Attention: Corporate Trust Department. Section 10.9. General Authorization. The Mayor, City Manager and the City Treasurer are hereby respectively authorized to do and perform from time to time any and all acts and things consistent with this Fiscal Agent Agreement necessary or appropriate to carry the same into effect. Section 10.10. Execution in Counterparts. This Fiscal Agent Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts shall together constitute but one and the same instrument. ~ 45733359.\ 40 3~ AOENDAITEM NO.~ PAGE 5/ OF ~~ 1_-- IN WITNESS WHEREOF, the CITY COUNCIL OF THE CITY OF LAKE ELSINORE, acting as the legislative body of CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON HILLS), has caused this Fiscal Agent Agreement to be signed by its Mayor and Union Bank of California, N.A., in token of its acceptance of the trust created hereunder, has caused this Fiscal Agent Agreement to be signed in its corporate name by its officer identified below, all as of the day and year first above written. ....." CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON HILLS) By: Mayor of the City of Lake Elsinore, acting in its capacity as the legislative body of City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) UNION BANK OF CALIFORNIA, N.A., as Fiscal Agent By: Its: Authorized Officer ....." ....." 45733359.1 S-l AGENDA ITEM ~ PAOE t) L-..OF~ ,...... EXHIBIT A FORM OF BOND No. $ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON mLLS) SPECIAL TAX BOND (IMPROVEMENT AREA B) 2006 SERIES A INTEREST RATE MATURITY DATE DATED DATE CUSIP NO. % September 1,,_ ,2006 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: AND NO/ 100 DOLLARS ,..-., CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON HILLS) (the "CFD") situated in the County of Riverside, State of California, FOR VALUE RECENED, hereby promises to pay, solely from certain amounts held under the Fiscal Agent Agreement (as hereinafter defmed), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 of each year (each, an "Interest Payment Date"), commencing 1, 200_, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of Union Bank of California, N.A., a national banking association (the "Fiscal Agent") in Los Angeles, California. Interest on this Bond shall be paid by check of the Fiscal Agent mailed by first class mail, postage prepaid, or in certain circumstances described in the Fiscal Agent Agreement by wire ,...... 45733359,1 A-I AOENDAITEM NO.~ PACE 6" -:s OF tJjl.{ L_ transfer to an account within the United States, to the Registered Owner hereof as of the close of business on the fifteenth day of the month preceding the month in which the Interest Payment Date occurs (the "Record Date") at such Registered Owner's address as it appears on the registration books maintained by the Fiscal Agent. Interest due on the Bonds shall be calculated on a basis of a 360-day year comprised of twelve 30-day months. ,...." This Bond is one of a duly authorized issue of "City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A" (the "Bonds") issued in the aggregate principal amount of $ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the "Act") for the purpose of financing the acquisition of certain capital facilities in the area designated as Improvement Area B, funding a reserve account, paying capitalized interest and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City of Lake Elsinore, acting in its capacity as the legislative body of the CFD (the "Council") on , 2006 and a Fiscal Agent Agreement, dated as of 1, 2006 (the "Fiscal Agent Agreement"), between the CFD and the Fiscal Agent, and this reference incorporates the Fiscal Agent Agreement herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Fiscal Agent Agreement is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special.Taxes and other amounts deposited to the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) established under the Fiscal Agent Agreement. The CFD has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Fiscal Agent Agreement it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of ,...." delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. The Bonds are subject to redemption prior to maturity at the option of the CFD on any date on or after , as a whole or in part, by lot, from any available source of funds at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices through through and thereafter 102.0% 101.0 100.0 The Bonds are subject to mandatory redemption prior to maturity on any date, in part, in a manner determined by the CFD from prepayments of Special Taxes at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices through through and thereafter 103.0% 102.5 As provided for in optional redemption ,...." 45733359.1 A-2 ACENDA ITEM ~o. 3 ).- PACE "5 t OF r tfl-r:=: ~ In connection with such redemption, the CFD may also apply amounts in the Reserve Account which will be in excess of the Reserve Requirement as a result of such Special Tax prepayment to redeem Bonds as set forth above. The Bonds are subject to special mandatory redemption on any date from unused proceeds of the Bonds after completion or abandonment of the improvements to be financed with such proceeds, from the deposit of fees with the CFD by a public agency which has accepted facilities serving Improvement Area B and from insurance or condemnation proceeds or other mandatory redemption, without premium, plus accrued interest to the redemption date, all as determined by the CFD. The Bonds maturing on September 1, 20_ are subject to mandatory redemption, in part by lot, on September 1 in each year, commencing September 1,20_, from the Sinking Fund Payments that have been deposited into the Redemption Account at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date of redemption as set forth in the following schedule; provided, however, that (i) in lieu of redemption thereof, the Bonds may be purchased by the CFD and tendered to the Fiscal Agent, and (ii) if some but not all of the Bonds have been redeemed pursuant to optional redemption, special mandatory redemption from prepayment of Special Taxes or any other special mandatory redemption provision provided in the Fiscal Agent Agreement, the total amount of all future sinking payments will be reduced by the aggregate principal amount of the Bonds so redeemed, to be allocated among such sinking payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the CFD. Bonds Maturing on September 1, 20_ /"'"' Redemption Date (September 1) Principal Amount Redemption Date (September 1) Principal Amount Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 60 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Fiscal Agent on ,..... the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. 45733359.1 A-3 ACENDA ITEM NO. 3;1 PACE ':55 OF 3tfl ~ This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the CFD and the Fiscal Agent may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. ....." The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Fiscal Agent Agreement. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Fiscal Agent in Los Angeles, California, but only in the manner, subject to the limitations and upon payment of the charges provided in the Fiscal Agent Agreement, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The Fiscal Agent shall not be required to register transfers or make exchanges of (i) any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. The rights and obligations of the CFD and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Fiscal Agent Agreement. The Fiscal Agent Agreement contains provisions permitting the CFD to make provision for the payment of the interest on, and the principal and premium, if any, of the Bonds so that such Bonds shall no longer be deemed to be outstanding under the terms of the Fiscal Agent Agreement. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF LAKE ELSINORE '""'" (THE "CITY") OR OF THE CFD FOR WHICH THE CITY OR THE CFD IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE CFD PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE FISCAL AGENT AGREEMENT BUT ARE NOT A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Fiscal Agent. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the CFD, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. ....." 45733359.1 A-4 3) AGENDA ITEM NO. .. PAOE'6V OF~ I"""" IN WITNESS WHEREOF, City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) has caused this Bond to be dated as of the Dated Date, to be signed on behalf of the CFD by the Mayor of the City of Lake Elsinore, acting as the legislative body of the City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) by her manual signature and attested by the manual signature of the City Clerk of the City of Lake Elsinore and has caused the seal of the City to be reproduced hereon. [SEAL] By: Mayor of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) ATIEST: City Clerk of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills) ,..-, [FORM OF FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one ofthe Bonds described in the within-defined Fiscal Agent Agreement. Dated: UNION BANK OF CALIFORNIA, N.A., as Fiscal Agent By: Its: Authorized Signatory ,....... 45733359.1 A-5 AGENDA ITEM NO. :3 ?- I PAOE=~l OF'-5'{ -- [FORM OF ASSIGNMENT] For value received the undersigned hereby sells, assigns and transfers unto ......" (NAME, ADDRESS, AND TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER OF ASSIGNEE) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Fiscal Agent with full power of substitution in the premIses. Dated: Signature Guaranteed: ,....", Note: Signature(s) must be guaranteed by an eligible guarantor institution. Note: The signature(s) on this Assignment must correspond with the names as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. ...", 45733359.1 A-6 AGENDA ITEM NO. PAGE ~ ~ 3J- OF .. 5 Lj~ 1 ~ ,,-.. EXHIBIT B REQUISITION NO.1 CITY OF LAKE ELSINORE , COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON HILLS) REQUISITION FOR DISBURSEMENT OF PROJECT COSTS Union Bank of California, N.A. is hereby requested to pay from the Acquisition and Construction Fund of the Community Facilities District 2003-2 (Canyon Hills), established by the Fiscal Agent Agreement dated as of I, 2006, between the Fiscal Agent and City of Lake Elsinore Community Facilities District 2003-2 (Canyon Hills), for payment of authorized Project Costs. The amount is due and payable under purchase order, contract or other authorization and has not formed the basis of any prior request for payment. The conditions to the release of this amount from the Community Facilities District 2003-2 (Canyon Hills) Acquisition and Construction Fund are satisfied. There has not been filed with nor served upon the CFD notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultaneously with the payment of such amount, other than materialmen's or mechanic's liens accruing by mere operation of law. ~ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (Canyon Hills) Dated: By: Authorized Representative ~ 45733359.1 B-1 AGENDA ITEM NO. ~;l- PAGE h~ OF ~tJ C CONTINUING DISCLOSURE AGREEMENT (City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills)) .., This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of 1, 2006, is executed and delivered by the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "CFD") and Union Bank of California, N.A., as dissemination agent (the "Dissemination Agent") hereunder, in connection with the issuance of the $ City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A (the "Bonds"). The Bonds are being issued pursuant to provisions of a Fiscal Agent Agreement, dated as of 1, 2006 (the "Fiscal Agent Agreement"), by and between the CFD and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent"). The CFD and the Dissemination Agent covenant and agree as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the CFD, the Dissemination Agent and the Fiscal Agent for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanmgs: '-" "Annual Report" shall mean any Annual Report or any addendum thereto provided by the CFD pursuant to, and as described in, Sections 3 and 4 ofthis Disclosure Agreement. "Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "CFD" means City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills), a community facilities district organized and existing under the laws of the State of California, and such area of land comprising that community facilities district. "City" means the City of Lake Elsinore, California. "Disclosure Representative" shall mean the Mayor of the City of Lake Elsinore or his or her designee, or such other officer or employee as the City Council of the City of Lake Elsinore (the "Council") shall designate in writing to the Fiscal Agent and Dissemination Agent from time to time. "Dissemination Agent" shall mean the Fiscal Agent, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the CFD and which has filed with the Fiscal Agent a written acceptance of such designation. ......", 45733429.1 1 AGENDA ITEM NO. :))..1"'1- " PAGE {,O Of ";~~ r"' "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission are set forth in the SEC website located at http://www.sec.gov. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "State" shall mean the State of California. "State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Agreement, there is no State Repository. ~ SECTION 3. Provision of Annual Rel'orts. (a) The CFD shall, or shall cause the Dissemination Agent to, not later than 225 days after the end of the City's fiscal year, commencing with fiscal year ending June 30, 2006, provide to each Repository and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be provided in electronic format to each Repository and may be provided through the services of a "Central Post Office" approved by the Securities and Exchange Commission. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f). Furthermore, upon receipt of a written request of any Beneficiary Owner, the Dissemination Agent shall provide a copy of the Annual Report to such Beneficial Owner. r- (b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the CFD shall provide the Annual Report to the Dissemination Agent and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent). Ifby such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the CFD and the Fiscal Agent of such failure to receive the Annual Report. The CFD shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Fiscal Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent and Fiscal Agent may conclusively rely upon such certification of the CFD and shall have no duty or obligation to review such Annual Report. 45733429.1 2 :;J.. AOENDA1TEM NO.~ PACE U l OF -' --' - (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each Repository or to the Municipal Securities Rulemaking Board and the State Repository, if any in substantially the form attached as Exhibit A. ....." (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and (ii) to the extent information is known to it, file a report with the CFD and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reports. The CFD's Annual Report shall contain or include by reference the following: (i) The audited financial statements of the City, prepared in accordance with generally accepted accounting principles in effect from time to time. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. .....", (ii) The balance in the Reserve Account held under the Fiscal Agent Agreement. (iii) Total assessed valuation (per the Riverside County Assessor records) of all parcels currently subject to the Special Tax within Improvement Area B of the CFD, showing the total assessed valuation for all land and the total assessed valuation for all improvements within Improvement Area B of the CFD and distinguishing between the assessed value of developed property and undeveloped property. (iv) Identification of each parcel within Improvement Area B of the CFD for which any Special Tax payment is delinquent, together with the following information respecting each such parcel: (A) the amount delinquent; (B) the date of each delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed; and (D) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary of the results of such foreclosure sale. (v) The number of certificates of occupancy issued by the City within Improvement Area B of the CFD and the principal amount of prepayments of the Special Tax with respect to Improvement Area B of the CFD for the prior Fiscal Year. '--' 45733429. I 3 ACENDA ITEM~O. OF~~J rr- PACE {j I :..2:!J=- "..... (vi) A land ownership summary listing property owners responsible for more than five percent (5%) of the annual Special Tax levy, as shown on the Riverside County Assessor's last equalized tax roll prior to the September next preceding the Annual Report date. (vii) A description of the status of the facilities being constructed with proceeds of the Bonds as of the date of the Annual Report (but only so long as such facilities are not completed). (viii) The number of building permits issued in Improvement Area B ofthe CFD during the prior Fiscal Year. (ix) The amount of Special Taxes generated by the developed parcels and undeveloped parcels within Improvement Area B of the CFD. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The CFD shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the CFD shall give, or cause ,-. to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. 2. 3. 4. 5. 6. 7. 8. 9. ,-. 10. 45733429.1 principal and interest payment delinquencies; non-payment related defaults; modifications to rights of Bondholders; optional, contingent or unscheduled bond calls; defeasances; rating changes; adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; unscheduled draws on the debt servIce reserves reflecting financial difficulties; unscheduled draws on credit enhancements reflecting financial difficulties; substitution of credit or liquidity providers, or their failure to perform; 4 AGS:y~. o~ ~ttJ:. ;""'" 11. release, substitution or sale of property securing repayment of the Bonds. (b) The Dissemination Agent shall, within one (1) Business Day of obtaining actual knowledge of the occurrence of any of the Listed Events, or as soon as reasonably practicable thereafter, contact the Disclosure Representative, inform such person of the event, and request that the CFD promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f) and promptly direct the Fiscal Agent whether or not to report such event to the Bondholders. In the absence of such direction the Dissemination Agent shall not report such event unless otherwise required to be reported by the Fiscal Agent to the Bondholders under the Fiscal Agent Agreement. The Dissemination Agent may conclusively rely upon such direction (or lack thereof). For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of such Listed Events shall mean actual knowledge by the officer at the corporate trust office of the Fiscal Agent or the Dissemination Agent with regular responsibility for the administration of matters related to the Fiscal Agent Agreement. Neither the Fiscal Agent nor the Dissemination Agent shall have any responsibility to determine the materiality of any of the Listed Events. (c) Whenever the CFD obtains knowledge of the occurrence of Cl; Listed Event, whether because of a notice from the Dissemination Agent pursuant to subsection (b) or otherwise, the CFD shall as soon as possible determine if such event would be material under applicable federal securities laws. ,,-., (d) If the CFD has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the CFD shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f). ( e) If in response to a request under subsection (b), the CFD determines that the Listed Event would not be material under applicable federal securities laws, the CFD shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f). (f) If the Dissemination Agent has been instructed by the CFD to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository or the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a){4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Fiscal Agent Agreement. SECTION 6. Termination of Reporting Obligation. The CFD's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the CFD shall give notice of such termination in the same manner as for a Listed Event under Section 5{f). ",..-. SECTION 7. Dissemination Agent. The CFD may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure 45733429.1 5 P,!.jEN~E~ ANq. J ~ tn'W1i '-1''7 OF ~ Lf7 -' Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the CFD pursuant to this Disclosure Agreement. The initial Dissemination Agent shall be Union Bank of California, N.A. The Dissemination Agent may resign by providing thirty days written notice to the CFD and the Fiscal Agent. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the CFD in a timely manner and in a form suitable for filing. '-"'" SECTION 8. Amendment: Waiver. Notwithstanding any other proVISIOn of this Disclosure Agreement, the CFD, Dissemination Agent and the Fiscal Agent may amend this Disclosure Agreement (and the Fiscal Agent and Dissemination Agent shall agree to any amendment so requested by the CFD) provided, neither the Fiscal Agent nor the Dissemination Agent shall be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the, provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments '-"'" or interpretations ofthe Rule, as well as any change in circumstances; and (c) The amendment or waiver either (i) is approved by the Holders of the Bonds in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the CFD shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the CFD. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the CFD from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the CFD chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the CFD shall have '-"'" 45733429. I 6 AGENDA ITEM NO. !;J:2 PACiE Co5 ~ "" no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. ",- "" SECTION 1 O. Default. In the event of a failure of the CFD or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent (at the written request of any Participating Underwriter or the Holders of at least 25% aggregate principal amount of Outstanding Bonds, shall but only to the extent funds in an amount satisfactory to the Fiscal Agent have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges and fees of the Fiscal Agent whatsoever, including, without limitation, fees and expenses of its attorneys), or any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the CFD or Fiscal Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the CFD or the Fiscal Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties. Immunities and Liabilities of Fiscal Agent and Dissemination Agent. Article VII of the Fiscal Agent Agreement pertaining to the Fiscal Agent is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Fiscal Agent Agreement and the Fiscal Agent and Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded the Fiscal Agent thereunder. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the CFD agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the CFD for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to them hereunder and shall not be deemed to be acting in any fiduciary capacity for the CFD, the Bondholders, or any other party. The Dissemination Agent shall have no liability to the Bondholders or any other party for any monetary damages or financial liability of any kind whatsoever related to or arising from this Agreement. The obligations of the CFD under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. 45733429.1 7 I\CENDA ITEM NO. ~.2 _ PAOE_~LP____OF 3!f7= SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: ""'" To the City: City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attn: City Manager Fax: (909) 674-3124 To the Fiscal Agent: Union Bank of California, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Attn: Corporate Trust Department Fax: (213) 972-5676 Fax: (213) 972-5694 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the CFD, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. ...., ...., 45733429.1 8 AOENDA ITEM NO. ,3)- PAOE <.tJ1 OF m --' .,-.. SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) By City Manager of the City of Lake Elsinore UNION BANK OF CALIFORNIA, N.A., as Dissemination Agent and Fiscal Agent By Authorized Officer ,..- ,..-. 45733429.1 9 AGENDA ITEM NO.8,), PAGE f.p~ ~ EXHffiIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT ..."" Name of Obligated Party: City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Name of Bond Issue: City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A Date oflssuance: , 2006 NOTICE IS HEREBY GNEN that the CFD has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of I, 2006, with respect to the Bonds. The CFD anticipates that the Annual Report will be filed by Dated: UNION BANK OF CALIFORNIA, N.A., on behalf of CFD ....., cc: Issuer ..."" 45733429.1 A-I AGENDA ITEM NO.~ PAGE 0 OF ~'1 \ -...... /'"'"' $ City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A Purchase Contract , 2006 City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) 130 South Main Street Lake Elsinore, California 92530 Ladies and Gentlemen: Southwest Securities, Inc. (the "Underwriter") hereby offers to enter into the following agreement with the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District"). Upon the acceptance hereof by you, this offer will be binding upon the District and the Underwriter. This offer is made subject to (i) the written acceptance hereof by ,-.. you and (ii) withdrawal by the Underwriter upon written notice (by facsimile or otherwise) delivered to you at any time prior to the acceptance hereof by you. 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the District, at the Closing Time on the Closing Date (both as defined herein), and the District hereby agrees to sell and deliver to the Underwriter, $ aggregate principal amount of its Special Tax Bonds (Improvement Area B) 2006 Series A (the "Bonds"). The Bonds shall be dated the date of their initial delivery, and shall mature on September 1 in the years shown on Exhibit A hereto, shall bear interest at the rates shown on Exhibit A hereto and shall be subject to mandatory redemption from sinking fund payments, in the amounts and on the dates shown in the Fiscal Agent Agreement. Interest on the Bonds shall be payable each March 1 and September 1 to maturity or earlier redemption of the Bonds, beginning I, 200_. The purchase price for the Bonds shall be an amount equal to $ (being the aggregate principal amount thereof ($ ), less an underwriter's discount of $ and less an original issue discount of $ ). (The date of such payment and delivery is referred to herein as the "Closing Date," the hour and date of such delivery and payment is referred to herein as the "Closing Time," and the other actions contemplated hereby to take place at the time of such payment and delivery being herein sometimes called the "Closing"). 2. The Bonds. The Bonds shall be described in, and shall be issued and secured pursuant to, the provisions of the Constitution and the laws of the State of California including the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, constituting ,-.. 45733452.1 1 AOENDA ITEM NO.~ PAOE 70 _OF .-:z::L..L,.. Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the "Bond Law") and a Fiscal Agent Agreement, dated as of 1,2006 (the "Fiscal Agent Agreement"), by and between the District and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent"), authorizing the issuance ofthe Bonds. ....." The Bonds are being issued for the purpose of financing the acquisition of certain public facilities and capital fees to meet the needs of new development within Improvement Area B of the District, funding a reserve account for the Bonds, funding the cost of capitalized interest through 1, 200_, and paying the costs of incidental expenses incurred in connection with financing such public facilities and forming and administering the District (collectively, the "Project"). The Bonds are secured by Special Taxes (as defined in the Fiscal Agent Agreement). The Bonds shall be payable and shall be subject to redemption as provided in the Fiscal Agent Agreement and shall be as described in the Preliminary Official Statement of the District dated , 2006 (the "Preliminary Official Statement") and the Official Statement of the District dated of even date herewith. Such Official Statement, including the cover page and the appendices thereto, relating to the Bonds, as amended to conform to the terms of this Purchase Contract and with such changes and amendments thereto as have been mutually agreed to by the District and the Underwriter, are hereinafter referred to as the "Official Statement." This Purchase Contract, the Fiscal Agent Agreement and the Continuing Disclosure Agreement, dated as of 1,2006 (the "District Continuing Disclosure Agreement"), by and between the District and Union Bank of California, N.A., as dissemination agent, are referred to herein as the "Basic Documents." """'" 3. Offering by the Underwriter. It shall be a condition to the District's obligations to sell and to deliver the Bonds to the Underwriter and to the Underwriter's obligation to purchase, to accept delivery of and to pay for the Bonds that the entire principal amount of the Bonds shall be issued, sold and delivered by the District and purchased, accepted and paid for by the Underwriter at the Closing. It is understood that the Underwriter proposes to offer the Bonds for sale to the public (which may include selected dealers) at prices or yields as set forth on the cover page of the Official Statement. Concessions from the public offering price may be allowed to selected dealers. It is understood that the initial public offering price and concessions set forth in the Official Statement may vary after the initial public offering. It is further understood that the Bonds may be offered to the public at prices other than the par value thereof. The net premium on the sale of the Bonds to the public, if any, shall accrue to the benefit of the Underwriter. 4. Official Statement, Delivery of Other Documents, Use of Documents. (a) The District hereby authorizes the use by the Underwriter of the Preliminary Official Statement and the Official Statement (including any supplements or amendments thereto) and the Fiscal Agent Agreement and the information therein contained, in connection with the public offering and sale of the Bonds. ....." 45733452.1 2 ACENDA ITEM ro,~ PACE! _OF~ ",-... (b) The District shall deliver to the Underwriter, within seven business days from the date hereof, such number of copies of the final Official Statement executed on behalf of and approved for distribution by the District as the Underwriter may reasonably request in order for the Underwriter to comply with the rules of the Municipal Securities Rulemaking Board and Rule 15c2-12(b)( 4) under the Securities Exchange Act of 1934. (c) As soon as practicable following receipt thereof, the Underwriter shall deliver the Official Statement, and any supplements or amendments thereto, to a nationally recognized municipal securities information repository. 5. Representations, Warranties and Agreements of the District. The District represents, warrants and agrees as follows: (a) The District is a community facilities district duly organized and validly existing under the laws of the State of California. (b) The District has full legal right, power and authority (i) to enter into the Basic Documents, (ii) to sell, issue and deliver the Bonds to the Underwriter as provided herein, arid (iii) to carry out and consummate the transactions on its part contemplated by the Basic Documents and the Official Statement. ,,-- (c) By all necessary official action, the City of Lake Elsinore (the "City"), as the legislative body of the District, has duly authorized and approved the Basic Documents, has duly authorized and approved the Preliminary Official Statement and the Official Statement, has duly authorized and approved the execution and delivery of, and the performance by the District of the obligations in connection with the issuance of the Bonds on its part contained in the Bonds and the Basic Documents, and the consummation by it of all other transactions contemplated by the Basic Documents in connection with the issuance ofthe Bonds. (d) To the best of its knowledge, the District is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of any state or of the United States, or any agency or instrumentality of either, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the Fiscal Agent Agreement) or other instrument to which the District is a party which breach or default has or may have an adverse effect on the ability of the District to perform its obligations under the Fiscal Agent Agreement, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instrument; and the execution and delivery of the Bonds and the Basic Documents, and compliance with the provisions on the District's part contained therein, will not conflict in any material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the District is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the District or under the terms of any such law, regulation or instrument, except as provided by the Bonds and the Fiscal Agent Agreement. ,,-.., 45733452.1 3 ACENDA IlEM NO.~ PACC! r _OF--X!.l-- (e) To the best of its knowledge, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the District of its obligations in connection with the issuance of the Bonds under the Basic Documents have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matters which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the District of its obligations under the Fiscal Agent Agreement have been duly obtained. (f) The Bonds when issued will conform to the descriptions thereof contained in the Official Statement under the captions "INTRODUCTORY STAT~MENT" and "THE BONDS"; and the Basic Documents when executed and delivered will conform to the descriptions thereof contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE BONDS," "SOURCES OF PAYMENT FOR THE BONDS," "SUMMARY OF THE FISCAL AGENT AGREEMENT" and "APPENDIX A ~ DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT." (g) The Bonds, when issued, authenticated and delivered in accordance with the Fiscal Agent Agreement, and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the District, entitled to the benefits of the Fiscal Agent Agreement, and upon such issuance and delivery, the Fiscal Agent Agreement will provide, for the benefit of the owners from time to time of the Bonds, the legally valid and binding pledge of and lien and security interest it purports to create. (h) As of the date hereof, there is no action, suit, proceeding, inquiry or investigation, notice of which has been served on the District, at law or in equity before or by any court, government agency, public board or body, pending or to the best knowledge of the officer of the City executing this Purchase Contract on behalf of the District, threatened against tpe District, affecting the existence of the District, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or the pledge and lien on the Special Taxes pursuant to the Fiscal Agent Agreement, or contesting or affecting as to the District the validity or enforceability of the Bond Law, the Bonds or the Basic Documents, or contesting the tax- exempt status of interest on the Bonds, or contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the District for the issuance of the Bonds, or the execution and delivery or adoption by the District of the Basic Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the District, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the Bond Law, as to the District, or the authorization, execution, delivery or performance by the District of the Bonds or the Basic Documents. 45733452. ) 4 ACENDA ITEM NO. ~ PAGE 1 ~ OF ~ ~ ~ -"'" (i) The District will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (x) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate, (y) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the District shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction, provided, that the Underwriter shall bear all costs in connection with the District's action under (x) and (y) herein, and (z) assure or maintain the tax-exempt status of the interest on the Bonds. (j) As of the date thereof, the Preliminary Official Statement does not, except for the omission of certain information permitted to be omitted in accordance with Rule 15c2-12 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934 (the "Rule"), contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein with respect to the District, in light of the circumstances under which they were made, not misleading. "...- (k) At the time of the District's acceptance hereof, and (unless an event occurs of the nature described in paragraph (m) of this Section 5) at all times subsequent thereto up to and including the date of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the District shall apply only to the information contained in the Official Statement relating to the District. (1) If the Official Statement is supplemented or amended pursuant to paragraph (m) of this Section 5, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the date of the Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the District shall apply only to the information contained in the Official Statement relating to the District. (m) If between the date of this Purchase Contract and that date which is 25 days after the end of the underwriting period (as determined in accordance with Section 13 hereof) any event known to the District shall occur affecting the District which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the District shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation -"'" and publication of a supplement or amendment to the Official Statement, the District will at its expense prepare and furnish to the Underwriter a reasonable number of copies of such 45733452.1 5 AGENDA ITEM Nt.~ PACE I OF '?J'-1 (~ supplement to, or amendment of, the Official Statement in a form and in a manner approved by the Underwriter. '-' (n) The District will refrain from taking any action, or permitting any action to be taken, with regard to which the District may exercise control, that results in the loss of the tax-exempt status of the interest on the Bonds. (0) Any certificate signed by any officer of the City on behalf of the District and delivered to the Underwriter pursuant to the Fiscal Agent Agreement, this Purchase Contract or any document contemplated thereby shall be deemed a representation and warranty by the District to the Underwriter as to the statements made therein. (p) The District will cause the proceeds from the sale of the Bonds to be paid to the Fiscal Agent for the purposes specified in the Fiscal Agent Agreement and the Official Statement. So long as any of the Bonds are outstanding and except as may be authorized by the Fiscal Agent Agreement, the District will not issue or sell any bonds or other obligations, other than the Bonds sold thereby, the interest on and premium, if any, or principal of which will be payable from the payments to be made under the Fiscal Agent Agreement. (q) The District shall honor all other covenants on its part contained in the Fiscal Agent Agreement which are incorporated herein and made a part of this Purchase Contract. (r) At or prior to the Closing, the City, acting as the legislative body of the District, shall have duly authorized, and the District shall have duly executed and delivered, the .....", District Continuing Disclosure Agreement which shall comply with the provisions of the Rule and shall be substantially in the form appended to the Official Statement in Appendix E thereto. 6. Closing. At 8:00 a.m., Los Angeles time, on , 2006, or on such earlier date or as soon thereafter as practicable, as may be mutually agreed upon by the District and the Underwriter, the District will, subject to the terms and conditions hereof. cause the Fiscal Agent to deliver to the Underwriter, the Bonds, in definitive form duly authenticated by the Fiscal Agent, together with the other documents hereinafter mentioned; and the Underwriter will accept such delivery and will pay the purchase price of the Bonds as set forth in Section 1 hereof by delivering federal or other immediately available funds in the amount of such purchase price to the Fiscal Agent. The Bonds shall be prepared in fully registered form without coupons in authorized denominations. 7. Closing Conditions. The Underwriter has entered into this Purchase Contract in reliance upon the representations and warranties of the District contained herein, and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the District of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the District of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions: ......, 45733452.1 6 AGENDA ITEM NO. 3 ;l PACE J) OF yn - "..... (a) The representations and warranties ofthe District contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) At the time of the Closing, the Fiscal Agent Agreement shall be in full force and effect in accordance with its terms and shall not have been amended, modified or supplemented and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; (c) At the time of the Closing, all necessary official action of the City on behalf of the District and of the other parties thereto relating to the Basic Documents shall have been taken and shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect; (d) Subsequent to the date hereof, there shall not have occurred any change in or affecting particularly the District or the Bonds, as the foregoing matters are described in the Official Statement, which in the reasonable opinion of the Underwriter materially impairs the investment quality of the Bonds; (e) At or prior to the Closing, the Underwriter shall have received copies of each of the following documents: (1) The Official Statement and each supplement or amendment, if any, ",- thereto, executed by the District; (2) A copy of the Fiscal Agent Agreement, executed by the District and the Fiscal Agent; (3) A copy of this Purchase Contract, executed by the District and the Underwriter; (4) Certificates of the District with respect to the matters described in Section 5 and in paragraphs (a), (b), (c) and (d) of this Section 7; (5) An opinion (the "Final Approving Legal Opinion"), dated the date of the Closing and addressed to the District, of Fulbright & Jaworski L.L.P., Bond Counsel for the District, substantially in the form set forth in Appendix F to the Official Statement; (6) A supplemental opinion, dated the date of the Closing and addressed to the Underwriter, of Fulbright & Jaworski L.L.P., Bond Counsel for the District, in substantially the form attached hereto as Exhibit B; (7) An opinion, dated the date of the Closing and addressed to the Underwriter, of the City Attorney of the City, as Special Counsel for the District in substantially the form attached hereto as Exhibit C; ",- 45733452.1 7 :Y AGEND.A ITEM NO._ !ff1 = PNJi__J-P Of ' (8) A reliance letter, dated the date of the Closing and addressed to the Underwriter and the Fiscal Agent, respectively, of Fulbright & Jaworski L.L.P., Bond Counsel for the District, regarding the final approving opinion; ~ (9) An opinion, dated the date of the Closing and addressed to the Underwriter, of Fulbright & Jaworski, L.L.P., Disclosure Counsel, in substantially the form attached hereto as Exhibit D; (10) Transcripts of all proceedings relating to the authorization and issuance of the Bonds certified by the City Clerk or a Deputy City Clerk of the City on behalf of the District; (11) An opinion of counsel to the Fiscal Agent, to the effect that: (i) Due Organization and Existence - the Fiscal Agent has been duly organized and is validly existing and in good standing under the laws of the United States of America, with full corporate power to undertake the trust duties and obligations under the Fiscal Agent Agreement; (ii) Corporate Action - the Fiscal Agent has duly authorized, executed and delivered the Fiscal Agent Agreement, and by all proper corporate action has authorized the acceptance of the duties and obligations of the Fiscal Agent under the Fiscal Agent Agreement and to authorize in such capacity the authentication and delivery of the Bonds; (iii) Due Authorization. Execution and Delivery - assuming due authorization, execution and delivery by the District, the Fiscal Agent Agreement is the valid, legal and binding agreement ofthe Fiscal Agent, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights in general and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and ~ (iv) Consents - exclusive of federal or state securities laws and regulations, to the best of such counsel's knowledge after reasonable inquiry and investigation, other than routine filings required to be made with governmental agencies in order to preserve the Fiscal Agent's authority to perform a trust business (all of which routine filings such counsel believes, after reasonable inquiry and investigation, to have been made), no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Fiscal Agent is or will be required for the execution by the Fiscal Agent of the Fiscal Agent Agreement or the authentication and delivery ofthe Bonds; (12) A certified copy of the general resolution of the Fiscal Agent authorizing the execution and delivery of certain documents by certain officers of the Fiscal Agent, which resolution authorizes the execution and delivery of the Fiscal Agent Agreement; ~ 45733452.1 8 ACENDA ITEM NO. .3;J... PAGE 17 OF~ /""'" (13) A certificate of the Fiscal Agent, dated the date of Closing, certifying that, subject to the limitations provided herein, the Fiscal Agent represents and warrants and agrees with the Underwriter that as of the date of Closing: (i) Due Organization and Existence - the Fiscal Agent is duly organized and existing as a national banking association in good standing under the laws of the United States of America having the full power and authority to enter into and perform its duties under the Fiscal Agent Agreement and to authenticate and deliver the Bonds to the Underwriter pursuant to the terms of the Fiscal Agent Agreement; (ii) No Conflict - to the best of the knowledge of the Fiscal Agent, after due investigation, the execution and delivery by the Fiscal Agent of the Fiscal Agent Agreement and the authentication and delivery by the Fiscal Agent ofthe Bonds, and compliance with the terms thereof will not, in any material respect, conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Fiscal Agent is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Fiscal Agent or any of its activities or properties, or result \n the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Fiscal Agent; and /'"'" (iii) No Litigation - to the best of the knowledge of the Fiscal Agent, no litigation has been served upon the Fiscal Agent to restrain or enjoin the Fiscal Agent's participation in, or in any way contesting the powers of the Fiscal Agent with respect to, the transactions contemplated by the Fiscal Agent Agreement; (14) Executed copies of the District Continuing Disclosure Agreement substantially in the form presented in Appendix E to the Official Statement; (15) Executed copies of the Continuing Disclosure Agreement, dated as of 1, 2006, by and between , a (the "Developer"), and Union Bank of California, N.A., as dissemination agent, substantially in the form presented in Appendix E to the Official Statement; (16) A certificate or certificates dated the date hereof from the Developer, together with a bring-down certificate dated the Closing Date in substantially the forms attached hereto as Exhibit E and Exhibit F, respectively; (17) An opinion of counsel to the Developer in the form satisfactory to the Underwriter; (18) Certificate of Status for the Developer from appropriate officials of the State of California; /'"'" (19) A certificate dated the Closing Date, signed by an authorized principal of Harris Realty Appraisal (the "Appraiser"), in a form satisfactory to the Underwriter and its counsel to the effect that (i) the individual signing the certificate is an authorized representative of the Appraiser, and as such, is familiar with the facts certified and is authorized 45733452.1 9 AGENDA ITEM NO. 3 ~ PACE 1<1 OF ~ and qualified to certify the same; (ii) in the opinion of the Appraiser the assumptions made in the appraisal report with respect to the City of Lake Elsinore Community Facilities District No 2003- ......, 2 (Canyon Hills), dated , 2006 (the "Appraisal"), are reasonable; (iii) that the Appraiser is not aware of any event or act which has occurred since the date of the Appraisal which, in its opinion, would materially and adversely affect the conclusion as to the appraised value reached in the Appraisal; (iv) the Appraiser consents to the reproduction of the Appraisal as Appendix C to the Official Statement and to the references to the Appraiser and the Appraisal made in the Official Statement; (v) that the Official Statem.ent has been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the statements concerning the Appraisal and the value of the property contained under the captions "IMPROVEMENT AREA B - Description of Development" are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (vi) the District and the Underwriter are entitled to rely on the Certificate; (20) A copy of the Appraisal; (21) A certificate from Harris & Associates ("Special Tax Consultant") to the effect that (i) the Special Tax if applied in accordance with the terms as set forth in the Rate and Method of Apportionment for Community Facilities District No. 2003-2 of the City of Lake Elsinore (Canyon Hills) (Improvement Area B) (the "Special Tax Fomiula"), after deducting Administrative Expenses, will annually yield sufficient revenue to make timely payments of debt service on the Bonds, provided that information and other data supplied by the District, by the Developer, by the Appraiser, by the Underwriter or by any of their agents, which has been relied upon by the Special Tax Consultant is true and correct, (ii) the Special Tax, if collected in the maximum amounts permitted pursuant to the Special Tax Formula on the Closing Date, would generate at least 110% of the maximum debt service payable with respect to the Bonds payable from such Special Tax during each fiscal year, based on a debt service schedule supplied by Southwest Securities, Inc. and the net taxable footage or acreage projection and other data provided by the Developer to the Special Tax Consultant and confirmed in the certificates of the Developer previously delivered to the Special Tax Consultant and relied upon by the Special Tax Consultant, (iii) the information supplied by such firm for use in the sections of the Official Statement captioned "APPENDIX D - RATE AND METHOD OF APPORTIONMENT" is true and correct as of the date of the Official Statement and as of the Closing Date, and (iv) the description of the Special Tax Formula contained in the section of the Official Statement captioned "FINANCIAL INFORMATION - Rate and Method of Special Tax Apportionment" is correctly presented in all material respects; (22) A certificate from Empire Economics, Inc. (the "Market Consultant") to the following effect (i) the individual signing the certificate is an authorized representative of the Market Consultant, and as such, is familiar with the facts certified and is authorized and qualified to certify the same; (ii) in the opinion of the Market Consultant the assumptions made in the Market Absorption Study Summary and Conclusion with respect to the City of Lake Elsinore Community Facilities District No 2003-2 (Canyon Hills), dated , 2006 (the "Market Absorption Study") are reasonable; (iii) that the Market Consultant is not aware of any event or act which has occurred since the date of the Market 45733452.1 10 AGENDA ITEM NO. :5 '2 PAOE '11 OF~ "'" ..."", I"""" Absorption Study, which, in its opinion, would materially and adversely affect the conclusions of the Market Absorption Study; (iv) the Market Consultant consents to the reproduction of the Market Absorption Study as Appendix B to the Official Statement and to the references to the Market Consultant and the Market Absorption Study made in the Official Statement; and (v) the Market Consultant certifies that as of the date of the certificate the Market Absorption Study contained in the Official Statement and the statements concerning the Market Absorption Study contained in the Official Statement are accurate in all material respects and do not omit to state a material fact necessary in order to make the statement contained therein, in the light of the circumstances under which they are made, not misleading and no events or occurrences have been ascertained by the Market Consultant as have come to its attention that would substantially adversely-change the opinions set forth in the Market Absorption Study; and (vi) the District and the Underwriter are entitled to rely on the Certificate; (23) A copy ofthe Market Absorption Study; (24) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the District's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the District on or prior to the date of the Closing of all the agreements then to be performed and conditions then to be satisfied by it. I"""'"' All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to Bond Counsel and the Underwriter. The opinions and other documents presented as exhibits to this Purchase Contract or as Appendices to the Official Statement shall be deemed satisfactory provided they are substantially in the forms attached as exhibits to this Purchase Contract or as Appendices to the Official Statement. If the District shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Purchase Contract, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the District shall be under any further obligation hereunder. 8. Termination. The Underwriter shall have the right to terminate the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds by notifying the District in writing or by telegram, of their election to do so, if, after the execution hereof and prior to the Closing: (a) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency; (b) there shall have occurred the declaration of a general banking moratorium by any authority of the United States or the States of New York or California; (c) an event shall have occurred or been discovered as described in paragraph (m) of Section 5 hereof which in the opinion of the ."...... Underwriter requires the preparation and publication of disclosure material or a supplement or amendment to the Official Statement; (d) any legislation, ordinance, rule or regulation shall be 45733452.1 11 ~CENDA ITEM NO.~ PACE ~ OF 71l .--' introduced in, or be enacted by any governmental body, department or agency in the State of California, or a decision by any court of competent jurisdiction within the State of California shall be rendered which, in the Underwriter's reasonable opinion, materially adversely affects the market price of the Bonds; ( e) legislation shall be introduced, by amendment or otherwise, or be enacted by the House of Representatives or the Senate of the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made or proposed, to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement, is or would be in violation of any provision of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, .as amended and as then in effect, or the Trust Fiscal Agent Agreement Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering or sale of obligations of the general character of the Bonds or the Bonds, as contemplated hereby or by the Official Statement; (f) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (g) the New York Stock Exchange, or.other national securities exchange or association or any governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by or the charge to the net capital requirements of broker-dealers; (h) trading in securities on the New York Stock Exchange or the American Stock Exchange shall have been suspended or limited or minimum prices have been established on either such exchange; or (i) any action shall have been taken by any government in respect of its monetary affairs which, in the reasonable opinion of the Underwriter, has a material adverse effect on the United States securities market. If this Purchase Contract shall be terminated pursuant to Section 7 or this Section 8, or if the purchase provided for herein is not consummated because any condition to the Underwriter's obligation hereunder is not satisfied or because of any refusal, inability or failure on the part of the District to comply with any of the terms or to fulfill any of the conditions of this Purchase Contract, or if for any reason the District shall be unable to perform all of its obligations under this Purchase Contract, the District shall not be liable to the Underwriter for damages on account of loss of anticipated profits arising out of the transactions covered by this Purchase Contract. 9. Payment of Costs and Expenses. The District shall pay (a) all costs and expenses incident to the sale and delivery of the Bonds to the Underwriter, including, but not limited to: (i) the fees and expenses of the District and its Counsel, Disclosure Counsel, Financing Consultant and other consultants; (ii) the fees and expenses of Bond Counsel; (iii) all costs and expenses incurred in connection with the preparation and printing ofthe Bonds; (iv) all expenses in connection with the preparation, printing, distribution and delivery of the Preliminary Official Statement, the Official Statement and any amendment or supplement thereto; (v) California Municipal Statistics fees, CUSIP Bureau charges, fees of Public Securities Association and California Public Securities Association, MSRB fees, California Debt and Investment Advisory Commission fees and (vi) the fees and expenses of the Fiscal Agent and its counsel shall be payable by the District from the proceeds of the Bonds. 45733452.1 12 AGENDA iTEM NO._~ PAGE U _OF ....2J.!-....- ....., ....., ......, ,,-.., (b) The Underwriter shall pay all advertising expenses in connection with the public offering of the Bonds and all other expenses incurred by it in connection with its public offering and distribution ofthe Bonds. 10. Representations, Warranties and Agreements to Survive Delivery. The representations, warranties, indemnities, agreements and other statements of the District and the Underwriter or their officers or partners set forth in, or made pursuant to, this Purchase Contract will remain operative and in full force and effect regardless of any investigation made by or on behalf of the District or the Underwriter or any controlling person and will survive delivery of and payment for the Bonds. 11. Notices. Any notice or other communication to be given under this Purchase Contract may be given by delivering the same in writing: To the District: City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) 130 South Main Street Lake Elsinore, California 92530 Attention: City Manager To the Underwriter: Southwest Securities, Inc. 620 Newport Center Drive, Suite" 300 Newport Beach, California 92660 Attention: Tony Wetherbee ,,-.. 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the District and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof All of the District's representations, warranties and agreements contained in this Purchase Contract shall remain operative and in full force and effect, regardless of: (i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to this Purchase Contract; and (iii) any termination of this Purchase Contract. 13. Determination of End of the Underwriting Period. For purposes of this Purchase Contract, the End of the Underwriting Period for the Bonds shall mean the earlier of (a) the day of the Closing unless the District has been notified in writing by the Underwriter, on or prior to the day of the Closing, that the "end of the underwriting period" for the Bonds for all purposes of the Rule will not occur on the day of the Closing, or (b) the date on which notice is given to the District by the Underwriter in accordance with the following sentence. In the event that the Underwriter has given notice to the District pursuant to clause (a) above that the "end of the underwriting period" for the Bonds will not occur on the day of the Closing, the Underwriter agrees to notify the District in writing as soon as practicable following the "end of the underwriting period" for the Bonds for all purposes of the Rule. ~ 45733452.1 13 ACENDA ITEM NO. 3~ PACE ~ ff OF2tD-- 14. Effectiveness. This Purchase Contract shall become effective upon the execution of the acceptance by the designee of the District and shall be valid and enforceable at the time of such acceptance. . ,....., 15. Headings. The headings of the sections ofthis Purchase Contract are inserted for convenience only and shall not be deemed to be a part hereof. 16. Governing Law. This Purchase Contract shall be construed in accordance with the laws of the State of California. 17. Counterparts. This Purchase Contract may be executed in any number of counterparts. If the foregoing is in accordance with your understanding of the Purchase Contract please sign and return to us the enclosed duplicate copies hereof, whereupon it will become a binding agreement between the District and the Underwriter in accordance with its terms. Very truly yours, SOUTHWEST SECURITIES, INC. By: ,....., Title Accepted: This day of , 2006 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) By: City Manager of the City of Lake Elsinore as the legislative body of the District '"wII' 45733452.1 14 ACENDA ITEM NO. PACE..i3 &< OF ?ffr= r'- r'- ~ Maturity Date (September I) 45733452.1 Exhibit A $ City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A Principal Amount Coupon Yield Price A-I AGENDA lTE':;t 3 ~ PACE OF 347 --- Exhibit B Supplemental Opinion of Fulbright & Jaworski L.L.P. ......, Addressed to the Underwriter $ City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A , 2006 Southwest Securities, Inc. 620 Newport Center Drive, Suite 300 Newport Beach, California 92660 Ladies and Gentlemen: We have acted as Bond Counsel to the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills), a community facilities district established under the Constitution and the laws of the State of California (the "District"), in connection with the issuance of $ aggregate principal amount of its Special Tax Bonds (Improvement Area B) 2006 Series A (the "Bonds"). ......, The Bonds are being issued by the District under the Mello-Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California and pursuant to a Fiscal Agent Agreement, dated as of 1, 2006 (the "Fiscal Agent Agreement"), by and between the District and Union Bank of California, N.A., as fiscal agent, for the purpose of financing the acquisition of certain public facilities or capital fees to meet the needs of new development within Improvement Area B of the District, funding a reserve account for the Bonds, funding the cost of capitalized interest through 1, 2006, and paying the costs of incidental expenses incurred in connection with financing such public facilities and forming and administering the District. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Fiscal Agent Agreement. As Bond Counsel, we have examined copies certified to us as being true and complete. copies of the proceedings of the District in connection with the issuance of the Bonds. We have also examined such certificates of representatives of the District and others as we have considered necessary for the purposes of this opinion. "willi. 45733452.1 B-1 AGENDA ITEM NO. 3~__ PAGE 1f:> OF --'i '" This opinion is limited to matters governed by the laws of the State of California and Federal securities laws of the United States, and we assume no responsibility with respect to the applicability or effect of laws of any other jurisdiction. Based upon the foregoing, it is our opinion that: 1. The Fiscal Agent Agreement is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended. 2. amended. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as 3. As of the date of the Official Statement, dated , 2006, relating to the Bonds, the information contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE BONDS," "SOURCES OF PAYMENT FOR THE BONDS," "SUMMARY OF THE FISCAL AGENT AGREEMENT:' "LEGAL MATTERS - Tax Exemption" and "APPENDIX A - DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT," insofar as such statements expressly summarize certain provisions of the Bonds and the Fiscal Agent Agreement is accurate in all material respects. Weare furnishing you this opinion letter at the request of the District solely for your benefit as the Underwriter of the Bonds, and it is not to be used, circulated, quoted or otherwise referred to for any other purpose, nor is it to be referred to iri whole or in part in the Official '" Statement relating to the Bonds or any other document, except that it may be included in, and reference may be made to it in any list of, the closing documents pertaining to the delivery of the Bonds. Respectfully submitted, '" 45733452.1 B-2 AGENDA "EM NO. 3 ;)- PAGE 1J..;; -,-OF ~ il ~ Exhibit C Opinion of Liebold, McClendon & Mann, P.C., Special Counsel to the District ......, Addressed to the Underwriter $ City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A , 2006 Southwest Securities, Inc. 620 Newport Center Drive, Suite 300 Newport Beach, California 92660 Ladies and Gentlemen: Weare special counsel to the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District") in connection with the issuance of the above-referenced Bonds and in such capacity, we have examined the original, certified copies, or copies otherwise identified to our satisfaction as being true copies of such resolutions, documents, certificates, and records as we have deemed relevant and necessary (except as we have specifically limited the scope of our investigation herein) as the basis for the opinions set forth herein (collectively the "Documents") relying on such examination and pertinent law and subject to the limitations and qualifications hereinafter set forth, we are of the opinion that: ......, 1. The District is a community facilities district duly organized and validly existing under the laws of the State of California with full legal right, power and authority to perform all of its obligations under the Purchase Contract dated , 2006 (the "Purchase Contract") between the District and Southwest Securities, Inc. (the "Underwriter") and the Basic Documents (as defined in the Purchase Contract). The City of Lake Elsinore, acting as the legislative body of the District, has duly authorized, and the District has executed and delivered, the Basic Documents and, assuming due authorization, execution and delivery by the other parties thereto, as necessary, the Basic Documents constitute legal, valid and binding agreements of the District enforceable against the District in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, moratorium, insolvency, equitable remedies and other laws affecting creditors' rights or remedies. 2. To the best of our knowledge, there is no action, suit or proceeding before or by any court, public board or body pending or threatened wherein an unfavorable decision, ruling or finding would (a) affect the creation, organization, existence or powers ofthe District or the titles of its officers to their respective offices, (b) in any way question or affect the validity or...." 45733452.1 C-I AGENDA ITEM NO. 3 d- P/aJ:L.Of ~ ,.,-. enforceability of the Basic Documents, or (c) find illegal, invalid or unenforceable the Purchase Contract, or the transactions contemplated thereby, or any other agreement or instrument related to the issuance of the Bonds to which the District is a party. 3. The execution and delivery of the Basic Documents and the other instruments contemplated by any of such documents to which the District is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States or any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the District is a party or is otherwise subject or bound in a manner which would materially adversely affect the District's performance under the Basic Documents. 4. All approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the performance by the I;>istrict of its obligations under the Basic Documents have been obtained and are in full force and effect. r-- This letter is furnished by us as special counsel to the District. Other than the District, no attorney-client relationship has existed or exists between us and you in connection with the Bonds or by virtue of this letter. Our engagement with respect to the Bonds has terminated as of the date hereof, and we disclaim any obligation to update this letter. This letter is delivered to you, is solely for your benefit and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not, be relied upon by owners ofthe Bonds. Respectfully submitted, r'" 45733452.1 C-2 AGENDA ITEM ~. .3 ;2- PAGE~ OF.2ilL- Exhibit D Opinion of Fulbright & Jaworski L.L.P., Disclosure Counsel Addressed to the Issuer and the Underwriter ~ $ City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A , 2006 City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) 130 South Main Street Lake Elsinore, California 92530 Southwest Securities, Inc. 620 Newport Center Drive, Suite 300 Newport Beach, California 92660 """"" Ladies and Gentlemen: We have acted as Disclosure Counsel to the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District" or "Issuer") with respect to the issuance of the above captioned Bonds (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and the laws of the State of California, including the provisions of the Mello- Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California, as in existence on the Closing Date or as thereafter amended from time to time. The Bonds shall be issued and secured pursuant to a Fiscal Agent Agreement, dated as of 1, 2006 (the "Fiscal Agent Agreement"), by and between the District and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent"), authorizing the issuance of the Bonds. The Bonds are more fully described in the final Official Statement of the Issuer dated ,2006 (the "Official Statement"). Capitalized ~ terms not otherwise defined herein shall have the meaning ascribed thereto in the Official Statement. In rendering this opinion, we have reviewed such records, documents, certificates and opinions, and made such other investigations of law and fact as we have deemed necessary or appropriate. ""'-" 45733452.1 D-I AGENDA ITEM No.3;). PACE 'i'tOF - /"'" This opinion is limited to matters governed by the Federal securities law of the United States, and we assume no responsibility with respect to the applicability or effect of the laws of any other jurisdiction. In our capacity as Disclosure Counsel, we have rendered certain legal advice and assistance to you in connection with the preparation of the Official Statement. Rendering such legal advice and assistance involved, among other things, discussions and inquiries concerning various legal matters, review of certain records, documents and proceedings, and participation in conferences with, among others, your representatives and representatives of Bond Counsel, the Financing Consultant, the City, the District, and other consultants, at which conferences the contents of the Official Statement and related matters were discussed. On the basis of the information made available to us in the course of the foregoing (but without having undertaken to determine or verify independently, or assuming any responsibility for, the accuracy, completeness or fairness of any of the statements contained in the Official Statement), no facts have come to the attention of the personnel in our firm directly involved in rendering legal advice and assistance in connection with the preparation of the Official Statement which cause us to believe that the Official Statement as of its date (excluding therefrom financial, engineering and statistical data; forecasts, projections, estimates, assumptions and expressions of opinions; the treatment of the Bonds or the interest, discount or premium related thereto for tax purposes under the law of any jurisdiction; and the statements contained in the Official Statement under the captions "LEGAL MATTERS - Tax Exemption," and in the Appendices thereto, as to all of which we express no view) contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. ~ During the period from the date of the Official Statement to the date of this opinion, except for our review of the certificates and opinions regarding the Official Statement delivered on the date hereof, we have not undertaken any procedures or taken any actions which were intended or likely to elicit information concerning the accuracy, completeness or fairness of any of the statements contained in the Official Statement. Weare furnishing this opinion to you, as Disclosure Counsel to the Issuer, solely for your benefit. This opinion is rendered in connection with the transaction described herein, and may not be relied upon by you for any other purpose. This opinion shall not extend to, and may not be used, circulated, quoted, referred to, or relied upon by, any other person, firm, corporation or other entity without our prior written consent. Our engagement with respect to this matter terminates upon the delivery of this opinion to you at the time of the closing relating to the Bonds, and we have no obligation to update this opinion. Very truly yours, ~ 45733452.1 D-2 3.:l ACENDA ITEM NO. PACE 10 OF?fF1-- Exhibit E Certificate of the Developer ....., Reference is made to the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A (the "Bonds"), and to the Purchase Contract (the "Purchase Contract") by and between the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District") and Southwest Securities, Inc. (the "Underwriter"), relating to the Bonds. This certificate is delivered pursuant to Section (7)(e)(16) of the Purchase Contract. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Contract. As used herein, the term "Actual Knowledge of the Undersigned" shall mean the knowledge that the undersigned currently has or has obtained from interviews with such officers and responsible employees of the Developer as the undersigned has reasonably determined are likely, in the ordinary course oftheir respective duties, to have knowledge of the matters set forth herein. Other than as set forth in the immediately preceding sentence, with your permission, the undersigned has not conducted any additional inspection or inquiry. As used herein, the term "Affiliate" shall mean any entity in which the Developer has a controlling ownership interest. The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of , a (the "Developer"), and the undersigned, on behalf of the Developer, further certifies as follows: ....., I. The Developer has been duly organized and validly exists under the laws of the State of , is duly qualified to conduct business in California, and has all requisite right, power and authority (i) to execute and deliver this Certificate, and to execute and deliver at Closing (as defined in the Purchase Contract) its proposed Developer Continuing Disclosure Agreement (the "Continuing Disclosure Agreement") dated as of 1, 2006 and (ii) to undertake all of the transactions on its part contemplated by the proposed Continuing Disclosure Agreement and described in the Preliminary Official Statement. 2. As set forth in, and as of the date of, the Preliminary Official Statement, the Developer owns certain property (the "Property") within Improvement Area B of the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District"). The Developer makes the representations herein with respect to all of such parcels. Except as otherwise described in the Preliminary Official Statement, the Developer is, and the Developer's current expectation is that the Developer shall remain, the developer of the Property. Except as otherwise described in the Preliminary Official Statement, the Developer has not entered into an agreement for development or management ofthe Property by any entity other than the Developer. ....., 45733452.1d E-l ACENDA ITEM NO. 3 .)- PACE q I OF Qj1} .-. ",..... 3. The Developer has, or will have prior to Closing, duly authorized the execution and delivery at Closing of its proposed Continuing Disclosure Agreement, and is duly authorized to perform the obligations on its part to be performed thereunder. To the Actual Knowledge of the Undersigned, the Developer has not previously failed to comply in any material respect with any undertakings by it under Rule 15c2-12 of the Securities and Exchange Commission under the Securities Exchange Act of 1934 to provide periodic continuing disclosure reports or notices of material events in California within the past five years. 4. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer and its Affiliates are not in breach of or in default under any applicable law or administrative regulation of the State of California or the United States, or any agency or instrumentality of either, which breach or default would in any way materially and adversely affect the Developer's ability to perform its obligations under the proposed Continuing Disclosure Agreement, or the Developer's ability to pay its special tax obligations when due on its Property (the "Special Taxes"), and to the Actual Knowledge of the Undersigned, no event has occurred and is continuing which with the passage of time or giving of notice, or both, would constitute . such a breach or default; and to the Actual Knowledge of the Undersigned, the execution and delivery at Closing by the Developer of its Continuing Disclosure Agreement and compliance with the provisions thereof will not conflict with or constitute a breach of or default.under any law or administrative regulation applicable to the Developer. ",..... 5. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer is not in: breach of or in default under any applicable judgment or decree or any loan agreement, option agreement, development agreement, indenture, fiscal agent agreement, bond, note, resolution, agreement or other instrument to which the Developer is, or will upon issuance of the Bonds be, a party or otherwise subject, which breach or default would in any way materially and adversely affect the Developer's ability to perform its obligations under the proposed Continuing Disclosure Agreement, or its ability to pay the Special Taxes, and no event has occurred and is continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default; and the execution and delivery at Closing by the Developer of its proposed Continuing Disclosure Agreement and compliance with the provisions thereof will not conflict with or, constitute a breach of or default under any judgment, decree, loan agreement, indenture, fiscal agent agreement, bond, note, resolution, agreement or other instrument to which the Developer is a party or otherwise subject which breach or default would in any way materially and adversely affect the Developer's ability to perform its obligations under the proposed Continuing Disclosure Agreement, its ability to develop the Property or its ability to pay the Special Taxes. 6. Except as described in the Preliminary Official Statement, the Developer has no loans outstanding and unpaid secured by the Property and no lines of credit which are secured by the Property. /'"" 7. Except as set forth in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there is no litigation or administrative proceedings of any 45733452.1 E-2 AGENDA ITEM NO. 3 J- PACE 111 OF ?ll?__ nature pending against the Developer (with property service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened against the ......" Developer, which if successful, would have a material adverse affect on the ability of the Developer to complete the development and sale of the Property, or to pay the Special Taxes or ordinary ad valorem property tax obligations when due on the Property. 8. As of the date hereof, except as clarified below, the Preliminary Official Statement, solely with respect to information contained therein with respect to the Developer, including its Affiliates, the ownership and proposed development of the Property, the Developer's development plan, the Developer's financing plan, and the Developer's lenders and contractual arrangements, if any, as set forth under the captions "IMPROVEMENT AREA B" (excluding the information regarding the Appraisal, market value ratios and annual special tax ratios and information provided by a source other than the Developer) and "SOURCES OF PAYMENT FOR THE BONDS" is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 9. The Developer has full power and authority to own and develop the Property, and to carry on its business as presently conducted and as described in the Preliminary Official Statement. 10. The Developer covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Developer and its Affiliates will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body, that in any way seeks to challenge or overturn the formation of the District, to challenge the adoption of the Ordinance levying Special Taxes within the District, to invalidate the District or any refunding obligations, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Developer in any way from bringing any other action, suit or proceeding including, without limitation, an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the District's Special Tax Formula pursuant to which the Special Taxes are levied, an action or suit with respect to the application or use of the Special Taxes levied and collected, or an action or suit to enforce the obligations of the City and the District under the Fiscal Agent Agreement or any other agreements between the Developer, the City and/or the District, or to which the Developer is a beneficiary. 11. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, no other public debt secured by a tax or assessment on the Property is in the process of being authorized and no assessment districts or community facilities districts are in the process of being formed that include any portion ofthe Property. 45733452.] E-3 ACENDA ITEM NO._ .3 .;n PACE 13 OF _ ... ......" ......" ,- 12. Except as described in the Preliminary Official Statement, the Developer has not assumed any obligations under any judgment, decree, contract or otherwise, that would materially interfere with the Developer's execution and performance of its obligations under the proposed Continuing Disclosure Agreement or which would in any way materially and adversely affect its ability to develop the Property or to pay Special Taxes. 13. To the Actual Knowledge of the Undersigned and except as disclosed in the Preliminary Official Statement, the Developer and its Affiliates have never defaulted to any material extent in the payment of special taxes or assessments in connection with the District or any other community facilities district or assessment district in California within the past five years. 14. The Developer has received a copy of the Rate and Method of Apportionment containing the prepayment formula. The Developer acknowledges that any prepayment of the levy of the Special Taxes with respect to any parcel of Property shall only be made in accordance with said terms. 15. The Developer agrees to comply with the provision of the Mello-Roos Community Facilities Act relating to the Notice of Special Tax described in California Government Code Section 53341.5 in connection with the sale of the Property. /'"' 16. To the Actual Knowledge of the Undersigned, the Developer and its Affiliates are solvent and no proceedings are pending (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in which the Developer or the Affiliates may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from any and all of its debts or obligations or granted an extension of time to pay its debts or obligations or a reorganization or readjustment of its debts. 17. To the Actual Knowledge of the Undersigned, there are no claims, disputes, suits, actions or contingent liabilities among, by or between the Developer and any of its financial partners, Affiliates, or among, by or between the Developer and any contractors involved in the development of the Property which may materially adversely affect the development of the Property or the payment of the Special Taxes. /'"' 18. Based upon its current development plans, including, without limitation, its current budget and subject to economic conditions and risks generally inherent in the development of real property, the Developer anticipates that it will have sufficient funds to develop the Property as described in the Preliminary Official Statement and to pay Special Taxes assessed against the Property and does not anticipate that the District will be required to resort to the Reserve Account for payment of principal of or interest on the Bonds due to the Developer's nonpayment of Special Taxes. However, none of the Developer or its Affiliates is obligated to make any additional capital contribution Of loan to the Developer at any time and neither the Developer nor its Affiliates are obligated to pay, or to contribute additional capital for the payment of, Special Taxes. 45733452.1 E-4 3r ACENDA IT~ ~. if1-=. PACE 1 OF? 19. To the Actual Knowledge of the Undersigned, all information submitted by, or on behalf of, the Developer to the City, the District, the Special Tax Consultant or "WIll the Underwriter in connection with the issuance of the Bonds, and to Harris Realty Appraisal (the "Appraiser") in connection with the preparation of the appraisal relating to the District was, at the time of submission or as updated through the date of this certificate, correct in all material respects. 20. The Developer consents to the issuance of the Bonds. The Developer acknowledges and agrees that the proceeds of such Bonds will be used as described in the Preliminary Official Statement, and that the costs of acquisition and construction of such improvements are estimates. Any increase in costs in excess of the estimated costs relating to improvements will reduce the improvements which may be financed by the District, and neither the City nor the District has any obligation to provide moneys to pay for any such costs. 21. Solely as to information indicated in Section 8 hereof concerning the Developer, its Affiliates and the proposed development of the Property by the Developer, and subject to the limitations and exclusions set forth in Section 9, the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the District and the City, and their officials, and employees and each person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified party may become subject under any statute or at law or in equity or otherwise, and shall reimburse any such indemnified party for any legal or other expense incurred by it in connection with investigating any such claims against it and defending any such actions, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state, in the Preliminary Official Statement, a material fact necessary to make the statement therein, in light of the circumstances under which it was made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any indemnified party, provided that in no event shall the Developer be obligated for double indemnification or for the gross negligence or willful misconduct of an indemnified party. ~ 22. The Developer agrees to execute its Continuing Disclosure Agreement substantially in the form attached to the Preliminary Official Statement, with such additional changes as may be agreed upon by the Developer. 23. Ifbetween the date hereof and the date ofthe Closing any event relating to or affecting the Developer or the proposed development of the Property by the Developer shall occur of which the undersigned has actual knowledge and which the undersigned believes might or would cause the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the District and the Underwriter and if in the opinion of counsel to the District or the ~ 45733452.1 E-5 ACENDA ITEM No.3). PACE 1CS OF 2>'11 -. /'""- Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Developer shall cooperate with the District in the preparation of an amendment or supplement to the Official Statement in form and substance satisfactory to counsel to the District and to the Underwriter. 24. For a period of 90 days after the issuance of the Bonds, if any event relating to or affecting the Developer or the proposed development of the Property by the Developer shall occur of which the undersigned has actual knowledge as a result of which it is necessary, in the opinion of the Underwriter or counsel to the District, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Developer shall cooperate with the District and the Underwriter in the preparation of an amendment or supplement to the Official Statement in form and substance satisfactory to the Underwriter and counsel to the District which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. 25. The Developer agrees to deliver a bring-down certificate, substantially in the form attached hereto as Exhibit A, dated the date of issuance of the Bonds at the time of issuance of the Bonds to affirm and restate the Developer's certifications made herein. ,-.... 26. On behalf of the Developer, I have reviewed the content of this certificate and the Developer has consulted with counsel regarding the meaning of its contents. DATED: , 2006 a By: By: ,...... 45733452.1 E-6 ACENDA ITEM NO. ~;2 PAGE '7 Lt O~ - Exhibit F Bring-Down Certificate of the Developer ......, Reference is made to the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B) 2006 Series A (the "Bonds"), to the Purchase Contract (the "Purchase Contract") by and between the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District") and Southwest Securities, Inc. (the "Underwriter"), dated , 2006, relating to the Bonds. This certificate is delivered pursuant to the Purchase Contract. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Contract. A copy of a Certificate dated , 2006 (the "Certificate") delivered by , a (the "Developer") is attached hereto as Exhibit A. The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Developer, and the undersign~d, on behalf of the Developer, further certifies as follows: 1. The Developer has received a copy of the final Official Statement and each statement made in the Certificate is affirmed and restated as if made on the date hereof, provided that each statement made in the Certificate referring to the Preliminary Official Statement is affirmed as it relates to the final printed Official Statement and each statement made in the Certificate referring to the proposed Continuing Disclosure Agreement is affirmed as if it relates to the Continuing Disclosure Agreement as executed and delivered. ~ 2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Official Statement which has adversely affected or will materially and adversely affect the business, properties, operations, prospects or financial condition of the Developer or its Affiliates which would materially and adversely affect the Developer's ability to develop its Property or its ability to pay its Special Taxes. 3. The Developer has duly authorized the execution and delivery of its Continuing Disclosure Agreement, is duly authorized to perform the obligations on its part to be performed thereunder, and its Continuing Disclosure Agreement constitutes the legal, valid and binding obligations ofthe Developer, enforceable against it in accordance with its terms. DATED: , 2006 a By: By: ~ 45733452.1 F-l ACENDA ITEM NO. .3 ~ PACE cr] OF~ DRAFT DATED 6/09/06 /'"' NOT RATED (See "CONCLUDING INFORMATION - No RatiDg OD the BODds" hereiD) In the opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the tax covenants described herein, interest on the Bonds is excluded pursuant to section I 03( a) of the Internal Revenue Code of 1986 (the "Code ':> from the gross income of the owners thereof for federal income tax purposes and is not an item of preference under section 57(a) of the Code for purposes of the federal alternative minimum tax. See, however, "LEGAL MATTERS - Tax Exemption" herein regarding certain other tax considerations. NEW ISSUE-BOOK ENTRY ONLY COUNTY OF RIVERSIDE STATE OF CALIFORNIA $20,095,000* CITY OF LAKE ELSINORE COMMUNITY FACILITES DISTRICT NO. 2003-2 (CANYON HILLS) SPECIAL TAX BONDS (IMPROVEMENT AREA B), 2006 SERIES A Dated: Date of Delivery Due: September 1, As ShowD Below This cover page cODtaiDs certaiD iDformatioD for quick refereDce oDly. It is Dot a summary of the issue. PoteDtial iDvestors must read the eDtire Official StatemeDt to obtaiD iDformatioD esseDtial to the makiDg of aD iDformed iDvestmeDt decisioD. IDvestmeDt in the BODds iDvolves risks. See "BONDOWNERS' RISKS" hereiD for a discussioD of special risk factors that should be cODsidered iD evaluatiDg the iDvestmeDt quality of the BODds. Interest on the Bonds is payable semiannually on March 1 and September 1 of each year, commencing March I, 2007, until maturity or earlier redemption (see "THE BONDS - GeDeral Provisions" and "THE BONDS - Redemption" herein). The information contained within this Official Statement was prepared under the direction of the City by the following firm serving as Financing Consultant to the City. ..---. Rod Gunn Associates, Inc. MATURITY SCHEDULE $ * SERIAL BONDS Maturity Date Seotember 1 Principal Amount. Interest Rate Reoffering Rate Maturity Date Seotember 1 PriDcipal Amount. Interest Rate Reoffering Rate 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 * _ % Term Bond due September 1,2026, Price _ % $ $ * _ % Term Bond due September I, 2036, Price _ % The Bonds will be issued under the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of California). Repayment of the Bonds will be from Special Taxes (as defined herein) to be levied within Improvement Area B of the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) and certain other funds held under the Fiscal Agent Agreement, as described herein (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS'RISKS" herein). It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The Depository Trust Company on or about ----J 2006 (see "THE BONDS - General Provisions - Book-Entry Only-System" herein). The date of the Official Statement is ---J 2006. * Preliminary, subject to change. ,.... SOUTHWEST SECURITIES ACENDA ITEM NO. 8 :)- PACE q'J ~ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON mLLS) ....., CITY COUNCIL Robert Magee, Mayor Robert Schiffner, Mayor Pro Tem Genie Kelley, Council Member Thomas Buckley, Council Member Daryl Hickman, Council Member CITY STAFF Robert Brady, City Manager Matt N. Pressey, Director of Administrative Services Frederick Ray, City Clerk PROFESSIONAL SERVICES Bond Counsel and Disclosure Counsel Fulbright & Jaworski L.L.P. Los Angeles, California City Attorney Leibold, McClendon & Mann, P.C. Laguna Hills, California Financing Consultant Rod Gunn Associates, Inc. Huntington Beach, California Fiscal Agent Union Bank of California, N.A. Los Angeles, California Underwriter Southwest Securities, Inc. Newport Beach, California Underwriter's Counsel McFarlin & Anderson LLP Lake Forest, California Special Tax Consultant Harris & Associates Irvine, California Appraiser Harris Realty Appraisal Newport Beach, California Market Absorption Consultant Empire Economics, Inc. Capistrano Beach, California ......, FOR ADDITIONAL INFORMATION Matt Pressey, City of Lake Elsinore (951) 674-3124 Southwest Securities, Inc. (949) 717-2000 """ ii AGENDA ITEM NO.3). .. PAOE11 OF ~ TABLE OF CONTENTS INTRODUCTORY STATEMENT .........................1 Exempt Properties....................................................34 The City and the District............................................l Insufficient Special Taxes ........................................35 Property Ownership and DevelopmenL....................2 No Acceleration Provision.......................................35 Security and Sources of Repayment .....:....................3 Property Controlled by Federal Deposit Purpose ......................................................................4 Insurance Corporation and other Federal The Bonds. ...... ... ............. ............ ........... .......... ..........4 Agencies................. ....... ........ ............... ................ 35 Legal Matters .............................................................5 Limitations on Remedies .........................................36 Professional Services .................................................5 Right to Vote on Taxes Act ......................................37 Offering of the Bonds ................................................5 Ballot Initiatives and Legislative Measures............. 37 Information Concerning this Official Statement........6 Early Bond Redemption ..........................................37 Loss of Tax Exemption............................................38 IRS Audits ...... ................ ................... ...................... 3 8 Secondary Market ...... ..... ................ ................. ........38 r--- SELECTED FACTS ...................................................9 ESTIMATED SOURCES AND USES OF FUNDS ....................................................................13 Investment of Funds ................................................13 THE BONDS .............................................................14 General Provisions ....... ............................................14 Redemption.................................. .......................... ..16 Additional Obligations.............................................18 Scheduled Debt Service on the Bonds .....................20 r--- SOURCES OF.PAYMENT FOR THE BONDS .....22 General...................................... ...... ....... ................ ..22 Special Taxes.. ........................ .... ......... ..... .............. .22 Reserve Account ..................... .................................22 Capitalized Interest ..................................................23 Covenant for Superior Court Foreclosure ................23 Prepayment of Special Tax ......................................24 Special Taxes Are Not Within Teeter Plan ...............24 BONDOWNERS' RISKS .........................................25 General........ ........ ......... ......... ...... ............. ......... ..... ..25 Limited Obligation... ............. ....... ... ............ ..... ....... .25 Insufficiency of Special Taxes .................................25 Concentration of Ownership. ......................... ......... .26 No Personal Liability for Special Taxes...................26 Adjustable Rate and Non-Conventional Mortgages.... ...... .... ........... ...... .... ............ ............ ..26 Foreclosure and Sale Proceedings ...........................26 Land Values .............................................................27 Value-to-Lien Ratio .................................................28 The Progress of Land Development; Risks of Real Estate Secured Investments ..........................29 Geologic, Topographic and Climatic Conditions.....29 Endangered and Threatened Species........................30 Earthquakes .......................... ...................... ...... .......30 Legal Requirements .................................................30 Other Possible Claims Upon the Values of an Assessed Parcel... ..................................................30 Bankruptcy Proceedings ....... ...................................31 Bankruptcy and Foreclosure Delays ........................31 Additional Taxation .................................................32 Parity Taxes and Special Assessments .....................33 Disclosure to Future Land Buyers ...........................33 Billing of Special Taxes ...........................................33 Collection of Special Tax.........................................34 Maximum Rates......... ....................................... .......34 -"'" SPECIAL TAXES AND DEBT SERVICE .............39 Administration of the Special Tax ...........................39 Rate and Method of Apportionment ........................39 Delinquencies and Foreclosure Actions...................40 Debt Service Coverage ............................................46 THE CITY ................................................................. 49 IMPROVEMENT AREA B .....................................50 Boundaries ofImprovement Area B .........................50 Facilities and Fees to be Financed by the District .................. ....... ........ ........... ...... ................50 The Master Developer and Merchant Builders........53 Description of Development ............................. .......54 Financing Plan ......................................................... 58 LEG AL MA TIERS ............................................. ..... 60 Enforceability of Remedies .....................................60 Approval of Legal Proceedings ...............................60 Tax Exemption.... .................. ..... .................... .......... 60 Absence of Litigation ..............................................62 CONCLUDING INFORMATION .......................... 63 No Rating on the Bonds...........................................63 Underwriting... .............................................. ........... 63 Experts................. ..... ..... ................................. .........63 The Financing Consultant........................................63 Additional Information ............................................63 References ................ ..... ...... ............ ..... ....... ....... ..... 64 Execution...... ........................ ................... ....... ......... 64 iii .'-\CENDA ITEM NO. PACE.l.DD 3;2 OF ~'-= APPENDIX A DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT A GRE EMENT ....... ............................................. A-I APPENDIX B SUMMARY OF THE FISCAL AGENT AGREEMENT ......................................B-l APPENDIX C MARKET ABSORPTION STUDY ................................................................. C-l APPENDIX D APPRAISAL REPORT ................ D-l APPENDIX E RATE AND METHOD OF APPO RTI ONMENT............................................E-l APPENDIX F FORMS OF CONTINUING DISCLOSURE AGREEMENTS ........................ F-l APPENDIX G PROPOSED FORM OF BOND COUNSEL OPINION ......................................... G-l ~ ~ ~ IV AGENDA ITEM NO.. .3 k-: PACE (D ( OF /""- Lake .msinore Vicinity Map r- v AGENDA ITEM NO. .3~ PACE tD d OF OFFICIAL STATEMENT .., $20,095,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) SPECIAL TAX BONDS (IMPROVEMENT AREA B), 2006 SERIES A This Official Statement which includes the cover page and appendices (the "Official Statement") is provided to furnish certain information concerning the sale of the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B), 2006 Series A (the "Bonds"), in the aggregate principal amount of $20,095,000. * INTRODUCTORY STATEMENT This Introductory Statement contains only a brief description of this issue and does not purport to be complete. This Introductory Statement is subject in all respects to more complete information in the entire Official Statement and the offering of the Bonds to potential investors is made only by means of the entire Ofjicial Statement and the documents summarized herein. Investment in the Bonds involves risks. Potential investors must read the entire Ofjicial Statement to obtain information essential to the making of an informed investment decision with respect to the Bonds (see "BONDOWNERS'RISKS" herein). The City and the District The City. The City of Lake Elsinore (the "City") was founded in 1883 and incorporated on April 23, '-' 1888 in San Diego County. In 1893 the Elsinore Valley, previously in San Diego County, became a part of the new County of Riverside. The City encompasses approximately 39 square miles, with over 10 miles of lake shore, and is located at the southwestern end of Riverside County. It is 73 miles east of downtown Los Angeles and 74 miles north of downtown San Diego. Neighboring communities include Canyon Lake, Murrieta and Temecula (see "Vicinity Map" herein). The District. The Mello-Roos Community Facilities Act of 1982, as amended, constituting Section 53311 et seq. of the Government Code of the State of California (the "Act"), was enacted by the California Legislature to provide an alternative method of financing certain public facilities, improvements and services. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of such district. Subject to approval by at least a two-thirds vote of the votes cast by qualified electors within such district and compliance with the provisions of the Act, the legislative body may issue bonds for such community facilities district established by it and may levy and collect a special tax within such district to repay such bonds (see "SELECTED FACTS" and "SPECIAL TAXES AND DEBT SERVICE" herein). On January 13,2004 the City formed City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District). The District consists offour improvement areas (each an "Improvement Area" and collectively the "Improvement Areas."). Each Improvement Area has a separate rate and method of apportionment approved by the qualified electors within each respective Improvement Area. * Preliminary, subject to change .., /.\GENOA ITEM NO. aJ- o PAGEJ D 3 OF '341 ~ The qualified electors within each Improvement Area voted in favor of the incurrence of bonded ~, indebtedness and each Improvement Area has separate bond authorizations. On January 13, 2004 the qualified electors within Improvement Area B approved the tax levy of the Special Tax in accordance with the rate and method of apportionment for Improvement Area B (the "Rate and Method of Apportionment") and approved issuance of bonds by the District (see "APPENDIX E-RATE AND METHOD OF APPORTIONMENT" herein). The bond authorization amount for Improvement Area B approved by the qualified electors is $37,000,000. After issuance of the Bonds, the District expects to issue one or more additional series of bonds secured by Special Taxes levied in Improvement Area B to finance facilities related to Improvement Area B as described herein (see "THE BONDS - Additional Obligations" and "IMPROVEMENT AREA B - Facilities to be Financed by the District" herein). Improvement Area B encompasses the 426.46 acre third phase of the 1,969 acre master planned community known as Canyon Hills being developed by Pardee Homes. The first and second phases of development for Canyon Hills are substantially completed. The majority ofImprovement Area B and the entirety of the Phase One Development (as defined herein) within Improvement Area B is located near the intersection of Hillside Drive and Canyon Hills Road, one mile southeast of Railroad Canyon Road. The balance of Improvement Area B and the majority of the Phase Two development (as defined herein) within Improvement Area B is located adjacent to Railroad Canyon Road northwest of the intersection of Canyon Hills Road. The intersection of Canyon Hills Road and Railroad Canton Road is approximately 2 1/2 miles east ofthe Corona Freeway (I-IS). Property Ownership and Development Pardee Homes ("Pardee"), originally owned and is the master developer of all of the net assessable acreage of the land within the District. Pardee is a wholly-owned subsidiary of Weyerhaeuser Real Estate Company, a national leader in residential, commercial and industrial construction. Pardee has developed ~, master planned communities in Southern California and Nevada. In California, Pardee has been active in the cities of Los Angeles, Santa Clarita, Palm dale, Camarillo, Moorpark, Beaumont, Oxnard, Agoura, Valencia, San Diego, Oceanside, and in the counties of Ventura, Riverside, and Los Angeles. In Nevada, Pardee has built in the cities of Las Vegas, North Las Vegas, Henderson, and numerous other communities in Clark County. Improvement Area B has been subdivided into three tracts, Final Tract 31706, Final Tract 30493 and Tentative Tract 30496. Each tract map consists of several planning areas (each a "Planning Area"). There are eight Planning Areas within Improvement Area B (Planning Areas 1,2, 2IA, 2lB, 22, 23, 24 and 36). As of May 15, 2006, there were 5 large property owners and 74 individual homeowners within Improvement Area B as shown on the following table. PROPERTY OWNERSHIP (as of May 15,2006) PLANNING AREA PROPERTY OWNER Planning Areas 1, 2 and 36 Pardee Construction Company Planning Areas 21A, 22 and 23 Planning Area 21A Pardee Grossman Cottonwood Canyon Win-Win Pardee Poollll (Delaware), LLC. Planning Areas 21 B and 24 Planning Areas 21A and 22 Pulte Homes 74 Individual Homeowners ,...... 2 i\(jENDA ITEM NO. 3)- PAGE I til OF '?JtfL Collectively, Pardee Construction Company, , Pardee Grossman Cottonwood Canyon, , Win-Win Pardee Pool III (Delaware) LLC., limited liability company, and Pulte Home Corporation, a Michigan corporation, are referred to herein as the "Merchant Builders." For a description of the Merchant Builders see "IMPROVEMENT AREA B" herein. .~ For the purposes of structuring the financing of facilities and fees within Improvement Area B, Improvement Area B has been separated into two phases of development. The Phase One development has been defined as Planning Ares 21A, 2lB, 22, 23 and 24. The Phase Two development has been defined as Planning Areas 1, 2 and 36. PHASE ONE DEVELOPMENT Planning Area Tract No. Merchant Builder No. of Lots 21A 30493-1 Win-Win Pardee Pool III (Delaware), LLC 123 2lB 30493-1 Pulte Homes 131 22 30493-1 Pardee Grossman Cottonwood Canyon III 23 30493-1 Pardee Grossman Cottonwood Canyon 147 24 30493-1 Pulte Homes 143 PHASE TWO DEVELOPMENT Planning Area 1 2 36 * Multifamily Units Tract No.(l) 30496 30496 30493-1 Merchant Builder Pardee Construction Company Pardee Construction Company Pardee Construction Company No.ofUnits* 318 360 216 ....., Phase One development in Improvement Area B is in various stages of development from lots in blue top condition to production homes (see "SELECTED FACTS" and "IMPROVEMENT AREA B- Development Status" herein). Security and Sources of Repayment The Bonds. The Bonds are secured under the Fiscal Agent Agreement between the District and Union Bank of California, N.A., Los Angeles, California, as fiscal agent (the "Fiscal Agent") dated as of July 1, 2006 (the "Fiscal Agent Agreement") (see "APPENDIX B - SUMMARY OF THE FISCAL AGENT AGREEMENT" herein). The District has covenanted in the Fiscal Agent Agreement to levy in each Fiscal Year the Special Taxes on parcels of land pledged to the repayment of the Bonds in an amount sufficient to pay debt service on the Bonds and the administrative expenses subject to the limitation on the Maximum Annual Special Tax that may be levied on such land within the District (see "IMPROVEMENT AREA B" and "SPECIAL TAXES AND DEBT SERVICE" for a description of the Special Tax within Improvement Area B) (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein). The Bonds are special obligations of the District. The Bonds do not constitute a debt or liability of the City, the State of California (the "State") or of any political subdivision thereof, other than the District. The District shall only be obligated to pay the principal of the Bonds, and the interest thereon, from the funds described herein, and neither the faith and credit nor the taxing power of ....., 3 Od- AGENDA ITEM NO._ 3if} :.. PAGE..oJ IJQ Of - - -- the City, the State or any of its political subdivisions is pledged to the payment of the principal of or ~ the interest on the Bonds. See "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS'RISKS" herein. Purpose The Bonds. The Bonds are being issued to provide the District with funds to finance public infrastructure, including certain capital fees imposed by the City and the Elsinore Valley Municipal Water District, related to Improvement Area B (the "Facilities") (see "IMPROVEMENT AREA B - Facilities and Fees to be Financed by the District"), to fund interest on the Bonds to and including September 1, 2007, to pay the expenses of the District and the Developer in connection with issuance of the Bonds and to make a deposit to the Reserve Account. The amount of the deposit into the Reserve Account will be in the amount equal to $ * (see "ESTIMATED SOURCES AND USES OF FUNDS" herein). The Bonds Redemption. The Bonds maturing September 1, 2026 and September 1, 2036 are subject to mandatory redemption, without premium, prior to their maturity date, in part by lot on September 1 in each year commencing September 1, 2022 in the case of the Bonds maturing September I, 2026 and September I, 2027 in the case of the Bonds maturing September I, 2036 from sinking fund payments under the Fiscal Agent Agreement (see "THE BONDS - Redemption - Mandatory Redemption" herein). The Bonds are subject to optional redemption prior to maturity, in whole or in part, by lot, on September I, 2012, and on any date thereafter at a redemption price equal to the principal amount thereof, plus accrued interest to the date of redemption, plus a premium, as described herein (see "THE BONDS - Redemption - Optional Redemption" herein). ,--. The Bonds are subject to redemption, in part, on any date from amounts constituting prepayments of Special Taxes at a redemption price equal to the principal amount thereof, plus accrued interest to the date of redemption, plus a premium, as described herein (see "THE BONDS - Redemption - Special Mandatory Redemption from Prepayment of Special Taxes" herein). The Bonds are subject to special mandatory redemption in whole or in part, on any date without premium under certain other circumstances as described herein (see "THE BONDS - Redemption" herein). Denominations. The Bonds will be issued in the minimum denomination of $5,000 each or any integral multiple thereof (see "THE BONDS - General Provisions" herein). Registration, Transfer and Exchange. The Bonds will be issued in fully-registered form without coupons. Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the Fiscal Agent Agreement (see "THE BONDS - General Provisions - Transfer or Exchange of Bonds" herein). When delivered, the Bonds will be registered in the name of The Depository Trust Company, New York, New York ("DTC"), or its nominee. DTC will act as securities depository for the Bonds. Individual purchases of Bonds will be made in book-entry form only in the principal amount of $5,000 each or any integral thereof. Purchasers of the Bonds will not receive certificates representing their Bonds (see "THE BONDS - General Provisions - Book-Entry-Only System" herein). * Preliminary, subject to change ,-..- 4 3..:l I[)U;OF~ :f"i-'<..;,,-.L~' Payment. Principal of the Bonds and any premium upon redemption will be payable in each of the years and in the amounts set forth on the cover page hereof upon surrender at the corporate trust office of the Fiscal Agent in Los Angeles, California. Interest on the Bonds will be paid by check of the Fiscal Agent mailed by first class mail on the Interest Payment Date to the person entitled thereto (except as otherwise described herein for interest paid to an account in the continental United States of America by wire transfer as requested in writing no later than the applicable Record Date by owners of $1 ,000,000 or more in aggregate principal amount of Bonds) (see "THE BONDS - General Provisions" herein). ......" Initially, interest on and principal and premium, if any, of the Bonds will be payable when due by wire of the Fiscal Agent to DTC which will in turn remit such interest, principal and premium, if any, to DTC Participants (as defined herein), which will in turn remit such interest, principal and premium, if any, to Beneficial Owners (as defined herein) of the Bonds (see "THE BONDS - General Provisions - Book-Entry- Only System" herein). Notice. Notice of any redemption will be mailed by first class mail by the Fiscal Agent at least thirty (30) but no more than sixty (60) days prior to the date fixed for redemption to the registered owners of any Bonds designated for redemption and to the Securities Depositories and Information Services provided in the Fiscal Agent Agreement. Neither failure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of the proceedings for redemption of such Bonds or the cessation of accrual of interest on the redemption date (see "THE BONDS - Redemption - Notice of Redemption" herein). Legal Matters The legal proceedings in connection with the issuance of the Bonds are subject to the approving opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, as Bond Counsel. Such opinion, and certain tax consequences incident to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, are described more fully under the heading "LEGAL MATTERS" herein. Certain legal matters will be passed on for the City by Leibold, McClendon & Mann, P.C., Laguna Hills, California, as City Attorney and by Fulbright & Jaworski L.L.P., Los Angeles, California, Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by McFarlin & Anderson LLP, Lake Forest, California, ....." Underwriter's Counsel. Professional Services Union Bank of California, N.A., Los Angeles, California, will serve as Fiscal Agent under the Fiscal Agent Agreement. The Fiscal Agent will act on behalf of the Bondowners for the purpose of receiving all moneys required to be paid to the Fiscal Agent, to allocate, use and apply the same, to hold, receive and disburse the Special Taxes and other funds held under the Fiscal Agent Agreement, and otherwise to hold all the offices and perform all the functions and duties provided in the Fiscal Agent Agreement to be held and performed by the Fiscal Agent. Harris & Associates, Irvine, California, Special Tax Consultant, prepared the cash flow certificate for the District demonstrating that there will be sufficient Special Taxes, assuming timely receipt, to pay debt service on the Bonds (see "CONCLUDING INFORMATION - Experts" herein). Rod Gunn Associates, Inc., Huntington Beach, California, Financing Consultant, advised the City as to the financial structure and certain other financial matters relating to the Bonds. Fees payable to Bond Counsel, Disclosure Counsel, Underwriter's Counsel and the Financing Consultant are contingent upon the sale and delivery of the Bonds. Offering of the Bonds Authority for Issuance. The Bonds are to be issued and secured pursuant to the Fiscal Agent Agreement, as authorized by resolution of the City adopted on April 25, 2006. The Bonds are also issued in ......, 5 AGENDA ITEMI\lu. 3~-p,- PAGE 101 OF f$~ I --'""l accordance with the laws of the State, and particularly the Mello-Roos Community Facilities Act of 1982, ,.... as amended (Section 53311 et seq. of the Government Code of the State). The Bonds are being sold to Southwest Securities, Inc. (the "Underwriter") pursuant to a Purchase Contract approved by the City by Resolution adopted on , 2006. Offering and Delivery of the Bonds. The Bonds are offered when, as and if issued, subject to the approval as to their legality by Fulbright & Jaworski L.L.P., Los Angeles, California, as Bond Counsel. Certain legal matters will be passed upon for the City by Leibold, McClendon & Mann, P.C., Laguna Hills, California, as City Attorney and by Fulbright & Jaworski L.L.P., Los Angeles, California, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by McFarlin & Anderson LLP, Lake Forest, California, as Underwriter's Counsel. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The Depository Trust Company on or about , 2006. No dealer, broker, salesperson or other person has been authorized by the District, the City, the Financing Consultant or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds described herein, other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell nor the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale or to any person to whom it is unlawful to make such offer, solicitation or sale. ,r-... IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. The Bonds are exempt from registration with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended. The Bonds have not been registered or qualified under the securities laws of any state. The Bonds will not be listed on any stock or securities exchange. Neither the Securities and Exchange Commission nor any other federal, state or other governmental entity or agency will have passed upon the accuracy or adequacy ofthe Official Statement or approved the Bonds for sale. Information Concerning this Official Statement This Official Statement speaks only as of its date. The information set forth herein has been obtained by the Financing Consultant from the City, the District, the Developer and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as a representation by the Financing Consultant, the City or the District. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended as such and are not to be -'" construed as representations of fact. 6 AGENDA ITEM NO. ~;'l PACE I f} ~ o~l Preliminary Official Statement Deemed Final. The information set forth herein is in a form deemed final, as of its date, by the District for the purpose of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (except for the omission of certain information permitted to be omitted under said ~ Rule). The information herein is subject to revision, amendment and completion in a final Official Statement. The information and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of the District since the date hereof. Continuing Disclosure. The District and the Developer have covenanted for the benefit of owners of the Bonds to provide certain financial information and operating data relating to Improvement Area Beach year. The District has agreed to make such information available not later than 225 days after the end of the City's fiscal year, commencing with fiscal year 2005/06 and the Developer has agreed to make such information available not later than February IS of each year until the obligation is terminated, commencing February 15,2007 (each an "Annual Report" and collectively the "Annual Reports"), and to provide notices of the occurrences of certain enumerated events, if material. The District and the Developer shall file or cause to be filed by the Dissemination Agent the Annual Reports with each Nationally Recognized Municipal Securities Information Repository and with the appropriate State information depository, if any. The notices of material events will be filed by the Dissemination Agent on behalf of the District and the Developer with the Municipal Securities Rulemaking Board (and with the appropriate State information depository, if any) or each Nationally Recognized Municipal Securities Information Repository. The specific nature of information to be contained in the Annual Reports or the notice of material events is summarized in "APPENDIX F - FORMS OF CONTINUING DISCLOSURE AGREEMENTS." These covenants have been made by the District and the Developer in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the "Rule") promulgated by the Securities and Exchange Commission. The Developer will be released from its obligation under its Continuing Disclosure Agreement to provide its Annual Report and notices of material events upon the earliest to occur of certain events, including at such time that the property owned by the Developer in Improvement Area B is no longer responsible for payment of 20% or more of the Special Taxes in Improvement Area B. The District has never failed to meet its continuing disclosure requirements under such rule in any ....., material manner. An officer or representative executing a certificate on behalf of the Developer will certify that to his or her knowledge, the Developer has not previously failed to comply in any material respect with undertakings by it under the Rule to provide periodic continuing disclosure reports or notice of material events in California within the past five years. Each year until the final maturity of the Bonds, the District is required to, not later than October 30 of each year, supply the following information to the California Debt and Investment Advisory Commission by mail, postage prepaid: 1. The principal amount of Bonds outstanding. 2. The balance in any Bonds reserve fund. 3. The balance in any capitalized interest fund. 4. The number of parcels which are delinquent with respect to their Special Tax payments, the amount that each parcel is delinquent, the length of time that each has been delinquent, and when foreclosure was commenced for each delinquent parcel. 5. The balance in any construction funds. 6. The assessed value of all parcels subject to Special Tax to repay the Bonds as shown on the most recent equalized roll. In addition, the District is required to notify the California Debt and Investment Advisory Commission by mail, postage prepaid, within 10 days if any of the following events occur: .~ 7 AGENDA ITEM NO. :3)- PAOE 101 OF ?ffL ,,-.. 1. The District or its Fiscal Agent fails to pay principal and interest due on any scheduled payment date. 2. Funds are withdrawn from any reserve fund to pay principal and interest on the Bonds. Neither the District nor the California Debt and Investment Advisory Commission will be liable for any inadvertent error in reporting the required information. The failure by the District to comply with its reporting obligations is not a default under the Fiscal Agent Agreement. Availability of Legal Documents. The summaries and references contained herein with respect to the Fiscal Agent Agreement, the Bonds, and other statutes or documents do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute, and references to the Bonds are qualified in their entirety by reference to the form thereof included in the Fiscal Agent Agreement. Definitions of certain terms used herein are set forth in "APPENDIX A" hereto. Copies of the documents described herein are available for inspection during the period of initial offering of the Bonds at the offices of the Underwriter, Southwest Securities, Inc., 620 Newport Center Drive, Suite 300, Newport Beach, California 92660, telephone (949) 717-2000. Copies of these documents may be obtained after delivery of the Bonds from the City at 130 S. Main Street, Lake Elsinore, California 92530, telephone (951) 674-3124. ",.-.- "...... 8 ACENDA ITEM NO. 3)- PACE 1/6 OF~ ~ SELECTED FACTS The following summary does not purport to be complete. Reference is hereby made to the complete Official Statement in this regard. Furthermore, the following summary makes certain assumptions regarding valuation of property within Improvement Area B. Neither the City nor the District makes any representation as to the current value of property in Improvement Area B or provides any assurance as to the estimated values of property being achieved (see "BONDOWNERS'RISKS" herein). THE BONDS Principal Amount of Bonds: $20,095,000* Additional Bonds: Additional bonds on a parity with the Bonds are authorized (see "THE BONDS -Additional Obligations" and "APPENDIX B - SUMMARY OF THE FISCAL AGENT AGREEMENT" herein). Maximum Bond Authorization: $37,000,000 First Optional Redemption Date: September 1, 2012 at 102% of Principal Amount (see "THE BONDS-Redemption" herein). First Special Mandatory Redemption Date: On any date on or after September I, 2006 from prepayment of Special Taxes at a premium, as described herein. Primary Source of Revenues for Repayment: Special Taxes levied within Improvement Area B as defined herein (see "SPECIAL TAXES AND DEBT SERVICE" herein). Priority: All Bonds are secured by a first pledge of and lien on all Special Taxes levied within Improvement Area B (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein). IMPROVEMENT AREA B Estimated Acreage: 426.46 gross acres Discounted "Bulk Value" of Parcels in Improvement Area B: $196,000,000 Ratio of Market Value to Principal Amount of Bonds: Minimum Ratio of Authorized Maximum Annual Special Taxes in any Fiscal Year to Annual Debt Service on the Bonds: 9.75 to 1* 110% * Preliminary, subject to change 9 AGENDA ITEM NO. 3;;L PACE (/ ( OF /1:ffi ""."" ......., --'. - PROPERTY OWNERS ~ Improvement Area B has been subdivided into three tracts, Final Tract 31706, Final Tract 30493 and Tentative Tract 30496. Each tract map consists of several planning areas (each a "Planning Area"). There are eight Planning Areas within Improvement Area B (Planning Areas 1, 2, 21A, 2lB, 22, 23, 24 and 36). As of May 15, 2006, there were 5 large property owners and 74 individual homeowners within Improvement Area B as shown on the following table. PROPERTY OWNERSHIP (as of May 15,2006) PLANNING AREA PROPERTY OWNER Planning Areas I, 2 and 36 Pardee Construction Company Planning Areas 21A, 22 and 23 Pardee Grossman Cottonwood Canyon Planning Area 21 A Planning Areas 21 B and 24 Planning Areas 21 A and 22 Win-Win Pardee Poollll (Delaware), LLC. Pulte Homes 74 Individual Homeowners ,..-. Collectively, Pardee Construction Company, , Pardee Grossman Cottonwood Canyon, , Win-Win Pardee Pool III (Delaware) LLC., limited liability company, and Pulte Home Corporation, a Michigan corporation, are referred to herein as the "Merchant Builders." For a description of the Merchant Builders see "IMPROVEMENT AREA B" herein. For the purposes of structuring the financing of facilities and fees within Improvement Area B, Improvement Area B has been separated into two phases of development. The Phase One development has been defined as Planning Ares 21A, 2lB, 22, 23 and 24. The Phase Two development has been defined as Planning Areas 1,2 and 36. PHASE ONE DEVELOPMENT Planning Area Tract No. Merchant Builder No. of Lots 21A 30493-1 Win-Win Pardee Poollll (Delaware), LLC 123 2lB 30493-1 Pulte Homes 131 22 30493-1 Pardee Grossman Cottonwood Canyon III 23 30493-1 Pardee Grossman Cottonwood Canyon 147 24 30493-1 Pulte Homes 143 ",....... 10 AGENDA ITEM NO. 6;;r PACE II ~ OF...2ifI,.. PHASE TWO DEVELOPMENT ....., Planning Area 1 2 36 Tract No.(l) 30496 30496 30493-1 Merchant Builder Pardee Construction Company Pardee Construction Company Pardee Construction Company No. of Units * 318 360 216 * Multifamily Units DESCRIPTION OF PHASE ONE DEVELOPMENT Shown below for each Planning Area are the name of the development, total number of units and the price and square footage of each model type. Planning Area Project Name Total Units Model Base Price Size (Sq. Ft.) 21A Cross Creek 123 1 $360,440 1,671 IX $381,400 1,918 2 $392,400 2,113 3 $418,400 2,439 21B Weatherly at 131 1 $431,510 1,949 Canyon Hills 2 $441,730 2,110 3 $459,720 2,458 22 Briarcliff 111 1 $435,900 2,485 2 $446,900 2,679 3 $457,900 2,820 4 $468,900 23 Bridgegate 147 1 $499,000 2,962 2 $519,000 3,073 2X $519,000 3,070 3 $529,000 3,315 4 $539,000 3,699 ....., """ 11 ACENDA ITEM NO. z,~ PAGE_II~ OF -- r- ~ ~ 24 Alderbrook at 143 1 $497,630 2,607 Canyon Hills 2 $518,360 2,888 3 $524,860 3,103 STATUS OF DEVELOPMENT Phase One development in Improvement Area B is in various stages of development from lots in blue top condition to production homes (see "SELECTED FACTS" and "IMPROVEMENT AREA B- Development Status" herein). PHASE ONE DEVELOPMENT CONSTRUCTION STAGES Construction PA 21A PA21B PA22 PA23 PA24 Total Stages Model Units Completed 8 3 0 - - 11 Under - - - 4 3 7 Construction Production Unite Completed 36 4 40 - - 80 Under 26 46 31 - 16 119 Construction Finished 57 78 36 - 25 196 Lots Blue Top - - - 143 99 242 Lots Total 127 131 107 147 143 12 AGENDA ITEM No.3;) PAGE /1'/ OF ~-J,... ESTIMATED SOURCES AND USES OF FUNDS Under the provisions of the Fiscal Agent Agreement, the Fiscal Agent will receive the proceeds from the ,....." sale of the Bonds and will apply them as follows: Sources of Funds Principal Amount of the Bonds $20,095,000.00* Net Original Issue Discount Underwriter's Discount Total Uses of Funds Acquisition and Construction Fund Interest Account (I) Reserve Account (2) Costs of Issuance Account (3) City Administration and Reimbursements (4) Total (1) Estimated capitalized interest through September 1, 2007. (2) Equal to the Reserve Requirement. (3) Expenses include fees of Bond Counsel, Financing Consultant, Disclosure Counsel, Appraiser, Market Consultant, Special Tax Consultant, Fiscal Agent, costs of printing the Official Statement, and other costs of issuance of the Bonds. ...." (4) City administration fees, fees and expenses of levying the Special Taxes in the first year and certain reimbursements including Developer Counsel and consultants. Investment of Funds All moneys in any of the funds or accounts established with the Fiscal Agent pursuant to the Fiscal Agent Agreement will be invested solely in Authorized Investments (see "APPENDIX A - DEFINITION OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT" herein), as directed pursuant to the Written Request of the District filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Written Request, the Fiscal Agent will invest any such moneys in money market funds. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. For the purpose of determining the amount in any fund, the value of Authorized Investments credited to such fund will be calculated at the market thereof (excluding any accrued interest). * Preliminary, subject to change 13 ....." ACENDA ITEM.. N 0.0;). ?ill -= PAQE liS OF ,~ - THE BONDS ,-..- General Provisions Repayment of the Bonds. Interest is payable on the Bonds at the rates per annum set forth on the cover page hereof. Interest with respect to the Bonds will be computed on the basis of a year consisting of 360 days and twelve 30-day months. Each Bond will be dated the Delivery Date, and interest with respect thereto will be payable from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest with respect thereto will be payable from such Interest Payment Date; (b) it is authenticated on or before February 15,2007, in which event interest with respect thereto will be payable from the Delivery Date; or (c) interest with respect to any Outstanding Bond is in default, in which event interest with respect thereto will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest with respect to the Bonds will be payable by check of the Fiscal Agent mailed by first class mail on the applicable Interest Payment Date to the Owners thereof provided that in the case of an Owner of $1,000,000 or greater in principal amount of Outstanding Bonds, such payment may, at such Owner's option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided prior .to the applicable Record Date to the Fiscal Agent by such Owner. The Owners of the Bonds shown on the Registration Books on the Record Date for the Interest Payment Date will be deemed to be the Owners of the Bonds on said Interest Payment Date for the purpose of the paying of interest. Principal of the Bonds and any premium upon early redemption is payable upon presentation and surrender thereof, at the corporate trust office of the Fiscal Agent in Los Angeles, California. ,- Book-Entry-Only System. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation, (respectively, "NSCC," "FlCC," and "EMCC," also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system ~ 14 ACENDAlTEMNO. 3~ =. PACE II f.t OF -'~ I - is also available to others such as both U.S. and non-U.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. ....., Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use ofthe book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. ....., Redemption notices shall be sent to DTC. Ifless than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium price, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Fiscal Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the ....., 15 3;/ AGENDA ITEM NO.~ PAGE 1/7 _OF~ Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and "" disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. In the event that the book-entry system is discontinued as described above, the requirements of the Fiscal Agent Agreement will apply. The foregoing information concerning DTC and DTC's book-entry system has been provided by DTC, and neither the District nor the Fiscal Agent take any responsibility for the accuracy thereof. Neither the District nor the Underwriter can and do not give any assurances that DTC, the Participants or others will distribute payments of principal, interest or premium, if any, evidenced by the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the District nor the Underwriter is responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. Transfer or Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the Fiscal Agent Agreement, upon surrender of such Bond for cancellation at the corporate trust office of the Fiscal Agent. Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the Fiscal Agent shall authenticate and deliver a new Bond or Bonds for like aggregate principal amount. The Fiscal Agent may require the payment by the Bondowner ~ requesting such transfer or exchange of any tax or other governmental charge required to be paid with respect to such transfer or exchange. The Fiscal Agent is not required to transfer or exchange (a) any Bonds or portions thereof during the period established by the Fiscal Agent for selection of Bonds for redemption, or (b) any Bonds selected for redemption. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond becomes mutilated, the District, at the expense of the Bondowner, will execute, and the Fiscal Agent will thereupon authenticate and deliver, a new Bond of like series, tenor and authorized denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent will be canceled by it. If any Bond issued under the Fiscal Agent Agreement is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and the District and, if such evidence is satisfactory to them and indemnity satisfactory to them is given, the District, at the expense of the Bondowner, will execute, and the Fiscal Agent will thereupon authenticate and deliver, a new Bond of like series and tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued under the provisions of the Fiscal Agent Agreement described in this paragraph in lieu of any Bond alleged to be lost, destroyed or stolen will be equally and proportionately entitled to the benefits of the Fiscal Agent Agreement with all other Bonds secured by the Fiscal Agent Agreement. Redemption Optional Redemption. The Bonds are subject to redemption prior to maturity at the option of the District on any date on or after September 1,2012, as a whole or in part, by lot, from any available source of funds at the following redemption prices, (expressed as a percentage of the principal amount of Bonds to be redeemed) together with accrued interest thereon to the date fixed for redemption: ,..... 16 a;l. AGENDA ITEM N~~ PAGE II LOf.21J..-- Redemption Periods Redemption Prices September 1, 2012 through August 31, 2013 September 1, 2013 through August 31, 2014 September 1,2014 and thereafter 102.0% 101.0% 100.0% ~ Special Mandatory Redemption from Prepayment of Special Taxes. The Bonds are subject to mandatory redemption prior to maturity on any date on or after September 1, 2006, in whole or in part, in a manner determined by the District from prepayments of Special Taxes at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption: Redemption Periods Redemption Prices September 1, 2006 through August 31, 2010 September 1, 2010 through August 31, 2012 September 1,2012 and thereafter 103.0% 102.5% as provided for optional redemption Mandatory Sinking Payment Redemption. The Bonds maturing on September 1,2026 and September 1, 2036 are subject to mandatory redemption, in part by lot, on September 1 in each year commencing September 1, 2022 in the case of the Bonds maturing September 1, 2026 and September 1, 2027 in the case of the Bonds maturing September 1, 2036 from mandatory sinking payments made by the District pursuant to the Fiscal Agent Agreement at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date of redemption as set forth in the following schedule; provided, however, that (i) in lieu of redemption thereof, the Bonds may be purchased by the District and tendered to the Fiscal Agent, and (ii) if some but not all of the Bonds have been redeemed pursuant to optional redemption, mandatory redemption from Special Taxes or special mandatory redemption provisions described herein, the total amount of all future sinking payments will be reduced by the aggregate principal amount of the Bonds so redeemed, to be allocated among such ~ sinking payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the District. SCHEDULE OF MANDATORY SINKING PAYMENT REDEMPTIONS TERM BONDS MATURING SEPTEMBE:g 1, 2026 September 1 Year 2022 2023 2024 Principal Amount* Septem ber 1 Year 2025 2026 Principal Amount* * Preliminary, subject to change ~ 17 3:l AGENDA ITEM NO. PACE II? ~~ ,,-.. SCHEDULE OF MANDATORY SINKING PAYMENT REDEMPTIONS TERM BONDS MATURING SEPTEMBER 1, 2036 September 1 Year 2027 2028 2029 2030 2031 Principal Amount* September 1 Year 2032 2033 2034 2035 2036 Principal Amount* Special Mandatory Redemption. The Bonds are subject to special mandatory redemption on any date from unused proceeds of the Bonds after completion or abandonment of the improvements to be financed with such proceeds, from the deposit of fees with the District by a public agency which has accepted facilities serving the District, and from insurance or condemnation proceeds or other mandatory redemption, without premium, plus accrued interest to the redemption date, all as determined by the District (see "IMPROVEMENT AREA B - Facilities and Fees to be Financed by the District" for a description of the scope of the Development). Notice of Redemption. When redemption is authorized or required, the Fiscal Agent is required to give written notice of the redemption of Bonds to the Bondowners designated for redemption at their addresses appearing on the bond registration books, to certain Securities Depositories, and to one or more Information Services, all as provided in the Fiscal Agent Agreement, by first class mail, postage prepaid, no less than thirty (30), nor more than sixty (60), days prior to the date fixed for redemption. Neither failure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of the ,,-.. proceedings for redemption of such Bonds or the cessation of accrual of interest on the redemption date. Effect of Redemption. The rights of a Bondowner to receive interest will terminate on the date, if any, on which the Bond is to be redeemed pursuant to a call for redemption. The Fiscal Agent Agreement contains no provisions requiring any publication of notice of redemption, and Bondowners must maintain a current address on file with the Fiscal Agent to receive any notices of redemption. Partial Redemption. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the District will execute and the Fiscal Agent will authenticate and deliver to the Bondowner thereof, at the expense of the District, a new Bond or Bonds of the same series and maturity date, of authorized denominations in an aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed. Additional Obligations The qualified electors within Improvement Area B authorized bonded indebtedness in the amount of $37,000,000. Pursuant to the provisions of the Fiscal Agent Agreement, the District is authorized to issue additional parity bonds for Improvement Area B and currently expects to issue additional parity bonds to finance the phase two facilities (see "IMPROVEMENT AREA B - Facilities to be Financed by the District" herein). * Preliminary, subject to change ,....- 18 AGENDA ITEMNO.~. . PAGE I;;~OF~ Parity Bonds. The District covenants that any Parity Bonds which shall be issued or incurred which are payable out of the Net Taxes of the Improvement Area B in whole or in part shall be issued in accordance with the following: (a) the amount of such Parity Bonds shall not, together with all other Bonds and Parity Bonds then Outstanding with respect to the Improvement Area B, exceed the total amount of Bonds authorized to be issued by the District with respect to Improvement Area B; '-' (b) The District shall be in compliance with all covenants set forth in the Fiscal Agent Agreement and a certificate of the District to that effect shall have been filed with the City Clerk on behalf of the District; provided, however, that Parity Bonds may be issued notwithstanding that the District is not in compliance with all such covenants so long as immediately following the issuance of such Parity Bonds for Improvement Area B the District will be in compliance with all such covenants; and (c) The District shall have received the following documents or money or securities, all of such documents dated or certified, as the case may be, as of the date of delivery of such Parity Bonds by the District Trustee (unless the District Trustee shall accept any of such documents bearing a prior date): (1) An opinion of Bond Counsel and/or counsel to City to the effect that (a) the District has the right and power under the Act to execute and deliver the Supplemental Fiscal Agent Agreement relating to such Parity Bonds, and the Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements have been duly and lawfully adopted, executed and delivered by the District, are in full force and effect and are valid and binding upon the District and enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement of creditors' rights); (b) the Fiscal Agent Agreement creates the valid pledge which it purports to create of the Net Taxes of Improvement Area B as provided in the Fiscal Agent Agreement, subject to the application thereof to the purposes and on the conditions permitted by the Fiscal Agent Agreement; and (c) such Parity Bonds are valid and binding limited obligations of the '-' District, enforceable in accordance with their terms (except as enforcement may be limited by bankruptcy, insolvency, reorganization and other similar laws relating to the enforcement or creditors' rights) and the terms of the Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements thereto and entitled to the benefits of the Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements, and such Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other applicable laws) and the Fiscal Agent Agreement and all such Supplemental Fiscal Agent Agreements and further opinion of Bond Counsel to the effect that, assuming compliance by the District with certain tax covenants, the issuance of the Parity Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any Outstanding Bonds and Parity Bonds theretofore issued or the exemption from State of California personal income taxation of interest on any Outstanding Bonds and Parity Bonds theretofore issued; and (2) A certificate of an Independent Financial Consultant certifying as of the closing date that (a) the ratio of the value of the property included within Improvement Area B within the District to the amount of lien which will be on the property after the issuance of the Parity Bonds, including the amount of any assessment bonds or bonds issued under the Act, is not less than 3:1 and (b) the total Special Tax revenues which could be generated by the District within Improvement Area B by the levy of the Special Tax at the Maximum Special Tax (pursuant to the Act and the applicable resolutions of the District) on all then taxable property in any Fiscal Year, is at least 1.10 times Maximum Annual Debt Service on all Outstanding Bonds relating to Improvement Area B (including Parity Bonds previously issued and the Parity Bonds proposed to be issued). '-' 19 AGENDA ITEM NO.~ PACE_/!J../ _OF~ - ,...... ,,-.. r-. Scheduled Debt Service on the Bonds The following is the scheduled debt service on the Bonds. Interest Payment Date March 1, 2007 September 1,2007 March 1,2008 September 1, 2008 March 1,2009 September 1, 2009 March 1,2010 September 1,2010 March 1, 2011 September 1, 2011 March 1,2012 September 1,2012 March 1,2013 September 1, 2013 March 1, 2014 September 1,2014 March 1,2015 September 1, 2015 March 1,2016 September 1, 2016 March 1,2017 September 1,2017 March 1, 2018 September 1, 2018 March 1,2019 September 1,2019 March 1, 2020 September 1,2020 March 1,2021 September 1, 2021 March 1, 2022 September 1,2022 March 1,2023 September 1,2023 March 1, 2024 September 1, 2024 March 1,2025 September 1, 2025 March 1, 2026 September 1, 2026 March 1,2027 September 1,2027 March 1, 2028 September 1, 2028 March 1,2029 September 1, 2029 PrinciDal Interest Annual Debt Service 20 AGENDA ITEM NO. 3~ PACE / Jl- OF Scheduled Debt Service Continued Interest Payment Date March 1,2030 September I, 2030 March 1,2031 September I, 2031 March 1,2032 September I, 2032 March 1,2033 September I, 2033 March 1, 2034 September 1,2034 March 1,2035 September 1,2035 March 1, 2036 September 1,2036 PrinciDal ...." Interest Annual Debt Service '-' '-' 21 AGENDA nEM NO. .3:2 PAOE 1')1 OF~ SOURCES OF PAYMENT FOR THE BONDS ~ General The principal of, premium, if any, and the interest on the Bonds, and the Administrative Expenses, are payable from the Special Taxes collected on real property within Improvement Area B and funds held by the Fiscal Agent and available for such purposes pursuant to the Fiscal Agent Agreement. The Bonds are limited obligations of the District payable solely from the proceeds of Special Taxes levied on certain parcels within Improvement Area B. The Bonds shall not be deemed to constitute a debt or liability of the City or the State or of any political subdivision thereof, other than the District. Neither the faith and credit nor the taxing power of the City, the State or any of its political subdivisions is pledged to the payment ofthe principal of or the interest on the Bonds. Special Taxes The Special Taxes are excepted from the tax limitation of California Constitution Article XIIIA pursuant to Section 4 thereof as a "special tax" authorized by at least a two-thirds vote of the qualified electors as set forth in the Act. Consequently, the City Council (the "City Council") of the City on behalf of the District has the power and is obligated by the Fiscal Agent Agreement to cause the levy and collection of the Special Taxes. The District has covenanted in the Fiscal Agent Agreement to levy (subject to the Maximum Annual Special Tax) in each Fiscal Year the Special Taxes in an amount sufficient to pay the debt service on the Bonds and the cost of providing Administrative Expenses. The Special Taxes are to be levied and collected according to the Rate and Method of Apportionment described in the section entitled "SPECIAL TAXES AND DEBT SERVICE" herein. ~ Although the Special Taxes will constitute a lien on parcels of real property within Improvement Area B, they do not constitute a personal indebtedness of the owner(s) of real property. There is no assurance that the property owner(s), or any successors and/or assigns thereto or subsequent purchaser(s) ofland within Improvement Area B, will be able to pay the annual Special Taxes or if able to pay the Special Taxes that they will do so (see "BONDOWNERS' RISKS" and "IMPROVEMENT AREA B" herein). The Special Taxes initially are required to be collected by the County of Riverside Tax Collector in the same manner and at the same time as regular ad valorem property taxes are collected by the Tax Collector of the County. When received, such Special Taxes will be deposited in the Special Tax Fund to be held by the Fiscal Agent as provided in the Fiscal Agent Agreement. Reserve Account In order to secure further the timely payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account for the Bonds an amount equal to the Reserve Requirement. The Reserve Requirement means, as of any date of calculation, an amount equal to the lowest of (1) 10% of the issue price (as defined pursuant to section 148 of the Code), or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual Debt Service of the Outstanding Bonds. Thereafter, the District is required to deposit from the payment of the Bonds and maintain an amount of money equal to the Reserve Requirement in the Reserve Account at all times while the Bonds are Outstanding. The amount of the deposit into the Reserve Account will be in the amount equal to $ . * Amounts in the Reserve Account will be used to pay debt service on the Bonds to the extent other moneys are not available therefor. Amounts in the Reserve Account in excess ofthe Reserve ~ * Preliminary, subject to change 22 3;l AGEN::;;or Of51I: Requirement will be deposited into the Acquisition and Construction Fund until all Facilities have been financed or it is determined sufficient funds are on deposit in the Acquisition and Construction Fund to fund all Facilities expected to be funded and thereafter such excess funds shall be deposited into the Interest Account. Amounts in the Reserve Account may be used to pay the final year's debt service on the Bonds (see "APPENDIX B - SUMMARY OF THE FISCAL AGENT AGREEMENT" herein). Upon mandatory redemption, amounts on deposit in the Reserve Account shall be reduced (to an amount not less than the Reserve Requirement) and excess money shall be transferred to the Redemption Account and used for the redemption of Bonds. ....., Capitalized Interest There will be an initial deposit to the Interest Account out of Bond proceeds which has been calculated to be sufficient to make interest payments on the Bonds due to and including September 1, 2007. Covenant for Superior Court Foreclosure Pursuant to Section 53356.1 of the Act, in the event of a delinquency in the payment of the Special Taxes levied, the District may order the institution of a superior court action to foreclose the lien therefor, provided such action is brought not later than four years after the final maturity date of the Bonds. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. The District has covenanted in the Fiscal Agent Agreement for the benefit of the owners of the Bonds that the District will determine or cause to be determined, no later than March I and August 1 of each year, whether or not any owners of the property within Improvement Area B of the District are delinquent in the payment of Special Taxes and, if such delinquencies exist, the District will order and cause to be commenced not later than April 15 (with respect to the March 1 determination date) or September 1 (with respect to the August 1 determination date), and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due, provided, however, that the District shall not be required to order the commencement of foreclosure proceedings if (i) the total Special Tax delinquency of Improvement Area B for such Fiscal Year is less than five percent ......." (5%) of the total Special Tax levied in such Fiscal Year, and (ii) the District shall have established from any source of lawfully available funds (other than Special Taxes) an escrow fund to provide for the payment of principal of and interest on the Bonds. Notwithstanding the foregoing, if the District determines that any single property owner is delinquent in excess of ten thousand dollars ($10,000) in the payment of the Special Tax, then it will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosure related to delinquent Special Taxes: (a) The District or the Fiscal Agent is authorized to credit bid at any foreclosure sale, without any requirement that funds be set aside in the amount so credit bid, in the amount specified in Section 53356.5 of the Act, or such less amount as determined under clause (b) below or otherwise under Section 53356.6 of the Act. (b) The District may permit, in its sole and absolute discretion, property with delinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5 of the Act, if it determines that such sale is in the interest of the Bond Owners. The Bond Owners, by their acceptance of the Bonds, consent to such sale for such lesser amounts (as such consent is described in Section 53356.6 of the Act), and release the District and the City, and their respective officers and agents from any liability in connection therewith. If such sale for lesser amounts would result in less than full payment of principal of and interest on the Bonds, the CFD will use best efforts to seek approval of the Bond Owners. (c) The District is authorized to use amounts in the Special Tax Fund to pay costs of foreclosure of delinquent Special Taxes. (d) The District may forgive all or any portion of the Special Taxes levied or to be levied on any parcel in Improvement Area B so long as the District determines that such forgiveness is not expected to adversely ....." 23 AGENDA ITEM NO. L3;1 PACE (?--") Of '~1 affect its obligation to pay principal of and interest on the Bonds as such payments become due and r" payable. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not require the District or the City to purchase or otherwise acquire any lot or parcel of property sold at the execution sale pursuant to the judgment in any such action if there is no other purchaser at such sale, nor does the Act specify the priority relationship, if any, between the Special Taxes and other taxes and assessment liens. As a result of the foregoing, in the event of a delinquency or nonpayment by the property owners in Improvement Area B of one or more Special Taxes installments, there can be no assurance that there would be available to the District sufficient funds to pay when due the principal of, interest on and premium, if any, on the Bonds (see "BONDOWNERS' RISKS - Concentration of Ownership," "BONDOWNERS' RISKS - Bankruptcy and Foreclosure Delays" and "BONDOWNERS' RISKS - Property Controlled by Federal Deposit Insurance Corporation and other Federal Agencies" herein). Prepayment of Special Tax. A property owner may prepay its Special Taxes and thereby cause a redemption of Bonds. See "APPENDIX E - RATE AND METHOD OF APPORTIONMENT - PREPAYMENT OF ANNUAL SPECIAL TAX" herein. Special Taxes Are Not Within Teeter Plan ~. The County has adopted a Teeter Plan as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. However, by policy, the County does not include assessments, reassessments and special taxes in its Teeter program. The Special Taxes are not included in the County's Teeter Program. ,...... 24 AOENDA ITEM NO. 3 :2.. PAGE 18~ OF~l/7 BONDOWNERS'RISKS General ""'" BEFORE PURCHASING ANY OF lHE BONDS, ALL PROSPECTIVE INVESTORS AND lHEIR PROFESSIONAL ADVISORS SHOULD CAREFULLY CONSIDER, AMONG OlHER THINGS, lHE FOLLOWING RISK FACTORS, WHICH ARE NOT MEANT TO BE AN EXHAUSTIVE LISTING OF ALL RISKS ASSOCIATED WITH lHE PURCHASE OF lHE BONDS. MOREOVER, lHE ORDER OF PRESENTATION OF lHE RISK FACTORS DOES NOT NECESSARILY REFLECT lHE ORDER OF lHEIR IMPORTANCE. The purchase of the Bonds involves investment risk. If a risk factor materializes to a sufficient degree, it could delay or prevent payment of principal of and/or interest on the Bonds. Such risk factors include, but are not limited to, the following matters. Limited Obligation Neither the faith and credit nor the taxing power of the City, the State or any political subdivision thereof other than the District is pledged to the payment of the Bonds. Except for the Special Taxes derived from Improvement Area B, no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City, the State or any political subdivision thereof or general obligations of the District, but are special obligations of the District, payable solely from Special Taxes and the other assets pledged therefor under the Fiscal Agent Agreement. Insufficiency of Special Taxes As discussed herein, the amount of Special Taxes that are collected with respect to Improvement Area B could be insufficient to pay principal of, interest and premium, if any, on the Bonds due to nonpayment of the Special Taxes levied and insufficient or no proceeds received from a foreclosure sale of land within Improvement Area B. ....., The District has covenanted in the Fiscal Agent Agreement to institute foreclosure proceedings upon delinquencies in the payments of the Special Taxes as described herein and to sell any real property with a lien of delinquent Special Taxes to obtain funds to pay debt service on the Bonds. If foreclosure proceedings are ever instituted, any holder of a mortgage or deed of trust could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant for Superior Court Foreclosure" herein for provisions which apply in the event foreclosure is required and which the District is required to follow in the event of delinquency in the payment of Special Taxes. Section 53317.3 of the Act provides that, if any real property within Improvement Area B not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and be enforceable against the public entity that acquires the property. Additionally, Section 533 17.5 provides that, if any property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. However, the constitutionality and operation of these provisions of the Act have not been tested. If for any reason, property subject to the Special Tax becomes exempt from taxation by reason of ownership by a non-taxable entity, such as the federal government or another public agency, and the District is unable to collect the Special Taxes or obtain compensation through the condemnation procedure, the Special Tax will be reallocated to the remaining taxable properties within Improvement Area B up to the Maximum Annual Special Tax. This reallocation would result in the owners of taxable properties within Improvement Area B subject to the Special Tax paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax by such owners and therefore the ability to pay debt service on the Bonds. ....., 25 AGENDA ITEM NO. 2>~ PACE 1:J7 OF ,-... ,,-- ",.-.. Concentration of Ownership Significant amounts of property within Improvement Area B is owned by several major property owners (see "IMPROVEMENT AREA B" herein). The only assets of the property owners which constitute security for the Bonds are their taxable property within Improvement Area B. There are expected to be subsequent transfers of ownership of the property within Improvement Area B to individual owners of single family homes during the development of the land within ImprovementArea B, although there is no assurance that such transfers of property will occur as described herein, if at all.. The fact that the a limited number of property owners own significant amounts of land within Improvement Area B presents substantial risk to the Bondowners. No Personal Liability for Special Taxes No property owner (including the Developer), or any merchant builder or any officer, partner, member, or affiliate thereof will be personally liable for the payment of the Special Taxes to be applied to pay the principal of and interest on the Bonds. In addition, there is no assurance that any property owner or any merchant builder will be able to pay the Special Taxes or that any property owner or any merchant builder will pay such Special Taxes even if it is financially able to do so. No representation is made that the Developer will have moneys available (or that it will advance such moneys, if available) to complete the development of the land within Improvement Area B in the manner described herein. Accordingly, the Developer's financial statements are not included in this Official Statement. No property owner is obligated in any manner to continue to own any of the land it presently owns within Improvement Area B. Adjustable Rate and Non-Conventional Mortgages Since the end of 2002, many persons have financed the purchase of new homes using loans with little or no down payment and with adjustable interest rates that start low and are subject to being reset at higher rates on a specified date or upon the occurrence of specified conditions. Many of these loans allow the borrower to pay interest only for an initial period, in some cases up to 10 years. Currently, in Southern California, a substantial portion of outstanding home loans are adjustable rate loans at historically low interest rates. In the opinion of some economists, the significant increase in home prices in this time period (more than 70% since 2003 in southern San Diego County) has been driven, in part, by the ability of home purchasers to access adjustable rate and non-conventional loans. If interest rates on new loans increase and if the interest rates on existing adjustable rate loans are reset (and payments are increased) there could be a decrease in home sales due to the inability of purchasers to qualify for loans with higher interest rates. Such a decrease in home sales could, eventually, result in a decrease in home prices. Such a reduction in home prices could result in recent homebuyers having loan balances that exceed the value of their homes, given their low down payments and small amount of equity in their homes. Homeowners in Improvement Area B who purchase their homes with adjustable rate and non- conventional loans with no or low down payments may experience difficulty in making their loan payments due to automatic mortgage rate increases and rising interest rates. This could result in an increase in the Special Tax delinquency rate in Improvement Area B and draws on the Reserve Fund. If there were significant delinquencies in Special Tax collections in Improvement Area B and the Reserve Fund was fully depleted, there could be a default in the payment of principal of and interest on the Bonds. If mortgage loan defaults increase, bankruptcy filing by such homeowners could also increase. Bankruptcy filings by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes Foreclosure and Sale Proceedings Payment of the Special Taxes is secured by the parcels assessed. In the event an annual installment of the Special Taxes included in the County tax bill of an assessed parcel is not paid when due, the District can institute foreclosure proceedings in court to cause the parcel to be sold in order to recover the delinquent 26 AOENDA. ITEM NO~. PAGE I ~ 2..0F~ amount from the sale of proceeds (see "SOURCES OF REPAYMENT FOR THE BONDS" herein). Foreclosure and sale may not always result in the recovery of any or the full amount of delinquent Special Taxes. Sufficiency of the foreclosure sales proceeds to cover the delinquent amount depends in part upon the ......, market for and the value of the parcel at the time of the foreclosure sale (see "Land Values" below). The current appraised value is some evidence of such future value. However, future events may result in significant changes from the current appraised value. Such events could include changes in land ownership, development plans and other factors affecting the progress of land development, legal requirements affecting the development of parcels, a downturn in the economy, as well as a number of additional factors. Any of these factors may result in a significant erosion in value, with consequent reduced security of the Bonds. Sufficiency of foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. A variety of governmental liens may presently exist or may arise in the future with respect to a parcel which, unless subordinate to the lien securing the Special Taxes, may effectively reduce the value of such parcel. Further, other governmental claims, such as hazardous substance claims, may affect the realizable value even though such claims may not rise to the status of liens. Timely foreclosure and sale proceedings with respect to a parcel may be forestalled or delayed by a stay in the event the owner of the parcel becomes the subject of bankruptcy proceedings. Further, should the stay not be lifted, payment of Special Taxes may be subordinated to bankruptcy law priorities. Land Values If a property owner defaults in the payment of the Special Tax, the District's only remedy is to commence foreclosure proceedings against the defaulting property owner's real property within Improvement Area B for which the Special Tax has not been paid, in an attempt to obtain funds to pay the delinquent Special Tax. Therefore, the value of the land and improvements within Improvement Area B is a critical factor in determining the investment quality of the applicable corresponding series of Bonds and, therefore, the '-'" Bonds. Reductions in property values within Improvement Area B due to a downturn in the economy or the real estate market, events such as earthquakes, droughts, or floods, stricter land use regulations, or other events may adversely impact the security underlying the Special Tax. The District had the following two studies prepared in order to estimate the current aggregate market value of land in Improvement Area B. 1. Market Absorption Study, Community Facilities District No. 2003-2 (Canyon Hills) City of Lake Elsinore, Riverside County, California prepared by Empire Economics, Inc., Capistrano Beach, California, February 28, 2006 (the "Market Absorption Study"). 2. Appraisal Report, City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Improvement Area B prepared by Harris Realty Appraisal, Newport Beach, California (the "Appraisal"), dated May 15,2006. Collectively, the studies are referred to herein as the "Appraisal Documents." The purpose of the Appraisal was to estimate the bulk value of the land and improvements within Improvement Area B in its "as is" condition (which assumes sale of the Bonds and construction of publicly-financed improvements). On the basis of the assumptions and limitations described in the Appraisal and in the Market Absorption Study, the Appraiser has estimated the aggregate discounted "bulk sale" value of all the parcels in Improvement Area B as of May 15, 2006 to be $196,000,000, which is approximately 9.75* times the principal amount of the Bonds .......", 27 3~ AOENDA ITEM NO. 9LtI: PACE / I) 1. Of ",-- Prospective purchasers of the Bonds should not assume that the land and improvements could be sold for the appraised amount at a foreclosure sale for delinquent Special Taxes. In particular, the values of individual properties in Improvement Area B will vary in some cases significantly. The actual value of the land is subject to future events which might render invalid some or all of the basic assumptions of the Appraiser. The future value of the land can be expected to fluctuate due to many different, not fully predictable, real estate related investment risk factors, including, but not limited to: general tax law changes related to real estate, changes in competition, general area employment base changes, population changes, changes in real estate related interest rates affecting general purchasing power, advertising, changes in allowed zoning uses and density, natural disasters such as floods, earthquakes and landslides, and similar factors. Appraisals in general are the result of an inexact process, and estimated market value is dependent, in part, upon assumptions which mayor may not be realized and upon market conditions and perceptions of market value, which are likely to change over time. The appraisal valuations represent opinions only and are not intended to be absolutes or assurances of specific resale values. If more than one appraiser were employed, it is reasonable to assume that a reasonable range of value opinions on the land and improvement value within Improvement Area B would be reflected depending upon personal professional interpretation of data, facts and circumstances reviewed and assumptions employed. Prospective purchasers should not assume that the land could be sold for the appraised amount at a foreclosure sale for delinquent Special Taxes. Copies of the Appraisal Documents are included in the Appendices. The summary herein of some of the conclusions in the Appraisal Documents does not purport to be complete. Reference is made to the Appraisal Documents for further information. The District makes no representations as to the value ofthe real property within Improvement Area B, and prospective purchasers of the Bonds are referred to 'the Appraisal Documents referred to above in evaluating the value of real property within Improvement Area B. ,-- Value-to-Lien Ratio Valuation-to-lien ratios are derived by dividing the appraised value of the property in Improvement Area B by the principal amount of the Bonds.. For example, a 3:1 ratio means that the value is three times the total Bond amount. According to the Appraisal the value of the land within Improvement Area B is $196,000,000. Therefore, the value to lien-ratio-is 9.75* to 1. The value-to-lien ratio of individual parcels may be less or more than the aggregate value-to-lien ratio for an District. In particular the value of developed property is substantially more than undeveloped property (see "Concentration of Ownership" above). Investors must recognize the uncertainties with respect to the fair market values of the parcels, since the Bonds are secured by the Special Taxes levied on the parcels. See "Land Values" above. * Preliminary, subject to change ,-.. 28 3:\ AGENDA ITEM NS'rPACE /3 OF CJ-tI--, Potential purchasers of the Bonds should be aware that if a parcel bears a Special Tax liability in excess of its market value, then there may be little incentive for the owner of the parcel to pay the Special Taxes on such parcel and little likelihood that such property would be purchased in a foreclosure sale. See "Foreclosure and Sale Proceedings" above describing risks relating to market values of parcels in Improvement Area B. ...., The Progress of Land Development; Risks of Real Estate Secured Investments Land development is an activity subject to substantial risk. Risk factors include, without limitation, general or local economic conditions; local real estate market conditions; supply of or demand for competitive properties; changes in the real estate tax rate; governmental regulation and approval requirements, particularly environmental quality, endangered species, land use, zoning and building requirements; development, financing and marketing capabilities of the various landowners; natural disasters, including without limitation earthquakes, flood and fire which may result in uninsured losses; and accomplishment of development plans on a timely basis, including but not limited to the provision of infrastructure improvements in addition to the Facilities. Since these are largely business risks of the type that landowners customarily evaluate individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the District has undertaken the financing without regard to any such evaluation. Thus, the undertaking of the financing by the District in no way implies that the District has evaluated these risks or the reasonableness of these risks. Further, the risk to the owners of the Bonds of development delays may be heightened when land ownership is concentrated in only a few landowners or developers. If ownership is concentrated, timely payment of the Special Taxes may be dependent upon the financing available to such owners or developers. Further, the continued progress of land development may be one of the present facts and circumstances forming the basis for the appraiser's opinion of value. Diminished values may lessen the effectiveness of foreclosure proceedings as a remedy. ......, The Special Taxes are to be collected from the owners of property located within Improvement Area B, and levy of the Special Taxes is not dependent on the completion of the development of the properties within Improvement Area B (see "SPECIAL TAXES AND DEBT SERVICE" herein). Nevertheless, the extent of completion of the development of the property within Improvement Area B may affect the ability and willingness of property owners to pay the Special Taxes and may affect the market value of any property foreclosed upon for nonpayment of installments of the Special Taxes. Geologic, Topographic and Climatic Conditions Land and improvement value can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and private improvements of the parcels assessed and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes and overdraft of groundwater basins; topographic conditions such as earth movements and floods; and climatic conditions such as droughts. Further, building codes require that some of these factors be taken into account, to a limited extent, in the design of private improvements of the parcels in Improvement Area B. Design criteria in any of these circumstances are established upon the basis of a variety of considerations and may change, leaving previously designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of establishment between the present costs of protection and the future costs of lack of protections, based in part upon a present perception of the probability that the condition will occur and the seriousness of the condition should the condition occur. "--' 29 AGENDA ITEM NO. -3::L PAGE 151 OF~ Endangered and Threatened Species ~ During the past several years, there has been an increase in activity at the State and federal level related to the listing and possible listing of certain plant and animal species found in the State as endangered species and in programs designed to set aside additional geographical areas for habitat conservation. Although areas within Improvement Area B have been included in the Western Riverside County Multi Species Habitat Conservation Plan (MSHCP) study area, such areas are exempt from any requirements because of a pre-existing Development Agreement. There is no assurance that such areas will not be included in future study areas. An increase in the number of endangered species and/or the designation of additional habitat areas to be subjected to conservation planning similar to areas subject to the Western Riverside County MSHCP is expected to curtail development in a number of areas in the State. The area proposed to be developed within Improvement Area B is not known to contain any plant or animal species which either the California Fish and Game Commission or the U.S. Fish and Wildlife Service has listed as endangered or to the knowledge of the District proposed for addition to the endangered species list. Further approval may be required for any planned clearing of land or construction across or impacting waterways, creeks or other drainages. If required, there is no assurance that such approvals will be obtained and that development will be permitted to proceed as projected. On a regular basis, new species are proposed to be added to the State and federal protected species lists. Regardless of the stage of entitlements and actual development of a particular development, any action by the State or federal governments to protect species located on or adjacent to the property within Improvement Area B could negatively affect the Developer's ability to complete the development of the properties within Improvement Area B as planned. This, in turn, could reduce the ability or the willingness of the property owners to pay the Special Taxes when due and would likely reduce the value of the land and the potential revenues available at a foreclosure sale for delinquent Special Taxes. Earthquakes /""' Southern California is among the most seismically active regions in the United States. The occurrence of seismic activity in Improvement Area B could result in substantial damage to properties in Improvement Area B which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes. Any major damage to structures as a result of seismic activity could result in a greater reliance on Undeveloped Property in the payment of Special Taxes. In the event of a severe earthquake, there may be significant damage to both property and infrastructure in Improvement Area B. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in Improvement Area B could be diminished in the aftermath of such an earthquake, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of Special Taxes. Certain procedures and design standards are required to be followed during the construction of buildings within Improvement Area B to ensure that each building is designed and constructed to meet, at a minimum, the highest seismic standards required by law. Legal Requirements Other events which may affect the value of a parcel include changes in the law or application of law. Such changes may include, without limitation, local growth control initiatives; local utility connection moratoriums; and local application of statewide tax and governmental spending limitation measures. Other Possible Claims Upon the Values of an Assessed Parcel In addition to existing property taxes, other governmental obligations, such as general obligation bonds, assessments or special taxes may be authorized in the future, the tax, assessment or charge for which may become an obligation of one or more of the parcels within Improvement Area B and may be secured by a ~ lien on a parity with the lien of the Special Taxes securing the Bonds. 30 ACENDA ITEM i'K._3~ PACE /3?- OF--Z.U-- In general, as long as the Special Taxes securing the Bonds are collected on the County tax roll, the Special Taxes and all other taxes, assessments and charges also collected on the tax roll are on a parity with each other. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges. The Special Taxes will have priority over non-governmental liens on a parcel, regardless of whether or not the non-governmental liens are in existence at the time of creation of any lien securing the Special Taxes. .~ While governmental taxes, assessments apd charges are a common claim against the value of a parcel, other less common claims may be relevant. One of the most serious in terms ofthe potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels in ImprovementArea B be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming the owner, will become obligated to remedy the condition just as is the seller. The values expressed herein, do not take into account the possible reduction in marketability and value of any of the parcels by reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The District is not aware that the owner (or operator) of any of the parcels has such a current liability with respect to any of the parcels in Improvement Area B. However, it is possible that such liabilities do currently exist. Further, it is possible that liabilities may arise in the future with respect to one or more of the parcels resulting from the existence, currently, on the parcel of a substance presently classified as hazardous or may arise in the future resulting from the existence, currently, on the parcel of a substance presently not classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not .~ simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly reduce the value of a parcel. Bankruptcy Proceedings Regardless of the priority of the Special Taxes securing the Bonds over non-governmental liens on parcels, the exercise by the District of the foreclosure and sale remedy may be forestalled or delayed by bankruptcy, reorganization, insolvency, or other similar proceedings of the owner of a parcel. The federal bankruptcy laws provide for an automatic stay of foreclosure and sale proceedings, thereby delaying such proceedings perhaps for an extended period. Delay in exercise of remedies, especially if the owners own parcels the Special Taxes of which are significant or if bankruptcy proceedings are instituted with respect to a number of owners owning parcels the Special Taxes of which is significant, may result in periodic Special Tax collections which may be insufficient to pay the debt service on the Bonds. Further, should remedies be exercised under the bankruptcy law against the parcels, payment of Special Taxes may be subordinated to other claims in the bankruptcy proceedings. Thus, certain claims may have priority over a claim for unpaid Special Taxes, even though, in the absence of the bankruptcy proceedings, no such priority would exist. Bankruptcy and Foreclosure Delays The payment of the Special Taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax, as discussed in the section herein entitled "SOURCES OF PAYMENT FOR THE BONDS" may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. ~ 31 AGENDA ITEM NO. <3 ) PAOEJ~3 OF ':5lf, -- The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond ,-.. Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or of a partner or other owner of a property owner within Improvement Area B could result in a delay in prosecuting superior court foreclosure proceedings and could result in loss of priority of the lien securing any Special Taxes with respect to Special Taxes levied while bankruptcy proceedings are pending. In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could be treated as an unsecured claim by the court. Such delay or loss of priority or nonpayment, would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent Special Tax installments not being paid in full. To the extent a significant percentage of the property in Improvement Area B continues to be owned by a limited number of property owners, the payment of the Special Taxes and the ability of Improvement Area B to foreclose the lien of a delinquent unpaid Special Taxes installment could be delayed by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition as "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor waS to foreclose on the property and retain all of the proceeds of the sale r--. except the amount of the pre-petition taxes. According to the court's ruling, as administrative expenses, post-petition taxes would have to be paid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time become subject to current ad valorem taxes. The Act provides that the Special Taxes are secured by a continuing lien, which is subject to the same lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for the Special Taxes levied after the filing of a petition in bankruptcy. Glasply is controlling precedent for bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Tax, the amount of Special Tax received from parcels whose owners declared bankruptcy could be reduced. It should also be noted that on October 22, 1994, Congress enacted 11 U.S. C. Section 362(b)(l8), which added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal years will attach even if the property is part of the bankruptcy estate. Bondowners should be aware that the potential effect of 11 U.S. C. Section 362(b)(l8) on the Special Taxes depends upon whether a court were to determine that the Special Taxes should be treated like ad valorem taxes for this purpose. Additional Taxation On June 3, 1986, California voters approved an amendment to Article XIIIA of the California Constitution to allow local governments and school districts to raise their property tax rates above the ,-.. constitutionally mandated 1 % ceiling for the purpose of repaying certain new general obligation debt 32 AGENDA ITEM NU, \3 ;;:J PAGE 13<( ---0';;'1 '1:7 ~ issued for the acquisition or improvement of real property and approved by at least two-thirds of the votes cast by the qualified electorate. If any such voter-approved debt is issued, it may be on a parity with the lien of the Special Taxes on the parcels within Improvement Area B. ~ Parity Taxes and Special Assessments The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land within Improvement Area B on which they will be annually imposed until they are paid in full. Such lien is on a parity with all special taxes and special assessments levied by other public entities, agencies and districts and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same real property. The Special Taxes have priority over all existing and future private liens imposed on the real property within Improvement Area B, however, has no control over the ability of other public entities, agencies and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the real property within Improvement Area B. Any such special taxes or assessments may have a lien on such real property on a parity with the Special Taxes (see "SPECIAL TAXES AND DEBT SERVICE" herein). Accordingly, the liens on the real property within Improvement Area B could greatly increase, without any corresponding increase in the value of the property within Improvement Area B and thereby severely reduce the lien-to-value ratio of the land secured public debt existing at the time the Bonds are issued. The imposition of such additional indebtedness could also reduce the willingness and ability of the property owners within Improvement Area B to pay the Special Taxes when due. Disclosure to Future Land Buyers A "Noti<<e of Special Tax Lien" for Improvement Area B was recorded pursuant to Section 53328.3 of the Act and Section 3114.5 of the Streets and Highways Code, with the County Recorder for the County (the "County Recorder"). The Notice sets forth, among other things, the Rate and Method of Apportionment, the Assessor's Parcel Numbers within Improvement Area B as of the date of recording the Notice, and the boundaries oflmprovement Area B by reference to the map(s) recorded with the County Recorder. While title insurance and search companies normally refer to such notices in title reports, and sellers of property within Improvement Area B are required to give prospective buyers a notice of special tax in accordance with Sections 53360.2 or 53341.5 of the Act, there can be no assurances that such reference will be made or notice given, or if made or given, that prospective purchasers or lenders will consider such Special Tax obligation in the purchase of land within Improvement Area B or the lending of money thereon. Failure to disclose the existence of the Special Tax may affect the willingness and ability of future landowners within Improvement Area B to pay the Special Tax when due. "'" Billing of Special Taxes A special tax can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn can lead to problems in the collection of the special tax. In some community facilities districts the taxpayers have refused to pay the special tax and have commenced litigation challenging the special tax, the community facilities district and the bonds issued by the District. Under provisions of the Act, the Special Taxes are billed to the properties within Improvement Area B which were entered on the Assessment Roll of the County Assessor by January 1 of the previous fiscal year on the regular property tax bills sent to owners of such properties. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. These Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and installment payments of Special Taxes in the future. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant for Superior Court Foreclosure" for a discussion of the provisions .....", 33 AGENDA ITEM .v"" 0;t PAGE /3~ OFr:;~/1 - which apply, and procedures which the District is obligated to follow, in the event of delinquency in the '"' payment of installments of Special Taxes. Collection of Special Tax In order to pay debt service on the Bonds, it is necessary that the Special Tax levied against land within Improvement Area B be paid in a timely manner. The District has covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosure proceedings against property with delinquent Special Tax in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. In the event such superior court foreclosure is necessary, there could be a delay in principal and interest payments on the Bonds pending prosecution of the foreclosure proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not specify the obligations of the District with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant for Superior Court Foreclosure." Maximum Rates ,.-.. Within the limits of the Rate and Method of Apportionment, the District may adjust the Special Tax levied on all property within Improvement Area B to provide an amount required to pay debt service on the Bonds and other obligations of Improvement Area B, and the amount, if any, necessary to pay all annual Administrative Expenses and make rebate payments to the United States government. However, the amount of the Special Tax that may be levied against particular categories of property within Improvement Area B is subject to the maximum rates provided in the Rate and Method of Apportionment. There is no assurance that the maximum rates will at all times be sufficient to pay the amounts required to be paid by the Fiscal Agent Agreement. See "SPECIAL TAXES AND DEBT SERVICE." Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method of Apportionment and provisions ofthe Act. The Act provides that properties or entities of the State, federal or local government at the time of formation of Improvement Area B are exempt from the Special Tax; provided, however, that property within Improvement Area B acquired by a public entity through negotiated transactions, or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested. If for any reason property subject to the Special Tax becomes exempt from taxation by reason of ownership bya non-taxable entity such as the federal government, or another public agency, subject to the limitation of the maximum authorized rate oflevy, the Special Tax may be reallocated to the remaining taxable properties within Improvement Area B. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax; however, the amount of Special Tax to be levied and collected from the property owner is subject to the Maximum Special Tax as set forth in the Rate and Method of Apportionment and to the limitation in the Act that under no circumstances may the Special Taxes levied on any residential parcel be increased by more than ten percent as a consequence of delinquency by the owner of any parcel. If a substantial portion of land within Improvement Area B became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due '"' and a default will occur with respect to the payment of such principal and interest. 34 AGENDA ITEM NO. 0 J. PAGE / 3t,P ~ The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. The Act would prohibit the City Council, acting as the legislative body of the District, from adopting a resolution to reduce the rate of the Special Tax or terminate the levy of the Special Tax unless the City Council, acting as the legislative body of the District determined that the reduction of termination of the Special Tax "would not interfere with the timely retirement" of the Bonds. See "BONDOWNERS'RISKS - Right to Vote on Taxes Act" below. ~ Insufficient Special Taxes Under the Rate and Method of Apportionment, the annual amount of Special Tax to be levied on each taxable parcel in Improvement Area B will be based primarily on whether such parcel is developed or not and, for Developed Property, on the type of structure and square footage of buildings constructed. See "APPENDIX E". Accordingly, to the extent Undeveloped Property does not become Developed Property, the collection of the Special Taxes will be dependent on the willingness and ability of the owners of Undeveloped Property to pay such Special Taxes when due. Such event may result in an unwillingness of such owners of the Undeveloped Property to pay additional Special Taxes. No Acceleration Provision The Fiscal Agent Agreement does not contain a provision allowing for the acceleration of the principal of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreement. Property Controlled by Federal Deposit Insurance Corporation and other Federal Agencies The District's ability to collect interest and penalties specified by State law and to foreclose the lien of a delinquent Special Tax payment may be limited in certain respects with regard to properties in which the ~ Interna] Revenue Service, the Drug Enforcement Agency, the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal agencies has or obtains an interest. Specifically, with respect to the FDIC, on June 4, 1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Real Property Taxes (the "]991 Policy Statement"). The ]991 Policy Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its proper tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that FDIC generally will not pay non ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it 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 special tax due each year, are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's '-' 35 AGENDA ITEM NO. 3 ~ PAGE~OF ~t.-t1 ". ,.... "....... ~ federal immunity. With respect to property in California owned by the FDIC on January 9, 1997, and that was owned by the Resolution Trust Corporation (the "RTC") on December 31, 1995, or that became property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC's prior practice of paying special taxes imposed pursuant to the Mello-Roos Act if the taxes were imposed prior to the RTC's acquisition of an interest in the property. All other special taxes, including the Special Taxes which secure the Bonds may be challenged by the FDIC. The FDIC has filed claims against the County of Orange with respect to Mello-Roos community facilities district special taxes in the United States Bankruptcy Court and in Federal District Court in which the FDIC has taken a position similar to the position outlined in the Policy Statement. While all of such claims have not been resolved, the Bankruptcy Court has issued a tentative ruling in favor of the FDIC on certain of such claims. The County of Orange has appealed such ruling and the FDIC has cross-appealed. The decision of the United States Court of Appeals for the 9th Circuit (the "9th Circuit Court") was filed on August 28,2001. In its decision, the 9th Circuit Court stated that the FDIC, as a federal agency, is exempt from the Mello-Roos special tax. The FDIC has also filed suit (the "post-bankruptcy" suit) regardin~ special taxes imposed after 1994. However, such action has been stayed pending resolution of the 9 Circuit Court appeal by the FDIC regarding the bankruptcy case. The post-bankruptcy suit has recently been consolidated with the cases filed by the FDIC against other California counties and is pending in the United States District Court in Los Angeles. The FDIC has filed a motion to lift the bankruptcy stay. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to a parcel in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed on at a judicial foreclosure sale would likely reduce the number of or eliminate the persons willing to purchase such a parcel at a foreclosure sale. Owners of the Bonds should assume that the District will be unable to foreclose on any parcel owned by the FDIC. The District has not undertaken to determine whether the FDIC currently has, or is likely to acquire, any interest in any of the parcels, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. Limitations on Remedies Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of creditor's rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Fiscal Agent Agreement. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners. Enforceability of the rights and remedies of the owners of the Bonds, and the obligations incurred by the District, may become subject to the federal bankruptcy code and bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditor's rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against joint powers authorities in the State. See "BONDOWNERS' RISKS - Bankruptcy and Foreclosure Delays," "-Billing of Special Taxes" and "-Property Controlled by Federal Deposit Insurance Corporation and Other Federal Agencies" herein. 36 AGENDA ITEM ~O. <3 ;). PAGE-'~~ OF ~rr= ,.-.. Right to Vote on Taxes Act An initiative measure commonly referred to as the "Right to Vote on Taxes Act" was approved by the voters of the State of California at the November 5, 1996 general election ("Proposition 218"). Proposition 218 added Article XIIIC ("Article XIIIC") and Article XmD to the California Constitution. According to the "Title and Summary" of Proposition 2 18 prepared by the California Attorney General, the Proposition 2 I 8 limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." Generally, the provisions of Proposition 218 have not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts to interpret . various aspects of Proposition 2 I 8. /"""" Among other things, Section 3 of Article XIIIC states that "the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." Proposition 2 18 provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, Proposition 2 I 8 prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to Proposition 2 I 8 unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. Although the matter is not free from doubt, it is likely that the exercise by the voters in Improvement Area B of the initiative power referred to in Article XIIIC to reduce or terminate the Special Tax is subject to the same restrictions as are applicable to the District, pursuant to the Act. Accordingly, altpough the matter is not free from doubt, it is likely that Proposition 218 has not conferred on the voters in Improvement Area B the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. It may be possible, however, for voters or the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. The interpretation and application of Proposition 2 18 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. Ballot Initiatives and Legislative Measures Proposition 218 was adopted pursuant to a measure qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. From time to time, other initiative measures could be adopted by California voters or legislation,epacted by the State Legislature. The adoption of any such initiative or enactment of legislation might place limitations on the ability of the State, the City or local districts to increase revenues or to increase appropriations or on the ability of a property owner to complete the development of the property. Early Bond Redemption The Bonds are subject to optional, special mandatory and mandatory redemption prior to their respective stated maturities. Special mandatory redemption from prepayment of Bonds from amounts constituting prepayments of Special Taxes may occur on any date (see "THE BONDS - Redemption" herein). /"""" 37 AOENDA ITEM NO. 3 ~ PAOE.J?}\ OF~ I -= Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS - Tax Exemption" herein, interest on the Bonds could ....." become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued as a result of future acts or omissions of the District in violation of its covenants contained in the Fiscal Agent Agreement. Should such an event of taxability occur, the Bonds are not subject to special redemption or any increase in interest rate and will remain outstanding until maturity or until redeemed under one ofthe redemption provisions contained in the Fiscal Agent Agreement. IRS Audits The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. ....." ......, 38 AGENDA ITEM NO, :3 ~ MIi lib -of3{/1 ~---= -- l..... ,-.... SPECIAL TAXES AND DEBT SERVICE Administration of the Special Tax The District is required each Fiscal Year to determine the amount of Special Taxes within Improvement Area B needed to pay debt service on the Bonds and Administrative Expenses of the District related to Improvement Area B (the "Special Tax Requirement"). The District is expected to incur Administrative Expenses within Improvement Area B for the levy and collection of the Special Taxes, foreclosure proceedings, Fiscal Agent fees and arbitrage rebate calculations. The District is required to communicate with the County Auditor to ascertain the relevant parcels within Improvement Area B on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current Fiscal Year. The District is required by resolution to provide for the levy of the Special Taxes within Improvement Area B in the then current Fiscal Year. A certified list of all parcels subject to the Special Tax, including the amount of the Special Tax to be levied on each such parcel, is filed by the District with the County Auditor on or before the tenth (10th) day of August of that tax year. The Special Taxes so levied may not exceed the authorized amounts as provided in the Rate and Method of Apportionment relating to Improvement Area B (see "Rate and Method of Apportionment" below). The Special Taxes are payable and are collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property. Special Taxes are due in two equal installments. Special Taxes levied become delinquent on the following December 10th and April 10th. Currently a 10% penalty is added to delinquent taxes. _. When received, the Special Taxes are required to be deposited in a separate Special Tax Fund for Improvement Area B to be held by the City and transferred by the City to the Fiscal Agent as provided in the Fiscal Agent Agreement. As of the delivery date of the Bonds, the District has retained Harris & Associates to assist in the preparation of the Special Tax roll and the determination of the amount of Special Taxes required in each Fiscal Year. Rate and Method of Apportionment The District levies the Special Taxes in accordance with the Rate and Method of Apportionment (see "APPENDIX E - RATE AND METHOD OF APPORTIONMENT"). Because the Special Taxes have been authorized by a two-thirds (2/3) vote of the qualified electorate within Improvement Area B, the Special Taxes are a special tax imposed within the limitations of Section 4 of Article XIIIA of the State Constitution. The City Council, as the legislative body of the District, has the power and is obligated, pursuant to the covenants contained in the Fiscal Agent Agreement, to cause the levy and collection of the Special Taxes annually. The Rate and Method of Apportionment may be modified pursuant to the provisions of the Act provided that the District determines that such modification will not impair the timely payment of the Bonds. The District has covenanted that no modification of the maximum authorized Special Tax shall be approved which would prohibit the District from levying the Special Tax in any Fiscal Year at such a rate as could generate Maximum Special Tax Revenues in each Fiscal Year at least equal to I I 0% of annual debt service in such Fiscal Year. ,-.... 39 AGENDA ITEM ~O. J;l PAGE~OF 3 f} .-- When a community facilities district is formed, a special tax may be levied on each parcel of taxable property within the community facilities district to pay for the construction, acquisition and rehabilitation of public facilities, to pay for authorized services or to repay bonded indebtedness or other related ....., expenses incurred by the community facilities district. This special tax may be apportioned in any reasonable manner; however, the tax may not be apportioned on an ad valorem basis. Pursuant to Section 53325.3 of the Act, the tax imposed "is a Special Tax and not a special assessment, and there is no requirement that the tax be apportioned on the basis of benefit to any property." When more than one type of land use or houses of different sizes are present within a community facilities district, several criteria may be considered when apportioning the special tax. Generally, criteria are based on building square footage or residential floor area, acreage, and land use. Categories based on such criteria are established to differentiate between parcels of property. Specific special tax levels are assigned to each category, with all parcels within a category assigned the same special tax rate. In Improvement Area B categories have been established for Developed Property, as shown in the Tables below. The Special Tax for a single family residential property will vary directly with the amount of residential floor area on each parcel. Assigned Special Tax Rates The tables below show the Assigned Special Tax rates for fiscal year 2005/06 that are to be levied against Developed Property within Improvement Area B. The Maximum Special Taxes for Developed Property cannot exceed the rates shown for fiscal year 2005/06, except when the Backup Special Tax is used as discussed below. The Assigned Special Taxes and Backup Special Taxes will increase at a rate of two percent per year. Each year, the District shall levy the Special Tax within Improvement Area B, subject to the methodology and Maximum Special Taxes set forth in the Rate and Method of Apportionment, in an amount sufficient to meet the Special Tax Requirement. Backup Special Tax Pursuant to the Rate and Method of Apportionment, the Maximum Special Tax for Developed Property within Improvement Area B is the greater of (i) the amount derived by application of the Assigned Special Tax or (ii) the amount derived by application of the Backup Special Tax. The Backup Special Tax will increase at a rate of two percent per year. ....., Under certain circumstances, the Special Tax for some parcels classified as Developed Property will be increased above the Assigned Special Tax until the Special Tax Requirement is met. However, under no circumstances will the Special Tax on an Assessor's Parcel of Developed Property be increased above the greater of the Backup Special Tax or the applicable Assigned Special Tax. The Assigned Special Tax Rates under the Rate and Method of Apportionment have been designed pursuant to City Policy not to exceed a total tax rate percentage of 2% when taking into account all taxes and assessments on property of all jurisdictions. The following tables shows the assumptions used in setting the Assigned Tax Rates and the effective tax rate within Improvement Area B. Delinquencies and Foreclosure Actions No parcels within Improvement Area B have experienced any delinquencies. The District has covenanted to initiate foreclosure action in the Superior Court against parcels with delinquent Special Taxes as provided in the Fiscal Agent Agreement. Foreclosure proceedings are directed by the District through a notification to foreclosure counsel as to the delinquent assessor parcel numbers for which foreclosure proceedings are to be initiated. The District first removes the delinquent Special Taxes from the County Tax Roll, as required by law. Foreclosure ......, 40 3:.1 AOENDA ITEM f'JO.~ PAaE J If d _OF-:r.u..- r--- /'" ,,-. counsel then initiates a request for a title search to identify the current legal owner of a delinquent parcel. Foreclosure counsel also sends a written demand for payment to the owner shown on the Tax Roll, followed by the filing of a complaint with the Superior Court in Riverside County and recording a /is pendens against the property at the office of the County Recorder. Each legal owner and all holders of any other interest in the land must file an answer to the complaint within 30 days following the completion of service of process on them. Ifno answer is filed with such 30 day period, foreclosure counsel files a request that a default judgment be entered by the Court. If any party files an answer, then the case must be litigated, and foreclosure counsel will typically file a motion for summary judgment. Following the entry of a judgment, whether by default or otherwise, against all defendants, foreclosure counsel requests a writ of sale from the Court for delivery to the Sheriff. The writ of sale is delivered to the Sheriff with instructions to execute on the delinquent parcel. Levy by the Sheriff consists of posting notice on the delinquent property, followed by mailing of notice to the last known address of the legal owner and publication of the notice of levy. Thereafter, the delinquent property owner is entitled to a redemption period of 120 days. Following such 120 day period, foreclosure proceedings can continue following the publication and mailing of a notice of sale of the delinquent parcel or parcels, which sale must be at least 20 days following such notice. The foreclosure process described above typically takes at least six months from the date on which a judgment is entered and can take substantially longer. 41 AGENDA ITEM NO. .3 ~ 1 PAGEJ~1:J OF ~~ ~ ""'" CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (CANYON HILLS) EFFECTIVE TAX RATES FISCAL YEAR 2006-2007 Planning Area 21A - Zone 2 Home Square Footage 1,650 - 1,749 1,750 -1,949 1,950 - 2,199 2,200 - 2,449 Lowest Base Price $360,440.00 $381,400.00 $392,400.00 $418,400.00 Base Property Tax (1.04305%) $3,759.57 $3,940.05 $4,092.93 $4,364.12 Other Fixed Charges, Assessment and Special Taxes $110.00 $110.00 $110.00 $110.00 City of Lake Elsinore AD 93-1 $424.00 $424.00 $424.00 $424.00 City ofLake Elsinore Citywide LLMD $50.00 $50.00 $50.00 $50.00 City of Lake Elsinore CFD No. 2003-1 $318.00 $318.00 $318.00 $318.00 Perris UHSD CFD 92-1 $0.00 $0.00 $0.00 $0.00 Proposed CFD No. 2006-2 Special Tax for Facilities $1 533.45 $1 588.63 $1642.75 $1 835.89 Total Property Taxes $6,195.02 $6,430.68 $6,637.68 $7,102.01 Annual Home Tax Rate (%) 1.72% 1.69% 1.69% 1.70% Planning Area 21A Zone 3 ......" Base Property Tax (1.04305%) $3,759.57 $3,940.05 $4,092.93 $4,364.12 Other Fixed Charges, Assessment and Special Taxes $110.00 $110.00 $110.00 $110.00 City of Lake Elsinore AD 93-1 $424.00 $424.00 $424.00 $424.00 City of Lake Elsinore Citywide LLMD $50.00 $50.00 $50.00 $50.00 City of Lake Elsinore CFD No. 2003-1 $318.00 $318.00 $318.00 $318.00 Perris UHSD CFD 92-1 $235.00 $235.00 $235.00 $235.00 Proposed CFD No. 2006-2 Special Tax for Facilities $1302.10 $1 357.29 $1 396.55 $1 580.14 Total Property Taxes $6,198.67 $6,434.34 $6,626.48 $7,081.26 Annual Home Tax Rate (%) 1.72% 1.69% 1.69% 1.69% Source: Harris and Associates ......" 42 ACENDA ITEM NO .3 .) PACE 1<.fj:OF ~1l __ --- ,,-.... CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (CANYON HILLS) EFFECTIVE TAX RATES FISCAL YEAR 2006-2007 Planning Area 21B - Zone 2 Home Square Footage 1,750 - 1,949 1,950 - 2,199 2,200 - 2,449 Lowest Base Price $431,510.00 $443,310.00 $459,720.00 Base Property Tax (1.04305%) $4,457.71 $4,623.94 $4,795.11 Other Fixed Charges, Assessment and Special Taxes $110.00 $110.00 $110.00 City of Lake Elsinore AD 93-1 $424.00 $424.00 $424.00 City of Lake Elsinore Citywide LLMD $50.00 $50.00 $50.00 City of Lake Elsinore CFD No. 2003-1 $318.00 $318.00 $318.00 Perris UHSD CFD 92-1 $0.00 $0.00 $0.00 Proposed CFD No. 2006-2 Special Tax for Facilities $1 588.63 $1642.75 $1 932.46 Total Property Taxes $6,948.34 $7,168.69 $7,629.57 ,....... Annual Home Tax Rate (%) 1.61% 1.62% 1.66% Planning Area 21A Zone 3 Base Property Tax (1.04305%) $4,457.71 $4,623.94 $4,795.11 Other Fixed Charges, Assessment and Special Taxes $110.00 $110.00 $110.00 City of Lake Elsinore AD 93-1 $424.00 $424.00 $424.00 City of Lake Elsinore Citywide LLMD $50.00 $50.00 $50.00 City of Lake Elsinore CFD No. 2003-1 $318.00 $318.00 $318.00 Perris UHSD CFD 92-1 $235.00 $235.00 $235.00 Proposed CFD No. 2006-2 Special Tax for Facilities $1357.29 $1.396.55 $1.671.40 Total Property Taxes $6,952.00 $7,157.49 $7,603.51 Annual Home Tax Rate (%) 1.61% 1.61% 1.65% ,...- 43 AGENDA ITEM ~ 3;) PAGE ,i{) OF?zt7 _ ~ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (CANYON HILLS) EFFECTIVE TAX RATES FISCAL YEAR 2006-2007 Planning Area 22 - Zone 2 Home Square Footage Lowest Base Price 2,450-2,699 $435,900.00 Base Property Tax (1.04305%) Other Fixed Charges, Assessment and Special Taxes City of Lake Elsinore AD 93-1 City of Lake Elsinore Citywide LLMD City of Lake Elsinore CFD No. 2003-1 Pems UHSD CFD 92-1 $4,503.06 $110.00 $424.00 $50.00 $318.00 $0.00 $1 932.46 Proposed CFD No. 2006-2 Special Tax for Facilities Total Property Taxes Annual Home Tax Rate (%) $7,337.52 1.68% Planning Area 23 Zone 2 Home Square Footage Lowest Base Price 2,950 & Above $499,000.00 Base Property Tax (1.04305%) $5,204.82 $110.00 $424.00 $50.00 $318.00 $0.00 $2222.17 Other Fixed Charges, Assessment and Special Taxes City of Lake Elsinore AD 93-1 City of Lake Elsinore Citywide LLMD City of Lake Elsinore CFD No. 2003-1 Perris UHSD CFD 92-1 Proposed CFD No. 2006-2 Special Tax for Facilities Total Property Taxes Annual Home Tax Rate (%) $8,328.99 1.67% 44 2,700-2,949 2,950 & Above $457,900.00 $468,900.00 $4,776.13 $4,890.86 $110.00 $110.00 $424.00 $424.00 $50.00 $50.00 $318.00 $318.00 $0.00 $0.00 $2030.09 $2 222.17 $7,708.22 $8,015.03 1.68% 1.71% ~ ...." AOENDA ITEM NO. 3 ~ PAGE /1 f.o OF '3.!Ji ~ r-- CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (CANYON HILLS) EFFECTIVE TAX RATES FISCAL YEAR 2006-2007 Planning Area 24 - Zone 2 Home Square Footage Lowest Base Price 2,450-2,699 $497,630.00 Base Property Tax (1.04305%) Other Fixed Charges, Assessment and Special Taxes City of Lake Elsinore AD 93-1 City of Lake Elsinore Citywide LLMD City of Lake E]sinore CFD No. 2003-] Perris UHSD CFD 92-1 $5,190.53 $110.00 $424.00 $50.00 $3]8.00 $0.00 $1.932.46 Proposed CFD No. 2006-2 Special Tax for Facilities ~, Total Property Taxes Annual Home Tax Rate (%) 1.61% $8,024.99 Planning Area 24 Zone 3 Home Square Footage Lowest Base Price 2,450-2,699 $497,630.00 Base Property Tax (1.04305%) Other Fixed Charges, Assessment and Special Taxes City of Lake Elsinore AD 93-1 City of Lake Elsinore Citywide LLMD City of Lake Elsinore CFD No. 2003-] Perris UHSD CFD 92-1 $5,190.53 $110.00 $424.00 $50.00 $3]8.00 $235.00 l!.J.QUQ Proposed CFD No. 2006-2 Special Tax for Facilities Total Property Taxes Annua] Home Tax Rate (%) $7,629.63 1.53% ~ 45 2,950 & Above $524,860.00 $5,422.07 $1]0.00 $424.00 $50.00 $3]8.00 $0.00 $2 222.17 $8,546.24 1.63% 2,700-2,949 2,950 & Above $518,380.00 $524,860.00 $5,406.96 $5,474.55 $1]0.00 $110.00 $424.00 $424.00 $50.00 $50.00 $318.00 $318.00 $235.00 $235.00 $] 357.29 $] 396.55 $7,901.25 $8,008.10 1.52% 1.53% AGENDA ITEM -~7' 5 ~ PAOE ('(].. OF ~ ~ Debt Service Coverage "'*" The following table presents the projected annual coverage on the Bonds based upon the realization of certain assumptions and the aggregate Assigned Special Tax Rates. No allowance was made for delinquencies. The projection assumes build out at the following unit mix. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON Hills IMPROVEMENT AREA B PROJECTION OF THE ASSIGNED SPECIAL TAX PHASE ONE DEVELOPMENT FISCAL YEAR 2006/07 Zone 2 Assigned Number Total Special Spec~al Tax of Units Taxes Residential Floor Area Greater than 2,950 2,700 - 2,949 2,450 - 2,699 2,200 - 2,449 1,950 - 2,199 1,750 - 1,949 1,650 - 1,749 SUBTOTAL Residential Floor Area Greater than 2,950 2,700 - 2,949 2,450 - 2,699 2,200 - 2,449 1,950 - 2,199 1,750 - 1,949 1,650 - 1,749 SUBTOTAL TOTAL $2,222.17 179 $397,768.43 $2,030.09 32 $64,962.88 $1,932.46 63 $121,744.98 $1,835.89 16 $29,374.24 $1,642.75 61 $100,207.75 $1,588.63 49 $77 ,842.87 $1,533.45 II $19.934.85 "'*" 413 $811,836.00 Zone 3 Assigned Number Total Special Special Tax of Units Taxes $1,990.83 $1,809.36 $1,671.40 $1,580.14 $1,396.55 $1,357.29 $1,302.10 46 48 47 82 1 33 30 1 242 655 $95,559.84 $85,039.92 $137,054.80 $1,580.14 $46,086.15 $40,718.70 $1.302.10 $407,341.65 $1.219.177.65 ,...., ACENDA ITEM NO. 3?- PACE 1<{1 OF~ ,-.. ~. /""'" Until such time as the receipt of Special Taxes from the levy of the assigned tax rate is sufficient to pay debt service on Bonds, the Rate and Method Apportionment provides for the levy of an undeveloped property tax (see "APPENDIX E - Rate and Method of Apportionment" and "Concentration of Property Ownership" above). The receipt of Special Taxes is subject to several variables described herein. The District provides no assurance that the Special Taxes and the coverage ratios shown will be achieved. 47 3;) AOENDA ITEM NO. 7...1 Ll _ PACE /Y 1 OF ..It I ~ - TABLE NO.2 ......, COMMUNITY FACILITIES DISTRICT NO. 2003-2 (CANYON HILLS) SPECIAL TAX BONDS (IMPROVEMENT AREA B) 2006 SERIES A PHASE ONE DEBT SERVICE COVERAGE Special Taxes Fiscal Assumed Administrative Net Special Coverage Year Assifmed Rate EXDense Taxes Debt Service* Ratio 2007 $1,219,177 ($25,000) $1,194,177 2008 1,243,561 (25,500) $1,218,061 2009 1,268,432 (26,010) $1,242,422 2010 1,293,800 (26,530) $1,267,270 2011 1,319,676 (27,061) $1;292,616 2012 1,346,070 (27,602) $1,318,468 2013 1,372,991 (28,154) $1,344,837 2014 1,400,451 (28,717) $1,371,734 2015 1,428,460 (29,291) $1,399,169 2016 1,457,029 . (29,877) $1,427,152 2017 1,486,170 (30,475) $1,455,695 2018 1,515,893 (31,084) $1,484,809 2019 1,546,211 (31,706) $1,514,505 2020 1,577,135 (32,340) $1,544,795 2021 1,608,678 (32,987) $1,575,691 2022 1,640,852 (33,647) $1,607,205 2023 1,673,669 (34,320) $1,639,349 2024 1,707,142 (35,006) $1,672,136 ~ 2025 1,741,285 (35,706) $1,705,579 2026 1,776, III (36,420) $1,739,690 2027 1,811,633 (37,149) $1,774,484 2028 1,847,866 (37,892) $1,809,974 2029 1,884,823 (38,649) $1,846,173 2030 1,922,519 (39,422) $1,883,097 2031 1,960,970 (40,211) $1,920,759 2032 2,000,189 (41,015) $1,959,174 2033 2,040,193 (41,835) $1,998,357 2034 2,080,997 (42,672) $2,038,325 2035 2,122,617 (43,526) $2,079,091 2036 2,165,069 (44,396) $2,120,673 * Preliminary, subject to change .~ 48 AGENDA ITEM NO. 2>~ PACE {fiD OF ",,- ,.-... ,,-. THE CITY The City of Lake Elsinore (the "City") was founded in 1883 and incorporated on April 23, 1888, and in 1893 the Elsinore Valley, previously in San Diego County, became a part of the new County of Riverside. The City is located 73 miles east of Los Angeles, 472 miles south of San Francisco, and 74 miles north of San Diego. It covers an area of approximately 39.1 square miles with 10.5 miles of lake shore and elevation of 1,258 feet above sea level. The City is incorporated as a general law city. The City has a CounciIlManager form of municipal government. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. The City Council is composed of five members elected bi-annually at large to four-year alternating terms. The mayor is selected by the City Council from among its members. The City employs a staff of 37 full-time employees and 18 part-time employees under the direction of the City Manager. The City Council members and term expiration dates are as follows: Council Members Robert Magee, Mayor Robert Schiffner, Mayor Pro Tern Genie Kelley, Member Thomas Buckley, Member Daryl Hickman, Member Term Expires November, 2008 November, 2008 November, 2008 November, 2006 November, 2006 Current City administrative staff include: Robert Brady, City Manager Matt N. Pressey, Director of Administrative Services Frederick Ray, City Clerk As of the delivery date of the Bonds, the District has retained Harris & Associates to assist in the preparation of the Special Tax roll and the determination of the amount of Special Taxes required in each Fiscal Year. 49 AGENDA ITEM NO. 3;t PACE /51 OF ~,t(l __ IMPROVEMENT AREA B ......, The information set forth herein regarding ownership of real property in Improvement Area B, the Developer and any proposed development of property in Improvement Area B was provided by the Developer and has not been independently verified. The District makes no representation as to the accuracy or completeness of any such information. This information has been included because it is considered relevant to an informed evaluation of Improvement Area B. As development of property in Improvement Area B has not been completed, no assurance can be given that it will occur, that it will occur as described herein, or that it will occur in a timely manner. The information should not be construed to suggest that the Bonds or the Special Taxes that will be used to pay the Bonds are personal obligations of the Developer. The owner of property within Improvement Area B will not be personally liable for payments of the Special Taxes to be applied to pay the principal of and interest on the Bonds. Accordingly, the Developer s financial statements have not been included in this Ofjicial Statement. . Furthermore, no representation is made that the Developer will have funds available to complete the development within Improvement Area B. Boundaries of Improvement Area B The majority of Improvement Area B and the Phase One Development (as defined herein) within Improvement Area B is located near the intersection of Hillside Drive and Canyon Hills Road, one mile southeast of Railroad Canyon Road. The balance of Improvement Area B and the phase two development within Improvement Area B is located adjacent to Railroad Canyon Road northwest of the intersection of Canyon Hills Road. The intersection of Canyon Hills Road and Railroad Canton Road is approximately 2 1/2 miles east ofthe Corona Freeway (I -15). The boundaries of Improvement Area B coincide with the development generally known as Canyon Hills. The boundaries of Improvement Area B are described on the reduced scale map entitled "Boundary Map of Community Facilities District No. 2003-2 (Canyon Hills)". A full scale map is on file with the Clerk of the City of Lake Elsinore and was recorded with the County Recorder, County of Riverside in Book _ Page _ of Maps of Assessment and Community Facilities District Districts, Document Number ......, Facilities and Fees to be Financed by the District The District is authorized to issue the Bonds to fund the planning, design, permitting and construction of public infrastructure consisting primarily of street, sewer, water, storm drain, park facilities as well as the funding of certain City and Elsinore Valley Municipal Water District fees (collectively the "Facilities"). The following table summarizes authorized District facilities and fees which are to be designed, acquired or constructed, or paid from proceeds of the Bonds: ........." 50 AGENDA ITEM NO. 2:>)...sPAGE / 'S /' OF 3'f7 -- ,,- Aerial Photo ",-... ,,- 51 ACiENDAITEM NO. c3~ PAOE (5}; OF3iLL- TABLE NO.3 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2003-2 (CANYON HILLS) ELIGBLE FACILITIES COSTS (Estimated Costs) TABLE TO COME FROM DPFG Source: The Developer To the extent the proceeds of the Bonds are insufficient to fund all of the eligible costs for all of the Facilities, such costs will be borne by the Developer. 52 AGENDA ITE~~~_ 2;,:). PAGE~OF'1ff7 ....." ....." ....." ~ ~ The Master Developer and Merchant Builders Pardee Homes ("Pardee"), originally owned and is the master developer of all of the net assessable acreage of the land within the District. Pardee is a wholly-owned subsidiary ofWeyerhaeuser Real Estate Company, a national leader in residential, commercial and industrial construction. Pardee has developed master planned communities in Southern California and Nevada. In California, Pardee has been active in the cities of Los Angeles, Santa Clarita, Palm dale, Camarillo, Moorpark, Beaumont, Oxnard, Agoura, Valencia, San Diego, Oceanside, and in the counties of Ventura, Riverside, and Los Angeles. In Nevada, Pardee has built in the cities of Las Vegas, North Las Vegas, Henderson, and numerous other communities in Clark County. Improvement Area B has been subdivided into three tracts, Final Tract 31706, Final Tract 30493 and Tentative Tract 30496. Each tract map consists of several planning areas (each a "Planning Area"). There are eight Planning Areas within Improvement Area B (Planning Areas 1, 2, 21 A, 21 B, 22, 23, 24 and 36). As of May 15, 2006, there were 5 large property owners and 74 individual homeowners within Improvement Area B as shown on the following table. PROPERTY OWNERSHIP (as of May 15,2006) PLANNING AREA PROPERTY OWNER /""' Planning Areas 1, 2 and 36 Planning Areas 21A, 22 and 23 Pardee Construction Company Pardee Grossman Cottonwood Canyon Planning Area 21 A Planning Areas 21 B and 24 Planning Areas 21 A and 22 Win-Win Pardee Pool III (Delaware), LLC. Pulte Homes 74 Individual Homeowners Collectively, Pardee Construction Company, , Pardee Grossman Cottonwood Canyon, , Win-Win Pardee Pool III (Delaware) LLC., limited liability company, and Pulte Home Corporation, a Michigan corporation, are referred to herein as the "Merchant Builders. Pardee. Pardee is the manager of . Pardee Construction Company, , Pardee Grossman Cottonwood Canyon, , and Win-Win Pardee Pool III (Delaware) LLC., limited liability company Pardee is completely responsible for the acquisition, planning, engineering, financing, construction, marketing, sales and management of each of its communities. Pardee is centrally managed with regional and project management for development, coordination, construction and sales. The upper management team has been promoted from within. In 1969, Pardee became a wholly-owned subsidiary ofWeyerhaeuser Real Estate Company, a national leader in residential, commercial and industrial construction. ,,-.. . Weyerhaeuser Real Estate Company (WRECO) is a wholly-owned subsidiary of Weyerhaeuser Company and is principally engaged in the construction and sale of residential housing units in the 53 b' ,AGENDA 1~I;fv'l9. - OF,-7,l/1 ~ JW4j, . li7 . . United States. With operations in regions encompassing selected major metropolitan areas including Los Angeles, San Diego, Las Vegas, Seattle, Dallas/Fort Worth and Washington, DC, WRECO is one of the largest home builders in the United States as measured by housing starts. In 2006, Professional Builder & Remodeler magazine ranked WRECO as the _ largest housing producer in the nation, based on 2005 sales of _ single-family detached and attached homes. WRECO is also an investor in real estate joint ventures and limited partnerships, both as a general and limited partner. To a lesser extent, WRECO is also engaged in the development of commercial buildings, residential and commercial lot sales, property management and other real estate-related activities. "'WJIIf Weyerhaeuser Company is listed on the New York Stock Exchange and is a Fortune 500 company. The company was incorporated in the State of Washington in January, 1900. Its principal businesses are the growing and harvesting of timber; the manufacture, distribution and sale of forest products, including logs, wood chips, building products, pulp, paper and packaging products; real estate construction and development; and financial services. Weyerhaeuser is the world's largest private owner of merchantable softwood timber and producer of softwood lumber and market pulp. It is also one of North America's largest producers of forest products and recyclers of office wastepaper, newspaper and corrugated boxes. Pulte Home. Pulte Homes is a wholly owned subsidiary of Pulte Diversified Companies, Inc. ("PDCI"), which is a wholly owned subsidiary of Pulte Homes, Inc., a Michigan corporation established in 1951 ("Pulte"). Pulte is a publicly held holding company whose subsidiaries engage in the homebuilding and financial services businesses. Pulte Homes is the domestic land development and residential building arm of Pulte. Pulte also has a mortgage banking company, Pulte Mortgage Corporation ("PMC"), which is a subsidiary ofPulte Homes and which originates mortgage loans primarily for Pulte Homes' buyers. Pulte is one of the largest residential builders in the nation, delivering nearly homes and generating over $_ billion in revenue in 2005. Since its inception, Pulte has built and sold over homes within the continental United States. Pulte's domestic homebuilding business focuses on the construction of housing for the first-time, first and second move-up, and active adult home buyers. ....., Pulte also has international homebuilding operations primarily conducted through subsidiaries in Puerto Rico and Mexico, which are not reflected in the above figures. Pulte is geographically diversified, operating 43 divisions located in key markets throughout the nation and in Mexico, Argentina and Puerto Rico. Description of Development For the purposes of structuring the financing of facilities and fees within Improvement Area B, Improvement Area B has been separated into two phases of development. The Phase One development has been defined as Planning Ares 21A, 2IB, 22, 23 and 24. The Phase Two development has been defined as Planning Areas 1,2 and 36. PHASE ONE DEVELOPMENT Planning Area Tract No. Merchant Builder No. of Lots 21A 30493-1 Win-Win Pardee Poollll (Delaware), LLC 123 2IB 30493-1 Pulte Homes 131 22 30493-1 Pardee Grossman Cottonwood Canyon 111 23 30493-1 Pardee Grossman Cottonwood Canyon 147 24 30493-1 Pulte Homes 143 ...., 54 ACENDA ITEM NO. :3 ~ PACE I~ OF ~ __ r--- ",.--, /"""-. PHASE TWO DEVELOPMENT Planning Area 1 2 36 * Multifamily Units Tract No.(1) 30496 30496 30493-1 Merchant Builder Pardee Construction Company Pardee Construction Company Pardee Construction Company No.ofUnits* 318 360 216 DESCRIPTION OF PHASE ONE DEVELOPMENT The following section describes the proposed development in terms of the size and prices of the units. There can be no assurance that the development plan described herein will be completed or that it will not be modified in the future. In addition, there can be no assurance that sufficient funds will or can be made available to complete the development plan or pay special taxes as described. Planning Area Project Name Total Units Model Base Price Size (Sq. Ft.) 21A Cross Creek 123 1 $360,440 1,671 IX $381,400 1,918 2 $392,400 2,113 3 $418,400 2,439 21B Weatherly at 131 1 $431,510 1,949 Canyon Hills 2 $441,730 2,110 3 $459,720 2,458 22 Briarcliff III 1 $435,900 2,485 2 $446,900 2,679 3 $457,900 2,820 4 $468,900 55 3)- AGENDA rrEM NO. PAGE~(51 OF~ ...., Planning Area Project Name Total Units Model Base Price Size (Sq. Ft.) 23 Bridgegate 147 1 $499,000 2,962 2 $519,000 3,073 2X $519,000 3,070 3 $529,000 3,315 4 $539,000 3,699 24 Alderbrook at 143 1 $497,630 2,607 Canyon Hills 2 $518,360 2,888 3 $524,860 3,103 ...., ""'-'" 56 AGENDA ITEM N% :3 ;l. PAoeJ5 ,-OF JA7 ~ ~ STATUS OF DEVELOPMENT ~ PHASE ONE DEVELOPMENT CONSTRUCTION STAGES Construction PA21A PA21B PA22 - PA23 PA24 Total Stages Model Units Completed 8 3 0 - - 11 Under - - - 4 3 7 Construction Production Unite Completed 36 4 40 - - 80 Under 26 46 31 - 16 119 Construction Finished 57 78 36 - 25 196 Lots Blue Top - - - 143 99 242 Lots Total 127 131 107 147 143 ~ 57 AGENDA ITElvl NO. :3 ,). PAGE I i)'1 OF 1tf7 -1t ~ Financing Plan The regional infrastructure in excess of amounts funded by bond proceeds, as well as in-tract, home construction, carrying, marketing and miscellaneous costs for Improvement Area B are expected to be financed through internal sources provided by Pardee's parent company, WRECO. All revenues received by Pardee from the sale of homes are immediately remitted to WRECO. WRECO advances funds to Pardee from time to time to enable Pardee to carry on its business operations. Pardee expects that its parent company will advance monies to Pardee in an amount sufficient to complete development of Improvement Area B. Notwithstanding this expectation, WRECO has no legal obligation to advance monies to Pardee and no assurance can be given that sufficient monies will be advanced to complete Improvement Area B as currently planned. The Developer estimates a total cost of approximately $ to develop finished lots. To date, the Developer has spent approximately $ on planning, engineering and grading. Bond proceeds are expected to finance $_ of the total $ the balance from internal sources. . Pardee Homes expects to finance There is no assurance that amounts necessary to finance Pardee's remaining site development costs within Improvement Area B will be available from Pardee or any other source, when needed. Neither Pardee nor any of its members or affiliates, or any lender, is under any legal obligation of any kind to expend funds for the development of the property in Improvement Area B. Any internal funding by Pardee or its members or affiliates, or borrowing. under any loan arrangement, to finance its development and home construction costs is entirely voluntary. The Merchant Builders will be required to finance the cost of completing each lot from a "Blue Top Parcel" to a finished lot, and constructing, marketing and selling the single family homes. It is expected that the Merchant Builders will finance such costs from either internal sources or with loans from its members. "..", There is no assurance that amounts necessary to finance the Merchant Builder's site improvement and home construction costs within Improvement Area B will be available from its members, lenders or any other source, when needed. Neither the Merchant Builders nor any of its members or affiliates, or any lender, is under any legal obligation of any kind to expend funds for the development of the property in Improvement Area B. Any internal funding by the Merchant Builders or its members or affiliates, or borrowing under any loan arrangement, to finance its development and home construction costs, is entirely voluntary. If and to the extent that home sales revenue, internal funding or borrowings from a lender are inadequate to pay the costs to complete the planned development by the Merchant Builders within Improvement Area B, there could be a delay in construction or portions of the project may not be developed as planned (see "BOND OWNERS RISKS' - The Progress of Land Development; Risks of Real Estate Secured Investments" herein). History of Property Tax Payment; Loan Defaults; Bankruptcy. Authorized representatives of Pardee and the Merchant Builders each have made the following representations with respect to their respective entity: "..", 58 AGENDA ITEM NO. :3 /... PACE I(JO OF 1lfl -- ,,-.. · Pardee and the Merchant Builders have not previously defaulted in a material amount or manner in payment of, and are not currently delinquent in the payment of, any ad valorem property taxes, special assessments or special taxes in any jurisdiction, · it is not in breach of or in default under any under any applicable judgment or decree or any loan agreement, option agreement, development agreement, indenture, fiscal agent agreement, bond, note, resolution, agreement or other instrument to which it is, or will upon issuance of the Bonds or District Bonds be, a party or otherwise subject which breach or default is reasonably likely to materially and adversely affect its ability to pay the Special Taxes, and no event has occurred and is continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default, · except as described herein and except for credit that may be extended by contractors, subcontractors, tradesmen or suppliers in the ordinary course of development, it has no loans outstanding and unpaid and no lines of credit relating to its development in Improvement Area B, and · there is no litigation pending of any nature in which the Pardee and the Merchant Builders has been served, or to the actual knowledge of the person executing the certificate, threatened, which if successful, is reasonably likely to materially adversely affect the ability of Pardee and the Merchant Builders to develop the property it owns or will own in Improvement Area B, or the ability of the Pardee and the Merchant Builders to pay Special Taxes on their respective property within Improvement Area B. . ~ "..... 59 AGENDA ITEM NO. 3 ;)- PAGE /lR/ OF ~7 -- LEGAL MATTERS ......, Enforceability of Remedies The remedies available to the Fiscal Agent and the Owners of the Bonds upon an event of default under the Fiscal Agent Agreement or any other document described herein are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the Fiscal Agent Agreement is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally. Approval of Legal Proceedings Fulbright & Jaworski L.L.P., Los Angeles, California, as Bond Counsel, will render an opinion which states that the Fiscal Agent Agreement and the Bonds are valid and binding contracts of the City and are enforceable in accordance with their terms. Fulbright & Jaworski L.L.P. will render an opinion which states that the Fiscal Agent Agreement and the Bonds are valid and binding contracts of the District and are enforceable in accordance with their terms. The legal opinions of Bond Counsel will be subject to the effect of bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights and to the exercise of judicial discretion in accordance with general principles of equity. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. The City has no knowledge of any fact or other information which would indicate that the Fiscal Agent Agreement is not so enforceable against the District, except to the extent such enforcement is limited by principles of equity and by state and federal laws relating to bankruptcy, reorganization, moratorium or creditors' rights generally. ......., Certain legal matters will be passed on for the City and the District by Leibold, McClendon & Mann, P.C., Laguna Hills, California, as City Attorney. In addition, certain legal matters will be passed on by Fulbright & Jaworski, Los Angeles, California, Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by McFarlin & Anderson LLP, Lake Forest, California, as Underwriter's Counsel. Fees payable to Bond Counsel, City Attorney, Disclosure Counsel and Underwriter's Counsel are contingent upon the sale and delivery of the Bonds. Tax Exemption The Internal Revenue Code of 1986 (the "Code") imposes certain requirements that must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in the gross income of the owners thereof for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to maintain the exclusion of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the aforementioned covenant, interest on the Bonds is excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Bond Counsel is also of the opinion that, assuming compliance with the aforementioned covenant, the Bonds are not "specified private activity bonds" within the meaning of section 57(a)(5) of the Code and, therefore, the interest on the Bonds will not be treated as an item of tax preference for purposes of computing the alternative ......., 60 AGENDA ITEM NO. 3> ;1 PAOE /~. OF ,41- ,,-.. ,,-. ,,-.. minimum tax imposed by section 55 of the Code. The receipt or accrual of interest on the Bonds owned by a corporation may affect the computation of its alternative minimum taxable income, upon which the alternative minimum tax is imposed, to the extent that such interest is taken into account in determining the adjusted current earnings of that corporation (75 percent of the excess, if any, of such adjusted current earnings over the alternative minimum taxable income being an adjustment to alternative minimum taxable income (determined without regard to such adjustment or to the alternative tax net operating loss deduction)). To the extent that a purchaser of a Bond acquires that Bond at a price that exceeds the aggregate amount of payments (other than payments of qualified stated interest within the meaning of section 1.1273-1 of the Treasury Regulations) to be made on the Bonds (determined, in the case of a callable Bond, under the assumption d,escribed below), such excess will constitute "bond premium" under the Code. Section 171 of the Code, and the Treasury Regulations promulgated thereunder, provide generally that bond premium on a tax-exempt obligation must be amortized on a constant yield, economic accrual, basis; the amount of premium so amortized will reduce the owner's basis in such obligation for federal income tax purposes, but such amortized premium will not be deductible for federal income tax purposes. In the case of a purchase of a Bond that is callable, the determination whether there is amortizable bond premium, and the computation of the accrual of that premium, must be made under the assumption that the Bond will be called on the redemption date that would minimize the purchaser's yield on the Bond (or that the Bond will not be called prior to maturity if that would minimize the purchaser's yield). The rate and timing of the amortization of the bond premium and the corresponding basis reduction may result in an owner realizing a taxable gain when a Bond owned by such owner is sold or disposed of for an amount equal to or in some circumstances even less than the original cost of the Bond to the owner. The excess, if any, of the stated redemption price at maturity of Bonds of a maturity over the initial offering price to the public of the Bonds of that maturity set forth on the cover of this Official Statement is "original issue discount" under the Code. Such original issue discount accruing on a Bond is'treated as interest excluded from the gross income of the owner thereof for federal income tax purposes and exempt from California personal income tax to the same extent as would be stated interest on the Bond. Original issue discount on any Bond purchased at such initial offering price and pursuant to such initial offering will accrue on a semiannual basis over the term of the Bond on the basis of a constant yield method and, within each semiannual period, will accrue on a ratable daily basis. The amount of original issue discount on such a Bond accruing during each period is added to the adjusted basis of such Bond to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such Bond. The Code includes certain provisions relating to the accrual of original issue discount in the case of purchasers of Bonds who purchase such Bonds other than at the initial offering price and pursuant to the initial offering. Any person considering purchasing a Bond at a price that includes bond premium should consult his or her own tax advisors with respect to the amortization and treatment of such bond premium, including, but not limited to, the calculation of gain or loss upon the sale, redemption or other disposition of the Bond. Any person considering purchasing a Bond of a maturity having original issue discount should consult his or her own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering and at the original offering price, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes. Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance of the Bonds may affect the tax status of interest on the Bonds or the tax consequences of the ownership of the Bonds. No assurance can be given that future legislation, or amendments to the Code, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exemption of interest on the Bonds from personal income taxation by the State of California or of the exclusion of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. Furthermore, Bond Counsel expresses no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the 61 AGENDA ITEM NO. 2 ~ PACE { (!?/OF:?1:f1-., proceeds thereof predicated or permitted upon the advice or approval of bond counsel if such advice or approval is given by counsel other than Bond Counsel. Although Bond Counsel is of the opinion that interest on the Bonds is exempt from state personal income tax and excluded from the gross income of the owners thereof for federal income tax purposes, an owner's federal, state or local tax liability may be otherwise affected by the ownership or disposition of the Bonds. The nature and extent of these other tax consequences will depend upon the owner's other items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of the Bonds should be aware that (i) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds or, in the case of a financial institution, that portion of an owner's interest expense allocated to interest on the Bonds, (ii) with respect to insurance companies subject to the tax imposed by section 831 of the Code, section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest on the Bonds, (iii) interest on the Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by section 884 of the Code, (iv) passive investment income, including interest on the Bonds, may be subject to federal income taxation under section 1375 ofthe Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income, (v) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest on the Bonds and (vi) under section 32(i) of the Code, receipt of investment income, including interest on the Bonds, may disqualify the recipient thereof from obtaining the earned income credit. Bond Counsel has expressed no opinion regarding any such other tax consequences. Bond Counsel's opinion is not a guarantee of a result, but represents their legal judgment based upon their review of existing statutes, regulations, published rulings and court decisions and the covenants of the District described above. No ruling has been sought from the Internal Revenue Service (the "Service") with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the c interest on municipal obligations. If an audit of the Bonds is commenced, under current procedures the Service is likely to treat the District as the "taxpayer," and the owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the District may have different or conflicting interests from the owners of the Bonds. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit, regardless of the ultimate outcome. Absence of Litigation The City will furnish a certificate dated as of the date of delivery of the Bonds that there is not now known to be pending or threatened any litigation restraining or enjoining the execution or delivery of the Fiscal Agent Agreement or the sale or delivery of the Bonds or in any manner questioning the proceedings and authority under which the Fiscal Agent Agreement is to be executed or delivered or the Bonds are to be delivered or affecting the validity thereof. 62 AGENDA ITEM NO. 21 ? PAGE ) ~OF~ ,..", ....." ....." ~ CONCLUDING INFORMATION No Rating on the Bonds The District has not made, and does not contemplate making, any application for a rating on the Bonds. No such rating should be assumed based upon any other City rating that may be obtained. Prospective purchasers of the Bonds are required to make independent determinations as to the credit quality of the Bonds and their appropriateness as an investment. Should a Bondowner elect to sell a Bond prior to maturity, no representations or assurances can be made that a market will have been established or maintained for the purchase and sale of the Bonds. The Underwriter assumes no obligation to establish or maintain such a market and is not obligated to repurchase any of the Bonds at the request of the owner thereof. Underwriting Southwest Securities, Inc., Newport Beach, California (the "Underwriter") is offering the Bonds at the prices set forth on the cover page hereof. The initial offering prices may be changed from time to time and concessions from the offering prices may be allowed to dealers, banks and others. The Underwriter has agreed to purchase the Bonds at a price equal to approximately % ($ ) of the aggregate principal amount of the Bonds, which amount represents the principal amount of the Bonds, less the Underwriter's discount of $ and a net original issue discount of $ . The Underwriter will pay certain of its expenses relating to the offering. Experts ,...- . The Market Absorption Study prepared by Empire Economics, Inc., Capistrano Beach, California, and the Appraisal prepared by Harris Realty Appraisal, Newport Beach, California, as well as the Special Tax projections prepared by Harris & Associates, Irvine, California, Special Tax Consultant, have been included in this Official Statement in reliance on and upon the authority of said firms as experts in the matters covered therein. The Financing Consultant The material contained in this Official Statement was prepared by Rod Gunn Associates, Inc., Huntington Beach, California, an independent financial consulting firm, who advised the City as to the financial structure and certain other financial matters relating to the Bonds. The information set forth herein has been obtained by Rod Gunn Associates, Inc. from sources which are believed to be reliable, but such information is not guaranteed by Rod Gunn Associates, Inc. as to accuracy or completeness, nor has it been independently verified. Fees paid to Rod Gunn Associates, Inc. are contingent upon the sale and delivery of the Bonds. Additional Information "....... The summaries and references contained herein with respect to the Fiscal Agent Agreement, the Bonds, statutes and other documents, do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute and references to the Bonds are qualified in their entirety by reference to the form hereof included in the Fiscal Agent Agreement. Definitions of certain terms used herein are set forth in "APPENDIX A-Definitions of Certain Terms Used In the Fiscal Agent Agreement". Copies of the Fiscal Agent Agreement are available for inspection during the period of initial offering on the Bonds at the offices of the Underwriter, Southwest Securities, Inc., 620 Newport Center Drive, Suite 300, Newport Beach, California 92660, telephone (949) 717-2000. Copies of these documents may be obtained after delivery of the Bonds from the City through the City Manager, City of Lake Elsinore, 130 S. Main Street, Lake Elsinore, California 92530. 63 AOENDA ITEM NO. ;3 :l PAGE I t.h OF J.t7 .-> References ..., Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of any of the Bonds. Execution The execution of this Official Statement by the City Manager has been duly authorized by the City of Lake Elsinore. CITY OF LAKE ELSINORE By: /s/ City Manager of the City, Acting on behalf of Community Facilities District No. 2003-2 (Canyon Hills) '-' '-' 64 AGENDA rrEM NO. 3 ~. PACE I Coy OF W -- ",.-. APPENDIX A DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT Unless otherwise defined in this Official Statement, the following terms have the following meanings. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Fiscal Agent, any fees for credit enhancement for the Bonds which are not otherwise paid as Costs of Issuance, any costs related to the CFD's compliance with State and federal laws requiring continuing disclosure of information concerning the Bonds and the CFD, and any other costs otherwise incurred by the City's staff on behalf of the CFD in order to carry out the purposes of the CFD as set forth in the Resolution of Formation and any obligation of the CFD hereunder. "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. "Authorized Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (1) Direct obligations of the United States of America (including obligations issued or held in book- ",-. entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America ("Direct Obligations"). ,,-... (2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): U.S. Export-Import Bank ("Eximbank") Direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration ("FmHA") Certificates of beneficial ownership Federal Financing Bank Federal Housing Administration Debentures ("FHA") General Services Administration Participation certificates Government National Mortgage Association ("GNMA" or "Ginnie Mae") GNMA-guaranteed mortgage-backed bonds GNMA-guaranteed pass-through obligations U.S. Maritime Administration Guaranteed Title XI financing U.S. Department of Housing and Urban Development (HUD) A-I AGENDA ITEM NO. PAGEl (f7 3)- OF 3L/7 __ Project Notes Local Authority Bonds '--' New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds (3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself: Federal Home Loan Bank Svstem Senior debt obligations Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") Participation certificates Senior debt obligations Federal National Mortgage Association ("FNMA" or "Fannie Mae") Mortgage-backed securities and senior debt obligations Student Loan Marketing Association ("SLMA" or "Sallie Mae") Senior debt obligations . Resolution Funding Com. ("REFCORP") obligations Farm Credit System CM. - Consolidated system-wide bonds and notes (4) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and haying a rating by Standard & Poor's of AAAm-G, AAAm or AAm, and, if rated by Moody's, rated Aaa, Aal or Aa2 (including those of the Fiscal Agent and its affiliates). (5) Certificates of deposit secured at all times by collateral described in (I) and/or (2) aboye. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral. --." (6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or which are with a bank rated AA or better by Standard & Poor's and Aa or better by Moody's (including those ofthe Fiscal Agent and its affiliates). (7) Investment Agreements with any corporation, including banking or financial institutions, provided that (a) the long-term debt of the provider of any such investment agreement is rated, at the time of investment, at least "AA" and "Aa" by the Rating Agency (without regard to gradations of plus or minus within such category), and (b) any such investment agreement is collateralized with United States Treasury or agency obligations which at least equal 102% ofthe principal amount invested thereunder, and (c) any such agreement shall include a provision to the effect that, in the event the long-term debt rating of the provider of such agreement is downgraded below "AA-" or below "Aa" by the applicable Rating Agency, the CFD has the right to withdraw or cause the Fiscal Agent to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to the Fiscal Agent Agreement. (8) Commercial paper rated, at the time of purchase, "Prime - I" by Moody's and "A-I" or better by ~ Standard & Poor's. A-2 ACENDA ITEM NO. '3 ~ PACE I toy OF 'Yf7 ~ ~ (9) Bonds or notes issued by any state or municipality which are rated by Moody's and Standard & Poor's in one of the two highest rating categories assigned by such agencies. (10) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - 1" or "A3" or better by Moody's and "A- 1" or "A" or better by Standard & Poor's. ~ (11) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-l" or "A3" or better by Moody's, and "A-I" or "A-" by Standard & Poor's; provided: (a) a master repurchase agreement or specific written repurchase agreement governs the transaction; and (b) the securities are held free and clear of any lien by the Fiscal Agent or an independent third party acting solely as agent ("Agent") for the Fiscal Agent, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million, or (iii) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Fiscal Agent shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Fiscal Agent; and (c) a perfected first security interest under the Uniform Commercial Code, or book-entry procedures prescribed at 31 C.P.R. 306.1 et seq. or 31 C.P.R. 350.0 et seq. in such securities is created for the benefit of the Fiscal Agent; and (d) the repurchase agreement has a term of 180 days or less, and the Fiscal Agent or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within two business days of such valuation; and (e) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%. (12) Local Agency Investment Fund ("LA IF") ofthe State of California. (13) Any other investment which the CFD is permitted by law to make. "Authorized Representative of the CFD" means the Mayor, City Manager, Administrative Services Director, or any other person or persons designated by the Council and authorized to act on behalf of the CFD by a written certificate signed on behalf of the CFD by the Mayor or the City Manager and containing the specimen signature of each such person. "Bond Counsel" means an attorney at law or a firm of attorneys selected by the CFD of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bond Year" means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds shall begin on the Delivery Date and end of September 1,2007. ~ A-3 ACENDA ITEM NO. .3 ?- PACE (CocLOF ':3 tf7 ~ "Business Day" means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Fiscal Agent is located, are not required or authorized to remain closed. .~ "Certificate of Authorized Representative of the CFD" means a written certificate or warrant request executed by an Authorized Representative ofthe CFD. "CFD" means the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) established pursuant to the Act and the Resolution of Formation. "Code" means the Internal Revenue Code of 1986 and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Fiscal Agent and its counsel, legal fees and expenses, costs of printing the Bonds and the preliminary and final official statements for the Bonds, fees of financial consultants and all other related fees and expenses, as set forth in a Certificate of Authorized Representative ofthe CFD. "Council" means the City Council of the City of Lake Elsinore. "Defeasance Securities" means any of the following: (a) Cash (b) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series - "SLGS") (c) Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury itself, e.g., CATS, TIGRS and similar securities. ~ (d) The interest component of Resolution Funding Corp. strips which have been stripped by request to the Federal Reserve Bank of New York and are in book-entry form. (e) Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard & Poor's. (f) Obligations issued by the following agencies which are backed by the full faith and credit of the United States: U.S. Export-Import Bank - direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration - certificates of beneficial ownership Federal Financing Bank G~neral Services Administration - participation certificates U.S. Maritime Administration - guaranteed Title XI financing U.S. Department of Housing and Urban Development (HUD) - Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds. "Delivery Date" means, with respect to the Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof. "Depository" shall mean The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Certificates, or any other securities depository acting as Depository under the Fiscal Agent Agreement. ~ A-4 ACENDA ITEM NO. ~ PACE_ (76 OF ,,- "Fiscal Agent" means Union Bank of California, N.A., a national banking association duly organized and existing under and by virtue of the laws of the United States of America, at its principal corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in the Fiscal Agent Agreement and any successor thereto. "Fiscal Agent Agreement" means the Fiscal Agent Agreement, together with any Supplemental Fiscal Agent Agreement approved pursuant to the Fiscal Agent Agreement. "Fiscal Year" means the period beginning on July I of each year and ending on the next following June 30. "Independent Financial Consultant" means a financial consultant or special tax consultant or firm of either such consultants generally recognized to be well qualified in the financial consulting or special tax consulting field, appointed and paid by the CFD, who, or each of whom: (1) is, in fact, independent and not under the domination of the CFD; (2) does not have any substantial interest, direct or indirect, in the CFD; and (3) is not connected with the CFD as a member, officer or employee of the CFD, but who may be regularly retained to make annual or other reports to the CFD. "Interest Payment Date" means each March 1 and September 1, commencing March 1, 2007, provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next preceding such date. . "Investment Agreement" means one or more agreements for the investment of funds of the CFD complying with the criteria therefor as set forth in Subsection (7) of the definition of Authorized Investments. "Maximum Annual Debt Service" means the maximum sum obtained for any Bond Year prior to the final ~ maturity of the Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Moody's" means Moody's Investors Service, its successors and assigns. "Nominee" shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Fiscal Agent Agreement. "Outstanding" or "Outstanding Bonds" means all Bonds theretofore issued by the CFD, except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with the Fiscal Agent Agreement; (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Fiscal Agent Agreement; and (3) Bonds which have been surrendered to the Fiscal Agent for transfer or exchange pursuant to the Fiscal Agent Agreement or for which a replacement has been issued pursuant to the Fiscal Agent Agreement. "Participants" shall mean those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as securities depository. ~ "Person" means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. A-5 ACENDA ITEM NO. '3 ?- PACE 17( OF?H7 ~ "Principal Office of the Fiscal Agent" means the office of the Fiscal Agent located in Los Angeles, California or such other office or offices as the Fiscal Agent may designate from time to time, or the office of any successor Fiscal Agent where it principally conducts its business of serving as Fiscal Agent under indentures pursuant to which municipal or governmental obligations are issued. '-'" "Project" means those public facilities described in the Resolution of Formation which are to be acquired or constructed within Improvement Area B, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the CFD from time to time. "Project Costs" means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds, including, but not limited to, remarketing, credit enhancement, Fiscal Agent and other fees and expenses relating to the issuance of the Bonds and the formation of the CFD, and to pay any other "incidental expenses" of the CFD, as such term is defined in the Act. "Rating Agency" means Moody's and Standard & Poor's, or both, as the context requires. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. "Regulations" means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to section 103 of the Code. "Reserve Requirement" means, as of any date of calculation, an amount equal to the lowest of (1) 10% of the issue price (as defined pursuant to section 148 ofthe Code), or (2) Maximum Annua] Debt Service, or (3) ]25% of the average Annua] Debt Service ofthe Outstanding Bonds. "Resolution of Formation" means Reso]ution No. to which the Council formed the CFD. adopted by the Council on pursuant ~ "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedule set forth in the Fisca] Agent Agreement. "Special Taxes" means the taxes authorized to be levied by the CFD on parcels within Improvement Area B in accordance with the Resolution of Formation, the Act and the voter approval obtained at the September] 3, 2005 election in the CFD and any additional special taxes authorized to be levied by the CFD from time to time which are pledged by the CFD to the repayment of the Bonds, together with the prepayment thereof and proceeds collected from the sale of property pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses. "Standard & Poor's" means Standard & Poor's, a division of McGraw-Hill, its successors and assigns. "Supplemental Fiscal Agent Agreement" means any supplemental fiscal agent agreement amending or supplementing the Fisca] Agent Agreement. "Tax Certificate" means the certificate by that name to be executed by the CFD on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Term Bonds" means the Bonds maturing on September 1, 2026 and September ], 2036. "Underwriter" means the institution or institutions, if any, with whom the CFD enters into a purchase contract for the sale of the Bonds. '~ A-6 AGENDA ITEM NO. 3.). . -= PACE J1J; OF_ ~c.f7 "...... "Written Request of the CFD" means a request in writing executed by the Mayor, City Manager, City Treasurer, or written designee, on behalf of the CFD. /""' /""' A-7 AGENDA ITEM NO. ~ ~ PAGE (0 oF7i7 ~ APPENDIX B SUMMARY OF THE FISCAL AGENT AGREEMENT ....., The following is a summary of certain provisions of the Fiscal Agent Agreement and does not purport to be a complete restatement thereof Reference is hereby made to the Fiscal Agent Agreement for the complete terms thereof Copies of the Fiscal Agent Agreement are available from the City upon request. Creation of Funds. There is created and established and shall be maintained by the Fiscal Agent the following funds and accounts: (1) The Special Tax Fund (the "Special Tax Fund") (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account and an Administrative Expense Account); (2) The Surplus Fund (the "Surplus Fund"); and (3) The Acquisition and Construction Fund (the "Acquisition and Construction Fund") (in which there shall be established a Costs of Issuance Account). The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Fiscal Agent in trust and the Fiscal Agent shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of the Fiscal Agent Agreement and shall disburse investment earnings thereon in accordance with the provisions of the Fiscal Agent Agreement. Except as required to be segregated into funds and accounts as described in the Fiscal Agent Agreement, money held by the Fiscal Agent in trust hereunder need not be segregated from other funds except to the extent required by law. Deposits to.and Disbursements from Special Tax Fund. The CFD shall, on each date on which it receives Special Taxes, transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund in accordance with the terms of the Fiscal Agent Agreement. The Fiscal Agent shall transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: (a) The Interest Account of the Special Tax Fund; .....", (b) The Principal Account of the Special Tax Fund; (c) The Redemption Account of the Special Tax Fund; (d) The Reserve Account of the Special Tax Fund; ( e) The Administrative Expense Account of the Special Tax Fund; and (f) The Surplus Fund. At the maturity of all of the Bonds and, after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Fiscal Agent have been paid in full, moneys in the Special Tax Fund and any accounts therein shall be transferred to the CFD and may be used by the CFD for any lawful purpose. Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds until maturity, other than principal due upon redemption, shall be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds will be made when due, at least five Business Days prior to each March 1 and September 1, the Fiscal Agent shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not ~ B-1 ACENDA ITE~~(9.~ ~ ft(] PACeJ.1.+-0F - .-----. .",.-..-. be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account: (1) To the Interest Account, an amount such that the balance in the Interest Account five Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. (2) To the Principal Account, an amount such that the balance in the Principal Account five Business Days prior to September I of each year, commencing September I, 2007 shall at least equal the principal payment due on the Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds as the same become due at maturity. r-- Redemption Account of the Special Tax Fund. (1) On each September 1 on which a Sinking Fund Payment is due, after the deposits have been made to the Interest Account and the Principal Account of the Special Tax Fund, the Fiscal Agent shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account five Business Days prior to each September 1 equal to the Sinking Fund Payment due on any Outstanding Bonds on such September 1; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded. Moneys so deposited in the Redemption Account shall be used and applied by the Fiscal Agent to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedule set forth in the Fiscal Agent Agreement. (2) After making the deposits to the Interest Account and the Principal Account of the Special Tax Fund and to the Redemption Account for Sinking Fund Payments then due, and in accordance with the CFD's election to call Bonds for optional redemption, the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the interest, the principal and the premiums, if any, payable on the Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (3) All prepayments of Special Tax shall be deposited in the Redemption Account to be used to redeem Bonds on the next date for which notice of redemption can timely be given. (4) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds and in the case of an optional redemption to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account as set forth above may be used to purchase Outstanding Bonds. Purchases of Outstanding Bonds may be made by the CFD at public or private sale as and when and at such prices as the CFD may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to the Fiscal Agent Agreement. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. ,-.. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts in the Reserve Account shall be applied as follows: B-2 ACENDA ITEM N~ 3)- PACE_ (1) OF2:f.1.-, (l) Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on any Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the '-' Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds when due, the Fiscal Agent shall withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund, as applicable, moneys necessary for such purposes. (2) Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in the Fiscal Agent Agreement, the Fiscal Agent shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the CFD elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Fiscal Agent determines that such amounts will not be needed to make the deposits required to be made to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the CFD shall include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the . extent of the maximum permitted Special Tax rates. (3) In connection with any redemption of the Bonds, or a partial defeasance of the Bonds, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this paragraph shall be withdrawn from the Reserve Account on the fifth Business Day before each March 1 and September 1 and transferred to the Acquisition and Construction Fund until the Fiscal Agent receives a Certificate of Authorized Representative of the CFD that all Project Costs have been funded, and thereafter to the Interest Account of the Special Tax Fund. ..."" Administrative Expense Account of the Special Tax Fund. The Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund amounts necessary to make timely payment of Administrative Expenses and shall be disbursed by the Fiscal Agent to pay Administrative Expenses, all as instructed by the CFD pursuant to a Written Request of the CFD. Moneys in the Administrative Expense Account of the Special Tax Fund may be invested in any Authorized Investments as directed by an Authorized Representative of the CFD. Surplus Fund. After making the transfers required by the Fiscal Agent Agreement, as soon as practicable after each September 1, the Fiscal Agent shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, other than amounts in the Special Tax Fund which the CFD directs the Fiscal Agent by Written Request of the CFD to retain because the CFD has included such funds as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to the Fiscal Agent Agreement. Moneys deposited in the Surplus Fund shall be transferred by the Fiscal Agent at the written request of the CFD (i) to the Administrative Expense Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Account of the Special Tax Fund are insufficient to pay Administrative Expenses or, (ii) to the Redemption Account for the purpose of redeeming Bonds. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds. In the event that the CFD reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, upon the written direction of the CFD, the Fiscal Agent will segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the '-' B-3 AGENDA ITEM NO. 3;)- PAGE flit OF~7- ~ ~ ~ Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds which were issued on a tax-exempt basis for federal income tax purposes. Investments. Moneys held in any of the funds and accounts under the Fiscal Agent Agreement shall be invested at the Written Request of the CFD in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such funds and accounts. Any loss resulting from such Authorized Investments shall be credited or charged to the fund or account from which such investment was made, and any investment earnings on a fund or account shall be applied as follows: (i) investment earnings on all amounts deposited in the Special Tax Fund (exclusive of amounts transferred to the Reserve Account), Surplus Fund, Acquisition and Construction Fund and each Account therein shall be deposited in those respective funds and accounts, and (ii) all other investment earnings shall be deposited in the Interest Account of the Special Tax Fund; provided, however, to the extent moneys in the Reserve Account exceed the Reserve Requirement, such excess amounts shall be deposited and transferred pursuant to the Fiscal Agent Agreement. Moneys in the funds and accounts held under the Fiscal Agent Agreement may be invested by the Fiscal Agent at the Written Request of the CFD received at least 2 Business Days prior to the investment date, from time to time, in Authorized Investments subject to the following restrictions: (1) Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due. (2) Moneys in the Acquisition and Construction Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the CFD estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition and Construction Fund. Notwithstanding anything in the Fiscal Agent Agreement to the contrary, amounts in the Acquisition and Construction Fund on the Delivery Date for the Bonds shall not be invested at yields greater than those set forth in the Tax Certificate. (3) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than two years from their date of purchase by the Fiscal Agent, and one-half of the amount in the Reserve Account may be invested only in Authorized Investments which mature not more than three years from the date of purchase by the Fiscal Agent; provided that such amounts may be invested in an Investment Agreement to the final maturity of the Bonds so 'long as such amounts may be withdrawn at any time, without penalty, for application in accordance with the Fiscal Agent Agreement; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the final maturity date of the Bonds. (4) In the absence of Written Request of the CFD providing investment directions, the Fiscal Agent shall invest solely in Authorized Investments specified in clause (4) of the definition thereof. The Fiscal Agent shall sell at the best price obtainable, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the fair market value thereof and marked to market at least annually. Notwithstanding anything in the Fiscal Agent Agreement to the contrary, the Fiscal Agent shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of the Fiscal Agent Agreement. The Fiscal Agent or an affiliate may act as principal or agent in connection with the acquisition or disposition of any Authorized Investments and shall be entitled to its customary fees therefor. Any Authorized Investments that are registrable securities shall be registered in the name of the Fiscal Agent. The Fiscal Agent is authorized, in B-4 AGENDA ITEM NO. .3)- PACE ( 7/ OF '3 LI7 .J making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with anyone or more of its affiliates, whether it or such affiliate is acting as an agent of the Fiscal Agent or for any third person or dealing as principal for its own account. ~ Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the CFD makes the following covenants with the Bondowners under the provisions of the Act and the Fiscal Agent Agreement (to be performed by the CFD or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the CFD to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (I) Punctual Pavment: Against Encumbrances. The CFD covenants that it will receive all Special Taxes in trust and will immediately deposit such amounts with the Fiscal Agent, and the CFD shall have no beneficial right or interest in the amounts so deposited except as provided by the Fiscal Agent Agreement. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth in the Fiscal Agent Agreement, and shall be accounted for separately and apart from all other money, funds, accounts or other resources ofthe CFD. The CFD covenants that it will duly and punctually payor cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with the Fiscal Agent Agreement to the extent that Special Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and the Fiscal Agent Agreement, and that it will faithfully observe and perform all of the conditions, covenants and requirements of the Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements and of the Bonds issued hereunder. The CFD will not mortgage or otherwise encumber, pledge or place any charge upon any of the Special Taxes except as provided in the Fiscal Agent Agreement, and will not issue any obligation or security having a lien or charge upon the Special Taxes superior to or on a parity with the Bonds. Nothing in the Fiscal Agent Agreement shall prevent the CFD from issuing or incurring indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to the pledge of Special Taxes to repay the Bonds. ~ (2) Levv of Soecial Tax. Beginning in Fiscal Year 2006-07 and so long as any Bonds issued under the Fiscal Agent Agreement are Outstanding, the CFD covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and the Surplus Fund and available for such purpose, to pay (I) the principal of and interest on the Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. (3) Commence Foreclosure Proceedings. The CFD covenants for the benefit of the Owners of the Bonds that it will determine or cause to be determined, no later than March I and August I of each year, whether or not any owner of the property within Improvement Area B are delinquent in the payment of Special Taxes and, if such delinquencies exist, the CFD will order and cause to be commenced no later than April 15 (with respect to the March 1 determination date) or September I (with respect to the August 1 determination date), and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due, provided, however, that the CFD shall not be required to order the commencement of foreclosure proceedings if (i) the total Special Tax delinquency in Improvement Area B for such Fiscal Year is less than five percent (5%) of the total Special Tax levied in such Fiscal Year, and (ii) the CFD shall have established from any source of lawfully available funds (other than Special Taxes) an escrow fund to provide for the payment of principal of and interest on the Bonds. Notwithstanding the foregoing, if the CFD determines that any single property owner in Improvement Area B is delinquent in excess of ten thousand dollars ($10,000) in the payment of the Special Tax, then it will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosure related to delinquent Special Taxes: ~ B-5 ACENDA ITEM NO. 3~ PACE__ 11 ~ OF '1; 1__ ~ (a) The CFD or the Fiscal Agent is authorized to credit bid at any foreclosure sale, without any requirement that funds be set aside in the amou,nt so credit bid, in the amount specified in Section 53356.5 of the Act, or such less amount as determined under clause (b) below or otherwise under Section 53356.6 of the Act. (b) The CFD may permit, in its sole and absolute discretion, property with delinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5 of the Act, if it determines that such sale is in the interest of the Bond Owners. The Bond Owners, by their acceptance of the Bonds, consent to such sale for such lesser amounts (as such consent is described in Section 53356.6 of the Act), and release the CFD and the City, and their respective officers and agents from any liability in connection therewith. If such sale for lesser amounts would result in less than full payment of principal of and interest on the Bonds, the CFD will use best efforts to seek approval of the Bond Owners. (c) The CFD is authorized to use amounts in the Special Tax Fund to pay costs of foreclosure of delinquent Special Taxes. . ",.-.. (d) The CFD may forgive all or any portion of the Special Taxes levied or to be levied on any parcel in Improvement Area B so long as the CFD determines that such forgiveness is not expected to adversely affect its obligation to pay principal of and interest on the Bonds as such payments become due and payable. (4) Payment of Claims. The CFD will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Special Taxes or; other funds in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), or which might impair the security of the Bonds then Outstanding; provided that nothing contained in the Fiscal Agent Agreement shall require the CFD to make any such payments so long as the CFD in good faith shall contest the validity of any such claims. (5) Books and Accounts. The CFD will keep proper books of records and accounts, separate from all other records and accounts of the CFD, in which complete and correct entries shall be made of all transactions relating to the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of the Bonds then Outstanding or their representatives authorized in writing. ~ (6) Tax Covenants. The CFD covenants that it shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, could cause the interest on any Bond to fail to be excluded pursuant to section I03(a) of the Code from the gross income of the owner thereoffor federal income tax purposes. (7) Reduction of Maximum Special Taxes. The CFD finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the CFD determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the CFD below the levels provided in the Fiscal Agent Agreement would interfere with the timely retirement of the Bonds. The CFD determines it to be necessary in order to preserve the security for the Bonds to covenant, and, to the maximum extent that the law permits it to do so, the CFD does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the CFD, unless, in connection therewith, (i) the CFD receives a certificate from one or more Independent Financial Consultants which, when taken together, certifY that, on the basis of the parcels of land and improvements existing in Improvement Area B as of the July 1 preceding the reduction, the maximum amount of the Special Tax which may be levied on then existing Developed Property (as defined in the Rate and Method of Apportionment of Special Taxes then in effect in Improvement Area B) in each Bond Year for any Bonds Outstanding will equal at least 110% of the sum on the estimated Administrative Expenses and gross debt service in that Bond Year on all Bonds to remain Outstanding after the reduction is approved, arid (ii) the CFD finds that any reduction made under such B-6 AGENDA ITEM NO. J:;)- PAGE~Of ~47 ~ conditions will not adversely affect the interests of the Owners of the Bonds. For purposes of estimating Administrative Expenses for the foregoing calculation, the Independent Financial Consultant shall compute the Administrative Expenses for the current Fiscal Year and escalate that amount by two percent (2%) in each ....." subsequent Fiscal Year. (8) Covenants to Defend. The CFD covenants that in the event that any initiative is adopted by the qualified electors in the CFD which purports to reduce the maximum Special Tax below the levels specified in the Fiscal Agent Agreement or to limit the power of the CFD to levy the Special Taxes for the purposes set forth in the Fiscal Agent Agreement, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (9) Annual Reports to CDIAC. Not later than October 30 of each year, commencing October 30, 2006 and until the October 30 following the final maturity of the Bonds, the CFD shall cause the City to supply the information required by Section 53359.5(b) or (c) of the Act to CDIAC (on such forms as CDIAC may specify). (l0) Continuing Disclosure. The CFD covenants to comply with the terms of the Continuing Disclosure Agreement executed by it with respect to the Bonds. Supplemental Fiscal Agent Agreements or Orders Not Requiring Bondowner Consent. The CFD may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Fiscal Agent Agreements for any of the following purposes: (I) to cure any ambiguity, to correct or supplement any provisions in the Fiscal Agent Agreement which may be inconsistent with any other provision in the Fiscal Agent Agreement, or to make any other provision with respect to matters or questions arising under the Fiscal Agent Agreement or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners; (2) to add to the covenants and agreements of and the limitations and the restrictions upon the CFD contained in the Fiscal Agent Agreement, other covenants, agreements, limitations and restrictions to be ....., observed by the CFD which are not contrary to or inconsistent with the Fiscal Agent Agreement as theretofore in effect or which further secure Bond payments; (3) to modify, amend or supplement the Fiscal Agent Agreement in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; or (4) to modify, alter or amend the rate and method of apportionment of the Special Taxes in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the CFD to an amount which is less than that permitted under the Fiscal Agent Agreement; or (5) to modify, alter, amend or supplement the Fiscal Agent Agreement in any other respect which is not materially adverse to the Bondowners. Events of Default. Anyone or more ofthe following events shall constitute an "event of default": (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) Except as described in (a) or (b), default shall be made by the CFD in the observance of any of the agreements, conditions or covenants on its part contained in the Fiscal Agent Agreement or the Bonds, ....., and such default shall have continued for a period of 30 days after the CFD shall have been given notice in B-7 AGENDA ITEM NO. :3).. PACE 100 OF 'P'17 __ writing of such default by the Fiscal Agent or the Owners of 25% in aggregate principal amount of the r-. Outstanding Bonds. The CFD agrees to give notice to the Fiscal Agent immediately upon the occurrence of an event of default under (a) or (b) above and within 30 days of the CFD's knowledge of an event of default under (c) above. The Fiscal Agent shall not be deemed to have knowledge of any event of default unless a responsible officer shall have actual knowledge thereof or the Fiscal Agent shall have received written notice at its Principal Office. Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (1) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the CFD and any of the members, officers and employees of the CFD, and to compel the CFD or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Fiscal Agent Agreement; (2) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (3) By a suit in equity to require the CFD and its members, officers and employees to account as the fiscal agent of-an express trust. Nothing in this article or in any other provision of the Fiscal Agent Agreement or the Bonds shall affect or impair the obligation of the CFD, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners thereof at the respective dates of maturity, as provided in the. Fiscal Agent Agreement, out of the Special Taxes and other amounts pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such ,-. payment by virtue of the contract embodied in the Bonds and in the Fiscal Agent Agreement. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the CFD and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy in the Fiscal Agent Agreement conferred upon. or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Fiscal Agent after an event of default shall be insufficient to pay in full the whole amount so owing and unpaid upon the Outstanding Bonds, then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. Defeasance. If the CFD shall payor cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated ,,-.. in the Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, then the Owner of such Bond shall cease to be entitled to the pledge of Special Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the CFD to the Owner of such Bond under the Fiscal Agent Agreement B-8 AOENDA ITEM alii.). O;}- PAOE ~ I OF- '3'17 ~ shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds, the Fiscal Agent shall execute and deliver to the CFD all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal Agent shall pay '-' over or deliver to the CFD's general fund all money or securities held by it pursuant to the Fiscal Agent Agreement which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds. Any Outstanding Bond shall be deemed to have been paid if such Bond is paid in anyone or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; or (c) by depositing with the Fiscal Agent or another escrow bank appointed by the CFD, in trust, noncallable Defeasance Securities, in which the CFD may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; then, at the election of the CFD, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the CFD under the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement with respect to such Bond shall cease and terminate, except for the obligation of the Fiscal Agent to payor cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the CFD contained in the Fiscal Agent Agreement or any,-, covenants in a Supplemental Fiscal Agent Agreement relating to compliance with the Code. Notice of such election shall be filed with the Fiscal Agent not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Fiscal Agent. In connection with a defeasance under (b) or (c) above, there shall be provided to the CFD a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Fiscal Agent or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds to be defeased, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with the Fiscal Agent Agreement and any applicable Supplemental Fiscal Agent Agreement. If a forward supply contract is employed in connection with an advance refunding to be effected under (c) above, (i) such verification report shall expressly state that the adequacy of the amounts deposited with the bank under (c) above to accomplish the refunding relies solely on the initial escrowed investments and the maturity principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement executed to effect an advance refunding in accordance with (c) above shall provide that, in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement, the terms of the escrow agreement shall be controlling. Upon a defeasance, the Fiscal Agent, upon request of the CFD, shall release the rights of the Owners of such Bonds which have been defeased under the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement and execute and deliver to the CFD all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds, the Fiscal Agent shall pay over or deliver to the CFD any funds held by the Fiscal Agent at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of, premium, if any, or interest on the Bonds when due. The Fiscal Agent shall, at the written direction of the CFD, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased, in the form directed by the CFD, stating that the defeasance has occurred '-' B-9 AGENDA ITEM ~o. 3)- PAGE , ~ 7 OF ,tfJ ~ .-" APPENDIX C MARKET ABSORPTION STUDY ,-.. -" C-I AOENDA 'TEM NO. 2>). Mae / ~~~~ O~"l<[J ,: ,...." ,...." Empire Economics A AGENDA ITElIU'nr06~)- PAGE r<t OF /Jif} __ CERTIFICATION OF INDEPENDENCE "'" The Securities & Exchange Commission has recently taken action against Wall Street firms that have utilized their research analysts to promote companies with whom they conduct business, citing this as a potential conflict of interest. Accordingly, Empire Economics (Empire), in order to ensure that its clients are not placed in a situation that could cause such conflicts of interest, provides a Certification of Independence. Specifically, the Certificate states that Empire performs consulting services for public entities only in order to avoid potential conflicts of interest that could occur if it also provided consulting services for developer/builder. For example, if a research firm for a specific Community Facilities District or Assessment District were to provide consulting services to both the public entity as well as the property owner/developer/builder, then a potential conflict of interest could be created, given the different objectives of the public entity versus the property owner/developer. Accordingly, Empire Economics certifies that the Market Absorption Study for the CFD No. 2003-2 2006 Series A (Canyon Hills) of the City of Lake Elsinore was performed in an independent professional manner, as represented by the following statements: ~ Empire was retained to perform the Market Absorption Study by the City of Lake Elsinore, not the District's property owner/developer, Pardee. ,.- ~ Empire has not performed any consulting services for the District's property owner or the developer/builders during at least the past five years. ~ Empire will not perform any consulting services for the District's property owner or the developer/builders during at least the next three years. ~ Empire's compensation for performing the Market Absorption Study for the District is not contingent upon the issuance of Bonds; Empire's fees are paid on a non-contingency basis. Therefore, based upon the statements set-forth above, Empire hereby certifies that the Market Absorption Study for CFD No. 2003-2 2006 Series A (Canyon Hills) of the City of Lake Elsinore was performed in an independent professional manner. Empire Economics, Inc. Joseph T. Janczyk, President ~ Empire Economics 3;)- AGENDA ITEM~'I, 288~ PA<iE Of '1 .-' INTRODUCTION TO THE BOND FINANCING PROGRAM ......, The City of Lake Elsinore was previously petitioned by Pardee to form a Community Facilities District to assist with the financing of the infrastructure that is required to support the development of their residential products in the Planned Community of Canyon Hills; this is hereafter referred to as CFD No. 2003-2. The City of Lake Elsinore also authorized the issuance of Bonds for Phase I in the amount of $12,235,000 in February 2004, and these projects have already entered the marketplace, and some of them have been closed-out. The City of Lake Elsinore is now considering the authorization of additional Bonds for Phase II, referred to as CFD No. 2003-2 2006 Series A. Specifically, the Bond Issue would be utilized to provide funds for various infrastructure components, including roadway, drainage, park, water and sewer improvements. The specific size of the Bond Issue and the particular improvements included will depend upon various factors which will be finalized when these bonds are sold. The purpose of the Market Absorption Study for CFD No. 2003-2 2006 Series A of the City of Lake Elsinore is to provide an estimate of the probable absorption schedules for the residential properties. Specifically, from the viewpoint of prospective Bond Purchasers, the particular components of the '-" infrastructure should be time-phased and location-phased in a manner that approximately coincides with the expected marketability/absorption of the projects in CFD No. 2003-2 2006 Series A. Otherwise, to the extent that the infrastructure is not appropriately phased, then the following types of market inefficiencies may occur: On the one hand, if certain projects do not have the infrastructure that is required to support their development in a timely manner, then they would not be able to respond to the demand in the marketplace, resulting in a market shortage. On the other hand, if too much infrastructure is built, then projects for which there is not presently a market demand would incur high carrying costs due to the market sumlus. and this could adversely impact their financial feasibility. Thus, the Market Absorption Study formulates guidelines on the appropriate or optimal time-phasing and location-phasing of the infrastructure for the properties located in CFD No. 2003-2 2006 Series A, as a means of providing the bond purchasers with a reasonable amount of security from a market absorption perspective. ....""" Empire Economics 2 AGENDAITE~~~ PAGE. Co'f:31l- ,,-.., Ui ~ ~ - ~ Z o ~ < U '-' N I ~ o o N o Z o ~ u r ~ \0 o o N ...c: ~ ::E '" () Os o I': o () ~ e .~ ~ < J ~ E-1 8 0 N - ..l:l ...-.. ~ r/1 ~ ~ ~ ~ ~ Z 0 ~ ~ U '-/ N I ("'f") ~J 0 0 N . 0 Z Q ~ U ~ ~ E-1 ~ 0 '" 0 r/1 .s 0 ~ ~ 0 0 ~ liIil e < .~ Q liIil S 0 ~ ~ AGENDA ITEM No.3;) PACE I i'l" OF OL\/--, CHARACTERISTICS OF THE EXPECTED PRODUCT MIX FOR THE CITY OF LAKE ELSINORE CFD NO. 2003-2 2006 SERIES A "....... The projects in the City of Lake Elsinore CFD No. 2003-2 2006 Series A have received planning approvals/entitlements for some 655 single-family detached housing units; their characteristics are expected to be as follows: ~ Cross Creek by Pardee has some 123 single-family homes on lots of some 6,638 sq.ft. that are priced at some $369,500 to $429,500, an average of $398,785, for 1,671 to 2,439 sq.:ft. of living area, an average of 2,044 sq.:ft., for a value ratio of $195; this project has already commenced escrow closings to homeowners. ~ Weatherly by Pulte is anticipated to have a total of some 131 single-family homes on lots of some 6,525 sq.:ft. that are priced at some $423,000 to $453,000, an average of $437,733, for 1,949 to 2,458 sq. ft. of living area, an average of2,196 sq.:ft., for a value ratio of$199; they are expected to commence escrow closings during 2od-2006. ,-..- ~ Briarcliff by Pardee has some 111 single-family homes on lots of some 5,895 sq.:ft. that are priced at some $441,400 to $481,900, an average of $464,098, for 2,485 to 3,085 sq.:ft. of living area, an average of 2,796 sq.:ft., for a value ratio of $166; this project has already commenced escrow closings to homeowners. ~ Bridgegate by Pardee is anticipated to have a total of some 147 single-family homes on lots of some 8,275 sq.:ft. that are estimated to be priced at some $475,000 to $560,000, an average of $505,510, for 2,96Q to 3,699 sq.:ft. of living area, an average of 3,258 sq.:ft., for a value ratio of $155; they are expected to commence escrow closings during 4th-2006. ~ Alderbrook by Pardee is anticipated to have a total of some 143 single-family homes on lots of some 6,888 sq.:ft. that are estimated to be priced at some $450,000 to $520,000, an average of $485,490, for 2,607 to 3,103 sq.:ft. ofliving area, an average of 2,869 sq.:ft., for a value ratio of $169; they are expected to commence escrow closings during 3rd-2006. Therefore, the 655 homes in CFD No. 2003-2 2006 Series A by Pardee and Pulte are single-family detached homes on lots of 5,895 to 8,275 sq.:ft. that are expected to be priced at some $369,500 to $560,000, an overall average of $460.524, for some 1,671 to 3,699 sq.:ft. of living area, an overall average of 2,655 sq.:ft., and some of the projects have already commence escrow closings to homeowners. ~ Empire Economics 5 ACENDA ITEM NO. 3~ PAaE ffll.cJ06 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 Ejprice-LoW1:f . Price-Average a Price-Upper 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 I2ILiving Area-Lower I!ILiving Area-Average DLiving Area-Upper Empire Economics CFD NO. 2003-2 2006 SERIES A EXPECTED PRICES FOR THE HOUSING PRODUCTS ~ $369,500 $398,785 $429,500 Weatherly $423,000 $437,733 $453,000 $450,000 $485,490 $520,000 Bridgegate $475,000 $505,5] 0 $560,000 $44],400 $464,098 $48],900 CFD NO. 2003-2 2006 SERIES A EXPECTED LIVING AREAS FOR THE HOUSING PRODUCTS ......., o 1,67] 2,044 2,439 2,485 2,796 3,085 2,960 3,258 3,699 2,607 2,869 3,103 ~ 6 AGENDA ITEM NOrJi 0~ _ PAC~ ' 0@11: ~ ROLE OF THE MARKET STUDY IN THE BOND FINANCING CFD NO. 2003-2 2006 SERIES A The Market Absorption Study for CFD No. 2003-2 2006 Series A has a multiplicity of roles with regards to the Bond Financing; accordingly, these are now discussed. Marketing Prospects for the Various Products Types Official Statement Prospective Bond Purchasers Aggregate Levels of Special Tax Revenues ,........ Maximum Special Taxes for the Residential Projects Conforming to the Issuer's Policies Share of Payments: DeveloperlBuilders vs. Final-Users Determined by the Absorption Schedules Appraisal of Property Discounted Cash Flow - Present Value Absorption Schedules The Issuing Agency for the Bond Issue, CFD No. 2003-2 2006 Series A of the City of Lake Elsinore, along with the Finance Team, can utilize the Market Absorption Study, Appraisal, and Special Tax Revenue to structure the Bond Issue. ~ Empire Economics 7 AGEN:~~. _ METHODOLOGY UNDERLYING THE MARKET STUDY FOR CFD NO. 2003-2 2006 SERIES A To perform a comprehensive analysis of the macroeconomic and microeconomic factors that are expected to influence the absorption of the residential single-family detached projects in CFD No: 2003-2 2006 Series A, Empire's Market Absorption Study conducts a systematic analysis of the following factors: ~ MACROECONOMIC FACTORS FOR CFD NO. 2003-2 2006 SERIES A MARKET AREA *Market Supply Planning Projections *Market Demand Economic Conditions *Reconciliation *Growth.Potential for the Market Area MICROECONOMICFACTORS FOR CFD NO. 2003-2 2006 SERIES A Regional Development Patterns Socioeconomic: School and Crime Housing Price Trends and Patterns Competitive Market Analysis - Product Types Residential Projects *Location *Product Type *Prices *Special Taxes/Assessments *F eatures/ Amenities ....., ESTIMATED ABSORPTION SCHEDULES Each of the Projects *Residential Single-Family Detached Homes Five Projects *Market Entry to Build-Out Therefore, the Market Absorption Study systematically proceeds from the macroeconomic analysis of the Market Region's future housing, industrial and commercial growth to the microeconomic analysis of the estimated absorption schedules for the residential single-family detached projects in CFD No. 2003-2 2006 Series A. ~ Empire Economics 8 AGENDA ITEM NO. o(] PACE MFf1lY~6 '?? __ RECENTIEXPECTED ECONOMIC TRENDS/PATTERNS /"*' The purpose of this section is to discuss the recent/expected economic trends/patterns for the United States (US), California (CA), and Riverside County (RC), including Gross Domestic Product, employment, housing starts, mortgage rates and oil/gas prices. Recent /Expected Real Gross Domestic Product Trends/Patterns With regards to the recent/expected growth rates for Gross Domestic Product (GDP) for the United States economy, they are as follows: . During 1999 and 2000, real GDP increased at strong rates of by 4.50% and 3.70%, respectively. . Then, in 2001 and 2002, as the economy slowed, real GDP increased by only 0.80% and 1.60%, respectively. . In 2003 and 2004, as the economy rebounded, real GDP increased by some 2.70% and 4.20%, respectively. . For 2005, real GDP growth moderated somewhat to a rate of 3.15%. . For 2006, real GDP is expected to moderate further to a rate of some 2.85%. .,...-.. Next, with respect to the actual/expected rates of change for the various components of real GDP for 2005 as compared to 2006 are as follows: . Consumption, which increased at some 3.28% in 2005 is expected to moderate to a rate of some 2.78% in 2006. . Business investment, which increased at some 7.00% in 2005 is expected to moderate to 4.83% in 2006. . Finally, with respect to government purchases, which grew at a rate of 1.65% in 2005 are expected to increase by 2.13% in 2006. Therefore, comparing the rates of growth for the various components of real GDP for 2006 as compared to 2005 reveals that the overall rate of growth is expected to moderate somewhat while among the various sectors, consumption and investment are expected to moderate while the rate of growth for government spending rises. UNITED STATES REAL GDP AND ITS COMPONENTS: ANNUALLY /"*' 12% ~ '0% /'.. ..;j .% < .,/ .~ ;;> ... ~ 6% ....::::!! I -.... < -g - - . 4% -.. ~ ~ '>0..- ...r.. fol ~ ~ 2% bl'l(1I 02YI Z R ~ ~ ~ R%I ~ ~ ~ 0% t>Q';J u / roo. -2% 0 \ / fol !- ..% ;! ..% \ .J -.% \/ -'0% 2003 200S 2006 1999 2000 2001 2002 2004 lSZSZlUS: Overall 4.50% 3.70% 0.80% 1.60% 2._ 4._ 3.15% 2.85% I-Consumotion 4_ 4._ 2._ 2.70% 2._ 3."'" 3.28% 2.78% """'-lnvcstmCllt 6.20% S._ -8.""" -5.50% 6._ 9._ 7.""" 4.83% - 'Government 3.70% 2.10% 3._ 4._ 2._ 2.10% 1.65% 2.13% Empire Economics 9 AGENDA ITEM .rw~ ~ PAGe tfIt< ~OO~ tt Recent/Expected Employment Trends/Patterns With regards to the recent/expected growth rates for employment, these are now discussed for the United States, California, and Riverside County economies, both on an annual as well as a quarterly basis. ......" For the United States economy, the recent trends/patterns for employment have been as follows: · In 1999 and 2000, employment growth was strong, some 2.44% and 2.20%, respectively. · Then, in 2001, due to the economic slowdown, employment was virtually stable. · For 2002, employment declined by -1.13%., followed by a decrease of -0.26% in 2003. · In 2004, as the economy moved into its recovery phase, employment rose by some 1.13%. · For 2005, as the economy expanded further, employment rose by 1.64%. · For 2006, as the economy slows, employment growth is expected to moderate to 1.25% California's employment followed a generally similar pattern: · Strong rates of employment growth in 1999 and 2000 of2.90% and 3.50%, respectively. · Then in 2001, employment rose only moderately, some 0.80%. · However, in 2002 to 2003, employment declined to -0.99% and -0.45%, respectively. · For 2004, the economy moved into a recovery, with an employment gain of 1.02%. · In 2005, the economy had stronger growth, with employment rising at a rate of 1.54%. · For 2006, as the economy slows, employment growth is expected to moderate to 1.10% Riverside-San Bernardino (R-SB) counties, on a comparative basis, have performed favorably: · R-SB counties experienced strong, though diminishing, rates of employment growth during 1999-2002, from 6.44% in 1999 to 3.38% in 2002. · Employment growth moderated in 2003, with a growth rate of3.26%. · Then, in 2004, employment rose at higher level of some 4.60%. ......." · For 2005, employment growth moderated to a rate of some 2.00%. · For 2006, the rate of employment growth is expected to moderate further, to some 1.45% Therefore, during 2006, the United States, California and R-SB counties economies are all expected to experience lower rates of employment growth. UNITED Sf ATES. CALIFORNIA & RIVERSIDE - SAN BERNARDINO COUNTIES RECENT~ECTEDEMPLOYMENTTRENDS:ANNUALLY 7% >< ....... 6% ~ ..l g 5% ~ f"-- ..A 4% .7 '\ . -" ~. ~ 3% -, "" ;z; :a 2% ~ '\. ".,..,.,,- u --- fo. 0 1% ~ " ~ ~ ~ ~ 0% ~ ~ .1% .2% 2004 1999 2000 2001 2002 2003 2005 2006 iir:JDUnitcd Stites 2.44% 2.20% 0.00% -1.13% -0.26% 1.13% 1.64% 1.25% -Clllifomi. 2.90% 350% 0.80% -0.99% -0.45% 1.02% 1.54% 1.10% +R SB 6.44% 5.26% 4.18% 3.38% 3.26% 4.60% 2.O<W. 1.45% "'" Empire Economics 10 "(;EN:;t~~i ~ ~ Recent/Expected Trends/Patterns for Housing Starts "",.- With regards to the recent trends and patterns for housing starts, they are as follows: · The United States housing market experienced a strong growth during the 2000 to 2005 time period, with the number of new homes rising from 1,573,400 in 2000 to 2,044,125 in 2005. For 2006, the United States housing market is expected to moderate to some 1,803,550 new homes, due to the combined impacts of a slowing economy as well as higher mortgage rates. · For the California housing market, housing starts have had strong growth during 2000 to 2005, as the number of new homes rose from 139,073 in 1999 to 212,954 in 2005. The California housing market is expected to decrease somewhat in 2006 to some 183,180 new homes, also as a result of a slowing economy and higher mortgage rates. . Finally, with respect to Riverside County, housing starts rose dramatically during the 1999- 2004 time period, from 14,577 homes in 1999 to 35,696 homes in 2005. For 2006, the level of activity is expected to moderate somewhat, to some 29,740 homes, due to the expectation of higher mortgage rates as well as higher gas prices. So, for 2005, the United States, California, and Riverside County housing markets are expected to decline somewhat from their 2005 levels, Que primarily to higher levels of mortgage rates as well as higher gas prices. "......... UNITED STATES, CALIFORNIA AND RIVERSIDE COUNTY HOUSING STARTS: ANNUALLY ..... 2,000,000 1".000"""'" -~ ~ -- .. ... ~ tn ? w S -- .. -' 1,500,000 ~ ~ tn ...- 0 W I- Z 1,000,000 ::) 500,000 A. - ..... 0 1999 2000 2001 2002 2003 2004 2005 2006 - Left: United States 1,663,100 1,573,400 1,601,200 1,712,340 1,858,760 1,963,700 2,044,125 1,803,550 ...... Right: California 139,073 148,540 148,757 164,318 194,882 210,150 212,954 183,180 -Right: Riverside County 14,577 17,692 19,890 20,990 28,366 33,870 35,696 29,740 2 500 000 250,000 200,000 ~ Z ::) 0 0 150,000 0 Z ~ ~ 100,000 Z 0:: 0 I&.' ::::i 50,000 ~ 0 0 "......... Empire Economics 11 Od- AOENDA 'lfa'o/1cp.QQfJ PACE '? OF 311-- RecentJExpected Trends in Mortgage Rates The recent/expected trends/patterns for mortgage rates, including the 15 year fixed rate mortgage, as '-'" well as the 1 O-year Treasury Bond which influences the 15 year fixed rate mortgage, and the 1 year adjustable, are now discussed: · During the 2000 to 2003 time period, the rates on the 10-year Treasury Bond, 15 year fixed mortgage and the 1 year adjustable mortgage all declined: the 10-year Treasury Bond from 6.00% to 3.95% (-2.05%), the 15 year fixed mortgage from 7.73% to 5.17% (-2.56%), and the 1 year adjustable mortgage from 7.05% to 3.76% (-3.29%). ' · From 2003 to 2005, the rates started to rise: on the lO-year Treasury Bond from 3.95% to 4.29% (+0.34%), the 15 year fixed mortgage from 5.17% to 5.42% (+0.25%), and the 1 year adjustable mortgage from 3.76% to 4.49% (+0.73%). · For 2006 as compare to 2005, the rates are expected to rise further, the lO-year Treasury Bond from 4.29% to 4.75% (+0.46%), the 15 year mortgage from 5.42% to 6.07% (+0.65%), and the 1 year adjustable mortgage from 4.49% to 5.44% (+0.95%). So, during 2006, financial rates are expected to rise at a faster pace, with an increase in the 10-year Treasury Bond driving up the 15 year fixed rates by some 0.65% while the increases in the federal fund rate by the Federal Reserve Board drives up the 1 year adjustable rate mortgages by some 0.95%. UNITED STATES MORTGAGE RATES: ANNUALLY ~ "',..,.-.- -.-..-.-. 2002 2003 2004 2005 2006 4.60% 3.95% 4.27% 4.29% 4.75% 4.62% 3.76% 3.88% 4.49"10 5.44% 5.98% 5.17% 5.20% 5.42% 6.07% 6.54% 5.83% 5.97% 5.87% 6.51% Empire Economics 12 '-'" . .;3).- ACENDA ITI:M J~~ PACi~arl~!I(f)f ::r-t1--- ~ Recent/Expected TrendslPatterns for Gas Prices in California With regards to the recent/expected annual gas prices per gallon in California, they are as follows: . From 1999 to 2000, California gas prices rose significantly from $1.47 to $1.77, respectively, an increase of some $0.30. . Then, gas prices declined to $1.62 in 2002, a decrease of -$0.12 from $1.74 in 2001. . However, with the invasion of Iraq and uncertainty in the Middle East, California gasoline prices rose dramatically to $2.23 in 2004, an increase of $0.61 from 2002. . For 2005, gas prices rose further to $2.61, an additional increase of some $0.38 from 2004. . For 2006, gas prices are expected to decline slightly, to some $2.51, a decrease of some $0.10 from 2005. So, during 1999 to 2005, California gas prices have risen sign~ficantly, by some $1.14 per gallon but they are expected to decline slightly in 2006, by some $0.1 O. CALIFORNIA GAS PRICES: ANNUALLY /'" ~ ~ ;J ~ < I r"l U ; j:l., 3.00 $2.50 $2.00 I ~ OO<X $1.50 $1.00 SO.50 $- 1999 2000 2001 2002 2003 2004 2005 2006 1&1 Gasoline Prices - CA $1.47 $1.77 $1.74 $1.62 $1.94 $2.23 $2.61 $2.51 $ ~ Empire Economics 13 3, AGENDA ITE(3!7h 1, 266~ PACE f OF ~ SOCIOECONOMICS CHARACTERISTICS: CRIME LEVELS AND THE QUALITY OF SCHOOLS ......., When households consider the purchase of a home, the primary factors are the location (relative to their place of employment) and price (within their income/affordability levels). Furthermore, secondary socioeconomic factors that are significant are the safety of the neighborhood as well as the quality of the schools; accordingly, these are now discussed. Crime Levels and Neie:hborhood Safety To gauge the safety of Riverside County and the CFD No. 2003-2 2006 Series A Neighborhood Area, information on crime levels was obtained utilizing the most recently available data from the Federal Bureau ofInvestigation (FBI) Index. The FBI Crime Index represents a compilation of crime data using the Uniform Crime Reporting system to ensure reliability and consistency among various geographical areas. The FBI Crime Index has two components for crime: violent crime and property crime. Violent crime consists of murder and non-negligent man-slaughter, forcible rape, robbery, and aggravated assault. Property crime consists of burglary, larceny-theft, motor vehicle theft and arson. For the state of California, approximately 88% of all crimes are property crimes whereas 12% are violent crimes. However, it should be noted that thesl:? statistics do not measure the "human or emotional" reactions of individuals to different types of crime. To adjust for the population differences of various geographical areas, Empire Economics divides the crime levels by the population to represent the number of crimes per 1,000 people. For California, as a whole, the average crime rate is approximately 40.2 per 1,000 people per year. For Southern California the rate is 39.1, which is slightly lower than the state average. While for Riverside County, the rate is 45.0, somewhat higher than for Southern California and also California. ......, According to the FBI index, Riverside County has a crime rate of about 45 per 1,000 people per year. With respect to the CFD No. 2003-2 2006 Series A Neighborhood Area, which includes the City of Lake Elsinore, has a slightly lower crime rate, some 43.4. RIVERSIDE COUNTY CRIME RATES BY CITY * DESIGNATES CITY IN THE CFD MARKET AREA 120 w 100 Riverside Gnunlv Averane: 45.0 -' ~ A- 0 W A- D 80 ~ ~ :::) 0 j!; 60 w '\. * z 0 Ill: W 40 A- 13 :Ii ii! ~ u 2: ~ ~ ~ ! ! J j l:" j j i i <;< ! f I I I J f f t 1 ~ i 6 ! ~ j ~ ~ ~ l ! 1 ......, Empire Economics 14 AGENDA ITEM n:3}' March 11 ?f/7 PACE OF ~ Quality of Schools and Education ~ To gauge the quality of schools in Riverside County and the CFD No. 2003-2 2006 Series A Neighborhood Area, information was compiled on educational achievement, specifically the SAT I scores. F or the Southern California counties, as a whole, the SAT I scores (with 1,600 being the highest possible) were at a level of 1,014 and this is similar to the scores for California as a whole, some 1,015. While for Riverside County, in particular, the SAT I scores amount to 963, somewhat below the overall averages for California and also Southern California. For Riverside County, the average SAT I score was 963. For the school district in the CFD No. 2003-2 2006 Series A Neighborhood Area, the Lake Elsinore Unified School District, their SAT I score amounts to 982, and this is somewhat higher than for Riverside County as a whole. f-o V Ea f-o 1600 '" 8 = v < 1400 r.l~ llIlO 0- ~f-o r.l~ 1200 .~~ ~ !:~ 1000 <0 ...:lS:: ~~ 800 !:~ ~6 600 =~ ~~ rii 400 ~ 0 V '" f-o < '" SAT I TEST SCORES: MATH AND VERBAL AVERAGE ( * DESIGNATES SCHOOL DISTRICT IN THE CFD) Riverside County Average: 963 / * 1013 1031 1034 ]039 ^U O~~ 966 969 970 982 Q1? ':I~l ':I~'t 833 u, U 7~1 -g -g -g '" -g -g -g -g -g -g -g .d -g -g -g -g '" -g " .. " '+= '+= '+= '+= '+= '+= '+= '+= '+= '+= '+= :E '+= '+= '+= '+= '+= '+= 8 '2 'E 'E 'E 'E 'E 8 'E 'E 'E 'E 8 8 8 'E 8 ::J ::J ::J ::J ::J ::J ::J ::J ::J c ::J ::J 0 2 .. " " g .. ] >> '" ~ 0 8 " e t$ >> E >> c ~ "E 1 ..2 .. e '" ..2 " .~ .S c 5 "c 0 s ~ :;; ~ ~ '* OJ 'C 0 .~ c " OJ < > c.. fI) z 1>' '" :r: > lil > .!l! ~ OJ 0 0 fI) t: 2 ii2 Iii tl " .. > OJ 5 c S !l p... " ~ 8 }1 p... fI) e OJ Cl g j .~ ~ 0 p... 0 " ::E u ::E Ii I- Therefore, from a socioeconomic perspective, Riverside County has a somewhat higher crime rate and a somewhat lower educational achievement level than California and also Southern California, as a whole. By comparison, the City of Lake Elsinore, wherein CFD No. 2003-2 2006 Series A is situated, has a slightly lower crime rate and the school district has a slightly higher educational achievement level than the county as a whole, and so CFD No.2003-2 2006 Series A is considered to be in a generally desirable socioeconomic area. .---- Empire Economics 15 AGENDAIIf~~.. PACE:t'1l-0F~., COMPETITIVE MARKET ANALYSIS OF THE PROJECTS IN THE CFD NO. 2003-2 2006 SERIES A COMPETITIVE HOUSING MARKET AREA .~ The purpose of this section is to provide an overview of the currently active Planned Communities and their projects in the CFD No. 2003-2 2006 Series A Competitive Housing Market Area, and then to compare these to the expected characteristics of the active/forthcoming residential single-family detached projects in CFD No. 2003-2 2006 Series A. The CFD No. 2003-2 2006 Series A Housing Competitive Market Area currently has six Major Planned Communities (PCs) that are located in the City of Lake Elsinore: Shore Pointe II, Serenity, Canyon Hills, Rosetta Canyon, Alberhill Ranch and Tuscany Hills. These PCs, with their fourteen active projects, along with CFD No. 2003-2 2006 Series A, with its five active/forthcoming projects, have a total of 2,431 housing units: 1,776 homes in the currently active projects in the PCs and another 655 homes in the active/forthcoming projects in CFD No. 2003-2 2006 Series A; additionally 618 of these homes have closed escrow. ~ CFD No. 2003-2 2006 Series A: 5 active/forthcoming projects with 655 homes. ~ Shore Pointe II: 2 projects with 214 homes of which 135 have closed escrow. ~ Serenity: 2 projects with 232 homes of which 11 have closed escrow. ~ Canyon Hills - Prior Bond: 2 projects with 219 homes of which 93 have closed escrow. ~ Rosetta Canyon: 4 projects with 509 homes of which 140 have closed escrow. ~ Alberhill Ranch: 2 projects with 343 homes of which 92 have closed escrow. ~ Tuscany Hills: 2 projects with 259 homes of which 147 have closed escrow. .~ CFD NO. 2003-2 2006 SERIES A COMPETITIVE HOUSING MARKET AREA: MARKETING STA TUS OF THE PROJECTS 19 Escrows Closed t2I Future Units 655 Shore Canyon Rosetta Alberhill Tuscany Pointe II Serenity Hills - Prior Canyon Ranch Hills Bond 135 II 93 140 92 147 79 221 126 369 251 112 ~ Empire Economics 16 3.>- h\I&;NUt\ II t.m .'iv. p_~~ OF ?Jfl The prices of homes in these projects, including the currently active comparable projects and also the projects in the CFD, are some $463,022 for some 2,596 sq.ft., on the average, and the prices for the projects in the various categories are as follows: ,.- );> CFD No. 2003-22006 Series A: $458,323 for some 2,633 sq.ft. of living area. );> Shore Pointe II: $388,490 for some 1,943 sq.ft. of living area. );> Serenity: $389,740 for some 2,176 sq.ft. ofliving area. );> Canyon Hills - Prior Bond: $416,120 for some 2,191 sq.ft. of living area. );> Rosetta Canyon: $478,615 for some 2,862 sq.ft. of living area. );> Alberhill Ranch: $514,490 for some 2,875 sq.ft. of living area. );> Tuscany Hills: $586,833 for some 3,173 sq.ft. of living area. CFD NO. 2003-2 2006 SERIES A COMPETITIVE HOUSING MARKET AREA HOUSING PRICES AND LIVING AREAS ",--. 700,000 . S6OO,OOO . . ~ S500,OOO . . ~ . . ~ $400,000 0 = ... S3OO,OOO 0 [3 ~ S200,OOO .. SIOO,OOO 10 CroNa. Shore Canyon Ro..... AlbettWl Tti.scany Totals/Aver 2003.2 Serenity Hills. Prim SericsA Pointe n Bond Cmyon Rmcb Hills - II:SLEFT: Price $458,323 $388,490 S389,740 $416,120 $478.615 S514,49O S586,833 $463,022 I.RIGI-IT: Livirul' Are. 2,633 1,943 2,176 2,191 2.862 2,875 3,173 2,596 3,500 3,000 ~ 2,500 !:! ~ 2,000 ~ 1,500 ~ 1,000 ... 0 \:'l ;;; 500 To compare the prices of the homes in these projects, their value ratios are utilized, the price per sq. ft. of living area, since this effectively makes adjustments for differences in their sizes of living areas. Accordingly, the value ratios for all of the projects amount to $181 per sq. ft. of living area and their Special Taxes/Assessments amounts to some $2,839/yr. (0.61% as a ratio to the housing prices); accordingly, the value ratios and Special Tax/Assessment characteristics for the product types in CFD No. 2003-2 2006 Series A and the currently active comparable projects are as follows: );> CFD No. 2003-2 2006 Series A: expected value ratio of $177 and the Special Taxes/Assessments amountto $1,793/yr. (0.39%). );> Shore Pointe II: expected value ratio of $202 and the Special Taxes/Assessments amount to $3,302/yr. (0.85%). );> Serenity: expected value ratio of $180 and the Special Taxes/Assessments amount to $2,923/yr. (0.75%). );> Canyon Hills - Prior Bond: expected value ratio of $191 and the Special Taxes/Assessments amount to $1,479/yr. (0.36%). );> Rosetta Canyon: expected value ratio of $169 and the Special Taxes/Assessments amount to $3,590/yr. (0.75%). );> Alberhill Ranch: expected value ratio of $180 and the Special Taxes/Assessments amount to $4,373/yr. (0.85%). ,.... );> Tuscany Hills: expected value ratio of $186 and the Special Taxes/Assessments amount to $3,228/yr. (0.55%). Empire Economics 17 AGENDA ITEM NO. 2>.).- PAO~l. 2fGF~1 CFD NO. 2003-2 2006 SERIES A COMPETITIVE HOUSING MARKET AREA VALUE RA nos AND SPECIAL TAXES S300 S5,OOO ~ . S4,500 I S250 < S4,OOO " ~ . S3,500 ; S200 183 ~ S3,OOO .. suo S2,500 a 8 ~ S2,OOO ~ ~ SIOO I- g [;j SI,500 ... 3 ~ $50 SI,OOO U S500 OJ .. '" so so CFD No. Sho.. Canyon Rosetta A1berbill Tuscany Totals/Aver 2003-2 Serenity Hills - Prior Series A Pointe D Bond Canyon Ranch 1J111s ages I!I LEFT: Value Ratio $177 $202 S180 $191 S169 SI80 SI86 SI81 . R1G1IT: Soecial AssmtITax SI,793 S3,302 $2,923 SI,479 $3,590 $4,373 S3,228 S2,839 ,....." The currently active residential projects have experienced a sales rate/escrow closings at a rate of some 785 homes per year, for an average of some 56 units per project per year; the distribution of these sales among the various PCs/Projects is as follows: ~ Shore Pointe II: an overall sales rate of90 homes annually, some 45 per project/average. ~ Serenity: an overall sales rate of 110 homes annually, some 55 per project/average. ~ Canyon Hills - Prior Bond: an overall sales rate of,l05 homes annually, some 53 per project/ average. ~ Rosetta Canyon: an overall sales rate of 240 homes annually, some 60 per project/average. ~ Alberhill Ranch: an overall sales rate of 125 homes annually, some 63 per project/average. ~ Tuscany Hills: an overall sales rate of 115 homes annually, some 58 per project/average. ,....." CFD NO. 2003-2 2006 SERIES A COMPETITIVE HOUSING MARKET AREA SALES RATES 1,200 100 . 63 80 1,000 60 >- 53 . . 60 ~ 45 . . :>- . 40 I ~ 800 ~ 20 6 :>- ~ '" 600 '" ~ .. ~ ~ 400 3 :i 200 Shore Pointe II Serenity Canyon Hills - Rosetta Canyon A1berl!ill Ranch Tuscany Hills Totals/Averages Prior Bond ,..., Empire Economics 18 3). AGENDA ITiNr~ 700" PACE 90'0 OF 1f/7 _ ,,-, ,.- ~ I ! ~ ~ ~ ~ ~ s s ~ ~ ~ ~ ~ ~ ~ ~ ~ '" ~ ~ ~ 5 ~ '" ~ 5 ~ '" I ill ~ ~ d d d d d d d d d d d d d d d d d d d '" '" '" '" '" '" '" I ] .. ! ~ ~ ~ ~ ::! I:! L'l ~ ~ a ~ Ii E ~ iil ~ ~ ~ l1 ~ ~ ~ J .! ~ ~ ~ ~ a ;; wi Oi Ii II Oi wi Ii Ii ;i ;i :. II Ii ;( ::i ;;; ;( :; ~ ! j Ii ! ! II ! ~ ! ! a I ~ ~ a ! ~ ~ ! ! [ ~ s a ~ a ~ ;; Oi Oi ;;; a ;;; ~ ;;; ;;; ! ! ! i! ! ~ ~ ~ i! ~ ~ 5 ~ ~ ~ 8_ 0 !! ! ~ !i: ; ~ ~ N ~ ~ ~ ::r .. ~ ~ N N N N N N ~ N .. . ~ ~ .. .. N N N N ..; ..; ! ! t l ! ! ! ! .. ! I ! ~ !; ~ ~ ~ il tfi ~ ~ ~ 3 ~ ~ N N .. N N N .. N ~ N .. N ;:; ;:; N ;< ..; N .. ~ 4 ! 3 5 S i ;;; iii ~ .. !i! !1 i !! i ~ 0 :l ~ Ii ~ ~ 5 r: ~ ~ 2 .. N - ..; ~ - N ~ N N .. 0 N N N ::l N N N N I ~ ~ ~ ; ~ i! i! i! i! ~ i! Ii! i! Ii! Ii! i! i! ~ ~ ~ ~ ~ ~ ~ ~ i ~ i ~ l:i ill ::i i'i ~ d ! i N I i .. i ~ ! s .. .. ~ ~ ~ II :. II :. Ii i i i i ;l; :: :i J t I ~ ~ 0 iii ; i i! i ~ ~ i! i! i i! i i !! ill E ; ~ ~ ~ ~- i .. j f i ! I I a ! ~ ! ~ ! i i ::l a .. ! ~ a .. ~ 5 i ~ a :. .. :: ! r ; ~ ~ ~ ; i! i! i! ~ .. i! i! i! i! Ii! i! ~ ~ ; ~ ~ ~ ~ ~ ~ ~ i S ~ ! a a a i ! ! i ! . a i a a ;; ..; ~ ::; . ! :: ! i ~ ~ ~ ~ l!! 1I 1I l;l Ii! ill 0 !! Ii! Ii! ~ lil 1I lil :! l!! ~ ~ ~ E z . z - - ~ ! 1 ! ~ j 11 ~ ~ 13 l' ~ 0 ~ ~ ~ l;l II II re II ~ ~ ~ ~ 3 i - - ~ . - - E l ~ ~ ~ ~ ~ ~ :ll !! 0 :: re :; !! ~ 0 0 iQ ill :;; Ii! ~ - = :;: ! ;: - ~ ! 11 ~ ~ I .. ~ ~ ~ :; iil III !1 ~ ~ !'1 . N f:i N ~ >: N ;; - - ~ - ! j !! !l I ~ II II !il !il ~ ~ ~ 8 8 8 ~ 8 8 ~- ~ . N N N . N N ~ f .! .. .. .. .. .. ~ .. .. . .. .. .. .. .. ~ ~ .. .. t j j I j J j j ~ j j J J ~ j j ~ J I ~ ~ :l! :l! :l! ~ l!! 2 2 " J i J ~ J J .. .. j z ~ ~ ~ $ ~ ~ a : j ~ ~ ~ . . s s ~ S ~ ~ 5 2 2 ! t .. I I j i ~ ii i ~ I i s i ~ 1 1 ~ 8 ~ il j JI ~ E I i i : ~ . j l! " ~ ij i s s ~ l ~ ~ 15 ~ ~ ~ ~ ~ ~ I I I I I I .B ~ ! ;i ;i f f . ~ ~ ~ 11 i J i i i ., i ~ 1 j; ~ ~ ij ~ JI , ~ ;f ;f j ! E ! i , i i . 5 5 Jl i i J ! ! i ~ i i i ~ i 6i 6i ~ ~ -. ~ ~ ~ ~ ~ ~ ~ ~ -;j r i i I ~ ij ij j ~ ~-d- ACENDA \TE~c%- _~ PACE_ Of_ \0 o o N ..c:: o ; ::E 0\ '" o .s o l:: o o ~ <ll ... .~ ~ < rfj ...., ~ rfj ....... ~ ~ ....... ~ 5 ~ rfj ~ \0 0 0 \0 ::s N 0 - 0 0 ..d ~ N U ::E N Q I ("r) ~ 0 ~ 0 N . 0 ~ z ~ Q ~ ~ =r:: u ~ ~ ~ 0 0 ~ rfj 0 Z N < ...., ~ 0 ....... ~ < ~ u ~ 0 ~ ~ < ~ ::s < c.:I ~ ~ ....... >< rfj 0 ~ ~ 0 ~ =r:: ~ -..."", ESTIMATED ABSORPTION SCHEDULES FOR THE PROJECTS IN CFD NO. 2003-2 2006 SERIES A (CANYON IDLLS) ,........ The purpose of this section is to estimate the absorption schedules for the active/forthcoming residential projects in CFD No. 2003-2 2006 Series A; accordingly, this is based upon a consideration of the following: First, the potential demand schedules for the residential projects for CFD No. 2003-2 were derived, based upon a consideration ofthe following: ~ The growth prospects for the Southern California Market Region, in general, and Riverside County, in particular. ~ How much of this growth the CFD No. 2003-2 2006 Series A Market Area is expected to capture, in particular. ~ The proportion of the Market Area demand that is expected to be captured by the projects in CFD No. 2003-2 2006 Series A, based upon an evaluation of their competitiveness in the marketplace. ~ For currently active projects in the Competitive Housing Market Area, their recent sales rates. ~ Expected changes in the current sales rate due to anticipated higher levels of mortgage rates during the foreseeable future when the projects in CFD No. 2003-2 are on the marketplace. --- Thus, the result of this analysis is the POTENTIAL demand for the residential projects in CFD No. 2003-2 2006 Series A. Next, the ability of the residential projects in CFD No. 2003-2 2006 Series A to respond to this demand is estimated. Accordingly, the infrastructure development schedule for the residential projects was obtained from the developer/builders. Specifically, this represents, from a time perspective, when the projects will have the infrastructure in place that is required to support their development. So, the result of this analysis is the INFRASTRUCTURE DEVELOPMENT of the projects in CFD No. 2003- 2 2006 Series A, and this reflects their ability to respond ~o the demand in the marketplace. Then, based upon a consideration of the POTENTIAL demand and the INFRASTRUCTURE DEVELOPMENT, the absorption rate for the residential projects are calculated, from the year in which the projects are expected to enter the marketplace, and continuing thereafter on an annualized basis, until all of the units are occupied. The application of this algorithm results in the absorption schedules for the projects in CFD No. 2003- 2 2006 Series A; absorption represents the structures being constructed as well as being occupied by households. Accordingly, the estimated absorption schedules for the 655 active/forthcoming homes in CFD No. 2003-2 2006 Series A are as follows: r--- Empire Economics 21 3;L.. ACEN=fM~0660F;;;n-- ~ _. ..-~.".1 ~ Cross Creek by Pardee has a total of some 123 single-family homes on lots of some 6,638 sq.ft. that are priced at some $369,500 to $429,500, an average of $398,785, for 1,671 to 2,439 sq.ft. of living area, an average of2,044 sq.ft., for a value ratio of$195. These homes commenced escrow closings during 1 st_2006, and are expected to be absorbed at a rate of 60 homes in 2006 and then the remaining 63 homes in 2007. ~ ~ Weatherly by Pulte is anticipated to have a total of some 131 single-family homes on lots of some 6,525 sq.ft. that are priced at some $423,000 to $453,000, an average of $437,733, for 1,949 to 2,458 sq.ft. of living area, an average of2,196 sq.ft., for a value ratio of$199. These homes are expected to commence escrow closings during 2nd -2006, and be absorbed at a rate of 55 homes in 2006, another 55 homes in 2007 and then the remaining 21 homes in 2008. ~ Briarcliff by Pardee has a total of some 111 single-family homes on lots of some 5,895 sq.ft. that are priced at some $441,400 to $481,900, an average of $464,098, for 2,485 to 3,085 sq.ft. of living area, an average of 2,796 sq.ft., for a value ratio of$166. These homes commenced escrow closings during Ist-2006, and be absorbed at a rate of 55 homes in 2006 and then the remaining 56 homes in 2007. ~ Bridgegate by Pardee is anticipated to have a total of some 147 single-family homes on lots of some 8,275 sq.ft. that are estimated to be priced at some $475,000 to $560,000, an average of $505,510, for 2,960 to 3,699 sq.ft. of living area, an average of 3,258 sq.ft., for a value ratio of $155. These homes are expected to commence escrow closings during 4th -2006, and be absorbed at a rate of 10 homes in 2006, 50 homes in 2007, another 50 homes in 2008, and then the remaining 37 homes in 2009. ~ ~ Alderbrook by Pardee is anticipated to have a total of some 143 single-family homes on lots of some 6,888 sq.ft. that are estimated to be priced at some $450,000 to $520,000, an average of $485,490, for 2,607 to 3,103 sq.ft. of living area, an average of 2,869 sq.ft., for a value ratio of $169. These homes are expected to commence escrow closings during 3rd -2006, and be absorbed at a rate of 25 homes in 2006, 50 homes in 2007, another 50 homes in 2008, and then the remaining 18 homes in 2009. The 655 single-family detached homes in CFD No. 2003-2 2006 Series A are expected to be absorbed during the 2006 to 2009 time period. The rate of absorption amounts to some 205 homes in 2006 as the projects enter the marketplace, increases to 274 homes in 2007 when all of the projects are on the marketplace for the entire year, and then the remaining 121 homes in 2008 and 55 homes in 2009, as the projects are closed-out. ~ Empire Economics 22 AGENOAITEM~ 3?- PAGE ~~~ ,,-..- The expected absorption schedule for the projects in CFD No. 2003-2 2006 Series A can also be expressed as a capture rate of the expected market demand for the CFD No. 2003-2 2006 Series A MA, the southwestern portion of Riverside County. Specifically, the capture rate reflects the percentage of the MA's demand that is fulfilled by the absorption of the homes in CFD No. 2003-2 2006 Series A. With respect to the capture rates of the demand in the Market Area, they are as follows: In 2006, as the projects enter the marketplace and commence escrow closings, the CFD No. 2003-2 2006 Series A's capture rate on the MA's demand is some 5.8%. Then, during 2007 when all of the projects are on the marketplace, the capture rates rise to some 7.3%. Finally, in 2008 and 2009, as the remaining homes in the projects are closed-out, the capture rate declines to some 3.1 % and 1.3%, respectively. For the 2006-2009 time period, as a whole, the overall capture rate amounts to some 4.2% of the demand in the Market Area, on the average. The estimated absorption schedule for the residential projects in CFD No. 2003-2 2006 Series A is subject to change due to potential shifts in economic/real estate market conditions and/or the development strategy by the developer, Pardee, and the builders, Pardee and Pulte. For additional information on the estimated absorption schedules for the residential products in CFD No. 2003-2 2006 Series A, please refer to the following table and graphs. Please refer to the section following the tables and graphs of the estimated absorption schedules for- the forthcoming residential products in CFD No. 2003-2 2006 Series A for a discussion of the "Potential Financial Risk Factors Underlying Land Secured Financings in Southern California." ~ "...... Empire Economics 23 3'J- AOENDAITEr~( J~ PAGE ,Of ESTIMA TED ABSORPTION SCHEDULES CITY OF LAKE ELSINORE CFD NO. 2003-2 2006 SERIES A March 1, 2006; Subject to Revision iProled N.... c..... Creek W.dtem - B"'_" Aldrinok AD._ 0unuI. ""...... PanIoe PuI.. Purlec Pmdoe PuI.. 1Pt.-....Anu> 21A 21B 22 23 24 IT-bI Lei Siu 6,638 6.525 589S 827> 6888 ............... S....~Founilv S....~ounilv S~Founilv Sm.Ie-Founilv Sirw1e-Familv ....Un.. 123 131 III 147 141 655 S..... 18.8% 20.()t.4 16.9% 224" 21.1% 100.0% u..mer.fUnt.. I'Ia .. 14 38 21 32 47 I'Ia OJ 40 43 27 18 47 I'Ia OJ 52 50 32 25 49 I'Ia .. 17 31 37 I'Ia * S 35 Totok 123 131 III 147 143 65S Lhin- A_ I'Ia .. 1671 1949 2.485 2960 2,601 PIon OJ 1,918 2,110 2.679 3,073 2,888 PIon OJ 2,113 2.458 2,820 3070 3,103 PIon .. 2.439 3,085 331S Pl.... S 36"" Ann.. 2.... 2196 2.796 USII 2,86' 2655 rk:ct - E.dmatN . Estima~ .. Estimated" PIon * I S369500 $423,000 S44I,400 $475000 $450,000 Pl.... 2 $390 SOO $433,000 S4S7 990 1480,000 $485,000 .....OJ $403,000 $453 000 S466 900 $480 000 $520 000 ....... $429,500 $481,900 5510,000 ......S S56O,OOO Alien_ S,," 78S 5431 733 S464 .,. S""". S41S,4" S4,,,,24 aJue Rallo: PriceIl.JvIn. Ara $195 $1"" $166 $155 $169 $173 AIt.....doII; EK,.w CIodnRl 1st 2006 2nd-2006 IIt-2006 4th-2OO6 3rd-2OO6 2006 60 55 55 10 25 205 205 2007 63 55 56 50 50 274 479 2008 0 21 0 50 SO 121 600 2009 0 0 0 37 18 55 655 To"" 123 131 III 147 143 65S '" ....." ....., Empire Economics AGENDA~~~ PAOli po> OF.2t!J.... 24 "......., ~ < 00. ~ ;~ ~~ oo.~ \C~ =~ ~= u -- 00. ~z ~o l-04 l-04 =~ z~ 00 ~oo. ~~ ~~ N~ I~ g~ N~ .~ 000. Z~ ~ ~ U ,.,--. o o M o or) N o o C'l o o ...... o tr) o tr) ...... A~~VilNNV-SmwOH~OH39wnN 0\ o 00 r- o .- M C'l 00 o 0 0 o tr) or) C'l 000 o N 0 r- o OOl.Oor)M o or) or) or) or) 1.0 C'l 1.0 o or) 0 or) or) 0 o C'l ...... tr) tr) \0 C'l o ~ 0 8 ~ ~ ~ ~] "C:l 'I:: 'I:: < tIl tIl BJ 8 ~ ~ o b e ~ u ~ ~ o 8 ~ u EO _ \0 o o N ..<:: ~ ~ V'l N rn o 's o !:: o o ~ ~ '~ ~ AGENDA fTEM NO. D -;- PAGE ~ OF 141- V3lIV ..LDIlIVW O..L O.!l::>.!IO :iI..LVlI IDIIl..LdV::> "'" '*- '*- '*- '*- '*- '*- '*- '*- '*- '*- 0 ~ 0 0 0 0 0 0 0 0 0 0 ..... 0\ 00 r-- \0 V) '<t t") N ..... 0 0\ 0 \0 \0 0 V) N ~ 0 N '<t 0 I V) N N ~ ~ r-- \0 trl ..,r 0 ..... - ~ 0 N ..d ~ 0 a ::E ~~ ~~ =~ z< OU ~~ 0\ t") '*- 0 V) V) Uoo 0 V) ."f' "'1 '-"< N <~ oo~ ~~ ~~ V) ~ \0 ~oo 00 0 ..... V) N "'" 00< 0 N O\~ - ~ ..... M N t") ~~ g~ N;:J N~ I~ a= r-- '<t 00 ~ 0 V) r-- r--~ ..... =U 0 N r...: ~oo N ..... Oz ZO ~~ U~ \0 V) 0 '*- 0 \0 '" 0 0 III 00 0 0 N N ..... .,.; Os 00 0 = t:: 0 < 0 ~ 0 0 0 0 0 0 0 0 0 0 -< Q) 0 0 0 0 0 0 0 8 0 '" .... o~ 0 0 0 0 0 0 0 Q) o~ 00 .,0 ."f' N 0 00 .,0 ."f' N 01: - ..... ..... ..... ..... Q) ~ tZl N I ..... Q) 0 <tl 0 ~ ~ N NOI..Ld1IOSHV O.!l::> ONY ONVW:ilO VIDIV ..L:DmVW 0 ~ z Q) 0 ~ ~ g. u ~ u II g . ......., 3?- AGENDA ITEM NO~ PAGE d-I OF ~ __ POTENTIAL MARKET RISK FACTORS ,-.. The potential market risk factors that may adversely impact the absorption of the active/forthcoming projects in CFD No. 2003-2 2006 Series A include the recently strong rates of housing price appreciation, the surge in the number of building permits, and the potential supply of new homes in currently active Planned Communities in the City of Lake Elsinore; accordingly, these are now discussed. Recent Housing Price Appreciation: The recent housing price trends for homes in the CFD No. 2003-2 2006 Series A Market Area are analyzed utilizing both the prices of existing as well as new homes that have sold during 1988 to 2005. Housing prices decreased from a peak level of some $156,900 in 1990 to a low of some $127,900 in 1996, a decline of some -18.5% due to the economic recession. Then, with the economic recovery and subsequent economic expansion, prices rose to a record level of some $420,100 in 2005, some 168% (more than double) above their prior peak level that occurred in 1990. MARKET HOUSING PRICE TRENDS FOR EXISTlNGINEW HOMES IN THE CFD NO. 2003-2 MARKET AREA $4~O,OOO $400,000 ,-.. $3~O,ooo e $300,000 f $2.\0,000 fi !1l $200,000 ~ $1~O,OOO $100.000 $~O,OOO $0 /""". /""" / / ... /-,- 1114,171 ~... . . SlS6.Ui1 $131,161 $121,199$12'-110 $lll.1SI ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Recent Surge in New Home Building Activity The City of Lake Elsinore recently experienced strong levels of new single-family home activity during 2002-2004, and then the level of activity surged to a record level of some 1,322 homes in 2005. For multiple-family homes, the level of activity has been minimal since 1990, with 126 new units in 1997 and 62 new units in 2003, but then the level of activity also surged to a record level of some 637 homes in 2005. ,,-... Empire Economics 27 AGENDA IT,l'IlIo), ,...0 >- PACE IT OF 3f L CONSTRUCTION ACTIVITY IN THE CITY OF LAKE ELSINORE NEW SINGLE-FAMILY AND MULTIPLE-FAMILY HOMES 2,500 500 ......, ... .. I . ~ o i5 '" ro1 ~ o = r.. o llIi !il ~ :z; 2,000 1,500 1,000 o ~~ssss~~~~~i~~~~~~i~&~~~~~~~~~~g~8gg ------------------------------NNNNNN Homes in the Currently Active Planned Communities The number of homes in the currently active projects Planned Communities located in the City of Lake Elsinore amounts to some 2,431 homes, including 655 active/forthcoming homes in CFD No. 2003-2 2006 Series A. Of these 2,431 homes, only 618 homes have closed escrows thus far, and so there are another 1,813 homes remaining for future escrow closings. Furthermore, considering the rate of absorption for these projects at an estimated rate of some 785 homes per year, there is presently available a supply for 2.3 years, including homes that are presently under construction or are expected to commence construction during the next year. ....., Conclusions So, these potential market risk factors may adversely impact the absorption of the active/forthcoming projects in CFD No. 2003-2 2006 Series A, due to a potential softening in housing prices, the surge in the supply of new homes as reflected by the record levels of building permit activity, and the supply of new homes in currently active Planned Communities. Consequently in the event of a softening of the real estate market, competition among these builders for a limited number of purchasers could result in softening prices and longer absorption for CFD No. 2003-2 2006 Series A. ......" Empire Economics 28 AGENDA ITEM NO. ~1: PACE ~~06- POTENTIAL "FINANCIAL" RISK F ACTORS UNDERLYING THE CREDIT QUALITY AND BOND SIZING FOR LAND SECURED ,,-- FINANCINGS IN SOUTHERN CALIFORNIA There has recently been a substantial amount of discussion on the potential for a housing market bubble, including remarks of "froth in some local markets" by the former Federal Reserve Board Chairman, Alan Greenspan, based primarily upon the use of exotic mortgage structures; these remarks have dealt with the housing market on a national as well as a regional level. However, developing Planned Communities have characteristics that differentiate them from broader markets: they represent the marketing of new homes to purchasers at current prices that exclusively utilize current mortgage rates and financing structures, and they are also concentrated in particular geographical locations. The purpose of this section is to focus specifically on the potential implications of the recent use of adjustable rate and creative financing techniques that are presently available for home purchasers on the credit quality underlying land-secured financings in Southern California. r-- There has been a fundamental shift in the driving force underlying the recent rates of housing price appreciation, from the historical role of employment growth as the driving force to the recent role of adjustable rate and creative financing techniques as the driving force. These financial factors have been the primary driving force underling the extraordinary rate of housing price appreciation in Southern California of more than 75% since January 2002. Consequently the current levels of housing prices and land values are subject to potentially substantial downward adjustments, due to mortgage rate resets (as mortgages are adjusted from teaser rates to market rates) as well as higher short-term rates (due to rate hikes by the Federal Reserve Board). These adjustments, in turn, may cause a softening in housing prices and land values that could adversely impact the credit quality underlying land-secured financings. Creative financing refers to the use of loan structures other than fixed-rate or 1 year adjustable, including the following: interest only, payment option loans as well as initial teaser rates (below market rates that are offered only for a limited time period) with very low initial payments that result in negative amortizations (higher principal balance), less stringent lending standards such as low/no documentation, and much higher mortgage payment to income ratios, among others. Structural Shift of Factors Underlying Housing Price Appreciation Since January 2002 there has been a fundamental shift in the primary factor underlying housing price appreciation in Southern California; the primary driving force was initially declining mortgage rates as well as the extensive use of adjustable and creative financing as compared to the traditional driving force of strong employment growth. Specifically, the term "driving force" is utilized herein to refer to a SIGNIFICANT CHANGE in a major economic/financial factor that has STRONG DISCERNIBLE IMPACT on housing prices. ,.,..- Empire Economics 29 3)- ACENDA ITEMrHD.h 1 ?Ol\';; PAceJt.12LoF3iJ.-.. ~ January 2002 through June 2003: The rates on fixed 30-year mortgage loans declined to recent historic lows in June 2003, and were a driving force underlying the rate of housing price appreciation of some 13.4% on an annualized basis; however, since June 2003, fixed rate mortgages have been ABOVE their recent historic lows. "'-" ~ July 2003 to March 2004: As fixed mortgage rates rose, purchasers shifted to adjustable rate mortgages which offered significantly lower rates, and these were a driving force underlying the rate of housing price appreciation of some 18.8% on an annualized basis; however, since March 2004, adjustable rates have been ABOVE their recent historic lows. ~ April 2004 - Presently: As adjustable mortgage rates rose due to the Federal Reserve Board increasing the federal funds rate, home buyers shifted to various types of creative financial structures, and these were a driving force underlying the rate of housing price appreciation of some 24.1 % on an annualized basis; however, since Fall-2005, some lenders have started to tighten their qualification standards. Potential Adjustments for Mortgage Payments The extensive use of adjustable rate mortgages and also creative mortgage structures since June 2003 means that such homeowners have monthly mortgage payments which are subject to significant upward adjustments due to automatic mortgage rate resets as well as potentially higher interest rates: ~ Mortgage Resets (Stable Mortgage Rates) reflect the changes in mortgage payments that households with adjustable and creative mortgage structures will incur as the initial "teaser" rates are realigned with the current "market" rates. The dollar volume of mortgages subject to resets for the United States mortgage markefis expected to increase from $83 billion in 2005 to more that $1 trillion in 2007. ......, ~ Higher Mortgage Rates would result in eve~ higher monthly payments for homeowners with adjustable rate mortgages as well as creative mortgage structures; the increase in their mortgage payments depends upon the degree to which short-term rates rise. The recent use of adjustable rate and creative financing techniques by home purchasers is especially significant for residential land secured financings, since these financings are predominately for developing Planned Communities that represent the marketing of new homes to purchasers at current prices that exclusively utilize current mortgage rates and financing structures and they are also concentrated in particular geographical locations. Specific Impacts of Rate Resets and Higher Mortgage Rates on the Land Secured Credit Quality To the extent that mortgage payments rise due to various possible combinations of automatic mortgage rate resets as well as potentially higher short-term rates that directly impact adjustable rate and creative mortgages, then the credit quality underlying recent land-secured financings may be diminished in the following ways: ......, Empire Economics 30 -a" AGENDA ITEM N8Iarch 1 ~o~ PACE ~1t.COF _~ ,-... );> Lower housing prices resulting in a higher Special Tax to Housing PriCe Burden for homeowners, possibly in excess of the Issuer's policy of a maximum total tax burden, typically some 1.8% to 2.0% of the initial sales prices, even though these maximums may have been satisfied at the time that the Special Taxes were established. );> Significantly lower land values resulting in a reduced ValuelLien ratio, possibly below the Issuer's policy of typically some 3 to 1 or 4 to 1 when the bonds are sold, thereby diminishing the security for bond holders. (The Appraisal for the Bond Issue is valid only for the stated Date of Value; it is not meant to be a prediction of future values.) );> Higher levels of Special Tax delinquencies as monthly payments of owners increase resulting in diminishing the maximum Special Tax to the bond debt service coverage ratios for bond holders that may adversely impact the Issuer's ability to meet the debt service payments in a timely manner, possibly resulting in the use of the bond reserve fund. Adjustable rate mortgages (some 79% of current mortgages) have significantly higher delinquency rates than fixed rate mortgages; additionally, homeowners that use adjustable rate mortgages also have higher loan to value ratios as well, some 90% as compared to homeowners with fixed rate loans, some 81 %. Accordingly, in arriving at these conclusions, this section systematically discusses the following: /"'" 1. Recent Shift in the Primary Factors Underling Housing Price Appreciation 2. Financial Factors "Driving" Recent Housing Price Appreciation 3. Mortgage Rate Resets: Realignment of Adjustable/Creative Loans to Market Rates 4. Mortgage Rate Increases: Potential for Further Federal Reserve Board Rate Hikes 5. Specific Impacts of Higher Mortgage Rates on the Land-Secured Credit Quality This section should not be construed as a forecast that mortgage rates will rise significantly in the foreseeable future; rather, it sets forth the POTENTIAL risk factors that mortgage rate resets as well as higher mortgage rates along with the near-term policy of the Federal Reserve Board would have on the credit quality underlying land-secured financings. Empire Economics acknowledges that financial markets, due to their high degree of economic efficiency and complexity, are difficult to forecast, and, as such, the use of the term "Potential" Risk Factor is regarded as being appropriate. ,-.. Empire Economics 31 3?- AGENDA ITEM tiO:ch 1,~ PACE~OF 1 1. Recent Shift in the Primarv Factors Underlvine Housine Price Appreciation The primary factors underlying housing price appreciation in Southern California since January 2002, declining mortgage rates as well as the extensive use of adjustable and creative financing, represent a fundamental shift from the traditional factor, employment growth. '-' Specifically, the term "driving force" is utilized herein to refer to a SIGNIFICANT CHANGE in a major economic/financial factor that has STRONG DISCERNIBLE IMPACT on housing prices. ~ During 1984-2001 housing price appreciation was driven by employment growth, along with accommodating financial factors, such as stable or somewhat declining mortgage rates. During this time period financial factors played only a secondary role: for instance, during 1991-1993 when employment decreased, housing prices declined, even though mortgage rates fell by more than two percentage points from their 1989-1990 levels. ~ However, since January 2002, as housing prices escalated at strong rates, the primary fundamental factor, employment growth, has experienced only minimal growth, less than 1 % per year, on the average. Instead, housing price appreciation has been driven primarily by financial factors, particularly the use of adjustable rate mortgages and creative financing techniques. SOUTHERN CALIFORNIA EMPLOYMENT, HOUSING PRICES AND MORTGAGE RATES, HOUSING PRICE CHANGES DRIVEN BY EMPLOYMENT CHANGES 30% MORTGAGE RATES 10.31% 9.86% 7.35% ..." .. 7.26% 6.05% 25% .. ~z SINCE 2002, EMPLOYMENT GROWTII <~ 20% HAS BEEN MINIMAL YET PRICE ~~ APPRECIATION HAS BEEN STRONG !~ 15% oll. ..Jll. STRONG EMPLOYMENT ~~ RESULTED IN STRONG f,.jU HOUSING PRICE ~~ 10% APPRECIATION "'c.:l !j~ z'" ~5 5% u= 0% Empire EconomiCl -5% 1984-1988 1989-1990 1991-1993 1994-1995 1996-1998 1999-2001 2002-2005 IIIiIIIlI Employment Changes .& Mortgage Rates - Fixed ...... Housing Price Changes Sources: Empire Economics, Employment Development Department, Freddie Mac & Office a/Federal Housing During 2002 to 2005 financial factors have been the strong driving force underlying the rates of housing price appreciation. Specifically, the rates of housing price appreciation have been generally similar among all of the Southern California counties, despite their differences in geographic location, employment growth and housing supply. ~ Empire Economics 32 0'>- AGENDA ITEM .ch 1, 2006 PAGE ?-HR OF ~z:rc - ,....... ~ The rates of employment growth for the counties varied substantially during 2002 to 2005, from a low of -1.15% per year for Los Angeles County to a high of 4.60% per year for Riverside-San Bernardino counties. ~ The supply of new housing has also exhibited a wide variation during 2002 to 2005 as compared to 1999-2001, from declines of -26% in Ventura County and -14% in Orange County to increases of 80% in Riverside-San Bernardino counties. Therefore, the financial factors have been so strong that they have effectively overshadowed other possible explanatory factors such as geographical location, employment growth and housing supply. 2. Financial Factors "Drivine" Recent Housine Price Appreciation in Southern California The particular factors that have been the driving forces underlying recent strong rates of housing price appreciation in Southern California during January 2002 through 2005 are now discussed. Specifically, the factors which have driven housing prices since January 2002 started with fixed mortgage rates declining to recent historic lows, then a shift to adjustable rate mortgages, and, most recently, a shift to "creative" mortgage structures. January 2002 to June 2003: Prices Driven by Declining Fixed Rates; Fixed Rates Now Higher ~ Fixed-rate 30-year mortgage loans declined from 7.00% in January 2002 to a low of 5.23% in June 2003, and were a driving force underlying the rate of housing price appreciation of some 13.4% on an annualized basis. /"'"' ~ Since June 2003, rates on fixed rate mortgages have been ABOVE their recent historic lows and, as such, they are no longer considered to be a driving force underlying housing price appreciation. RECENT MORTGAGE RATE TRENDS: FIXED-RATE MORTGAGE LOANS 8.00% 7.00"10 6.000/. e S.OO% ~ ~ 4.00"10 < ~ ; C 3.00"/. " 2.00% TRENDLlNE FIXED RATE MORTGAGES RISE 1.00"/. FIXED RATE MORTGAGES AT HISTORIC LOWS: JUNE 2003 ,..... 0.00% leonaMIea . > " t I > " 0 f ~ " 0 f ~ " 0 ~ ... << '[ << 5 << ~ << 5 ~ :; 1\ ~ :; ~ :; 1\ ;., ~ ~ ;., 8 ~ 8 ~ ~ 8 .. Sources: Empire Economics & Freddie Mac Empire Economics 33 2,').. ACENDA ITEM N&1arch 1 7001\ PACE-2Ll-OF .,"1-, July 2003 to March 2004: Prices Driven by Adjustable Rate Loans; Adjustable Rates Higher ~ Starting in July 2003, as rates on fixed rate mortgages rose, households shifted to adjustable rate mortgages which offered favorable terms, due to the Federal Reserve Board maintaining a low federal funds rate, and these attained a recent historic low of 3.41 %. During the July 2003 to March 2004 time period, adjustable rates were significantly below fixed rates of by some 215 basis points. The use of adjustable rates were a driving force underlying the rate of housing price appreciation of some 18.8% on an annualized basis. ~ Since March 2004, the rates on adjustable rate mortgages have been ABOVE their recent historic lows, and, as such, they are no longer considered to be a driving force underlying housing price appreciation. RECENT MORTGAGE RATE TRENDS: I-YEAR ADJUSTABLE RATE LOANS 6.- FEDEJlAL RESERVE BOARD LOWERS TIm FEIERAL FtJK)3 RA'lES DUElO'DIIi ~ MEL1DOWNAM>9-11 ATrAClCS. nrIlR.ALusmtVlt8OAllD1lAJ5ll.'lntJi, FEDEIVoL FUNDS JV.TB OlE TO INI'LA'J'1ON.Io.RY CONCERNS ..- 4.- s S 3.00% ~ :i 2.00% TRENDUNE ADJUSTABLE RATE MORTGAGES 1._ ADJUSTABLE RATE : MORTGAGES AT : HISTORIC wws: MARCH 2004 In....... 0.- f f ~ f ~ f J ~ I f ~ f f f f Iff ~ t . .. ~ f f J ! f f : f J ~ ~ ~ Sowcu: Empin: f..coDorpiu 4 Freddie M...-: ~ For Southern California, the percentage of adjustable rate loans has risen dramatically, from 19% in 2001 to 79% during 2005; conversely, fixed rate loans have decreased from 81% in 200 I to only 21 % in 2005. Additionally, each of the Southern California counties exhibited a similar pattern in the shift from fixed-rate to adjustable rate mortgages as well. lYPES OF MORTGAGE LOANS - SOUTHERN CALIFORNIA 100% '"'" IlO% 70% ~ 60% 50% .. .. ~ 40% 30% 20% 10% 0% 2001 2002 II Sbare.Fixed 2003 2004 IIShare-Variable 2005 Sources: Empire Economics, Mortgage Bankers Auociation & Real Property Empire Economics 2>)- AGENDA ITEMllfid 1, 2006 PAGE~OF .11+1 34 ......., """'" ......, ,.,,-- ~ Furthermore, for Southern California, the ratio of the mortgage loans (first and seconds) to the housing purchase prices during 2001 to 2005 has risen for homeowners with adjustable rate mortgages as compared to homeowners with fixed-rate loans. For homeowners with adjustable rate loans, the ratio of their loans to the purchase price of the homes has risen from 85% in 2001 to 90% in 2005, a gain of five percentage points. While for homeowners with fixed-rate mortgages the ratio of their loans to the purchase price of their homes has declined from 87% in 2001 to 81 % in 2005, a decrease of six percentage points. So, homeowners with adjustable rate mortgages have substantially higher amounts of mortgage debt (90%) as compared to homeowners with fixed rate mortgages (81 %). LOAN TO VALUE RATIOS - SOUTHERN CALIFORNIA FIXED-RATE vs. VARIABLE-RATE LOANS ~ HIO% 95% !2 90% < 3 ~ tl 15% ~ '" 80% 75% 2001 2002 2003 2004 DVariable: LoanIValue 2005 IIFixed: Loan/Value Sour=: Empi.. Economic., Mortgll8e Bankers AlIOCiation & Real PropcJ1y April 2004 to Present: Prices Driven by Shifting to Creative Loan Structures: ~ Since April 2004, as adjustable rates rose due to the Federal Reserve Board increasing the federal funds rate, home buyers shifted to various types of creative financial structures. These have been the driving force underlying the rate of housing price appreciation of some 24.1 % on an annualized basis. Creative financing refers to the use of loan structures other than fixed-rate or 1 year adjustable, including the following: interest only, payment option loans as well as initial teaser rates such as 1 % for the first year that results in negative amortizations (higher principal balance), less stringent lending standards such as low/no documentation, and much higher mortgage payment to income ratios, among others. ,.,,-- During the 2001 to 2004 time period, for the United States as a whole, there has been a dramatic shift from fixed rate to adjustable rate loans: fixed rate mortgage loans declined from 75% in 2001 to only 19% in 2004. Adjustable rates that were amortized (interest and principal) rose from 20% to 29% while adjustable rates that are interest only (no reduction of principal) rose dramatically, from 5% in 2001 to 53% in 2004. Empire Economics 35 AGENDA rf9I:lvb. 20060)- PAGE ;),Iq OF:!i:IL- RECENT TRENDS FOR VARIOUS MORTGAGE LOAN STRUCTURES FIXED RATE, ADJUSTABLE RATE AND INTEREST ONLY \00% 90% 80% ~ 70% ~ III 60% i 50% ... 0 '" 400,4 C ~ 30% '" li ie 20% ]0% OOA. ...,. Fixed Rate ARM- Amortized ARM-Interest Only 112001 D2002 [] 2003 B 2004 Sowces: Empire Economics, Loan Performance &. Mortgage Bank.en Association Conclusions In conclusion, since January 2002, the primary driving force underlying housing price appreciation has been households initially taking advantage of recent historically low fixed rates through June 2003, then a shift to adjustable rate mortgages through March 2004, and finally, since then, the use of creative financing structures. Specifically, for the same monthly mortgage payment, the use of lower mortgage rates and creative mortgage structures has bolstered housing prices substantially since January 2002. 50% 45% 40% '" Q ~ 35% 101 ... ~ 300/0 0 '" 25% I=! ~ ~ 20% g 15% ~ \00/. 50/0 00/0 Empire Economics ......, RELATlONSIDP OF HOUSING PRICE APPRECIATION AND TYPES OF MORTGAGE FINANCINGS Shift to Creative Structures. A ril 2004 to December 2005, A reciation: 42.1 % Fixed Rates Decline: Appreciation: 20. J % Shift to Variable Rates: JuJ -2003 to March 2004 Appreciation: 14.1% Sources: Empire Economics & Office of Federal Housing ....., 36 AOENDA ITEM NO. 3)- ~~20M PAGE . OF ?If7 ~ 3. Morteaee Rate Resets: Realienment of Adiustable/Creative Loans to Market Rates ~ There may be some softness in housing prices and land values even if mortgage rates remain stable during the foreseeable future, as households with various types of "adjustable rate" and "creative" debt structures have their initial teaser rates realigned to the current market rates. The resets are expected to generally result in higher monthly payments for homeowners since both the fixed as well as adjustable rate loans attained their recent historical lows in June 2003 and March 2004, respectively, and, since then, these rates have moved upwards: ~ Fixed Rate Loans were recently at some 6.32%, some 109 basis points above their recent historic low. ~ Adjustable Rate Loans were recently at some 5.22%, some 181 basis points above their recent historic lows. With regard to the amount of mortgages that are subject to such resets, based upon data for the United States mortgage market as a whole, these are expected to rise dramatically, from some $0.83 billion in 2005 to more that $1.0 trillion in 2007. ESTIMATED MORTGAGE LOAN - RESETS VARIABLE RATE LOANS WITH ADJUSTABLE MORTGAGE RATES ~ S 1.20 $1.00 Ii! '" Z SO.80 0 ::s ~ ... ~ SO.60 0 ol ~ SO.40 -< " Ii: ~ SO.20 SO.OO S1.00! SO.083 2005 2006 11II Mortgage Loans - TRILLIONS 2007 Sources: Empire Economic. & DB Global Marlcets Research The specific types of resets that may occur for adjustable rate and creative loan structures as rates are realigned with the marketplace are as follows: ~ Adjustable Rate Mortgages are expected to have upward reset adjustments to their monthly payments as a result of the Federal Reserve Board's policy since June 2004 which has caused the short end of the yield curve to rise significantly. The one-year adjustable loans, which were at their recent historic lows in March 2004, have started to have higher monthly payments, and such loans are now some 181 basis points above their cyclical lows. ~ Empire Economics 37 2>.:1 ,AGENDA rTEMM.] ?I)Q(i PAGE ~ L.OF -?If7 -- For instance, a household that entered into an adjustable rate loan in March 2004 with a rate of 3.41 % would encounter an approximate adjustment in March 2005 to a rate of 4.23%. This represents an increase of some 82 basis points which results in the household's mortgage payment rising by some 24%. So, for a household with a monthly mortgage payment of some $2,000 per month, their payment would increase to some $2,480 per month. '""""" > Creative Mortgage Structures will undergo reset adjustments over time as the starter teaser rates are adjusted to their market rates. Since creative mortgages are typically based upon short-term rates and also have further adjustments due to teaser rates, then the mortgage payments of such households may rise by much more than for adjustable rate mortgages. So, households with adjustable and creative mortgage structures will encounter higher mortgage payments as their initial teaser rates are realigned to the market rates which have significantly higher mortgage payments due to the recent hikes of the federal funds rate by the Federal Reserve Board. For example, the types of adjustments that may occur for various loan structures can be gauged by comparing their initial payments with their payments at the start of year six, after the five year time span during which rates are fixed at a low level; accordingly, these adjustments for various interest rate scenarios are as follows: Mortgage Loan of $500,000 Fixed Rate Hybrid ARM Option ARM 30- Year Interest Only Initial Min. Pymts. Initial Payments - First Fiye Years $2,998 $2,553 $1,608 (Interest & Princioal) (Interest Only) (Minimum Payments) 'Neaative Amortization' Rates Decline 100 BP Pavment Start of Sixth-Yr. $2,998 $2,960 $3,289 Chanae from Initial Pvmt. 0% 16% 105% Rates Stable Pavment Start of Sixth-Yr. $2,998 $3,260 $3,575 Change from Initial Pvmt. 0% 28% 122% Rates Rise 100 BP Payment: Start of Sixth-Yr. $2,998 $3,513 $3,928 Change from Initial Pymt. 0% 38% 144% '""""" > Homeowners with fixed rate mortgages can expect stable mortgage payments of some $2,998 per year for the entire term of the loan of 30 years, regardless of what happens to mortgage rates after they originate their loans. > Homeowners with Hybrid ARM Interest Only Loans have lower payments for the initial five years but can then expect higher mortgage payments starting in year six: from $2,553 to $3,260 (+28%) if rates are stable or, if rates rise by 100 basis points (one percent), from $2,553 to $3,513 (+38%). > Homeowners with Option ARMs that initially make minImum payments (negative amortization) of some $1,608 can expect very significant increases in their monthly payments atthe start of year six: from the initial payment of $1,608 to $3,575 (+ 122%) if rates are stable, or ifrates rise by 100 basis points, from $1,608 to $3,928 (+144%). '-'" Empire Economics 38 0)- ACiENDA ITE~h 1, 2~ PAGE j OF ~ ,... Additionally, the mortgage delinquency levels for homeowners with adjustable and creative mortgages have traditionally been significantly higher than for homeowners with fixed rate loans. This is typically attributed to homeowners with adjustable rate loans having difficulty with higher mortgage payments as rates rise as well as such households having "low" equity levels (due to higher loan to price ratios as well as negative amortization), and hence less of an incentive to "hold-on" to the home, especially if the rate of appreciation diminishes. During the 2000-2005 time period, the 5.4% delinquency rate for adjustable rate(loans has been above the 3.6% delinquency rate for fixed rate loans by some 50% (5.4% vs. 3.6%.). DELINQUENCY RATES: FIXED-RATE VS. V ARIABLE-RA TE LOANS /""'"" 7"10 6% 5% ~ S 4% !:l ~ 3% ~ l:! 2% 1% 0% 2000 2001 2002 II Fixed-Rate 2003 2004 2005 DVariable-Rate Sources; Empire Economics" National Delinquency 4. Mortl!al!e Rate Increases: Potential for Further Federal Reserve Board Rate Hikes Since the financial markets, being very efficient, are difficult to forecast, especially mid-term and long- term rates, it is not the position of Empire Economics to forecast that mortgage rates will rise. Nevertheless, it is worthwhile to explore the potential implications of the Federal Reserve Board continuing its current policy of increasing the federal funds rate, since this directly impacts the short- end of the yield curve, and, in turn, adjustable rate mortgage rates as well as the creative mortgage structures. The Federal Reserve Board, according to some analysts, is expected to raise the federal funds rate to some 4.75%, significantly above its prior level of 1.0% in June 2004; the federal funds rate is presently at 4.50%. Consequently, the primary driving forces underlying the strong rates of housing price appreciation, adjustable rates and creative financing structures, will diminish substantially over time. (Note: Since the recent fixed rate of some 6.32% is some 110 basis points above the recent one-year adjustable rate of 5.22%, even a moderate decline in fixed rates would not become a driving force for further price appreciation because they are significantly higher than adjustable rates.) ,... Empire Economics 39 6? AGENDA l1EM:tIQ.?oo" PAc~'1'3' Of ~7 9 Therefore, further increases in the federal fundsrate will result in the short-term rates rising, and this, in turn, will cause the following: ....." ~ Existing Borrowers would have higher monthly payments as adjustable rate mortgages rise and creative teaser rates are realigned to HIGHER market rates, as compared to the current market rates. ~ New Borrowers would face HIGHER rates, reducing their ability to qualify for loans that support existing prices, thereby placing downward pressure on home prices. RECENT MORTGAGE RATES FIXED AND ADJUSTABLE AND THE FEDERAL RESERVE BOARD 8.00% PRICE APPRECIATION: - 13.4o/oIyr- -.11 -- --18.8o/oIyr - II -- 24.1o/oIyr 7.00% rJ:l ~ 6.00% ~ 3 u ~ z E: Q Z <( !j ~ !i; o ::; 5.00% FIXED RATE MORTGAGES AT HISTORIC LOWS: JULY 2003 4.00% 3.00% 1.00% ADmSTABLE RATE MORTGAGES AT HISTORIC LOWS: MARCH 2004 ,...., 2.00% 0.00% ~ C l>> ~ , iv <> <> IV ~ ;:!; ... Eo '< I ~ 5 [ ~ ! , iv o <> .... ~ ~ 0 ... ~ a' ~ ~ > ..... & ~ 0 g '<: 1 Eo ;:!; '< 5 ;:!; f c '< ! I [ .5 I .5 f [ N N . N <> iv <> iv <> iv 0 ~ <> .... <> 8 '" 8 ~ '" '" -Fixed: 30-Yr -Yariable l-Yr Sources: Empire Economics, Federal Reserve Board & Freddie Mac IV <> o IV _Federal Funds 5. Specific Impacts of Hie:her Morte:ae:e Rates on the Land-Secured Credit Qualitv The widespread use of adjustable rate and creative financing for newly developing residential projects has significant implications for the Credit Quality underlying Land Secured Financing: )- Special Tax Rates set-forth in the Rate and Method of Apportionment of Special Taxes are based upon current housing prices which have recently realized strong rates of appreciation as a result of the utilization of adjustable and creative financing techniques by home purchasers. ......." Empire Economics 40 3~ AGENDA IT~~~ ?OOh /} IV) PAGE OF ~l ~ ~ Appraisals are based upon current land values, which, in turn, are derived from current housing prices, that have appreciated at a strong rate in recent years, and so they also reflect the use of adjustable and creative financing techniques. Furthermore, since the value of the land is a residual value, that is, the price of the home less the construction costs of building the home, most of the decline in the price of a home is passed through to the land, since construction costs are relatively stable in the short-run. For example, if a home with an initial price of $400,000 declines to $350,000, a reduction of some -$50,000 or -12.5%, the value of the finished lot for the same sized home declines from $149,000 to $113,600, a reduction of -$35,400 or -23.8%. Similarly, a decline in the price of a home by 25% results in a reduction of the value of a finished lot for the same sized home by some 48%! (Note: The above discussion focuses on the value of a finished lot which includes entitlements and infrastructure improvements; by comparison, the value of "raw" land, land without any entitlements or infrastructure improvements, may approach zero.) CHANGES IN HOUSING PRICES AND FINISHED LOT LAND VALUES * LAND VALUES DELCINE AT A FASTER RATE ~ 0"10 0.0"/. 0.0"10 ~ -10-/. ~ ~ -20% ~ la ~ .30"10 ... ~ ~ -40% ~ is la .50"/. ~ ..60-;' Price $ 400,000 Price $ 400.000 to $375,000 Price $ 400,000 to $350,000 Price $ 400,000 to $325,000 Price $ 400,000 to $300,000 . Change in Housing Prices . Change in Finished Lot YaJue Therefore, the Credit Quality underlying Land Secured Financings reflects the use of current prices and land values, and, as such, includes, among other factors, the underlying use of adjustable and creative loan structures by homeowners. Consequently, should mortgage rates rise significantly, the Credit Quality of the land secured bonds is subject to substantial weakening due to the following: /"'" );> Lower housing prices resulting in a higher Special Tax to Home Price Burden for homeowners, possibly in excess of the Issuer's policy of a maximum total tax burden, typically some 1.8% to 2.0% of the initial sales prices, even though these maximums may have been satisfied at the time that the Special Taxes were established. Empire Economics 41 AGENDA IJSliN02oo6 ~ J- PAGE d-n~ )> Significantly lower land values resulting in a reduced ValuelLien ratio, possibly below the Issuer's policy of typically some 3 to 1 or 4 to 1 when the bonds are sold, thereby diminishing the security for bond holders. (The Appraisal for the Bond Issue is valid only for the stated Date of Value; it is not meant to be a prediction of future values.) ~ )> Higher levels of Special Tax delinquencies as monthly payments of owners increase resulting in diminishing the maximum Special Tax to the bond debt service coverage ratios for bond holders that may adversely impact the Issuer's ability to meet the debt service payments in a timely manner, possibly resulting in the use of the bond reserve fund. Adjustable rate mortgages (some 79% of current mortgages) have significantly higher delinquency rates than fixed rate mortgages; additionally, homeowners that use adjustable rate mortgages also have higher loan to value ratios as well, some 90% as compared to homeowners with fixed rate loans, some 81 %. Therefore, as mortgage rate resets occur to the current market rates, and furthermore, to the extent that mortgage rates rise further, then the Credit Quality for Land Secured financing may be diminished, resulting in Higher Tax Burdens due to lower housing prices, Lower ValuelLien Ratios due to lower land values, and Higher Special Tax Delinquencies due to higher monthly mortgage payments. 6. Recent Trends/Patterns for "Notices of Default" for Morteaees A "leading" indicator of higher Special Tax delinquency rates may be "notices of default" (NOD) that are recorded against homes that are not making their mortgage payments on a timely basis. The NOD hit a prior peak in 1996, due to the adverse impacts that the economic recession had on the housing market, and then declined thereafter. However, for 2005 as compared to 2004, the level of NODs began to rise, by some 15.6% for California, 19.6% for Southern California and 43.1% for Riverside County. So, although the number of NODs is well below the prior peak levels of 1996, the recent patterns of increases should be monitored carefully. ~ RECENT TRENDS FOR "NOTICES OF DEFAULT" FOR MORTGAGES 300,000 50% 43.1% A 40% 250,000 30% 19.6% ;! ~ r! 15.6% ... 20% ~ 200,000 ~ .. ::> c 10% ~ iii 162,597 c ~ ... 150,000 0% 0 ::> '" c w ... III .-.. l!l ::Ii ::> ... z 100,000 0 0 i 50,000 13,663 6,428 4,492 0 Califomia Southem Califomia Riverside County III Prior Peak: 1996 1i:12004 l;I2005 A, Change: 2005 vs.2004 Source: Dataquick & Empire Economics ......." Empire Economics 42 EN March 1, 2006 3 >- AG DA ITEM NO. ~ ",..~ (fdtl OF ~~1: ASSUMPTIONS AND LIMITING CONDITIONS ~ The Market Absorption Study for CFD No. 2003-2 2006 Series A is based upon various assumptions and limiting conditions; accordingly, these are as follows: /""'" Title to Property Property Boundaries Accuracy of Information from Others Date of Study Hidden or Unapparent Conditions Opinions of a Legal/Specialized Nature Right of Publication of Report Soil and Geological Studies Earthquakes and Seismic Hazards Testimony or Court Attendance Maps and Exhibits Environmental and Other Regulations Required Permits and Other Governmental Authority Liability of Market Analyst Presence and Impact of Hazardous Material Structural Deficiencies of Improvements Presence of Asbestos Acreage of Property Designated Economic Scenario Provision of the Infrastructure; Role of Coordinator DeveloperlBuilders Responsiveness to Market Conditions Financial Strength of the Project DeveloperlBuilder Market Absorption Study Timeliness of Results For additional information on the various assumptions and limiting conditions, please refer to the comprehensive Market Absorption Study. /""'" Empire Economics 43 AQENDAITEM ~~ PAOE-m.OF~ APPENDIX D APPRAISAL REPORT 0-1 AGENDA ITE~ 3;).- 7 PACE OF r ~Lj __ ....., ....., ....., ,-.. APPRAISAL REPORT , CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT No. 2003-2 Improvement Area B ~ Canyon Hills Phases 3 an~, ,-.-.. '(} Q (. Prepared for: CI~ OF LAKE ELSINORE 130 S. Main Street Lake Elsinore, CA 92530 James B. Harris, MAl Berri J. Cannon Harris Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, CA 92660 May 2006 ,.... AGENDA ITEM NO. "6j. PACE ooq OF ,tfl: '-' May 4, 2006 Mr. Matt N. Pressey Director of Administrative Services CITY OF LAKE ELSINORE 130 S. Main Street Lake Elsinore, CA 92530 , Re: CFD No. 2003-2, Improvement Area B Canyon Hills Phases 3 and 4 , Dear Mr. Pressey: ~ In response to your authorization, we prepared a self-contained appraisal report that addresses all of the taxable prope within the boundaries of Improvement Area B of Community Facilitie~istrict No. 2003-2 (CFD No. 2003-2). This appraisal includes an estimate of Marke lue of the land, site improvements and dwelling units subject to special tax. This land i der the ownership of two major developer/merchant builders, Pardee Homes and Pulte omes and 74 individual homeowners. The land ranges from a raw condO . finished lots with site improvements under construction. In addition, 11 model h es a ' complete, 7 model homes are in various stages of unit construction, rod tion homes are completed and 119 production homes are in various stages 0 . onstruction. There are 196 near finished lots, 242 lots in blue-top lot condition, a 12 re superpad zoned for 216 attached units, and two parcels in a raw condition entitled for 678 attached dwelling units. '-' According to the specific guidelines of the California Debt and Investment Advisory Commission (CDIAC), each ownership is valued in bulk, representing a discounted value to that ownership as of the date of value. Based on the investigation and analyses undertaken, our experience as real estate appraisers and subject to all the premises, assumptions and limiting conditions set forth in this report, the following opinions of Market Value are formed as of May 1, 2006. ~ b.r AOENDA'TE~~\>. OF!Jh:: PAOE~ -- "....... Mr. Matt N. Pressey May 4, 2006 Page Two ONE HUNDRED NINETY -SIX MILLION DOLLARS $196,000,000 ",--.. Pardee Construction Company Planning Area 1 $15,900,000 Planning Area 2 $18,000,000 Planning Area 36 $11,880,000 Pardee Grossman Cottonwood Canyon \It Planning Area 21A $19,160')p Planning Area 22 ~16'000'OOO Planning Area 23 $21,000,000 Win-Win Pardee Pool III (Delaware), LLC. Planning Area 21A $3,582,000 Pulte Homes ~ Planning Area 21 B ... V Planning Area 24 74 Individual HO:5wners Planning Area A Planning Area 2 $33,300,000 $23,500,000 $14,758,000 $19,000,000 The e lue assumes bond proceeds of approximately $16,000,000 for eligible facilities dlor es, as described in the Community Facilities Report, are available at the time of sale. The self-contained report that follows sets forth the results of the data and analyses upon which our opinions of value are, in part, predicated. This report has been prepared for the City of Lake Elsinore for use in the issuance of Community Facilities District No. 2003- 2. The intended users of this report are the City of Lake Elsinore, its underwriter, legal counsel, consultants, and potential bond investors. This appraisal has been prepared in accordance with and is subject to the requirements of the Appraisal Standards for land secured financing as published by the California Debt and Investment Advisory Commission; the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation; and the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. ",--.. AGENDA. i6:).. _ PAOE_~ if?) ~~OF=pn=; Mr. Matt N. Pressey May 4, 2006 Page Three ~ We meet the requirements of the Competency Provision of the Uniform Standards of Professional Appraisal Practice. A statement of our qualifications appears in the Addenda. Respectfully submitted, i(} Berri J,~nnon Harris Vice Pre nt AG009147 'mes B. Harris, MAl President AG001846 """" <.. Q ~ AGENDA ITEM NO. ~ PAOE ~1-oF ,-... SUMMARY OF FACTS AND CONCLUSIONS EFFECTIVE DATE OF APPRAISAL DATE OF REPORT INTEREST APPRAISED LEGAL DESCRIPTION /"""' OWNERSHIP , SITE CONDIT~ /"""' May 1, 2006 May 4, 2006 Fee Simple Estate, subject to special tax liens CFD 2003-2, Improvement Area B is identified as: PA 21A Canyon Hills Specific Plan PA 21 B Canyon Hills spec~Plan PA 22 Canyon Hills SpecifiC~ PA 23 Canyon es ~pecific Plan PA 24 Canyon _~pecific Plan. PA 1 Canyon Hills Specific Plan P~on Hills Specific Plan PA ~yon Hills Specific Plan Pardee Grossman Cottonwood Canyon, Pardee Construction Company, Win-Win Pardee Pool III (Delaware), LLC, Pulte Homes, and 74 individual owners. PA 21A: 8 Model homes completed, 36 production homes completed, 26 production homes in various stages of construction, 57 finished lots, total of 127 lots. PA 21 B: 3 Model homes completed, 4 production homes completed, 46 production homes in various stages of construction, 78 finished lots, total of 131 lots. PA 22: 40 production homes completed, 31 production homes in various stages of construction, 36 finished lots, a total of 107 lots. iv AGENDA ITEM NO. .3 J.. PACE?33 Of ~ / ~ SUMMARY OF FACTS AND CONCLUSIONS HIGHEST AND BEST USE VALUATION CONCLUSION Q , ...." PA 23: 4 Model homes under construction, 143 lots in blue top condition, total 147 lots. PA 24: 3 Model homes under construction, 16 production homes in various stages of construction, 25 finished lots, 99 lots in blue top condition, total of 143101s. \. PA 36: 12.0 aC~graded superpad entitled for 216 attached units. PA 1: 30.8 acre pa I in raw condition entitled for 318 attached units. P~2 acre parcel in raw condition entitled for 360" ~d units. Continued residential development within the Canyon Hills Master Planned Community. ...." MARKET VALUE $196,000,000 Pardee Construction Company Planning Area 1 Planning Area 2 Planning Area 36 $16,200,000 $15,900,000 $18,000,000 Pardee Grossman Cottonwood Canyon Planning Area 21A $19,160,000 Planning Area 22 $16,000,000 Planning Area 23 $21,000,000 Win-Win Pardee Pool III (Delaware), LLC. Planning Area 21A $3,582,000 Pulte Homes Planning Area 21 B Planning Area 24 $33,300,000 $23,500,000 ......." v AGENDA ITEM NO. 2> ).. PAGE ~3~OF?;H1 __ ,-. SUMMARY OF FACTS AND CONCLUSIONS ,,-.. Q ..-.. , 74 Individual Homeowners Planning Area 21A Planning Area 22 t(> vi , , $14,758,000 $19,000,000 AGENDA ITEM NO.6;;;" PAGE~l.~ - TABLE OF CONTENTS Section Transmittal Letter................................................................................................................ Summary of Facts and Conclusions ............. .............. ........... ....... ........ ............ .................. Table of Contents........ ............. ............................................... ........................... .......... ...... Introduction ....................................... ...................................... .... ................................ ......... Area Description................................... .............................. ....................~............... Site Analysis............................................................. ................................. ................... ...... Improvement Description ....................................................~............ ........................ Highest and Best Use................................................................. ........................................ Valuat~on Methodology.............................. ..... ~.............................................. ......... Valuation of CFD No. 2003-2 .......... ..... ...... .....~ v............ ............... ............ ...... .......... Valuation Conclusion ................. -./.............. ............................................ .......................... Certification..................................~............................................................................... . Addenda Q Qualification Empire Econo' Market Study (Portion) ~ Paae iii v 1 14 34 47 50 59 61 ......, 96 97 ......, vii AGEr~OA iTEM NO, 3~ .-----. ;11 PAGE )?jJ OF ?)~~"'-= ,....... INTRODUCTION r" Purpose of the Report The purpose of this appraisal is to estimate the Market Value for the fee simple estate, subject to special tax liens for all the taxable property within Community Facilities District No. 2003-2, Improvement Area B, located in the City of lake Elsinore. The purpose of this appraisal is to estimate the "As Is" Market Value of the land and improvements under the ownership of the developer/merchant builders and numerous individual homeowners. The opinions set forth are subject to the assumptions and li~nditionS set forth in this appraisal, and the appraisal guidelines as set ~ the City of Lake Elsinore. Function of the Report and Intended Use It is our understanding that this aprx...report is to be used for Community Facilities District bond purposes only. Ttf~ct properties are described more particularly within this report. The bonds are issued pursuant to the Mello-Roos Community Facilities District A~f 1982. The maximum authorized bond indebtedness for the CFD is $26,995,660. " Client and In ers of the Re ort This rep repared for our client, the City of lake Elsinore. The intended users of the report i elude the City, its legal counsel, underwriter, consultants, and potential bond purchasers. Scope of the Assianment According to the CDIAC guidelines, the total value conclusion includes the "As Is" estimate of Market Value for the property under the ownerships of the developer/merchant builders and individual homeowners within the boundaries of CFD No. 2003-2, Improvement Area B. This is a fully documented self-contained appraisal report. Any lands ",...... 1 AGENDA ITEM NO. 2J~ PAGE.l:2LOF~ designated for park, open space, flood control or civic uses within these tracts not subject to special tax are not included in this assignment. ~ The residential land is valued in its "As Is" condition as of the date of value. Site development for the subject property ranges from raw acreage to a finished lot condition, plus completed model homes and production homes. The following exhibit illustrates the condition and construction in each of the planning areas of the subject property. 8 11 3 7 Production Units Completed 36 4 80 '" Under Construction 26 46 16 119 Finished lots fil 36 25 196 Blue Top Lots 143 99 242 Mass Graded 216 216 Raw Land 318 360 678 Total 127 131 107 147 143 216 318 360 1,549 We have analyzed the subject property based upon the proposed uses and our opinion of its highest and best use. We have searched for sales of residential land to estimate the value of the property. The following paragraphs summarize the process of collecting, confirming and reporting of data used in the analysis. ..~ 2 AGENDA ITEM NO. 3 ;).. PAGE ~~ OF~ ~ 1. Gathered and analyzed demographic data from sources including the California Department of Finance (population data), Employment Development Department of the State of California (employment data), City of lake Elsinore (zoning information, building permit trends), lake Elsinore Chamber of Commerce (local demographic trends), Hanley Wood Market Intelligence (housing sales, inventory levels, and absorption), and sales personnel of comparable projects (market trends of individual home sales). Subject information was gathered from the developer/builder and their consultants. 2. Inspected the subject's neighborhood and reviewed proposed product and similar products for consideration of Highest and Best Use of the proposed lots. 3. Gathered and analyzed comparable merchant bUild)t nd sales within the lake Elsinore market areas, and residential e~~ed unit sales, within the subject's primary and sec~ry market areas. Data was gathered from sources including, omps.com, brokers, appraisers, builders active in the area and velopers within the Southern California area. Where feasible, data ere confirmed with both the buyer and seller. The data gathered are presented on ,..- summary data sheets wfthin th~ Date of Value and Report The opinion of Market v~ expressed in this report is stated as of May 1, 2006. The date of the appraisal report ~ay 4, 2006. Date of Ins c. pro rty was inspected on numerous occasions, with the most recent Property Riahts Appraised The property rights appraised are those of the fee simple estate subject to special tax liens of the real estate described herein. ,... Property Identification The subject property consists of land, finished lots, units under construction and completed homes in the City of lake Elsinore. CFD No. 2003-2 is identified as indicated on the following table. 3 3~ AvtN~:~~ ~'J-:3~ OF 1J-/'--oO ~ PA21A SF 4,900 SF lots 29.6 127 30493-1 Lets 1-11, 387-401 Cross Qeek Pardee 30493-2 lots 12-25, 252-287, 380-386 3Q493.3 lots 223-251, 288-302 PA 21B SF 4,900 SF lots 28.5 131 304934 Lets 26-55, 370-379 Weatherly Pulle Homes 30493-5 lots 56-84, 362-369 30493-6 Lets 85-102, 326-361 PA22 SF 6,000 SF lots 30.7 107 317lJ&.2 lots 1-19, 77-107 Pardee 3170&-3 lots 20-76 PA23 SF 6,000 SF lots 54.3 147 317lJ&.1 lots 108-113, 136-143, 145-149, 179-196, 246-245 31706-4 lots 150-178 31706-5 Lets 144, 197-245 31706 Lets 114-135 Tract lib. 31 PA24 SF 5,000 SF lots 40.7 143 30493-7 Lets 103-116, 137-156, 186-1 A1dErbrook Pulle Homes 30493-8 lots 117-136, 157-187 30493 lots 199-222, 303-321 PA36 MF 18.0 DUlAc 12.0 216 30493-1 tNL in Pa lot 402 MB 3701062 U1deveIoped PA1 MF 10.3 DUlAc 30.8 318 30496 lot 1 367/017 U1deveIoped PA2 MF 13.7 DUlAc 26.2 360 30496 lot 3 U1deI.eIoped ~ TOTAL 252.8 1,549 Leaal Description and Ownership The fOI~e identifies ownership for the subject property by tract number and lot number. "V ,...." 4 A,.,L:,i\," ..""." 0-).. U~I.~~~""~tll) OF ~~ ,-. ,....... ,....... Plannlna Area 21A Crass Creek PlarvlIno /Ilea 22 Brlarcliff IMr>-W1n Pardee Pool III De Uc 9/2312005 30493-1 1 Indll.duaI 0M1er 31706-2 1 IMr>-W1n PEI"dee Pool 01 De Uc 9/2312005 30493-1 2 Indi\idJaI 0M1er 31706-2 2 IMr>-W1n PEI"dee Pool Oi De Uc 9/2312005 30493-1 3 IndhAduaI Owner 31706-2 3 IMf'}-Vl/ln PEI"dee Pool IIi De Uc 9/2312005 30493-1 4 Indil.duaI 0M1er 31706-2 4 IMf'}-Vl/ln PEI"dee Pool Iii De Uc 9/2312005 30493-1 5 IndhAduaI 0M1er 31706-2 5 W1r>-IMn Pardee Pool III De Uc 9/2312005 30493-1 6 IndhAduaI 0M1er 31706-2 6 W1r>-IMn Pardee Pool UI De Uc Q/23I2005 30493-1 7 IndhAduaI 0M1er 31706-2 7 W1r>-W1n PEI"dee Pool iii De Uc 9/2312005 30493-1 8 IndiIidual 0M1er 31706-2 8 PEI"dee Grossman Cottoowood Can 30493-1 9-11 Indil.duaI 0M1er 31706-2 9 Pardee Grossman Cottoowood Can 30493-1 387-401 Pardee Grossman Cottoowood Can 31706-2 1G-19 Pardee Grossman Cottoowood Can 30493-2 12-25 IndhAdual 0M1er 31706-2 77 BakBrlanS 1212212005 30493-2 252 IndiIidual 0M1er 31706-2 78 Ge&ta John 1212312005 30493-2 253 Indiloidual 0M1er 31706-2 79 Spencer Edith K 218/2006 30493-2 254 Indil.duaI 0M1er 31706-2 80 Romero Kent D 21812006 30493-2 255 IndilAduaI 0M1er ~ 31706-2 81 Okano Family Trust 212212006 30493-2 256 Indiloidual 0M1er 31706-2 82 Byers Barbera 311712006 30493-2 257 IndhAduaI 0M1er 31706-2 83 Brox Jamal E 311712006 30493-2 258 Indiloidual 0M1er 31706-2 84 Gan::ia Dianne R 417/2006 30493-2 259 Indiloidual 0M1er ,. ~1706-2 85 Cine Bruce 2124/2006 30493-2 260 Indiloidual 0M1er 31706-2 86 Grepo Aminio A 2128/2006 30493-2 261 Indiloidual OwnerAll/ii 31706-2 87 Calacutan RodoIfo G 31312006 30493-2 262 Indh.idual 0M1er --- 31706-2 88 Hanahan "Tim 218/2006 30493-2 263 Indiloidual 0M1er ,.,. 31706-2 89 ZendElias Cesar 1212312005 30493-2 264 Indiloidual 0M1er ....... 31706-2 90 Huyler Mike 12127/2005 30493-2 265 Indiloidual 0M1er ..... 31706-2 91 Pardee Grossman Cottoowood Can 30493-2 266 Indiloidual Owner ..... 31706-2 82 BoutdaIalh Chico C 311312006 30493-2 267 Indh.lduaI 0M1er 31706-2 93 Santos Epimello 3124/2006 30493-2 268 Indh.ldual Owner 31706-2 94 GIwoick John 1212312005 30493-2 269 II 31706-2 95 Gilger Glenn 1212312005 30493-2 270 31706-2 96 Guajardo Tracv 3114/2006 30493-2 271 4 I Owner 31706-2 97 """sen Rock 1212212005 30493-2 272 31706-2 98 Byrne St8\8 1211812005 30493-2 273 . 0M1er 31706-2 99 \M'onka Charles R 2115/2006 30493-2 274 . 0M1er 31706-2 100 S~liIan Brian T 1211/2005 30493-2 275 I Ioidual 0M1er 31706-2 101 Cornejo Rene 121212005 30493-2 276 Indiloidual Owner 31706-2 102 Ortega Michelle 11/3012005 [I 277 Indiloidual Owner 31706-2 103 Chew Gnlgory V 3124/2006 278 IndilAduaI Owner 31706-2 104 George KBIoin L 1211612005 279 Indiloidual 0M1er 31706-2 105 Dillev Dolores F 2124/2006 280 Indiloidual Owner 31706-2 106 Nguyen Dao A 1/25/2006 281 Indiloidual 0M1er 31706-2 107 Morgan Brandon 12128/2005 30493-2 282 Pardee Grossman Cottoowood Can 31706-3 2G-76 Osoo O1rIstopher 121212005 30493-2 283 --a 30493-2 284 Plannlno Area 23 Brt-....... Well Ann 14/2005 30493-2 285 Pardee Grossman Cottoowood Can 31706-1 108-113 B 9/2005 30493-2 286 Pardee Grossman Cottonwood Can 31706-1 136-149 Amdd Jason ~512005 30493-2 287 Pardee Grossman Cottoowood Can 31706-1 179-196 Pardee Grossman Cott 7IT 30493-2 38G-386 Pardee Grossman Cottonwood Can 31706-1 246-254 Pardee Grossm&'l Cott 30493-3 223-251 Pardee Grossman Cottoowood Can 31706-4 15G-178 Pardee Grossman Cottoowood 30493-3 288-302 PEI"dee Grossman Cottonwood Can 31706-5 144 Pardee Grossman Cottonwood Can 31706-5 197-245 Plamlna /Ilea 21B Wtatherlv Pardee Grossman Cottonwood Can 31706 114-135 P~te Homes 30493-4 26-55 P~te Homes 30493-4 37G-379 P1annino Area 24 Alderbrook P~te Homes 30493-5 56-84 P~te Homes 30493-7 103-116 P~eHomes 30493-5 362-369 Pulte Homes 30493-7 137-156 P~eHomes 30493-6 85-102 P~eHomes 30493-7 188-198 P~eHomes 30493-6 326-361 P~eHomes 30493-7 322-325 P~te Homes 30493-8 117-136 P~te Homes 30493-8 157-187 Nte Homes 30493 199-222 P~eHomes 30493 303-321 Plamlno Area 1 Pardee Construction Company 30496 Lot 1 and Lot 2 MB 367/017 Plannlna Area 2 Pardee Construction Company 30496 Lot 3 MB 367/017 Plannlna Area 3 Pardee Construction Company 30493-1 MIL in Per Lot 402 MB 3701062 5 &d- ~~~'~~;d~.:i1L~ Prooertv Historv Pardee Grossman Cottonwood Canyon and Pardee Construction Company, its predecessor and affiliated companies, has owned the subject properties for over ten years. ...., Planning Areas No. 21 Band 24 have been sold to Pulte Homes. Planning Area 21B sold on July 15, 2005 and consists of 131 4,900 square foot minimum lots, on 28.5 acres. The total price was $17,805,000 or $135,916 per lot. The finished lot costs are estimated to be $200,377 per lot. Pulte is currently develop,ing a single-family subdivision known as Weatherly. The homes range in size from 1,k to 2,458 square feet. - ~ Planning Area 24 sold on July 23, 2005 and co~ of 143 5,000 square foot minimum lots, on 40.7 acres. The total price was $18,940,000 or $132,447 per lot. The finished lot costs are estimated to be $202f'}f:.r lot. Pulte is currently developing a single-family subdivision known as Alderbrcf'V homes range in size from 2,607 to 3,079 square feet. ....., Definitions , Market Val prob e price in terms of money which a property should bring in 've a open market under all conditions requisite to a fair sale, eller, each acting prudently, knowledgeably and assuming the price is t affected by undue stimulus. Implicit in this definition are the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (a) Buyer and seller are typically motivated. (b) Both parties are well informed or well advised, and each acting in what he considers his own best interest. (c) A reasonable time is allowed for exposure in the open market. 1 Part 563, subsection 563.17-1a(b)(2), Subchapter 0, Chapter V, Title 12, Code of Federal Regulations. ....., 6 ~J. '-"'~I~;;~~YtQ; OF~ ,-... ,-... ,-... CFD No. 2003-2, Improvement Area B Q , ~ , \ 7 0> "\J(;'.;~~~OF JtL- Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Fee Simple Estate2 Absolute ownership unencumbered by any other interest or estate subject only to the four powers of government. (d) ..., (e) Fee Simple Estate Subject to Special Tax and Special Assessment Liens Empirical evidence (and common sense) suggests that the s~ prices of properties encumbered by such liens are discounted compared";~erties free and clear of such liens. In new development p .ects, annual special tax and/or special assessment payments can be su ntial, and prospective buyers take this added tax burden into account w formulating their bid prices. Taxes, including special taxes, are legally distinc om assessments. The Market Value included herein, re~the value potential buyers would consider given the special tax lien of ity Facilities District No. 2003- 2, Improvement Area B. Retail Value Retail value should be eLated for all fully improved and sold properties. Retail value is an estim~ what an end user would pay for a finished property under the conditions requisite to a fair sale. ,.., Parcel parcel includes streets cut and padded lots with utilities arcel and perimeter streets in. Finished Site3 Land that is improved so that it is ready to be used for a specific purpose. (Improvements include padded lot, streets and utilities to the lot, and all fees required to issue a building permit paid.) 2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page 140 3 Ibid, Page 334 ,.., 8 Od- AGENDA I'TEI"~ ~J'\ _ ~ ~t\- Of~ - ,-... Mass-Graded Parcels Mass-graded parcel with utilities stubbed to the site and perimeter streets in. Assumptions and Limitina Conditions The analyses and opinions set forth in this report are subject to the following assumptions and limiting conditions: Standards Rule ("S.R. ") 2-1 (c) of the "Standards of Professional Appraisal Practice" of the Appraisal Institute requires the appraisers to "clearly and accurately disclose any extraordinary assumption or limiting condition that directly affects a ppraisal analysis, opinion, or conclusion." In compliance with S.R. 2-1(c) and to assl e reader in int.erpreting the report, the following contingencies, assu~ns and limiting conditions are set forth as follows: , .,,-.. Contingencies of the Appraisal The appraisal is contingent upon th~sful issuance and funding of bonds for Community Facilities Dist 003-2, Improvement Area B, through the City of lake Elsinore. The ial tax formula was prepared on behalf of the City of lake Elsinore by Harris & Associates, Special Tax Consultant. .t The Market Value estima~ported in this report reflects a portion of the funding for the infrastructure improvements and fees from the proceeds of Commu . 'lities District No. 2003-2. The public improvements and fees subjec 0 rei ursement include street improvements, water & sewer facilities fe and City development impact fees. The total construction funds and with contingency subject to possible reimbursement are approximately $16,000,000. If the CFD is not funded and/or the amount or timing of the reimbursements should change, the value opinion stated herein could change. Please refer to the Valuation section for further detail of the reimbursements and timeline for reimbursement. ,-... The appraisers have reviewed portions of the "Preliminary Geotechnical Investigation Tentative Tract No. 30493 Canyon Hills Planning areas 18,19, 21A, 21B, 22, 24 and 36 lake Elsinore, CA.," dated November 14, 2002. The appraisers have reviewed portions of the "Preliminary Geotechnical Investigation Tentative Tract No. 30493 Canyon Hills Planning area 23 lake Elsinore, CA," dated December 12, 2002. Both reports were prepared by Pacific Soils Engineering, Inc. The reports conclude in Section 6.0 Geotechnical Conclusions and Recommendations, 9 ACENDA ITEM NO. 3 ;)- PACE ;}.~~ "Development of the subject property as proposed is considered feasible, from a geotechnical standpoint, provided that the conclusions and recommendations presented herein are incorporated into the design and construction of the project." The reports specify issues identified by the study or previous studies as possibly affecting site development. Recommendations to mitigate these issues are presented in the text of the reports. It is recommended that the client and any potential bond purchaser review all soils and geotechnical reports. It is a specific assumption and contingency of this appraisal that Tract 30493 can be developed as proposed. ......" The individual parcel sizes have been calculated by BV Engineering, Inc. Our value estimate is, in part, based on the accuracy of this information. According to the County of Riverside's web site as of May 3,)t. property taxes for a portion of the District are unpaid and considered to ~~~quent. It is a specific contingency of this appraisal repo~value estimates that the property taxes and any delinquencies are paid i II. Assumptions and Limiting Conditions No responsibility is assumed by your appraisers for matters that are legal in nature. No opinion of title is rendeli6d the property is appraised as though free of all ~ncumbrances and h marketable. No survey of the boundaries of the property was underta y your appraisers. All areas and dimensions furnished to your appraisers are presumed to be correct. The date of value for wttl. the opinions of Market Value are expressed in this report is April 1, 2006~e dollar amount of this value opinion is based on the purchasing power of ttie United States dollar on that date. ......" Maps, xhibits included herein are for illustration only, as an aid for the rea lizing matters discussed within the report. They should not be consid surveys or relied upon for any other purpose, nor should they be rem ed from, reproduced, or used apart from this report. Oil, gas, mineral rights and subsurface rights were not considered in making this appraisal unless otherwise stated and are not a part of the appraisal, if any exist. The appraisers have not been provided with a title report for the District. For purposes of this appraisal, we are not aware of any easements, encroachments or restrictions that would adversely impact the value of the subject properties. Information contained in this report has been gathered from sources which are believed to be reliable, and, where feasible, has been verified. No responsibility is assumed for the accuracy of infolimation supplied by others. ......" 10 AGENDA \TE~~ -o~<1i- PAGE OF ~ '" Since earthquakes are common in the area, no responsibility is assumed for their possible affect on individual properties, unless detailed geologic reports are made available. The appraisers have inspected as far as possible by observation, the land; however, it was impossible to personally inspect conditions beneath the soil. Therefore, no representations are made as to these matters unless specifically considered in the report. ,...-. The appraisers assume no responsibility for economic or physical factors that may occur after the date of this appraisal. The appraisers, in rendering these opinions, assume no responsibility for subsequent changes in management, tax laws, environmental regulations, economi~r physical factors that mayor may not affect said conclusions or opinions. . ~ No e~gineering survey, legal, or engineering ana has been made by us of this property. It is assumed that the leg Ctescription and area computations furnished are reasonably accur However, it is recommended that an analysis be made for exact erification through appropriate professionals before demising, hypothecating, purchasing or lending occurs. !e Unless otherwise stated in this re the existence of hazardous substances, including without limitation a estos, polychlorinated biphenyls, petroleum leakage, or S'cultural chemicals, which mayor may not be present on the property, ther environmental conditions, were not called to the attention of nor did t/1 ppraisers become aware of such during the appraisers' inspection. The praisers have no knowledge of the existence of su~c'aIS on or in the property unless otherwise stated. The apprai ,h ver, are not qualified to test for such substances or conditio The presen of such substances such as asbestos, urea formaldehyde, foam insulation, or other hazardous substances or environmental conditions may affect the value of the property. The value estimated herein is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in the field of environmental impacts upon real estate if so desired. '" The cost and availability of financing help determine the demand for and supply of real estate and therefore affect real estate values and prices. The transaction price of one property may differ from that of an identical property 11 AGENDA ITEM NO. ~ ~ PAGE.1iJ.:OF ,;'11 -- because financing arrangements vary. ,..., The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used. The forecasts of future events that influence the valuation process are predicated on the continuation of historic and current trends in the market. The property appraised is assumed to be in full compliance with all applicable federal, state, and local environmental regulations and laws, and the property is in conformance with all applicable zoning and use ordinances/restrictions, unless otherwise stated. \it The Americans with Disabilities Act ("ADA'] became effectiv~ ~ry 26, 1992. We have not made a specific compliance s5Y and analysis of this. property to determine whether or not it is in co ity with the various detailed requirements of the ADA. It is possible that ompliance survey of the property, together with a detailed analysis of the quirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this could have a negative effect on the value of the property. Since we v direct evidence relating to this issue, we did not consider possible non 0 pliance with the requirements of the ADA in estimating the value of the pro erty. We shall not be reqUired~reason of this appraisal, to give testimony or to be in attendance in cou or any governmental or other hearing with reference to the property wit out prior arrangements having first been made with the a . ers relative to such additional employment. In the nt th appraisers are subpoenaed for a deposition, judicial, or administr e ceeding, and are ordered to produce their appraisal report and files, th praisers will immediately notify the client. ,..., The appraisers will appear at the deposition, judicial, or administrative hearing with their appraisal report and files and will answer all questions unless the client provides the appraisers with legal counsel who then instructs them not to appear, instructs them not to produce certain documents, or instructs them not to answer certain questions. These instructions will be overridden by a court order which the appraisers will follow if legally required to do so. It shall be the responsibility of the client to obtain a protective order. The appraisers have personally inspected the subject property; however, no opinion as to structural soundness of existing improvements or conformity to any applicable building code is made. The appraisers assume no ,..., 12 AGENDArrE~i' 3~ . PACE oF31L. ~ responsibility for undisclosed structural deficiencies/conditions. No consideration has been given in this appraisal to personal property located on the premises; only the real estate has been considered unless otherwise specified. ~ James B. Harris is a Member and Berri J. Cannon Harris is an Associate Member, of the Appraisal Institute. The Bylaws and Regulations of the Institute require each Member and Associates to control the uses and distribution of each appraisal report signed by such Member or Associates. Except as hereinafter provided, possession of this report, or a copy of it, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraisers and in any event only with properly written qualification and only in its entirety. The City of Lak~.nore, its underwriter and legal counsel may publish this report i Official Statement for this Community Facilities District. Neither all nor any part of the contents of th~ort (especially any conclusions as to value, the identity of the apprais r the firm with which they are connected, or any reference to the Appraisa stitute or the MAl designation) shall be disseminated to the public through advertising media, public relations, news media or any !iPUbIiC means of communication without the prior consent and approva f undersigned. The acceptance of and/or use of this aisal report by the client or any third party constitutes accep-tance of the following conditions: The liability of Htls Realty Appraisal and the appraisers responsible for th~port is limited to the client only and to the fee actually received by the appraisers. Further, no accountability, obligation or liability to any . If the appraisal report is placed in the hands of her than the client for whom this report was pre , the client shall make such party and/or parties aware of all limiting conditions and assumptions of this assignment and related discussions. Any party who uses or relies upon any information in this report, without the preparer's written consent, does so at his own risk. If the client or any third party brings legal action against Harris Realty Appraisal or the signer of this report and the appraisers prevail, the party initiating such legal action shall reimburse Harris Realty Appraisal and/or the appraisers for any and all costs of any nature, including attorneys' fees, incurred in their defense. ~ 13 AGENDA ITEM NO. ~ 6 PAGE ;). ~ ~ OF ~t{l -- AREA DESCRIPTION The following section of this report will summarize the major demographic and economic characteristics such as population, employment, income and other pertinent characteristics for the Southern California region, Riverside County, City of Lake Elsinore and the subject market areas. Southern California Reaional Overview The Southern California region, as defined in this report, encompasses six individual counties including Los Angeles, Orange, Riverside, San Bernardi#)r San Diego, and Ventura Counties. The Southern California region extends from the~fornia-Mexico border on the south to the Tehachapi mountain range o~e north and from the Pacific Ocean on the west to the California-Arizona border on. east. The region covers an estimated 38,242 square miles and embodies a diverse spect of climates, topography, and level of urban development. Please refer ~OIlOWing page for a location map. Population · U The Southern california~ion has added about 7.7 million new residents since 1980 as indicated in the table sh on page 16. According to the California Department of Finance, the most recent data aval able indicate that as of January 2006, the regional population sto~21.1 million. II the region were an individual state, it would rank as one 01 the mosV in the nation. . Since 1981, annual population gains from natural increase and immigration have ranged from a low of 87,300 persons in 1995 up to 568,645 persons in 1989. These figures represent annual gains of 0.5% to 3.5%. During the past five years, the population of the six-county Southern California region grew by 1.2% to 2.0% per annum. 14 AGENDA ITEI~ PACE OF ....., ....., ....., -oy 2y{1(., ""...... ""...... ,... Insert Regional Location Map on this page. Q , t(> 15 , , ACENDA 11 t:M IvV. 3, PAGE rl-5l OF ~ As of January 2006 the population of the six-county area stood at 21,147,233 ......, persons. Looking toward the future it is estimated that the region's population will continue to climb as new residents seek out the southern California area. During the economic downturn from 1992 through 1996, and continuing through 2006, the population growth rate declined compared to the growth experienced in the late 1980s. Population Trends 1980-2006 '-' April 1, 1980,1990, and 2000; all other years January 1 Source: California Department of Finance. 5/06 The future rate of growth will depend on a number of factors that may dramatically affect the region. Some of the major factors include availability of developable land, availability of water, national economic climate, and public policy toward growth and the assimilation of a large number of new foreign immigrants. The continued growth of the '-' 16 3;)- ACENDA nCIVlI~V. Mot: J6/ OF ''?<f!--"~ ~ population within the region, even during periods of economic slow down, provides a positive indicator as to the desirability of the Southem California region. Employment In conjunction with the population growth, a key indicator of the region's economic vitality is the trend in employment. The most common measure of employment growth is the change in non-agricultural wage and salary employment. The table below illustrates the non-agricultural wage and salary employment trends in Southern California. Southern California Region Errployment Trends 1983-2005 ~ 2005 Benchmark Source: Employment De-.elopment Department 5106 ~ In the Southern California region, average annual non-agricultural employment has grown from 5,691,000 jobs in 1983, to a peak employment of 8,362,000 in 2005. 17 AGENDA ITEM NO. (5 r PAGE Ab,7 OF 317 Employment declined to 8,073,100 in 2002. This decline was mostly caused by a significant job decrease in Los Angeles County. In 2005, employment climbed to a new record level, 8,362,000. This was in spite of Los Angeles County only adding an additional 20,000:t jobs. This represents an increase of approximately 280,000 new jobs over the past five years. As the economy entered into an economic recession during the latter part of 1990, employment growth slowed. The average annual gain in 1990 was approximately 192,100 jobs or 2.7%. In 1992 when the full weight of the recession was fI It, area employment suffered the highest annual decline in jobs registered in the last d de, losing nearly 204,000 jobs or a percentage decrease of 2.9%. This was followed by fu r employment declines of 103,300 jobs in 1993. It appears that by th(piddle of 1994, the economic recovery finally began to take hold in the Southern califom~ion. The employment data for 1994 indicated a slight increase of 35,800 jobs or 0.5% for 1994. The adv~rse employment issues experienced in the prior ~ears had abated. The annual average employment for 1995 exhibited a gain of 1 Z3~W jobs or a 1.8% increase, and for 1996 an estimated 126,300 new jobs were added. In 1997, total non-agricultural employment stood at 7.3 millioqfnally exceeding the prior high in 1990. As of year-end 2002, employment was over 8.0 ~ion. Forecasts prior to September 11, 2001, indicate that job growth w Id continue to be positive in 2001 and increase moderately over the next one to However, with the terrorist attack on the United States and the conflict -with economists are saying we were in a flat to slightly declining economy, during 2 2 and first half of 2003, but that we began recovery during the second half of 2003. 2003 showed a small increase over the previous high mark in 2001. Employment gains have recovered in 2005 with an additional 137 ,400 new jobs or a 1.7% increase. Employment among the individual industry categories reflects some fundamental regional changes in the economy during the past decade. The level of mining activity in Southern California continues to steadily decline as reflected in the consistent decrease in mining employment. Construction employment, as of 1989, was at a high level in response ....., '-' '-' 18 AGENDA IH:.M i~O. '0). PAGE~OF '3L/l-- ,...., ,.... ~, to the level of construction activity that had occurred in the region during the past five years. During the period from 1991 through 1994, construction employment declined in response to decreased residential and commercial construction activity. From 1994 through 2005, as the economy rebounded, residential construction increased bringing back more than the construction jobs lost during the recession. Total manufacturing employment in the region has exhibited little gain from the levels recorded in 1980. Due to the high labor, land, and capital costs in most of the Southern California region, some manufacturing firms have expanded or relocated their manufacturing operations outside of the area. , The Southern California economy, which hiS~.caIlY depended heavily on aeros~ace and defense related employment, has been d dOUbl~ blow. ~irst from the reduction of the space program and reduced defense pending which affected manufacturers and suppliers, and second fro~e closure of several military bases which has had a ripple effect throughout the local Areas heavily dependent on military spending will be impacted as the units are depl abroad. The finance, insurance,ll real estate ("FIRE") employment category grew rapidly as the economy recovered fro~e 1981-1982 national recession. As the economy entered a new~.onary cycle, the FIRE employment sector exhibited little growth from 1991 through 5. So e of the manufacturing and aerospace jobs permanently displaced from the econom slowly being replaced with administrative, marketing and research employment. It is reasonable to assume that similar stagnant growth in this area will be experienced during the current economy. The employment group that has contributed most to the employment growth in the region is the service sector. Since 1980, the majority of all new jobs have been created in the service category. The service sector was the leader in new jOb growth during the years that followed the economic recovery from the 1990 recession. Government employment tends to mirror the growth of the population that it services. It is expected that government employment will grow at a rate similar to the area 19 '. '" O}- Avt:I~Uh i i '- ',' " PAGE r& OF3!JL.. population. The future employment growth in the Southern California region is expected to continue but at a level moderately lower than recent years. Factors that will affect employment growth include the direction of the national economy, wage levels, housing prices, and population trends. Given the national disaster of September 11, 2001, government should not experience layoffs; on the contrary, growth particularly in the defense sector should occur. However, the California deficit has negatively impacted both state and local government employment. Riverside County Riverside County consists of 24 individual cities and num~s unincorporated communities. Riverside County is typically grouped with adjacent San ~rdino County to form the Riverside-San Bernardino Metropolitan Stati~1 Area ("MSA"). This area is commonly called the Inland Empire. Riverside County is b~d by Orange County to the west, San Bernardino to the north, the state of Arizona to the east, and San Diego County to the south. ~ The major urbanized areas are located In the western portion of the County. The major incorporated cities includ~e cities of Riverside, Corona, and Moreno Valley. These areas were the most active areas", new growth during the mid 1980's until the recession took hold during 1 90. The area which encompasses Lake Elsinore, Murrieta, Menifee Valley and T cula s also experienced rapid growth since the mid 1980's. The areas that have exper e most active growth during the 1980s also suffered the most during the lengthy cession. However, since 1996, residential activity has increased due to downsizing of product with more affordable pricing, and the general improvement in the regional economy. Population Riverside County has almost tripled its population, adding approximately 1,290,000 new residents since 1980 as illustrated in the following table. As of the 2000 Census, the countywide population stood at 1,545,387 residents. The 2006 estimate by the State of California indicates that the County had 1,953,330 residents on January 1, 2006. Annual ~ '" ......" 20 I'\VCI\lv,.... .. ~,., L C'.'. "3 r PACE ()-~iL OF ~ ~ population gains, from natural increase and immigration, have ranged from 25,300 persons in 1997 up to 81,303 persons in 2004. From 1991 to 1996, the rate of growth in population declined moderately each year. Recent gains of 44,799 to 81,303 persons represent annual changes of 2.9% to 4.7%. The future rate of growth within the County will depend on a number of factors. Some of the major factors include availability of developable land, availability of water, national and regional economic climate and public policy toward growth. The areas within the County that will continue to experience~ largest share of the new population growth will be the Corona-Riverside area and ~rea between lake Elsinore, Sun City and Temecula, which includes t~enifee Valley. Riverside County ....~ Population Trends 1980-20 ",,- April 1 , 1980, 1990, and 2000, all other years January 1 Source: California Department of Finance. 5/06 """' 21 '0)- AGENDA ITEM NO. PAGE asi OF~ Employment Employment data for Riverside County are compiled for the entire MSA, which includes San Bernardino and Riverside Counties. These counties have become a diverse economy, with manufacturing, construction and tourism the major industry groups. In conjunction with the rapid population growth experienced in the past two decades, the employment base has continued to grow and diversify. The Inland Empire's unemployment rate is moderately above the Southern California average and similar to the State. The higher unemployment rate is due to the seasonal nature of agricultural employment in the area. The following exhibit illustrates the area's unemployment compared to California as of March 2006. Unemployment rates have declined 64% from the recesk high of 12.2% in 1993. -~ Labor Force California 17,688,900 . % Inland Empire 1,713,300 4.4% The most common measure of ~ent growth is the increase in nonagricultural employment. Nonagricultural ez,::nt is outlined in the following exhibit. During the 1980's the Inland filire's employment base expanded rapidly as the area moved away from its military an~vernment oriented employment base to a more fully diversified econom . ployment has grown from an annual average of 443,100 jobs in s in 2005. This represents an increase of over 792,000 new jobs created in San Bernardino and Riverside Counties during the past 22 years. As the economy rebounded from the national recession in 1981-1982, annual employment gains jumped by approximately 30,500 new jobs in 1984. Job gains peaked in 1990 with 67,000 new jobs. During the economic recession of 1991 to 1996, increases ranged from 4,300 to 28,600 new jobs representing a 0.6% to 3.7% gain per annum. Since 1999, job increases have ranged from 34,100 new jobs to a record increase of 59,300 new jobs in 2004. The percentage increases have ranged from 3.2% to 6.3%. The table on the following page """ ......., "will' 22 AOENDA ITEM NO. O/- PAOE.J.6COF~ ~ illustrates the annual employment trends from 1983 through 2005. In March 2006, the non- agricultural employment had increased to 1,235,100, a 2.3% increase from March 2005. Employment among the individual industry categories reflects changes in the Inland Empire economy during the past decade. Construction employment gains generally mirror the regional economy. In response to the high level of construction activity that occurred in the County during the period from 1984 to 1989, construction employment reached nearly three times the level recorded in 1982. From 1992 through 1995, construction employment declined in response to decreased building activity. The 2005 levels were more than double the 1993 low. , San Bernardino-Riverside M\ Elll>loymmt Trends 1983-2005 .-- 2005 Benchmark Source: Employment De\elopment Department 5/06 ,..... 23 AGENDA ITEM NO. 0 r ~ PAO& ~ OF. 24, ~:;' The number of manufacturing jobs in the Inland Empire has increased over 45% from the levels recorded in 1991. However, manufacturing jobs declined 5.5% from the 2000 high of 120,000 jobs to 113,400 jobs by 2003, but increased back up to 120,200 in 2005. Due to the high labor and capital costs in Los Angeles and Orange Counties, manufacturing firms have expanded or relocated some of their manufacturing operations to Riverside and San Bernardino counties to take advantage of the labor force and lower land costs. ~ Transportation and public utilities employment tend to mirror ~pulation growth. In the Inland Empire the finance, insurance and real estate ("FIRE") ca ry is still a small segment of the employment picture. A significant number of the new jobs created in the ~ years have been created in the service sector. The service sector will continue to play a major role in employment growth during the next few years. Governme~oyment is a major employment sector in the Inland Empire due to the rapid growth. ... V ~ The future employment ~.~h in the Inland Empire is expected to continue as more firms relocate to the area ~ke advantage of lower land prices and the abundant labor pool. Factors that will affect employment growth include the direction of the state and national econogconsumer confidence. Due to the terrorist attack on September 11, 2001 and the ~ co ict, consumer confidence has been negatively impacted. Most economists report we were in a flat economy in 2002 and the first half of 2003, but that we began recovery during the second half of 2003. The recovery continued into 2006. Income -The average household income in Riverside County is estimated to be $63,592. The median household income stands at $48,384. These figures are moderately below the Southern California region average. The lower income level is due to the lower wages in agriculture, manufacturing, service and government employment. The household income distribution for Riverside County is illustrated in the following table. ~ 24 AGENDA ITEM NO. ;:) r PAGE Q{eD OF?Jh ~ r--- County of Riverside Household Income Distribution 2005 Retail Sales ,.- Retail demand continues to be fuel~the growth in population as outlined previously. For Riverside County, taxable rer~s have increased from $3.9 billion in 1985 to over $7.1 billion by 1994 and to over $18.7 billion by 2004. During the past four years, annual changes have ~ed from an increase of $768 million in 1998 to an increase of $2.7 billion in 2004, a~wn on the next table. Data for 2005 are not available as of the date of es' retail sales are due to the exceptionally high County population growth rates exper nced during the period from 1983 through 1990. During the period from 1991 through 1993, retail sales were stagnant due to the economic recession. From 1994, and continuing through 2004, there was a significant rebound in retail sales. Official state reports for 2005 will not be released until later this year. In the future, retail sales growth should mirror the population growth in the County. ,.- 25 AGENDA ITEM NO. '0 r PACE 9-t.e"( OF >11 -- Riverside County Retail Sales Trends 1 1985-2004 ....." ....." 1/ Taxable R~;:les Total (not adjusted for inflation) Source: StaL ~ of Equalization 5/06 Transportation Riversid is served by a major airport, Ontario International, located in o County. Several major airlines have flights into Ontario, while be booked out of Los Angeles International Airport. adjoining San international flights A network of freeways links most urbanized areas of the County. The major north- south arterials are the Corona (15) and Escondido (215) Freeways. The Pomona Freeway (60) provides east-west access to the Los Angeles area and the desert areas of Riverside County. The Riverside Freeway (91) provides access to Orange and Los Angeles Counties. ....." 26 AGENDA ITEM NO. .3 )- PACE d.(p;}- OF.3itL.. /"'" ,....... Environmental Concerns The Endangered Species Act of 1973 precludes any activity that constitutes a taking of a federally listed endangered species except by permit. Numerous areas within Riverside County have been identified as containing potential habitat of the Stephen's Kangaroo Rat, a listed species. The evidence of habitation by this rat has resulted in delays or substantial revisions of proposed developments. The California Department of Fish and Game is currently reviewing the status of additional wildlife for possible inclusion on a list of endangered or threatened species. A Multiple Species Habitat Conservation Plan (MSHCP) was approved by the County Board of Supervisors o~une 17, 2003. The MSHCP is a comprehensive, multi-jurisdictional effort that includes County and 14 cities. This plan focuses on the conservation of 146 species. The MSH consists of a reserve system of approximately 500,000 acres of WhiC~7,000 acres are within public ownership and approximately 153,000 acres are in private ~ShiP. The purchase of the privately owned lands will be funded by an adopted fee. A MSHCP fee of $1,651 per dwelling unit is imposed for housing built in thr-x..CP area. In summary, the region exhibited ve~~ population and employment growth during the 1980 to 1989 period.~recession of the early 1990s had significantly slowed population growth and resulted overall job losses from 1990 to 1995. Over the past seven years, as the economy reco ered, population and employment growth have been stronger than e prior growth years of the 1980s. The long-term outlook for the region remain sitiv s the elements of abundant affordable land and labor still exist. Future growth will, ever, continue to be affected by the trends in the overall economy. Riverside County's economic environment should follow a path similar to that of the other Southern California counties. lake Elsinore The City of lake Elsinore is located in the southwestern portion of Riverside County. The City of lake Elsinore and the surrounding area to the southeast, most notably Murrieta and Temecula, experienced rapid development beginning in the early 1980's and late 1990's and was one of the fastest growing areas in Southern California. It has become /"'" a sprawling suburban bedroom community for Orange and los Angeles counties. The area 27 AGL:hlUk n tlVi '''v. 3 >- PAOE ~6 OF ~ ~ has attempted to retain the semi-rural, western atmosphere of the early residents. Please refer to the next page for a neighborhood map. ""-"" , , ~ .~ , Q ""-"" 28 , ',.''")'\ c..,~,~ ~'n 3~ I'a\,;... , , ..,. , , ":t.\ u PACE;}(J "'OF'?AI'='" ~ Insert Neighborhood Map Lake Elsinore here /"'" Q /"'" , ~ 29 \ , h...........,,...III-,,......-L Or PAGE d(P~ OF ,([: During the past five to ten years, the City of lake Elsinore has begun to add new """"" residential and retail developments. Most of the newer retail commercial development has occurred adjacent to the Corona Freeway (1-15), which bisects the northern and eastern sections of the City of lake Elsinore. The major community commercial retail development is concentrated near the intersection of the Corona Freeway (1-15) and Railroad Canyon Road, primarily along Mission Trails. A major retail development is under construction at the 1-15 and State Highway 74. There is older commercial development located along Riveee Drive between. lakeshore Drive and Grand Avenue. ~ The newest residential developments are locate4the northeastern area of the City, in the vicinity of the Tuscany Hills, Rosetta Canyon ~anyon Hills developments. In addition, there is some residential development on the northwest.side of lake Elsinore, along lake Avenue. Most of the new home~. uctctiion is single-family detached product in master planned communities. The homl!"~d range from entry-level homes in moderate price ranges to larger move-up homes. As the market changed during the past recession, the residential secto"oved to the smaller homes with affordable prices. But recent development has shown a~rease in dwelling size and sales prices. ...., Popul Although of lake Elsinore, incorporated in 1888, is old by southern California standard , it was not until the 1980's that the City experienced significant population growth. The City of lake Elsinore has experienced moderate population increases during recent years as illustrated on the following exhibit. Since 1980, annual population gains of 400 persons to a peak of 2,700 persons have been recorded. The current population of the City of lake Elsinore, as of January 2006, is estimated to be 40,985 persons. Over the last three years, the City has averaged a 6.9% annual growth in population. ...., 30 AOENDA ITEM NC. ~ r PAOIi?-totl OF ()f\)_ "....... Although the City of Lake Elsinore is predominantly residential in nature, there are 1 ,200 acres zoned for industrial use. The improved industrial development is limited with most of the industrial land remaining vacant. City of Lake Elsinore Population Trends 1980-2006 ~riI1, 1980, 1990, and 2000, all other years January 1 . .y"'e'" Ca'Oomla Department of Finance. 5106 Employment In the immediate Lake Elsinore area is limited. The major employers in the area are as follows: ,--. Manufacturina Labeda Wheels Pacific Clay Wieland Precision, Inc. Emplovment 150 130 112 Product Racing Skates Building Products Tool & Dye ~ 31 AGENDA ITEM NO. Or PAGE d-.{e1 OF.2:tL- Non-manufacturina Emplovment Product ....." Lake Elsinore USD 1,681 School Lake Elsinore Outlet Center 1,169 Outlet Mall Wal-Mart 400 Retail Lake Elsinore Storm 250 Baseball Lake Elsinore Casino 200 Resort/Casino Albertsons 150 Supermarket Vons 145 Supermarket Stater Bros. 131 Supermarket Most of the residents in Lake Elsinore work in areas outside of the City. Many residents drive considerable distances to work in San Diego, Los .iJleles and Orange counties. - "'" The housing market in Lake Elsinore is typicalc~-gle-family residences. New homes range from relatively entry-level homes of 2,000!':q3 feet on 5,000 square foot lots up to larger move-up homes on 7 '200~re foot lots. The majority of the homes range in size from 2,000 to 3,000 square fee located in larger subdivision tracts or master planned communities on typical lot size ,000 to 7,200 square feet. In view of lake Elsino~rowing economy and population, only shortages of public services or a prolonged national building slump are likely to keep the City from reaching full d~t over time. Based o~t and expected future economic and population growth of the Lake Elsinore area, the Lake Elsinore area is considered to have average to good future growth potential. ~ Immediate Neiahborhood The subject properties are located in the east portion of the City of Lake Elsinore. The projects are in the general vicinity of Canyon Hills Road and Hillside Drive about two miles east of the 1-15 Freeway south of Railroad Canyon Road. The newer homes in this area are part of the existing Canyon Hills master planned community. The community is ~ 32 AGENDA ITEM NO< 2> r PAGE d-U:Ji<'OF?:JJ7 -- " newer, approximately three to five years old. The homes are a mix of one and two story construction, of average to good quality in good condition. Phase I is completed and Phase II of Canyon Hills is nearing build-out. The subdivisions of The Willows by Pardee Homes, Edgewater by Pardee Homes, Riverbend by Pardee Homes and Cedar Point by KB homes are completed and sold out or nearing sell-out. ~ The majority of the area around Canyon Hills is currently vacant. The exception is the City of Canyon Lake, to the north of Canyon Hills. The Tuscany Hills Community is located approximately 1 mile to the northwest. The remaining area is either developed with single-family dwe~ schools. The Lake Elsinore Recreation Area and boat launch are 10caS;bout three miles west of the subject neighborhood. There are retail uses along shore Drive. New local neighborhood commercial is currently under construction at ailroad Canyon Road at Canyon Hills Road. The primary retail areas x:.the 1-15 and Railroad Canyon Road, the 1-15 and Central Avenue, and the Lake E""Uutlet Center near the 1-15. Conclusion .( Lake Elsinore and the s~nding area has been experiencing rapid population growth during the past few years. New residents are being attracted to the area because of the affordable comparison to the coastal regions of Los Angeles, San Diego and Orange counti bject's neighborhood is experiencing new construction of single- family developme that conform to the existing neighborhoods. The demand for continued development supports the build-out of the subject property. ~ The economy has experienced economic growth beginning in the third quarter of 2003, due largely to increased consumer and business spending. The anticipated continued strength should bring renewed job growth. Inflation is reported to remain low, which should keep mortgage rates from rising too steeply while the economy gains strength. The Inland Empire's housing boom has shown minimal signs of slowing. Builders in Riverside County increased demand for new housing permits and pulled 34,226 residential permits during 2004, and 34,330 residential permits in 2005. 33 AGENDA ITEM NO. 21 1'" PACE ~.f..\.... OF ;3 ~l .. -....if! The Riverside County area saw an increase of 9.4% in the median home price from a year ago. The median home price in Riverside County was $409,000 in April 2006. San Bernardino's median home price was $360,000. Both of these prices are less than the record highs for each County. Over the last four years, the subject's market area has continued to experience good demand for detached single-family homes. However, over each of the last six months, the number of home sales has declined from the previous year. As long as the economy continues to grow, employment opportunities improve closer to the subject area, and the cities close to the more urbanized areas become even more expensive areas to live and operate a business in, the Lake Elsinore \ita and the District are anticipated to continue to experience moderate growth, -~ ~ ....., , Q ....., 34 ACENDA Ilt.IVl I""... a J' PACE Q1b OF ~l{ l ~ "'" SITE ANALYSIS General The subject property of this appraisal is identified as CFD No. 2003-2, Improvement Area B. The subject includes eight planning areas: Planning Areas 1, 2, 21A, 21 B, 22, 23, 24 and 36. Planning Areas 1 and 2 are in a raw condition, while PA 36 is in superpad condition. Planning Areas 21A, 21 B, 22, 23 and 24 are single-family subdivisions is various stages of development from actively selling production homes to lots in blue-top, condition. CFD No. 2003-2, Improvement Area B is a portion of the Canyon Hills Specific Plan. , Location The majority of subject parcels are located near ~'ntersection of Hillside Drive and Canyon Hills Road, one mile southeast of Railroad on Road. Planning Areas 1 and 2 are located on Railroad Canyon Road northwest of e intersection of Canyon Hills Road. At Railroad Canyon Road, can~ls Road is about 2% miles east of the Corona Freeway (1-15). · U ,-... Current Site Condition ~ As of the date of value this appraisal, the subject is in various stages of construction from raw land to comp eted dwellings. The following exhibit summaries the current condi~Ubject by Planning Area. Planning Area'V, a single family subdivision known as Cross Creek by Pardee Homes. There are a total of 127 lots of which 8 model homes are completed (includes models for Cross Creek and Briarcliff), 36 completed production homes, 26 production homes in various stages of construction and 57 finished lots. Planning Area 21 B is a single family subdivision known as Weatherly by Pulte Homes. There are a total of 131 lots of which 3 model homes are completed, 4 completed production homes, 46 production homes in various stages of construction and 78 finished lots. ,,-.. 35 AOENDA ITEM NO. 3> r PAGE ~ \ OF ~ L{ I..-. , r ......", Model Units Canpleted Under Construction 8 3 01 4 3 36 4 40 26 46 31 16 57 78 36 25 143 216 11 7 80 119 196 242 216 318 360 678 318 360 1,549 Production Units Canpleted U1der Construction Finished lots Blue Top Lots Mass Graded Total 127 131 143 216 Raw Land 1 Briarciff IIitJdeI units in PA21A adjacent to O"oss O"eek mxIeIs ......", Planning Area 22 is a single family subdivision known as Briarcliff by Pardee Homes. There are a total of 107 lots. ~ model units are located in planning area 21A in the Cross Creek development. The~re 40 completed production homes, 31 production homes in Vari" of construction and 36 finished lots. Planning AreVa single family subdivision known as Bridgegate by Pardee Homes. There are a total of 147 lots. The 4 model units are under construction with completion scheduled for May 2006. The balance of the parcel, 143 lots, is in blue-top lot condition with wet utilities under construction. Planning Area 24 is a single family subdivision known as Alderbrook by Pulte Homes. There are a total of 143 lots of which 3 model homes are under construction and 16 production homes are in various stages of construction. There are 25 finished lots, some with foundation work commenced. The balance of 99 lots is in blue-top lot condition with wet utilities under construction and streets graded. .~ 36 A"i:::.....,... i Od- -~ PACE 79- OF~ " Planning Area 36 is a multi-family site in super-pad condition. Planning Areas 1 and 2 are multi-family areas in a raw condition. Size and ShaDe The overall shape of CFD No. 2003-2, Improvement Area B, is irregular and contains 426.46:t gross acres. CFD 2003-2, Improvement Area B has been subdivided into three tracts, Final Tracts 31706 and 30493 and Tentative Tract 30496. Please refer to the following table, which summarizes the tracts. The following three pages show a copy of the tract maps. /""" PA 1 Lot 1 MB 367/017 Tr 363-210-014 28.44 PA 1 Lot 2 MB 367/017 Tr 363-210-015 7.68 PA2 Lot 3 MB 367/017 Tr 30496 363-210-016 28.25 PA 21A MIL In Per ~2 MB 3701062 Tr 30493-1 363-220-026 9.50 PA21B MIL in POI" L 13 MB 370/062 Tr 30493-1 363-220-027 6.45 PA 21B MIL in POI" Lot 3 MB 370/062 Tr 30493-1 363-230-074 1.69 PA 21B MIL in Per Lot 413 MB 370/062 Tr 30493-1 358-110-007 20.25 PA Q in Per LoI413 MB 3701062 Tr 30493-1 358-120-005 0.14 PA L in Per Lot 405 MB 370/062 Tr 30493-1 363-220-024 139.32 PA 22 406 MB 3701062 Tr 30493-1 363-220-025 137.05 PA 24 MIL in Per Lot 414 MB 370/062 Tr 30493-1 363-220-028 1.30 PA24 MIL in Per Lot 414 MB 370/062 Tr 30493-1 358-11 Q-008 39.45 PA36 MIL in POI" Lot 402 MB 370/062 Tr 30493-1 363-220-022 4.73 PA36 MIL in Per Lot 402 MB 370/062 Tr 30493-1 363-230-069 2.21 TOTAL 426.46 /""" 37 ACENDA ITEM NO. 3;r PACE r;{P; OF~ Q Tract 30493 Planning Areas 21A, 218, 24 and 36 'Z> , , '-' , '-' 38 '-' ACENDA ITEf~;~ 'l>? PAGE 1 OF '9tr~C .~ ~ .~ ..-.. . Q Tract 31706 Planning Areas 22 and 23 '2> , , , 39 AOEN.DA nEr.).,~,O. .3 ~ PACE_<JrJ OF Q Tentative Tract 30496 Planning Areas 1 and 2 i(} , , , ......., ......, 40 "'-' ACENDA ITEM "'Iv. 3 tr PACE CALe OF.2tb.....: ,.,..... Soils and Geoloav The appraisers have reviewed portions of the "Preliminary Geotechnical Investigation Tentative Tract No. 30493 Canyon Hills Planning Areas 18,19, 21A, 21B, 22, 24 and 36 Lake Elsinore, CA.," dated November 14,2002. The appraisers have reviewed portions of the "Preliminary Geotechnical Investigation Tentative Tract No. 30493 Canyon Hills Planning Area 23 Lake Elsinore, CA," dated December 12, 2002. Both reports were prepared by Pacific Soils Engineering, Inc. The reports conclude in Section 6.0 Geotechnical Conclusions and Recommendations, "Development of the subject property as proposed is considered feasible, from a geotechnical standpoint, provided that the conclusions and recommendations presented herein are incorporate~o the design and construction of the project." The reports specify issues identified by th~y or previous studies as possibly affecting site development. Recomme(rtions to mitigate these issues are presented in the text of the reports. . , ,.,..... Topoaraphv and Drainaae ~ The topography of the subject prop~el to sloping with padded lots. Site elevations range from 1 ,525 feet to 1 ,625 feet above sea level. The site elevations will facilitate view premium lots wit~e proposed developments. Drainage is via natural sheet flow and percolation. Storm drain capacity for the subject will b nstr ed during the development process. During our inspection of the site, we obse rainage problems that would not be cured by the proposed development of the ite. Zonina Canyon Hills is zoned SP, Specific Plan, by the City of Lake Elsinore. This zone allows for a variety of compatible uses that comprise a master planned community. Planning Area 21A, 21 B, 22 and 24 are designated SF-3, with a density of 4 to 8 units per acre. Planning Area 23 is designated SF-2, with a density of 2 to 4 units per acre. Planning Area 1 is designated MF-1, with a density of 8 to 12 units per acre, and ,.... Planning Areas 2 and 36 are designated MF-2, with a density of 15 to 24 units per acre. 41 ACENDA ITEM NO. 3~ PACE-4TI-OF ~ ~-- ""'" PA 21A 127 29.6 SF-3 4-8 4.3 4,900 PA 218 131 28.5 SF-3 4-8 4.6 4,900 PA22 107 30.7 SF-3 4-8 3.5 6,000 PA23 147 54.3 SF-2 2-4 2.7 6,000 PA24 143 40.7 SF-3 4-8 3.5 5,000 PA36 216 12.0 MF-2 15 - 24 18.0' - PA 1 318 30.8 MF-1 8 -15 10.3 PA2 360 26.2 MF-2 15 - 24 13.7 TOTAL 1,549 252.8 6.1 As proposed, the subject project atto_ be a legally conforming use. The subject property is in conformance with all :~uirements, and is assumed to be in conformance with all governmental regulations. '-' Access and Circulation , The subject area is primarily accessed by Canyon Hills Road. Canyon Hills Road is dedicated 1 oo~w and is improved with two lanes of asphalt in each direction with a raised center m 'an, turn pockets, and concrete curbs and gutters. Railroad Canyon Road extends eas st from Canyon Hills Road and connects the 1-15 Freeway about 2% miles west of the subject. Easements The appraisers have not been provided with a title report. It is a specific assumption of this appraisal that easements and encumbrances affecting the property are not detrimental to value. The property is subject to several special taxes: City of Lake Elsinore LLMD, Elsinore Valley Municipal Water District and Regional Sewer, CFD No. 98-1 Temescal Valley Project and the City of Lake Elsinore CFD 2003-2. '-' 42 ACENDA ITEM NO. '3>- PACE J7t OF '1t{) --- ",..... Utilities The subject property is served by the following companies/agencies: Electricity Water Gas Sewer Telephone Southern California Edison Elsinore Valley Municipal Water District Southern California Gas Company Elsinore Valley Municipal Water District Verizon ,..-, Earthauake, Flood Hazards, and Nuisances The subject properties are shown on Riverside County's Nati~al Flood Insurance Map Panel No. 060636-0008D. According to the flood insurance rate ps for the City of Lake Elsinore, the subject properties are not located in a HUD flood hazar ea. According to the California Division of Mines and ~y. the subject properties are not located in a seismic study zone; however, earthquakes impact all of Southern California. There are several faults in the ViC~In' the subject. They consist of the Glen Ivy Fault, Elsinore Fault, Willard Fault and the Fault. Other active faults are the San Jacinto (20 miles from the subject) and the San ndreas (30 miles from the subject). , d report was not provided to the appraiser. There are no toxic hazards Toxic Hazards known to the The subject sites are not classified as properties with historical, archaeological, or scientific value and to the best of our knowledge, are not considered wetlands. The property owner has not provided a Phase 1 Environmental Site Assessment Report for the appraisers' review. It is a specific assumption of this appraisal that all environmental concerns have been addressed and mitigated. Based on the current site condition and map status is appears that the site is suitable for development of the ",..... proposed uses. 43 AGENDA ITEM NO. -0)- PAGE r 1 1-0F..:t:tL..: Taxes and Special Assessments The individual assessor parcels have property. taxes as shown on the following table. Pursuant to Proposition 13, passed. in California in 1978, current Assessed Values mayor may not have any direct relationship to current Market Value. Real estate tax increases are limited according to Proposition 13 to a maximum of 2% per year plus bonds, if any. If the property is sold, real estate taxes are normally subject to modification to the then current Market Value. Currently, there are special taxes for one existing CFD. In addition, there will be special taxes for CFO No. 2003-2. Improvement Area B. The total krat~ is estimated not to exceed 2.0%. CFD No. 2003-2 will have special taxes rang~rom $807 to $2,094 per unit depending on house size. , The office of Harris & Associates estimates the Special. Taxes on the undeveloped residential land within CFD~003-2. The Special Taxes for the individual homes are also estimated. The e . a property values are based, in part, on the Special Taxes estimated for the ultimate omeowner. The subject property falls within the taxing jurisdiction ott/.e Riverside County Assessor's office. The applicable tax rate areas are 0050-48, 005~, 0050-51,0050-52. The published annual tax rate in these areas i 1.04305% and 1.00520%. The subject tax rate includes bond indebtednes late 0 school district debt service and flood control district debt service. The overelll effective tax rate for the proposed homes will be approximately 1.8% to 2.0% of their base values. This tax burden is common for Riverside County where tax rates in new home communities typically range from 1.50% to 2.00%. A survey of the subject's market area revealed that special Assessment Districts or CFDs encumber most of the competing residential subdivisions. There does not appear to be a great deal of resistance to the special assessments that do not increase the overall tax rate significantly above 2.00% of Assessed Value. ......" ......" ......, 44 AGENDA Ire. M NO. ~ PAGE ?--~ 0 ~ PAl Pardee Coostruction CanplI1y La 1 MB ~/017 Tr 30496 363-21~4 0005.{)52 28.44 $ W2,2OO $ 41,B01.72 PAl Pardee Coostruction CanplI1y La 2 MB ~/017 Tr 30496 363-21~5 0005.{)52 7.68 $ 162.625 $ 11,298.96 PA2 . Pardee Construction CanplI1y La 3 MB 367/017 Tr 30496 363-21~6 0005.{)52 28.25 $ 598,200 $ 46,436.06 PA 21A Pardee GrosSfTlBl CdtonNOOd Calyon MIl in Per Lot 412 MB 37lY062 Tr 30493-1 363-220-026 0005.{)52 9.50 $ 65,550 $ 11,194.32 PA 21B Pardee GrossIlWl CdtonNOOd Calyon 1 MIl in Per La 413 MB 37tv062 Tr 30493-1 363-220-027 0005.{)52 6.45 $ 44,505 $ 7,748.90 PA 21B Pardee GrosSfTlBl CdtonNOOd Calyon 1 MIl in Per La 413 MB 37tv062 Tr 30493-1 363-23l}.O74 0()Cl5.{)51 1.6!I $ 33,800 $ 857.38 PA21B Psdee GrosSfTlBl CdtonNOOd Calyon 1 MIl in Per La 413 MB 37tv062 Tr 30493-1 358-110-007 lJOO5.{)5O 20.25 $ 344,250 $ 26,423.30 PA21B Pardee Grossrr&l CdtonNOOd Calyon 1 MIl in Per La 413 MB 37tv062 Tr 30493-1 358-120-005 0005-048 0.14 $ 1,300 $ 218.30 PA22 Psdee GrossIlWl CdtonNOOd Galyon MIl in Per La 405 MB 37tv062 Tr 30493-1 363-220-024 0005.{)52 ."~ $ 8,426.90 PA22&23 Psdee GrossIlWl CdtonNOOd Calyon La 406 MB 37tv062 Tr 30493-1 363-220-025 0005.{)52 $ 890,825 $ 143,497.76 PA24 Pardee GrossIlWl CdtonNOOd Calyon MIl in Per Lot 414 MB 37lY062 Tr 30493-1 363-220-026 0005.{)52 1. -"'0. 9,100 $ 1,486.26 PA24 Psdee GrossIlWl CdtonNOOd Calyon 1 MIl in Per Lot 414 MB 37tv062 Tr 30493-1 358-110008 lJOO5.{)5O 39.45 631,200 $ 48,820.28 ... PA36 Psdee GrossIlWl CdtonNOOd Calyon MIL in Per La 402 MB 37lY062 Tr 30493-1 363-~1 0()Cl5.{)52 4.73 $ 32,637 $ 5,310.90 PA36 Pardee GrossIlWl CdtonNOOd Calyon MIL in Per La 402 MB 37tv062 Tr 30493-1 363-::W0()Cl5.{)51 2.21 $ 44,200 $ 4,000.06 TOTAL :& 426.46 $ 3,878,362 $367,521.12 Scuce: Rv....1do 0llIlIry Sec<.red RqlOl1y Tax Ell. FY J\.ly 1 2005 tITouItI~ 30. 2006. 1 FlIrceI sdd to R.fte H:lmos 7106 According to the County's web Sijfb May 3, 2006, both installments of ~ ~ g~"~_Ji.~; property taxes due by December paid for eight parcels. 0, 2005 and April 1 0, 2006 for fiscal year 2005-06 are .' w ~ . ~~~~r_'.<' . 'KL"~(t~11~f&llIJI~I'_I_.f,B~~,",,,w, .,' " '; '.'~?Y:r_:,'Y. '^~~;iY m~", . "~"?ir,"",*hL '_~i"':' ': ,:' - -, .': Please refer to the table of assessed Current and ProDosed ImDrovements The exhibit on page 46 summarizes the five subdivisions currently being developed. Planning Area 21A is being developed with 127 single-family homes with four floor plans, in a subdivision known as Cross Creek. The homes range in size from 1,671 to 2,439 square feet and have base prices ranging from $371,500 up to $438,550. There are 8 completed homes in the model complex (The model units are for Cross Creek and Briarcliff), 36 production homes completed and sold to individual homeowners, 26 homes under construction and 57 finished lots. "..-. 45 AGENDA ITEM NO,~ PAGE 0fS1 _OF_~ - --- Planning Area 22 is being developed with 107 single-family homes with four floor plans, in a subdivision known as Briarcliff. The homes range in size from 2,485 to 3,035 square feet and have base prices ranging from $465,175 up to $485,175. There are 40 production homes completed and sold to individual homeowners, 31 homes under construction and 36 finished lots. ~ Planning Area 21 B is being developed with 131 single-family homes with three floor plans, in a subdivision known as Weatherly. The homes range in size from 1,949 to 2,458 square feet and have base prices ranging from $431,510 up to $459,720. There are 3 model units completed, 4 production homes completed, 46 homes u.k. construction and 78 finished lots. . ._~ Planning Area 24 is being developed with 143 ~1e-familY homes wilh three floor plans, in a subdivision known as Alderbrook. The :~~ range in size from 2,607 to 3,103 square feet and have base prices nging from $494,500 up to $517,720. There are 3 model units are under constru production homes in various stages of construction, 25 finished lots and 99 blue-t ots. Planning Area 23 is beirteveloped with 147 single-family homes with five floor plans, in a subdivision known :~idgegate. The homes range in size from 2,962 to 3,699 square d have estimated base prices ranging from $510,000 up to $570,000. The odel units are under construction and the balance of the lots ~ The appraisers have not been provided plans or specifications for the proposed attached residential dwellings in Planning Areas 1, 2 and 36. "'-"" 46 AGENDA ITEM NO. oJ.. PACE ~<6~OF--1tL.: ,..... Total Lot Size Belrm' Stories fA Proiect/Developer/Location Units Size Model Base Price ~ $ISQ. Ft Bath Garaae 21A Cross Creek 127 6,000 Plan 1 $371,500 1,671 $222.32 3/2 1/2 Pardee Homes Plan 1X $390,500 1,918 $203.60 3/2 2/2 Sweet Acacia Cl Plan 2 $407,000 2,113 $192.62 3/3 2/2 Plan 3 $438,550 2,439 $179.81 4+/3 2/3 21 B Weatherty at Canyon Hills 131 4,900 Plan 1 $431,510 1,949 $221.40 4/2.5 2/2 PuIte Homes Plan 2 $443,310 2.110 $2~2.5 2/2 Angles Falls @ Chaparossa Plan 3 $459,720 2,458 $18 4+ /3 2/2 22 Briareliff 107 6,000 Plan 1 $465,175 2,485 $187.1 +/3 2/2 Pardee Homes Plan 2 $483,820 2,679 $180.60 3+/3 2/2 Hllside Drive @ Trailside Drive Plan 3 $467,8 ,820 $165.89 3+/3 2/2+ Plan 4 $485,17 ,035 $159.86 4+/3 2/2 23 Bridgegate 147 6,000 Plan 1 $510,000 , 2 $172.18 4/3 2/3 Pardee Homes Plan 2 $530,000 3,0 3 $172.47 4+/3 2/3 Hllside Drive Plan 2X $530,000 3,070 $172.64 4/3 2/3 P~.ooo 3,315 $165.91 4+/3 2/3 /"""" PI 0,000 3,699 $154.10 4+/3 2/3 24 AkIerbrook at Canyon Hills 143 5,000 Plan 94,500 2,607 $189.68 4/2.5 2/2 PuIte Homes Plan 2 $516,590 2,888 $178.87 4/3 2/3 Canyon Hils Rd @ Fallsbrook Ln Plan 3 $517,720 3,103 $166.84 4+/3 2/3 Survey [8te 4117106 Q ~ 47 ACENDA ITEM NO. 0 ~ PACE ?63 OF <04:1 _ IMPROVEMENT DESCRIPTION ....., General There are five active single-family subdivisions currently being developed in Improvement Area B of CFD 2003-2. The currently active developments contain 217 detached residential units, completed or under construction, within 77.61:. gross acres. The 217 units are being built on lots that generally have a minimum size ranging from 4,100 to 6,000 square feet. The following table summarizes the floor plans of the active developments within CFD No. 2003-2, Improvement Area B as of the appraisal date. The base sales prices are those actually being achieved, as of th~te of value. The exception is the Bridgegate project by Pardee. The sales will not b~~til early May 2006 and the base sales prices have been estimated. Total Lot Size No. Proiec1fDeveloperfLocation y!!!!! Size .!l!2!!!! Base Price Sa. Ft $/Sa. Ft 1 A1derbl'OOk at Canyon Hills 143~ Plan 1 $494,500 2,607 $189.68 PUle Homes Plan2 $516,590 2,888 $178.87 CarryunHiUsRd@FallsbrookLn Plan3 $517,720 3,103 $166.84 Lake Elsinore, 113M 867 E-6 .~ Bdnnf S10ries No. Sold I!!!! Garaae Start Date 4/2.5 2/2 8 4/3 2/3 Feb-06 4+/3 2/3 2 -~ 147 6,000 Plan 1 $510,000 2,962 $172.18 4/3 2/3 Pardee Ho Plan 2 $530,000 3,073 $172.47 4+/3 2/3 Hillside Drive Plan 2X $530,000 3,070 $172.64 4/3 2/3 Lake Elsinore, 867 Plan 3 $550,000 3,315 $165.91 4+/3 2/3 Plan 4 $570,000 3,699 $154.10 4+/3 2/3 3 Briarcliff 107 6,000 Plan 1 $465,175 2,485 $187.19 3+/3 2/2 Pardee Homes Plan 2 $483,820 2,679 $180.60 3+/3 2/2 Hllside Drive @ Trailside Drive Plan 3 $467,800 2,820 $165.89 3+/3 2/2+ Lake Elsinore, 113M 867 E-6 Plan 4 $485,175 3,035 $159.86 4+/3 2/2 4 Cross Creek 127 6,000 Plan 1 $371,500 1,671 $222.32 3/2 1/2 Pardee Homes Plan 1X $390,500 1,918 $203.60 3/2 2/2 SWeet Acacia Ct. Plan 2 $407,000 2,113 $192.62 3/3 2/2 Lake Elsinore, 113M 867 E-6 Plan 3 $438,550 2,439 $179.81 4+/3 2/3 5 Weatherty at Canyon Hills 131 4,900 Plan 1 $431,510 1,949 $221.40 4/2.5 2/2 PUle Homes Plan 2 $443,310 2,110 $210.10 3/2.5 2/2 Angles Falls @ Chaparossa Plan 3 $459,720 2,458 $187.03 4+/3 2/2 Lake Elsinore, 113M 867 E-6 Survey QIle 4/17106 (1) Reservations o May-OO 51 J~ 66 Jl1-05 16 JarH>6 ....." 48 AGENDA ITEM NO. :3 )- PAGE~OF '{)i.(7 ~ ",...... We have been provided with brochures of the actively selling projects and they have been reviewed. The following is a list of some of the assumed general construction specifications for the detached single-family homes. Construction Units are of Class "0" construction; wood frame and stucco siding with several elevation choices. Foundations Foundations are poured concrete. second floor. Particle board over W,iOists for the Structural Frame Consists of 2" x 4" and 2" x 6" wood framing. Roofs Roofs are of concrete tile. , /"""' Windows ~I: White framed aluminum windows wit.._Vass. Floor Covering Floor coverings are wa"~:" carpet in all living areas. Entries are of ceramic tile and kitchen, bathrooms ~u~Undry room are of vinyl. Interior Finish custom~d ceiling and wall treatments. Heatin VAC Energy e ntral air conditioning and gas forced air heating. . Kitchens Kitchens will be equipped with oak cabinets and ceramic tile counter tops. Each kitchen will include a drop-in range and oven, microwave, and dishwasher. Bathrooms Master bathrooms will have double sinks with cultured marble countertops and oak cabinets, separate fiberglass shower/tub. Secondary bathrooms will have cultured marble countertops, fiberglass combination tub/shower, and oak cabinets. Doors Solid core 8 foot entry door. Garage doors are sectional steel roll-up. /"""' 49 AGENDA ITEM NO. 2> ~ PACE }f'S OF'r= Site Improvements The production homes include concrete driveways and walkways to the front entry. Side and rear yard fencing are included. Front landscaping and irrigation system are included. ,...., Options Numerous options and upgrades will be available including flooring, cabinet, and countertop upgrades. Most options and upgrades, provided at competing similar quality developments, will be offered. Conclusion of the Improvements Based on the review of the product information and PhYSical~~ction of current models and similar products, we are of the opinion that the qUality~ ~ projects are average to above average for the market are.a and will g~a"y meet buyer expe~tations for the subject's marketplace. , Functional Utility It is an assumption of this appraisal ~ of the floor plans are functional, and competitive with current design standards. .. V ,...., Remainina Economic Life ~ The totaVremaining econ~ life, according to the Marshall Valuation Service, is considered to be ars from date of completion. Homeowners A The currently selling projects have a Homeowner's Association. The monthly association dues are reported to be approximately $100 per month. ,...., 50 AGENDA ITEM NO. 3,i}- PAGE~ OF ~ """" HIGHEST AND BEST USE The term highest and best use is an appraisal concept that has been defined as follows: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity4 The determination of highest and best use, therefore, require'Jrseparate analysis for the land as legally permitted, as if vacant. Next, the highest and be~t ~f the property wit~ its improvements must be analyzed to consider.~y deviation of the existing improvements from the ideal. ''The highest and best use 0 land as though vacant and property as improved must meet four criteria. The highest an best use must be: legally permissible, physically possible, finanCiaIlY~ible, and maximally productive. These ,-.. criteria are often considered sequentially."s criteria interact and, therefore, may also be considered in concert. A use may be cially feasible, but it is irrelevant if it is physically impossible or legally p.ribited. Leaallv Permissible Use " The le~rs affecting the site and its potential uses are often the most restrictive. Th wou typically be government regulations such as zoning and building codes. CFD No. 2003-2 is located in the City of Lake Elsinore. The subject is zoned for residential development within a Specific Plan. This zone designation allows for multi- family and single family product with various densities. The land use designation SF-2 allows for single-family detached dwellings with a density of 2 to 4 dwelling units per. The SF-3 designation allows for single-family detached development of 4 to 8 dwelling units per ,,- 4 The Dictionary of Real Estate Appraisal, 4th Edition, Pub. by the Appraisal Institute, Chicago, IL., p. 135. 5 The Appraisal of Real Estate, 10th Edition, Pub. by the Appraisal Institute, Chicago, IL., p. 280. 51 AGENDA ITEM NO. 2> do PACi~_ ;r 1J "r-. 317 / acre. The Multi-family attached designations are MF-1 which allows units with a density of 8 to 15 dwelling units per acre, while the MF-2 allows from 15 to 24 dwelling units per acre. All of the current developments and proposed developments are considered legal and conforming uses. Phvsicallv Possible Use CFD No. 2003-2, Improvement Area B is irregular in shape and contains approximately 245:t gross acres according to the District report. The parcels have a flat to sloping topography. The proposed residential developments are a natural extension of existing nearby residential developments constructed in the fir~o phases of the Canyon Hills community. ~ ~ The propel'ly is generally bounded by residential d~-pment of the first phases of Canyon Hills to the west. The area generally to the sout~nned for future residential development. To the north and east are unde oped lands. Access is considered to be average via Railroad Canyon Road, Can Road, and the 1-15 Freeway. This appraisal considers the benefits and/or impro ents that are to be funded by CFD No. 2003-2. .( Based on the physical a.)sis, the subject property appears to be viable for numerous typ elopment based on its size and topography. However, the site's location and c nt si improvements would suggest the lands have a primary use of nt. Financial Feasibility and Market Conditions The financial feasibility of the development of the subject property is based on its ability to generate sufficient income and value in excess of the costs to develop the property to its highest and best use. Please refer to the Valuation section of this report, which gives support to the financial feasibility of CFD No. 2003-2, Improvement Area B. ....", '..." -....", 52 AGENDA ITEM No.3;).. PAGE 0-~ OF 317 __ ,-- ---- General Market Conditions - Riverside County The Inland Empire housing market has continued to increase in demand and price over the past several years. As in the past, the increased housing prices in Orange, San Diego and Los Angeles counties have encouraged buyers to look at alternative locations for homes. The Riverside County median housing prices as of December 2005 were up 15.7% over the same month last year. The average detached new home price in the County jumped 12.7 % to hit a record high of $488,060 in December 2005, according to a survey by the Hanley Wood Market Intelligence. San Bernardino County's $433,954 record high was also achieved, U~.1 % in one year. Sales volume is still at historic highs; 37,177 homes sold in 2005, 2.5% from 2004. The subject property is located in the South submarket, which leads sales volume with 6,549 sales. The Riverside South submarket accCrted for 17.6% of the Inland Empire total for 2005. , The current projection for the housi~et is that we are seeing a return to a more balanced and normal market. The pa~ual years of record high sales volume and record high appreciation appears to have stabilized, causing property values to plateau or even decline in so~reas. Th. e Inland Empire is expected to stay stronger longer where homes are more~ordable than on the coast. The Inland Empire is expected to conti e to draw homebuyers from Orange, Los Angeles and San Diego counties whe orne ices are significantly higher. Over the la 12 to 18 months, these three counties saw a decline in home sales from a year earlier, while the Inland Empire experienced its strongest or second strongest monthly sales rates. Most markets throughout Southern California plateaued during the last quarter of 2004 and the first six weeks of 2005. However, between March and October 2005, sales prices and sales rates improved. Sales have slowed over the last five months. While overall inventory is up, the impact is to a more normal market especially ,-- when it comes to supply and demand. Job creation was moderate over the past 24 to 53 ,ACENDA ITEM NO. :3 ~ PAOE tf-Yt\ OF 3'-11 -- 30 months of recovery from the previous recession and the economy is still growing at a reasonable pace overall. Given the supply of new residential product in the Riverside County market, the subject tracts should sell at a reasonable rate, but without the increases in price that have been experienced over the past several years. More and more news articles are suggesting that home prices are reaching a maximum level, and might even decline in 2006 or 2007. .~ Riverside County builders sold 3,947 detached homes in the fourth quarter of 2005, down significantly from the 6,023 detached new horn. es durin~he third quarter of 2005. The bulk of the detached homes sold in Riverside Coun uring the fourth quarter of 2005 are priced under $550,000 and comprise 70%.:!:. of the t sales. Sales of homes priced between $350,000 and $550,000 co~e to see the most activity, comprising 61 %.:!: of the detached market. The number~tive detached projects in Riverside County decre~sed to 424 from 440 projects during the fourth quarter of 2005. The majority of active projects located in ~e County are located in "the South, Desert and Central submarkets. ... V ~ Standing (built, but ur4d) detached inventory increased during the fourth quarter of 2005 was 382 units i~verside County. At the current sales rate, that is a week supply of d tached homes. Detached total (built,. under construction, planned) unsold inven ted of 22,421 units at the end of the fourth quarter 2005, down the end of the third quarter of 2005. At current sales rates, this level of inventory e uates to an 11.0-month supply, which is up compared to last year. This indicates that future competition could be very strong if the market declines or all of the proposed units are built. Home prices continued to increase during the fourth quarter of 2005. However, in general, percentage increases have moderated since the first and second quarters of 2004. Interviews with builders in the Inland Empire anticipate significantly smaller price increases per phase. Some new subdivisions increased prices 1 % per phase opening. Many tracts have begun offering incentives and concessions to buyers. The higher prices -...; 54 ACENDA ITEM Np. 3;> PACE o-q D OF '317 __ ,-... have prompted more people to sell their homes which is bringing the supply and demand into better balance. According to an interest rate survey published weekly in The Los Angeles Times, the typical 30-year, fixed rate conforming loan was between 6.25% and 6.50% as of the date of this report. Mortgage rates have been in the 5.00% to 6.50% range over the past year, following more than a year of rates in the 6% range. While a slight increase in rates may impact demand, we do not anticipate a significant drop in demand as long as rates remain near or below the 8% level. /"""', Riverside - South Submarket CFD No. 2003-2.is situated in the South sUbma~region, which accounted for 969 detached home sales during the fourth quarter of ~or about a 24.6% market share of the Riverside County market. The median price in the South submarket has decreased minimally over the past year to ~75, a 3.2% decline. Although one of the more expensive submarkets in RiversiB~ty with a price per square foot of $177.00, the price per square foot in the subject's submarket increased by 7.3%, and the average size of a detachedtlme decreased to 2,637 square feet from 2,922 square feet, a decline of 9.8%. " , DUring~fOU quarter of 2005, the subject's submarket did not sell any new detached hom pr" d under $349,999; 155 detached homes priced between $350,000 and $39 , 99 were sold, 200 detached homes priced between $400,000 and $449,999 were sold, 334 detached homes sold between $450,000 and $549,999; and 280 homes sold over $550,000. There were 108 attached units that sold in the subject's submarket, all but 11 under $350,000. Within the South submarket there are 116 active projects, which were 8 more than the previous year. The subject's market area reports 70 units of unsold standing (built, but unsold) inventory and 715 unsold units are under construction. This is about a ,-... six-week absorption time for the units under construction. Total inventory, which 55 AGENDA ITEM NO. 3 .:l PAGEffi l OF qq1 -' includes units built, under construction and future construction, totals 4,741 units which equates to a 10.1 month supply at the current sales rate. One year ago total inventory was at 4,067 units, and the absorption time based on last year's sales rate was 8.0 months. "'-'" Feasibility It is not in the scope of this appraisal assignment for the appraisers to conduct an extensive independent market study/absorption analysis, but it is the appraisers' responsibility to address the reasonableness of the conclusions of an market study which has been prepared by outside firms for the subject property. UnJ regional economicand/or social changes will affect the time-frame real estate development. ~ In an attempt to arrive at reasonable and supporta~l~sorption schedules for the various uses within CFD No. 2003-2, the ap~r . ers reviewed an independently prepared absorption analysis that relates to the C. . independent study is titled Market Absorption Study. Community Facilities Distric .2003-2. 2006 Series A (Canvon Hills), prepared by Empire EconomiCS,~, dated February 28, 2006, and updated March 1, 2006 for the City of Lake Elsinore. A ~ of a portion of the absorption analysis summary is included in the Addenda of this report The s~s on page 25, that the subject property will have a 4+-year absorption time ~he 127 homes at Cross Creek are estimated to absorb at 60 units in 2006 and 63 homes in 2007. The 107 proposed homes at Briarcliff are estimated to absorb at 55 homes in 2005 and 56 homes in 2007. The 143 proposed homes at Alderbrook are estimated to absorb at 25 homes in 2005, 50 homes in 2007, 50 homes in 2008 and 18 homes in 2009. The 131 proposed homes at Weatherly are estimated to absorb at 55 homes in 2005, 55 homes in 2007, and 21 homes in 2008. The 147 proposed homes at Bridgegate are estimated to absorb at 10 homes in 2005, 50 homes in 2007, 55 homes in 2008, and 37 in 2008. The overall monthly absorption is 42: units per month per project. The market absorption report refers to homebuyers purchasing completed homes. ......" ......" 56 ACENDA ITEM NO. :? ). PACe (jq 2:oF 3t{J ~ ~ It is our OpiniOn, after surveying the competitive projects and analyzing the pricing, design, location differences and other pertinent factors, that the subject property should experience average to good absorption, similar to that reported by Empire Economics. The table on the following two pages summarizes the prices and absorption of fourteen detached residential developments. Detached absorption has ranged from 2.9 units per month to 14.5 units per month for projects that have been in an active sales program for 3 to 22 months. SIz No. Sold No. ProlectlDevelOl)8rJLocatlon Model Base Price Sa. Ft. ~ ~ Mo. Ails. 1 A1derbrook at Canyon Hills Plan 1 $494,500 2,607 $189.68 8(1) 4.0 PuIle HOmes ~'6'_ 2,888 $178.87 FetHJ6 /"""" Canyon Hills Road @ Fallsbrook lare n 17,720 3,103 $166.84 (Can}Qn Hills Conmunity), lake Elsinore 16M 867 E-6 2 __"Canyon ""ls 107,,000 Plan 1 $465,175 2,485 $187.19 51 5.8 Pardee Homes Plan 2 $483,820 2,679 $180.60 JlJ.05 Hlside Driw @Trailside Driw Plan 3 $467,800 2,820 $165.89 (Can}Qn Hils Conmunity), lake Elsinore Plan 4 $485,175 3,035 $159.86 16M 867 E-6 3 _..~ 131 4,900 Plan 1 $431,510 1,949 $221.40 16 5.7 PUle Horres Plan 2 $443,310 2,110 $210.10 Jan-06 Argles Falls @ rossa Plan 3 $459,720 2,458 $187.03 (Can}Qn Hills . ), Elsinore 16M 867 E-6 4 Cross Creek at Canyon Hills 127 6,000 Plan 1 $371,500 1,671 $222.32 66 7.5 Pardee Homes Plan1X $390,500 1,918 $203.60 JlJ.05 Sweet Acacia Cl Plan 2 $407,000 2,113 $192.62 (Can}Qn Hils Conmunity), lake Elsinore Plan 3 $438,550 2,439 $179.81 16M 867 E-6 5 Madison 111 6,000 Plan 1 $388,990 1,975 $196.96 33 2.9 KB Homes Plan 2 $411,990 2,255 $182.70 May.{)5 Palomar@ COl}Uon, lake Elsinore Plan 3 $407,990 2,459 $165.92 16M 896 H4 Plan 4 $425,990 2,762 $154.23 6 Fairfield 119 6,000 Plan 1 $366,990 1,740 $210.91 66 5.8 KB Homes Plan 2 $375,990 1,864 $201.71 May.{)5 Palomar@Col}Uon, lake Elsinore Plan 3 $385,990 1,999 $193.09 16M 896 H4 Plan 4 $393,990 2,228 $176.84 /"'" 57 AGENDA ITEM NO. L~) PAGE Q-CG OF~ "'-' 7 Edgewater 108 4,000 Plan 1 $354,950 1,683 $210.90 88 13.1 Pardee Homes Plan 2 $372,725 1,983 $187.96 Sep-05 Cedar Creek Lane and Sage Lane Plan 3 $387,650 2,105 $184.16 (Canyon Hills CornrnJnity), Lake Elsinore IBM 867 D-5 8 SaItIIIo @A1berhlD Ranch 153 6,500 Plan 1 $423,990 2,010 $210.94 101 8.2 Castle & Cooke Cormuilies Plan 2 $462,990 2,483 $186.46 Apr-05 Aspen Circle Nlo MoIrtainAve. Plan 3 $506,990 2,845 $178.20 (Alberhin Ranch), Lake Elsinore Plan 4 $536,990 3,120 $172.11 IBM 865 1-1-1 9 Caraway @ Rosetta Canyon 80 6,500 Plan 1 $459,990 2,648 .m~ 6.8 Certex Homes Plan 2 $521,990 2,916 $179.01 Rosella Canyon Dr. @Crimson Pillar Lane Plan 3 ~~~ $163.59 (Rosetta Canyon), Lake Elsinore IBM 836 F-6 10 SoIana@ Rosetta Canyon 80 6,500 Plan 1 $434,990 2, $199.54 71 7.1 Certex Homes Plan 2 $444,990 2,32 $191.48 JlIl-05 Rosella Canyon Dr. @ Diana Lane Plan 3 $466,990 2,579 $181.07 (Rosetta Canyon), Lake Elsinore ~~ 2,750 $172.72 IBM 836 F-6 11 Augusta @Rosetta Canyon 88 6,500 Plan 2 ,990 3,242 $164.40 88 8.8 ~ Certex Homes Plan $578,990 3,613 $160.25 JlIl-05 Rosella CalT)Ul Dr. @ Diana Lane Plan 4063 $599,990 4,063 $147.67 (Rosetta Canyon), Lake Elsinore ~,~ IBM 836 F-6 12 Fox & Jacobs@RosettaCanyon Plan 1 $419,990 2,400 $175.00 244 14.5 Fox & Jacobs Homes Plan 2 $429,990 2,710 $158.67 Nov-04 ~~&~~ Plan 3 $439,990 2,873 $153.15 (Rosetta Can~ e Plan 4 $499,990 3,113 $160.61 IBM 836 F-6 Plan 6 $394,990 1,979 $199.59 Plan 7 $432,990 2,613 $165.71 13 Stone's Throw@T Hills 126 6,000 Plan 4 $617,330 3,400 $181.57 119 5.7 PUle Homes Plan 5 $598,690 3,729 $160.55 JIJ.04 Plaza Valenza (Tuscany Hills), Lake Elsinore IBM 867 B4 14 Watermark @ Tuscany Hills 133 7,000 Plan 1 $640,620 2,965 $216.06 104 6.9 PUle Homes Plan 2 $674,800 3,353 $201.25 Jan-05 Volta Dellirtori Sl Plan 3 $673,000 3,711 $181.35 (Tuscany Hills), Lake Elsinore Plan 4 $649,540 3,842 $169.06 IBM 867 B4 Suwy Olte 4/17106 (1) _ervalionI ~ 58 AGENDA ITEM ~(-:.:3 ~ PAGE~4-0F 1H1 - ~ Maximallv Productive In considering what uses would be maximally productive for the subject property, we must consider the previously stated legal considerations. We are assuming the land uses , allowed under the Specific Plan zone regulation with the City of Lake Elsinore are the most productive uses that will be allowed at the present time. Current zoning and approved uses indicate that other alternative uses are not feasible at this time. Given the steady demand for residential product in Riverside County and the subject market area, it is our opinion that the development as pr~sed provides the highest land value and is, therefore, maximally productive. ~ , Conclusion ~ Legal, physical, and market considerations have n analyzed to evaluate the highest and best use of the property. This analysis is prese d to evaluate the type of uses that will generate the greatest level of future benefits possible from the land. /"'- After reviewing the ahematives availa~considertng this and other information, it is the opinion of the appraisers~t the highest and best use for the subject property, as vacant and as proposed, is for sidential development similar to that proposed for the SUbject tracts. The projects appear have the location, features, and pricing structure to obtain an ave~d sales rate under normal financing and market conditions. As vaca~s Improved After reviewing the alternatives available and considering this and other information, it is these appraisers' opinion that ultimate development of single-family detached and attached for-sale homes similar to the current proposed products are considered the highest and best use of the property. ,-... 59 AGENDA ITEM NO. J>) PACE 915 OF ~ __ VALUATION METHODOLOGY '-' Basis of Valuation Valuation is based upon general and specific background experience, opinions of qualified informed persons, consideration of all data gathered during the investigative phase of the appraisal and analysis of all market data available to the appraiser. Valuation Approaches Three basic approaches to value are available to the appraiser: Cost Approach , This approach entails the preparation of a rePlace~or reproduction cost estimate of the subject property improvements new ( . taining comparable quality and utility) and then deducting for losses in val sustained through age, wear and tear, functionally obsolescent features, and economic factors affecting the property. This is then ~o. the estimated land value to provide a value estimate. .... V Income Approach This approach is based ~the theory that the value of the property tends to be set by the expected income therefrom to the owner. It is, in effect, the capitalization of expec ed future income into present worth. This approach 'res an estimate of net income, an analysis of all expense items, sel 'on of a capitalization rate, and the processing of the net income am i a value estimate. ......, This approach is based upon the principle that the value of a property tends to be set by the price at which comparable properties have recently been sold or for which they can be acquired. This approach requires a detailed comparison of sales of comparable properties with the subject property. One of the main requisites, therefore, is that sufficient transactions of comparable properties be available to provide an accurate indicator of value and that accurate information regarding price, terms, property description, and proposed use be obtained through interview and observation. The Direct Comparison Approach is used for the valuation of land when sufficient comparable sales are available. The Income Approach is typically used when appraising '-' 60 ACENDA'TEM NO. 3.d-: PACE ?/1lf OF' 3t./l "...... income producing properties. This approach is not applicable in the valuation of land as land is not typically held to generate monthly income, but rather purchased to construct an end product that mayor may not generate income. The Cost Approach is not an appropriate tool in the valuation of land. The land under site construction is valued by Direct Comparison. The subject property is in various stages of development. Planning Areas 1 and 2 are raw land; PA 36 is in super pad condition. The five active subdivisions are in various stages of unit construction including completed model homes, completed production homes, model homes under construction and production homes u~r construction by the builder/developer. Most of the lots in the subdivisions are in ~ ~d condition, however, Planning Areas 23 and 24 are generally in a e-top condition. The products being built are considered the highest and best use of t roperty and are in demand by the Riverside County home buyer. Therefore, the partiall completed improvements are considered to add value. The units~ ur construction are. valued based on a ~ conservative estimate of their stage of co . This percentage is applied to the estimated base sales price of the home for a ication of value. The completed model homes are valued using the ~ent base sales price for the floor plan and adding approximately 10% of the va"to account for the interior and exterior upgrade improvements. Q ~ 61 ACENDA ITEM NO. .3;), PAOE ;)-t{l OF ?f{ 1 .# VALUATION OF CFD NO. 2003-2. IMPROVEMENT AREA B Generallnfonnation The subject property is being built by the developer Pardee Homes and a merchant builder, Pulte Homes. As previously described, the subject property is in various phases of the development process. The first section of the valuation will address Planning Areas 1, 2 and 36 which are in a raw or super pad condition, proposed for attached dwelling units. The second section of the valuation portion of the report will value the lots that do not have unit construction, proposed for detached dwelling units. The value estimates for the lots at blue-top lot and finished lot condition is pro~ based on the lot condition as of the date of value. The next section of the report will v~l~ models and production units that are completed and in various stages (tonstruction. Valuation of Undeveloped Land: Plannina Area~ ~ 1, 2 and 36 Planning Areas 1, 2 and 36 a?a:roposed for multi-family residential development. Planning Areas 1 and 2 are land condition, while Planning Area 36 has been mass graded and is in a suppe d condition. Planning Area 1 is 30.8! gross acres, proposed for 318.t-ached units at an average density of 10.3 units per acre. Planning Area 2 is 26.2~OSS acres, proposed for 360 attached units at an average density of 13.7 units per acre. Planning Area 36 is 12.0! gross acres, proposed for ~ed units at an average density of 18.0 units per acre. Direct c~on Approach The Direct Comparison Approach is based upon the premise that, when a property is replaceable in the market, its value tends to be set by the purchase price necessary to acquire an equally desirable substitute property, assuming no costly delay is encountered in making the decision and the market is reasonably informed. In appraisal practice, this is known as the Principle of Substitution. This approach is a method of analyzing the subject property by comparison of actual sales of similar properties, when available. These sales are evaluated by weighing both the overall comparability and the relative importance of such variables as time, terms ...."., '-' '-' 62 3)- AOEN~~~~~OF 31~ ,.... of sale, location of sale property, and lot characteristics. For the purpose of this report, the unit of comparison utilized is the price per unit for the residential land. Please refer to the following page that summarizes the sales considered similar to the subject parcel. Subject (PA 1) f\l() RaDroad Canyon Ri. SJIIO Canyon H1Is Ri lake Elsinore Fardee Q-ossrran 318 10.3 Wacre 30.8 Acres Subject (PA 2) N'O RaIlroad Canyon Ri. SJIIO Canyon Hils Ri lake Elsinore Fardee Q-ossrran 26.2Acres 13.7~a~ -- 12 Acres 216 ,- 18.0 Wacre Subject (PA 36) WO Hlsicle Dive N'O Canyon Hils Ri lake Elsinore Fardee Q-ossrran ",--.. 13~ 144 ~~ Wacre $50,375 Sold in rfNI condition 1.8% tax rate Serre units with lake view N:>.1 6'8 G"ape St 8/0 Railroad Canyon Ri. lake Elsinore <.. N:>. 2 WlHam Lyon H:lrres 1/04 ~ Harveston 'Way Lennar H:lrres and Harveston D". & NI\C Harveston~ D"and view Ri. NI\C Harveston D". Ri. TelreCula N:>. 3 N'A WS Corydon Ri, N'O lake Villas Q-ancI Ave. lake EIs inore Wlstem Facific l-busing Oak Q-ove 7104 13 Acres 162 13 Wacre $79,630 QJrrent 10 acres Listing Subject Property ~.. 1. rate Subject operty Raw condition 1.8% tax rate Subject Property Superpad condition 1.8% tax rate R>rtion of Harverston, Alase I Sold as superpad, 1.8% tax rate, sorre units w iIh lake view 150 15 DJacre $45,000 QJrrent listing of a WIdorrar parcel, acij. to lake Elsinore Raw site, 1.2% tax rate N:>.4 NI\C rvtBw ain Ri. & Sierra Ln. MJrrieta Wlstem Facific l-busing QJrrent 15Acres 198 TelreCula Valley LLC Escrow 13 Wacre $65,000 R>rtion of IIbrth Oaks, 2.0% tax rate, sold as superpad ,....... 63 AGENDA ITEM NO. PACE g-1tt OF b> ,17 ~ Analysis Financing .AII of the comparable sales were all cash transactions or financing considered to be cash, therefore, no adjustments for financing were warranted. --'. Property Rights Conveyed All of the comparables involved the transfer of the fee simple interest. The subject's fee simple interest is appraised in this report, and therefore, no adjustment is warranted. Time of Sale During the past 8 years, Southern California has st(,IY rebounded from its lengthy recession. Demand for land sales has dramatically eX~d supply. Prices paid for residential land increased annually by 15% to 20% and more from 1997 to 2000. However, 2001 saw a leveling of land prices, only to in.-x.. again during 2002, 2003, and the first six months of 2004. Home prices have increcfsun the lows of 1996. The average new home price in Riverside County has increased from $156,907 in the first quarter of 1996 to $445,424 in the fourth quarter ~005. The median price for an existing home increased 9.4% in the last 12 months. Thi~near the record high, median price level for existing homes in Riversid County. However, while prices have continued up, the increase is significantly I r tha the previous 5:t years. Activity is reported to be decreasing over the past 2 to 3 . The market in general began to plateau during August and September 2004 nd continued through February 2005. Prices again increased between February 2005 and August 2005, although at a lower rate than previous years. However, during the past 2 to 3 months, home prices have stabilized or decreased. Therefore, we are of the opinion that a time adjustment is not warranted for sales that occurred during 2005. A 1 % per month adjustment is estimated for sales during 2004. For current listings and current escrows a 5% downward adjustment is estimated. , ......., ......., 64 ACENDA ITEM Nv. .3 r PACE hOb OF jt.() ~. ~ Conditions of Sale Typically, adjustments for conditions of sale reflect the motivations of the buyer and the seller in the transfer of real property. The conditions of sale adjustment reflects the difference between the actual sales price of the comparable and its probable sales price if it were sold in an arms-length transaction with typical motivations. Some circumstances of comparable sales that will need adjustment include sales made under duress, eminent domain transactions and sales that were not arm's length. All of the transactions were reported to be arm's length in nature. Accordingly, no adjustment is indicated. ,,-.. Location The location adjustment is based on proximi4 existing infrastructure and employment. The Temecula and Murrieta sales require ~nward adjustment, while Data No.3 requires significant upward adjustment. En/itlemenf/Map Status ~ All of the sales are entitled. No adjustment is required. , , Tax Rate is expected to have an average overall tax rate around 2.00% of base value. hese sales have similar CFD's or Assessment Districts, no adjustment is re ata No.6 will have a lower tax rate which requires a downward adjustment. The m rchant builders of the land are aware of the various taxes and have factored the impact of the higher tax rates into the prices paid for the land. Density The comparables have densities that range from attached at 10 dwelling units per acre up to 15 dwelling units per acre. The subject is an attached product at 10:t to 18:t dwelling units per acre. Interviews with sales persons indicated that density is an important feature to the Lake Elsinore homebuyer. Therefore, we have given equal ~ weight to all of the sales. 65 AGENDA ITEI'l l. (.. 3 ,. PAGE -1:;0( oi:- ,~Vl : '-' .11 ~ ~ ~ ~ ~ It) ~ i~~ ;::: l:j fj~ ! ! ! a ~ ~ ~ ~ ':I!. ~ ':I!. ':I!. ~ ':I!. ':I!. i5 i5 i5 0 i5 i5 dll ':I!. ':I!. ':I!. ':I!. ':I!. ~ ':I!. {!.~ i5 i5 i5 i5 i5 III i5 '0 l~ ':I!. ':I!. ~ ':I!. ':I!. ':I!. ':I!. i5 i5 i5 i5 i5 i5 AI ':I!. ':I!. ':I!. ':I!. ':I!. \; ':I!. ~ i5 0 i5 ~ ~ lh ~ 0 ~ t~1 ~ ~ ~ ~ ~ .. ~ ~ i I=l ~I ~ ':I!. ':I!. ~ ':I!. ~ i5 i5 It) ~ III 8 ~I ~i ~ @ @ 1:.. ~ ~ ~ lL Gl lL A "'I ~ ~ I ~ I ~ I ~ - . ~1i ~ \: aJ ~ ::l ~ ::l en en i i i i ~ i = = E = E 'E 'E 1: 'E ~ 1: w w w w w w co N 0 0 0 0 0 ~ ~ ~ ~ ~ ~ ~ I!! I!! ~ J~ ~ ~ Q ~~ 16 ~a ~a ~a ~~ ~~ t'l "- 0 C! 0 0 0 ~ ~ ~ ~ ~ ~ ~ Gl sl ~ ~ i.~ i ~ ~.!! ;:::: 'lh 8::1 881 ~~ ~~ ~ ~ o!S 6 .. tli1 ~ II ~ . ~ ! il ;:-d:t2 Nd~2 l{~~ ~ ti o. "d 66 6 ~ c: {~ l~ - - ~ ~ . 2 j .!!.J {~l- {~l- it- Ij 11~ 8 ~ .- ~ . lS- .. lS- .. lS = .. ~dl <(.!!l Gl~Oiii Gl~Oiii . ~ iii Nf.) u~l M ~~ 'ff.)j~ f~~~ f~~~ f~~~ ~ G) ~f3~~ ~~~o!S~~F ~~ ~ ~~C7i~ ......,;' 66 ACENDA ITEM NO. 2>2 PACE ?;D? OF ~J__ /""'" Condition of Lots All of the data had prices based on a finished condition. No adjustment is indicated. ",......... After all adjustments, and giving most emphasis to Data No. 1 and No.3, the comparable data indicated a raw land value of $50,000 per unit for parcels with densities between 10 and 13 units per acre. After all adjustments, and giving most emphasis to Data No. 2 and No.4, the comparable data indicated a super pad site value of $55,000 per unit for a density of 18 units per acre. roach-Blue-To Lots and Finished lois' The Direct Comparison Approach is.based upon t remise that, when a property is replaceable in the market, its value tends to be set by th rchase price necessary to acquire an equally desirable substitute property, assuming no costly delay is encountered in making the decision and the market is rea~ informed. In appraisal practice, this is known as the Principle of Substitution. 11'" V This approach is a me~ of analyzing the subject property by comparison of actual sales of similar properties,~en availabl~. These sales are evaluated by weighing both overall comp- bility and the relative importance of such variables as time, terms of sale, location ale p erty, and lot characteristics. The actual sales price of a particular parcel is alway ered the best indication of value, assuming the transaction is arm's length, curre and meets the definition of Market Value. In the case of the subject parcels, two parcels have sold to a merchant builder. The Market Value will be best indicated by the merchant builder residential land sales that have occurred in the Lake Elsinore, Wildomar and Menifee areas. A discussion of the market data will precede the parcel valuation. For the purpose of this report, the unit of comparison utilized is the price per unit for the residential land. Please refer to the following page that summarizes the sales considered similar to the subject parcel. /""'" 67 AGENDA ITEM No.3'> PAGE ?:t:0 OF 3~1 __ We have surveyed residential sales in the subject market area. The eight sales are the comparables considered most helpful in valuing the subject property. We have reviewed and inspected all of the data items. The following table includes the finished lot prices for merchant builder parcels. ....."" The comparable land sales have sold in raw condition and blue-top condition. Costs to bring the land from the condition at the time of sale to finished lot condition were made available to analyze the data. Therefore, the analysis will conclude at an indication of finished lot value for the subject parcels. I'b.l \IIBsson Canyon HJIdi1gs, l &05 59.4 Acres 191 $185,000 RaN condition aI sale SEat 1-15, SEat &74 \l\Bsson CB1yon nveslmlnls, L.P. 6,000 SF Mn 1.9% tax rate @3rd St. & Od Ranch Road Lake Bsinore 1'b.2 IUe Hmes 7105 a'_ {,b- $135,916 $200,377 Subject Property PA 21B eo RaIroad Canyon R:I. Pwdee Grossrran 4,900 Bkle Top concilIon aI sale ...." 1'10 Canyon HIs Road 1.8% tax rate Lake 8sinore 1'b.3 AJleHmes ~~- ,~ $132,447 $202,600 SUbject Property PA 24 eo RaIroad Canyon R:I. Pwdee GrossITBll 5,000 SF Mn Bkle Top concilIon aI sale 1'10 Canyon HIs Road 1.8% tax rate Lake Bsinae 1'b.4 7104 60 Acres 226 $145,000 Sold it rfINoI condition I'IS New port R:I. @ 7,000 SF MIl 1.8% tax rale Wnler I-bw k Road Mlnifee 1'b.5 2105 36.1 Acres 128 $90,000 $155,000 Sold it rfINoI condition NI\C Haun Road & 7,200 SF MIl 1.9% tax rate Gerbeni Road Mlnifee 1'b.6 Olnridential OJrrent 64.6 Acres 21~ $82,975 $168,000 Sold it rfINoI condtion SVIC Haun Road & BI.ms Ranch, he. Escrow 7,200 SF Mn 1.9% tax rate Q-eig Avenue M3nifee 1'b.7 Rancho Vista I Ventures 6104 No\ 114 $105,000 $159,990 Sold it rfINoI condition JIBS PaIomlr SIreet TerrecuIa O'eek Esetes 7,200 SF Mn 1.7% tax rale SE at Call Road VIIdon1Ir 1'b.8 Wnchesler Ranch 202, LLC 12/04 58.3 Acres 202 $77,500 $155,000 Sold it rfINoI condition 1'10 Sirrpson Road SlonegaIe Dev. l LLC 7,200 SF MIl 1.9% tax rale eo Leon Road Mlnifee ...."" 68 ACENDA ITEM tJF-lO, 2> >-_m 0]-..., ._..._~ PACE ~ OF~ { ~ ~ Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: ~ Date Recorded: Sale Price: Price/Unit: Finished Lot Cost: Site Condition: Financing: Verification: ~ Comments: "V ~ land Sale Data No.1 Southeast side of 1-15, southeast of S-74 and east of the intersection of 3rd Street and Old Ranch Road, Lake Elsinore 347-330-019,045,046,050,051,052,053 and 347- 360-003 Wasson Canyon Holdings, LLC Wasson Canyon Investments, L.P. 59.4 acres 191 , 6,000 square feet ~ R-1 To construct 191 detache esidential dwellings June 28a ' N/A, ba~Ufinished lot value of $185,000 N/A ~ $185,000 'Raw at sale date with approved tentative tract map All cash to seller Seller, broker and Grant Deed The effective tax rate is estimated to be 1.9%. 69 AGENDA 'TEM NO. 3;2 PACE '00'::> Of3,?,'~ Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: Date Recorded: Sale Price: Price/Unit: Finished Lot ~ Site Condition: V Financing: Verification: Comments: Land Sale Data No.2 ......" East of Railroad Canyon Road, north of Canyon Hills Road, Lake Elsinore Tract No. 30493-4, Lots 26-55, 370-379; Tract No. 30493-5, Lots 56-84, 362-369; Tract No. 30493-6, Lots 85-102, 326-361. Pulte Home Pardee Home 28.5:t gross acres , 131 4,900 square foot mi~lot size SP To cons!ti31 detached dwellings ranging in size from 1, 458 square feet. The subdivision is known as therly, July 15, 2005 ~17,805,OOO $135,916 $200,377 ,..., Blue-top at sale All cash to seller Seller & Buyer This property is encumbered by a CFD. This site is level to rolling hillside. It is within the Canyon Hills master planned community. ......" 70 AGENDA ITEM NO. :7 d- PAGE 3DboF ?Lf7 --- ,-. Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: ;"""' Intended Use: Date Recorded: Sale Price: Price/Unit: ~ Finished Lot cO'V Site Condition: Financing: Verification: Comments: ,,-... land Sale Data No.3 East of Railroad Canyon Road, north of Canyon Hills Road, Lake Elsinore Tract No. 30493-7, Lots 103-116, 137-156; 188-198, 322-325. Tract No. 30493-8, Lots 117-136, 157-187; Tract No. 30493, Lots 199-222, 303-321. Pulte Home Pardee Home , 40.7j: gross acres 143 ~ 5,000 square foot mini~ lot size SP To con~~ detached dwellings ranging in size from 2,6'Oti/!'079 square feet. The subdivision is known as Alderbrook. .t July 23, 2005 '18,940,000 $132,447 $202,600 Blue-top at sale All cash to seller Seller & Buyer This property is encumbered by a CFD. This site is level to rolling hillside. It is within the Canyon Hills master planned community. 71 AGENDA ITEM NO.3') PAGE 6b1 OF 3<{J .- Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: Date Recorded: Sale Price: Price/Unit: Finished Lot Cost: Site condition~ Financing: ~ Verification: Comments: Land Sale Data No.4 '-' North side Newport Road at Winter Hawk Road, Menifee Parcel Map No. 12764 U.S. Home (Lennar) Creekside Villa, LLC 60.0 gross acres 226 \t 7,200 square foot minimum size ~ ~ ~~ 1 construct 226 de~ dwellings in two projects, dwelling size to range from 2,600 to 3,400 ~quare feet. July 2, ~ N/A .c N/A '145,000 '-' Sold raw, site grading underway All cash to seller Listing broker This site will have two developments. Emerson Lane will have homes from 2,600 to 3,400 square feet. Arbor Lane will have homes from 2,621 to 3,322 square feet. This property will have a CFD, with a tax rate similar to the subject. "'-"" 72 AGEN~:~~~, _ " Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: Date Recorded: ,,-...,. Sale Price: Price/Unit: Finished Lot Cost: Site conditionQ: Financing: Verification: Comments: ,..... Land Sale Data No.5 Northwest corner of Haun Road and Garbani Road, Menifee TIM No. 31724 SCC-Canyon II, LLC Ani! Rastogi, et al 36.13 acres 128 , 7,200 square feet ~~ 1construcl128 deta~ingle-family dweDings. Februa~5 $11,520~oV $90,000 ~155.000 Raw at sale All cash to seller Buyer The seller processed Tentative Tract Map No. 31724, and the sale closed with an approved tentative tract map. A CFD is being formed and the effective tax rate is approximately 1.9%. The CFD is approximately $18,000 per lot. The finished lot price is $155,000 per lot (net of the CFD) and $173,000 per lot with04t the CFD. 73 AGENDA ITEM NO. a '}-- PAGE ??d1. OF'3.I7 .." Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: Date Recorded: Sale Price: Price/Unit: Finished Lot Cost: Site Condition: Financing: Verification: Comments: Q Land Sale Data No.6 ......" Southwest comer Haun Road and Craig Avenue, Menifee Portion SE Quarter Section 10, T6S R3W Confidential Bums Ranch, Inc. 64.55 acres 210.:t , 7,200 square feet R-1 To construct approxitelY 210 detached residential dWellings., ' Current escrow . $17,425~ $82,975: V $168,000 .( Raw at sale date 'All cash to seller Listing Broker The property is scheduled to close in mid-2006. The long escrow period allows the buyer to process the approvals and the site will close with the approval of the tentative tract map. The effective tax rate is 1.9%. The APNsare 360-240-034 and 360-260-005. ......" ......, 74 AGENDA iTEM NO~__P__._",~ . PACE '31 b OF '7-;1/1 .i ,.... Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: ,..-. Date Recorded: Sale Price: Price/Unit: Finished Lot Cost: Site Condition: Financing: Q Verification: Comments: ,..- land Sale Data No~ 7 Northeast side of Palomar Street, southeast of Catt Road, Wildomar N/A (Rancho Vista II) Rancho Vista II Ventures, LLC Temecula Creek Estates, LLC N/A 114 , 7,200 square feet R-1 To construct 114 ~hed residential dwellings ranging from 2,447 t ~34 square feet. Base sales prices are estimated etween $350,000 and $465,000. June 20~ $11 ,970~oV' $105,000 .t $159,990 'aw at sale date with approved tentative tract map All cash to seller Seller The effective tax rate is estimated to be 1.7%. 75 ACENDA ITEM NO. 3'> - PACE3dl-OF?J.t7 -- Location: Legal Description: Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: Date Recorded: Sale Price: Price/Unit: Finished Lot Cost: Site Condition: Financing: Verification: ~ Comments: 'V Land Sale Data No.8 """ North of Simpson Road, east of Leon Road, Menifee Valley 462-020-040, 041, 046 and 047; Parcel 1 and 2 of Parcel Map 5986 and Parcels 1, 3 and 4 of Parcel Map 6517 Winchester Ranch 202, LLC Stonegate Development I, LLC 58.3 acres 202 , 7,200 square feet ~ R-1 To construct 202 detache esidential dwellings Decemb~004 $15,655~U $77,500 .t $155,000 'Raw at sale date with approved tentative tract map All cash to seller Broker and Grant Deed The effective tax rate is estimated to be 1.9%. ~ """ 76 ACENDA ITEM NO. D> i.f7": PACE 31'?--6F , "'" We have surveyed residential sales in the lake Elsinore, Menifee and Wildomar market areas. The 8 sales used in the analysis are the comparables considered most helpful in valuing the subject property. We have reviewed and inspected all of the data items. The previous table includes the raw land cost per unit, blue-top price per unit, and the finished lot prices for merchant builder parcels. The comparable land sales have sold in raw condition and blue-top lot condition. Costs to bring the land from the condition at the time of sale to finished lot condition were made available to analyze the data. Therefore, the analysis will conclude at an indication of finished lot value for the subject parcels, and then a deduction to bri~e subject from a finished lot condition to the "As Is" lot condition is made. An analysis"'~ finished land purchase price for all the Data Items was helpful to arrive ~e "As Is" value of the subject tracts. Most weight was given to Data Nos. 2 and 3 wh~e a portion of the subject property . /"""" Analysis Financing All of the comparable sa~ere all cash transactions or financing considered to be cash, therefore, no adjustments f~anCing were warranted. 'Z> onveyed bles involved the transfer of the fee simple interest. The subject's fee simple interest i appraised in this report, and therefore, no adjustment is warranted. Time of Sale During the past 8 years, Southern California has sharply rebounded from its lengthy recession. Demand for land sales has dramatically exceeded supply. Prices paid for residential land increased annually by 15% to 20% and more from 1997 to 2000. However, 2001 saw a leveling of land prices, only to increase again during 2002, 2003, and the first six months of 2004. Home prices have increased from the lows of 1996. The average new "'" home price in Riverside County has increased from $156,907 in the first quarter of 1996 to 77 ACENDA ITEM NO. 3)- PACE ? \~ OF~tf7 ___ $445,424 in the fourth quarter of 2005. The median price for an existing home increased 9.4% in the last 12 months. This is near the record high median price level for existing homes in Riverside County, which occurred in March 2006. However, while prices have continued up, the increase is significantly lower than in the previous 5! years. Activity is reported to be decreasing over the past 2 to 3 months. The market in general began to plateau during August and September 2004 and continued through February 2005. Prices again increased between February 2005 and August 2005, although at a lower rate than previous years. However, during the past 2 to 3 months, home prices have stabilized or decreased. Therefore, we are of the opinion that a time adjustment is not warranted for sales that occurred during 2005. A 1 % per month adjSt,~nt is estimated for sales during 2004. For current listings and current escrows ~/o downward adjustment is estimated. . , Conditions of Sale Typically, adjustments for conditions o~eflect the motivations of the buyer and the seller in the transfer of real property. Trr~tions of sale adjustment reflects the difference between the actual sales price of the comparable and its probable sales price if it were sold in an arms-length tr~ction with typical motivations. Some circumstances of comparable sales that will need~ustment include sales made under duress, eminent domain transactio and sales that were not arm's length. All of the transactions were reported to b th in nature. Accordingly, no adjustment is indicated. Location The location adjustment is based on proximity to existing infrastructure and employment. The four sales located in the Menifee area are generally considered inferior and a 20% upward adjustment is indicated. Entitlement/Map Status All of the sales are entitled. No adjustment is required. ....., ....., ....., 78 AGENDA ITEM N~ 3d PACE 3J OF~ ~ ~ Tax Rate The subject is expected to have an average overall tax rate around 1.80% to 2.00% of base sales price. The comparable sales that have similar CFDs or Assessment Districts do not require an adjustment. The merchant builders of the land are aware of the various taxes and have factored the impact of the higher tax rates into the prices paid for the land. Lot Size The comparables have minimum lot sizes that range from 4,900 square feet to 7,200 square feet. The minimum lot size for the subject is 4,900 ~re feet to 6,000 square feet. Interviews with sales persons indicated that lot size is an ;~ant feature to the Lake Elsinore homebuyer. Downward adjustments ar~uired for Data Nos. 4, 5, 6, 7 and 8 which have 7,000 to 7,200 square foot minimum lOt.' r- Condition of Lots ~ All of the d_ata had prices based on '5~d condition. Deductions for costs to bring the subject parcel from finished lot condition to the current "As Is" condition is made al the Conclusion of Value in th~lysiS. Please refer to the next page for the adjustment grid of the 8 comparable land sales. After all adju d giving consideration to all of the data, the comparable data indicated a per I f $161,110 to $202,600 per finished lot. ,,-..... 79 ACENDA ITEM NO. 2>;) PACE 76 OF?t; / ......" 'gGl ~ ~ ~ ~ ~ ~ ~ ~ i~ ..... lB ~ N ~ ~ lii 10 ~ fj ~ ~ ~ ~ ~ ~ ~ jil ~ ~ ~ ~ ~ ~ ~ '$. b b b 19 19 II? 19 IL? )( "I ~ ~ ~ ~ ~ ~ ~ ~ ~! ~ ~ ~ ~ ~ ~ ~ ~ 'g ~ i~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ II ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ t~1 ~ ~ ~ ~ ~ ~ ~ ~j lB ~ ~ &f ~~! lB :8. ~ ~ ~ ~ ~I ~ ~ ~ '$. ~ ~ ~ ~ ~ ~ ~ III ~ ;j ~ ~ ~ ~~ ~ ~ ~ Q.'g 8i lB ~ ~ ~ m :8 "1:- ~ ~ ~ Q..E <<It <<It <<It I&. ......" 3 t 8- 3 3 3 3 3 ~ ~ ~ ~ ~ ~ ~ 10 ,; ~ i i i ~ ~ i E E E :;:: ~ c c c c ~ ~ ~ w w w w w w w c c c c c c c ~ ~ ~ ~ ~ ~ ~ .....1&. ~~ ~~ 001&. +11&. .,.1&. ",I&. ",en ",en ~en ....en @en .....~ .....~ ~ .....~ "'~ .....~ ~ <i uj ,.: ,.: ,.: ,.: ,.: ~ ~I ~ J ~ ~ ~ ~ it it ~ it it ~ it :.en .,. III ~ ..... 10 '" lB !\1 ~ 53 III Ii :8 tIl "I III :g III 25 III i ~ ~ ~ ~.!3 0 0 ~ i::: i::: i::: i::: aan en ~ ~~ ~~ .,..c :h~ :~ oll oll i ~~ ! II '0 ~.!Il ~(/) i~ ~ ~ tii~ "0 ~~~ a~2 ~o2 ujoll ~ l- .lIi ~jj ~a" !Ii .!3..J ~li5]i ~ Era ~ ra fjj ~ ~ .!:; ; j .... w ....'O~CD '" CD '" CD Ill() j ~~~j r-.en'15 ooen..J ~ ~ @)j . 00 ~ . 0 o~ ~~~ ~~ ~~~~ ~~~j ~w~ ~w~ ....." 80 AGENDA ITEM NO. 3 d" PAce~oF '"3f7 --- ,.... Conclusion of Blue-top Lot Value The estimated value of the lots in a blue-top lot condition is based primarily on Data Nos. 2 and 3 which are a portion of the subject property and sold in a blue-top lot condition. No adjustments were indicated to the Data. The indicated blue-top lot value is $135,000 for a lot with a minimum size of 4,900 square feet. Conclusion of Finished Lot Value After all adjustments, and giving the most emphasis to Data Nos. 2 and 3. the comparable data indicated a per lot value of $200.000 per finished lot, for lots with a minimum size of 5,000 square feet. , Valuation of Dwellin Units Under Construction and Seventy-four of the homes in two of the subdivision have been sold to individual homeowners. Where information is available these units ~ For the balance of the homes they are valued at the average base price of the subdivision. The base prices a~utlined on the following table. The average base price calculated is rounded to the ~est five thousand dollars. Based on an equal distribution of flo r plans for each project. the average base price for the five subdivisions i s fol are valued at the recorded sales price. ,......... Cross Creek: Weatherly: Briarcliff Bridgegate Alderbrook $400,000 $445,000 $475,000 $540,000 $510.000 These indicated average base prices should render a conservative value as builders typically build more of the larger floor plans. ",-.. 81 AGENDA ITEM NO. (,). PAGE ~/7 OF ?II? -- ,...." Total Lot Size Bdnn' Stories PA ProiectlDeveloperILocation Units Size Model Base Price SQ. Ft $/SQ. Ft Bath Garage 21A Cross Creek at Canyon Hills 127 6,000 Plan 1 $371,500 1,671 $222.32 3/2 1/2 Pardee Horres Plan 1X $390,500 1,918 $203.60 3/2 2/2 _SweetAcada Ct Plan 2 $407,000 2,113 $192.62 3/3 2/2 Plan 3 $438,550 2,439 $179.81 4+/3 2/3 AVERAGE $401,888 2,035 $197.46 21 B Weatherly at Canyon Hills 131 4,900 Plan 1 $431,510 1,949 $~25 2/2 PuIte Horres Plan 2 $443,310 2,110 $21. 3/2.5 2/2 Ar'{Jles Falls @ Chaparossa Plan 3 $459,720 2,458 $187.0 /3 2/2 AVERAGE ~~ $204.78 22 Briarcliff at Canyon Hills 107 6,000 Plan 1 $465,17 ,485 $187.19 3+/3 2/2 Pardee Homes Plan 2 $483,820 79 $180.60 3+/3 2/2 Hllside Olive @ Trailside Olive Plan 3 $467,800 2, $165.89 3+/3 2/2+ Plan 4 $485,175 3,035 $159.86 4+/3 2/2 AVERAGE ~~3 2,755 $172.61 23 Bridgegate at Canyon Hills 147 6,000 P ,000 2,962 $172.18 4/3 2/3 Pardee Homes Plan 530,000 3,073 $172.47 4+/3 2/3 ......, Hllside Drive Plan 2X $530,000 3,070 $172.64 4/3 2/3 , Plan 3 $550,000 3,315 $165.91 4+/3 2/3 Plan 4 $570,000 3,699 $154.10 4+/3 2/3 AVERAGE $538,000 3,224 $166.88 24 Alderbrook at Canyon Hills 143 5,000 Plan 1 $494,500 2,607 $189.68 4/2.5 2/2 p~~e Plan 2 $516,590 2,888 $178.87 4/3 2/3 Carryon H @ rook Ln Plan 3 $517,720 3,103 $166.84 4+/3 2/3 AVE RAG $509,603 2,866 $177.81 Survey Dale 4'17106 As a cross check we have surveyed a total of 14 active subdivisions for our analysis. On the following page the subdivisions and subject properties are illustrated on the graph. This exhibit is used as a cross check to view base prices of the subject in relation to the comparable homes in the Lake Elsinore competitive market. It appears that the subject homes are priced within the range of competing homes in the Lake Elsinore market. ......, 82 AGENDA ITEM N~ 0 ;,. PAGE ~ 7> OF ~t/7 __ ,..., ,.-.. i~ 2..... D..J! en'- c: ca -- :E - - fJ) (1)_ tn= >.:::1:: 1! c: (I) ~ r.;;;. c: '- ca au ,..., ~ 88888888888888888~ ~ ~ ~ ~ 8 8 ~ g ~ g ~ ~ m s ~ ~ ~ uuuuuu~~~~~~~~~~~ ,:I .bS Jad SJellOa ~ .. I C"f ~ C"f ~ C"f ~..... C"fLL - ~c- C"fen c I -- N ~ -- ~en NCI) en ~ ~ NO :J: ~ N ~ N ~ ~ ~.Ja ::c= e::I: ~5 oli 00 .... 83 AGENDA ITEM NO. ~,Q " PAGE '~I Ct OF: : ~_..._..--... . ---- .- ~ ,....", The model homes at Alderbrook and Bridgegate are currently under construction. These model homes are valued as a percentage of the base price based on the stage of construction. No additional value is attributed to these model-units as there are no interior or exterior upgrades as of the date of value. ~ 84 AGENDA ITEM NO,_?> (f PACE ?J')O OF :?~, ,...... ,...... ,...... Value Conclusions for CFD No. 2003-2, ImDrovement Area B The following exhibits indicate the value estimates for each home or lot in the fIVe active subdivisions as of the dat~ of value. The following tables are for Planning areas 21A, 21 S, 22, 23 and 24. Please refer to the following table which summarizes the values of the land and units by Planning Area. PA 21A Pardee Cross Qeek 4,900m 29.6 127 See exhibit $37,521,500 ROUNDED $37,500,000 .. .oil PA 21B Pulte Homes Weather1y 4,900 SF 1M 28.5 131 See exhibit $33,288,750 ROUNDED $33,300,000 PA22 Pardee Briarcl~ 6,000 SF lots 30.7 107 See exhibit $35,011,250 ROUNDED $35,000,000 PA23 ~ Bridge Gate 6,000 SF lots 54.3 147 See exhibit $21,033,000 ROUNDED $21,000,000 PA24 A1derbrook 5,000 SF lots 40.7 143 See exhibit $23,490,500 ROUNDED $23,500,0001 PA36 Pardee l.klde\eIopecf 18.0 DlVAc 12.0 216 $55,000 $11,880,OOC PA 1 Pardee Unc:IewIopecf 10.3 DlVAc 30.8 318 $50,000 $15,900,OOC PA2 Pardee Unc:IewIopecf 13.7 DlVAc 26.2 360 $50,000 $18,OOO,OOC TOTAL 252.8 1,549 $196,080,OOC: ESTIMATED VALUE OF CFD 2003-2, Planning Areas, 21A, 218, 22, 23,24, 36, 1 and 2 $196,000,000 I I I I 85 AGENDA ITEM NO. :3 }- PAGE , ') \ OF?t/I ..; 363-700001 '^"'>-WIn Perdee Pool 6i De Uc !:V23I2OO5 3Cl4le-1 1~ Briardlff ~ CcmpIeted plus """"*' $469,OOC $469, 363-790-aX2 Wln-Wn Perdee Pool 6i De Uc !:V23I2OO5 3Cl4le-1 2~ Briardlff ~ CcmpIeted plus """"*' $457,000 $457, 363-79().003 Wln-Wn Perdee Pool r. De Uc !:V23I2OO5 3Cl4le-1 3~ BriardIff ~ CcmpIeted IlIUS LDndes $500.500 $500, 363-790004 Wln-Wn Perdee Pool Hi De Uc !:V23I2OO5 3Cl4le-1 4~ Briardlff ~ CcmpIeted plus """"*' $538,500 $538. 363-79l>OO5 Wln-Wn Perdee Pool Iii De Uc !:V23I2OO5 3Cl4le-1 5~ Qcss Creek Model CaTlllIeted $455,5OC $455, 363-7r0006 Wln-Wn Perdee Pool 6i De Uc 9/2312005 3Cl4le-1 6~ Qoss Creek ~ Canpleled $427,500 $427. 363-790007 Wln-Wn Perdee Pool Ii De Uc 9/2312005 3Cl4le-1 7~ Qoss Creek ~ Canpleled plus """"*' $391.00c $391, 363-7r0006 Wln-Wn Perdee Pool Ii De Uc !:V23I2OO5 3Cl4le-1 6~ Qcss Creek ~ Canpleled plus lIXI'IIdes ~~ $343, 363-79G009 Perdee ClrossINWI CcltcnMlOd Ca1 3Cl4le-1 9 ~ porkirg-Firished Id Let $2llO, $2llO, 363-790-010 Perdee GrosSlTllrl CcltCX'1WDOd Ca1 3Cl4le-1 10 Fou1daIion -"II Let $2llO,lllJOI $2llO,oooI 363-790011 Perdee GrosSlTllrl CcltcnMlOd Ca1 3Cl4le-1 11 FClU'ldaIion tl1l'lChi"ll Let $2llO, $2llO. 363-791'()()1 Perdee GrosSlTllrl CcltcnMlOd Ca1 3Cl4le-1 367 FClU'ldaIIon tlWlChim Let $2llO, $2llO, 363-791-<lO2 Perdee ClrossINWI CcltcnMlOd Ca1 3Cl4le-1 366 Firished Let Let $2llO, $2llO, 363-791.()()3 PErdee GrosSlTllrl CcltcnMlOd Ca1 3Cl4le-1 366 Forished Let Let $2llO, $2llO, 363-791.()()4 Pardee GrosSl1lll'l CcltcnMlOd Ca1 3Cl4le-1 :lllO Forished Let Let $2llO, $2llO, 363-791.()()5 Perdee Grossman CcltcnMlOd Ca1 3Cl4le-1 391 Firished Let ~ $2llO, $2llO, 363-791.()()6 Perdee GrosSl1lll'l CcltcnMlOd Ca1 3Cl4le-1 392 Firished Let $2llO, $2llO,oooI 363-791.Q07 Perdee GrosSl1lll'l CcltcnMlOd Ca1 3Cl4le-1 393 Firished Let $2llO, $2llO-;ciD 363-791.()()6 PErdee Grossman CcltcnMlOd Ca1 3Cl4le-1 :l94 Firished Let $2llO, $2llO,oooI 363-791.()()9 Perdee Grossman CcltcnMlOd Ca1 3Cl4le-1 395 Firished Let $2llO, $206,cm 363-791.010 Pardee Grossman CcltcnMlOd Ca1 3Cl4le-1 396 Firished Let ~ Let $2llO, $2llO,oooI 363-791.011 PErdee Grossman CcltcnMlOd Ca1 3Cl4le-1 367 FClU'ldaIIon lrerdif'l!I ~ Let $2llO, $2llO-;ciD 363-791.012 PErdee Grossman CcltcnMlOd Ca1 3Cl4le-1 396 FClU'ldaIion -"II Let $2llO, ~000I 363-791.013 Perdee Grossman CcltcnMlOd Ca1 3Cl4le-1 399 FClU'ldaIIon _ra Let $2llO, $200, 363-791.014 Psrdoe Grossman CcltcnMlOd Ca1 3Cl4le-1 4ll FClU'ldaIIon _m Let $2llO, $2llO, 363-791.015 Perdee Grossman CcltcnMlOd Ca1 3Cl4le-1 401 FClU'ldaIion tlWlChi"ll ..... Let $2llO, $200, 363-790014 PErdee Grossman CcltcnMlOd Ca1 3Cl4le-2 12 Finished Let T Let $2llO, $2llO, 363-790-015 PErdee Grossman CcItcnMlOd Ca1 3Cl4le-2 13 Finished Let Let $2llO, $2llO, 363-790016 Perdee Grossman CcltcnMlOd Ca1 3Cl4le-2 14 Finished Let Let $2llO, $2llO, 363-790-017 PErdee Grossman CcltcnMlOd Ca1 3Cl4le-2 15 ,. Let $2llO,WJ $2llO, 363-790-016 PErdee Grossman CcltcnMlOd Ca1 3Cl4le-2 16 Let $2llO,ooc $2llO, 363-790-019 Psrdoe Grossman CcItcnMlOd Ca1 3Cl4le-2 17 .. F1ni Let $2llO,ooo $2llO-;ciD 363-790Q20 Pardee Grossman CcltcnMlOd Ca1 3Cl4le-2 16 --. FI Let $2llO,ooo I 363-79Q.Q21 Psrdoe Grossman CcltcnMlOd Ca1 3Cl4le-2 1 I.shedail' Let $2llO, 000 $2llO, 363-79O{l22 Psrdoe Grossman CcltcnMlOd Ca1 3Cl4le-2 20 Let $2llO,ooo $2llO, 363-790.Q23 Perdee Grossman CcltcnMlOd Ca1 3Cl4le-2 21 finished Let Let $200, $2llO, 363-79Q.Q24 Pardee Grossman CcltcnMlOd Ca1 ,~ 22 Finished Let Let $2llO, $2llO, 363-79Q.Q25 Pardee Grossman CcltcnMlOd Ca1 23 Finished Let Let $2llO, $2llO, 363-790026 Pardee GrosSma1 CcltcnMlOd Ca1 24 Finished Let Let $2llO, $2llO, 363-79Q.Q27 Perdee Grossman CcltCX'1WDOd Ca1 25 Finished Let Let $2llO, $2llO, 363-600001 Bsk IIria1 S 252 Ccmpleled House -sold $489,500 $489,5001 363-OOGOO2 GeaIIa Jctn 12J23{20Q5 253 Ccmpleled House -sold $409,500 $409-;-5001 ~ Spencer Edith K 2/812006 254 Canpleled House -sold $466,500 $466, 363-<<10004 Romero KerI 0 2/812006 3Cl4le-2 255 IComIlIeted House .sold $409,000 $409, 363-8JO<I05 Ok..,., FlI'I1i1y Trust 2I22l2OO6 3Cl4le-2 256 ICanllIeIed House .sold $396,500 $396, 363.eoo.oo6 -~ 3/1712006 3Cl4le-2 257 ICanllIeIed House .sold $454,000 $454, 363<<lOOO7 Brox Jamal ..... 3/1712006 3Cl4le-2 256 CanDleled House .sold $416,50: $416, 363.eoo.oo6 Gert:ia _ 41712006 3Cl4le-2 259 Ccmpleled House -8llId $459,000 $459, 363-800009 Cine Bruce . 2/2412006 3Cl4le-2 2llO ComcleIed House -sold $455,000 $455, ~O Grepo Anninlo . 2I28l2OO6 3Cl4le-2 261 Canpleled House .sold $423,000 $423, ~1 C81aaJS'l ~ ~ 3I3l2OO6 3Cl4le-2 262 CcmpIeted House .sold $442,000 $442, ~2 Ha1ahanTIIII 2/812006 3Cl4le-2 263 Canpleled House -sold $469,000 $469, ~3 Zendejas ees. 12J23{20Q5 3Cl4le-2 264 ComcleIed House .sold $472,500 $472, ~4 HlNI... Mike 1212712005 3Cl4le-2 265 CanDleled House-sold $419,000 $419, ~5 Pardee Grossman CllItCX'1WDOd Ca1 3Cl4le-2 266 Can_ed House 100% $400,000 $400, ~6 Bo..tdelath a-ico C 3/1312006 3Cl4le-2 267 Canpleted House .sold $435,500 $435, ~7 Sartcs Epimelio 3/24/2006 3Cl4le-2 268 IComcleIed House .sold $446,000 $446, ~8 Gawick Jctn 12J23{20Q5 3Cl4le-2 "281: CanpIeled House -8llId $417,000 $417, :J63.<<X}019 Gilaer Gem 12J23{20Q5 3Cl4le-2 270 ~ed House .sold $424,5OC $424, :J63.<<X}02O Gu8jordo Tracy 3/14/2006 304lB-2 271 Canpleted House -8llId $453,000 $453, :J63.<<X}021 NIelsen Rock 12I22l2OO5 3Cl4le-2 272 CcmpIeted House -sold $439,000 $439, :J63.<<X}022 Bvme SlIM! 12/1812006 3Cl4le-2 273 CanDleled House -sold $480,000 $480, 363-<<lQ.Q23 VVrcrl<a CI81es R 2/1S12rol 3Cl4le-2 274 Completed House .sold $380,500 $380, :J63.<<X}024 Sulil.en IIria1 T 12/112005 3Cl4le-2 275 Ccmpleled House .sold $492,000 $492, :J63.<<X}025 Canejo Rene 12I2l2OO5 3Cl4le-2 276 Canpleled House .sold $387,500 $387, 3fl3.al1.()()1 OrIeae Michelle 11/D2005 3Cl4le-2 277 Canpleled House .sold $372,000 $372, 3fl3.al1.()Q2 0..., Gnlacrv V 3124/2006 3Cl4le-2 276 Canpleted House .sold $415,000 $415, 3fl3.al1.()()3 George KsIAn L 12/1612005 3Cl4le-2 279 Ccmpleted House -8llId $452,500 $452, 3fl3.al1.()()4 Dilley DoIaes F 2/24/2006 3Cl4le-2 2!!0 Ccmpleled House -8llId $396,ooc $396, 3fl3.al1.()()5 ~en Dao A 1I25l2OO6 3Cl4le-2 281 Completed House .sold $489,000 $486, 3fl3.al1.()()6 MorgEn BI'lI'ldon 12/2612005 304lB-2 282 CcmpIeted House .sold $425,000 $425, 3fl3.al1.Q07 Olson OYistopher 12I2l2OO5 3Cl4le-2 283 CanpIeled House .sold $447,500 $447, 3fl3.al1.()()9 Perdee GrossmS'l CottCX'1WDOd Ca1 3Cl4le-2 284 Canpleled House 100% $400,000 $400. 3fl3.al1.()()9 Well Am 12/1412005 3Cl4le-2 265 CcmpIeted House .sad $416,5OC $416. 3fl3.al1.Q10 BUI'a1g JEnmy 121W2OO5 3Q493.2 2116 Canpleted House .sold $471.000 $471. 3fl3.al1.Q11 AmoId Jason 12/1512005 3Cl4le-2 267 CanDleted House .sold $373,000 $373. 86 I" "2 ;? Ati,="-N!J}o. .!..... .' .,_V . PACE -) J}r OF 31? ,...", ..." ..." -- ~ /"" 3lB-79H118 P..- GroMrnIwl CeltCl'MOOd c... ~ Finished Let- Temp _trailer & p8k Let $200, $200, 3lB-791.o19 PlW'<lee GroMrnIwl CeltCl'MOOd c... ~ 381 Fir/shed Let - Temp sales trailer & p8king Let $200,000 $200, 3lB-791~ Psrdee Grassmlrl CeltCl'MOOd c... ~ 382 Fir/shed Let Let $200,000 $200, 3lB-791.Q21 PlW'<lee Grossmlrl CeltCl'MOOd c... ~ 383 Fir/shed Let Let $200,000 $200, 3lB-791.Q22 Psrdee GrcsS/l1S'l CeltCl'MOOd c... 3CJ4ll3.2 384 Firished Let Let $200,000 $200, 3lB-791.Q23 PlW'<lee Gress....... CeltCl'MOOd c... ~ 385 FR'lished Let Let $200,000 $200, 3lB-791.Q24 Psrdee Gressmsn CeltCl'MOOd c... ~ 386 Fir/shed Let Let $200, $200, Psrdee Gressmsn CeltCl'MOOd c... 3Q493.3 223 Finished Let Let $200, $200, PlW'<lee Grcssmsn CeltCl'MOOd c... 3Q493.3 224 Fir/shed Let Let $200, $200, PlW'<lee GrcsS/l1S'l CottCl'MOOd c... 3Q493.3 225 Finished Let Let $200, $200, Psrdee Grossmlrl CaItCI'MOOd c... 3Q493.3 228 Fir/shed Let Let $200, $200, PlW'<lee Grcssmsn CctICI'MOOd c... 3Q493.3 227 Finished Let Let $200, $200, PlW'<lee Grossman CottCl'MOOd c... 3Q493.3 228 Finished Let Let $200, $200, Psrdee GrcsS/l1S'l CctICI'MOOd c... 3Q493.3 229 Fir/shed Let Let $200, $200, PlW'<lee GrasS/l1S'l CctICI'MOOd c... 3Q493.3 230 Fir/shed Let Let $200, $200, PlW'<lee GrasS/l1S'l CctICI'MOOd c... 3Q493.3 231 Fir/shed Let Let $200, $200, PlW'<lee Grass....... CctICI'MOOd c... 3Q493.3 232 Firished Let ~ $200, $2OO.00a Psrdee Gress....... CctICI'MOOd c... 3Q493.3 233 Finished Let $200, $200,0001 Psrdee Grossmlrl CottCl'MOOd c... 30493-3 234 Finished Let $200, $200, PlW'<lee Grossman CctICI'MOOd c... 30493-3 235 Finished Let $200, $200, Psrdee GrcsS/l1S'l CottCl'MOOd c... :J0493.3 238 Finished Let $200,0001 $200, Psrdee Gressmsn CottCl'MOOd c... 3Q493.3 237 Fir/shed Let ...... Let $200,000 $200, Psrdee GrasS/l1S'l CctICI'MOOd c... 3Q493.3 238 Fir/shed Let =k Let $200, $200, Psrdee Grossman CottCl'MOOd c... 3Q493.3 238 Finished Let Let $200, $200, Psrdee GrasS/l1S'l CottCl'MOOd c... 3Q493.3 240 Firished Let Let $200, $200, Psrdee Grossman CctICI'MOOd c... 3Q493.3 241 \Mapped. Roof U1C - 80% $400, $240, Pardee Grossmlrl CeltCl'MOOd c... 3Q493.3 242 IVIA'a<ICe<l. Roof U1C ..... 80% $4OO,llOOI $240, Pardee Grcssmsn CctICI'MOOd c... 3Q493.3 243 \M'apped. Roof U1C ...... 80% $400,0001 $240, Pardee Gressmsn CotICl'MOOd c... 30493-3 244 \M'apped. Roof U1C 80% $400,0001 $240, P..- Grcssmsn CctICI'MOOd c... 3Q493.3 2045 .~ 80% $400,000 $240, Psrdee GrasS/l1S'l CctICI'MOOd c... 3Q493.3 248 80% $4OO,w; $240, Pardee Grassman CottCl'MOOd c... 3Q493.3 247 , roof U1C 75% $400,000 $300, Psrdee Gressman CottCl'MOOd c... 3Q493.3 248 _Cot roof U1C 75% $400,000 $300, PlW'<lee Groos....... CottCl'MOOd c... 30493-3 249 U1C 75% $400,000 $300, Pardee Gressmsn CaItCI'MOOd c... 30493-3 250 UrcorUlC 75% $400,000 $300, Psrdee Grcssmsn CottCl'MOOd c... 3Q493.3 251 , roof U1C 75% $400,000 $300, Pardee Gressman CottCl'MOOd c... 3Q493.3 288 ColOr coal, roof U1C 75% $400,000 $300, Psrdee Gressmsn CctICI'MOOd c... I 289 Cotcr coal, roof U1C 75% $400,000 $300, Pardee Gressman CctICI'MOOd c... 290 Cotcr coal, roof U1C 75% $400,000 $300, Pardee Grcssmlrl CctICI'MOOd Can 291 ColOr coal, roof U1C 75% $400,000 $300, Psrdee Grossman CctICI'MOOd c... 292 Cotcr coal, roof U1C 75% $400,000 $3OO,WU1 Psrdee Grassmsn CottCl'MOOd Can 293 ColOr coal, roof U1C 75% $400,000 $3OO,ooa Psrdee Grassmsn CctICI'MOOd Can 294 ColOr coal, roof U1C 75% $400,000 ~ Pardee Gressmsn CeltCl'MOOd Can 295 \M'apped. Roof U1C 80% $400, $240, Psrdee Grcssmsn CottCl'MOOd c... 3Q493.3 296 W'epped, RoofUlC 80% $400, $240, '-. 3Q493.3 2ffT \M'apped. Roof U1C 80% $400, $240, Pardee Can 30493-3 29lI \M'apped. Roof U1C 80% $400, $240, Psrdee CctI Can 3Q493.3 29ll \M'apped. Roof U1C 80% $400, ~ Psrdee an Celt 30493-3 300 iMaIJped, Roof U1C 80% ~~ $240, Psrdee CctI 30493-3 ;lO1 MBIlD8<1 Roof U1C 80% $400, $24O,w. Psrdee Gress :J0493.3 3Q2 \M'apped. Roof U1C 80% $400, $240,00: Total LeG 127 Estimlted Value Cross Creek Product $37,521,501 /"" 87 AOENDA ITEM NO, PAOE 1-;0 3~ OF~ -- PUle Homes 3ll4ll3-4 2E Canplete Less ftocring & ~ 8O'l6 $446, $400, PUle Homes 3ll4ll3-4 ZT Canplete less ftocring & IlI'ldsClllling 8O'l6 $446, ~ PUle Homes 3ll4ll3-4 2! Canplete less Goering & IlI'ldscaping 8O'l6 $445, ~ PUle Homes 3ll4ll3-4 Z Canclete less Goerina & IlI'ldsCllllina 8O'l6 $445, ~ PUle Homes 3ll4ll3-4 3C Canplete Less ftocring & Ia'ldsClllling 90% $446, $400, PUle Homes 3ll4ll3-4 31 Canplete Less Goering & Ia'ldsCSl>ing 90% $446, $400, PUle Homes 3ll4ll3-4 32 Canplete Less ftocring & Ia'ldsC8lling 8O'l6 $446, $<<Xl, PUle Homes 3ll4ll3-4 3:; Canpleteless ftocrina & Ia'ldsCSl>ina 8O'l6 $446, $400, PUle Homes 3ll4ll3-4 34 Complete Less Goering & IlI'ldsClllling 8O'l6 $446, $400, PUle Homes 3ll4ll3-4 3/ Complete Less ftocring & IlI'ldsCSI>ina 8O'l6 $446, $400, PUle Homes 3ll4ll3-4 3E Canplete less aoering & IlI'ldsClllling 8O'l6 $446, $400, PUle Homes 3ll4ll3-4 37 Complete Less Goering & IlI'ldsCSI>ing 8O'l6 $445, $400, PUle Homes 3ll4ll3-4 3! Canplete Less Goering & Ia'ldsClllling 90% $446, $400, PUle Homes 3ll4ll3-4 3E Canplete less Gocrina & Ia'ldsC8lling 90% $446, $<<Xl, PUle Homes 3ll4ll3-4 --.. Canplete Less Goering & IlI'ldsClllling 90% $446, $400, PUle Homes 3ll4ll3-4 41 Canplete Less Goerina & IlI'ldsClllling 8O'l6 $446, $445, PUle Homes 3ll4ll3-4 \I'v\'apped, Roof UlC ElO% $446, $267, PUle Homes 3ll4ll3-4 \I'v\'apped, Roof U1C $446, $267, PUle Homes 3ll4ll3-4 \I'v\'apped, Roof UlC $446, $267, PUle Homes 3ll4ll3-4 \I'v\'apped, Roof UlC $446, $267, PUle Homes 3ll4ll3-4 \Mapped, Roof UlC ... ElO% $446, $267, PUle Homes 3ll4ll3-4 47 \I'v\'apped, Roof U1C ~ ElO% $446, $267, pute Homes 3ll4ll3-4 48 IMallDed Roof UlC ElO% $446, $267, PUle Homes 3ll4ll3-4 46 \I'v\'apped, Roof UlC ElO% $446, $267, PUle Homes 3ll4ll3-4 & \I'v\'apped, Roof UlC ElO% $446, $267, PUle Homes 3ll4ll3-4 51 \Mapped, Roof UlC ElO% $446, $267, PUle Homes 3ll4ll3-4 52 IMalDed Roof UIC ...... ElO% $446, $267, PUle Homes 3ll4ll3-4 53 \I'v\'apped, Roof UlC 60% $446, $267, PUle Homes 3ll4ll3-4 54 \Mapped, Roof UlC 60% $446, $267, Pute Homes 3ll4ll3-4 55 .~ ElO% $446,1lWf $267, PUle Homes 3ll4ll3-4 'Sf 0 , roc:tUlC El5% 11 PUle Homes 3ll4ll3-4 'Sf1 , roc:tUlC El5% PUle Homes 3ll4ll3-4 'S12 UlC 65% $446, $289, PUle Homes 3ll4ll3-4 'Sl3 .;"focfUlC El5% $446, $289, PuIIe Homes 3ll4ll3-4 'Sf4 , roc:tUlC 65% $446, $289, PuIle Homes 3ll4ll3-4 'Sf5 _CCllIl,roc:tUlC El5% $446, $289, PUle Homes I 376 CompIetelMth Goerino 100% $446, $446, PUle Homes 377 Complete with Goerino 100% $446, lXlOt $446, PUle Homes 376 CompIetelMth Goering 100% $446,000 $446, PUle Homes 379 CanDlete with Goering 100% $446, $446, PUle Homes 56 Fnmed Fuly 55% $446, $244,7 PUle Homes 57 Franed Fuly 55% $445, $244,7 PUle Homes 51' Franed Fuly 55% $446, $244,7 PUle Homes ~ 51' Franed Fuly 55% $445, $244,7 PUle Homes ~ fi{ Franed Fuly 55% $446, $244, 7 ~~ ~ 61 Fnmed Fuly 55% $446, $244,7 ~ 62 Franed Fuly 55% $445, $244,7 PUle .. ~ .8:! FOU1daIicln slab Lcl $2OO,1lWf $200, PUle Homes _ ~ 64 FOU1daIlcn slab Lcl $200,000 $200, PUle Homes . ~ 65 FOU1daIicln slab Lcl $200,000 $200, Pute Homes .- ~ 66 FOU1daIicn slab Lcl $200,000 $200, Pute Homes ...... ~ 67 FOU1daIicn slab Lcl $200,000 $200, Pute Homes ... ~ 66 FOU1daIicn Trenched Lcl $200,000 $200, PUle Homes ~ 69 FOU1daIlcn Trenched Lcl $200, 000 $200, PUle Homes ~ 7 FOU1daIlcn Trenched Lcl $200,000 ~ PUte Homes ~ 71 FOU1dalicn Trenched Lcl $200, ~ Pulle Homes ~ 72 FCU1daIicn Trenched Lcl $200, ~ PUle Homes ~ 73 FOU1daIicn Trenched Lcl $200, ~ PUle Homes ~ 74 FOU1daIicn Trenched Lcl $200, ~ PUle Homes ~ 75 FOU1daIicn Trenched Lcl $200, ~ PUle Homes ~ 76 FOU1daIicn Trenched Lcl $200, $200, PUle Homes ~ 77 FCU1daIicn Trenched Lcl $200, $200, PUle Homes ~ 76 FOU1daIicn Trenched Lcl $200, $200, Pute Homes ~ 79 FOU1daIicn Trenched Lcl $200, ~ Pute Homes ~ 8( FCI.I"Idelicn Trenched Lcl $200, $200, Pute Homes ~ 81 FOU1daIicln Trenched Lcl $200,000 $200, PUle Homes ~ 82 Finished Lcl Lcl $200,00: $200, puteHomes ~ 83 Finished Lcl Lcl $200,000 $200, PUle Homes ~ 64 Finished Lcl Lcl $200,000 $200, PUle Homes ~ 382 Finished Lot Lcl $200, OOC $200, PUle Homes ~ 383 Finished Lcl Lcl $200,000 $200, PUle Homes ~ 364 Finished Lot Lcl $2OO,OOC $200, PUle Homes ~ 385 FOU'ldaIicn Trenched Lcl ~i ~ pute Homes ~ 366 FOU1dalicn Trenched Lcl $200, ~ PUle Homes ~ 357 VIotapped, Roof UlC 60% $446, $267, ~ ....., '-'" 88 NO 3~ AClENDA \TEM .:r :?f7-= PAOE31-- OF ".-... ~ PUle_ ~ _lIC eo% $445, $2/!5T. PUte_ ~ ;DI WBpped, _ lIC eo% $445, $2/!5T. PUt._ 3Q493.6 85 FIriahod Lot Lot $200, ~ PUt._ 3Q493.6 e6 FIrished Lot Lot $200, ~ PtJIe _ 3Q493.6 fIT Firishecl Lot Lot $200. ~ PUte_ 3Q493.6 e6 Firished Lot Lot $200. ~ PtJIe_ 3Q493.6 Il9 Firished Lot Lot $200. S2OO. PUte_ 3Q493.6 90 Flrished Lot Lot $200. S2OO. PUte_ 3Q493.6 91 Firisheel Lot Lot $200. $200. PUte_ 3Q493.6 92 Firished Lot Lot $200. S2OO. ptJte _ 3Q493.6 Firishecl Lot Lot $200. S2OO. PtJIe_ 3Q493.6 Flrisheel Lot Lot $200, S2OO. ptJte _ 3Q493.6 Firished Lot Lot $200, S2OO. PtJIe_ 3Q493.6 Flrished Lot Lot $200, $200, PUle Homes 3Q493.6 Flrisheel Lot Lot $200, S2OO. PUte Homes 3Q493.6 -~ .- $200, PUle Homes 3Q493.6 Flrisheel Lot - Model perklrg Lot S2OO. S2OO. PUte _ 3Q493.6 100 Model _ Model Completed plus UDCrades 110% $445,0001 $489. ptJte _ 3Q493.6 101 Model Weatherly Model Completed pius urxndos 0% $445.oooT $489. PtJIe_ 3Q493.6 102 Model WeaIher1y Model Completed plus ~ $445.000t $489. ptJte _ 3Q493.6 326 Firished Lot $200-;o0oi $200, PUte Homes 3Q493.6 W Firished Lot ~ Lot $2OO,ooot S2OO. PUle Homes 3Q493.6 32Il Firished Lot . Lot $200, S2OO. PUte Homes .. 3Q493.6 329 Firisheel Lot ~ Lot $200. $200, PtJIeHomes 3Q493.6 330 Firishecl Lot Lot $200, $200, PtJIeHomes 3Q493.6 331 Firished Lot Lot $200. S2OO. PtJIeHomes 3Q493.6 332 Flrished Lot .... Lot $2OO.000t $200, PtJIeHomes 3Q493.6 333 Flrished Lot ..... Lot $2OO.000t S2OO. PUte Homes 3Q493.6 334 Firished Lot Lot $200,0001 S2OO. PUte Homes 3Q493.6 33Ii Flrisheel Lot Lot $2OO.000t S2OO. PtJIeHomes 3Q493.6 = - Lot ~~ S2OO. PtJIeHomes 3Q493.6 ~ Lot $200, S2OO. PtJIeHomes 3Q493.6 338 Lot $200,000 S2OO. PUte Homes 3Q493.6 339 _Fi Lot $200.000 S2OO. PUte Homes 3Q493.6 34C Lot $200.000 $200. PUte Homes 3Q493.6 341 ~ Lot $200. S2OO. PtJIeHomes 3Q493.6 342 Lot S2OO. ~ PtJIeHomes I 343 Firished Lot Lot $200, ~ PtJIeHomes 344 Firished Lot Lot $200. S2OO. PUte Homes 345 Flrished Lot Lot S2OO. S2OO. PtJIeHomes 346 Firished Lot Lot S2OO. S2OO. PUte Homes 347 Firished Lot Lot $200. S2OO. PUte Homes 348 Firished Lot Lot $200. ~ PUte Homes 349 Flrished Lot Lot $200, ~ PUte Homes 3Q493.6 360 Firished Lot Lot $200, ~ PUte Homes 3Q493.6 351 Flrished Lot Lot $200, ~ PUteHomes ~ 3Q493.6 352 Forished Lot Lot $200, $200. -~ 3Q493.6 353 Flrished Lot Lot $200, S2OO. PUte -. 3Q493.6 354 FirishecI Lot Lot $200. S2OO. PtJIe Homes . 3Q493.6 355 Flrished Lot Lot $200. S2OO. PUte Homes - 3Q493.6 356 Flrished Lot Lot S2OO. ~ PtJIe Homes u~ 3Q493.6 3fi1 Flrished Lot Lot $200. PUte Homes 3Q493.6 356 Flrished Lot Lot $200. PtJIeHomes 3Q493.6 359 Firishecl Lot Lot $200, PUte Homes 3Q493.6 :l6OI Flrished Lot Lot $200, ptJte Homes 3Q493.6 361 Firished Lot Lot $200, S2OO.oo Total Lola 131 Estimated Value Weatherly Product $33,288,7641 "..... 89 ACENDA ITEM NO. :3") PACE '?Irs OF~ Inc:IMdJaI o..-.er 31706-2 1 Complete - sold 100% $475, ~ Inc:IMdJaI o..-.er 31706-2 2 Complete - sold 100% $475, $475, Inc:IMdJaI o..-.er 31706-2 3 CcmpIete-soId 100% $475, $475, Inc:IMdJaI o..-.er 31706-2 Complete - sold 100% $475, $475, Inc:IMdJaI o..-.er 317C&-2 5 Complete - sold 100% $475, $475, InlNciJaI o..-.er 31706-2 6 Complete - sold 100% $475, ~ Inc:IMdJaI o..-.er 317C&-2 7 Complete-sold 100% $475, InlNciJaI o..-.er 317C&-2 Complete - sold 100% $475, $475, Inc:IMdJaI o..-.er 317C&-2 Complete - sold 100% $475, $475, Pardee Gross""", ColtonNCOd Ca1 317C&-2 10 CoIcr COllI, IC"HJlC 75% $475, $3/l6, Pardee Grossman CcltOONOOd Ca1 317C&-2 11 CoIcr COllI, reef UtC 75% $475, $3/l6, Pardee Gross""", CcltOONOOd Ca1 317C&-2 12 Coler COllI, reef UtC 75% $475, $3/l6, Pardee GrosSlNln CcltOONOOd Ca1 317C&-2 13 Coler COllI, reef UtC 75% $475, $3/l6,2SOI Pardee Grossman CcltOONOOd Ca1 31706-2 14 Coler COllI, reef UtC 75% $475, $3/l6,2SOI Pardee Grossmll'1 ColtonNCOd Ca1 31706-2 15 CoIcr COllI, reef UtC I.\. 75% $475, $3/l6,2SOI Pardee GrossIT1ll'1 CoIIOONOOd Ca1 317C&-2 16 CoIcr COllI, reef UIC ~%$475, $3/l6,2501 Pardee GrosSIT1ll'1 CcltOONOOd Ca1 317C&-2 17 CoIcr COllI, reef UtC 75% $475, =fi Pardee Gross""", CcltOONOOd Ca1 317C&-2 18 CoIcr COllI, reef UtC 5% $475, Pardee Gross""", CcltOONOOd Ca1 317C&-2 19 CoIcr COllI, reef UtC >>= InlNciJaI o..-.er 317C&-2 77 Complete - sold $475, Inc:IMdJaI o..-.er 317.Q6.2 78 Complete - sold ... 100% $475, $475, Inc:IMdJaI o..-.er 317C&-2 79 Complete - sold . 100% $475, $475, InlNciJaI o..-.er 317C&-2 80 CcmpIele - sold 100% $475, $475, Inc:IMdJaI o..-.er 31706-2 81 CcmpIele - sold 100% $475, ~ Inc:IMdJaI o..-.er 31706-2 82 ComPele - sold 100% $475, $475, InlNciJaI o..-.er 31706-2 -8:3 CcmpIeIe - sold .... 100% $475, $475, Inc:IMdJaI o..-.er 317C&-2 84 ComPele - sold Y 100% $475, $475, hI\jciJaI o..-.er 317C&-2 85 Complete - sold 100% $475,OC $475, hI\jciJaI o..-.er 317C&-2 BEl CcmpIete-soId 100% $475, $475, InlNciJaI o..-.er 317C&-2 87 . 100% $475, $475, InlNciJaI o..-.er 317C&-2 88 e-sold 100% $475, $475, Ind\jciJal o..-.er 317C&-2 81 sold 100% $475, $475, Ind\jciJaI o..-.er 317C&-2 9C 100% $475, $475, hI\jciJaI o..-.er 317C&-2 91 100% $475, $475, InlNciJaI o..-.er 317C&-2 92 -sold 100% $475, $475, hI\jciJaI o..-.er 317C&-2 ~ CcriiiiI8Ie - sold 100% $475, $475, hI\jciJaI o..-.er 317C&-2 g, CcmpIele - sold 100% $475, $475, InlNciJaI o..-.er I 95 CcmpIeIe . sold 100% $475, $475, Inc:IMdJaI o..-.er 98 CcmpIele - sold 100% $475, $475, InlNciJaI o..-.er 97 CancleIe - sold 100% $475, $475, InlNciJaI o..-.er 98 ICcrnClIele - sold 100% $475, $475, InlNciJaI o..-.er 3 2 81 CancleIe - sold 100% $475, $475, hI\jciJaI o..-.er 317 lOC ComPele - sold 100% $475, $475, hI\jciJaI o..-.er 317C&-2 101 CClmcIele - sold 100% $475, ~, InlNciJaI o..-.er 317C&-2 102 CanDlete - sold 100% $475, 1= hI\jciJaI o..-.er 317C&-2 103 CClmcIeIe - sold 100% $475, --E 31706-2 104 CanDlete - sold 100% $475, $475, Inc:IMdJaI .. 31706-2 1ll! CcmpIele - sold 100% $475, $475,.;:3 Ird\oiciJaI . 317C&-2 106 ComPele - sold 100% $475, $475, InlNciJaI . 317C&-2 107 CancleIe - sold 100% $475, ~ Pardee Grossmll'1 Ca1 317(&.3 20 FrsmecI FullY 55% $475, ~ Pardee Gross""", Ca1 317(&.3 21 Franed Fully 55% $475, $261, Pardee Grossman CcltlnNcccl Ca1 317(&.3 22 Franed FullY 55% $475, $261, Pardee Grossmll'1 CcltOONOOd Ca1 317(&.3 23 Franed Fully 55% $475, $261, Pardee Gross""", ColtonNCOd Ca1 317(&.3 24 Franed Fully 55% $475, $261, Pardee GrosSlT1ll'1 CcltOONOOd Ca1 317(&.3 25 Franed FullY 55% $475, $261, Pardee GrosSlT1ll'1 CcltOONOOd Ca1 317(&.3 28 FrsmecI Fully 55% $475, $261, Pardee Gross""", CcltOONOOd Ca1 317(&.3 27 Finished L.cI L.cI $200, $200, Pardee GrosSlT1ll'1 CcltOONOOd Ca1 317(&.3 28 Finished L.cI L.cI $200, $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 2!l Finished L.cI L.cI $200, $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 311 Finished L.cI L.cI $200, ~ Pardee Gross""", CcltOONOOd Ca1 317(&.3 31 Finished L.cI L.cI $200, $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 32 Firished Let L.cI $200, $200, Pardee GrosSlT1ll'1 CcltOONOOd Ca1 317(&.3 33 Finished L.cI L.cI $200, $200, Pardee GrosSIT1ll'1 CcltOONOOd Ca1 317(&.3 34 Finished L.cI L.cI $200, ~ Pardee Gross""", CcltOONOOd Ca1 317(&.3 35 Firished L.cI L.cI $200, $200, Pardee GrosSIT1ll'1 CcltOONOOd Ca1 317(&.3 36 Finished L.cI L.cI $200, $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 37 Finished L.cI L.cI $200, $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 38 Finished L.cI L.cI $2OO,OCXl $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 39 Finished L.cI L.cI $2OO,DOC $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 40 Finished L.cI L.cI $200, DOC $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 41 Finished L.cI L.cI $2OO,DOC $200, Pardee Gross""", CcltOONOOd Ca1 317(&.3 42 Firished L.cI L.cI $200, 0CXl $200, Pardee Gross""", CcltClO'MXld Ca1 317(&.3 43 Firished L.cI L.cI $200, DOC $200, Pardee Grossmll'1 CcltOONOOd Ca1 317(&.3 44 Firished L.cI Let $200, 0CXl $200, 90 AGENDA ITLh, .--.., d;; PAGE "3;2-0 OF 7'0 ......, ......, ......, -- ~ /'"' P_ Gressman CotlcnMxld c.. 31706-3 FIrished LoI LoI $2llO, $2llO, P_ Gressman CottClfWOOd c.. 31706-3 4E FIrished LoI LoI 11 p..- Grcssmsn CottClfWOOd c.. 31706-3 1fT Finished LoI LoI P_ Grcssmsn CotlcnMxld c.. 31706-3 48 Finished LoI LoI $200, $2llO, P_ GressITl&"l CotlcnMxld c.. 31706-3 49 Fir/shecf LoI LoI $200, ~ P_ GresSITI&"l CottClfWOOd c.. 31706-3 5C Finished LoI LoI $2llO, $200, P_ Grcssmsn Cottonwood c.. 31706-3 51 Finished LoI LoI $2llO, $2llO, P_ GressITl&"l Cottonwood c.. 31706-3 52 Finished LoI LoI $2llO, $2llO, Psrdee GressITl&"l CottClfWOOd c.. 31706-3 53 Finished LoI LoI s:;m,(ijjjI $2llO, P_ Grcssmsn Cottonwood c.. 31706-3 54 Framed F....1y 55% $475,0001 $261, Psrdee GrossITl&"l CottClfWOOd c.. 31706-3 55 Framed F....1y 55% $47s;roor $261, P_ Gressman CottClfWOOd c.. 31706-3 51 Framed Partial 50% $475,0001 $237, Psrdee Gressman CottClfWOOd c.. 31706-3 57 Framed Partial 50% $475,0001 $237, Psrdee Grossman CottcnMXld c.. 31706-3 51 Framed Parti'" 50% $475,0001 $237, Psrdee GresSITI&"l Cottonwood c.. 31706-3 59 Framed Partial 50% $471- $237, Psrdee Gressman Cottonwood c.. 31706-3 I3C Framed Parti'" ~50% $475, $237, Psrdee GrossITl&"l CottClfWOOd c.. 31706-3 61 Fardalion Trenched LoI s:;m, s:;m, Psrdee Grcssmsn Cottonwood c.. 31706-3 62 Fardalion Trenched LoI $200, s:;m, Psrdee Gressman Cottonwood Cal 31706-3 63 Fardalion Trenched $s:;m,OO s:;m, Psrdee Grcssmsn CottClfWOOd c.. 31706-3 64 Fardalion Trenched $200,000 s:;m, Psrdee Grcssmsn CottClfWOOd c.. 31706-3 65 Fardalion Trenched $200, s:;m, P_ Grcssmsn CottClfWOOd c.. 31706-3 56 Fardalion Trenched ~ LoI $200, ~ Psrdee Grcssmsn Cottonwood c.. 31706-3 67 Fardalion Trenched . LoI $200, ~ Psrdee Grossman CotlcnMxld c.. 31706-3 66 Fardalion Trenched :K LoI $200, s:;m, Psrdee GressITl&"l CottClfWOOd c.. 31706-3 6E Fardalion Trenched LoI $200, $200, Psrdee Grcssmsn CottClfWOOd c.. 31706-3 7 Framed Partial ~ 50% $475, $237, Psrdee Grossman CottcnMXld c.. 31706-3 71 Fnmed Partial ... 50% $475,0001 $237, Psrdee Gressman CottClfWOOd c.. 31706-3 n Fnmed Partial "'" 50% $475;CiXi1 $237, Psrdee GrossITl&"l CottcnMXld c.. 31706-3 73 Fnmed Partial 50% $475,0001 $237, Psrdee Grcssmsn CottClfWOOd c.. 31706-3 74 Framed Parti'" 50% $475;00 $237, Psrdee Grcssmsn CottcnMXld c.. 31706-3 75 Z 55% $475,000 $261, Psrdee Grcssmsn Cottonwood c.. 31706-3 76 F....1y 55% $475,OOC $261, ... Total Lois 10'1 " . _ Value Brlarclllf Product: $34,011,251 ..... , Q "..... AGc.hi.Jk 3> PACE ~i:7--r OF :II) "l/ 91 ... P_ Grossman Colla'wlod C8l 317lJ6.1 108 Blue Top Lot Lot $135,0001 $135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 109 Blue Top Lot Lot $135,000 135, P_ Grossman Colla'wlod C8l 317lJ6.1 110 Blue Top Lot Lot $135, $135, P_ Grossman Colla'wlod C8l 317CJ6.1 111 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 112 Blue Top Lot Lot $135, $135, P_ Grossman Colla'wlod C8l 317CJ6.1 113 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 136 Blue Top Lot Lot $135, $135, P_ Grossman Colla'wlod C8l 317CJ6.1 137 Blue Top Lot Lot $135, 135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 138 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 1Jll Blue Top Lot Lot $135, 5135, P_ Grossman CoIIal1MlOd C8l 317lJ6.1 140 Blue Too Lot Lot 5135, 5135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 141 Blue Top Lot Lot $135, $135, P_ Grossman Colla'wlod C8l 317CJ6.1 142 Blue Too Lot Lot 5135, 5135, P_ Grossman Colla'wlod C8l 317CJ6.1 143 Blue Top Lot Lot $135, 5135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 145 Blue Top Lot ~ Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 146 Blue Top Lot - P_ Grossman CoIIal1MlOd C8l 317CJ6.1 147 Blue Top Lot P_ Grossman CoIIal1MlOd C8l 317lJ6.1 148 Blue Top Lot Lot $135, $135, P_ Grossman Colla'wlod C8l 317CJ6.1 149 Blue Top Lot $135, $135, P_ Grossman Colla'wlod C8l 317CJ6.1 179 Blue Top Lot $135, $135, P_ Grossman Colla'wlod C8l 317CJ6.1 180 Blue Top Lot - Lot $135, $135, P_ Grossmen CoIIal1MlOd C8l 317lJ6.1 181 Blue Top Lot ~ Lot 5135, 5135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 182 Blue Top Lot Lot $135,0001 5135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 183 Blue Top Lot Lot 51~~ P_ Grossman Colla'wlod C8l 317CJ6.1 184 Blue Top Lot Lot $135, ~ P_ Grossman CoIIal1MlOd C&1 317CJ6.1 185 Blue Top Lot Lot $135, ~ P_ Grossman CoIIal1MlOd C8l 317CJ6.1 186 Blue Top Lot Lot 5135, 5135, P_ Grossman Colla'wlod C8l 317CJ6.1 187 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 317lJ6.1 186 Blue Top Lot Lot $135, $135, P_ Grossmen Colla'wlod C8l 317CJ6.1 189 . Lot $135, $~ P_ Grossman Colla'wlod C8l 317CJ6.1 IIll Lot Lot 5135, p; P_ Grossman CoIIal1MlOd C8l 317CJ6.1 191 . Lot $135, 135, P_ Grossman Colla'wlod C8l 317CJ6.1 192 ... "Ii Lot 5135, ~ P_ Grossman CoIIal1MlOd C8l 317CJ6.1 193 1j Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 194 Blue Top ::: Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 317CJ6.1 195 Lot $135,000 $135, P_ Grossman Colla'wlod C8l I' 196 Blue Top Lot Lot $135,000 $135, P_ Grossman CoIIal1MlOd C8l CJ6.1 246 Blue Top Lot Lot $135,000 $135, P_ Grossman CoIIal1MlOd C8l 4 17CJ6.1 247 Blue Top Lot Lot $135,000 $135, P_ Grossman CoIIal1MlOd C8l 7CJ6.1 248 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 1 249 Blue Top Lot Lot $135,000 $135, P_ Grossman CoIIal1MlOd C8l 31'''1 250 Model Bridge Gale Model, Cola- coat, roof cat1lIete llO% $540,000 S432,(J(Q P_ Grossman CoIIal1MlOd C8l 317CJ6.1 251 Model Bridge Gale Model, Cola- coat, roof cat1lIete llO% $540,000 S432,(J(Q P_ Grossman CoIIal1MlOd C8l 317lJ6.1 252 Model Bridge Gale Model, Cola- coat, roof cat1lIete llO% $540, ~ .~. 317lJ6.1 253 Modet Bridge Gale Model, Cola- coat, roof cat1lIete llO% $540, P_ Gros C8l 317CJ6.1 254 Blue Top Lot Lot $135, P_ ColI C8l 31706-4 150 Blue Top Lot Lot $135, 5135, P_ n ColI 31706-4 151 Blue Top Lot Lot $135, $135, P_ Gross ColI 31706-4 152 Blue Top Lot Lot $135, $135,0001 P_ Gross 31706-4 153 Blue Top Lot Lot $135, $135,0001 P_ Grossman C8l 31706-4 154 Blue Top Lot Lot $135,000 $135,0001 P_ Grossman C8l 31706-4 155 Blue Top Lot Lot $135,000 5135,llllOI P_ Grossman CoIIal1MlOd C8l 31706-4 156 Blue Top Lot Lot $135,000 $135,(J(Q P_ Grossman CoIIal1MlOd C8l 31706-4 157 Blue Top Lot Lot $135, $135,0001 P_ Grossman CoIIal1MlOd C8l 31706-4 158 Blue Top Lot Lot $135, 5135,0001 Pardee Grossman CoIIOO\/\OOd C8l 31706-4 159 Blue Top Lot Lot $135, 5135,llllOI Pardee Grossman CoII00\/\00d C8l 31706-4 160 Blue Top Lot Lot $135, ~ P_ Grossman CoII00\/\00d C8l 31706-4 161 Blue Top Lot Lot 5135, $135, P_ Grossman CoIIal1MlOd C8l 31706-4 162 Blue Top Lot Lot 5135, 5135,llllOI PatIee Grossman Colla'wlod C8l 31706-4 163 Blue Top Lot Lot $135, 5135,0001 P_ Grossman CoIIal1MlOd C8l 31706-4 184 Blue Top Lot Lot 5135, 5135, P_ Grossman Colla'wlod C8l 31706-4 165 Blue Top Lot Lot $135,000 5135, P_ Grossman Colla'wlod C8l 31706-4 166 Blue Top Lot Lot 5135, 5135, P_ Grossman CoIIOO\/\OOd C8l 31706-4 167 Blue Top Lot Lot 5135, $135, P_ Grossman CoII00\/\00d C8l 31706-4 166 Blue Top Lot Lot 5135, $135, P_ Grossman CoIIal1MlOd C8l 31706-4 169 Blue Top Lot Lot 5135, 5135, Pardee Grossman CoIIal1MlOd C8l 31706-4 170 Blue Top Lot Lot $135, $135, P_ Grossman CoII00\/\00d C8l 31706-4 171 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 31706-4 172 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd C8l 31706-4 173 Blue Top Lot Lot $135, $135, PatIee Grossman CoIIalIMlOd Cal 31706-4 174 Blue Top Lot Lot $135, $135, P_ Grossman CoIIal1MlOd Cal 31706-4 175 Blue Top Lot Lot $135, $135, Pardee Grossman CoII00\/\00d Cal 31706-4 176 Blue Top Lot Lot $135,000 $135, P_ Grossman CoIIalIMlOd Cal 31706-4 177 Blue Top Lot Lot $135,000 $135, P_ Grossman CoIIal1MlOd C8l 31706-4 178 Blue Top Lot Lot $135,000 $135,0001 92 ACENDA ITEM NO. ~) PACE 3J?i OF 117 ~ ~ ~ ~ "....... ~ ,.-.. P_ GronrnIwI Cdta-MOOd Con 31706-6 144 BlueT< Let Let $135, $135, Psrdee Grr:>ssn\M Cdta-MOOd Con 31706-5 197 Blue Tm Let Let $135,000 $135, Pardee GrosSlTlll'l Cdta-MOOd Con 31706-6 199 Blue Top Let Let $135, $135, PlWdee GrosSlTlll'l Cdta-MOOd Con 31706-5 199 Blue Tm Let Let $135, $135, Psrdee Grr:>ssn\M Cdta-MOOd Con 31706-5 200 Blue Top Let Let $135,0001 $136, Pardee GronrnIwI Cdta-MOOd Con 31706-6 201 Blue Top Let Let $135,0001 $136, P_ Grossman Cdta-MOOd Con 31706-5 202 Blue Tm Let Let $135,0001 $135, Psrdee Grossman Cdta-MOOd Con 31706-6 203 Blue Top Let Let 5135,0: $135, Psrdee Grossman Cdta-MOOd Con 31706-5 204 Blue Tm Let Let $135,000 $136, Pardee Grossman Cdta-MOOd Con 31706-5 205 Blue Top Let Let $136,00( $136, Psrdee Grossman Cdta-MOOd Con 31706-5 205 Blue Tm Let Let $135,000 $136, P_ Grossman Cdta-MOOd Con 31706-5 2(J1 Blue Top Let Let $135,000 $135, P_ Grossman Colla-MOOd Con 31706-5 205 Blue Tm Let Let $135,00( $135, P_ Grossman Cdta-MOOd Con 31706-5 209 Blue Top Let Let $135,000 $135,0001 P_ Grossman Cdta-MOOd Con 31706-5 210 Blue Top Let Let $136,00( $1~~ Pardee Grr:>ssn\M Cdta-MOOd Con 31706-5 211 Blue Top Let Let $135,000 $135, P_ GrosSlTlll'l Colla-MOOd Con 31706-5 212 Blue Top Let ~Let $136,000 $135,0001 P_ Grossman Cdta-MOOd Con 31706-5 213 Blue Top Let Let $135,000 $135,0001 P_ GrosSlTlll'l Cdta-MOOd Can 31706-5 21 Blue Top Let Let $135,000 $135,0001 Psrdee GrosSlTlll'l Cdta-MOOd Con 31706-5 215 Blue Top Let -... $135,000 $135,0001 Psrdee Grossman Cdta-MOOd Con 31706-6 216 Blue Tm Let -m $136,000 , Pardee Grossman Cdta-MOOd Con 31706-5 217 Blue Top Let ...... Let $136,000 P_ GrosSlTlll'l Cdta-MOOd Con 31706-5 216 Blue Tm Let . Let $136,000 $135, P_ Grr:>ssn\M Colla-MOOd Con 31706-5 219 Blue Top Let :It: Let $135,000 $135, P_ Qcssman Cdta-MOOd Con 31706-5 220 Blue Top Let Let $135,000 $136, P_ GrosSlTlll'l Cdta-MOOd Con 31706-5 221 Blue Top Let Let $135,000 $135, P_ Qcssman Cdta-MOOd Con 31706-5 222 Blue Top Let ...... Let $135,000 $135, P_ Grossman Cdta-MOOd Con 31706-6 zz:: Blue Top Let T Let $135,00( $136, Pardee Grossman Cdta-MOOd Con 31706-5 224 Blue Top Let Let $136,m $136, P_ GrosSlTlll'l Cdta-MOOd Con 31706-5 225 Blue Top Let Let $135,000 $135, P_ QcsSlTlll'l Cdta-MOOd Con 31706-5 226 . Let $135,000 $135, P_ Grossman Cdta-MOOd Con 31706-6 227 Let $135,000 $135, Psrdee Grossman Cdta-MOOd Con 31706-5 226 -B Let $136,00: $136, Pardee Grossman Cdta-MOOd Con 31706-5 22! B Let $135,000 $136, P_ Grossman Cdta-MOOd Con 31706-5 230 T< Let $135,00: $135, Psrdee Grr:>ssn\M Cdta-MOOd Con 31706-6 231 Let Let $135,000 $135, P_ Grossman Cdta-MOOd Con 31706-5 232 Blue Let Let $135,000 $135, P_ Grossman Cdta-MOOd Con 31706-5 233 Blue Top Let Let $136,00( $136, Psrdee Qcssman Cdta-MOOd Con I 234 Blue Top Let Let $135,lii $136, Pardee Grossman Cdta-MOOd Con 06-5 235 Blue Top Let Let $135,ooot $135, P_ Grr:>ssn\M Cdta-MOOd Con 1706-6 236 Blue Top Let Let $135,000 $136, P_ Qcssm.... Cdta-MOOd Con 237 Blue Too Let Let $135,ou; $135, P_ Grosllmlll'l Cdta-MOOd Con ~17 236 Blue Top Let Let $135,000 $135, P_ QcsSlTlll'l Cdta-MOOd Con 239 Blue Top Let Let $135,000 $136, Psrdee Grossman Cdta-MOOd Con 31706-5 240 Blue Top Let Let $135,000 $135, '-. 31706-6 241 Blue Top Let Let $135,000 $136, Pardee Gross Con 31706-5 242 Blue Tm Let Let $135,000 $136, P_ Cdt Con 31706-6 243 Blue Top Let Let $135,000 $135, PlWdee Cdt 31706-5 244 Blue Top Let Let $136,00 $136, P_ Qcs Cdt 31706-6 245 Blue Too Let Let $136,000j $136, Psrdee 31706 114 Blue Too Let Let $1~ $135, P_ Grossman Con 31706 115 Blue Top Let Let $135, $135, P_ Grr:>ssn\M Con 31706 116 Blue Too Let Let $135, 000 $136, P_ Qcssm.... ColtlnNcod Con 31706 117 Blue Top Let Let $135,0: $136, Pardee Grr:>ssn\M Cdta-MOOd Con 31706 118 Blue Too Let Let $135,000 $135, P_ Grr:>ssn\M Cdta-MOOd Con 31706 119 Blue Top Let Let $135,000 $136, Psrdee Qcssman Cdta-MOOd Con 31706 120 Blue Top Let Let $136,00( $135, P_ Qcsllmlll'l Cdta-MOOd Con 31706 121 Blue Tm Let Let $135,000 $135, Pardee Grossman Cdta-MOOd Con 31706 122 Blue Top Let Let $135,000 $135, P_ Grossman Cdta-MOOd Con 31706 123 BlueT< Let Let $135,000 $135~ P_ Grossman Cdta-MOOd Con 31706 124 Blue" Let Let $135,000 $1~1 P_ Grossman Cdta-MOOd CIn 31706 125 Blue" Let Let $135,000 $136, P_ Grossman CoIla-MOOd CIn 31706 126 Blue" Let Let $135,000 $135, Pardee Grossman Cdta-MOOd Con 31706 127 Blue" Let Let $135,000 $135, P_ GrosSlTlll'l Cdta-MOOd Con 31706 128 BlueT< Let Let $135,000 $135, Psrdee Grr:>ssn\M Cdta-MOOd Can 31706 129 Blue" Let Let $136,000 $135, P_ Grossman Cdta-MOOd Con 31706 130 Blue Top Let Let $135,000 $135, P_ Grossm.... Cdta-MOOd CIn 31706 131 Blue Top Let Let $136,000 $135, P_ Qcssman Cdta-MOOd Con 31706 132 Blue Tm Let Let $135,000 $135, P_ Qcssman Cdta-MOOd CIn 31706 133 Blue Top Let Let $135,000 $135, P_ Qcssman Cdta-MOOd CIn 31706 134 Blue Top Let Let $135,000 $135, P_ Qcssman Colla-MOOd CIn 31706 135 Blue Too Let Let $135,000 $135, Tolallols 147 Estimated Value Brldaeaate Product $21,lI33, OCJ( i : 93 ",' ie"~> , ITEi'~ NO 3r ,vv~I~~:CE~~ OF?ff7 __ PUte Homes 30493-7 103 Model Aldertlrook Models - \M1Iped, RDcI UC 60% $510,nnr $306, PUle Homes 30493-7 104 Model Aldertlrook Models - Wnlped, RDcI UC 60% $510,000 $306, PUle Homes 30493-7 105 Model AIdertlrook Models - \M1Iped, RDcI UC 60% $510,000 1 PUte Homes 30493-7 106 Finished lot let $2OO,llllll $200, Pule Homes 30493-7 107 Finished lot let $200,000 $200, PUte Homes 30493-7 106 Finished lot let $200,000 $200, PUte Homes 30493-7 109 Framed Fuly 55% $510,000 $280, PUte Homes 30493-7 110 Framed FUIy 55% $510,000 $280, PUte Homes 30493-7 111 Framed Fuly 55% $510,000 $280, PUte Homes 30493-7 112 Framed FtJIy 55% $510,000 $280, PUte Homes 30493-7 113 Framed FtJIy 55% $510,000 $280, PUte Homes 30493-7 11 FomdeIIon poued let $2OO,llllll $200, PUle Homes 30493-7 11 FomdeIIon lXiinid let $200,000 $200, PUte Homes 30493-7 11 FomdeIIon poued let $2OO,lllll $200, PUte Homes 30493-7 137 Framed pertial ~ $510,000 $255, PUte Homes 30493-7 138 Framed pertial $510,000 $255, PUte Homes 30493-7 139 Framed pertial $510,000 $255, PUte Homes 30493-7 140 Framed osrtial $510,000 $255, PUle Homes 30493-7 141 Framed pertiaI $510,000 $255, Pule Homes 30493-7 142 Framed pertial $510,000 $255, PUte Homes 30493-7 143 Framed pertial .. 50% $510,000 $255, PUte Homes 30493-7 144 Framed pertial . 50% $510,000 $255, PUte Homes 30493-7 145 Framed pertiaI 50% $510,000 $255, PUte Homes 30493-7 146 Fraped pertiaI .... 50% $511 ~ PUte Homes 30493-7 147 BIll! Top let - let $135, $135, PUte Homes 30493-7 148 BIll! Top let ~ let $135, $135, PUte Homes 30493-7 149 BIll! Top let let $135,000 $135, PUte Homes 30493-7 150 BIll! op let let $135,000 $135, PUle Homes 30493-7 151 BIll! Top let let $135,000 $135, PUte Homes 30493-7 152 . Let $135,000 $135, PUte Homes 30493-7 153 :'i. : Let $135,000 $135, PUte Homes 30493-7 154 Let $135,000 $135, PUte Homes 30493-7 155 Let $135,000 $135, PUte Homes 30493-7 156 let $135,000 $135, PUte Homes 30493-7 188 I_let let $135,000 $135, PUte Homes 30493-7 189 BIll! Top let let $135,000 $135, PUte Homes I 190 BIll! Top let Let $135,m $135, PUte Homes 191 BIll! Top let Let $135,000 $135, PUle Homes 192 BIll! Top let let $135,000 $135, Pule Homes 193 BIll! Top let Lot $135,lllll $135, PUte Homes 194 BIlIl Ton let Lot $135,OlJ( ~ PUte Homes 195 BIll! Top let Lot $135,000 $135, Pule Homes 196 BIll! Top let let $135,000 $135,0001 Pule Homes 30493-7 197 BIll! Top let let $135,000 $135"Jiil! ~~ 30493-7 196 BIll! Top let let $135,000 $135,0001 30493-7 322 BIll! Top let Let $135,000 $135"Jiil! PUte ~ 30493-7 323 BIll! Too let let $135,m $135~ PUte _ 30493-7 324 BIll! Ton let Lot $135,000 $135, PUle Homes ~ 30493-7 325 BIll! Top let Let $135,000 $135, PUte Homes ~ 30493-8 117 FOU'Illetion poued let $200, $200, PUte Homes 30493-8 11 FomdeIIon poued let $200, ~ PUteHomes ..... 30493-8 11 FomdeIIon IIllllChed Lot $200, ~ PUteHomes 30493-8 12C FOU'Illetion IIllllChed let $200, ~ Pule Homes 30493-8 121 FomdeIIon IIllllChed let $200, ~ PUle Homes 30493-8 122 FomdeIIon tIllIlChed let $200, ~ PUle Homes 30493-8 123 FomdeIIon IIllllChed let $200,000 $200, PUte Homes 30493-8 124 FOU'Illetion IIllllChed let $200, $200, Pule Homes 30493-8 12.! FOU'Illetion tIllIlChed let $200, $200, PUte Homes 30493-8 126 FomdeIIon tIllIlChed let $200, $200, PUte Homes 30493-8 127 FOU'Illetion IiIiiidiiid Lot $200, $200, PUle Homes 30493-8 121: FOU'Illetion tIllIlChed let $2OO,CX $200, PUte Homes 30493-8 125 FOU'Illetion tIllIlChed let $200, $200, PUte Homes 30493-8 13C FOU'Illetion tIllIlChed let $200, ~, PUte Homes 30493-8 131 FOU1datlon tIllIlChed let $2OO,CX $200, PUteHomes 30493-8 132 FOU1datlon tIllIlChed let $200, $200, PUle Homes 3lJ493..8 133 FomdeIIon tIllIlChed let $200, $200, PUte Homes 3lJ493..8 134 FOU'Illetion IIllllChed let $200, $200, Pule Homes 3lJ493..8 1~ FOU'Illetion tIllIlChed let $200, $200, PUte Hcrnes 3lJ493..8 138 Framed pertial 50% $510,000 $255, PUte Homes 3lJ493..8 157 BIll! Top let Lot $135,000 $135, Pule Homes 30493-8 158 BIll! Top Lot Lot $135,000 $135, PUle Homes 30493-8 159 BIll! Top let Let $135,000 $135, Pule Homes 30493-8 160 BIll! Top Lot let $135,000 $135, Pule Homes 3lJ493..8 161 BIll! Top Lot Let $135,000 $135, PUteHomes 3lJ493..8 162 BIll! Top let Lot $135,000 $135, '-"" ....., ....., 94 ~C"NDA ITEM;') .3 ;) PACE :0 OF '!:JI7 ~ ,,--. "...- ".... PUle Homos 304Q3..8 163 Blue Top l.ol l.ol $135,000 $135, PUle Homos 304Q3..8 164 Blue Top l.ol l.ol $135,000 $135, Pllte Homos 304Q3..8 165 Blue Top l.ol lot $135,llUll $135, Pllte Homos 304Q3..8 166 Blue Top l.ol l.ol $135,000 $135, Pllte Homos 304Q3..8 167 Blue Top l.ol lot $135,000 $135, Pllte Homos 304Q3..8 168 Blue Top l.ol lot $135,000 $135, PUle Homos 304Q3..8 169 Blue Top Lot lot $135,000 $135, PUle Homos 304Q3..8 170 Blue Top l.ol Lot $135,000 $135, PllteHomos 304Q3..8 171 Blue Top l.ol Lot $135,000 $135, Pllte Homos 304Q3..8 1n Blue Top l.ol Lot $135,000 $135, Pllte Homos 304Q3..8 173 Blue Top l.ol l.ol $135,000 $135, Pllte Homos 304Q3..8 174 Blue Top l.ol l.ol $135,000 $135, Pllte Homos 304Q3..8 175 Blue Top l.ol lot $135,000 $135, Pllte Homos 304Q3..8 176 Blue Top l.ol Lot $135,000 $135, Pule Homos 304Q3..8 177 Blue Top l.ol Lot $135,lJO[ $135, PUle Homos 304Q3..8 178 Blue Top Lot l.ol $135,Wl $135, Pule Homos 304Q3..8 179 Blue Top l.ol l.ol $135,000 $135, PUle Homos 304Q3..8 180 Blue Top l.ol Lot $135,Wl $135, Pllte Homos 304Q3..8 181 Blue Top l.ol ... Lot $135,000 $135, PllteHomos 304Q3..8 182 Blue Top l.ol ,.. $135,000 $135, Pllte Homos 304Q3..8 163 Blue Top Lot ot $135,000 ") Pllte Homos 304Q3..8 164 Blue Top l.ol . Lot $135,lJO[ $135, PUle Homos 304Q3..8 185 Blue Top l.ol - Lot $135,000 $135, Pllte Homos 304Q3..8 166 Blue Top l.ol l.ol $135,000 $135, PUle Homos 304Q3..8 187 Blue Top l.ol ..... Lot $135,000 $135, Pllte Homos 30493 199 Blue Top l.ol ~ l.ol $135,000 $135, PUle Homos 30493 200 Blue Top Lot l.ol $135,000 $135,0001 Pllte Homos 30493 201 Blue Top l.ol l.ol $135,lJO[ $135,0001 Pllte Homos 30493 202 Blue Top l.ol Lot $135,000 $135,0001 Pllte Homos 30493 203 Blue Top l.ol Lot $135,000 $1~~ PUle Homos 30493 204 . Lot $135,000 $135, PUle Homos 30493 205 .. l.ol l.ol $135,000 $135,0001 Pllte Homos 30493 206 .B1 Lot $135,000 $135,0001 PUle Homos 30493 207 .... " Lot $135,000 $135,0001 Pllte Homos 30493 208 Tdrl.ol l.ol $135,000 $135,0001 PUle Homos 30493 209 l.ol lot $135,000 $135,0001 PUle Homos 30493 210 Blue Top l.ol l.ol $135,000 $135, Pllte Homos Ii 211 Blue Top Lot Lot $135,000 $135, Pllte Homos 212 Blue Top l.ol Lot $135,000 $135, PUle Homos 213 Blue Top l.ol Lot $135,000 $135, PUle Homos 214 Blue Top l.ol Lot $135,000 $135, PUle Homos 215 Blue Top l.ol Lot $135,000 $135, Pule Homos JOWil 216 Blue Top l.ol Lot $135,000 $135,0001 PUle Homos 30493 217 Blue Top l.ol lot $135,000 $135,0001 Pule Homos 30493 218 Blue Top l.ol l.ol $135,000 $135,0001 Pllte Homos ~ 30493 219 Blue Top l.ol Lot $135,000 $135,0001 -e 30493 220 Blue Top l.ol l.ol $135,000 $135,0001 Pllte 30493 221 Blue Top l.ol l.ol $135,000 $135, Pllte _ 30493 222 Blue Top Lot lot $135,000 $135, PllteHomos . 30493 303 Blue Top l.ol Lot $135,000 $135, PUle Homos ~ 30493 304 Blue Top l.ol Lot $135,000 $135, Pllte Homos 30493 305 Blue Top l.ol lot $135,000 $135,0001 Pllte Homos .... 30493 306 Blue Top l.ol l.ol $135,000 $135,0001 PUle Homos 30493 '<t17 Blue Top Lot Lot $135,000 $135,0001 PllteHomos 30493 306 Blue Top l.ol Lot $135,000 $135,0001 Pllte Homos 30493 309 Blue Top Lot Lot $135,000 $135,0001 Pule Homos 30493 310 Blue Top Lot Lot $135,000 $135,0001 PUle Homos 30493 311 Blue Top l.ol l.ol $135,000 $135,0001 PUle Homos 30493 312 Blue Top l.ol Lot $135,000 $135,0001 Pule Homos 30493 313 Blue Top l.ol l.ol $135,000 $135,WU1 Pllte Homos 30493 314 Blue Top l.ol Lot $135,000 $135,0001 PUle Homes 30493 315 Blue Top Lot Lot $135,000 $135,0001 PUle Homos 30493 316 Blue Top l.ol Lot $135,000 $135, PUle Homos 30493 317 Blue Top l.ol Lot $135,000 $135, PUle Homos 30493 318 Blue Top Lot Lot $135,000 $135, Pllte Homos 30493 319 Blue Top Lot lot $135,000 $135, PUle Homos 30493 320 Blue Top Lot Lot $135,000 $135,0001 Pule Homos 30493 321 Blue Top l.ol Lot $135,000 $135,0001 I T_I lois 143 Estimated Value A1derbrook Product $23,48O,6OOf : I 95 n.......IWA 3;}- 33\ .~OF~ ~ PAOE VALUATION CONCLUSION ~ Based on the investigation and analyses undertaken, our experience as real estate appraisers, and subject to all the premises, assumptions and limiting conditions set forth in this report, the following opinions of Market Value are formed as of May 1, 2006. ONE HUNDRED NINETY -SIX MILLION DOLLARS $196,000,000 Pardee Construction Company ~ Planning Area 1 $15,9 , 0 Planning Area 2 $18,000,0 Planning Area 36 ,11 ,880,000 Pardee Grossman Cottonwood Canyon Planning Area 21A 19,160,000 Planning Area 22 $16,000,000 Planning Area 23 ~ $21,000,000 Win-Win Pardee Pool III (Del;~LLC. Planning Area 21A $3,582,000 Pulte Homes ~ Planning Area B $33,300,000 Planning Area 2 $23,500,000 ~ndi ualHomeowne~ PI ing Area 21A $14,758,000 ning Area 22 $19,000,000 """--' The estimated value assumes bond proceeds of approximately $16,000,000 for eligible facilities and/or fees, as described in the Community Facilities Report, are available at the time of sale. """--' 96 AGENDA ITEM NO. 2> /- PACE '33)- OF:?t/7 = "........ CERTIFICATION We hereby certify that during the completion of this assignment, we personally inspected the property that is the subject of this appraisal and that, except as specifically noted: .,-.... We have no present or contemplated future interest in the real estate or personal interest or bias with respect to the subject matter or the parties involved in this appraisal. To the best of our knowledge and belief, the statements of fa~tained in this appraisal report, upon which the analyses, opinions, an elusions expressed herein are based, are true and correct. Our engagement in this assignment was not conti~t upon developing or reporting predetermined results. The compensation ot contingent upon the reporting of a predetermined value or direction in lue that favors the cause of the client, the amount of the value estimate, the attainment of a stipulated result, or the occurrence of ~quent event. The appraisal assignment was not ba;~ requested minimum valuation, a specific valuation, or the approval of a loan. The reported analyses, ~ions, and conclusions were developed, and this report has been prepare~',~nformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal . ute, which include the Uniform Standards of Professional Apprai rac of this report, James B. Harris has completed the of the continuing education program of the Appraisal Institute. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. No one provided professional assistance to the persons signing this report. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In furtherance of the aims of the "........ Appraisal Institute to develop higher standards of professional performance by its 97 AOENDA ITEM NO. :3 2r -=- PAOE J ?-)J) OF ?A7 Members, we may be required to submit to authorized committees of the Appraisal Institute """'" copies of this appraisal and any subsequent changes or modifications thereof. Q , ~ 98 Respectfully submitted, Berri J. Cannon Harris Vice President AG009147 James ~s, MAl Ct ~!eSident ,G001846 -..,.,Jf ,....." AGENDA ITEM NO. Z, do PACE J~~ OF ?J!7-- .~ ~ Q ,-., , ADDENDA t{} , , ACENDA ITEM NO. ~). PACE 3 y:j OF 3D --" Q @((!I#J ILO If' 0 iG#JuU@ ~ HARRIS REAL TV APPRAISAL 5100 Birch St~ite 200 Newport Bea 92660 (949) 85 27 , , ~ ~ ~ AGENDA ITEM NO. 3r PAGE ; ~ OF ?U7-- ,.... QUALIFICATIONS OF JAMES B. HARRIS, MAl PROFESSIONAL BACKGROUND Actively engaged as a real estate analyst and consulting appraiser since 1971. President and Principal of Harris Realty Appraisal, with offices at: 5100 Birch Street, Suite 200 Newport Beach, California 92660 Before forming Harris Realty Appraisal, in 1982, was employed with Real Estate Analysts of Newport, Inc. (REAN) as a Principal and Vice President. Prior to employment with REAN was employed with the Bank of America as the Assistant Urban Appraisal Supervisor. Previously, was employed by the Verne Cox Company as a real estate appraiser. PROFESSIONAL ORGANIZATIONS , ,-- Member of the Appraisal Institute, with MAl designation No. 650~ Director, Southern California Chapter - 1998, 1999 Chair, Orange County Branch, Southern California Chapt r 97 Vice-Chair, Orange County Branch; Southern California Chap - 1996 Member, Region VII Regional Governing Committee -1991 to 1995,1997, 1998 Member, Southern California Chapter Executi e Committee - 1990,1997 to 1999 Chairman, Southern California Chapter Se ommittee - 1991 Chairman, Southern California Chapter W ommittee - 1990 Member, Southern California Chapter Admi' Committee - 1983 to 1989 Member, Regional Standards of Professional Practice Committee -1985 - 1997 Member of the International Ri9ht-4ay Association, Orange County Chapter 67. California State Certified Appraiser, N~er AG001846 ~ EDUCATIONAL ACTIVITIES B.S., California Pol chnic University, Pomona, 1972. Successfully complet the following courses sponsored by the Appraisal Institute and the Right-of- Way.Association: Course I-A Course I-B Course " Course IV Course VI Course VIII Course SPP Course 401 Principles of Real Estate Appraisal Capitalization Theory Urban Properties Litigation Valuation Investment Analysis Single-Family Residential Appraisal Standards of Professional Practice Appraisal of Partial Acquisitions ,-- Has attended numerous seminars sponsored by the Appraisal Institute and the International Right- of-Way Association. ACENDA ITEM NO. ~~ = PACE3'?P OF?J/7 TEACHING AND LECTURING ACTIVITIES Seminars and lectures presented to the Appraisal Institute, the University of California-Irvine, UCLA, ~ California Debt and Investment Advisory Commission, Stone & Youngberg and the National Federation of Municipal Analysts. MISCELLANEOUS Member of the Advisory Panel to the California Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004) LEGAL EXPERIENCE Testified as an expert witness in the Superior Court of the County of Los Angeles and the County of San Bernardino and in the Federal Bankruptcy Courts five times concerning the issues of Eminent Domain, Bankruptcy, and Specific Performance. He has been deposed numerous times concerning these and other issues. This legal experience has been for both Plaintiff and Respondent .ents. He has prepared numerous appraisals for submission to the IRS, without having values overturne e has worked closely with numerous Bond Counsel in the completion of 100 Land Secured Munic I Bond Financing appraisals over the last five years. Feasibility and Consultive Studies SCOPE OF EXPERIENCE' Feasibility and market analyses, including the use of computer-based economic models for both land developments and investment properties such as s~e. nters, industrial parks, mobile home parks, condominium projects, hotels, and residential projec....V Appraisal Projects ,...." Has completed all types of appraisal ~nments from San Diego to San Francisco, California. Also has completed out-of-state appraisal assi ents in Arizona, Florida, Georgia, Hawaii, Nevada, New Jersey, Oklahoma, Oregon, and Washington. ions, condominiums, planned unit developments, mobile home parks, nd single-family residences. Office buildings, hotels, motels, retail store buildings, restaurants, power shopping centers, neighborhood shopping centers, and convenience shopping centers. Industrial Multi-tenant industrial parks, warehouses, manufacturing plants, and research and development facilities. Vacant Land Community Facilities Districts, Assessment Districts, master planned communities, residential, commercial and industrial sites; full and partial takings for public acquisitions. ,...." AGENDA ITEM NO., ~~ PAGE h? <t OF 347 -' ,-... QUALIFICATIONS OF BERRI J. CANNON HARRIS PROFESSIONAL BACKGROUND Actively engaged as a real estate appraiser since 1982. Vice President of Harris Realty Appraisal, with offices at: 5100 Birch Street, Suite 200 Newport Beach, California 92660 Before joining Harris Realty Appraisal was employed with Interstate Appraisal Corporation as Assistant Vice President. Prior to employment with Interstate Appraisal was employed with Real Estate Analysts of Newport Beach as a Research Assistant. , PROFESSIONAL ORGANIZA TIONS Candidate of the Appraisal Institute for the MAl designation. ~ Co-Chair, Southern California Chapter Hospitality Com e - 1994 - 1998 Chair, Southern California Chapter Research Committee - 92, 1993 ""..-- Women in Commercial Real Estate, Member or'?jcounty Chapter. Chair, Special Events -1998, 1999,20, 1,2002,2003 Second Vice-President - 1996, 1997 Treasurer - 1993, 1994, 1995 Chair, Network Luncheon Committee -1991,1992 California State Certified APpraise'umber AG009147 ED}A TIONAL ACTIVITIES B.S.B.A., Univ~lands, Redlands, California Successfully co~e following courses sponsored by the Appraisal Institute: Principles of Real Estate Appraisal Basic Valuation Procedures Capitalization Theory and Techniques - A Capitalization Theory and Techniques - B Report Writing and Valuation Analyses Standards of Professional Practice Case Studies in Real Estate Valuation Has attended numerous seminars sponsored by the Appraisal Institute. Has also attended real estate related courses through University of California-Irvine. .,,-..... ACENDA ITEM NO. '07r PACE ~--;~ OF 3m __ LECTURING ACTIVITIES Seminars and lectures presented to UCLA, California Debt and Investment Advisory '-' Commission, and Stone & Youngberg. MISCELLANEOUS Member of the Advisory Panel to the California Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secure~ Financing (March 2003 through June 2004) SCOPE OF EXPERIENCE Appraisal Projects Has completed all types of appraisal assignments from San Diego to Sa2ncisco, California. Also has completed out-of-state appraisal assignments in Arizona and Han~ . Residential . Residential subdivisions, condominiums, planned .Ct developments, mobile home parks, apartment houses, and single-family residence~ Commercial Office buildings, retail store buildings, r~s, neighborhood-shopping centers, strip retail centers. -"'V '-' Industrial Multi-tenant industrial pa.t warehouses, manufacturing plants, and research and development facilities. ~ Vacant sites commercial sites, industrial sites, large multi-unit housing, master planned u elopments, and agricultural acreage. Specializing in Community Facilities Dist ct and Assessment District appraisal assignments. '-' A ITI!:'.A "OR, 3>-Y AOEN~AQE';~~ OF ~h__ "'"' PARTIAL LIST OF CLIENTS Lending Institutions Bank of America Bank One Commerce Bank Downey S&L Assoc. Fremont Investment and Loan Institutional Housing Partners NationsBank Preferred Bank Santa Monica Bank TokaiBank Union Bank Wells Fargo Bank Public Agencies ---- Army Corps of Engineers California State University Caltrans City of Aliso Viejo City of Beaumont City of Corona City'of Costa Mesa City of Encinitas City of Fontana City of Fullerton City of Hesperia City of Honolulu City of Huntington Beach City of Indian Wells City of Irvine City of Lake Elsinore City of Loma Linda City of Los Angeles City of Moreno Valley City of Newport Beach City of Oceanside DMB -ladera <"'\ Foothill Ranch coY Hon Development Co. Irvine Apartment Communities The Irvine Company. '. City of Palm Springs City of Perris City of Riverside City of San Marcos City of Tustin City of Vic i1le County of ge County of side County of San ardino Eastern Municip Water District Orange County Sheriff's Department tQmona Municipal Water District cho Santa Fe Comm. Services District C trano Unified School District met Unified School District Hesperia Unified School District Romoland School District Saddleback Valley Unified School District Santa Ana Unified School District Val Verde Unified School District Yucaipa-Calimesa Unified School District , Developers and Landowners Lennar Homes Rancho Mission Viejo Santa Margarita Company Shapelllndustries Sterling Development Law Firms Arter & Hadden Bronson, Bronson & McKinnon Bryan, Cave, McPheeters & McRoberts Richard Clements Cox, Castle, Nicholson Gibson, Dunn & Crutcher Hill, Farrer & Burrill McClintock, Weston, Benshoof, Rochefort & MacCuish Palmiri, Tyler, Wiener, Wilhelm, & Waldron Sonnenschein Nath & Rosenthal Strauss & Troy Wyman, Bautzer, Rothman, Kuchel & Silbert "'"' A'f':/.,.c.'.'" /. .3 J ,\lL,;...~.J"J, \, ~ PAGE~OF ~2}/7 .....,; , , MARKET ABSORPTIO~Y (A PORTION) , Q .....,; ....., AGENDA fttM NO. Ntfi.-. PAGE:Jt1l=.OF ~ Decal quotes Page 1 of 1 Mark Dennis ...--- From: George Bloomfield [george@bloomfieldgroup.com] Sent: Monday, June 19, 200611:50AM To: Mark Dennis Subject: Decal quotes From one of two possible suppliers, I have an initial quote of $1,097 ($1.57 per unit) for 700 decals @ the 5" size. A second quote is coming. I've asked for samples for you and I to see and approve the quality and level of detail. They cannot include the TM. Do you think this is a concern for this application? George Bloomfield An.1t A Strategic Marketing and Design Firm Graphic Design and Illustration for Print and Web Right Brain Marketing for a Left Brain World /"'"' T: 949.837.5113 F: 949.837.5189 c: 949.922.5627 www.bloomfieldgroup.com ...--- AOENDA ITEM 1;0. 2:> ~ PACE ~L/~ OF --.!i_ ~ 6/20/2006 APPENDIX E RATE AND METHOD OF APPORTIONMENT ......" ....." ......., E-I AOENDA ITEM NO. 3 )- PAOE ~c.j 4 OF qt/]__ ,...... APPENDIX F FORMS OF CONTINUING DISCLOSURE AGREEMENTS ,...... ,.,.-.- F-I ~ AGENDA ITEM NO. . ...11j PACE '3~) OF ~ APPENDIX G PROPOSED FORM OF BOND COUNSEL OPINION ....., City of Lake Elsinore 130 S. Main Street Lake Elsinore, California 92530 $ City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B), 2006 Series A Members ofthe City Council: We have acted as bond counsel to the City of Lake Elsinore (the "City") in connection with the issuance of the $ aggregate principal amount of City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) Special Tax Bonds (Improvement Area B), 2006 Series A (the "Bonds"), pursuant to the provisions of Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, or the Government Code of the State of California (the "Act") and pursuant to a Fiscal Agent Agreement, dated as of June 1,2006 (the "Fiscal Agent Agreement"), by and between the City of Lake Elsinore Community Facilities District No. 2003-2 (Canyon Hills) (the "District") and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent"). We have examined the Act and such certified proceedings and other papers as we deem necessary to render this opinion. ....., As to questions of fact material to our opinion, we have relied upon representations of the District contained in the Fiscal Agent Agreement and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing we are of the opinion, under existing law, as follows: 1. The Fiscal Agent Agreement has been duly and validly authorized, executed and delivered by the District and, assuming such Fiscal Agent Agreement constitutes the legally valid and binding obligation of the Fiscal Agent, constitutes the legally valid and binding obligation of the District enforceable against the District in accordance with its terms. 2. The Bonds constitute valid and binding limited obligations of the District as provided in the Fiscal Agent Agreement, and are entitled to the benefits of the Fiscal Agent Agreement. 3. The Bonds are secured by a valid pledge of the Special Taxes (as defined in the Fiscal Agent Agreement) and all moneys in the funds and accounts under the Fiscal Agent Agreement, including all amounts derived from the investment of such moneys, subject to the application thereof on the terms and conditions as set forth in the Fiscal Agent Agreement. 4. The Internal Revenue Code of 1986, as amended (the "Code") sets forth certain requirements that must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in gross ...., G-l AOENDA ITEM NO. 3 d' PAO~tf~ OF 3'17 ,...... income retroactive to the date of issue of the Bonds. The District has covenanted in the Fiscal Agent Agreement to maintain the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In our opinion, under existing law, interest on the Bonds is exempt from personal income taxation of the State of California and, assuming compliance with the aforementioned covenant, interest on the Bonds is excluded pursuant to section l03(a) of the Code from the gross income of the owners thereof for federal income tax purposes. We are further of the opinion that under existing statutes, regulations, rulings and court decisions, the Bonds are not "specified private activity bonds" within the meaning of section 57(a)(5) of the Code and, therefore, the interest on the Bonds will not be treated as an item of tax preference for purposes of computing the alternative minimum tax imposed by section 55 of the Code. The receipt or accrual of interest on Bonds owned by a corporation may affect the computation of the alternative minimum taxable income, upon which the alternative minimum tax is imposed, to the extent that such interest is taken into account in determining the adjusted current earnings of that corporation (75 percent of the excess, if any, of such adjusted current earnings over the alternative minimum taxable income being an adjustment to alternative minimum taxable income (determined without regard to such adjustment or to the alternative tax net operating loss deduction)). Except as stated in the preceding two paragraphs, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, it any action is taken with respect to the Bonds or the proceeds thereof predicated or permitted upon the advice or approval of other bond counsel. No opinion is expressed herein on the accuracy, completeness or sufficiency of the Official Statement or other offering materials relating to the Bonds. ~ The rights of the owners of the Bonds and the enforceability of the Bonds and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Respectfully submitted, "....... G-2 AOINDA ITEM NO. '3 y PAOE 7<{) OF 117 ~ ""'-' ""'-' ~ ,-.... CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: RESOLUTION AUTHORIZING THE ISSUANCE OF BONDS AND APPROVING BOND DOCUMENTS FOR COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A) BACKGROUND On April 25, 2006 the City adopted the necessary resolutions and ordinances forming Lake Elsinore Community Facilities District (CFD) 2006-2 (Viscaya) and authorizing the levy of a special tax. ~ The developer plans to build 168 residential dwelling units. DISCUSSION Bond Issue In order to finance the facilities it is necessary to incur bonded indebtedness. The not to exceed amount is $7,500,000. Before you is the resolution authorizing the issuance of bonds and the related bond documents. The bond issue has been sized at $7,245,000. The resolution approves the following bond documents: 1. Fiscal Agent Agreement (Pages 9 to 58 of 306) 2. Continuing Disclosure Agreement (Pages 59 to 68 of306) 3. Purchase Contract (Pages 69 to 96 of 306) 4. Preliminary Official Statement (Pages 97 to 306 of 306) ~ ACENDA ITEM NO. PACE I o~ OF 31/6 . REPORT TO CITY COUNCIL JUNE 27,2006 PAGE 2 Special Tax The average residential special tax in the CFD is estimated at $2,648. The annual CFD tax amount, when combined with all other property taxes applicable to the project, is estimated to be within the 2% total tax rate policy within the City CFD guidelines. Facilities The proposed facilities list is attached. The list totals over $5.8 million. The list includes $2.7 million in City of Lake Elsinore impact fees and improvements. The list also includes over $3.1 million of EVMWD impact fees and improvements. FISCAL IMPACT Repayment of the bonds are secured by the special taxes levied on all property within the district, other than those properties that are exempt as provided in the respective rate and method of apportionment. Responsibility for the construction of the improvements is born by the developer. The cost of acquiring the improvements is paid by the CFD bond proceeds. RECOMMENDA TION It is recommended that City Council adopt Resolution No. 2006 - ~ which approves the following: 1. Issuance of CFD 2006-2 (Viscaya) Special Tax Bonds 2006 Series A 2. Fiscal Agent Agreement 3. Continuing Disclosure Agreement 4. Purchase Contract 5. Preliminary Official Statement ACENDA ITEM NO. PAGEd- ......" ......" ......, 6~ . '2r</", .-. Of~ ~ REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 3 PREPARED BY: MATT N. PRESSEY DIRECTOR OF ADMI STRATIVE SERVICES APPROVED FOR AGENDA BY: ~ ~ AGENDA ITEM NO. ,,~ PAGE , OF ..lOft? "" City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Facilities List """" Facilities Cost Estimate City Improvements Traffic Signal $ 177,000 Lakeshore Drive $ 203,000 Storm Drain $ 438,000 City Impact Fees $ 1,869,901 Library Fee $ 18,300 Master Plan of Drainage $ 101,023 Park In-Lieu Fee $ 195,200 Traffic Impact Fee $ 167,018 Transportation Uniform Mitigation Fee $ 884,256 MSHCP Fee $ 201,422 Public Building Impact Fee $ 302,682 EVMWD Improvements Sewer $ 417,000 Water $ 758,000 EVMWD Impact Fees $ 1,958,746 '-' Water Fees $ 979,244 Sewer Fees $ 883,140 Landscape Irrigation Meters - 2" $ 50,402 Landscape Irrigation Meters - 1" $ 45,960 Total Estimated Cost $ 5,821,647 """" AGENDA ITEM NO. D3 PAGE~OF3.crL RESOLUTION NO. 2006- \0 \ "'"' RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE AUTHORIZING THE ISSUANCE OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCAYA) SPECIAL TAX BONDS, 2006 SERIES A AND THE EXECUTION AND DELIVERY OF A FISCAL AGENT AGREEMENT, A CONTINUING DISCLOSURE AGREEMENT, A PURCHASE CONTRACT AND AN OFFICIAL STATEMENT AND APPROVING A PRELIMINARY OFFICIAL STATEMENT IN CONNECTION THEREWITH r-- WHEREAS, the City Council (the "Council") of the City of Lake Elsinore (the "City") has conducted proceedings under and pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act"), to form the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "CFD"), to authorize the levy of special taxes upon the land within the CFD, and to issue bonds secured by said special taxes, the proceeds of which are to be used to finance the purchase, construction, expansion or rehabilitation of certain real and other tangible property with an estimated useful life of five year~ or longer, including public infrastructure facilities and other government facilities (including related capital fees), which are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within the proposed CFD (the "Facilities"); and WHEREAS, the Council intends to issue bonds designated "City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A" (the "Bonds"); and WHEREAS, there have been submitted to this Council certain documents providing for the issuance of the Bonds and this Council, with the aid of its staff, has reviewed said documents and found them to be in proper order; and WHEREAS, all conditions, things and acts required to exist, to have happened and to have been performed precedent to and in the issuance of said Bonds and the levy of said special taxes as contemplated by this Resolution and the documents referred to herein, exist, have happened and have been performed in due time, form and manner as required by the laws of the State of California, ,- including the Act. 45788753.1 AGENDA ITEM NO. PAGES 2>3 OF -3/J.L CITY COUNCIL RESOLUTION NO. 2006- Page 2 of2 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF """'" LAKE ELSINORE DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The Council hereby authorizes the issuance of the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A (the "Bonds") in an amount not to exceed $7,500,000 for the purpose of financing the Facilities. SECTION 2. The Council hereby approves the Fiscal Agent Agreement in substantially the form annexed hereto. The Mayor, the City Manager or the Director of Administrative Services (each, a "Responsible Officer") is hereby authorized to execute the Fiscal Agent Agreement with such revisions, amendments and completions as shall be approved by any Responsible Officer executing the same, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 3. The Council hereby approves the Continuing Disclosure Agreement in substantially the form annexed hereto. Any Responsible Officer is hereby authorized to execute the Continuing Disclosure Agreement with such revisions, amendments and completions as shall be approved by any Responsible Officer executing the same, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 4. The Council hereby approves the Preliminary Official Statement relating to the Bonds, substantially in the form annexed hereto, with such revisions, amendments and completions as shall be approved by any Responsible Officer with the advice of Bond Counsel, in order to make the Preliminary Official Statement final as of its date, except for the omission of certain information, as permitted by Section 240.l5c2-l2(b)(1) of Title 17 of the Code of Federal Regulations ("Rule l5c2-l2"), and any certificate relating to the finality of the Official Statement under Rule l5c2-l2. Any Responsible Officer is authorized and directed to execute and deliver a final Official Statement in substantially the form hereby approved, with such additions and changes as may be approved by Bond Counsel and any Responsible Officer executing the same, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 5. The Council hereby approves the Purchase Contract in substantially the form annexed hereto. Any Responsible Officer is hereby authorized to execute the Purchase Contract with such revisions, amendments and """'" 45788753.1 """'" AGENDA ITEM NO. PAGEL( 2>~ OF~ ~ CITY COUNCIL RESOLUTION NO. 2006- Page 3 of3 ~ completions as shall be approved by any Responsible Officer executing the same, with the advice of Bond Counsel, such approval to be conclusively evidenced by the execution and delivery thereof, provided that, the Purchase Contract shall provide for an interest rate on the Bonds not greater than 6.00%, and an underwriter's discount not greater than 2.0% of the principal amount of Bonds. SECTION 6. Each Responsible Officer is hereby authorized and directed, for and in the name and on behalf of the City, to do any and all things and take any and all other actions, including the obtaining of municipal bond insurance and the publication of any notices necessary or desirable in connection with the sale of the Bonds and execution and delivery of any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they, or any of them, deem necessary or advisable in order to consummate the lawful issuance and sale of the Bonds and the consummation of the transactions as described herein. SECTION 7. This Resolution shall take effect from and after the date of its passage and adoption. ,...... ,-.., 45788753-1 ACENDA IT!;... ,h_:'2__ PNJi 7 OF ?Jl)(P_ CITY COUNCIL RESOLUTION NO. 2006- Page 4 of 4 PASSED, APPROVED AND ADOPTED this 27th day of June, 2006. AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ATTEST: Frederick Ray, City Clerk City of Lake Elsinore APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney City of Lake Elsinore 45788753.1 RobertE. Magee, Mayor City of Lake Elsinore AOENDA ITEM NO. PME7} ...." '-' '-' 'O~ OF~ ,-. FISCAL AGENT AGREEMENT BETWEEN ...-- THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCAYA) AND UNION BANK OF CALIFORNIA, N.A., AS FISCAL AGENT DATED AS OF 1,2006 RELATING TO $ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A) SPECIAL TAX BONDS, 2006 SERIES A ,-. 45788706.1 33 ACENDA ITEM NO. PACE '1 OF~ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS ... ...... ...... ....... ................. ................................ ...... .... ....... ....... ..... .............. 1 Section 1.1. Definitions ........ ....... ................... ................... ......... ............... ............................... 1 ......" ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS ..................................................9 Section 2.1. Amount, Issuance, Purpose and Nature of Bonds................................................ 9 Section 2.2. Type and Nature of Bonds ................................................................................. 10 Section 2.3. Equality of Bonds and Pledge of Special Taxes................................................. 10 Section 2.4. Description of Bonds; Interest Rates.................................................................. 11 Section 2.5. Place and Form of Payment ............................................................................... 11 Section 2.6. Form of Bonds........ .................. ......... .............. ................... ................................ 12 Section 2.7. Execution and Authentication ............................................................................ 12 Section 2.8. Bond Register. ....... ..................... ........ ................. ........ ....................................... 13 Section 2.9. Registration of Exchange or Transfer ................................................................ 13 Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds ...................................................... 13 Section 2.11. Validity of Bonds .................. ...... ........... ........... ....... ................ ............... .... ....... 14 Section 2.12. Book-Entry System............... ..................... ....... ............ ........................... ...... .... 14 Section 2.13. Representation Letter............................... ........................ .................... .............. 14 Section 2.14. Transfers Outside Book-Entry System............................................................... 15 Section 2.15. Payments to the Nominee................................................................................... 15 Section 2.16. Initial Depository and Nominee ......................................................................... 15 ARTICLE III CREATION OF FUNDS AND APPLICATION OF SPECIAL TAXES....................... 15 Section 3.1. Creation of Funds; Application of Proceeds ...................................................... 15 Section 3.2. Deposits to and Disbursements from Special Tax Fund .................................... 16 Section 3.3. Interest Account and Principal Account of the Special Tax Fund ..................... 16 Section 3.4. Redemption Account of the Special Tax Fund .................................................. 17 Section 3.5. Reserve Account of the Special Tax Fund ......................................................... 18 Section 3.6. Administrative Expense Account of the Special Tax Fund ............................... 18 Section 3.7. Surplus Fund............ ............ ................... ..... ....... ........ .............................. ......... 18 Section 3.8. Acquisition and Construction Fund.................................................................... 19 Section 3.9. Investments ... ........................................... .............................. .................. .......... 19 ......" ARTICLE N REDEMPTION OF BONDS ..........................................................................................21 Section 4.1. Redemption of Bonds.......................................................................... ............... 21 Section 4.2. Selection of Bonds for Redemption ...................................................................22 Section 4.3. Notice of Redemption.. ............. ............................. ......... ........ ......... ............ ...... 22 Section 4.4. Partial Redemption of Bonds ............................................................................. 23 Section 4.5. Effect of Notice and Availability of Redemption Money.................................. 23 ARTICLE V COVENANTS AND WARRANTy............................................................................... 24 Section 5 .1. Warranty.......... ........................ ............... ........... ................. ........ ................. ....... 24 Section 5.2. Covenants.................................. .............................. ...................................... ..... 24 ......, 45788706.1 AGENDA ITEM NO. '33 PACE ID OF~ TABLE OF CONTENTS (continued) "....... Page ARTICLE VI AMENDMENTS TO FISCAL AGENT AGREEMENT ............................................... 30 Section 6.1. Supplemental Fiscal Agent Agreements or Orders Not Requiring Bondowner Consent ....... ........ ... ..... ...... ... ..... ............ ...... ........................ ....... ..... 30 Section 6.2. Supplemental Fiscal Agent Agreements or Orders Requiring Bondowner Consent............................................................................................................... 30 Section 6.3. Notation of Bonds; Delivery of Amended Bonds .............................................. 31 ARTICLE VII FISCAL AGENT ....... ............ ...... .................... ........................... ....... ............................. 31 Section 7.1. Fiscal Agent ....................................................................................................... 31 Section 7.2. Removal of Fiscal Agent.................................................................................... 32 Section 7.3. Resignation of Fiscal Agent ............................................................................... 32 Section 7.4. Compensation and Liability of Fiscal Agent...................................................... 32 Section 7.5. Merger or Consolidation .................. .......... ................. ..................... ....... ...... ..... 34 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES .......................................................................... 34 Section 8.1. Events of Default................... .......................... ....... ..... ........................ ............... 34 Section 8.2. Remedies of Owners .......................................................................................... 34 ARTICLE IX DEFEASANCE.................... ................................. ............................ .................. ...... ...... 35 Section 9.1. Defeasance ...... ...................... ........................................ ...... ......... ........ ......... ..... 35 Section 9.2. No Additional Bonds....... ....... ............................ ....................................... ......... 37 ,,--. ARTICLE X MISCELLANEOUS ..... ...... ................... ......................................................................... 37 Section 10.1. Cancellation of Bonds .. ......................... ........ ........ .................. ........................... 37 Section 10.2. Execution of Documents and Proof of Ownership............................................. 37 Section 10.3. Unclaimed Moneys............ .............:.... ................ .............................................. 37 Section 10.4. Provisions Constitute Contract............... .......... ........ ............. ........... .............. .... 38 Section 10.5. Future Contracts........ .......... ....... ........... ............ ....... .............. ............... ........ ..... 38 Section 10.6. Further Assurances.............. .................................................. .................. ...... ..... 38 Section 10.7. Severability. ........ ...... ........................... .............................................................. 38 Section 10.8. Notices ........ .......................................... ......... .............. ...................................... 38 Section 10.9. General Authorization ...... ............... .................... ........... ...................... ...... ........ 39 Section 10.10. Execution in Counterparts.................................................................................. 39 Exhibit A - Form of Bond...... ................ ...................... ........... .................... ........... ............................... .. A-I Exhibit B - Requisition No. I .,. .............. ........ ......... ............ ............ ....................................................... B-1 ,,-.. 45788706.1 11 ACENDA ITEM M). 3 ~u_ PAGE-4L-Of~- _ nSCALAGENTAGREEMENT ~ THIS FISCAL AGENT AGREEMENT, dated as of I, 2006, between the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent") governs the terms of the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A. RECITALS.' WHEREAS, the City Council of the City of Lake Elsinore (the "Council"), located in Riverside County, California, has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "CFD") pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the "Act"); and WHEREAS the qualified electors within the CFD have approved the levy of a special tax and the issuance of bonds by the CFD and the CFD has authorized the issuance of bonds in one or more series, pursuant to the Act, in an aggregate principal amount not to exceed $7,500,000; and WHEREAS, the Council intends to accomplish the financing of the purchase, construction, expansion or rehabilitation of certain real and other tangible property with an estimated useful life of five years or longer, including public infrastructure facilities and other governmental facilities (including related capital fees), which are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within the CFD (collectively, the "Facilities") through the issuance of bonds in an aggregate principal amount of $ designated as the "City of Lake ~ Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A" (the "Bonds"); and WHEREAS, all requirements of the Act for the issuance of the Bonds have been satisfied; NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the CFD does hereby covenant and agree, for the benefit of the Owners of the Bonds (as defined herein) which may be issued hereunder from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. Unless the context requires, the following terms shall have the following meanings: "Acquisition and Construction Fund" means the fund by such name created and established pursuant to Section 3.1 hereof. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code. ~ 45788706.1 ACENDAITEM NO. O? PAQEJ)-- OF..3J21e- "..... "Administrative Expense Account" means the account by such name in the Special Tax Fund created and established pursuant to Section 3.1 hereof. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Fiscal Agent, any fees for credit enhancement for the Bonds which are not otherwise paid as Costs of Issuance, any costs related to the CFD's compliance with State and federal laws requiring continuing disclosure of information concerning the Bonds and the CFD, and any other costs otherwise incurred by the City's staff on behalf of the CFD in order to carry out the purposes of the CFD as set forth in the Resolution of Formation and any obligation of the CFD hereunder. "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. "Authorized Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (1) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America ("Direct Obligations"). (2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): ,,--... U.S. Export-Import Bank ("Eximbank") Direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration ("FmHA") Certificates of beneficial ownership Federal Financing Bank Federal Housing Administration Debentures ("FHA") General Services Administration Participation certificates Government National Mortgage Association ("GNMA" or "Ginnie Mae") GNMA-guaranteed mortgage-backed bonds GNMA -guaranteed pass-through obligations ~ 45788706.1 2 AOENDA ITEM NO. IWJEffi .33 Of~tPu .. u.s. Maritime Administration Guaranteed Title XI financing ......., U.S. Department of Housing and Urban Development (HUD) Project Notes Local Authority Bonds New Communities Debentures - U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds (3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself: Federal Home Loan Bank System Senior debt obligations Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") Participation certificates Senior debt obligations ......., Federal National Mortgage Association ("FNMA" or "Fannie Mae") Mortgage-backed securities and senior debt obligations Student Loan Marketing Association ("SLMA" or "Sallie Mae") Senior debt obligations Resolution Funding Corp. ("REFCORP") obligations Farm Credit System CM. - Consolidated system-wide bonds and notes (4) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by Standard & Poor's of AAAm-G, AAAm or AAm, and, if rated by Moody's, rated Aaa, Aal or Aa2 (including those of the Fiscal Agent and its affiliates). (5) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral. ......., 45788706. ] 3 ACENDA ITEM NO. b .3 PAGEJ.:{.:JF 3J1RJ ..: ",....... (6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or which are with a bank rated AA or better by Standard & Poor's and Aa or better by Moody's (including those of the Fiscal Agent and its affiliates). (7) Inve~tment Agreements with any corporation, including banking or financial institutions, provided that (a) the long-term debt of the provider of any such investment agreement is rated, at the time of investment, at least "AA" and "Aa" by the Rating Agency (without regard to gradations of plus or minus within such category), and (b) any such investment agreement is collateralized with United States Treasury or agency obligations which at least equal 102% of the principal amount invested thereunder, and (c) any such agreement shall include a provision to the effect that, in the event the long-term debt rating of the provider of such agreement is downgraded below "AA-" or below "Aa" by the applicable Rating Agency, the CFD has the right to withdraw or cause the Fiscal Agent to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to this Fiscal Agent Agreement. (8) Commercial paper rated, at the time of purchase, "Prime - I" by Moody's and "A-I" or better by Standard & Poor's. (9) Bonds or notes issued by any state or municipality which are rated by Moody's and Standard & Poor's in one of the two highest rating categories assigried by such agencies. ~ (10) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - 1" or "A3" or better by Moody's and "A-I" or "A" or better by Standard & Poor's. (11) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-I" or "A3" or better by Moody's, and "A-I" or "A-" by Standard & Poor's; provided: (a) a master repurchase agreement or specific written repurchase agreement governs the transaction; and (b) the securities are held free and clear of any lien by the Fiscal Agent or an independent third party acting solely as agent ("Agent") for the Fiscal Agent, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million, or (iii) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Fiscal Agent shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Fiscal Agent; and (c) a perfected first security interest under the Uniform Commercial Code, or book entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created for the benefit ofthe Fiscal Agent; and ",........ 45788706.1 4 AGENDA ITEM NO. --- PACE Ij :$3 OF ....2L. (d) the repurchase agreement has a term of 180 days or less, and the Fiscal Agent or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within ~ two business days of such valuation; and (e) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103% (12) Local Agency Investment Fund ("LAIF") ofthe State of California. (13) Any other investment which the CFD is permitted by law to make. "Authorized Representative of the CFD" means the Mayor, City Manager, Administrative Services Director, or any other person or persons designated by the Council and authorized to act on behalf of the CFD by a written certificate signed on behalf of the CFD by the Mayor or the City Manager and containing the specimen signature of each such person. "Bond Counsel" means an attorney at law or a firm of attorneys selected by the CFD of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. ......, "Bonds" means the CFD's $ this Fiscal Agent Agreement. Special Tax Bonds, 2006 Series A, issued pursuant to "Bond Year" means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds shall begin on the Delivery Date and end of the first September 1 which is not more than 12 months after the Delivery Date. "Business Day" means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Fiscal Agent is located, are not required or authorized to remain closed. "Certificate of Authorized Representative of the CFD" means a written certificate or warrant request executed by an Authorized Representative of the CFD. "CFD" means the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) established pursuant to the Act and the Resolution of Formation. "City" means the City of Lake Elsinore, California. "Code" means the Internal Revenue Code of 1986 and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. ......, 45788706. ) 5 AGENDA ITEM NO. b:> PACE lie OF ~ ~ "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Fiscal Agent and its counsel, legal fees and expenses, costs of printing the Bonds and the preliminary and final official statements for the Bonds, fees of financial consultants and all other related fees and expenses, as set forth in a Certificate of Authorized Representative of the CFD. "Costs of Issuance Account" means the account by such name m the Acquisition and Construction Fund created and established pursuant to Section 3.1 hereof. "Defeasance Securities" means any of the following: (a) Cash (b) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series -- "SLGS") (c) Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury itself, e.g., CATS, TIGRS and similar securities. (d) The interest component of Resolution Funding Corp. strips which have been stripped by request to the Federal Reserve Bank of New York and are in book-entry form. (e) & Poor's. Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard ,,-, (f) Obligations issued by the following agencies which are backed by the full faith and credit of the United States: U.S. Exoort-Import Bank - direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration - certificates of beneficial ownership Federal Financing Bank General Services Administration - participation certificates U.S. Maritime Administration - guaranteed Title XI financing U.S. Deoartment of Housing and Urban Develooment (HUD) - Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.S. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds. "Council" means the City Council of the City of Lake Elsinore. "Delivery Date" means, with respect to the Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof. "Depository" shall mean The Depository Trust Company, New York, New York, and its .~ successors and assigns as securities depository for the Certificates, or any other securities depository acting as Depository under Article II hereof. 45788706.1 6 ACENDA ITEM NO. 2> ~ PACE---l::1.-OF~ "Fiscal Agent" means Union Bank of California, N.A., a national banking association duly organized and existing under and by virtue of the laws of the United States of America, at its principal corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust ....., company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3 and any successor thereto. "Fiscal Agent Agreement" means this Fiscal Agent Agreement, together with any Supplemental Fiscal Agent Agreement approved pursuant to Article 6 hereof. "Fiscal Year" means the period beginning on July I of each year and ending on the next following June 30. "Independent Financial Consultant" means a financial consultant or special tax consultant or firm of either such consultants generally recognized to be well qualified in the financial consulting or special tax consulting field, appointed and paid by the CFD, who, or each of whom: (1) is, in fact, independent and not under the domination of the CFD; (2) does not have any substantial interest, direct or indirect, in the CFD; and (3) is not connected with the CFD as a member, officer or employee of the CFD, but who may be regularly retained to make annual or other reports to the CFD. "Interest Account" means the account by such name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. "Interest Payment Date" means each March I and September I, commencing March I, 2007, provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next preceding such date. ......" "Investment Agreement" means one or more agreements for the investment of funds of the CFD complying with the criteria therefor as set forth in Subsection (7) of the defmition of Authorized Investments herein. "Maximum Annual Debt Service" means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds by adding the following for each Bond Year: (I) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Moody's" means Moody's Investors Service, its successors and assigns. "Nominee" shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.16 hereof. "Outstanding" or "Outstanding Bonds" means all Bonds theretofore issued by the CFD, except: (1) 10.1 hereof; Bonds theretofore cancelled or surrendered for cancellation in accordance with Section ......" 45788706. ] 7 AGENDA ITEM NO. 2:>3 PAOE~OF~ ,..... (2) Bonds for payment or redemption of which monies shall have been theretofore deposited (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Fiscal Agent Agreement; and (3) Bonds which have been surrendered to the Fiscal Agent for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof. "Participants" shall mean those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as securities depository. "Person" means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. "Principal Account" means the account by such name in the Special Tax Fund created and established pursuant to Section 3.1 hereof. "Principal Office of the Fiscal Agent" means the office of the Fiscal Agent located in Los Angeles, California or such other office or offices as the Fiscal Agent may designate from time to time, or the office of any successor Fiscal Agent where it principally conducts its business of serving as Fiscal Agent under indentures pursuant to which municipal or governmental obligations are issued. "Project" means those public facilities described in the Resolution of Formation which are to be acquired or constructed within the CFD, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified ~ electors within the CFD from time to time. "Project Costs" means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds, including, but not limited to, remarketing, credit enhancement, Fiscal Agent and other fees and expenses relating to the issuance of the Bonds and the formation of the CFD, and to pay any other "incidental expenses" of the CFD, as such term is defined in the Act. "Rating Agency" means Moody's and Standard & Poor's, or both, as the context requires. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. "Redemption Account" means the account by such name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. "Regulations" means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to section 103 of the Code. "Representation Letter" shall mean the Blanket Letter of Representations from the CFD to the Depository as described in Section 2.13 hereof. "Reserve Account" means the account by such name created and established in the Special Tax Fund pursuant to Section 3.1 hereof. .~ 45788706.1 8 AGENDA ITEM NO. D 3 PMiE....a-~ "Reserve Requirement" means, as of any date of calculation, an amount equal to the lowest of (I) 10% of the issue price (as defmed pursuant to section 148 of the Code), or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual Debt Service of the Outstanding Bonds. ....., "Resolution of Formation" means Resolution No. 2006-_ adopted by the Council on April 25, 2006, pursuant to which the Council formed the CFD. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedule set forth in this Fiscal Agent Agreement. "Special Taxes" means the taxes authorized to be levied by the CFD on parcels within the CFD in accordance with the Resolution of Formation, the Act and the voter approval obtained at the January 25, 2005 election in the CFD and any additional special taxes authorized to be levied by the CFD from time to time which are pledged by the CFD to the repayment of the Bonds, together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of this Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses. "Special Tax Fund" means the fund by such name created and established pursuant to Section 3.1 hereof. "Standard & Poor's" means Standard & Poor's, a division of McGraw-HilI, its successors and aSSIgns. "Supplemental Fiscal Agent Agreement" means any supplemental fiscal agent agreement ...", amending or supplementing this Fiscal Agent Agreement. "Surplus Fund" means the fund by such name created and established pursuant to Section 3.1 hereof. "Tax Certificate" means the. certificate by that name to be executed by the CFD on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Term Bonds" means the Bonds maturing on September 1,2026 and September 1,2036. "Underwriter" means the institution or institutions, if any, with whom the CFD enters into a purchase contract for the sale of the Bonds. "Written Request of the CFD" means a request in writing executed by the Mayor, City Manager, City Treasurer, or written designee, on behalf of the CFD. ARTICLE n GENERAL AUTHORIZATION AND BOND TERMS Section 2.1. Amount, Issuance, Purpose and Nature of Bonds. Under and pursuant to the Act, the Bonds in the aggregate principal amount of $ shall be issued for the purpose of financing the Project, provided that the aggregate principal amount of the Bonds shall not exceed the total ...", 45788706.1 9 "D3 iAGENOA ITEM NO. ~ !l'AME~ OF . ~ indebtedness presently authorized or subsequently authorized by the qualified electors of the CFD in accordance with the Act. The Bonds shall be and are limited obligations of the CFD and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Special Taxes and the other amounts in the Special Tax Fund (other than amounts in the Administrative Expense Account). Section 2.2. Type and Nature of Bonds. Neither the faith and credit nor the taxing power of the City, the State of California or any political subdivision thereof other than the CFD is pledged to the payment of the Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City nor general obligations of the CFD, but are limited obligations of the CFD payable solely from certain amounts deposited by the CFD in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), as more fully described herein. The CFD' s limited obligation to pay the principal of, premium, if any, and interest on the Bonds from amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds may compel the exercise of the taxing power by the CFD (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the CFD's property, or upon any of its income, receipts or revenues, except the Special Taxes and other amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) which are, under the terms of this Fiscal Agent Agreement and the Act, set aside for the payment of the Bonds and interest thereon, and neither the members of the Council nor any persons executing the Bonds are liable personally on the Bonds by reason of their issuance. ~ Notwithstanding anything to the contrary contained in this Fiscal Agent Agreement, the CFD shall not be required to advance any money derived from any source of income other than the Special Taxes for the payment of the interest on or the principal of the Bonds, or for the performance of any covenants contained herein. The CFD may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3. Equality of Bonds and Pledge of Special Taxes. Pursuant to the Act and this Fiscal Agent Agreement, the Bonds shall be equally payable from the Special Taxes and other amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) without priority for number, date of the Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Special Taxes and other amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), which are hereby set aside for the payment of the Bonds. Amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement. Notwithstanding any provision contained in this Fiscal Agent Agreement to the contrary, Special Taxes transferred to the Administrative Expense Account of the Special Tax Fund and the Surplus Fund shall no longer be considered to be pledged to the Bonds, and none of the Surplus Fund or the Administrative Expense Account of the Special Tax Fund shall be construed as a trust fund held for the benefit of the Owners. ~ 45788706.1 10 33 1"";.1"''=2l...-.....'~.. 3~ Lf::r,'k;,s ~__ C--L~_~~U~~._ Nothing in this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement shall preclude, subject to the limitations contained hereunder, the redemption prior to maturity of any Bond subject to call and redemption and payment of said Bond from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California. ...., Section 2.4. Description of Bonds; Interest Rates. The Bonds shall be issued in fully registered form in denominations of $5,000 or any integral multiple thereof. The Bonds of each issue shall be numbered as desired by the Fiscal Agent. The Bonds shall be designated "CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A) SPECIAL TAX BONDS, 2006 SERIES A." The Bonds shall be dated their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on each Interest Payment Date. Maturity Date (September 1) Principal Amount Interest Rate ....." Interest shall be payable on each Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond has been paid; provided, however, that if at the maturity date of any Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Fiscal Agent Agreement, such Bonds shall then cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a 360-day year comprised of twelve 30-day months. Section 2.5. Place and Form of Payment. The Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Principal Office of the Fiscal Agent, or at the designated office of any successor Fiscal Agent. Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i) such date of authentication is an '-' 45788706.1 11 2>3 ?:J-- OF~ ,.... ,-.... Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest shall be payable from the dated date of such Bond, as applicable; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Bond, interest on that Bond shall be payable from its dated date. Interest on any Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Fiscal Agent mailed on the Interest Payment Date by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Fiscal Agent on or before the applicable Record Date from an Owner of $1,000,000 or more in principal amount of the Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account within the United States designated by such Owner. Section 2.6. Form of Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which forms are hereby approved and adopted as the forms of such Bonds and of the certificate of authentication. Notwithstanding any provision in this Fiscal Agent Agreement to the contrary, the CFD may, in its sole discretion, elect to issue the Bonds in book-entry form. Until definitive Bonds shall be prepared, the CFD may cause to be executed and delivered in lieu of such definitive Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of defmitive Bonds, except that they may be in any denominations authorized by the CFD. Until exchanged for definitive Bonds, any temporary bond shall be entitled and subject to the same benefits and provisions of this Fiscal Agent Agreement as definitive Bonds. If the CFD issues temporary Bonds, it shall execute and furnish definitive Bonds, without unnecessary delay and thereupon any temporary Bond may be surrendered to the Fiscal Agent at its office, without expense to the Owner, in exchange for a definitive Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds so surrendered shall be cancelled by the Fiscal Agent and shall not be reissued. Section 2.7. Execution and Authentication. The Bonds shall be signed on behalf of the CFD by the manual or facsimile signature of the Mayor or the City Manager, in their capacity as officers of the CFD, and attested by the signature of the City Clerk. In case anyone or more of the officers who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds so signed and sealed have been authenticated and delivered by the Fiscal Agent (including new Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or to lost, stolen, destroyed or mutilated Bonds), such Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed or sealed such Bonds had not ceased to hold such office. Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A hereto shall be entitled to any right or benefit under this Fiscal Agent Agreement, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly ",....... executed by the Fiscal Agent. 45788706.1 12 AGENDA ITf;IVi 1..0. "b"3 ~OF~ Section 2.8. Bond Register. The Fiscal Agent will keep or cause to be kept, at its office, sufficient books for the registration and transfer of the Bonds which shall upon reasonable prior notice be open to inspection by the CFD during all regular business hours, and, subject to the limitations set forth in ......, Section 2.9 below, upon presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds as herein provided. The CFD and the Fiscal Agent may treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of that Bond for any and all purposes, and the CFD and the Fiscal Agent shall not be affected by any notice to the contrary. The CFD and the Fiscal Agent may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Fiscal Agent of any change in the Bondowner's address so that the Bond Register may be revised accordingly. Section 2.9. Registration of Exchange or Transfer. Subject to the limitations set forth in the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the office of the Fiscal Agent, accompanied by delivery of written instrument of transfer in a form approved by the Fiscal Agent and duly executed by the Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the office of the Fiscal Agent for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Fiscal Agent shall not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds shall be surrendered for registration of transfer or exchange, the CFD shall execute and the Fiscal Agent shall authenticate and ...., deliver a new Bond or Bonds of the same issue and maturity, for a like aggregate principal amount; provided that the Fiscal Agent shall not be required to register transfers or make exchanges of (i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. Section 2.10. Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond shall become mutilated, the CFD shall execute, and the Fiscal Agent shall authenticate and deliver, a new Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be cancelled by the Fiscal Agent pursuant to Section 10.1 hereof. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence is satisfactory to the Fiscal Agent and, if any indemnity satisfactory to the CFD and the Fiscal Agent shall be given, the CFD shall execute and the Fiscal Agent shall authenticate and deliver, a new Bond, as applicable, of like tenor, maturity and issue, numbered and dated as the Fiscal Agent shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds issued hereunder. The Fiscal Agent shall not treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Fiscal Agent may make payment with respect to such Bonds. ....., 45788706.1 13 AOENDAITEM NO. 33 . Of J ~ -.---- PAOE~OF~ ,..... ~ ~ Section 2.11. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any defect in any proceedings taken by the CFD, or by the invalidity, in whole or in part, of any contracts made by the CFD in connection therewith, and the recital contained in the Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12. Book-Entry System. The Bonds shall be initially delivered in the form of a separate single fully registered Bond (which may be typewritten) for each of the maturities of the Bonds. Upon initial delivery, the ownership of each such Bond shall be registered in the registration books kept by the Fiscal Agent in the name of the Nominee as nominee of the Depository. Unless the CFD elects to discontinue the use of the book-entry system, all of the Outstanding Bonds shall be registered in the registration books kept by the Fiscal Agent in the name of the Nominee. With respect to Bonds registered in the registration books kept by the Fiscal Agent in the name of the Nominee, the CFD and the Fiscal Agent shall have no responsibility or obligation to any such Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the CFD and the Fiscal Agent shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Fiscal Agent, of any notice with respect to the Bonds, including any notice of redemption, (iii) the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the Bonds are redeemed in part, or (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books kept by the Fiscal Agent, of any amount with respect to principal of, premium, if any, or interest due with respect to the Bonds. The CFD and the Fiscal Agent may treat and consider the Person in whose name each Bond is registered in the registration books kept by the Fiscal Agent as the holder and absolute owner of such Bond for the purpose of payment of the principal of, premium, if any, and interest on such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Fiscal Agent shall pay all principal of, premium, if any, and interest due on the Bonds only to or upon the order of the respective Owner, as shown in the registration books kept by the Fiscal Agent, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to satisfy and discharge fully the CFD's obligations-with respect to payment of the principal, premium, if any, and interest due on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books kept by the Fiscal Agent, shall receive a Bond evidencing the obligation of the CFD to make payments of principal, premium, if any, and interest pursuant to this Fiscal Agent Agreement. Upon delivery by the Depository to the Fiscal Agent and the CFD of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Fiscal Agent Agreement shall refer to such new nominee of the Depository. Section 2.13. Representation Letter. In order to qualify the Bonds which the CFD elects to register in the name of the Nominee for the Depository's book-entry system, an authorized representative of the CFD or the Fiscal Agent is hereby authorized to execute from time to time and deliver to such Depository the Representation Letter. The execution and delivery of the Representation Letter shall not in any way limit the provisions of Section 10.2 or in any other way impose upon the CFD or the Fiscal Agent any obligation whatsoever with respect to persons having interests in the Bonds other than the Owners, as shown on the registration books kept by the Fiscal Agent. The Fiscal Agent agrees to take all action necessary to continuously comply with all representations made by it in the Representation Letter. In addition to the execution and delivery of the Representation Letter, the Mayor and any Authorized 45788706.1 14 AGENDA ITEM ~t;._.~3 PAOi ~ OF.2J2(Q. Representative of the CFD are hereby authorized to take any other actions, not inconsistent with this Fiscal Agent Agreement, to qualify the Bonds for the Depository's book-entry program. ~ Section 2.14. Transfers Outside Book-Entry System. In the event (i) the Depository determines not to continue to act as securities depository for the Bonds, or (ii) the CFD determines that the Depository shall no longer so act, then the CFD will discontinue the book-entry system with the Depository. If the CFD fails to identify another qualified securities depository to replace the Depository then the Bonds so designated shall no longer be restricted to being registered in the registration books kept by the Fiscal Agent in the name of the Nominee, but shall be registered in whatever name or names Persons transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 hereof. Section 2.15. Payments to the Nominee. Notwithstanding any other provisions of this Fiscal Agent Agreement to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal, premium, if any, and interest due with respect to such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. Section 2.16. Initial Depository and Nominee. The initial Depository under this Article shall be The Depository Trust Company, New York, New York. The initial Nominee shall be Cede & Co., as Nominee of The Depository Trust Company, New York, New York. ARTICLE III CREATION OF FUNDS AND APPLICATION OF SPECIAL TAXES Section 3.1. Creation of Funds; Application of Proceeds. There is hereby created and ~ established and shall be maintained by the Fiscal Agent the following funds and accounts: (1) The Community Facilities District No. 2006-2 Special Tax Fund (the "Special Tax Fund") (in which there shall be established and created an Interest Account, a Principal Account, a Redemption Account, a Reserve Account and an Administrative Expense Account); (2) The Community Facilities District No. 2006-2 Surplus Fund (the "Surplus Fund"); and (3) The Community Facilities District No. 2006-2 Acquisition and Construction Fund (the "Acquisition and Construction Fund") (in which there shall be established a Costs ofIssuance Account). The amounts on deposit in the foregoing funds, accounts and subaccounts shall be held by the Fiscal Agent and the Fiscal Agent shall invest and disburse the amounts in such funds, accounts and subaccounts in accordance with the provisions of this Article III and shall disburse investment earnings thereon in accordance with the provisions of Section 3.9 hereof. Except as required to be segregated into funds and accounts as described herein, money held by the Fiscal Agent hereunder need not be segregated from other funds except to the extent required by law. At the Written Request of the CFD, the Fiscal Agent may create new funds, accounts or subaccounts, or may create additional accounts and subaccounts within any of the foregoing funds and accounts for the purpose of separately accounting for the proceeds of the Bonds. All proceeds of the sale of the Bonds shall be received by the Fiscal Agent on behalf of the CFD and deposited and transferred as follows: ~ 45788706.1 15 AGENDA ITEM NO. PAGE (7{p ?:>~ OF 3 t?fo ,... (1) $ shall be transferred to the Costs of Issuance Account of the Acquisition and Construction Fund established hereunder for disbursement in accordance with Section 3.8 below; and (2) $ (which is equal to the initial Reserve Requirement) shall be deposited in the Reserve Account to be disbursed in accordance with Section 3.5 below; and (3) $ shall be transferred to the Interest Account of the Special Tax Fund for disbursement in accordance with Section 3.3 below; and (4) $ shall be transferred to the Acquisition and Construction Fund for disbursement in accordance with Section 3.8 below. Section 3.2. Deposits to and Disbursements from Special Tax Fund. The CFD shall, on each date on which it receives Special Taxes transfer the Special Taxes, to the Fiscal Agent for deposit in the Special Tax Fund to be held in accordance with the terms of this Fiscal Agent Agreement. The Fiscal Agent shall transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: (a) The Interest Account of the Special Tax Fund; (b) The Principal Account of the Special Tax Fund; (c) The Redemption Account of the Special Tax Fund; (d) The Reserve Account of the Special Tax Fund; ~ (e) The Administrative Expense Account of the Special Tax Fund; and (f) The Surplus Fund. At the maturity of all of the Bonds and, after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Fiscal Agent have been paid in full, moneys in the Special Tax Fund and any accounts therein shall be transferred to the CFD and may be used by the CFD for any lawful purpose. Section 3.3. Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds until maturity, other than principal due upon redemption, shall be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund, respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds will be made when due, at least five Business Days prior to each March 1 and September 1, the Fiscal Agent shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however, that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds, or otherwise, the transfer from the Special Tax Fund need not be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account: (1) To the Interest Account, an amount such that the balance in the Interest Account five Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment ~ 45788706.1 16 AGENDA ITEM NO. 3 3 MJE..21-OF~~ Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. '-' (2) To the Principal Account, an amount such that the balance in the Principal Account five Business Days prior to September 1 of each year, commencing September I, 200_ shall at least equal the principal payment due on the Bonds maturing on such September 1 and any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds as the same become due at maturity. Section 3.4. Redemption Account of the Special Tax Fund. (I) On each September I on which a Sinking Fund Payment is due, after the deposits have been made to the Interest Account and the Principal Account of the Special Tax Fund as required by Section 3.3 hereof, the Fiscal Agent shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account five Business Days prior to each September 1 equal to the Sinking Fund Payment due on any Outstanding Bonds on such September I; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded, pursuant to Section 3.5 below. Moneys so deposited in the Redemption Account shall be used and applied by the Fiscal Agent to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedule set forth in Section 4.1 hereof. (2) After making the deposits to the Interest Account and the Principal Account of the Special Tax Fund pursuant to Section 3.3 above and to the Redemption Account for Sinking Fund Payments then due pursuant to subparagraph (1) of this Section, and in accordance with the CFD's election to call Bonds for optional redemption as set forth in Section 4.1(1) hereof, the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the ....., purpose and sufficient to pay the interest, the principal and the premiums, if any, payable on the Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (3) All prepayments of Special Taxes shall be deposited in the Redemption Account to be used to redeem Bonds on the next date for which notice of redemption can timely be given. (4) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds and in the case of an optional redemption to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account as set forth above may be used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds may be made by the CFD at public or private sale as and when and at such prices as the CFD may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to Section 4.1(1) hereof. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. ....., 45788706.1 17 AGENDA ITt:IVl 1'\10. JWE ~<( 33 Of r:if Hi;- '-_. "....... Section 3.5. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts in the Reserve Account shall be applied as follows: (1) Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on any Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds when due, the Fiscal Agent shall withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund, as applicable, moneys necessary for such purposes. (2) Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in Sections 3.4 and 3.5 above, the Fiscal Agent shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the CFD elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Fiscal Agent determines that such. amounts will not be needed to make the deposits required to be madeto the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the CFD shall include the amount necessary fully to restore the Reserve Ac~ount to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates. ~ (3) In connection with any redemption of the Bonds, or a partial defeasance of the Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this paragraph shall be withdrawn from the Reserve Account on the fifth Business Day before each March 1 and September 1 and transferred to the Acquisition and Construction Fund until the Fiscal Agent receives a Certificate of Authorized Representative of the CFD that all Project Costs have been funded and, thereafter, to the Interest Account of the Special Tax Fund. Section 3.6. Administrative Expense Account of the Special Tax Fund. The Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund amounts necessary to make timely payment of Administrative Expenses and shall be disbursed by the Fiscal Agent to pay Administrative Expenses, all as instructed by the CFD pursuant to a Written Request of the CFD. Moneys in the Administrative Expense Account of the Special Tax Fund may be invested in any Authorized Investments as directed by an Authorized Representative of the CFD. Section 3.7. Surplus Fund. After making the transfers required by Sections 3.3, 3.4, 3.5, and 3.6 hereof, as soon as practicable after each September 1, the Fiscal Agent shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, other than amounts in the Special Tax Fund which the CFD directs the Fiscal Agent by Written Request of the CFD to retain because the CFD has included ,..... such funds as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to Section 5.2(2) hereof. Moneys deposited in the Surplus Fund shall 45788706.1 18 AGENDA ITEM NO. PAGE -71 3'3 Of}fio be transferred by the Fiscal Agent at the written. direction of the CFD to the Administrative Expense Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Account of the Special Tax Fund are insufficient to pay Administrative Expenses or, upon the Written Request of the CFD, may be disbursed to the CFD to be expended for any other lawful purpose of the CFD. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds. In the event that the CFD reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, upon the written direction of the CFD, the Fiscal Agent will segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds which were issued on a tax-exempt basis for federal income tax purposes. Section 3.8. Acquisition and Construction Fund. (1) The moneys in the Acquisition and Construction Fund shall be applied exclusively to pay the Project Costs and Costs of Issuance. Amounts for Project Costs and Costs of Issuance shall be disbursed by the Fiscal Agent from the account in the Acquisition and Construction Fund designated therefor in a requisition signed by an Authorized Representative of the CFD, substantially in the form of Exhibit B hereto, which must be submitted in connection with each requested disbursement. (2) Upon receipt of a Certificate of Authorized Representative of the CFD that all or a specified portion of the amount remaining in the Acquisition and Construction Fund is no longer needed to pay Project Costs or Costs of Issuance, the Fiscal Agent shall redeem Bonds pursuant to Section 4.1(4) hereof, or transfer all or such specified portion of the moneys remaining on deposit in one or more of the accounts in the Acquisition and Construction Fund to the Special Tax Fund, or to the Surplus Fund if requested in the Certificate and if there shall have been delivered to the Fiscal Agent with such Certificate an opinion of Bond Counsel to the effect that such transfer to the Surplus Fund will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds which were issued on a tax-exempt basis for federal income tax purposes. Upon transfer of the final amounts on deposit in the Acquisition and Construction Fund or either account in such fund, such accounts and fund shall be closed. Notwithstanding the foregoing, any amount remaining in the Costs of Issuance Account of the Acquisition and Construction Fund on the date 180 days from the Delivery Date shall be transferred to the Acquisition and Construction Fund and such account shall be.closed. Section 3.9. Investments. Moneys held in any of the funds and accounts under this Fiscal Agent Agreement shall be invested at the Written Request of the CFD in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such funds and accounts. Any loss resulting from such Authorized Investments shall be credited or charged to the fund or account from which such investment was made, and any investment earnings on a fund or account shall be applied as follows: (i) investment earnings on all amounts deposited in the Special Tax Fund (exclusive of amounts transferred to the Reserve Account), Surplus Fund, Acquisition and Construction Fund and each Account therein shall be deposited in those respective funds and accounts, and (ii) all other investment earnings shall be deposited in the Interest Account of the Special Tax Fund; provided, however, to the extent moneys in the Reserve Account exceed the Reserve Requirement, such excess amounts shall be deposited and transferred pursuant to Section 3.5(3) hereof. Moneys in the funds ...., ....., ...., 45788706.1 19 AGENDA ITEM NO. 3 3 PAGE I1p OF ~~ ~ '"' and accounts held under this Fiscal Agent Agreement may be invested by the Fiscal Agent at the Written Request of the CFD received at least 2 Business Days prior to the investment date, from time to time, in Authorized Investments subject to the following restrictions: (1) Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due. (2) Moneys in the Acquisition and Construction Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the CFD estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition and Construction Fund. Notwithstanding anything herein to the contrary, amounts in the Acquisition and Construction Fund on the Delivery Date for the Bonds shall not be invested at yields greater than those set forth in the Tax Certificate. (3) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than two years from their date of purchase by the Fiscal Agent, and one-half of the amount in the Reserve Account may be invested only in Authorized Investments which mature not more than three years from the date of purchase by the Fiscal Agent; provided that such amounts may be invested in an Investment Agreement to the final maturity of the Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.5 hereof; and provided that no such Authorized Investment of amounts in the ",-- Reserve Account allocable to the Bonds shall mature later than the final maturity date of the Bonds. (4) In the absence of Written Request of the CFD providing investment directions, the Fiscal Agent shall invest solely in Authorized Investments specified in clause (4) ofthe definition thereof. The Fiscal Agent shall sell at the best price obtainable, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the fair market value thereof and marked to market at least annually. Notwithstanding anything herein to the contrary, the Fiscal Agent shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Fiscal Agent Agreement. The Fiscal Agent or an affiliate may act as principal or agent in connection with the acquisition or disposition of any Authorized Investments and shall be entitled to its customary fees therefor. Any Authorized Investments that are registrable securities shall be registered in the name of the Fiscal Agent. The Fiscal Agent is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with anyone or more of its affiliates, whether it or such affiliate is acting as an agent of the Fiscal Agent or for any third person or dealing as principal for its own account. '"' 45788706.1 20 AGENDA ITt:M ..l. PAGE ?;\ D~ OF~ ARTICLE N REDEMPTION OF BONDS ......., Section 4.1. Redemption of Bonds. (1) Ootional Redemption. The Bonds are subject to redemption prior to maturity at the option of the CFD on any date on or after September 1, 2012, as a whole or in part, by lot, from any available source of funds at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1,2012 through August 31, 2013 September 1, 2013 through August 31, 2014 September 1, 2014 and thereafter 102.0% 101.0 100.0 (2) Special Mandatory Redemption from Special Tax Prepavrnents. The Bonds are subject to mandatory redemption prior to maturity on any date on or after September 1, 2006, in part, in a manner determined by the District from prepayments of Special Taxes at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, 2006 through August 31, 2010 September 1,2010 through August 31, 2012 September 1,2012 and thereafter 103.0% 102.5 As provided for in optional redemption ......., In connection with such redemption, the CFD may also apply amounts in the Reserve Account which will be in excess of the Reserve Requirement as a result of such Special Tax prepayment to redeem Bonds as set forth above. (3) Special Mandatory Redemption. The Bonds are subject to special mandatory redemption on any date from unused proceeds of the Bonds after completion or abandonment of the improvements to be financed with such proceeds, from the deposit of fees with the CFD by a public agency which has accepted facilities serving the CFD and from insurance or condemnation proceeds or other mandatory redemption, without premium, plus accrued interest to the redemption date, all as determined by the CFD. (4) Mandatory Sinking Fund Redemption. The Bonds maturing on September 1,20_ and September 1, 20_ are subject to mandatory redemption, in part by lot, on September 1 in each year commencing September 1, 20_, with respect to the Bonds maturing on September 1, 20-, and commencing September 1, 20_, with respect to the Bonds maturing on September 1, 20_, from the Sinking Fund Payments that have been deposited into the Redemption Account at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date of redemption as set forth in the following schedule; provided, however, that (i) in lieu of redemption thereof, the Bonds may be purchased by the CFD and tendered to the Fiscal Agent, and (ii) if some but not all of the Bonds have been redeemed pursuant to Section 4.1(1) through (3) above, the total amount of all future sinking payments will be reduced by the aggregate principal amount of the Bonds so '-' 45788706.1 21 AGENDA IT.btl ..\., PAGE 3r ~3 OF ~~ ",...... redeemed, to be allocated among such sinking payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the CFD. Bonds Maturing on September 1, 20_ Redemption Date (September 1) Principal Amount Bonds Maturing on September 1, 20_ Redemption Date (September 1) Principal Amount /""'"' Section 4.2. Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed, the portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption, the Fiscal Agent shall treat such Bonds as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bonds to be redeemed in part by $5,000. The Fiscal Agent shall promptly notify the CFD in writing of the Bonds, or portions thereof, selected for redemption. Section 4.3. Notice of Redemption. When Bonds are due for redemption under Section 4.1 above, the Fiscal Agent shall give notice, in the name of the CFD, of the redemption of such Bonds; provided, however, that a notice of a redemption to be made from other than from Sinking Fund Payments shall be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the Bonds to be redeemed. Such notice of redemption shall (a) specify the CUSIP numbers (if any), the bond numbers and the maturity date or dates of the Bonds selected for redemption, except that where all of the Bonds of a maturity are subject to redemption, or all the Bonds of one maturity, are to be redeemed, the bond numbers of such issue need not be specified; (b) state the date fixed for redemption and surrender of the Bonds to be redeemed; (c) state the redemption price; (d) state the place or places where the Bonds are to be redeemed; (e) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed; (f) state the date of issue of the Bonds as originally issued; (g) state the rate of interest borne by each Bond being redeemed; and (h) state any other /""'" 45788706.1 22 AOENDA ITEM NO. :, ~ PAOe% OF~ descriptive information needed to identify accurately the Bonds being redeemed as shall be specified by the Fiscal Agent. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond, or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date, the Fiscal Agent shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond or the original purchaser of any Bond of notice of such redemption shall not be a condition precedent to redemption, and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Fiscal Agent that notice of such redemption has been given as herein provided shall be conclusive as against all parties and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. "-' In addition to the foregoing notice, further notice shall be given by the Fiscal Agent as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption shall be sent on or before the date notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section by telecopy or registered or certified mail or overnight delivery service to the registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as shall be specified by the CFD to the Fiscal Agent and to the national information services that disseminate notice of redemption of obligations such as the Bonds. Upon the payment of the redemption price of any Bonds being redeemed, each check or other ,...." transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Section 4.4. Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the CFD shall execute and the Fiscal Agent shall authenticate and deliver to the Bondowner, at the expense of the CFD, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity . Section 4.5. Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3 hereof, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for. such redemption: (1) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Fiscal Agent Agreement, anything in this Fiscal Agent Agreement or in the Bonds to the contrary notwithstanding; (2) Upon presentation and surrender thereof at the office of the Fiscal Agent, the redemption price of such Bonds shall be paid to the Owners thereof; ,...." 45788706. I 23 ACENDA rrEM f~O.~__~~ PAce?lt OF ~~ ",.-. (3) As of the redemption date the Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds, or portions thereof, shall cease to bear further interest; and (4) As of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption, shall be entitled to any of the benefits of this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.1. Warranty. The CFD shall preserve and protect the security pledged hereunder to the Bonds against all claims and demands of all persons. Section 5.2. Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the CFD makes the following covenants with the Bondowners under the provisions of the Act and this Fiscal Agent Agreement (to be performed by the CFD or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the CFD to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (1) Punctual Payment: Against Encumbrances. The CFD hereby covenants that it will receive all Special Taxes in trust and will immediately deposit such amounts with the Fiscal Agent, and ""........ the CFD shall have no beneficial right or interest in the amounts so deposited except as provided by this Fiscal Agent Agreement. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the CFD. The CFD covenants that it will duly and punctually payor cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with this Fiscal Agent Agreement to the extent that Special Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and this Fiscal Agent Agreement, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements and of the Bonds issued hereunder. The CFD will not mortgage or otherwise encumber, pledge or place any charge upon any of the Special Taxes except as provided in this Fiscal Agent Agreement, and will not issue any obligation or security having a lien or charge upon the Special Taxes superior to or on a parity with the Bonds. Nothing herein shall prevent the CFD from issuing or incurring indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to the pledge of Special Taxes to repay the Bonds. (2) Levv of Special Tax. Beginning in Fiscal Year 2006-07 and so long as any Bonds issued under this Fiscal Agent Agreement are Outstanding, the CFD hereby covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and the Surplus Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds when due, (2) ""........ 45788706.1 24 AOENDA ITEM NO. PAGE '?6 "b3 OF ~o-(O the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. "WI' (3) Commence Foreclosure Proceedings. The CFD hereby covenants for the benefit of the Owners of the Bonds that it will determine or cause to be determined, no later than March 1 and August 1 of each year, whether or not any owner of the property within the CFD are delinquent in the payment of Special Taxes and, if such delinquencies exist, the CFD will order and cause to be commenced no later than April 15 (with respect to the March 1 determination date) or September 1 (with respect to the August I determination date), and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due, provided, however, that the CFD shall not be required to order the commencement of foreclosure proceedings if (i) the total Special Tax delinquency in the CFD for such Fiscal Year is less than five percent (5%) of the total Special Tax levied in such Fiscal Year, and (ii) the CFD shall have established from any source of lawfully available funds (other than Special Taxes) an escrow fund to provide for the payment of principal of and interest on the Bonds. Notwithstanding the foregoing, if the CFD determines that any single property owner in the CFD is delinquent in excess of ten thousand dollars ($10,000) in the payment of the Special Tax, then it will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosure related to delinquent Special Taxes: (a) The CFD or the Fiscal Agent, is hereby expressly authorized to credit bid at any foreclosure sale, without any requirement that funds be set aside in the amount so credit bid, in the amount specified in Section 53356.5 of the Act, or such less amount as determined under clause (b) below or otherwise under Section 53356.6 of the Act. (b) The CFD may permit, in its sole and absolute discretion, property with ~ delinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5 of the Act, if it determines that such sale is in the interest of the Bond Owners. The Bond Owners, by their acceptance of the Bonds, hereby consent to such sale for such lesser amounts (as such consent is described in Section 53356.6 of the Act), and hereby release the CFD and the City, and their respective officers and agents from any liability in connection therewith. If such sale for lesser amounts would result in less than full payment of principal of and interest on the Bonds, the CFD will use best efforts to seek approval of the Bond Owners. (c) The CFD is hereby expressly authorized to use amounts in the Special Tax Fund to pay costs of foreclosure of delinquent Special Taxes. (d) The CFD may forgive all or any portion of the Special Taxes levied or to be levied on any parcel in the CFD so long as the CFD determines that such forgiveness is not expected to adversely affect its obligation to pay principal of and interest on the Bonds as such payments become due and payable. (4) Payment of Claims. The CFD will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Special Taxes or; other funds in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), or which might impair the security of the Bonds then Outstanding; provided that nothing herein contained shall require the CFD to make any such payments so long as the CFD in good faith shall contest the validity of any such claims. ~ 45788706.1 25 t,3 AGENDA ITEM NO. PAGE?if OF ~(!)(o_ ~ (5) Books and Accounts. The CFD will keep proper books of records and accounts, separate from all other records and accounts of the CFD, in which complete and correct entries shall be made of all transactions relating to the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of the Bonds then Outstanding or their representatives authorized in writing. (6) Tax Covenants. (a) Special Definitions. When used in this subsection, the following terms have the following meanings: "Code" means the Internal Revenue Code of 1986. "Computation Date" has the meaning set forth in section 1.148-1(b) of the Tax Regulations. "Gross Proceeds" means any proceeds as defined in section 1.148-l(b) of the Tax Regulations (referring to sales, investment and transferred proceeds), and any replacement proceeds as defined in section 1.148-1 (c) of the Tax Regulations, of the Bonds. "Investment" has the meaning set forth in section 1.148-1(b) of.the Tax Regulations. "Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Bonds are invested and that is not acquired to carry out the governmental purposes of that series of Bonds. "........ "Rebate Amount," has the meaning set forth in section 1.148-1(b) of the Tax Regulations. "Tax Regulations" means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code, or section 103 of the 1954 Code, as applicable. "Yield" of any Investment has the meaning set forth in section 1.148-5 of the Tax Regulations; and of any issue of governmental obligations has the meaning set forth in section 1.148-4 of the Tax Regulations. (b) Not to Cause Interest to Become Taxable. The CFD covenants that it shall take all actions necessary in order that interest on the Bonds be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes, and that it shall not use or invest, and shall not permit the use or investment of, and shall not omit to use or invest Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, could cause the interest on any Bond to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Fiscal Agent receives a written opinion of Bond Counsel to the effect that compliance with such covenant is not necessary to, or that failure to comply with such covenant will not adversely affect, the exclusion of the interest on any Bond from the gross income of the owner thereof for federal income tax purposes, the CFD shall comply with each of the specific covenants in this subsection. ,..... (c) Private Use and Private Pavments. Except as would not cause any Bond to become a "private activity bond" within the meaning of section 141 of the Code and the Tax 45788706.1 26 AGENDA ITEM NO. PACiE 31 1>3 OF' ?P{(i Regulations, the CFD shall take all actions necessary to assure that the CFD at all times prior to the final cancellation of the last of the Bonds to be retired: ~ (i) exclusively owns, operates and possesses all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Bonds and not use or permit the use of such Gross Proceeds (including through any contractual arrangement with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (ii) does not directly or indirectly impose or accept any charge or other payment by any person or entity (other than a state or local government) who is treated as using any Gross Proceeds of the Bonds or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds. (d) No Private Loan. Except as would not cause any Bond to become a "private activity bond" within the meaning of section 141 of the Code and the Tax Regulations and rulings thereunder, the CFD shall not use or permit the use of Gross Proceeds of the Bonds to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (i) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal income tax purposes; (ii) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or (iii) indirect benefits of such Gross Proceeds, or burdens ~ and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a loan. (e) Not to Invest at Higher Yield. Except as would not cause the Bonds to become "arbitrage bonds" within the meaning of section 148 of the Code and the Tax Regulations and rulings thereunder, the CFD shall not (and shall not permit any person to), at any time prior to the final cancellation of the last Bond to be retired, directly or indirectly invest Gross Proceeds in any Investment, if as a result of such investment the Yield of any Investment acquired with Gross Proceeds, whether then held or previously disposed of, would materially exceed the Yield of the Bonds within the meaning of said section 148. (f) Not Federallv Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Tax Regulations and rulings thereunder, the CFD shall take or omit to take (and shall not permit any person to take or omit to take) any action that would cause any Bond to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder. (g) Information Report. The CFD shall timely file any information required by section 149(e) of the Code with respect to Bonds with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe. ~ 45788706.1 27 AOENDA ITEM NO. D ~ PAQE 3~ Of,po~ ~ (h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Tax Regulations: (i) The CFD shall account for all Gross Proceeds (including all receipts, expenditures. and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Bond is discharged. However, to the extent permitted by law, the CFD may commingle (and may allow the CFD to commingle) Gross Proceeds of Bonds with its other monies, provided that it separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (ii) Not less frequently than each Computation Date, the CFD shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Tax Regulations and rulings thereunder. The CFD shall maintajn a copy of the calculation with its official transcript of proceedings relating to the issuance of the Bonds until six years after the final Computation Date. ,......... (iii) In order to assure the excludability pursuant to 3(a) of the Code of the interest on the Bonds from the gross income of the owners thereof for federal income'tax purposes, the CFD shall pay to the United States the amount that when added to the future value of previous rebate payments made for the Bonds equals (i) in the case of the Final Computation Date as defined in section L148-3(e)(2) of the Tax Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, such rebate payments shall be made by the CFD at the times and in the amounts as are or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder for execution and filing by the CFD. Notwithstanding the foregoing, and provided that the CFD takes all steps available to it to cause the provision of such amounts, the monetary obligation of the CFD under this paragraph (3) shall be limited to amounts provided to it for such purpose by the CFD. (i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Tax Regulations and rulings thereunder, the CFD shall not and shall not permit any person to, at any time prior to the final cancellation of the last of the Bonds to be retired, enter into any transaction that reduces the amount required to be paid to the United States pursuant to paragraph (h) of this subsection because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yields on the Bonds not been relevant to either party. (j) Bonds Not Hedge Bonds. (i) The CFD represents that none of the Bonds is or will become a "hedge bond" within the meaning of section 149(g) ofthe Code. ,......... (ii) Without limitation of paragraph (i) above: (A) the CFD reasonably expects that at least 85% of the spendable proceeds of the Bonds will be expended within the three-year period commencing on the date of issuance of the Bonds; and (B) no more 45788706.1 28 AGENDA ITEM NO. D 3 PACE~Of 3~~ than 50% of the proceeds of the Bonds will be invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more. '-'" (k) Elections. The CFD hereby directs and authorizes any CFD Authorized Representative to make elections permitted or required pursuant to the provisions of the Code or the Tax Regulations, as such representative (after consultation with Bond Counsel) deems necessary or appropriate in connection with the Bonds, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document. (1) Closing Certificate. The CFD agrees to execute and deliver in connection with the issuance of the Bonds a Tax Certificate as to Arbitrage and the Provisions of Sections 103 and 141-150 of the Internal Revenue Code of 1986, or similar document containing additional representations and covenants pertaining to the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes, which representations and covenants are incorporated as though expressly set forth herein. (7) Reduction of Maximum Special Taxes. The CFD hereby finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the CFD hereby determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the CFD below the levels provided in this Section 5.2(7) would interfere with the timely.retirement of the Bonds. The CFD determines it to be necessary in order to preserve the security for the Bonds to covenant, and, to the maximum extent that the law permits it to do so, the CFD hereby does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the CFD, unless, in connection therewith, (i) the CFD receives a certificate from one or more Independent Financial ......." Consultants which, when taken together, certify that, on the basis of the parcels ofland and improvements existing in the CFD as of the July 1 preceding the reduction, the maximum amount of the Special Tax which may be levied on then existing Developed Property (as defined in the Rate and Method of Apportionment of Special Taxes then in effect in the CFD) in each Bond Year for any Bonds Outstanding will equal at least 110% of the sum on the estimated Administrative Expenses and gross debt service in that Bond Year on all Bonds to remain Outstanding after the reduction is approved, and (ii) the CFD hereby finds that any reduction made under such conditions will not adversely affect the interests of the Owners of the Bonds. For purposes of estimating Administrative Expenses for the foregoing calculation, the Independent Financial Consultant shall compute the Administrative Expenses for the current Fiscal Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year. (8) Covenants to Defend. The CFD hereby covenants that in the event that any initiative is adopted by the qualified electors in the CFD which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(7) above or to limit the power of the CFD to levy the Special Taxes for the purposes set forth in Section 5.2(2) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (9) . Annual Reports to CDIAC. Not later than October 30 of each year, commencing October 30, 200_ and until the October 30 following the final maturity of the Bonds, the CFD shall cause the City to supply the information required by Section 53359.5(b) or (c) of the Act to CDIAC (on such forms as CDIAC may specify). (10) Continuing Disclosure. The CFD hereby covenants to comply with the terms of the Continuing Disclosure Agreement executed by it with respect to the Bonds. ......." 45788706.1 29 AOENDA ITEM ~. PAOE '16 OF ~3 '3&h ARTICLE VI "..... AMENDMENTS TO FISCAL AGENT AGREEMENT Section 6.1. Supplemental Fiscal Agent Agreements or Orders Not Requiring Bondowner Consent. The CFD may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Fiscal Agent Agreements for any of the following purposes: (1) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Fiscal Agent Agreement or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners; (2) to add to the covenants and agreements of and the limitations and the restrictions upon the CFD contained in this Fiscal Agent Agreement, other covenants, agreements, limitations and restrictions to be observed by the CFD which are not contrary to or inconsistent with this Fiscal Agent Agreement as theretofore in effect or which further secure Bond payments; (3) to modify, amend or supplement this Fiscal Agent Agreement in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; or (4) to modify, alter or amend the rate and method of apportionment of the Special Taxes in ,-.... any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the CFD to an amount which is less than that permitted under Section 5.2(7) hereof; or (5) to modify, alter, amend or supplement this Fiscal Agent Agreement in any other respect which is not materially adverse to the Bondowners. Section 6.2. Supplemental Fiscal Agent Agreements or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Fiscal Agent Agreements described in Section 6.1, the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the adoption by the CFD of such Supplemental Fiscal Agent Agreements as shall be deemed necessary or desirable by the CFD for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Fiscal Agent Agreement; provided, however, that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond, (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon, (c) a preference or priority of any Bond over any other Bond, or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplemental Fiscal Agent Agreement, without the consent of the Owners of all Bonds then Outstanding. If at any time the CFD shall desire to adopt a Supplemental Fiscal Agent Agreement, which pursuant to the terms of this Section shall require the consent of the Bondowners, the CFD shall so notify the Fiscal Agent and shall deliver to the Fiscal Agent a copy of the proposed Supplemental Fiscal Agent Agreement. The Fiscal Agent shall, at the expense of the CFD, cause notice of the proposed Supplemental Fiscal Agent Agreement to be mailed, by first class mail, postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the "..... 45788706.\ 30 ACiENDA ITb~, "~. 3 3 ~ 4t ~- OF .5 FJ)(i;-... nature of the proposed Supplemental Fiscal Agent Agreement and shall state that a copy thereof is on file at the office of the Fiscal Agent for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Fiscal Agent Agreement when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Fiscal Agent shall receive an instrument or instruments purporting to be executed by the Owners of a majority in aggregate principal amount of the Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Fiscal Agent Agreement described in such notice, and shall specifically consent to and approve the adoption thereof by the CFD substantially in the form of the copy referred to in such notice as on file with the Fiscal Agent, such proposed Supplemental Fiscal Agent Agreement, when duly adopted by the CFD, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any Supplemental Fiscal Agent Agreement, Bonds which are owned by the CFD or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the CFD shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. ......, Upon the adoption of any Supplemental Fiscal Agent Agreement and the receipt of consent to any such Supplemental Fiscal Agent Agreement from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds in instances where such consent is required pursuant to the provisions of this Section, this Fiscal Agent Agreement shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Fiscal Agent Agreement of the CFD and all Owners of Outstanding Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Section 6.3. Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as hereinabove provided, the CFD may determine that the Bonds may bear a notation, by ......, endorsement in form approved by the CFD, as to such action, and in that case upon demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the CFD shall so determine, new Bonds so modified as, in the opinion of the CFD, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond at such effective date such new Bonds shall be exchanged at the office of the Fiscal Agent or at such additional offices as the Fiscal Agent may select and designate for that pm;pose, without cost to each Owner of Outstanding Bonds, upon surrender of such Outstanding Bonds. ARTICLE vn FISCAL AGENT Section 7.1. Fiscal Agent. Union Bank of California, N.A., a national banking association shall be the Fiscal Agent for the Bonds unless and until another Fiscal Agent is appointed by the CFD hereunder. The CFD may, at any time, provided that no Event of Default has occurred and is continuing, appoint a successor Fiscal Agent satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the CFD is required to deposit with the Fiscal Agent hereunder and to allocate, use and apply the same as provided in this Fiscal Agent Agreement. The Fiscal Agent is hereby authorized to and shall mail by first class mail, postage prepaid, or wire transfer in accordance with Section 2.5 above, interest payments to the Bondowners, to select Bonds for redemption, and to maintain the Bond Register. The Fiscal Agent is hereby authorized to pay the ......, 45788706.1 31 ACENDA ITEM NO. ~3 PACE J./.:J- OF~ ~ principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in this Fiscal Agent Agreement, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Fiscal Agent Agreement; provided, however, that the Fiscal Agent undertakes to perform such duties and only such duties as are set forth in this Fiscal Agent Agreement, and no duties of the Fiscal Agent shall be implied hereunder. Discretionary rights of the Fiscal Agent under this Fiscal Agent Agreement shall not be construed as duties. The Fiscal Agent may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Fiscal Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care hereunder. The Fiscal Agent shall keep accurate records of all funds administered by it and all Bonds paid, discharged and cancelled by it. The Fiscal Agent may establish such funds and accounts as it deems necessary to perform its obligations hereunder. The Fiscal Agent is hereby authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Fiscal Agent shall cancel all Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. Section 7.2. Removal of Fiscal Agent. Provided that no Event of Default has occurred and is continuing, the CFD may at any time at its sole discretion remove the Fiscal Agent initially appointed, and any successor thereto, by delivering to the Fiscal Agent a written notice of its decision to remove the Fiscal Agent and may appoint a successor or successors thereto; provided that any such successor, other than the Fiscal Agent, shall be a bank or trust company having (or if s:uch bank or trust company is a member of a bank holding company system its bank holding company has) a combined capital (exclusive r-- of borrowed capital) and surplus of at least $50,000,000, and subject to supervision or examination by federal or state Authority. Any removal shall become effective only upon acceptance of appointment by the successor Fiscal Agent. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Any removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent and notice being sent by the successor Fiscal Agent to the Bondowners of the successor Fiscal Agent's identity and address. Section 7.3. Resignation of Fiscal Agent. The Fiscal Agent may at any time resign by giving written notice to the CFD and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Fiscal Agent. Upon receiving such notice of resignation, the CFD shall promptly appoint a successor Fiscal Agent satisfying the criteria in Section 7.2 above by an instrument in writing. Any resignation or removal of the Fiscal Agent and appointment of a successor Fiscal Agent shall become effective only upon acceptance of appointment by the successor Fiscal Agent provided, however, that in the event the CFD does not appoint a successor Fiscal Agent within 30 days following receipt of such notice of resignation, the resigning Fiscal Agent may, at the expense of the CFD, petition the appropriate court having jurisdiction to appoint a successor Fiscal Agent. Section 7.4. Compensation and Liability of Fiscal Agent. The CFD shall from time to time, subject to any agreement between the CFD and the Fiscal Agent then in force, pay to the Fiscal Agent compensation for its services, reimburse the Fiscal Agent for all of its advances and expenditures, including, but not limited to, advances to and reasonable fees and expenses of independent accountants "....... 45788706.1 32 AGENDA ITEM NO. B -:s PAGE 43 OF .:S~ and counsel and agents employed by it in the exercise and performance of its powers and duties hereunder. The CFD agrees to indenmifY the Fiscal Agent, including its officers, directors, employees and agents for, and hold it harmless against, any loss, claim, liability or expense incurred which does not ~ arise from its own negligence or willful misconduct, arising out of or in connection with the administration of this Fiscal Agent Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Fiscal Agent shall not be liable for any error in judgment made in good faith by a reasonable officer, unless it shall be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. Whether or not therein expressly so provided, every provision of this Fiscal Agent Agreement relating to the conduct of or affecting the liability of or affording protection to the Fiscal Agent (acting in its capacity as Fiscal Agent or in its capacity as Dissemination Agent), its officers, directors, employees and agents, shall be subject to the provisions of this Section 7.4. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds and any offering documents pertaining to the Bonds shall be taken as statements, promises, covenants and agreements of the CFD, and the Fiscal Agent assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Fiscal Agent Agreement or the Bonds, and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bonds, or in the certificate of authentication assigned to or imposed upon the Fiscal Agent. The Fiscal Agent shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Fiscal Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Fiscal Agent may consult with counsel, who may be counsel to the CFD, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith ~ and in accordance therewith. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. The Fiscal Agent may become the owner or pledgee of Bonds, and may otherwise deal with the CFD with the same rights it would have if it were not the Fiscal Agent. Whenever in the administration of its duties under this Fiscal Agent Agreement the Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part ofthe Fiscal Agent, be deemed to be conclusively proved and established by a written certificate of the CFD, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of this Fiscal Agent Agreement upon the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Fiscal Agent shall have no duty or obligation whatsoever to enforce the collection of Special Taxes or other funds to be deposited with it hereunder, or as to the correctness of any amounts received, but its liability shall be limited to the proper accounting for such funds as it shall actually receive. No provision in this Fiscal Agent Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of its rights or powers. ......., 45788706.1 33 33 AOENDA ITEM NO. PAGE /-{ 1 OF 3 rJfb__ ;-- All rights and indenmities of the Fiscal Agent pursuant to this Section 7.4 shall survive the removal or resignation of the Fiscal Agent, the discharge of the Bonds, or the amendment or assignment of this Fiscal Agent Agreement. Section 7.5. Merger or Consolidation. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Fiscal Agent without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. ARTICLE VllI EVENTS OF DEF AUL T; REMEDIES Section 8.1. "event of default": Events of Default. Anyone or more of the following events shall constitute an (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or ,.....- (c) Except as described in (a) or (b), default shall be made by the CFD in the observance of any of the agreements, conditions or covenants on its part contained in this Fiscal Agent Agreement or the Bonds, and such default shall have continued for a period of 30 days after the CFD shall have been given notice in writing of such default by the Fiscal Agent or the Owners of 25% in aggregate principal amount of the Outstanding Bonds. The CFD agrees to give notice to the Fiscal Agent immediately upon the occurrence of an event of default under (a) or (b) above and within 30 days of the CFD's knowledge ofan event of default under (c) above. The Fiscal Agent shall not be deemed to have knowledge of any event of default described in Section 8.1(c) unless a responsible officer shall have actual knowledge thereof or the Fiscal Agent shall have received written notice at its Principal Office. Section 8.2. Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (1) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the CFD and any of the members, officers and employees of the CFD, and to compel the CFD or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Fiscal Agent Agreement; (2) By suit in equity to enjoin any actions or things which are unlawful or violate the rights ofthe Owners; or ,- (3) By a suit in equity to require the CFD and its members, officers and employees to account as the fiscal agent of an express trust. 45788706.1 34 AGENDA ITEM NO. PAGE ~ o~ OF3~ _ Nothing in this Article or in any other provision of this Fiscal Agent Agreement or the Bonds shall affect or impair the obligation of the CFD, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners thereof at the respective dates of maturity, as herein provided, out of the Special Taxes and other amounts pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in this Fiscal Agent Agreement. ..."., A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the CFD and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Fiscal Agent after an event of default pursuant to Section 8.1(a) or (b) shall be insufficient to pay in full the whole amount so owing and unpaid upon the Outstanding ......., Bonds, then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. ARTICLE IX DEFEASANCE Section 9.1. Defeasance. If the CFD shall payor cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, then the Owner of such Bond shall cease to be entitled to the pledge of Special Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the CFD to the Owner of such Bond under this Fiscal Agent Agreement shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds pursuant to this Section, the Fiscal Agent shall execute and deliver to the CFD all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal Agent shall pay over or deliver to the CFD's general fund all money or securities held by it pursuant to this Fiscal Agent Agreement which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds. Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this Section if such Bond is paid in anyone or more of the following ways: ..."., 45788706.1 35 AOENDA ITEM NO. PAOE tf~ :;3 OF3~ ,.... ~ ~ (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Fiscal Agent at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; or (c) by depositing with the Fiscal Agent or another escrow bank appointed by the CFD noncallable Defeasance Securities, in which the CFD may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; then, at the election of the CFD, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the CFD under this Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement with respect to such Bond shall cease and terminate, except for the obligation of the Fiscal Agent to payor cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the CFD contained in Section 5.2(6) or any covenants in a Supplemental Fiscal Agent Agreement relating to compliance with the Code. Notice of such election shall be filed with the Fiscal Agent not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Fiscal Agent. In connection with a defeasance under (b) or (c) above, there shall be provided to the CFD a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Fiscal Agent or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with this Fiscal Agent Agreement and any applicable Supplemental Fiscal Agent Agreement. If a forward supply contract is employed in connection with an advance refunding to be effected under (c) above, (i) such verification report shall expressly state that the adequacy of the amounts deposited with the bank under (c) above to accomplish the refunding relies solely on the initial escrowed investments and the maturity principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement executed to effect an advance refunding in accordance with (c) above shall provide that, in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement, the terms of the escrow agreement shall be controlling. Upon a defeasance, the Fiscal Agent, upon request of the CFD, shall release the rights of the Owners of such Bonds which have been defeased under this Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement and execute and deliver to the CFD all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds, the Fiscal Agent shall pay over or deliver to the CFD any funds held by the Fiscal Agent at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of, premium, if any, or interest on the Bonds when due. The Fiscal Agent shall, at the written direction of the CFD, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased, in the form directed by the CFD, stating that the defeasance has occurred. 45788706.1 36 MENDA ITEM NO. 0 ?/ PAGE 47 OF ~ Section 9.2. No Additional Bonds. The CFD shall not issue bonds, notes or other forms of indebtedness payable from Special Taxes and other amounts deposited in the Special Tax Fund and secured by a lien and charge upon such amounts equal to the lien and charge securing the Outstanding Bonds. ....." ARTICLE X MISCELLANEOUS Section I 0.1. Cancellation of Bonds. All Bonds surrendered to the Fiscal Agent for payment upon maturity or for redemption shall be upon payment therefor, and any Bond purchased by the CFD as authorized herein and delivered to the Fiscal Agent for such purpose shall be, cancelled forthwith and shall not be reissued. The Fiscal Agent shall destroy such Bonds, as provided by law, and, upon request of the CFD, furnish to the CFD a certificate of such destruction. Section 10.2. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Fiscal Agent Agreement to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of this Fiscal Agent Agreement (except as otherwise herein provided), if made in the following manner: (I) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company or other eligible guarantor located within the United States of America. ~. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his Authority. (2) As to any Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the CFD nor the Fiscal Agent shall be affected by any notice to the contrary . Nothing contained in this Fiscal Agent Agreement shall be construed as limiting the Fiscal Agent or the CFD to such proof, it being intended that the Fiscal Agent or the CFD may accept any other evidence of the matters herein stated which the Fiscal Agent or the CFD may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Fiscal Agent or the CFD in pursuance of such request or consent. Section 10.3. Unclaimed Moneys. To the extent permitted by law, anything in this Fiscal Agent Agreement to the contrary notwithstanding, any money held by the Fiscal Agent for the payment and discharge of any of the Outstanding Bonds which remain unclaimed for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date when such Outstanding Bonds have become due and payable, if such money was held by the Fiscal Agent ~ 45788706.1 37 AGENDA ITEM ~ PACE L/ l> OF b'?J 3/.:J- _ ,...,....., /"'" ~.. at such date, or for a period ending at the earlier of two Business Days prior to the date such funds would escheat to the State or two years after the date of deposit of such money if deposited with the Fiscal Agent after the date when such Outstanding Bonds become due and payable, shall be repaid by the Fiscal Agent to the CFD, as its absolute property, and the Fiscal Agent shall thereupon be released and discharged with respect thereto and the Owners shall look only to the CFD for the payment of such Outstanding Bonds; provided, however, that, before being required to make any such payment to the CFD, the Fiscal Agent at the written request of the CFD or the Fiscal Agent shall, at the expense of the CFD, cause to be mailed by first-class mail, postage prepaid, to the registered Owners of such Outstanding Bonds at their addresses as they appear on the registration books of the Fiscal Agent a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than 30 days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the CFD. The Fiscal Agent shall not be liable to the CFD or any Owner for interest on uninvested funds held by it for the payment and discharge ofthe principal, premium or interest on any ofthe Bonds to any Owner. Section 10.4. Provisions Constitute Contract. The provisions of this Fiscal Agent Agreement shall constitute a contract between the CFD and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Fiscal Agent, then the CFD, the Fiscal Agent and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Fiscal Agent Agreement shall be irrepealable, but shall be subject to modifications to the extent arid in the manner provided in this Fiscal Agent Agreement, but to no greater extent and in no other manner. Section 10.5. Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the CFD from making contracts or creating bonded or other indebtedness payable from a pledge of the Special Taxes which is subordinate to the pledge hereunder, or which is payable from the general fund of the CFD or from taxes or any source other than the Special Taxes and other amounts pledged hereunder . Section 10.6. Further Assurances. The CFD will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Fiscal Agent Agreement, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Fiscal Agent Agreement. Section 10.7. Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Fiscal Agent Agreement, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Fiscal Agent Agreement and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Fiscal Agent Agreement, the Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8. Notices. Any notices required to be given to the CFD with respect to the Bonds or this Fiscal Agent Agreement shall be mailed, first class, postage prepaid, or personally delivered to the Mayor of the City of Lake Elsinore, 130 South Main Street, Lake Elsinore, California 92530, and all 45788706,1 38 AOENDA ITEM ~O. PACE ~1 OF 33 ~ notices to the Fiscal Agent in its capacity as Fiscal Agent shall be mailed, first class, postage prepaid, or personally delivered to the Fiscal Agent, Union Bank of California, N.A., 120 South San Pedro Street, Suite 400, Los Angeles, California 90012, Attention: Corporate Trust Department. ~ Section 10.9. General Authorization. The Mayor, City Manager and the City Treasurer are hereby respectively authorized to do and perform from time to time any and all acts and things consistent with this Fiscal Agent Agreement necessary or appropriate to carry the same into effect. Section 10.10. Execution in Counterparts. This Fiscal Agent Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original; and all such counterparts shall together constitute but one and the same instrument. ~ ......" 45788706.1 39 A.:iENOA ITEM i1JO. PAGE 6D 63 OF~~ ,......, IN WITNESS WHEREOF, the CITY COUNCIL OF TIlE CITY OF LAKE ELSINORE, acting as the legislative body of CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A), has caused this Fiscal Agent Agreement to be signed by its Mayor and Union Bank of Cali fomi a, N.A., in token of its acceptance of the trust created hereunder, has caused this Fiscal Agent Agreement to be signed in its corporate name by its officer identified below, all as of the day and year first above written. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (Viscaya) By: Mayor of the City of Lake Elsinore, acting in its capacity as the legislative body of City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) UNION BANK OF CALIFORNIA, N.A., as Fiscal Agent ,,-... By: Its: Authorized Officer ~ 45788706.1 S-l .1:11':1::"'" ',. ".. '3"$ '-IiO'UIJi\ II ~! C'I i; L . PAGE 61 OF~-3Of';_ EXIllBIT A FORM OF BOND No. $ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A) SPECIAL TAX BOND, 2006 SERIES A INTEREST RATE MATURITY DATE DATED DATE CUSIP NO. % September 1,_ ,2006 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: AND NOll 00 DOLLARS CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A) (the "CFD") situated in the County of Riverside, State of California, FOR V ALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Fiscal Agent Agreement (as hereinafter defmed), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof, unless (i) the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii) the date of authentication is prior to the close of business on the frrst Record Date in which event interest shall be payable from the Dated Date set forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, ifno interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 of each year (each, an "Interest Payment Date"), commencing March 1, 2007, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of and premium, if any, on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office of Union Bank of California, N.A., a national banking association (the "Fiscal Agent") in Los Angeles, California. Interest on this Bond shall be paid by check of the Fiscal Agent mailed by first class mail, postage prepaid, or in certain circumstances described in the Fiscal Agent Agreement by wire transfer to an account within the United States, to the Registered Owner hereof as of the close of business 45788706.1 A-I AGENDA n to.,;, ... .m~c- ..3 ?_ ._c_.c PACE 1))-- . OF~--" ......., ~ ~ "".-. on the fifteenth day of the month preceding the month in which the Interest Payment Date occurs (the "Record Date") at such Registered Owner's address as it appears on the registration books maintained by the Fiscal Agent. Interest due on the Bonds shall be calculated on a basis of a 360-day year comprised of twelve 30-day months. This Bond is one of a duly authorized issue of "City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A" (the "Bonds") issued in the aggregate principal amount of $ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the "Act") for the purpose of financing the acquisition of certain capital facilities in the CFD, funding a reserve account, paying capitalized interest and paying certain costs related to the issuance of the Bonds. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City of Lake Elsinore, acting in its capacity as the legislative body of the CFD (the "Council") on January 25, 2005 and a Fiscal Agent Agreement dated as of 1, 2006 (the "Fiscal Agent Agreement"), between the CFD and the Fiscal Agent, and this reference incorporates the Fiscal Agent Agreement herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Fiscal Agent Agreement is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts deposited to the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) established under the Fiscal Agent Agreement. The CFD has covenanted for the benefit of the owners of the Bonds that under certain circumstances described in the Fiscal Agent Agreement it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of ~ delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. The Bonds are subject to redemption prior to maturity at the option of the CFD on any date on or after September 1,2012, as a whole or in part, by lot, from any available source of funds at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1,2012 through August 31, 2013 September 1, 2013 through August 31, 2014 September 1,2014 and thereafter 102.0% 101.0 100.0 The Bonds are subject to mandatory redemption prior to maturity on any date on or after September 1, 2006, in part, in a manner determined by the District from prepayments of Special Taxes at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, 2006 through August 31, 2010 September 1, 2010 through August 31, 2012 September 1, 2012 and thereafter 103.0% 102.5 As provided for in optional redemption "".-. 45788706.1 A-2 AGENDA ITflVI l'wvo PAGE 5:) 33 OF 31::> In connection with such redemption, the CFD may also apply amounts in the Reserve Account which will be in excess of the Reserve Requirement as a result of such Special Tax prepayment to redeem Bonds as set forth above. ..., The Bonds are subject to special mandatory redemption on any date from unused proceeds of the Bonds after completion or abandonment of the improvements to be financed with such proceeds, from the deposit of fees with the CFD by a public agency which has accepted facilities serving the CFD and from insurance or condemnation proceeds or other mandatory redemption, without premium, plus accrued interest to the redemption date, all as determined by the CFD. The Bonds maturing on September I, 20_ and September 1, 20_ are subject to mandatory redemption, in part by lot, on September 1 in each year commencing September 1, 20_, with respect to the Bonds maturing on September 1, 20--, and commencing September 1, 20_, with respect to the Bonds maturing on September 1, 20_, from the Sinking Fund Payments that have been deposited into the Redemption Account at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus ac~rued interest thereon to the date of redemption as set forth in the following schedule; provided, however, that (i) in lieu of redemption thereof, the Bonds may be purchased by the CFD and tendered to the Fiscal Agent, and (ii) if some but not all of the Bonds have been redeemed pursuant to optional redemption, special mandatory redemption from prepayment of Special Taxes or any other special mandatory redemption provision provided in the Fiscal Agent Agreement, the total amount of all future sinking payments will be reduced by the aggregate principal amount of the Bonds so redeemed, to be allocated among such sinking payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the CFD. Bonds Maturing on September 1, 20_ Redemption Date (September 1) ....., Principal Amount Bonds Maturing on September 1, 20_ Redemption Date (September 1) Principal Amount ....., 45788706. ] A-3 AGENDA ITEM NO. PPDE5/ 33 OF '2/.)/__ ,..... Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 60 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemptiolJ. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Fiscal Agent on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the CFD and the Fiscal Agent may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully registered form in the denomination of $5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Fiscal Agent Agreement. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Fiscal Agent in Los Angeles, California, but only in the manner, subject to the limitations and upon payment of the charges provided in the Fiscal Agent Agreement, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. ./'"' The Fiscal Agent shall not be required to register transfers or make exchanges of (i) any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. The rights and obligations of the CFD and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Fiscal Agent Agreement. The Fiscal Agent Agreement contains provisions permitting the CFD to make provision for the payment of the interest on, and the principal and premium, if any, of the Bonds so that such Bonds shall no longer be deemed to be outstanding under the terms of the Fiscal Agent Agreement. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF LAKE ELSINORE (THE "CITY") OR OF THE CFD FOR WHICH THE CITY OR THE CFD IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE CFD PAYABLE FROM THE PORTION OF THE SPECIAL TAXES AND OTHER AMOUNTS PLEDGED UNDER THE FISCAL AGENT AGREEMENT BUT ARE NOT A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDNISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Fiscal Agent. ~ IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the 45788706.1 A-4 ACENDA ITEM NO. D~ PAO& 5,0 Of ~ amount of this Bond, together with all other indebtedness of the CFD, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. ....., IN WITNESS WHEREOF, City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) has caused this Bond to be dated as of the Dated Date, to be signed on behalf of the CFD by the Mayor of the City of Lake Elsinore, acting as the legislative body of the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) by her manual signature and attested by the manual signature of the City Clerk of the City of Lake Elsinore and has caused the seal of the City to be reproduced hereon. [SEAL] By: Mayor of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) ATTEST: City Clerk of the City of Lake Elsinore, acting as the legislative body of City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) ....., [FORM OF FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one ofthe Bonds described in the within-defined Fiscal Agent Agreement. Dated: UNION BANK OF CALIFORNIA, N.A., as Fiscal Agent By: Its: Authorized Signatory ....., 45788706.1 A-5 AGENDA ITEM NO. PACE 6l.t 33 OF~_ ~ ,...... ~ [FORM OF ASSIGNMENT] For value received the undersigned hereby sells, assigns and transfers unto (NAME, ADDRESS, AND TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER OF ASSIGNEE) the within-mentioned Bond and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Fiscal Agent with full power of substitution in the premises. Dated: Signature Guaranteed: Note: Signature(s) must be guaranteed by an eligible guarantor institution. Note: The signature(s) on this Assignment must correspond with the names as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. 45788706.1 A-6 AGENDA ITEM NO. PAGE f)7 3~ OF~ EXIllBIT B REQIDSITION NO.1 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCAY A) REQIDSITION FOR DISBURSEMENT OF PROJECT COSTS/COSTS OF ISSUANCE ~ Union Bank of California, N.A. is hereby requested to pay from the Acquisition and Construction Fund of the Community Facilities District No. 2006-2 (Viscaya), established by the Fiscal Agent Agreement dated as of 1, 2006, between the Fiscal Agent and City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya), for payment of authorized Project Costs/Costs of Issuance. The amount is due and payable under purchase order, contract or other authorization and has not formed the basis of any prior request for payment. The conditions to the release of this amount from the Community Facilities District No. 2Q06-2 (Viscaya) Acquisition and Construction Fund are satisfied. There has not been filed with nor served upon the CFD notice of any lien, right to lien or attachment upon, or stop notice or claim affecting the right to receive payment of the amount specified above which has not been released or will not be released simultaneously with the payment of such amount, other than materialmen's or mechanic's liens accruing by mere operation of law. Dated: CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A) ~ By: Authorized Representative ~ 45788706. ) B-1 AGENDA ITEM NO. PAGE~ 3, OF~ ,-.. CONTINUING DISCLOSURE AGREEMENT (City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya)) This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of 1, 2006, is executed and delivered by the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "CFD") and Union Bank of California, N.A., as dissemination agent (the "Dissemination Agent") hereunder, in connection with the issuance of the $ City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A (the "Bonds"). The Bonds are being issued pursuant to provisions of a Fiscal Agent Agreement, dated as of 1, 2006 (the "Fiscal Agent Agreement"), by and between the CFD and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent"). The CFD, the Fiscal Agent and the Dissemination Agent covenant and agree as follows: SECTION 1. Purpose of the DisclosUre Agreement. This Disclosure Agreement is being executed and delivered by the CFD, the Dissemination Agent and the Fiscal Agent for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). SECTION 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanmgs: "....... "Annual Report" shall mean any Annual Report or any addendum thereto provided by the CFD pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. "CFD" means City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya), a community facilities district organized and existing under the laws of the State of California, and such area of land comprising that community facilities district. "City" means the City of Lake Elsinore, California. "Disclosure Representative" shall mean the City Manager of the City of Lake Elsinore or his or her designee, or such other officer or employee as the City Council of the City of Lake Elsinore (the "Council") shall designate in writing to the Fiscal Agent and Dissemination Agent from time to time. ,- "Dissemination Agent" shall mean the Fiscal Agent, acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the CFD and which has filed with the Fiscal Agent a written acceptance of such designation. 45788722.\ 1 , . ~b'2 ACENDA J H:hl .. ~. 7 ~OF3~ "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. ...." "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The National Repositories currently approved by the Securities and Exchange Commission are set forth in the SEC website located at http://www.sec.gov. . "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering ofthe Bonds. "Repository" shall mean each National Repository and each State Repository. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Special Taxes" shall mean the special taxes to be levied within the CFD. "State" shall mean the State of California. "State Repository" shall mean any public or private repository or entity designated by the State as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date ofthis Agreement, there is no State Repository. SECTION 3. Provision of Annual Reports. ...." (a) The CFD shall, or shall cause the Dissemination Agent to, not later than 225 days after the end of the City's fiscal year, commencing with fiscal year ending June 30, 2006, provide to each Repository and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be provided in electronic format to each Repository and may be provided through the services of a "Central Post Office" approved by the Securities and Exchange Commission. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(f). Furthermore, upon receipt of a written request of any Beneficiary Owner, the Dissemination Agent shall provide a copy of the Annual Report to such Beneficial Owner. (b) Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to Repositories, the CFD shall provide the Annual Report to the Dissemination Agent and the Fiscal Agent (if the Fiscal Agent is not the Dissemination Agent). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall notify the CFD and the Fiscal Agent of such failure to receive the Annual Report. The CFD shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Fiscal Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The ...." 45788722.1 2 AGENDA ITEM NO. . 3> ~ PACE (P'D_OF ~ ,.... Dissemination Agent and Fiscal Agent may conclusively rely upon such certification of the CFD and shall have no duty or obligation to review such Annual Report. (c) If the Dissemination Agent is unable to verify that an Annual Report has been provided to Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to each Repository or to the Municipal Securities Rulemaking Board and the State Repository, if any in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and the State Repository, if any; and (ii) to the extent information is known to it, file a report with the CFD and (if the Dissemination Agent is not the Fiscal Agent) the Fiscal Agent certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. SECTION 4. Content of Annual Reoorts. The CFD's Annual Report shall contain or include by reference the following: (i) The audited financial statements of the City, prepared in accordance with generally accepted accounting principles in effect from time to time. If the City's audited ____ financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (ii) The balance in the Reserve Account held under the Fiscal Agent Agreement. (iii) Total assessed valuation (per the Riverside County Assessor records) of all parcels currently subject to the Special Tax within the CFD, showing the total assessed valuation for all land and the total assessed valuation for all improvements within the CFD and distinguishing between the assessed value of developed property and undeveloped property. (iv) Identification of each parcel within the CFD for which any Special Tax payment is delinquent, together with the following information respecting each such parcel: (A) the amount delinquent; (B) the date of each delinquency; (C) in the event a foreclosure complaint has been filed respecting such delinquent parcel and such complaint has not yet been dismissed, the date on which the complaint was filed; and (D) in the event a foreclosure sale has occurred respecting such delinquent parcel, a summary ofthe results of such foreclosure sale. (v) The number of certificates of occupancy issued by the City within the CFD and the principal amount of prepayments of the Special Tax with respect to the CFDfor the prior Fiscal Year. ,.... 45788722.1 3 AGENDA 11EM ;~::. 'b"3 PAGE Cd OF~~ (vi) A land ownership summary listing property owners responsible for more than five percent (5%) of the annual Special Tax levy, as shown on the Riverside County Assessor's last equalized tax roll prior to the September next preceding the Annual Report date. '-' (vii) A description of the status of the facilities being constructed with proceeds of the Bonds as of the date of the Annual Report (but only so long as such facilities are not completed). (viii) The number of building permits issued in the CFD during the prior Fiscal Year. (ix) The amount of Special Taxes generated by the developed parcels and undeveloped parcels within the CFD. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The CFD shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the CFD shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. principal and interest payment delinquencies; '-' 2. non-payment related defaults; 3. modifications to rights of Bondholders; 4. optional, contingent or unscheduled bond calls; 5. defeasances; 6. rating changes; 7. adverse tax opinions or events adversely affecting the tax-exempt status of the Bonds; 8. unscheduled draws on the debt servIce reserves reflecting financial difficulties; 9. unscheduled draws on credit enhancements reflecting financial difficulties; 10. substitution of credit or liquidity providers, or their failure to perform; 11. release, substitution or sale of property securing repayment of the Bonds. "-' 45788722.1 4 33 AOENDA ITEM NO. PACE &;~ OF~- ,-... ",-- ~ (b) The Dissemination Agent shall, within one (1) Business Day of obtaining actual knowledge of the occurrence of any of the Listed Events, or as soon as reasonably practicable thereafter, contact the Disclosure Representative, inform such person of the event, and request that the CFD promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection (f) and promptly direct the Fiscal Agent whether or not to report such event to the Bondholders. In the absence of such direction the Dissemination Agent shall not report such event unless otherwise required to be reported by the Fiscal Agent to the Bondholders under the Fiscal Agent Agreement. The Dissemination Agent may conclusively rely upon such direction (or lack thereof). For purposes of this Disclosure Agreement, "actual knowledge" of the occurrence of such Listed Events shall mean actual knowledge by the officer at the corporate trust office of the Fiscal Agent or the Dissemination Agent with regular responsibility for the administration of matters related to the Fiscal Agent Agreement. Neither the Fiscal Agent nor the Dissemination Agent shall have any responsibility to determine the materiality of any of the Listed Events. (c) Whenever the CFD obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Dissemination Agent pursuant to subsection (b) or otherwise, the CFD shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the CFD has determined that knowledge of the occurrence of a Listed Event would be material under applicable federal securities laws, the CFD shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f). (e) If in response to a request under subsection (b), the CFD determines that the Listed Event would not be material under applicable federal securities laws, the CFD shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection (f). (f) If the Dissemination Agent has been instructed by the CFD to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and the State Repository or the Repositories. Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(4) and (5) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Fiscal Agent Agreement. SECTION 6. Termination of Reporting Obligation. The CFD's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior tp the final maturity of the Bonds, the CFD shall give notice of such termination in the same manner as for a Listed Event under Section 5(f). SECTION 7. Dissemination Agent. The CFD may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any 45788722.1 5 AGENDA ITEM NO. 7::> 3 PAOli w?> Of ~ manner for the content of any notice or report prepared by the CFD pursuant to this Disclosure Agreement. The initial Dissemination Agent shall be Union Bank of California, N.A. The Dissemination Agent may resign by providing thirty days written notice to the CFD and the Fiscal Agent. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the CFD in a timely manner and in a form suitable for filing. ......, SECTION 8. Amendment: Waiver. Notwithstanding any other provlSlon of this Disclosure Agreement, the CFD, Dissemination Agent and the Fiscal Agent may amend 'this Disclosure Agreement (and the Fiscal Agent and Dissemination Agent shall agree to any amendment so requested by the CFD) provided, neither the Fiscal Agent nor the Dissemination Agent shall be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder, and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds, or the type of business conducted; (b) The undertaking, as amended or taking into account such waiver, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and '-' (c) The amendment or waiver either (i) is approved by the Holders of the Bonds in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the Holders or Beneficial Owners of the Bonds. In the event of any amendment or waiver of a provision of this Disclosure Agreement, the CFD shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or w~iver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the CFD. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the CFD from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the CFD chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the CFD shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. ...., 45788722.1 6 AOEN=EM~. o;~ .",...... ~ ",...... SECTION 1 O. Default. In the event of a failure of the CFD or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Fiscal Agent (at the written request of any Participating Underwriter or the Holders of at least 25% aggregate principal amount of Outstanding Bonds, shall but only to the extent funds in an amount satisfactory to the Fiscal Agent have been provided to it or it has been otherwise indemnified to its satisfaction from any cost, liability, expense or additional charges and fees of the Fiscal Agent whatsoever, including, without limitation, fees and expenses of its attorneys), or any Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance bycourt order, to cause the CFD or Fiscal Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the CFD or the Fiscal Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties. Immunities and Liabilities of Fiscal Agent and Dissemination Agent. Article VII of the Fiscal Agent Agreement pertaining to the Fiscal Agent is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were. (solely for this purpose) contained in the Fiscal Agent Agreement and the Fiscal Agent and Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded the Fiscal Agent thereunder. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the CFD agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the CFD for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to them hereunder and shall not be deemed to be acting in any fiduciary capacity for the CFD, the Bondholders, or any other party. The Dissemination Agent shall have no liability to the Bondholders or any other party for any monetary damages or financial liability of any kind whatsoever related to or arising from this Agreement. The obligations of the CFD under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. SECTION 12. Notices. Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: To the City: City of Lake Elsinore 130 South Main Street Lake Elsinore, California 92530 Attn: City Manager Telephone: (951) 674-3124 Fax: (951) 674-2392 45788722. I 7 AGENDA ITEM NO. PAGE l.P5 ~~ OF~_ To the Fiscal Agent: Union Bank of California, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Attn: Corporate Trust Department Telephone: (213) 972-5676 Fax: (213) 972-5694 ......,; To the Dissemination Agent: Union Bank of California, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Attn: Corporate Trust Department Telephone: (213) 972-5676 Fax: (213) 972-5694 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the CFD, the Fiscal Agent, the Dissemination Agent, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. ~ ~ 45788722.1 8 ACENDAITEM NO. ~3 PAGE f.p~ OF ~(g ~ SECTION 14. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCA Y A) By Mayor of the City of Lake Elsinore UNION BANK OF CALIFORNIA, N.A., as Dissemination Agent and Fiscal Agent By Authorized Officer ~ ~ 45788722.1 9 AGENDA ITEM NO. IWJE /11 33 OF ;,{!;)(Q. EXHffiIT A NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT ,......" Name of Obligated Party: City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Name of Bond Issue: City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A Date of Issuance: ,2006 NOTICE IS HEREBY GIVEN that the CFD has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated as of I, 2006, with respect to the Bonds. The CFD anticipates that the Annual Report will be filed by Dated: UNION BANK. OF CALIFORNIA, N.A., on behalf of CFD ....., cc: Issuer ,......" 45788722.1 A-I AGENDA nEM NO. 33 IWJ& (0 c.j OF ~ _ ~ $ City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A Purchase Contract , 2006 City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) 130 South Main Street Lake Elsinore, California 92530 Ladies and Gentlemen: Southwest Securities, Inc. (the "Underwriter") hereby offers to enter into the following agreement with the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District"). Upon the acceptance hereof by you, this offer will be binding upon the District and the Underwriter. This offer is made subject to (i) the written acceptance hereof by you and (ii) withdrawal by the Underwriter upon written notice (by facsimile or otherwise) delivered to r"' you at any time prior to the acceptance hereof by you. 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase from the District, at the Closing Time on the Closing Date (both as defined herein), and the District hereby agrees to sell and deliver to the Underwriter, $ aggregate principal amount of its Special Tax Bonds, 2006 Series A (the "Bonds"). The Bonds shall be dated the date of their initial delivery, and shall mature on September 1 in the years shown on Exhibit A hereto, shall bear interest at the rates shown on Exhibit A hereto and shall be subject to mandatory redemption from sinking fund payments, in the amounts and on the dates shown in the Fiscal Agent Agreement. Interest on the Bonds shall be payable each March 1 and September 1 to maturity or earlier redemption of the Bonds, beginning March 1, 2007. The purchase price for the Bonds shall be an amount equal to $ (being the aggregate principal amount thereof ($ ), less an underwriter's discount of $ and less a net original issue discount of $ ). (The date of such payment and delivery is referred to herein as the "Closing Date," the hour and date of such delivery and payment is referred to herein as the "Closing Time," and the other actions contemplated hereby to take place at the time of such payment and delivery being herein sometimes called the "Closing"). 2. The Bonds. The Bonds shall be described in, and shall be issued and secured pursuant to, the provisions of the Constitution and the laws of the State of California including the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California (the "Bond Law") and a Fiscal Agent Agreement, dated as of 1, 2006 (the "Fiscal Agent r"' 45788725.1 1 AGENDA ITEM flO. J .3 PAO&~OF~__ Agreement"), by and between the District and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent"), authorizing the issuance of the Bonds. '-' The Bonds are being issued for the purpose of fmancing the acquisition of certain public facilities and capital fees to meet the needs of new development within the District, funding a reserve account for the Bonds, funding the cost of capitalized interest through September 1, 2007, and paying the costs of incidental expenses incurred in connection with financing such public facilities and forming and administering the District (collectively, the "Project"). The Bonds are secured by Special Taxes (as defined in the Fiscal Agent Agreement). The Bonds shall be payable and shall be subject to redemption as provided in the Fiscal Agent Agreement and shall be as described in the Preliminary Official Statement of the District dated , 2006 (the "Preliminary Official Statement") and the Official Statement of the District dated of even date herewith. Such Official Statement, including the cover page and the appendices thereto, relating to the Bonds, as amended to conform to the terms of this Purchase Contract and with such changes and amendments thereto as have been mutually agreed to by the District and the Underwriter, are hereinafter referred to as the "Official Statement." This Purchase Contract, the Fiscal Agent Agreement and the Continuing Disclosure Agreement, dated as of 1, 2006 (the "District Continuing Disclosure Agreement"), by and between the District and Union Bank of California, N.A., as dissemination agent, are referred to herein as the "Basic Documents." 3. Offering by the Underwriter. It shall be a condition to the District's obligations to sell and to deliver the Bonds to the Underwriter and to the Underwriter's obligation to '--' purchase, to accept delivery of and to pay for the Bonds that the entire principal amount of the Bonds shall be issued, sold and delivered by the District and purchased, accepted and paid for by the Underwriter at the Closing. It is understood that the Underwriter proposes to offer the Bonds for sale to the public (which may include selected dealers) at prices or yields as set forth on the cover page of the Official Statement. Concessions from the public offering price may be allowed to selected dealers. It is understood that the initial public offering price and concessions set forth in the Official Statement may vary after the initial public offering. It is further understood that the Bonds may be offered to the public at prices other than the par value thereof. The net premium on the sale of the Bonds to the public, if any, shall accrue to the benefit of the Underwriter. 4. Official Statement, Delivery of Other Documents, Use of Documents. (a) The District hereby authorizes the use by the Underwriter of the Preliminary Official Statement and the Official Statement (including any supplements or amendments thereto) and the Fiscal Agent Agreement and the information therein contained, in connection with the public offering and sale of the Bonds. (b) The District shall deliver to the Underwriter, within seven business days from the date hereof, such number of copies of the final Official Statement executed on behalf of and approved for distribution by the District as the Underwriter may reasonably request in order '-' 45788725.1 2 AGENDA ITEM NO. 33 PMIi ID Of l~~- ,,-.- for the Underwriter to comply with the rules of the Municipal Securities Rulemaking Board and Rule 15c2-12(b)(4) under the Securities Exchange Act of 1934. (c) As soon as practicable following receipt thereof, the Underwriter shall deliver the Official Statement, and any supplements or amendments thereto, to a nationally recognized municipal securities information repository. 5. Representations, Warranties and Agreements of the District. The District represents, warrants and agrees as follows: (a) The District is a community facilities district duly organized and validly existing under the laws of the State of California. (b) The District has full legal right, power and authority (i) to enter into the Basic Documents, (ii) to sell, issue and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate the transactions on its part contemplated by the Basic Documents and the Official Statement. (c) By all necessary official action, the City of Lake Elsinore (the "City"), as the legislative body of the District, has duly authorized and approved the Basic Documents, has duly authorized and approved the Preliminary Official Statement and the Official Statement, has duly authorized and approved the execution and delivery of, and the performance by the District of the obligations in connection with the issuance of the Bonds on its part contained in the Bonds ,,-..- and the Basic Documents, and the consummation by it of all other transactions contemplated by the Basic Documents in connection with the issuance of the Bonds. (d) To the best of its knowledge, the District is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of any state or of the United States, or any agency or instrumentality of either, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the Fiscal Agent Agreement) or other instrument to which the District is a party which breach or default has or may have an adverse effect on the ability of the District to perform its obligations under the Fiscal Agent Agreement, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instrument; and the execution and delivery of the Bonds and the Basic Documents, and compliance with the provisions on the District's part contained therein, will not conflict in any material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the District is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the District or under the terms of any such law, regulation or instrument, except as provided by the Bonds and the Fiscal Agent Agreement. ,,-.- (e) To the best of its knowledge, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or 45788725.1 3 A<iENDA ITEM NO. IWE '71 'f 33 OF~~ commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the District of its obligations in connection with the issuance of the Bonds under the Basic Documents have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matters which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the District of its obligations under the Fiscal Agent Agreement have been duly obtained. ~ (f) The Bonds when issued will conform to the descriptions thereof contained in the Official Statement under the captions "INTRODUCTORY STATEMENT" and "THE BONDS"; and the Basic Documents when executed and delivered will conform to the descriptions thereof contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE BONDS," "SOuRCES OF PAYMENT FOR THE BONDS," "SUMMARY OF THE FISCAL AGENT AGREEMENT" and "APPENDIX A DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT." (g) The Bonds, when issued, authenticated and delivered in accordance with the Fiscal Agent Agreement, and sold to the Underwriter as provided herein, will be validly issued and outstanding obligations of the District, entitled to the benefits of the Fiscal Agent Agreement, and upon such issuance and delivery, the Fiscal Agent Agreement will provide, for the benefit of the owners from time to time of the Bonds, the legally valid and binding pledge of and lien and security interest it purports to create. ......, (h) As of the date hereof, there is no action, suit, proceeding, inquiry or investigation, notice of which has been served on the District, at law or in equity before or by any court, government agency, public board or body, pending or to the best knowledge of the officer of the City executing this Purchase Contract on behalf of the District, threatened against the District, affecting the existence of the District, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance or delivery of the Bonds or the pledge and lien on the Special Taxes pursuant to the Fiscal Agent Agreement, or contesting or affecting as to the District the validity or enforceability of the Bond Law, the Bonds or the Basic Documents, or contesting the tax- exempt status of interest on the Bonds, or contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the District for the issuance of the Bonds, or the execution and delivery or adoption by the District of the Basic Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the District, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the Bond Law, as to the District, or the authorization, execution, delivery or performance by the District of the Bonds or the Basic Documents. ~ 45788725.1 4 AGENDA ITEM NO. :3 ~ PACE I'J-- OF 3l2XP. ,,-... ,,-... ,,-... (i) The District will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (x) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate, (y) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the District shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction, provided, that the Underwriter shall bear all costs in connection with the District's action under (x) and (y) herein, and (z) assure or maintain the tax-exempt status ofthe interest on the Bonds. (j) As of the date thereof, the Preliminary Official Statement does not, except for the omission of certain information permitted to be omitted in accordance with Rule 15c2-12 of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934 (the "Rule"), contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein with respect to the District, in light of the circumstances under which they were made, not misleading. (k) At the time ofthe District's acceptance hereof, and (unless an event occurs of the nature described in paragraph (m) of this Section 5) at all times subsequent thereto up to and including the date of the Closing, the Official Statement does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the District shall apply only to the information contained in the Official Statement relating to the District. (1) If the Official Statement is supplemented or amended pursuant to paragraph (m) of this Section 5, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the date of the Closing, the Official Statement as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that these representations and warranties of the District shall apply only to the information contained in the Official Statement relating to the District. (m) If between the date of this Purchase Contract and that date which is 25 days after the end of the underwriting period (as determined in accordance with Section 13 hereof) any event known to the District shall occur affecting the District which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the District shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the District will at its expense prepare and furnish to the Underwriter a reasonable number of copies of such 45788725. ) 5 AGENDA ITEM NO. 33 PAGi-l S OF 300 supplement to, or amendment of, the Official Statement in a form and in a manner approved by the Underwriter. ......", (n) The District will refrain from taking any action, or permitting any action to be taken, with regard to which the District may exercise control, that results in the loss of the tax -exempt status of the interest on the Bonds. (0) Any certificate signed by any officer of the City on behalf of the District and delivered to the Underwriter pursuant to the Fiscal Agent Agreement, this Purchase Contract or any document contemplated thereby shall be deemed a representation and warranty by the District to the Underwriter as to the statements made therein. (P) The District will cause the proceeds from the sale of the Bonds to be paid to the Fiscal Agent for the purposes specified in the Fiscal Agent Agreement and the Official Statement. So long as any of the Bonds are outstanding and except as may be authorized by the Fiscal Agent Agreement, the District will not issue or sell any bonds or other obligations, other than the Bonds sold thereby, the interest on and premium, if any, or principal of which will be payable from the payments to be made under the Fiscal Agent Agreement. (q) The District shall honor all other covenants on its part contained in the Fiscal Agent Agreement which are incorporated herein and made a part of this Purchase Contract. (r) At or prior to the Closing, the City, acting as the legislative body of the District, shall have duly authorized, and the District shall have duly executed and delivered, the ......", District Continuing Disclosure Agreement which shall comply with the provisions of the Rule and shall be substantially in the form appended to the Official Statement in Appendix E thereto. 6. Closing. At 8:00 a.m., Los Angeles time, on , 2006, or on such earlier date or as soon thereafter as practicable, as may be mutually agreed upon by the District and the Underwriter, the District will, subject to the terms and conditions hereof, cause the Fiscal Agent to deliver to the Underwriter, the Bonds, in definitive form duly authenticated by the Fiscal Agent, together with the other documents hereinafter mentioned; and the Underwriter will accept such delivery and will pay the purchase price of the Bonds as set forth in Section I hereof by delivering federal or other immediately available funds in the amount of such purchase price to the Fiscal Agent. The Bonds shall be prepared in fully registered form without coupons in authorized denominations. 7. Closing Conditions. The Underwriter has entered into this Purchase Contract in reliance upon the representations and warranties of the District contained herein, and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the District of its obligations hereunder, both as of the date hereof and as of the date of the Closing. Accordingly, the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the District of its obligations to be performed hereunder and under such documents and instruments at or prior to the Closing, and shall also be subject to the following additional conditions: ......", 45788725.1 6 AGENDA ITEM NO. PACE 71 a~ OF 50V:?. ,..... (a) The representations and warranties of the District contained herein shall be true, complete and correct on the date hereof and on and as of the date of the Closing, as if made on the date of the Closing; (b) At the time of the Closing, the Fiscal Agent Agreement shall be in full force and effect in accordance with its terms and shall not have been amended, modified or supplemented and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; (c) At the time of the Closing, all necessary official action of the City on behalf of the District and of the other parties thereto relating to the Basic Documents shall have been taken and shall be in full force and effect and shall not have been. amended, modified or supplemented in any material respect; (d) Subsequent to the date hereof, there shall not have occurred any change in or affecting particularly the District or the Bonds, as the foregoing matters are described in the Official Statement, which in the reasonable opinion of the Underwriter materially impairs the investment quality of the Bond~; (e) At or prior to the Closing, the Underwriter shall have received copies of each of the following documents: ,..... (1) The Official Statement and each supplement or amendment, if any, thereto, executed by the District; (2) A copy of the Fiscal Agent Agreement, executed by the District and the Fiscal Agent; (3) A copy of this Purchase Contract, executed by the District and the Underwriter; (4) Certificates of the District with respect to the matters described in Section 5 and in paragraphs (a), (b), (c) and (d) of this Section 7; (5) An opinion (the "Final Approving Legal Opinion"), dated the date of the Closing and addressed to the District, of Fulbright & Jaworski L.L.P., Bond Counsel for the District, substantially in the form set forth in Appendix F to the Official Statement; (6) A supplemental opinion, dated the date of the Closing and addressed to the Underwriter, of Fulbright & Jaworski L.L.P., Bond Counsel for the District, in substantially the form attached hereto as Exhibit B; (7) An opinion, dated the date of the Closing and addressed to the Underwriter, of the City Attorney of the City, as Special Counsel for the District in substantially the form attached hereto as Exhibit C; ,..... 45788725. ] 7 AGENDA ITEM NO. /" ~-'7Q 1:>3 OF 30(0 (8) A reliance letter, dated the date of the Closing and addressed to the Underwriter and the Fiscal Agent, respectively, of Fulbright & Jaworski L.L.P., Bond Counsel for the District, regarding the final approving opinion; ......" (9) An opinion, dated the date of the Closing and addressed to the Underwriter, of Fulbright & Jaworski, L.L.P., Disclosure Counsel, in substantially the form attached hereto as Exhibit D; (10) Transcripts of all proceedings relating to the authorization and issuance of the Bonds certified by the City Clerk or a Deputy City Clerk of the City on behalf of the District; (11) An opinion of counsel to the Fiscal Agent, to the effect that: (i) Due Organization and Existence - the Fiscal Agent has been duly organized and is validly existing and in good standing under the laws of the United States of America, with full corporate power to undertake the trust duties and obligations under the Fiscal Agent Agreement; (ii) Corporate Action - the Fiscal Agent has duly authorized, executed and delivered the Fiscal Agent Agreement, and by all proper corporate action has authorized the acceptance of the duties and obligations of the Fiscal Agent under the Fiscal Agent Agreement and to authorize in such capacity the authentication and delivery of the Bonds; (iii) Due Authorization. Execution and Delivery - assuming due authorization, execution and delivery by the District, the Fiscal Agent Agreement is the valid, legal and binding agreement ofthe Fiscal Agent, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights in general and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and '-" (iv) Consents - exclusive of federal or state securities laws and regulations, to the best of such counsel's knowledge after reasonable inquiry and investigation, other than routine filings required to be made with governmental agencies in order to preserve the Fiscal Agent's authority to perform a trust business (all of which routine filings such counsel believes, after reasonable inquiry and investigation, to have been made), no consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Fiscal Agent is or will be required for the execution by the Fiscal Agent of the Fiscal Agent Agreement or the authentication and delivery of the Bonds; (12) A certified copy of the general resolution of the Fiscal Agent authorizing the execution and delivery of certain documents by certain officers of the Fiscal Agent, which resolution authorizes the execution and delivery of the Fiscal Agent Agreement; '-" 45788725.1 8 AGENDA ITEM NO. ~ 3 PACE '1 Lf .~ OF~_~ ,......, (13) A certificate of the Fiscal Agent, dated the date of Closing, certifying that, subject to the limitations provided herein, the Fiscal Agent represents and warrants and agrees with the Underwriter that as of the date of Closing: (i) Due Organization and Existence - the Fiscal Agent is duly organized and existing as a national banking association in good standing under the laws of the United States of America having the full power and authority to enter into and perform its duties under the Fiscal Agent Agreement and to authenticate and deliver the Bonds to the Underwriter pursuant to the terms of the Fiscal Agent Agreement; (ii) No Conflict - to the best of the knowledge of the Fiscal Agent, after due investigation, the execution and delivery by the Fiscal Agent of the Fiscal Agent Agreement and the authentication and delivery by the Fiscal Agent of the Bonds, and compliance with the terms thereof will not, in any material respect, conflict with, or result in a violation or breach of, or constitute a default under, any loan agreement, indenture, bond, note, resolution or any other agreement or instrument to which the Fiscal Agent is a party or by which it is bound, or any law or any rule, regulation, order or decree of any court or governmental agency or body having jurisdiction over the Fiscal Agent or any of its a~tivities or properties, or result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Fiscal Agent; and "...-. (iii) No Litigation - to the best of the knowledge of the Fiscal Agent, no litigation has been served upon the Fiscal Agent to restrain or enjoin the Fiscal Agent's participation in, or in any way contesting the powers ofthe Fiscal Agent with respect to, the transactions contemplated by the Fiscal Agent Agreement; (14) Executed copies of the District Continuing Disclosure Agreement substantially in the form presented in Appendix E to the Official Statement; (15) Executed copies of the Developer Continuing Disclosure Agreement, dated as of 1, 2006, by and between Corman Leigh-Tozai Lakeshore, LLC, a California limited liability company (the "Developer"), and Union Bank of California, N.A., as dissemination agent, substantially in the form presented in Appendix E to the Official Statement; (16) A certificate or certificates dated the date hereof from the Developer, together with a bring-down certificate dated the Closing Date in substantially the forms attached hereto as Exhibit E and Exhibit F, respectively; (17) Certificate of good standing of the Developer from the Secretary of State's office; (18) An opinion of counsel to the Developer in the form acceptable to the Underwriter; (19) A certificate dated the Closing Date, signed by an authorized ,.... principal of Harris Realty Appraisal (the "Appraiser"), in a form satisfactory to the Underwriter and its counsel to the effect that (i) the individual signing the certificate is an authorized 45788725.1 9 '2.3 AGENDA ITEM NO, i:..) PAGE 17 OF ?:,~ representative of the Appraiser, and as such, is familiar with the facts certified and is authorized and qualified to certify the same; (ii) in the opinion of the Appraiser the assumptions made in the appraisal report with respect to the City of Lake Elsinore Community Facilities District No 2006- 2 (Viscaya), dated , 2006 (the "Appraisal"), are reasonable; (iii) that the Appraiser is not aware of any event or act which has occurred since the date of the Appraisal which, in its opinion, would materially and adversely affect the conclusion as to the appraised value reached in the Appraisal; (iv) the Appraiser consents to the reproduction of the Appraisal as Appendix C to the Official Statement and to the references to the Appraiser and the Appraisal made in the Official Statement; (v) that the Official Statement has been reviewed on behalf of the Appraiser and to the best knowledge of the Appraiser the statements concerning the Appraisal and the value of the property contained under the captions "THE DISTRICT - Description of Development" are true, correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (vi) the District and the Underwriter are entitled to rely on the Certificate; (20) A copy of the Appraisal; ....., (21) A certificate from Harris & Associates ("Special Tax Consultant") to the effect that (i) the Special Tax if applied in accordance with the terms as set forth in the Rate and Method of Apportionment for CoIinnunity Facilities District No. 2006-2 of the City of Lake Elsinore (Viscaya) (the "Special Tax Formula"), after deducting Administrative Expenses, will annually yield sufficient revenue to make timely payments of debt service on the Bonds, provided that information and other data supplied by the District, by the Developer, by the '-'" Appraiser, by the Underwriter or by any of their agents, which has been relied upon by the Special Tax Consultant is true and correct, (ii) the Special Tax, if collected in the maximum amounts permitted pursuant to the Special Tax Formula on the Closing Date, would generate at least 110% of the maximum debt service payable with respect to the Bonds payable from such Special Tax during each fiscal year, based on a debt service schedule supplied by Southwest Securities, Inc. and the net taxable footage or acreage projection and other data provided by the Developer to the Special Tax Consultant and confirmed in the certificates of the Developer previously delivered to the Special Tax Consultant and relied upon by the Special Tax Consultant, (iii) the information supplied by such firm for use in the sections of the Official Statement captioned "APPENDIX D - RATE AND METHOD OF APPORTIONMENT" is true and correct as of the date of the Official Statement and as of the Closing Date, and (iv) the description of the Special Tax Formula contained in the section of the Official Statement captioned "FINANCIAL INFORMATION - Rate and Method of Apportionment" is correctly presented in all material respects; (22) A certificate from Empire Economics, Inc. (the "Market Consultant") to the following effect (i) the individual signing the certificate is an authorized representative of the Market Consultant, and as such, is familiar with the facts certified and is authorized and qualified to certify the same; (ii) in the opinion of the Market Consultant the assumptions made in the Market Absorption Study Summary and Conclusion with respect to the City of Lake Elsinore Community Facilities District No 2006-2 (Viscaya), dated 2006 (the "Market Absorption Study") are reasonable; (iii) that the Market Consultant is not '-'" ACENDA ITEM NO. 33 PAGE 7[( OF ~ 45788725.1 10 ",....... ~ ",....... aware of any event or act which has occurred since the date of the Market Absorption Study, which, in its opinion, would materially and adversely affect the conclusions of the Market Absorption Study; (iv) the Market Consultant consents to the reproduction of the Market Absorption Study as Appendix B to the Official Statement and to the references to the Market Consultant and the Market Absorption Study made in the Official Statement; and (v) the Market Consultant certifies that as of the date of the certificate the Market Absorption Study contained in the Official Statement and the statements concerning the Market Absorption Study contained in the Official Statement are accurate in all material respects and do not omit to state a material fact necessary in order to make the statement contained therein, in the light of the circumstances under which they are made, not misleading and no events or occurrences have been ascertained by the Market Consultant as have come to its attention that would substantially adversely change the opinions set forth in the Market Absorption Study; and (vi) the District and the Underwriter are entitled to rely on the Certificate; (23) A copy of the Market Absorption Study; (24) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and acc~racy, as of the date hereof and as of the date of the Closing, of the District's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the District on or prior to the date of the Closing of all the agreements then to be performed and conditions then to be satisfied by it. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Purchase Contract shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to Bond Counsel and the Underwriter. The opinions and other documents presented as exhibits to this Purchase Contract or as Appendices to the Official Statement shall be deemed satisfactory provided they are substantially in the forms attached as exhibits to this Purchase Contract or as Appendices to the Official Statement. If the District shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Purchase Contract, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the District shall be under any further obligation hereunder. 8. Termination. The Underwriter shall have the right to terminate the Underwriter's obligations under this Purchase Contract to purchase, to accept delivery of and to pay for the Bonds by notifying the District in writing or by telegram, oftheir election to do so, if, after the execution hereof and prior to the Closing: (a) the United States has become engaged in hostilities which have resulted in a declaration of war or a national emergency; (b) there shall have occurred the declaration of a general banking moratorium by any authority of the United States or the States of New York or California; (c) an event shall have occurred or been discovered as described in paragraph (m) of Section 5 hereof which in the opinion of the Underwriter requires the preparation and publication of disclosure material or a supplement or 45788725.1 11 AOENDAITEM NO. 33 ~~.~~<%> PAGE ''7Q OF 1> .. ." amendment to the Official statement; (d) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency in the State of California, or a decision by any court of competent jurisdiction within the State of California shall be rendered which, in the Underwriter's reasonable opinion, materially adversely affects the market price of the Bonds; ( e) legislation shall be introduced, by amendment or otherwise, or be enacted by the House of Representatives or the Senate of the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made or proposed, to the effect that the issuance, offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement, is or would be in violation of any provision of the Securities Act of 1933, as amended and as then in effect, or the Securities Exchange Act of 1934, .as amended and as then in effect, or the Trust Fiscal Agent Agreement Act of 1939, as amended and as then in effect, or with the purpose or effect of otherwise prohibiting the issuance, offering or sale of obligations of the general character of the Bonds or the Bonds, as contemplated hereby or by the Official Statement; (f) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange; (g) the New York Stock Exchange, or other national securities exchange or association or any governmental authority, shall impose as to the Bonds, or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now i~ force, with respect to the extension of credit by or the charge to the net capital requirements of broker-dealers; (h) trading in securities on the New York Stock Exchange or the American Stock Exchange shall have been suspended or limited or minimum prices have been established on either such exchange; or (i) any action shall have been taken by any government in respect of its monetary affairs which, in the reasonable opinion of the Underwriter, has a material adverse effect on the United States securities market. ~ ....., If this Purchase Contract shall be terminated pursuant to Section 7 or this Section 8, or if the purchase provided for herein is not consummated because any condition to the Underwriter's obligation hereunder is not satisfied or because of any refusal, inability or failure on the part of the District to comply with any of the terms or to fulfill any of the conditions of this Purchase Contract, or if for any reason the District shall be unable to perform all of its obligations under this Purchase Contract, the District shall not be liable to the Underwriter for damages on account of loss of anticipated profits arising out of the transactions covered by this Purchase Contract. 9. Payment of Costs and Expenses. The District shall pay (a) all costs and expenses incident to the sale and delivery of the Bonds to the Underwriter, including, but not limited to: (i) the fees and expenses of the District and its Counsel, Disclosure Counsel, Financing Consultant and other consultants; (ii) the fees and expenses of Bond Counsel; (iii) all costs and expenses incurred in connection with the preparation and printing of the Bonds; (iv) all expenses in connection with the preparation, printing, distribution and delivery of the Preliminary Official Statement, the Official Statement and any amendment or supplement thereto; (v) California Municipal Statistics fees, CUSIP Bureau charges, fees of Public Securities Association and California Public Securities Association, MSRB fees, California Debt and Investment Advisory Commission fees and (vi) the fees and expenses ofthe Fiscal Agent and its counsel shall be payable by the District from the proceeds of the Bonds. "'" 45788725.1 12 AOENDA ITEM NO. PACE to 2>3 OF~..~ '" (b) The Underwriter shall pay all advertising expenses in connection with the public offering of the Bonds and all other expenses incurred by it in connection with its public offering and distribution ofthe Bonds. 10. Representations, Warranties and Agreements to Survive Delivery. The representations, warranties, indemnities, agreements and other statements of the District and the Underwriter or their officers or partners set forth in, or made pursuant to, this Purchase Contract will remain operative and in full force and effect regardless of any investigation made by or on behalf of the District or the Underwriter or any controlling person and will survive delivery of and payment for the Bonds. 11. Notices. Any notice or other communication to be given under this Purchase Contract may be given by delivering the same in writing: To the District: City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) 130 South Main Street Lake Elsinore, California 92530 Attention: City Manager To the Underwriter: Southwest Securities, Inc. 620 Newport Center Drive, Suite 300 Newport Beach, California 92660 Attention: Tony Wetherbee ~ 12. Parties in Interest. This Purchase Contract is made solely for the benefit of the District and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof All of the District's representations, warranties and agreements contained in this Purchase Contract shall remain operative and in full force and effect, regardless of: (i) any investigations made by or on behalf of the Underwriter; (ii) delivery of and payment for the Bonds pursuant to this Purchase Contract; and (iii) any termination of this Purchase Contract. 13. Determination of End of the Underwriting Period. For purposes of this Purchase Contract, the End of the Underwriting Period for the Bonds shall mean the earlier of (a) the day of the Closing unless the District has been notified in writing by the Underwriter, on or prior to the day of the Closing, that the "end of the underwriting period" for the Bonds for all purposes of the Rule will not occur on the day of the Closing, or (b) the date on which notice is given to the District by the Underwriter in accordance with the following sentence. In the event that the Underwriter has given notice to the District pursuant to clause (a) above that the "end of the underwriting period" for the Bonds will not occur on the day of the Closing, the Underwriter agrees to notify the District in writing as soon as practicable following the "end of the underwriting period" for the Bonds for all purposes of the Rule. 14. Effectiveness. This Purchase Contract shall become effective upon the execution of the acceptance by the designee of the District and shall be valid and enforceable at the time of such acceptance. ~ 45788725.1 13 33 ACEN~:~~~';10. OF 3~ 15. Headings. The headings of the sections of this Purchase Contract are inserted for convenience only and shall not be deemed to be a part hereof. ......", 16. Governing Law. This Purchase Contract shall be construed in accordance with the laws of the State of California. 17. Counterparts. This Purchase Contract may be executed in any number of counterpart.s. If the foregoing is in accordance with your understanding of the Purchase Contract please sign and return to us the enclosed duplicate copies hereof, whereupon it will become a binding agreement between the District and the Underwriter in accordance with its terms. Very truly yours, SOUTHWEST SECURITIES, INC. By: Title Accepted: ......", This th day of , 2006 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCAYA) By: City Manager of the City of Lake Elsinore as the legislative body of the District ......", 45788725.1 14 AGENDA ITEM NO. 2> 3 MOl (5/- OF bOXP I"""- ---- "..... 45788725.1 Exhibit A $ City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A Maturity Date (September I) Principal Amount Coupon Yield A-I AOENOA ITEM NO. D 3 PAGE ~ OF :3Qa. Exhibit B Supplemental Opinion of Fulbright & Jaworski L.L.P. ....." Addressed to the Underwriter $ City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A , 2006 Southwest Securities, Inc. 620 Newport Center Drive, Suite 300 Newport Beach, California 92660 Ladies and Gentlemen: We have acted as Bond Counsel to the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya), a community facilities district established under the Constitution and the laws of the State of California (the "District"), in connection with the issuance of $ aggregate principal amount of its Special Tax Bonds, 2006 Series A (the "Bonds"). ....." The Bonds are being issued by the District under the Mello-Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California and pursuant to a Fiscal Agent Agreement, dated as of 1, 2006 (the "Fiscal Agent Agreement"), by and between the District and Union Bank of California, N.A., as fiscal agent, for the purpose of financing the acquisition of certain public facilities or capital fees to meet the needs of new development within the District, funding a reserve account for the Bonds, funding the cost of capitalized interest through September 1, 2006, and paying the costs of incidental expenses incurred in connection with financing such public facilities and forming and administering the District. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Fiscal Agent Agreement. As Bond Counsel, we have examined copies certified to us as being true and complete copies of the proceedings of the District in connection with the issuance of the Bonds. We have also examined such certificates of representatives of the District and others as we have considered necessary for the purposes of this opinion. This opinion is limited to matters governed by the laws of the State of California and Federal securities laws of the United States, and we assume no responsibility with respect to the applicability or effect of laws of any other jurisdiction. ........" 45788725.1 B-1 AGENDA ITEM 7ifo 2> 3 PAGE OF~/J(b . ,-... Based upon the foregoing, it is our opinion that: 1. The Fiscal Agent Agreement is exempt from qualification as an indenture pursuant to the Trust Indenture Act of 1939, as amended. 2. amended. The Bonds are exempt from registration pursuant to the Securities Act of 1933, as 3. As of the date of the Official Statement, dated January 26, 2006, relating to the Bonds, the information contained in the Official Statement under the captions "INTRODUCTORY STATEMENT," "THE BONDS," "SOURCES OF PAYMENT FOR THE BONDS," "SUMMARY OF THE FISCAL AGENT AGREEMENT," "LEGAL MATTERS - Tax Exemption" and "APPENDIX A - DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT," insofar as such statements expressly summarize certain provisions of the Bonds and the Fiscal Agent Agreement is accurate in all material respects. Weare furnishing you this opinion letter at the request of the District solely for your benefit as the Underwriter of the Bonds, and it is not to be used, circulated, quoted or otherwise referred to for any other purpose, nor is it to be referred to in whole or in part in the Official Statement relating to the Bonds or any other document, except that it may be included in, and reference may be made to it in any list of, the closing documents pertaining to the delivery of the Bonds. ~ Respectfully submitted, "..... 45788725.1 B-2 AGENDA ITEM NO. "3 '3 PAGE If'j OF ~ Exhibit C Opinion of Leibold, McClendon & Mann, P.C., Special Counsel to the District .....", Addressed to the Underwriter $ City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A February 7,2006 Southwest Securities, Inc. 620 Newport Center Drive, Suite 300 Newport Beach, California 92660 Ladies and Gentlemen: We are special counsel to the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District") in connection with the issuance of the above-referenced Bonds and in such capacity, we have examined the original, certified copies, or copies otherwise .....", identified to our satisfaction as being true copies of such resolutions, documents, certificates, and records as we have deemed relevant and necessary (except as we have specifically limited the scope of our investigation herein) as the basis for the opinions set forth herein (collectively the "Documents") relying on such examination and pertinent law and subject to the limitations and qualifications hereinafter set forth, we are of the opinion that: 1. The District is a community facilities district duly organized and validly existing under the laws of the State of California with full legal right, power and authority to perform all of its obligations under the Purchase Contract dated , 2006 (the "Purchase Contract") between the District and Southwest Securities, Inc. (the "Underwriter") and the Basic Documents (as defined in the Purchase Contract). The City of Lake Elsinore, acting as the legislative body of the District, has duly authorized, and the District has executed and delivered, the Basic Documents and, assuming due authorization, execution and delivery by the other parties thereto, as necessary, the Basic Documents constitute legal, valid and binding agreements of the District enforceable against the District in accordance with their terms, except as the enforceability thereof may be limited by bankruptcy, moratorium, insolvency, equitable remedies and other laws affecting creditors' rights or remedies. 2. To the best of our knowledge, there is no action, suit or proceeding before or by any court, public board or body pending or threatened wherein an unfavorable decision, ruling or finding would (a) affect the creation, organization, existence or powers ofthe District or the titles of its officers to their respective offices, (b) in any way question or affect the validity or ....., 45788725.1 C-l ~ITEMN~ ~~ PADi rl-e. OP. . if "....... enforceability of the Basic Documents, or (c) find illegal, invalid or unenforceable the Purchase Contract, or the transactions contemplated thereby, or any other agreement or instrument related to the issuance of the Bonds to which the District is a party. 3. The execution and delivery of the Basic Documents and the other instruments contemplated by any of such documents to which the District is a party, and compliance with the provisions of each thereof, will not conflict with or constitute a breach of or default under any applicable law or administrative rule or regulation of the State of California, the United States or any department, division, agency or instrumentality of either thereof, or any applicable court or administrative decree or order or any loan agreement, note, resolution, indenture, contract, agreement or other instrument to which the District is a party or is otherwise subject or bound in a manner which would materially adversely affect the District's performance under the Basic Documents. 4. All approvals, consents, authorizations, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adve~sely affect, the performance by the District of its obligations under the Basic Documents have been obtained and are in full force and effect. ~ This letter is furnished by us as special counsel to the District. Other than the District, no attorney-client relationship has existed or exists between us and you in connection with the Bonds or by virtue of this letter. Our engagement with respect to the Bonds has terminated as of the date hereof, and we disclaim any obligation to update this letter. This letter is delivered to you, is solely for your benefit and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person. This letter is not intended to, and may not, be relied upon by owners of the Bonds. Respectfully submitted, "....... 45788725.1 C-2 AGENDA ITEM NO. 2> '3 PAOE:.-_~l OF ~ Exhibit D Opinion of Fulbright & Jaworski L.L.P., Disclosure Counsel Addressed to the Issuer and the Underwriter ....., $ City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A ,2006 City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) 130 South Main Street Lake Elsinore, California 92530 Southwest Securities, Inc. 620 Newport Center Drive, Suite 300 Newport Beach, California 92660 Ladies and Gentlemen: ....., We have acted as Disclosure Counsel to the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District" or "Issuer") with respect to the issuance of the above captioned Bonds (the "Bonds"). The Bonds are being issued pursuant to the provisions of the Constitution and the laws of the State of California, including the provisions of the Mello- Roos Community Facilities Act of 1982, as amended, constituting Chapter 2.5, Part 1, Division 2, Title 5 of the Government Code of the State of California, as in existence on the Closing Date or as thereafter amended from time to time. The Bonds shall be issued and secured pursuant to a Fiscal Agent Agreement, dated as of 1,2006 (the "Fiscal Agent Agreement"), by and between the District and Union Bank of California, N.A., as fiscal agent (the "Fiscal Agent"), authorizing the issuance of the Bonds. The Bonds are more fully described in the final Official Statement of the Issuer dated ,2006 (the "Official Statement"). Capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Official Statement. In rendering this opinion, we have reviewed such records, documents, certificates and opinions, and made such other investigations of law and fact as we have deemed necessary or appropriate. This opinion is limited to matters governed by the Federal securities law of the United States, and we assume no responsibility with respect to the applicability or effect of the laws of any other jurisdiction. ....., 45788725.1 D-l AGENDA ITEM NO. :? "3 PAOE_ ~r OF:S;V . ",..... --- ,....- In our capacity as Disclosure Counsel, we have rendered certain legal advice and assistance to you in connection with the preparation of the Official Statement. Rendering such legal advice and assistance involved, among other things, discussions and inquiries concerning various legal matters, review of certain records, documents and proceedings, and participation in conferences with, among others, your representatives and representatives of Bond Counsel, the Financing Consultant, the City, the District, and other consultants, at which conferences the contents of the Official Statement and related matters were discussed. On the basis of the information made available to us in the course of the foregoing (but without having undertaken to determine or verify independently, or assuming any responsibility for, the accuracy, completeness or fairness of any of the statements contained in the Official Statement), no facts have come to the attention of the personnel in our firm directly involved in rendering legal advice and assistance in connection with the preparation of the Official Statement which cause us to believe that the Official Statement as of its date (excluding therefrom financial, engineering and statistical data; forecasts, projections, estimates, assumptions and expressions of opinions; the treatment of the Bonds or the interest, discount or premium related thereto for tax purposes under the law of any jurisdiction; and the statements contained in the Official Statement under the captions "LEGAL MATTERS - Tax Exemption," and in the Appendices thereto, as to all of which we express no view) contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. During the period from the date of the Official Statement to the date of this opinion, except for our review of the certificates and opinions regarding the Official Statement delivered on the date hereof, we have not undertaken any procedures or taken any actions which were intended or likely to elicit information concerning the accuracy, completeness or fairness of any of the statements contained in the Official Statement. Weare furnishing this opinion to you, as Disclosure Counsel to the Issuer, solely for your benefit. This opinion is rendered in connection with the transaction described herein, and may not be relied upon by you for any other purpose. This opinion shall not extend to, and may not be used, circulated, quoted, referred to, or relied upon by, any other person, firm, corporation or other entity without our prior written consent. Our engagement with respect to this matter terminates upon the delivery of this opinion to you at the time of the closing relating to the Bonds, and we have no obligation to update this opinion. Very truly yours, 45788725.1 D-2 AGENDA IlE,'" NO. PAGE <t1 ."... 03 OF~/~~ Exhibit E Certificate of the Developer ~ Reference is made to the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A (the "Bonds"), and to the Purchase Contract dated , 2006 (the "Purchase Contract") by and between the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District") and Southwest Securities, Inc. (the "Underwriter"), relating to the Bonds. This certificate is delivered pursuant to Section (7)(e)(16) of the Purchase Contract. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Contract. As used herein, the term "Actual Knowledge of the Undersigned" shall mean the knowledge that the undersigned currently has or has obtained from interviews with such officers and responsible employees of the Developer as the undersigned has reasonably determined are likely, in the ordinary course oftheir respective duties, to have knowledge of the matters set forth herein. Other than as set forth in the immediately preceding sentence, with your permission, the undersigned has not conducted any additional inspection or inquiry. As used herein, the term "Affiliate" shall mean any entity in which the Developer has a controlling ownership interest. The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of Corman Leigh-Tozai Lakeshore, LLC, a California limited liability company (the "Developer"), and the undersigned, on behalf of the Developer, further certifies as follows: ....., 1. The Developer has been duly organized and validly exists under the laws of the State of California, is duly qualified to conduct business in California, and has all requisite right, power and authority (i) to execute and deliver this Certificate, and to execute and deliver at Closing (as defined in the Purchase Contract) its proposed Developer Continuing Disclosure Agreement (the "Continuing Disclosure Agreement") dated as of I, 2006 and (ii) to undertake all of the transactions on its part contemplated by the proposed Continuing Disclosure Agreement and described in the Preliminary Official Statement. 2. As set forth in, and as of the date of, the Preliminary Official Statement, the Developer owns all of the property (the "Property") within the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District"). The Developer makes the representations herein with respect to all of such parcels. Except as otherwise described in the Preliminary Official Statement, the Developer is, and the Developer's current expectation is that the Developer shall remain, the developer of the Property. Except as otherwise described in the Preliminary Official Statement, the Developer has not entered into an agreement for development or management of the Property by any entity other than the Developer. ...." 45788725.1 E-I AGENDA I~__ 2:>3 P~OF~ ~ 3. The Developer has, or will have prior to Closing, duly authorized the execution and delivery at Closing of its proposed Continuing Disclosure Agreement, and is duly authorized to perform the obligations on its part to be performed thereunder. To the Actual Knowledge of the Undersigned, the Developer has not previously failed to comply in any material respect with any undertakings by it under Rule 15c2-12 of the Securities and Exchange Commission under the Securities Exchange Act of 1934 to provide periodic continuing disclosure reports or notices of material events in California within the past five years. 4. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer and its Affiliates are not in breach of or in default under any applicable law or administrative regulation of the State of California or the United States, or any agency or instrumentality of either, which breach or default would in any way materially and adversely affect the Developer's ability to perform its obligations under the proposed Continuing Disclosure Agreement, or the Developer's ability to pay its special tax obligations when due on its Property (the "Special Taxes"), and to the Actual Knowledge of the Undersigned, no event has occurred and is continuing which with the passage of time or giving of notice, or both, would constitute such a breach or default; and to the Actual Knowledge of the Undersigned, the execution and delivery at Closing by the Developer of its Continuing Disclosure Agreement and compliance with the provisions thereof will not conflict with or constitute a breach of or default under any law or administrative regulation applicable to the Developer. ~ 5. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, the Developer is not in breach of or in default under any applicable judgment or decree or any loan agreement, option agreement, development agreement, indenture, fiscal agent agreement, bond, note, resolution, agreement or other instrument to which the Developer is, or will upon issuance of the Bonds be, a party or otherwise subject, which breach or default would in any way materially and adversely affect the Developer's ability to perform its obligations under the proposed Continuing Disclosure Agreement, or its ability to pay the Special Taxes, and no event has occurred and is continuing that with the passage of time or giving of notice, or both, would constitute such a breach or default; and the execution and delivery at Closing by the Developer of its proposed Continuing Disclosure Agreement and compliance with the provisions thereof will not conflict with or, constitute a breach of or default under any judgment, decree, loan agreement, indenture, fiscal agent agreement, bond, note, resolution, agreement or other instrument to which the Developer is a party or otherwise subject which breach or default would in any way materially and adversely affect the Developer's ability to perform its obligations under the proposed Continuing Disclosure Agreement, its ability to develop the Property or its ability to pay the Special Taxes. 6. Except as described in the Preliminary Official Statement, the Developer has no loans outstanding and unpaid secured by the Property and no lines of credit which are secured by the Property. ~ 7. Except as set forth in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, there is no litigation or administrative proceedings of any 45788725. ] E-2 AOEIfDA rTEM NO. ~ '3 PACE 1 ( _ OF /'!LUo nature pending against the Developer (with property service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened against the Developer, which if successful, would have a material adverse affect on the ability of the Developer to complete the development and sale of the Property, or to pay the Special Taxes or ordinary ad valorem property tax obligations when due on the Property. "" 8. As of the date hereof, except as clarified below, the Preliminary Official Statement, solely with respect to information contained therein with respect to the Developer, including its Affiliates, the ownership and proposed development of the Property, the Developer's development plan, the Developer's financing plan, and the Developer's lenders and contractual arrangements, if any, as set forth under the captions "THE DISTRICT" (excluding the information regarding the Appraisal, market value ratios and annual special tax ratios and information provided by a source other than the Developer) and "SOURCES OF PAYMENT FOR THE BONDS" is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 9. The Developer has full power and authority to own and develop the Property, and to carry on its business as presently conducted and as described in the Preliminary Official Statement. 10. The Developer covenants that, while the Bonds or any refunding obligations related thereto are outstanding, the Developer and its Affiliates will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, "" regulatory agency, public board or body, that in any way seeks to challenge or overturn the formation of the District, to challenge the adoption of the Ordinance levying Special Taxes within the District, to invalidate the District or any refunding obligations, or to invalidate the special tax liens imposed under Section 3115.5 of the Streets and Highways Code based on recordation of the notices of special tax lien relating thereto. The foregoing covenant shall not prevent the Developer in any way from bringing any other action, suit or proceeding including, without limitation, an action or suit contending that the Special Tax has not been levied in accordance with the methodologies contained in the District's Special Tax Formula pursuant to which the Special Taxes are levied, an action or suit with respect to the application or use of the Special Taxes levied and collected, or an action or suit to enforce the obligations of the City and the District under the Fiscal Agent Agreement or any other agreements between the Developer, the City and/or the District, or to which the Developer is a beneficiary. 11. Except as disclosed in the Preliminary Official Statement, to the Actual Knowledge of the Undersigned, no other public debt secured by a tax or assessment on the Property is in the process of being authorized and no assessment districts or community facilities districts are in the process of being formed that include any portion of the Property. 12. Except as described in the Preliminary Official Statement, the Developer has not assumed any obligations under any judgment, decree, contract or otherwise, that '-' 45788725.1 E-3 AOENoA ITEM NO. 33 PAce?)", _OF r~~ ".... would materially interfere with the Developer's execution and performance of its obligations under the proposed Continuing Disclosure Agreement or which would in any way materially and adversely affect its ability to develop the Property or to pay Special Taxes. 13. To the Actual Knowledge of the Undersigned and except as disclosed in the Preliminary Official Statement, the Developer and its Affiliates have never defaulted to any material extent in the payment of special taxes or assessments in connection with the District or any other community facilities district or assessment district in California within the past five years. 14. The Developer has received a copy of the Rate and Method of Apportionment containing the prepayment formula. The Developer acknowledges that any prepayment of the levy of the Special Taxes with respect to any parcel of Property shall only be made in accordance with said terms. 15. The Developer agrees to comply with the provision of the Mello-Roos Community Facilities Act relating to the Notice of Special Tax described in California Government Code Section 53341.5 in connection with the sale of the Property. . r-- 16. To the Actual Knowledge of the Undersigned, the Developer and its Affiliates are solvent and no proceedings are pending (with proper service of process having been accomplished) or, to the Actual Knowledge of the Undersigned, threatened in which the Developer or the Affiliates may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from any and all of its debts or obligations or granted an extension of time to pay its debts or obligations or a reorganization or readjustment of its debts. 17. To the Actual Knowledge of the Undersigned, there are no claims, disputes, suits, actions or contingent liabilities among, by or between the Developer and any of its financial partners, Affiliates, or among, by or between the Developer and any contractors involved in the development of the Property which may materially adversely affect the development of the Property or the payment of the Special Taxes. 18. Based upon its current development plans, including, without limitation, its current budget and subject to economic conditions and risks generally inherent in the development of real property, the Developer anticipates that it will have sufficient funds to develop the Property as described in the Preliminary Official Statement and to pay Special Taxes assessed against the Property and does not anticipate that the District will be required to resort to the Reserve Account for payment of principal of or interest on the Bonds due to the Developer's nonpayment of Special Taxes. However, none of the Developer or its Affiliates is obligated to make any additional capital contribution or loan to the Developer at any time and neither the Developer nor its Affiliates are obligated to pay, or to contribute additional capital for the payment of, Special Taxes. ~ 19. To the Actual Knowledge of the Undersigned, all information submitted by, or on behalf of, the Developer to the City, the District, the Special Tax Consultant or 45788725.1 E-4 AGENDA ITEM NO. ~ 3 PAGE 92_ OF ~~_ the Underwriter in connection with the issuance of the Bonds, and to Harris Realty Appraisal (the "Appraiser") in connection with the preparation of the appraisal relating to the. District was, at the time of submission or as updated through the date of this certificate, correct in all material respects. ~ 20. The Developer consents to the issuance of the Bonds. The Developer acknowledges and agrees that the proceeds of such Bonds will be used as described in the Preliminary Official Statement, and that the costs of acquisition and construction of such improvements are estimates. Any increase in costs in excess of the estimated costs relating to improvements will reduce the improvements which maybe financed by the District, and neither the City nor the District has any obligation to provide moneys to pay for any such costs. 21. Solely as to information indicated in Section 8 hereof concerning the Developer, its Affiliates and the proposed development of the Property by the Developer, and subject to the limitations and exclusions set forth in Section 9, the Developer agrees to indemnify and hold harmless, to the extent permitted by law, the District and the City, and their officials, and employees and each person, if any, who controls any of the foregoing within the meaning of Section 15 of the Securities Act of 1933, as amended, or of Section 20 of the Securities Exchange Act of 1934, as amended, against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified party may become subject under any statute or at law or in equity or otherwise, and shall reimburse any such indemnified party for any legal or other expense incurred by it in connection with investigating any such claims against it and defending any such actions, insofar as such losses, claims, damages, liabilities or actions arise out of or are based ~ upon any untrue statement or alleged untrue statement of a material fact or the omission or alleged omission to state, in the Preliminary Official Statement, a material fact necessary to make the statement therein, in light of the circumstances under which it was made not misleading. This indemnity provision shall not be construed as a limitation on any other liability which the Developer may otherwise have to any indemnified party, provided that in no event shall the Developer be obligated for double indemnification or for the gross negligence or willful misconduct of an indemnified party. 22. The Developer agrees to execute its Continuing Disclosure Agreement substantially in the form attached to the Preliminary Official Statement, with such additional changes as may be agreed upon by the Developer. 23. If between the date hereof and the date ofthe Closing any event relating to or affecting the Developer or the proposed development of the Property by the Developer shall occur of which the undersigned has actual knowledge and which the undersigned believes might or would cause the Official Statement, as then supplemented or amended, to contain an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Developer shall notify the District and the Underwriter and if in the opinion of counsel to the District or the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Developer shall cooperate with the District in ~ 45788725.1 E-5 AGENDA ITEM NO. ~ 3 PAce qL/ OF~l?fq ,--. the preparation of an amendment or supplement to the Official Statement in form and substance satisfactory to counsel to the District and to the Underwriter. 24. For a period of 90 days after the issuance of the Bonds, if any event relating to or.affecting the Developer or the proposed development of the Property by the Developer shall occur of which the undersigned has actual knowledge as a result of which it is necessary, in the opinion of the Underwriter or counsel to the District, to amend or supplement the Official Statement in order to make the Official Statement not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, the Developer shall cooperate with the District and the Underwriter in the preparation of an amendment or supplement to the Official Statement in form and substance satisfactory to the Underwriter and counsel to the District which will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to a purchaser, not misleading. 25. The Developer agrees to deliver a bring-down certificate, substantially in the form attached hereto as Exhibit A, dated the date of issuance of the Bonds at the time of issuance of the Bonds to affirm .and restate the Developer's certifications made herein. 26. On behalf of the Developer, I have reviewed the content of this certificate and the Developer has consulted with counsel regarding the meaning of its contents. ~ , 2006 CORMAN LEIGH- TOZAI LAKESHORE, LLC, a California limited liability company DATED: By: Corman Leigh Communities, a California corporation Its: Managing Member By: Title: ,-.. 45788725.1 E-6 ACENDA rrEM NO. PAGE 95 33 OF :3K)?; Exhibit F Bring-Down Certificate ofthe Developer ~ Reference is made to the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A (the "Bonds"), to the Purchase Contract dated , 2006 (the "Purchase Contract") by and between the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District') and Southwest Securities, Inc. (the "Underwriter"). This certificate is delivered pursuant to the Purchase Contract. Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Purchase Contract. A copy of a Certificate dated , 2006 (the "Certificate") delivered by Corman Leigh-Tozai Lakeshore, LLC, a California limited liability company (the "Developer") is attached hereto as Exhibit A. The undersigned certifies that he is familiar with the facts herein certified and is authorized and qualified to certify the same as an authorized officer or representative of the Developer, and the undersigned, on behalf of the Developer, further certifies as follows: 1. The Developer has received a copy of the final Official Statement and each statement made in the Certificate is affirmed and restated as if made on the date hereof, provided that each statement made in the Certificate referring to the Preliminary Official Statement is affirmed as it relates to the final printed Official Statement and each statement made in the Certificate referring to the proposed Continuing Disclosure Agreement is affirmed as if it relates to the Continuing Disclosure Agreement as executed and delivered. ~ 2. To the Actual Knowledge of the Undersigned, no event has occurred since the date of the Official Statement which has adversely affected or will materially and adversely affect the business, properties, operations, prospects or financial condition of the Developer or its Affiliates which would materially and adversely affect the Developer's ability to develop its Property or its ability to pay its Special Taxes. 3. The Developer has duly authorized the execution and delivery of its Continuing Disclosure Agreement, is duly authorized to perform the obligations on its part to be performed thereunder, and its Continuing Disclosure Agreement constitutes the legal, valid and binding obligations of the Developer, enforceable against it in accordance with its terms. DATED: ,2006 CORMAN LEIGH- TOZAI LAKESHORE, LLC, a California limited liability company By: Corman Leigh Communities, a California corporation Its: Managing Member By: Title: ......" 45788725. I F-I AOENDA ITEM NO. 3?> PACE 9t f- OF 5~ DRAFT DATED 6/14/06 NEW ISSUE-BOOK ENTRY ONLY NOT RATED (See "CONCLUDING INFORMATION - No Rating on the Bonds" herein) In the opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the tax covenants described herein, interest on the Bonds is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 (the "Code") from the gross income of the owners thereof for federal income tax purposes and is not an item of preference under section 57(a) of the Code for purposes of the federal alternative minimum tax. See, however, "LEGAL MA1TERS - Tax Exemption" herein regarding certain other tax considerations. ;""'-. STATE OF CALIFORNIA COUNTY OF RIVERSIDE Dated: Date of Delivery $7,245,000* CITY OF LAKE ELSINORE COMMUNITY FACILITES DISTRICT NO. 2006-2 (VISCAYA) SPECIAL TAX BONDS, 2006 SERIES A Due: September I,As Shown Below This cover page contains certain information for quick reference only. It is not a summary of the issue. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision. Investment in the Bonds involves risks. See "BONDOWNERS' RISKS" herein for a discussion of special risk factors that should be considered in evaluating the investment quality of the Bonds. Interest on the Bonds is payable semiannually on March 1 and September I of each year, commencing March I, 2007, until maturity or earlier redemption (see "THE BONDS - General Provisions" and "THE BONDS - Redemption" herein). " Maturity Date SeDtember I The information contained within this Official Statement was prepared under the direction of the City by the following firm serving as Financing Consultant to the City. Rod Gunn Associates, Inc. . Principal Amount. MATURITY SCHEDULE $1,250,000* SERIAL BONDS Reoffering Maturity Date Rate SeDtember 1 Principal Amount. Interest Rate Reoffering Rate Interest Rate $15,000 2015 $90,000 25,000 2016 100,000 35,000 2017 115,000 45,000 2018 130,000 55,000 2019 150,000 65,000 2020 165,000 75,000 2021 185,000 $1,240,000* _ % Term Bond due September 1, 2026, Price _ % $4,755,000* _ % Term Bond due September 1, 2036, Price _ % The Bonds will be issued under the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State of Cali fomi a). Repayment of the Bonds will be from Special Taxes (as defined herein) to be levied within City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) and certain other funds held under the Fiscal Agent Agreement, as described herein (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein). It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The Depository Trust Company on or about July 6, 2006 (see "THE BONDS - General Provisions - Book-Entry Only-System" herein). 2008 2009 2010 2011 2012 2013 2014 The date of the Official Statement is --' 2006. * Preliminary, subject to change. ;""'- SOUTHWEST SECURITIES 33 Of 3 ?7J'/J AGENDA lTbvl NO. PM& ('(7 CITY STAFF Robert Brady, City Manager Matt N. Pressey, Director of Administrative Services Frederick Ray, City Clerk PROFESSIONAL SERVICES Bond Counsel and Disclosure Counsel Fulbright & Jaworski L.L.P. Los Angeles, California City Attorney Leibold, McClendon & Mann, P.C. Laguna Hills, California Financing Consultant Rod Gunn Associates, Inc. Huntington Beach, California Fiscal Agent Union Bank of California, N.A. Los Angeles, California Underwriter Southwest Securities, Inc. Newport Beach, California Underwriter's Counsel McFarlin & Anderson LLP Lake Forest, California Special Tax Consultant Harris & Associates Irvine, California Appraiser Harris Realty Appraisal Newport Beach, California Market Absorption Consultant Empire Economics, Inc. Capistrano Beach, California FOR ADDITIONAL INFORMATION Matt Pressey, City of Lake Elsinore (951) 674-3124 Southwest Securities, Inc. (949) 717-2000 11 ....., ....., ....., ~~ AGENDA ITEM NO. . ~~ PAGE <J' ( OF"3 --- TABLE OF CONTENTS INTRODUCTORY STATEMENT .........................1 No Acceleration Provision .......................................31 The City and the District............................................ 1 Property Controlled by Federal Deposit Security and Sources of Repayment ..........................2 Insurance Corporation and other Federal Purpose ..... ....... ....... .... ........ ................ .... ........... ........2 Agencies ................. ...... ................. ........ ..... ... ....... 31 The Bonds..................................................................3 Limitations on Remedies .........................................32 Legal Matters .............................................................4 Right to Vote on Taxes Act ......................................33 Professional Services .......................:.........................4 Ballot Initiatives and Legislative Measures............. 33 Offering of the Bonds ................................................4 Early Bond Redemption ..........................................34 Information Concerning this Official Statement........5 Loss of Tax Exemption............................................34 IRS Audits ...............................................................34 Secondary Market............... .......... ......... ........ ..........34 ,-- SELECTED FACTS ...................................................8 ESTIMATED SOURCES AND USES OF FUNDS ....................................................................10 Investment of Funds ................................................10 THE BONDS .............................................................11 General Provisions................................................... 11 Redemption..... ...... ............ .................. ................... ..13 Scheduled Debt Service on the Bonds..................... 16 ,-- SOURCES OF PAYMENT FOR THE BONDS.....18 GeneraL........ ...................... ...... ....... ................ ...... ..18 Special Taxes ...........................................................18 Reserve Account ......................................................18 Capitalized Interest ..................................................19 Covenant for Superior Court Foreclosure ................19 Prepayment of Special Tax ......................................20 Special Taxes Are Not Within Teeter Plan ...............20 BONDOWNERS' RISKS .........................................21 General........................................... .................. ........21 Limited Obligation.... ........ ........... .................. ......... .21 Insufficiency of Special Taxes .................................21 Concentration of Ownership ....................................22 No Personal Liability for Special Taxes.......,...........22 Adjustable Rate and Non-Conventional Mortgages .............................................................22 Foreclosure and Sale Proceedings ...........................23 Land Values .............................................................23 Value-to-Lien Ratio .................................................24 The Progress of Land Development; Risks of Real Estate Secured Investments ..........................25 Geologic, Topographic and Climatic Conditions.....25 Endangered and Threatened Species........................26 Earthquakes ............ ................. ....... .................. ...... .26 Legal Requirements .................................................26 Other Possible Claims Upon the Values of an Assessed Parcel......... ....... ....... ................. ............ .26 Bankruptcy Proceedings ..........................................27 Bankruptcy and Foreclosure Delays ........................28 Additional Taxation .................................................29 Parity Taxes and Special Assessments .....................29 Disclosure to Future Land Buyers ...........................29 Billing of Special Taxes ...........................................29 Collection of Special Tax.........................................30 Maximum Rates ......... ............................ ..................30 Exempt Properties............. ..................................... ..30 Insufficient Special Taxes ........................................31 ,-- SPECIAL TAXES AND DEBT SERVICE .............35 Administration of the Special Tax ...........................35 Rate and Method of Apportionment ........................35 Delinquencies and Foreclosure Actions................... 36 Debt Service Coverage ............................................39 THE CITY................................................................. 41 THE DISTRICT ....................................................... 42 Boundaries of the District........................................42 Facilities and Fees to be Financed by the District ...... ........... ........... ......................................42 The Developer .........................................................45 Description of Development................ ....... ............. 46 Financing Plan .........................................................49 LEGAL MATTERS .................................................. 51 Enforceability of Remedies ..................................... 51 Approval of Legal Proceedings ...............................51 Tax Exemption......................................................... 51 Absence of Litigation ..............................................53 CONCLUDING INFORMATION ..........................54 No Rating on the Bonds.........................:.................54 Underwriting.. ....... ...... ................. .... ...... ....... ...........54 Experts.. .................. .................. ........ ...... ................. 54 The Financing Consultant........................................ 54 Additional Information ............................................54 References ............... ...... ............ ...... ....... ...... ...........55 Execution............ ......................... ............................55 iii AGENDA.TiM tiO. :3 ~ PAO&(qOf?-bro APPENDIX A DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT .................................................... A-I APPENDIX B SUMMARY OF THE FISCAL AGENT AGREEMENT ......................................B-l APPENDIX C MARKET ABSORPTION STUDY ................................................................. C-l APPENDIX D APPRAISAL REPORT ................ D-l APPENDIX E RATE AND METHOD OF APPORTIONMENT ............................................E-l APPENDIX F FORMS OF CONTINUING DISCLOSURE AGREEMENTS ........................F-l APPENDIX G PROPOSED FORM OF BOND COUNSEL 0 PINION ......................................... G-l iv AGENDA ITEM NO. PACE /'DD OF '"'-tIll' ...." ....", 3~ ~ ,- Lake ElsinoreVidnjtyMap ..",- v AOENDA ITEM NO. '3'3 PAGE i Ol OF ~{)td_ OFFICIAL STATEMENT 'w1JIf $7,245,000* CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCAYA) SPECIAL TAX BONDS, 2006 SERIES A This Official Statement which includes the cover page and appendices (the "Official Statement") is provided to furnish certain information concerning the sale of the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A (the "Bonds"), in the aggregate principal amount of $7,245,000* . INTRODUCTORY STATEMENT This Introductory Statement contains only a brief description of this issue and does not purport to be complete. This Introductory Statement is subject in all respects to more complete information in the entire Official Statement and the offering of the Bonds to potential investors is made only by means of the entire Official Statement and the documents summarized herein. Investment in the Bonds involves risks. Potential investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision with respect to the Bonds (see "BONDOWNERS'RISKS" herein). The City and the District The City. The City of Lake Elsinore (the "City") was founded in 1883 and incorporated on April 23, 1888 in San Diego County. In 1893 the Elsinore Valley, previously in San Diego County, became a part of the new County of Riverside. The City encompasses approximately 39 square miles, with over 10 miles of lake shore, and is located at the southwestern end of Riverside County. It is 73 miles east of downtown Los Angeles and 74 miles north of downtown San Diego. Neighboring communities include Canyon Lake, Murrieta and Temecula (see "Vicinity Map" herein). '-' The District. The Mello-Roos Community Facilities Act of 1982, as amended, constituting Section 53311 et seq. of the Government Code of the State of California (the "Act"), was enacted by the California Legislature to provide an alternative method of financing certain public facilities, improvements and services. The Act authorizes local governmental entities to establish community facilities districts as legally constituted governmental entities within defined boundaries, with the legislative body of the local applicable governmental entity acting on behalf of such district. Subject to approval by at least a two-thirds vote of the votes cast by qualified electors within such district and compliance with the provisions of the Act, the legislative body may issue bonds for such community facilities district established by it and may levy and collect a special tax within such district to repay such bonds (see "SELECTED FACTS" and "SPECIAL TAXES AND DEBT SERVICE" herein). * Preliminary, subject to change ....., AGENDA ITEM NO. "3} PAGE tDJ.--"OF ~~ ,-.... On April 25, 2006 the City formed City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District). The sole qualified elector at the time within the District voted in favor of the incurrence of bonded indebtedness. The maximum authorized bonded indebtedness for the District is $7,500,000. The special tax authorized to be levied within the District to pay for certain facilities, capital fees and to pay debt service on the Bonds is described in the Rate and Method of Apportionment (the "Rate and Method of Apportionment") attached hereto as "APPENDIX E - RATE AND METHOD OF APPORTIONMENT" and shall be referred to herein as the "Special Tax" or "Special Taxes." The District is located is located approximately 2 miles southwest of Interstate 15 freeway near the southwest comer of Lakeshore Drive and Riverside Drive. The District coincides with the boundaries of Tract No. 32008. The development within the District is planned for 168 detached single family housing units (the "Development") on approximately 15.6 net acres. Corman Leigh-Tozai Lakeshore, LLC, a California limited liability company, (the Developer") currently owns all of the land in the District. (see "BONDOWNERS RISKS- Concentration of Ownership" herein). The manager of the Developer is Corman Leigh Communities, a California corporation. As of May 15,2006, the sites within Tract No. 32008 were improved from blue top to near finished lot condition, four model homes were complete and 42 production units were under construction. As of May 15,2006, 122 dwellings had been released for sale and 119 homes were under contract but escrows have not yet closed on these homes. As is common with sales at this stage of development, the sales- are subject to -a number of contingencies and the Developer can provide no assurance that the current sales will result in closed escrows. Security and Sources of Repayment The Bonds. The Bonds are secured under the Fiscal Agent Agreement between the District and Union r--. Bank of California, N.A., Los Angeles, California, as fiscal agent (the "Fiscal Agent") dated as of July 1, 2006 (the "Fiscal Agent Agreement") (see "APPENDIX B SUMMARY OF THE FISCAL AGENT AGREEMENT" herein). The District has covenanted in the Fiscal Agent Agreement to levy in each Fiscal Year the Special Taxes on parcels of land pledged to the repayment of the Bonds in an amount sufficient to pay debt service on the Bonds and the administrative expenses subject to the limitation on the Maximum Annual Special Tax that may be levied on such land within the District (see "THE DISTRICT" and "SPECIAL TAXES AND DEBT SERVICE" for a description of the Special Tax within the District) (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein). The Bonds are special obligations of the District. The Bonds do not constitute a debt or liability of the City, the State of California (the "State") or of any political subdivision thereof, other than the District. The District shall only be obligated to pay the principal of the Bonds, and the interest thereon, from the funds described herein, and neither the faith and credit nor the taxing power of the City, the State or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds. See "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein. Purpose The Bonds are being issued to provide the District with funds to finance public infrastructure, including certain capital fees imposed by the City and the Elsinore Valley Municipal Water District, related to the District (the "Facilities") (see "THE DISTRICT - Facilities and Fees to be Financed by the District"), to fund interest on the Bonds to and including September 1,2007, to pay the expenses of the District and the Developer in connection with the formation of the District and issuance of the Bonds and to make a ,...... 2 AGENDA IT. Ell Ng.. D {D<t? PAOeJ 0 ~ OF ___- deposit to the Reserve Account. The amount of the deposit into the Reserve Account will be in the amount equal to $652,480* (see "ESTIMATED SOURCES AND USES OF FUNDS" herein). ......." The Bonds Redemption. The Bonds maturing September 1, 2026 and September 1,2036 are subject to mandatory redemption, without premium, prior to their maturity date, in part by lot on September 1 in each year commencing September 1, 2022 in the case of the Bonds maturing September 1, 2026 and September 1, 2027 in the case of the Bonds maturing September 1, 2036 from sinking fund payments under the Fiscal Agent Agreement (see "THE BONDS - Redemption - Mandatory Redemption" herein). The Bonds are subject to optional redemption prior to maturity, in whole or in part, by lot, on September 1, 2012, and on any date thereafter at a redemption price equal to the principal amount thereof, plus accrued interest to the date of redemption, plus a premium, as described herein (see "THE BONDS _ Redemption - Qptional Redemption" herein). The Bonds are subject to redemption, in part, on any date from amounts constituting prepayments of Special Taxes at a redemption price equal to the principal amount thereof, plus accrued interest to the date of redemption, plus a premium, as described herein (see "THE BONDS - Redemption - Special Mandatory Redemption from Prepayment of Special Taxes" herein). The Bonds are subject to special mandatory redemption in whole or in part, on any date without premium under certain other circumstances as described herein (see "THE BONDS - Redemption" herein). Denominations. The Bonds will be issued in the minimum denomination of $5,000 each or any integral multiple thereof (see "THE BONDS - General Provisions" herein). Registration, Transfer and Exchange. The Bonds will be issued in fully-registered form without coupons. Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the Fiscal Agent Agreement (see "THE BONDS - General Provisions - Transfer or Exchange of Bonds" herein). When delivered, the Bonds will be registered in the name of The Depository Trust Company, New York, New York ("DTC"), or its nominee. DTC will act as securities depository for the Bonds. Individual purchases of Bonds will be made in book-entry form only in the principal amount of $5,000 each or any integral thereof. Purchasers of the Bonds will not receive certificates representing their Bonds (see "THE BONDS - General Provisions - Book-Entry-Only System" herein). ....., Payment. Principal of the Bonds and any premium upon redemption will be payable in each of the years and in the amounts set forth on the cover page hereof upon surrender at the corporate trust office of the Fiscal Agent in Los Angeles, California. Interest on the Bonds will be paid by check of the Fiscal Agent mailed by first class mail on the Interest Payment Date to the person entitled thereto (except as otherwise described herein for interest paid to an account in the continental United States of America by wire transfer as requested in writing no later than the applicable Record Date by owners of $1 ,000,000 or more in aggregate principal amount of Bonds) (see "THE BONDS - General Provisions" herein). Initially, interest on and principal and premium, ifany, of the Bonds will be payable when due by wire of the Fiscal Agent to DTC which will in turn remit such interest, principal and premium, if any, to DTC Participants (as defined herein), which will in turn remit such interest, principal and premium, if any, to Beneficial Owners (as defined herein) of the Bonds (see "THE BONDS - General Provisions - Book-Entry- Only System" herein). * Preliminary, subject to change '-" 3 AGENDA ITEM NO. PAGE ( tx-I -O? OF~ ,-.. Notice. Notice of any redemption will be mailed by first class mail by the Fiscal Agent at least thirty (30) but no more than sixty (60) days prior to the date fixed for redemption to the registered owners of any Bonds designated for redemption and to the Securities Depositories and Information Services provided in the Fiscal Agent Agreement. Neither failure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of the proceedings for redemption of such Bonds or the cessation of accrual of interest on the redemption date (see "THE BONDS - Redemption - Notice of Redemption" herein). Legal Matters The legal proceedings in connection with the issuance of the Bonds are subject to the approving opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, as Bond Counsel. Such opinion, and certain tax consequences incident to the ownership ofthe Bonds, including certain exceptions to the tax treatment of interest, are described more fully under the heading "LEGAL MATTERS" herein. Certain legal matters will be passed on for the City by Leibold, McClendon & Mann, P.C., Laguna Hills, California, as City Attorney and by Fulbright & Jaworski L.L.P., Los Angeles, California, Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by McFarlin & Anderson LLP, Lake Forest, California, Underwriter's Counsel. Professional Services ,,-.... Union Bank of California, N.A., Los Angeles, California, will serve as Fiscal Agent under the Fiscal Agent Agreement. The Fiscal Agent will act on behalf of the Bondowners for the purpose of receiving all moneys required to be paid to the Fiscal Agent, to allocate, use and apply the same, to hold, receive and disburse the Special Taxes and other funds held under the Fiscal Agent Agreement, and otherwise to hold all the offices and perform all the functions and duties provided in the Fiscal Agent Agreement to be held and performed by the Fiscal Agent. Harris & Associates, Irvine, California, Special Tax Consultant, prepared the cash flow certificate for the District demonstrating that there will be sufficient Special Taxes, assuming timely receipt, to pay debt service on the Bonds (see "CONCLUDING INFORMATION - Experts" herein). Rod Gunn Associates, Inc., Huntington Beach, California, Financing Consultant, advised the City as to the financial structure and certain other financial matters relating to the Bonds. Fees payable to Bond Counsel, Disclosure Counsel, Underwriter's Counsel and the Financing Consultant are contingent upon the sale and delivery of the Bonds. Offering of the Bonds Authority for Issuance. The Bonds are to be issued and secured pursuant to the Fiscal Agent Agreement, as authorized by resolution of the City adopted on April 25, 2006. The Bonds are also issued in accordance with the laws of the State, and particularly the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311 et seq. of the Government Code of the State). The Bonds are being sold to Southwest Securities, Inc. (the "Underwriter") pursuant to a Purchase Contract approved by the City by Resolution adopted on April 25, 2006. "...... Offering and Delivery of the Bonds. The Bonds are offered when, as and if issued, subject to the approval as to their legality by Fulbright & Jaworski L.L.P., Los Angeles, California, as Bond Counsel. Certain legal matters will be passed upon for the City by Leibold, McClendon & Mann, P.c., Laguna Hills, California, as City Attorney and by Fulbright & Jaworski L.L.P., Los Angeles, California, Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by McFarlin & 4 AOENDA ITEM NO. 33 PACE ID5 OF 3(1 Anderson LLP, Lake Forest, California, as Underwriter's Counsel. It is anticipated that the Bonds, in book-entry form, will be available for delivery through the facilities of The Depository Trust Company on ...." or about July 6, 2006. No dealer, broker, salesperson or other person has been authorized by the District, the City, the Financing Consultant or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds described herein, other than as contained in this Official Statement, and if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement does not constitute an offer to sell nor the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale or to any person to whom it is unlawful to make such offer, solicitation or sale. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. The Bonds are exempt from registration with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended. The Bonds have not been registered or qualified under the securities laws of any state. The Bonds will not be listed on any stock or securities exchange. Neither the Securities and ...." Exchange Commission nor any other federal, state or other governmental entity or agency will have passed upon the accuracy or adequacy of the Official Statement or approved the Bonds for sale. Information Concerning this Official Statement This Official Statement speaks only as of its date. The information set forth herein has been obtained by the Financing Consultant from the City, the District, the Developer and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness, nor has it been independently verified and is not to be construed as a representation by the Financing Consultant, the City or the District. The Underwriter has provided the following sentence for inclusion in this Official Statement. The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended as such and are not to be construed as representations of fact. Preliminary Official Statement Deemed Final. The information set forth herein is in a form deemed final, as of its date, by the District for the purpose of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (except for the omission of certain information permitted to be omitted under said Rule). The information herein is subject to revision, amendment and completion in a final Official Statement. The information and expressions of opinion herein are subject to change without notice and the delivery of this Official Statement shall not, under any circumstances, create any implication that there has been no change in the information or opinions set forth herein or in the affairs of the District since the date hereof. ~ 5 AGENDA ITEM NO. ;, '7 ~ PAGE L OcP OF ~ . ... ~ ",-... ~ Continuing Disclosure. The District and the Developer have covenanted for the benefit of owners of the Bonds to provide certain financial information and operating data relating to the District each year. The District has agreed to make such information available not later than 225 days after the end of the City's fiscal year, commencing with fiscal year 2005/06 and the Developer has agreed to make such information available not later than February IS of each year until the obligation is terminated, commencing February 15,2007 (each an "Annual Report" and collectively the "Annual Reports"), and to provide notices of the occurrences of certain enumerated events, if material. The District and the Developer shall file or cause to be filed by the Dissemination Agent the Annual Reports with each Nationally Recognized Municipal Securities Information Repository and with the appropriate State information depository, if any. The notices of material events will be filed by the Dissemination Agent on behalf of the District and the Developer with the Municipal Securities Rulemaking Board (and with the appropriate State information depository, if any) or each Nationally Recognized Municipal Securities Information Repository. The specific nature of information to be contained in the Annual Reports or the notice of material events is summarized in "APPENDIX F - FORMS OF CONTINUING DISCLOSURE AGREEMENTS." These covenants have been made by the District and the Developer in order to assist the Underwriter in complying with Rule 15c2-12(b)(5) (the "Rule") promulgated by the Securities and Exchange Commission. The Developer will be released from its obligation under its Continuing Disclosure Agreement to provide its Annual Report and notices of material events upon the earliest to occur of certain events, including at such time that the property owned by the Developer in the District is no longer responsible for payment of 20% or more of the Special Taxes in the District. The District has never failed to meet its continuing disclosure requirements under such rule in any material manner. An officer or representative executing a certificate on behalf of the Developer will certify that to his or her knowledge, the Developer has not previously failed to comply in any material respect with undertakings by it under the Rule to provide periodic continuing disclosure reports or notice of material events in California within the past five years. Each year until the final maturity of the Bonds, the District is required to, not later than October 30 of each year, supply the following information to the California Debt and Investment Advisory Commission by mail, postage prepaid: I. The principal amount of Bonds outstanding. 2. The balance in any Bonds reserve fund. 3. The balance in any capitalized interest fund. 4. The number of parcels which are delinquent with respect to their Special Tax payments, the amount that each parcel is delinquent, the length of time that each has been delinquent, and when foreclosure was commenced for each delinquent parcel. 5. The balance in any construction funds. 6. The assessed value of all parcels subject to Special Tax to repay the Bonds as shown on the most recent equalized roll. In addition, the District is required to notify the California Debt and Investment Advisory Commission by mail, postage prepaid, within 10 days if any of the following events occur: 1. The District or its Fiscal Agent fails to pay principal and interest due on any scheduled payment date. 2. Funds are withdrawn from any reserve fund to pay principal and interest on the Bonds. Neither the District nor the California Debt and Investment Advisory Commission will be liable for any inadvertent error in reporting the required information. The failure by the District to comply with its reporting obligations is not a default under the Fiscal Agent Agreement. 6 )~ AOENOA ITEM N~. - ~ PAGE--L15l OF - t) ~ Availability of Legal Documents. The summaries and references contained herein with respect to the Fiscal Agent Agreement, the Bonds, and other statutes or documents do not purport to be comprehensive ...", or definitive and are qualified by reference to each such document or statute, and references to the Bonds are qualified in their entirety by reference to the form thereof included in the Fiscal Agent Agreement. Definitions of certain terms used herein are set forth in "APPENDIX A" hereto. Copies of the documents described herein are available for inspection during the period of irutial offering of the Bonds at the offices of the Underwriter, Southwest Securities, Inc., 620 Newport Center Drive, Suite 300, Newport Beach, California 92660, telephone (949) 717-2000. Copies of these documents may be obtained after delivery of the Bonds from the City at 130 S. Main Street, Lake Elsinore, California 92530, telephone (951) 674-3124. ....." '-II' 7 AGENDA 'TEM NO. ? ~ PAOeJ1i> ~ ~ SELECTED FACTS The following summary does not purport to be complete. Reference is hereby made to the complete Official Statement in this regard. Furthermore, the following summary makes certain assumptions regarding valuation of property within the District. Neither the City nor the District makes any representation as to the current value of property in the District or provides any assurance as to the estimated values of property being achieved (see "BONDOWNERS'RISKS" herein). THE BONDS Principal Amount of Bonds: $7,245,000* Additional Bonds: No additional bonds on a parity with the Bonds are authorized (see "APPENDIX B SUMMARY OF THE FISCAL AGENT AGREEMENT" herein). First Optional Redemption Date: September 1, 2012 at 102% of Principal Amount (see "THE BONDS-Redemption" herein). First Special Mandatory Redemption Date: On any date on or after September 1, 2006 from prepayment of Special Taxes at a premium, as described herein. Primary Source of Revenues for Repayment: Special Taxes levied within the District as defined herein (see "SPECIAL TAXES AND DEBT SERVICE" herein). -- Priority: All Bonds are secured by a first pledge of and lien on all Special Taxes levied within the District (see "SOURCES OF PAYMENT FOR THE BONDS" and "BONDOWNERS' RISKS" herein). THE DISTRICT Estimated Acreage: 15.6 net acres Discounted "Bulk Value" of Parcels in the District: $28,800,000 Ratio of Market Value to Principal Amount of 3.98 to 1 * Bonds: Minimum Ratio of Authorized Maximum 110% Annual Special Taxes in any Fiscal Year to Annual Debt Service on the Bonds: * Preliminary, subject to change ,..... 8 AGENDA ITEM}!9. PAGE I V\ ~?>>- OF~ PROPERTY OWNERS AND DEVELOPMENT Property Owner: Description of Proposed Development: Government Approvals: Grading: Start of Construction: Estimated Absorption Period: Estimated Home Sizes: Estimated Price Range of Homes: ....." Corman Leigh- Tozai Lakeshore, a California limited liability company (see "BONDOWNERS' RISKS -Concentration of Ownership" herein). The Developer expects to construct 168 detached residential units. Tentative maps approved and Final maps have been recorded. As of May IS, 2006, the property within Tract No. 32008 was improved from blue top to near finished lot condition. As of May 15,2006,4 model homes were completed and construction had started on 42 production units. The Developer expects that escrows will close on all 168 units in 2006. 122 units have been released for sale. 119 units have been reserve with cash deposits. 4 floor plans ranging in size from 1,506 Sq. Ft. to 2,513 Sq. Ft. $363,000 to $414,000 ....." ~ 9 AGENDA ITEM NO. '33 PACE_'ib OF ~fM__ ,,-... ESTIMATED SOURCES AND USES OF FUNDS Under the provisions of the Fiscal Agent Agreement, the Fiscal Agent will receive the proceeds from the sale of the Bonds and will apply them as follows: Sources of Funds Principal Amount of the Bonds $7,245,000.00* Net Original Issue Discount Underwriter's Discount Total Uses of Funds Acquisition and Construction Fund Interest Account (1) Reserve Account (2) Costs of Issuance Account (3) City Administration and Reimbursements (4) Total (1) Estimated capitalized interest through September 1,2007. ,,-.. (2) Equal to the Reserve Requirement. (3) Expenses include fees of Bond Counsel, Financing Consultant, Disclosure Counsel, Appraiser, Market Consultant, Special Tax Consultant, Fiscal Agent, costs of printing the Official Statement, and other costs of issuance of the Bonds. (4) City administration fees, fees and expenses of levying the Special Taxes in the first year and certain reimbursements including Developer Counsel and consultants. Investment of Funds All moneys in any of the funds or accounts established with the Fiscal Agent pursuant to the Fiscal Agent Agreement will be invested solely in Authorized Investments (see "APPENDIX A - DEFINITION OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT" herein), as directed pursuant to the Written Request of the District filed with the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Written Request, the Fiscal Agent will invest any such moneys in money market funds. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. For the purpose of determining the amount in any fund, the value of Authorized Investments credited to such fund will be calculated at the market thereof (excluding any accrued interest). * Preliminary, subject to change ,....... 10 ACENDA ITEM NO. ~ '3> PACE J)2 ~ OF ~ t;1:P THE BONDS ...." General Provisions Repayment of the Bonds. Interest is payable on the Bonds at the rates per annum set forth on the cover page hereof. Interest with respect to the Bonds will be computed on the basis of a year consisting of 360 days and twelve 30-day months. Each Bond will be dated the Delivery Date, and interest with respect thereto will be payable from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before an Interest Payment Date and after the close of business on the preceding Record Date, in which event interest with respect thereto will be payable from such Interest Payment Date; (b) it is authenticated on or before February 15,2007, in which event interest with respect thereto will be payable from the Delivery Date; or (c) interest with respect to any Outstanding Bond is in default, in which event interest with respect thereto will be payable from the date to which interest has been paid in full, payable on each Interest Payment Date. Interest with respect to the Bonds will be payable by check of the Fiscal Agent mailed by first class mail on the applicable Interest Payment Date to the Owners thereof provided that in the case of an Owner of $1,000,000 or greater in principal amount of Outstanding Bonds, such payment may, at such Owner's option, be made by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided prior to the applicable Record Date to the Fiscal Agent by such Owner. The Owners of the Bonds shown on the Registration Books on the Record Date for the Interest Payment Date will be deemed to be the Owners of the Bonds on said Interest Payment Date for the purpose of the paying of interest. Principal of the Bonds and any premium upon early redemption is payable upon presentation and surrender thereof, at the corporate trust office of the Fiscal Agent in Los Angeles, California. Book-Entry-Only System. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof. '-' The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered security certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2.2 million issues of U.S. and non-U.S. equity corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Fixed Income Clearing Corporation and Emerging Markets Clearing Corporation, (respectively, "NSCC," "FICC," and "EMCC," also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American '-' II AGENDA ITEM NO. 3'3 PAGE I J ~ OF ?;f7d3_ ,-...... Stock Exchange LLC, and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as both U.S. and non-U.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive. written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which mayor may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. ",-... Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and. by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. Ifless than all of the Bonds within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Coo's consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium price, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Fiscal Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or ,,-. registered in "street name," and will be the responsibility of such Participant and not of DTC, the Fiscal 12 AGENDA ITEM NO. "D3 PACE / / t.f OF..!:lk2- Agent, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal, redemption price and interest payments to Cede & Co. (or such other nominee ......" as may be requested by an authorized representative of DTC) is the responsibility of the District or the Fiscal Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Fiscal Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered to DTC. In the event that the book-entry system is discontinued as described above, the requirements of the Fiscal Agent Agreement will apply. The foregoing information concerning DTC and DTC's book-entry system has been provided by DTC, and neither the District nor the Fiscal Agent take any responsibility for the accuracy thereof. Neither the District nor the Underwriter can and do not give any assurances that DTC, the Participants or others will distribute payments of principal, interest or premium, if any, evidenced by the Bonds paid to DTC or its nominee as the registered owner, or will distribute any redemption notices or other notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in the manner described in this Official Statement. Neither the District nor the Underwriter is responsible or liable for the failure of DTC or any Participant to make any payment or give any notice to a Beneficial Owner with respect to the Bonds or an error or delay relating thereto. Transfer or Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred or exchanged, pursuant to the provisions of the Fiscal Agent Agreement, upon surrender of such Bond for cancellation at the corporate trust office of the Fiscal Agent. Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the Fiscal Agent shall authenticate and deliver a new Bond or Bonds for like aggregate principal amount. The Fiscal Agent may require the payment by the Bondowner requesting such transfer or exchange of any tax or other governmental charge required to be paid with respect to such transfer or exchange.' The Fiscal Agent is not required to transfer or exchange (a) any Bonds or portions thereof during the period established by the Fiscal Agent for selection of Bonds for redemption, or (b) any Bonds selected for redemption. '-'" Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond becomes mutilated, the District, at the expense of the Bondowner, will execute, and the Fiscal Agent will thereupon authenticate and deliver, a new Bond of like series, tenor and authorized denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent will be canceled by it. If any Bond issued under the Fiscal Agent Agreement is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and the District and, if such evidence is satisfactory to them and indemnity satisfactory to them is given, the District, at the expense of the Bondowner, will execute, and the Fiscal Agent will thereupon authenticate and deliver, a new Bond of like series and tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued under the provisions of the Fiscal Agent Agreement described in this paragraph in lieu of any Bond alleged to be lost, destroyed or stolen will be equally and proportionately entitled to the benefits of the Fiscal Agent Agreement with all other Bonds secured by the Fiscal Agent Agreement. Redemption Optional Redemption. The Bonds are subject to redemption prior to maturity at the option of the District on any date on or after September 1,2012, as a whole or in part, by lot, from any available source ......" 13 AGENDA ITEM NO. ~ PACE //5" OF 0_ ",,-- of funds at the following redemption prices, (expressed as a percentage of the principal amount of Bonds to be redeemed) together with accrued interest thereon to the date fixed for redemption: Redemption Periods Redemption Prices September 1,2012 through August 31, 2013 September 1,2013 through August 31, 2014 September 1, 2014 and thereafter 102.0% 101.0% 100.0% Special Mandatory Redemption from Prepayment of Special Taxes. The Bonds are subject to mandatory redemption prior to maturity on any date on or after September 1, 2006, in whole or in part, in a manner determined by the District from prepayments of Special Taxes at the following redemption prices (expressed as a percentage of the principal amount of Bonds to be redeemed), together with accrued interest thereon to the date fixed for redemption: Redemption Periods Redemption Prices September 1, 2006 through August 31, 2010 September 1, 2010 through August 31, 2012 September 1,2012 and thereafter 103.0% 102.5% as provided for optional redemption ,,-- Mandatory Sinking Payment Redemption. The Bonds maturing on September 1,2026 and September 1, 2036 are subject to mandatory redemption, in part by lot, on September 1 in each year commencing September 1,2021 in the case of the Bonds maturing September 1,2026 and September 1,2027 in the case of the Bonds maturing September 1, 2036 from mandatory sinking payments made by the District pursuant to the Fiscal Agent Agreement at a redemption price equal to the principal amount thereof to be redeemed, without premium, plus accrued interest thereon to the date of redemption as set forth in the following schedule; provided, however, that (i) in lieu of redemption thereof, the Bonds may be purchased by the District and tendered to the Fiscal Agent, and (ii) if some but not all of the Bonds have been redeemed pursuant to optional redemption, mandatory redemption from Special Taxes or special mandatory redemption provisions described herein, the total amount of all future sinking payments will be reduced by the aggregate principal amount of the Bonds so redeemed, to be allocated among such sinking payments on a pro rata basis (as nearly as practicable) in integral multiples of $5,000 as determined by the District. ",,-- 14 AGENDA ITEM NO. ~ PACE //1{ OF - SCHEDULE OF MANDATORY SINKING PAYMENT REDEMPTIONS TERM BONDS MATURING SEPTEMBER 1,2026 ~. September 1 Year 2022 2023 2024 Principal Amount* $205,000 225,000 245,000 September 1 Year 2025 2026 Principal Amount* $270,000 295,000 (maturity) SCHEDULE OF MANDATORY SINKING PAYMENT REDEMPTIONS TERM BONDS MATURING SEPTEMBER 1,2036 September 1 Year 2027 2028 2029 2030 2031 Principal Amount* $325,000 350,000 380,000 415,000 450,000 September 1 Year 2032 2033 2034 2035 2036 Principal Amount* $485,000 525,000 565,000 605,000 655,000 (maturity) Special Mandatory Redemption. The Bonds are subject to special mandatory redemption on any date from unused proceeds of the Bonds after completion or abandonment of the improvements to be financed with such proceeds, from the deposit of fees with the District by a public agency which has accepted facilities serving the District, and from insurance or condemnation proceeds or other mandatory redemption, without premium, plus accrued interest to the redemption date, all as determined by the District (see "THE DISTRICT - Facilities and Fees to be Financed by the District" for a description of the scope of the Development). ~ Notice of Redemption. When redemption is authorized or required, the Fiscal Agent is required to give written notice of the redemption of Bonds to the Bondowners designated for redemption at their addresses appearing on the bond registration books, to certain Securities Depositories, and to one or more Information Services, all as provided in the Fiscal Agent Agreement, by first class mail, postage prepaid, no less than thirty (30), nor more than sixty (60), days prior to the date fixed for redemption. Neither failure to receive such notice nor any defect in the notice so mailed will affect the sufficiency of the proceedings for redemption of such Bonds or the cessation of accrual of interest on the redemption date. Effect of Redemption. The rights of a Bondowner to receive interest will terminate on the date, if any, on which the Bond is to be redeemed pursuant to a call for redemption. The Fiscal Agent Agreement contains no provisions requiring any publication of notice of redemption, and Bondowners must maintain a current address on file with the Fiscal Agent to receive any notices of redemption. Partial Redemption. In the event only a portion of any Bond is called for redemption, then upon surrender of such Bond the District will execute and the Fiscal Agent will authenticate and deliver to the Bondowner thereof, at the expense of the District, a new Bond or Bonds of the same series and maturity date, of authorized denominations in an aggregate principal amount equal to the unredeemed portion of the Bond to be redeemed. * Preliminary, subject to change ~ 15 AGENDA ITEM NO. PACE In 33 OF '3f)(iJ__ ",....... Scheduled Debt Service on the Bonds The following is the scheduled debt service on the Bonds. ~ Interest Pavment Date March I, 2007 September 1,2007 March 1,2008 September I, 2008 March I, 2009 September I, 2009 March 1,2010 September I, 2010 March 1,2011 September I, 20II March 1,2012 September I, 2012 March 1,2013 September I, 2013 March I, 2014 September I, 2014 March 1,2015 September 1,2015 March 1,2016 September I, 2016 March 1,2017 September I, 2017 March 1,2018 September 1,2018 March 1,2019 September 1,2019 March 1, 2020 September 1,2020 March 1,2021 September I, 2021 March 1,2022 September I, 2022 March I, 2023 September I, 2023 March I, 2024 September I, 2024 March 1, 2025 September I, 2025 March I, 2026 September 1, 2026 March 1,2027 September 1,2027 March 1,2028 September I, 2028 March 1,2029 September 1,2029 PrinciDal "........ Interest Annual Debt Service 16 AOENDA ITEM NO. PAOE JIg ~~ OF~ Scheduled Debt Service Continued Interest Payment Date March 1,2030 September 1, 2030 March 1,2031 September 1, 2031 March 1,2032 September 1, 2032 March 1,2033 September 1, 2033 March 1, 2034 September 1, 2034 March 1,2035 September 1,2035 March 1, 2036 September 1,2036 Principal ~ Interest Annual Debt Service --' --' 17 ACENDA ITEM NO. "63 PACE.JJ1-0F~ ,-.. SOURCES OF PAYMENT FOR THE BONDS General The principal of, premium, if any, and the interest on the Bonds, and the Administrative Expenses, are payable from the Special Taxes collected on real property within the District and funds held by the Fiscal Agent and available for such purposes pursuant to the Fiscal Agent Agreement. The Bonds are limited obligations of the District payable solely from the proceeds of Special Taxes levied on certain parcels within the District. The Bonds shall not be deemed to constitute a debt or liability of the City or the State or of any political subdivision thereof, other than the District. Neither the faith and credit nor the taxing power of the City, the State or any of its political subdivisions is pledged to the payment of the principal of or the interest on the Bonds. Special Taxes - The Special Taxes are excepted from the tax limitation of California Constitution Article XIIIA pursuant to Section 4 thereof as a "special tax" authorized by at least a two-thirds vote of the qualified electors as set forth in the Act. Consequently, the City Council (the "City Council") of the City on behalf of the District has the power and is obligated by the Fiscal Agent Agreement to cause the levy and collection of the Special Taxes. The District has covenanted in the Fiscal Agent Agreement to levy (subject to the Maximum Annual Special Tax) in each Fiscal Year the Special Taxes in an amount sufficient to pay the debt service on the Bonds and the cost of providing A~ministrative Expenses. The Special Taxes are to be levied and collected according to the Rate and Method of Apportionment described in the section entitled "SPECIAL TAXES AND DEBT SERVICE" herein. Although the Special Taxes will constitute a lien on parcels of real property within the District, they do not constitute a personal indebtedness of the owner(s) of real property. There is no assurance that the property owner(s), or any successors and/or assigns thereto or subsequent purchaser(s) of land within the District, will be able to pay the annual Special Taxes or if able to pay the Special Taxes that they will do so (see "BONDOWNERS' RISKS" and "THE DISTRICT" herein). The Special Taxes initially are required to be collected by the County of Riverside Tax Collector in the same manner and at the same time as regular ad valorem property taxes are collected by the Tax Collector of the County. When received, such Special Taxes will be deposited in the Special Tax Fund to be held by the Fiscal Agent as provided in the Fiscal Agent Agreement. Reserve Account In order to secure further the timely payment of principal of and interest on the Bonds, the District is required, upon delivery of the Bonds, to deposit in the Reserve Account for the Bonds an amount equal to the Reserve Requirement. The Reserve Requirement means, as of any date of calculation, an amount equal to the lowest of (1) 10% of the issue price (as defined pursuant to section 148 of the Code), or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual Debt Service of the Outstanding Bonds. Thereafter, the District is required to deposit from the payment of the Bonds and maintain an amount of money equal to the Reserve Requirement in the Reserve Account at all times while the Bonds are Outstanding. The amount of the deposit into the Reserve Account will be in the amount equal to $652,480.70.'" Amounts in the Reserve Account will be used to pay debt service on the Bonds to the ,-.. ... Preliminary, subject to change 18 AGENDA ITEM NO. PAGE-J)::> ~:? OF~ extent other moneys are not available therefor. Amounts in the Reserve Account in excess of the Reserve Requirement will be deposited into the Acquisition and Construction Fund until all Facilities have been '-' financed or it is determined sufficient funds are on deposit in the Acquisition and Construction Fund to fund all Facilities expected to be funded and thereafter such excess funds shall be deposited into the Interest Account. Amounts in the Reserve Account may be used to pay the final year's debt service on the Bonds (see "APPENDIX B SUMMARY OF THE FISCAL AGENT AGREEMENT" herein). Upon mandatory redemption, amounts on deposit in the Reserve Account shall be reduced (to an amount not less than the Reserve Requirement) and excess money shall be transferred to the Redemption Account and used for the redemption of Bonds. Capitalized Interest There will be an initial deposit to the Interest Account out of Bond proceeds which has been calculated to be sufficient to make interest payments on the Bonds due to and including September 1, 2007. Covenant for Superior Court Foreclosure Pursuant to Section 53356.1 of the Act, in the event of a delinquency in the payment of the Special Taxes levied, the District may order the institution of a superior court action to foreclose the lien therefor, provided such action is brought not later than four years after the final maturity date of the Bonds. In such an action, the real property subject to the unpaid amount may be sold at a judicial foreclosure sale. The District has covenanted in the Fiscal Agent Agreement for the benefit of the owners of the Bonds that the District will determine or cause to be determined, no later than March 1 and August 1 of each year, whether or not any owners of the property within the District of the District are delinquent in the payment of Special Taxes and, if such delinquencies exist, the District will order and cause to be commenced not later than April 15 (with respect to the March 1 determination date) or September 1 (with respect to the August I determination date), and thereafter diligently prosecute, an action in the superior "-'" court to foreclose the lien of any Special Taxes or installment thereof not paid when due, provided, however, that the District shall not be required to order the commencement of foreclosure proceedings if (i) the total Special Tax delinquency of the District for such Fiscal Year is less than five percent (5%) of the total Special Tax levied in such Fiscal Year, and (ii) the District shall have established from any source of lawfully available funds (other than Special Taxes) an escrow fund to provide for the payment of principal of and interest on the Bonds. Notwithstanding the foregoing, if the District determines that any single property owner is delinquent in excess of ten thousand dollars ($10,000) in the payment of the Special Tax, then it will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosure related to delinquent Special Taxes: (a) The District or the Fiscal Agent is authorized to credit bid at any foreclosure sale, without any requirement that funds be set aside in the amount so credit bid, in the amount specified in Section 53356.5 ofthe Act, or such less amount as determined under clause (b) below or otherwise under Section 53356.6 of the Act. (b) The District may permit, in its sole and absolute discretion, property with delinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5 of the Act, if it determines that such sale is in the interest of the Bond Owners. The Bond Owners, by their acceptance of the Bonds, consent to such sale for such lesser amounts (as such consent is described in Section 53356.6 of the Act), and release the District and the City, and their respective officers and agents from any liability in connection therewith. If such sale for lesser amounts would result in less than full payment of principal of and interest on the Bonds, the CFD will use best efforts to seek approval of the Bond Owners. (c) The District is authorized to use amounts in the Special Tax Fund to pay costs of foreclosure of delinquent Special Taxes. ......., 19 ~3 AOENDA ITEM NO. PAOE 1)\ OF2QJl- . ~ (d) The District may forgive all or any portion of the Special Taxes levied or to be levied on any parcel in the District so long as the District determines that such forgiveness is not expected to adversely affect its obligation to pay principal of and interest on the Bonds as such payments become due and payable. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not require the District or the City to purchase or otherwise acquire any lot or parcel of property sold at the execution sale pursuant to the judgment in any such action if there is no other purchaser at such sale, nor does the Act specify the priority relationship, if any, between the Special Taxes and other taxes and assessment liens. As a result of the foregoing, in the event of a delinquency or nonpayment by the property owners in the District of one or more Special Taxes installments, there can be no assurance that there would be available to the District sufficient funds to pay when due the principal of, interest on and premium, if any, on the Bonds (see "BONDOWNERS' RISKS - Concentration of Ownership," "BONDOWNERS'RISKS - Bankruptcy and Foreclosure Delays" and "BONDOWNERS'RISKS - Property Controlled by Federal Deposit Insurance Corporation and other Federal Agencies" herein). Prepayment of Special Tax. A property owner may prepay its Special Taxes and thereby cause a redemption of Bonds. See "APPENDIX E - RATE AND METHOD OF APPORTIONMENT - PREPAYMENT OF ANNUAL SPECIAL TAX" herein. Special Taxes Are Not Within Teeter Plan ~ The County has adopted a Teeter Plan as provided for in Section 4701 et seq. of the California Revenue and Taxation Code, under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. However, by policy, the County does not include assessments, reassessments and special taxes in its Teeter program. The Special Taxes are not included in the County's Teeter Program. ,,-... 20 AGENDA ITEM NO. 33 PAGEJ )y OF2fZt;..~ BONDOWNERS'RISKS ...." General BEFORE PURCHASING ANY OF lHE BONDS, ALL PROSPECTIVE INVESTORS AND lHEIR PROFESSIONAL ADVISORS SHOULD CAREFULLY CONSIDER, AMONG OlHER THINGS, lHE FOLLOWING RISK FACTORS, WHICH ARE NOT MEANT TO BE AN EXHAUSTIVE LISTING OF ALL RISKS ASSOCIATED WITH lHE PURCHASE OF lHE BONDS. MOREOVER, lHE ORDER OF PRESENTATION OF lHE RISK FACTORS DOES NOT NECESSARILY REFLECT THE ORDER OF lHEIR IMPORTANCE. The purchase of the Bonds involves investment risk. If a risk factor materializes to a sufficient degree, it could delay or prevent payment of principal of and/or interest on the Bonds. Such risk factors include, but are not limited to, the following matters. Limited Obligation Neither the faith and credit nor the taxing power of the City, the State or any political subdivision thereof other than the District is pledged to the payment of the Bonds. Except for the Special Taxes derived from the District, no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City, the State or any political subdivision thereof or general obligations of the District, but are special obligations of the District, payable solely from Special Taxes and the other assets pledged therefor under the Fiscal Agent Agreement. Insufficiency of Special Taxes As discussed herein, the amount of Special Taxes that are collected with respect to the District could be insufficient to pay principal of, interest and premium, if any, on the Bonds due to nonpayment of the ......" Special Taxes levied and insufficient or no proceeds received from a foreclosure sale of land within the District. The District has covenanted in the Fiscal Agent Agreement to institute foreclosure proceedings upon delinquencies in the payments of the Special Taxes as described herein and to sell any real property with a lien of delinquent Special Taxes to obtain funds to pay debt service on the Bonds. If foreclosure proceedings are ever instituted, any holder of a mortgage or deed of trust could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant for Superior Court Foreclosure" herein for provisions which apply in the event foreclosure is required and which the District is required to follow in the event of delinquency in the payment of Special Taxes. Section 53317.3 of the Act provides that, if any real property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and be enforceable against the public entity that acquires the property. Additionally, Section 53317.5 provides that, if any property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. However, the constitutionality and operation of these provisions of the Act have not been tested. If for any reason, property subject to the Special Tax becomes exempt from taxation by reason of ownership by a non-taxable entity, such as the federal government or another public agency, and the District is unable to collect the Special Taxes or obtain compensation through the condemnation procedure, the Special Tax will be reallocated to the remaining taxable properties within the District up to the Maximum Annual Special Tax. This reallocation would result in the owners of taxable properties within the District subject to the Special Tax paying a greater amount of the Special Tax and could have ""-"" 21 o? AGENDA ITEM NO. PAOEJ1;~ OF~- ,......, ,...... ,...... an adverse impact upon the timely payment of the Special Tax by such owners and therefore the ability to pay debt service on the Bonds. Concentration of Ownership Property within the District is owned by the Developer (see "THE DISTRICT" herein). The only assets of the Developer which constitute security for the Bonds are its taxable property within the District. There are expected to be subsequent transfers of ownership of the property within the District to individual owners of single family homes during the deyelopment of the land within the District, although there is no assurance that such transfers of property will occur as described herein, if at all.. The fact that the Developer owns most ofthe land within the District presents substantial risk to the Bondowners. No Personal Liability for Special Taxes No property owner (including the Developer), or any merchant builder or any officer, partner, member, or affiliate thereof will be personally liable for the payment of the Special Taxes to be applied to pay the principal of and interest on the Bonds. In addition, there is no assurance that any property owner or any merchant builder will be able to pay the Special Taxes or that any property owner or any merchant builder will pay such Special Taxes even if it is fmancially able to do so. No representation is made that the Developer will have moneys available (or that it will advance such moneys, if available) to complete the development of the land within the District in the manner described herein. Accordingly, the Developer's financial statements are not included in this Official Statement. No property owner is obligated in any manner to continue to own any of the land it presently owns within the District. Adjustable Rate and Non-Conventional Mortgages Since the end of 2002, many persons have financed the purchase of new homes using loans with little or no downpayment and with adjustable interest rates that start low and are subject to being reset at higher rates on a specified date or upon the occurrence of specified conditions. Many of these loans allow the borrower to pay interest only for an initial period, in some cases up to 10 years. Currently, in Southern California, a substantial portion of outstanding home loans are adjustable rate loans at historically low interest rates. In the opinion of some economists, the significant increase in home prices in this time period (more than 70% since 2003 in southern San Diego County) has been driven, in part, by the ability of home purchasers to access adjustable rate and non-conventional loans. If interest rates on new loans increase and if the interest rates on existing adjustable rate loans are reset (and payments are increased) there could be a decrease in home sales due to the inability of purchasers to qualify for loans with higher interest rates. Such a decrease in home sales could, eventually, result in a decrease in home prices. Such a reduction in home prices could result in recent homebuyers having loan balances that exceed the value of their homes, given their low downpayments and small amount of equity in their homes. Homeowners in the District who purchase their homes with adjustable rate and non-conventional loans with no or low downpayments may experience difficulty in making their loan payments due to automatic mortgage rate increases and rising interest rates. This could result in an increase in the Special Tax delinquency rate in the District and draws on the Reserve Fund. If there were significant delinquencies in Special Tax collections in the District and the Reserve Fund was fully depleted, there could be a default in the payment of principal of and interest on the Bonds. If mortgage loan defaults increase, bankruptcy filing by such homeowners could also increase. Bankruptcy filings by homeowners with delinquent Special Taxes would delay the commencement and completion of foreclosure proceedings to collect delinquent Special Taxes 22 33 AGENDA ITEM ~ ~q. PAGE Jrf Of ~ Foreclosure and Sale Proceedings ......." Payment of the Special Taxes is secured by the parcels assessed. In the event an annual installment of the Special Taxes included in the County tax bill of an assessed parcel is not paid when due, the District can institute foreclosure proceedings in court to cause the parcel to be sold in order to recover the delinquent amount from the sale of proceeds (see "SOURCES OF REPAYMENT FOR THE BONDS" herein). Foreclosure and sale may not always result in the recovery of any or the full amount of delinquent Special Taxes. Sufficiency of the foreclosure sales proceeds to cover the delinquent amount depends in part upon the market for and the value of the parcel at the time of the foreclosure sale (see "Land Values" below). The current appraised value is some evidence of such future value. However, future events may result in significant changes from the current appraised value. Such events could include changes in land ownership, development plans and other factors affecting the progress of land development, legal requirements affecting the development of parcels, a downturn in the economy, as well as a number of additional factors. Any of these factors may result in a significant erosion in value, with consequent reduced security of the Bonds. Sufficiency of foreclosure sale proceeds to cover a delinquency may also depend upon the value of prior or parity liens and similar claims. A variety of govemmentalliens may presently exist or may arise in the future with respect to a parcel which, unless subordinate to the lien securing the Special Taxes, may effectively reduce the value of such parcel. Further, other governmental claims, such as hazardous substance claims, may affect the realizable value even though such claims may not rise to the status of liens. Timely foreclosure and sale proceedings with respect to a parcel may be forestalled or delayed by a stay in the event the owner of the parcel becomes the subject of bankruptcy proceedings. Further, should the stay not be lifted, payment of Special Taxes may be subordinated to bankruptcy law priorities. Land Values ......." If a property owner defaults in the payment of the Special Tax, the District's only remedy is to commence foreclosure proceedings against the defaulting property owner's real property within the District for which the Special Tax has not been paid, in an attempt to obtain funds to pay the delinquent Special Tax. Therefore, the value of the land and improvements within the District is a critical factor in determining the investment quality of the applicable corresponding series of Bonds and, therefore, the Bonds. Reductions in property values within the District due to a downturn in the economy or the real estate market, events such as earthquakes, droughts, or floods, stricter land use regulations, or other events may adversely impact the security underlying the Special Tax. The District had the following two studies prepared in order to estimate the current aggregate market value of land in the District. 1. Market Absorption Study, Community Facilities District No. 2006-2 (Viscaya) City of Lake Elsinore, Riverside County, California prepared by Empire Economics, Inc., Capistrano Beach, California, May 1, 2006 (the "Market Absorption Study"). 2. Appraisal Report, City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) prepared by Harris Realty Appraisal, Newport Beach, California (the "Appraisal"), dated May 15, 2006. Collectively, the studies are referred to herein as the "Appraisal Documents." .......", 23 AGENDA 1T81"NJ._ "?> 3 PAGE.Ji!::LOF ~{'}lP ,...... The purpose of the Appraisal was to estimate the bulk value of the land and improvements within the District in its "as is" condition (which assumes sale of the Bonds and construction of publicly-financed improvements). On the basis of the assumptions and limitations described in the Appraisal and in the Market Absorption Study, the Appraiser has estimated the aggregate discounted "bulk sale" value of all the parcels in the District as of May 15,2006 to be $28,800,000, which is approximately 3.98* times the principal amount of the Bonds. Prospective purchasers of the Bonds should not assume that the land and improvements could be sold for the appraised amount at a foreclosure sale for delinquent Special Taxes. In particular, the values of individual properties in the District will vary in some cases significantly. The actual value of the land is subject to future events which might render invalid some or all of the basic assumptions of the Appraiser. The future value of the land can be expected to fluctuate due to many different, not fully predictable, real estate related investment risk factors, including, but not limited to: general tax law changes related to real estate, changes in competition, general area employment base changes, population changes, changes in real estate related interest rates affecting general purchasing power, advertising, changes in allowed zoning uses and density, natural disasters such as floods, earthquakes and landslides, and similar factors. Appraisals in general are the result of an inexact process, and estimated market value is dependent, in part, upon assumptions which mayor may not be realized and upon market conditions and perceptions of market value, which are likely to change over time. The appraisal valuations represent opinions only and are not intended to be absolutes or assurances of specific resale values. ..--.' If more than one appraiser were employed, it is reasonable to assume that a reasonable range of value opinions on the land and improvement value within the District would be reflected depending upon personal professional interpretation of data, facts and circumstances reviewed and assumptions employed. Prospective purchasers should not assume that the land could be sold for the appraised amount at a foreclosure sale for delinquent Special Taxes. Copies of the Appraisal Documents are included in the Appendices. The summary herein of some of the conclusions in the Appraisal Documents does not purport to be complete. Reference is made to the Appraisal Documents for further information. The District makes no representations as to the value of the real property within the District, and prospective purchasers of the Bonds are referred to the Appraisal Documents referred to above in evaluating the value of real property within the District. Value-to-Lien Ratio Valuation-to-lien ratios are derived by dividing the appraised value of the property in the District by the principal amount of the Bonds.. For example, a 3:1 ratio means that the value is three times the total Bond amount. According to the Appraisal the value of the land within the District is $28,800,000. Therefore, the value to lien-ratio-is 3.98* to 1. The value-to-lien ratio of individual parcels may be less or more than the aggregate value-to-lien ratio for an District. In particular the value of developed property is substantially more than undeveloped property (see "Concentration of Ownership" above). Investors must recognize the uncertainties with respect to the fair market values of the parcels, since the Bonds are secured by the Special Taxes levied on the parcels. See "Land Values" above. * Preliminary, subject to change ,...... 24 N- "3 '3 ACENDA ITEM )r; ~ PAGiJ OF ~ ......" Potential purchasers of the Bonds should be aware that if a parcel bears a Special Tax liability in excess of its market value, then there may be little incentive for the owner of the parcel to pay the Special Taxes on such parcel and little likelihood that such property would be purchased in a foreclosure sale. See "Foreclosure and Sale Proceedings" above describing risks relating to market values of parcels in the District. The Progress of Land Development; Risks of Real Estate Secured Investments Land development is an activity subject to substantial risk. Risk factors include, without limitation, general or local economic conditions; local real estate market conditions; supply of or demand for competitive properties; changes in the real estate tax rate; governmental regulation and approval requirements, particularly environmental quality, endangered species, land use, zoning and building requirements; development, financing and marketing capabilities of the various landowners; natural disasters, including without limitation earthquakes, flood and fire which may result in uninsured losses; and accomplishment of development plans on a timely basis, including but not limited to the provision of infrastructure improvements in addition to the Facilities. Since these are largely business risks of the type that landowners customarily evaluate individually, and inasmuch as changes in land ownership may well mean changes in the evaluation with respect to any particular parcel, the District has undertaken the financing without regard to any such evaluation. Thus, the undertaking of the financing by the District in no way implies that the District has evaluated these risks or the reasonableness of these risks. Further, the risk to the owners of the Bonds of development delays may be heightened when land ownership is concentrated in only a few landowners or developers. If ownership is concentrated, timely payment of the Special Taxes may be dependent upon the financing available to such owners or developers. Further, the continued progress of land development may be one of the present facts and circumstances forming the basis for the appraiser's opinion of value. Diminished values may lessen the effectiveness of foreclosure proceedings as a remedy. ~ The Special Taxes are to be collected from the owners of property located within the District, and levy of the Special Taxes is not dependent on the completion of the development of the properties within the District (see "SPECIAL TAXES AND DEBT SERVICE" herein). Nevertheless, the extent of completion of the development of the property within the District may affect the ability and willingness of property owners to pay the Special Taxes and may affect the market value of any property foreclosed upon for nonpayment of installments of the Special Taxes. Geologic, Topographic and Climatic Conditions Land and improvement value can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and private improvements of the parcels assessed and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes and overdraft of groundwater basins; topographic conditions such as earth movements and floods; and climatic conditions such as droughts. Further, building codes require that some of these factors be taken into account, to a limited extent, in the design of private improvements of the parcels in the District. Design criteria in any of these circumstances are established upon the basis of a variety of considerations and may change, leaving previously designed improvements unaffected by more stringent subsequently established criteria. In general, design criteria reflect a balance at the time of establishment between the present costs of protection and the future costs of lack of protections, based in part upon a present perception of the probability that the condition will occur and the seriousness of the condition should the condition occur. ......" 25 3~ AGENDA ITEM ~ i~ PAOE..J \ Of ,-.... Endangered and Threatened Species During the past several years, there has been an increase in activity at the State and federal level related to the listing and possible listing of certain plant and animal species found in the State as endangered species and in programs designed to set" aside additional geographical areas for habitat conservation. Although areas within the District have been included in the Western Riverside County Multi Species Habitat Conservation Plan (MSHCP) study area, such areas are exempt from any requirements because of a pre- existing Development Agreement. There is no assurance that such areas will not be included in future study areas. An increase in the number of endangered species and/or the designation of additional habitat areas to be subjected to conservation planning similar to areas subject to the Western Riverside County MSHCP is expected to curtail development in a number of areas in the State. The area proposed to be developed within the District is not known to contain any plant or animal species which either the California Fish and Game Commission or the U.S. Fish and Wildlife Service has listed as endangered or to the knowledge of the District proposed for addition to the endangered species list. Further approval may be required for any planned clearing of land or construction across or impacting waterways, creeks or other drainages. If required, there is no assurance that such approvals will be obtained and that development will be permitted to proceed as projected. On a regular basis, new species are proposed to be added to the State and federal protected species lists. Regardless of the stage of entitle.ments and actual development of a particular development, any action by the State or federal governments to protect species located on or adjacent to the property within the District could negatively affect the Developer's ability to complete the development of the properties within the District as planned. This, in turn, could reduce the ability or the willingness of the property owners to pay the Special Taxes when due and would likely reduce the value of the land and the potential revenues available at a foreclosure sale for delinquent Special Taxes. ,-.... Earthquakes Southern California is among the most seismically active regions in the United States. The occurrence of seismic activity in the District could result in substantial damage to properties in the District which, in turn, could substantially reduce the value of such properties and could affect the ability or willingness of the property owners to pay their Special Taxes. Any major damage to structures as a result of seismic activity could result in a greater reliance on Undeveloped Property in the payment of Special Taxes. In the event of a severe earthquake, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition, the value of land in the District could be diminished in the aftermath of such an earthquake, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of Special Taxes. Certain procedures and design standards are required to be followed during the construction of buildings within the District to ensure that each building is designed and constructed to meet, at a minimum, the highest seismic standards required by law. Legal Requirements Other events which may affect the value of a parcel include changes in the law or application of law. Such changes may include, without limitation, local growth control initiatives; local utility connection moratoriums; and local application of statewide tax and governmental spending limitation measures. Other Possible Claims Upon the Values of an Assessed Parcel In addition to existing property taxes, other governmental obligations, such as general obligation bonds, /"'"' assessments or special taxes may be authorized in the future, the tax, assessment or charge for which may 26 AGENDA ITEM 1% "33 PAOE \ OF -orue become an obligation of one or more of the parcels within the District and may be secured by a lien on a parity with the lien of the Special Taxes securing the Bonds. --" In general, as long as the Special Taxes securing the Bonds are collected on the County tax roll, the Special Taxes and all other taxes, assessments and charges also collected on the tax roll are on a parity with each other. Questions of priority become significant when collection of one or more of the taxes, assessments or charges is sought by some other procedure, such as foreclosure and sale. Otherwise, in the event of such foreclosure proceedings, the Special Taxes will generally be on a parity with the other taxes, assessments and charges. The Special Taxes will have priority over non-governmental liens on a parcel, regardless of whether or not the non-governmental liens are in existence at the time of creation of any lien securing the Special Taxes. While governmental taxes, assessments and charges are a common claim against the value of a parcel, other less common claims may be relevant. One of the most serious in terms of the potential reduction in the value of a parcel is a claim with regard to a hazardous substance. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance condition whether or not the owner (or operator) has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the parcels in the District be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming the owner, will become obligated to remedy the condition just as is the seller. The values expressed herein, do not take into account the possible reduction in marketability and value of any of the parcels by "reason of the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the parcel. The District is not aware that the owner (or operator) of any of the parcels has such a current liability with respect to any of the parcels in the District. However, it is possible that such liabilities do currently exist. --" Further, it is possible that liabilities may arise in the future with respect to one or more of the parcels resulting from the existence, currently, on the parcel of a substance presently classified as hazardous or may arise in the future resulting from the existence, currently, on the parcel of a substance presently not classified as hazardous but which may in the future be so classified. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly reduce the value of a parcel. Bankruptcy Proceedings Regardless of the priority of the Special Taxes securing the Bonds over non-governmental liens on parcels, the exercise by the District of the foreclosure and sale remedy may be forestalled or delayed by bankruptcy, reorganization, insolvency, or other similar proceedings of the owner of a parcel. The federal bankruptcy laws provide for an automatic stay of foreclosure and sale proceedings, thereby delaying such proceedings perhaps for an extended period. Delay in exercise of remedies, especially if the owners own parcels the Special Taxes of which are significant or if bankruptcy proceedings are instituted with respect to a number of owners owning parcels the Special Taxes of which is significant, may result in periodic Special Tax collections which may be insufficient to pay the debt service on the Bonds. Further, should remedies be exercised under the bankruptcy law against the parcels, payment of Special Taxes may, be subordinated to other claims in the bankruptcy proceedings. Thus, certain claims may have priority over a claim for unpaid Special Taxes, even though, in the absence of the bankruptcy proceedings, no such priority would exist. ....., 27 ACENDAITEMNO. 3~ PAOE..rM-OF J - ;""'" Bankruptcy and Foreclosure Delays The payment of the Special Taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax, as discussed in the section herein entitled "SOURCES OF PAYMENT FOR TIlE BONDS" may be limited by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State of California relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments, by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. /"" Although bankruptcy proceedings would not cause the Special Taxes to become extinguished, bankruptcy of a property owner or of a partner or other owner of a property owner within the District could result in a delay in prosecuting superior court foreclosure proceedings and could result in loss of priority of the lien securing any Special Taxes with respect to Special Taxes levied while bankruptcy proceedings are pending. In addition, the amount of any lien on property securing the payment of delinquent Special Taxes could be reduced if the value of the property were determined by the bankruptcy court to have become less than the amount of the lien, and the amount of the delinquent Special Taxes in excess of the reduced lien could be treated as an unsecured claim by the court. Such delay or loss of priority or nonpayment, would increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds and the possibility of delinquent Special Tax installments not being paid in full. To the extent a significant percentage of the property in the District continues to be owned by a limited number of property owners, the payment of the Special Taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Taxes installment could be delayed by bankruptcy, insolvency, or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. On July 30, 1992, the United States Court of Appeals for the Ninth Circuit issued its opinion in a bankruptcy case entitled In re Glasply Marine Industries. In that case, the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. The court upheld the priority of unpaid taxes imposed after the filing of the bankruptcy petition as "administrative expenses" of the bankruptcy estate, payable after all secured creditors. As a result, the secured creditor was to foreclose on the property and retain all of the proceeds of the sale except the amount of the pre-petition taxes. According to the court's ruling, as administrative expenses, post-petition taxes would have to be paid, assuming that the debtor has sufficient assets to do so. In certain circumstances, payment of such administrative expenses may be allowed to be deferred. Once the property is transferred out of the bankruptcy estate (through foreclosure or otherwise) it would at that time become subject to current ad valorem taxes. The Act provides that the Special Taxes are secured by a continuing lien, which is subject to the same lien priority .in the case of delinquency as ad valorem taxes. No case law exists with respect to how a bankruptcy court would treat the lien for the Special Taxes levied after the filing of a petition in bankruptcy. Glasply is controlling precedent for bankruptcy courts in the State. If the Glasply precedent was applied to the levy of the Special Tax, the amount of Special Tax received from parcels whose owners declared bankruptcy could be reduced. It should also be noted that on October 22, 1994, Congress enacted 11 U.S. C. Section 362(b)(18), which added a new exception to the automatic stay for ad valorem property taxes imposed by a political subdivision after the filing of a bankruptcy petition. Pursuant to this new provision of law, in the event of a bankruptcy petition filed on or after October 22, 1994, the lien for ad valorem taxes in subsequent fiscal .'" years will attach even if the property is part of the bankruptcy estate. Bondowners should be aware that 28 -:03 AGENDA ITEM NO. -~- PACE \?p OF .!f'Jfn--- the potential effect of 11 U.S. C. Section 362(b)(18) on the Special Taxes depends upon whether a cJurt were to determine that the Special Taxes should be treated like ad valorem taxes for this purpose.. ......, Additional Taxation On June 3, 1986, California voters approved an amendment to Article XIIIA of the California Constitution to allow local governments and school districts to raise their property tax rates above the constitutionally mandated 1 % ceiling for the purpose of repaying certain new general obligation debt issued for the acquisition or improvement of real property and approved by at least two-thirds of the votes cast by the qualified electorate. If any such voter-approved debt is issued, it may be on a parity with the lien of the Special Taxes on the parcels within the District. Parity Taxes and Special Assessments The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land within the District on which they will be annually imposed until they are paid in full. Such lien is on a parity with all special taxes and special assessments levied by other public entities, agencies and districts and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same real property. The Special Taxes have priority over all existing and future private liens imposed on the real property within the District, however, has no control over the ability of other public entities, agencies and districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the real property within the District. Any such special taxes or assessments may have a lien on such real property on a parity with the Special Taxes (see "SPECIAL TAXES AND DEBT SERVICE" herein). Accordingly, the liens on the real property within the District could greatly increase, without any corresponding increase in the value of the property within the District and thereby severely reduce the lien-to-value ratio of the land secured public debt existing at the time the Bonds are issued. The ......, imposition of such additional indebtedness could also reduce the willingness and ability of the property owners within the District to pay the Special Taxes when due. Disclosure to Future Land Buyers A "Notice of Special Tax Lien" for the District was recorded pursuant to Section 53328.3 of the Act and Section 3114.5 of the Streets and Highways Code, with the County Recorder for the County (the "County Recorder"). The Notice sets forth, among other things, the Rate and Method of Apportionment, the Assessor's Parcel Numbers within the District as of the date of recording the Notice, and the boundaries of the District by reference to the map(s) recorded with the County Recorder. While title insurance and search companies normally refer to such notices in title reports, and sellers of property within the District are required to give prospective buyers a notice of special tax in accordance with Sections 53360.2 or 53341.5 of the Act, there can be no assurances that such reference will be made or notice given, or if made or given, that prospective purchasers or lenders will consider such Special Tax obligation in the purchase of land within the District or the lending of money thereon. Failure to disclose the existence of the Special Tax may affect the willingness and ability of future landowners within the District to pay the Special Tax when due. Billing of Special Taxes A special tax can result in a substantially heavier property tax burden being imposed upon properties within a community facilities district than elsewhere in a city or county, and this in turn can lead to problems in the collection of the special tax. In some community facilities districts the taxpayers have refused to pay the special tax and have commenced litigation challenging the special tax, the community facilities district and the bonds issued by the District. ......, 29 AGENDA ITEM NO,__ ~3 PAGE J '21) ~F 2>D (j) - ~ Under provisions of the Act, the Special Taxes are billed to the properties within the District which were entered on the Assessment Roll of the County Assessor by January 1 of the previous fiscal year on the regular property tax bills sent to owners of such properties. Such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do regular property tax installments. These Special Tax installment payments cannot be made separately from property tax payments. Therefore, the unwillingness or inability of a property owner to pay regular property tax bills as evidenced by property tax delinquencies may also indicate an unwillingness or inability to make regular property tax payments and installment payments of Special Taxes in the future. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant for Superior Court Foreclosure" for a discussion of the provisions which apply, and procedures which the District is obligated to follow, in the event of delinquency in the payment of installments of Special Taxes. Collection of Special Tax ,--.. In order to pay debt service on the Bonds, it is necessary that the Special Tax levied against land within the District be paid in a timely manner. The District has covenanted in the Fiscal Agent Agreement under certain conditions to institute foreclosure proceedings against property with delinquent Special Tax in order to obtain funds to pay debt service on the Bonds. If foreclosure proceedings were instituted, any mortgage or deed of trust holder could, but would not be required to, advance the amount of the delinquent Special Tax to protect its security interest. In the event such superior court foreclosure is necessary, there could be a delay in principal and interest payments on the Bonds pending prosecut'ion of the foreclosure proceedings and receipt of the proceeds of the foreclosure sale, if any. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not specify the obligations of the District with regard to purchasing or otherwise acquiring any lot or parcel of property sold at the foreclosure sale if there is no other purchaser at such sale. See "SOURCES OF PAYMENT FOR THE BONDS - Covenant for Superior Court Foreclosure." Maximum Rates Within the limits ofthe Rate and Method of Apportionment, the District may adjust the Special Tax levied on all property within the District to provide an amount required to pay debt service on the Bonds and other obligations of the District, and the amount, if any, necessary to pay all annual Administrative Expenses and make rebate payments to the United States government. However, the amount of the Special Tax that may be levied against particular categories of property within the District is subject to the maximum rates provided in the Rate and Method of Apportionment. There is no assurance that the maximum rates will at all times be sufficient to pay the amounts required to be paid by the Fiscal Agent Agreement. See "SPECIAL TAXES AND DEBT SERVICE." Exempt Properties Certain properties are exempt from the Special Tax in accordance with the Rate and Method of Apportionment and provisions of the Act. The Act provides that properties or entities of the State, federal or local government at the time of formation of the District are exempt from the Special Tax; provided, however, that property within the District acquired by a public entity through negotiated transactions, or by gift or devise, which is not otherwise exempt from the Special Tax, will continue to be subject to the Special Tax. In addition, the Act provides that if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Act have not been tested. If for any reason property subject to the Special Tax becomes exempt from taxation by reason of ownership by a ~ non-taxable entity such as the federal government, or another public agency, subject to the limitation of 30 AGENDA II U . 33_ PAGEH-Of ~D(Q -. the maximum authorized rate of levy, the Special Tax may be reallocated to the remaining taxable properties within the District This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the timely payment of the Special Tax; however, the amount of Special Tax to be levied and collected from the property owner is subject to the Maximum Special Tax as set forth in the Rate and Method of Apportionment and to the limitation in the Act that under no circumstances may the Special Taxes levied on any residential parcel be increased by more than ten percent as a consequence of delinquency by the owner of any parcel. If a substantial portion of land within the District became exempt from the Special Tax because of public ownership, or otherwise, the maximum Special Tax which could be levied upon the remaining acreage might not be sufficient to pay principal of and interest on the Bonds when due and a default will occur with respect to the payment of such principal and interest. The Act further provides that no other properties or entities are exempt from the Special Tax unless the properties or entities are expressly exempted in a resolution of consideration to levy a new special tax or to alter the rate or method of apportionment of an existing special tax. The Act would prohibit the City Council, acting as the legislative body of the District, from adopting a resolution to reduce the rate of the Special Tax or terminate the levy of the Special Tax unless the City Council, acting as the legislative body of the District determined that the reduction of termination of the Special Tax "would not interfere with the timely retirement" of the Bonds. See "BONDOWNERS' RISKS - Right to Vote on Taxes Act" below. Insufficient Special Taxes ......, Under the Rate and Method of Apportionment, the annual amount of Special Tax to be levied on each taxable parcel in the District will be based primarily on whether such parcel is develope.d or not and, for Developed Property, on the type of structure and square footage of buildings constructed. See "APPENDIX E". Accordingly, to the extent Undeveloped Property does not become Developed Property, the collection of the Special Taxes will be dependent on the willingness and ability of the owners of Undeveloped Property to pay such Special Taxes when due. Such event may result in an unwillingness of ......, such owners of the Undeveloped Property to pay additional Special Taxes. No Acceleration Provision The Fiscal Agent Agreement does not contain a provision allowing for the acceleration of the principal of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Fiscal Agent Agreement. Property Controlled by Federal Deposit Insurance Corporation and other Federal Agencies The District's ability to collect interest and penalties specified by State law and to foreclose the lien of a delinquent Special Tax payment may be limited in certain respects with regard to properties in which the Internal Revenue Service, the Drug Enforcement Agency, the Federal Deposit Insurance Corporation (the "FDIC") or other similar federal agencies has or obtains an interest. Specifically, with respect to the FDIC, on June 4,1991, the FDIC issued a Statement of Policy Regarding the Payment of State and Local Real Property Taxes (the "1991 Policy Statement"). The 1991 Policy Statement was revised and superseded by a new Policy Statement effective January 9, 1997 (the "Policy Statement"). The Policy Statement provides that real property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its proper tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided 31 ACENDA ITEM NO. PAOE /3Z, ?~ OF~ ......, ~ ,,--. , under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security i'nterest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that FDIC generally will not pay non ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it 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 special tax due each year, are specifically identified in the Policy Statement as being imposed eacp year and therefore covered by the FDIC's federal immunity. With respect to property in California owned by the FDIC on January 9, 1997, and that was owned by the Resolution Trust Corporation (the "RTC") on December 31, 1995, or that became property of the FDIC through foreclosure of a security interest held by the RTC on that date, the FDIC will continue the RTC's prior practice of paying special taxes imposed pursuant to the Mello-Roos Act if the taxes were imposed prior to the RTC's acquisition of an interest in the property. All other special taxes, including the Special Taxes which secure the Bonds may be challenged by the FDIC. The FDIC has filed claims against the County of Orange with respect to Mello-Roos community facilities district special taxes in the United States Bankruptcy Court and in Federal District Court in which the FDIC has taken a position similar to the position outlined in the Policy Statement. While all of such claims have not been resolved, the Bankruptcy Court has issued a tentative ruling in favor of the FDIC on certain of such claims. The County of Orange has appealed such ruling and the FDIC has cross-appealed. The decision of the United States Court of Appeals for the 9th Circuit (the "9th Circuit Court") was filed on August 28, 2001. In its decision, the 9th Circuit Court stated that the FDIC, as a federal agency, is exempt from the Mello-Roos special tax. The FDIC has also filed suit (the "post-bankruptcy" suit) regardin~ special taxes imposed after 1994. However, such action has been stayed pending resolution of the 9 Circuit Court appeal by the FDIC regarding the bankruptcy case. The post-bankruptcy suit has recently been consolidated with the cases filed by the FDIC against other California counties and is pending in the United States District Court in Los Angeles. The FDIC has filed a motion to lift the bankruptcy stay. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency with respect to a parcel in which the FDIC has an interest, although prohibiting the lien of the FDIC to be foreclosed on at a judicial foreclosure sale would likely reduce the number of or eliminate the persons willing to purchase such a parcel at a foreclosure sale. Owners of the Bonds should assume that the District will be unable to foreclose on any parcel owned by the FDIC. The District has not undertaken to determine whether the FDIC currently has, or is likely to acquire, any interest in any of the parcels, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. Limitations on Remedies Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Fiscal Agent Agreement to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of creditor's rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Fiscal Agent Agreement. The lack of availability of certain remedies or the limitation of remedies may entail /""'"'. risks of delay, limitation or modification of the rights of the Owners. 32 AGENDA lrEM NO. '3 '3 PAGE 1?1J Of ~f?h - Enforceability of the rights and remedies of the owners of the Bonds, and the obligations incurred by the District, may become subject to the federal bankruptcy code and bankruptcy, insolvency, reorganization, ......", moratorium, or similar laws relating to or affecting the enforcement of creditor's rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against joint powers authorities in the State. See ""\ "BONDOWNERS' RISKS - Bankruptcy and Foreclosure Delays," "-Billing of Special Taxes" and "-Property Controlled by Federal Deposit Insurance Corporation and Other Federal Agencies" herein. Right to Vote on Taxes Act An initiative measure commonly referred to as the "Right to Vote on Taxes Act" was approved by the voters of the State of California at the November 5, 1996 general election ("Proposition 218"). Proposition 218 added Article XIIIC ("Article XIIIC") and Article XIIID to the California Constitution. According to the "Title and Summary" of Proposition 218 prepared by the California Attorney General, the Proposition 218 limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." Generally, the provisions of Proposition 218 have not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts to interpret various aspects of Proposition 218. Among other things, Section 3 of Article XIIIC states that "the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." Proposition 218 provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of apportionment of an existing special tax. However, Proposition 218 prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to Proposition 218 unless such ......", legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. Although the matter is not free from doubt, it is likely that the exercise by the voters in the District of the initiative power referred to in Article XIIIC to reduce or terminate the Special Tax is subject to the same restrictions as are applicable to the District, pursuant to the Act. Accordingly, although the matter is not free from doubt, it is likely that Proposition 218 has not conferred on the voters in the District the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. It may be possible, however, for voters or the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds, but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. Ballot Initiatives and Legislative Measures Proposition 218 was adopted pursuant to a measure qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the ......", 33 AGENDA ITEM ~~.. 3., PACE / OF~~ ,-... State Legislature. The adoption of any such initiative or enactment of legislation might place limitations on the ability of the State, the City or local districts to increase revenues or to increase appropriations or on the ability of a property owner to complete the development of the property. Early Bond Redemption The Bonds are subject to optional, special mandatory and mandatory redemption prior to their respective stated maturities. Special mandatory redemption from prepayment of Bonds from amounts constituting prepayments of Special Taxes may occur on any date (see "THE BONDS - Redemption" herein). Loss of Tax Exemption As discussed under the caption "LEGAL MATTERS - Tax Exemption" herein, interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued as a result of future acts or omissions of the District in violation of its covenants contained in the Fiscal Agent Agreement. Should such an event of taxability occur, the Bonds are not subject to special redemption or any increase in interest rate and will remain outstanding until maturity or until redeemed under one of the redemption provisions contained in the Fiscal Agent Agreement. IRS Audits The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). ~ Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. ,,-. 34 :>7 AGENDA ITEM NO. (Jj.fl. PAGE_/:J2 OF 1> ~ SPECIAL TAXES AND DEBT SERVICE "" Administration of the Special Tax The District is required each Fiscal Year to determine the amount of Special Taxes within the District needed to pay debt service on the Bonds and Administrative Expenses of the District related to the District (the "Special Tax Requirement"). The District is expected to incur Administrative Expenses within the District for the levy and collection of the Special Taxes, foreclosure proceedings, Fiscal Agent fees and arbitrage rebate calculations. The District is required to communicate with the County Auditor to ascertain the relevant parcels within the District on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current Fiscal Year. The District is required by resolution to provide for the levy of the Special Taxes within the District in the then current Fiscal Year. A certified list of all parcels subject to the Special Tax, including the amount of the Special Tax to be levied on each such parcel, is filed by the District with the County Auditor on or before the tenth (10th) day of August of that tax year. The Special Taxes so levied may not exceed the authorized amounts as provided in the Rate and Method of Apportionment relating to the District (see "Rate and Method of Apportionment" below). The Special Taxes are payable and are collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property. Special Taxes are due in two equal installments. Special Taxes levied become delinquent on the following December 10th and April 10th. Currently a 10% penalty is added to delinquent taxes. When received, the Special Taxes are required to be deposited in a separate Special Tax Fund for the District to be held by the City and transferred by the City to the Fiscal Agent as provided in the Fiscal Agent Agreement. "" As of the delivery date of the Bonds, the District has retained Harris & Associates to assist in the preparation of the Special Tax roll and the determination of the amount of Special Taxes required in each Fiscal Year. Rate and Method of Apportionment The District levies the Special Taxes in accordance with the Rate and Method of Apportionment (see "APPENDIX E - RATE AND METHOD OF APPORTIONMENT"). Because the Special Taxes have been authorized by a two-thirds (2/3) vote of the qualified electorate within the District, the Special Taxes are a special tax imposed within the limitations of Section 4 of Article XIIIA of the State Constitution. The City Council, as the legislative body of the District, has the power and is obligated, pursuant to the covenants contained in the Fiscal Agent Agreement, to cause the levy and collection of the Special Taxes annually. The Rate and Method of Apportionment may be modified pursuant to the provisions of the Act provided that the District determines that such modification will not impair the timely payment of the Bonds. The District has covenanted that no modification of the maximum authorized Special Tax shall be approved which would prohibit the District from levying the Special Tax in any Fiscal Year at such a rate as could generate Maximum Special Tax Revenues in each Fiscal Year at least equal to 110% of annual debt service in such Fiscal Year. "" 35 AGENDA ITEM NO. "3 ). PAGE J3lf OF <'b.CXo. ~ When a community facilities district is formed, a special tax may be levied on each parcel of taxable property within the community facilities district to pay for the construction, acquisition and rehabilitation of public facilities, to pay for authorized services or to repay bonded indebtedness or other related expenses incurred by the community facilities district. This special tax may be apportioned in any reasonable manner; however, the tax may not be apportioned on an ad valorem basis. Pursuant to Section 53325.3 of the Act, the tax imposed "is a Special Tax and not a special assessment, and there is no requirement that the tax be apportioned on the basis of benefit to any property." When more than one type of land use or houses of different sizes are present within a community facilities district, several criteria may be considered when apportioning the special tax. Generally, criteria are based on building square footage or residential floor area, acreage, and land use. Categories based on such criteria are established to differentiate between parcels of property. Specific special tax levels are assigned to each category, with all parcels within a category assigned the same special tax rate. In the District categories have been established for Developed Property, as shown in the Tables below. The Special Tax for a single family residential property will vary directly with the amount of residential floor area on each parcel. Assigned Special Tax Rates The tables below show the Assigned Special Tax rates for fiscal year 2005/06 that are to be levied against Developed Property within the District. The Maximum Special Taxes for Developed Property cannot exceed the rates shown for fiscal year 2005/06, except when the Backup Special Tax is used as discussed below. The Assigned Special Taxes and Backup Special Taxes will increase at a rate of two percent per year. .--.-. Each year, the District shall levy the Special Tax within the District, subject to the methodology and Maximum Special Taxes set forth in the Rate and Method of Apportionment, in an amount sufficient to meet the Special Tax Requirement. Backup Special Tax Pursuant to the Rate and Method of Apportionment, the Maximum Special Tax for Developed Property within the District is the greater of (i) the amount derived by application of the Assigned Special Tax or (ii) the amount derived by application of the Backup Special Tax. The Backup Special Tax will increase at a rate of two percent per year. Under certain circumstances, the Special Tax for some parcels classified as Developed Property will be increased above the Assigned Special Tax until the Special Tax Requirement is met. However, under no circumstances will the Special Tax on an Assessor's Parcel of Developed Property be increased above the greater of the Backup Special Tax or the applicable Assigned Special Tax. The Assigned Special Tax Rates under the Rate and Method of Apportionment have been designed pursuant to City Policy not to exceed a total tax rate percentage of 2% when taking into account all taxes and assessments on property of all jurisdictions. The following tables shows the assumptions used in setting the Assigned Tax Rates and the effective tax rate within the District. Delinquencies and Foreclosure Actions No parcels within the District have experienced any delinquencies. The District has covenanted to initiate foreclosure action in the Superior Court against parcels with delinquent Special Taxes as provided in the Fiscal Agent Agreement. ~ 36 ACENDA ITEM NO. PACE /31 33 OF '30&_ Foreclosure proceedings are directed by the District through a notification to foreclosure counsel as to the delinquent assessor parcel numbers for which foreclosure proceedings are to be initiated. The District ....." first removes the delinquent Special Taxes from the County Tax Roll, as required by law. Foreclosure counsel then initiates a request for a title search to identify the current legal owner of a delinquent parcel. Foreclosure counsel also sends a written demand for payment to the owner shown on the Tax Roll, followed by the filing of a complaint with the Superior Court in Riverside County and recording a lis pendens against the property at the office of the County Recorder. Each legal owner and all holders of any other interest in the land must file an answer to the complaint within 30 days following the completion of service of process on them. If no answer is filed with such 30 day period, foreclosure counsel files a request that a default judgment be entered by the Court. If any party files an answer, then the case must be litigated, and foreclosure counsel will typically file a motion for summary judgment. Following the entry of a judgment, whether by default or otherwise, against all defendants, foreclosure counsel requests a writ of sale from the Court for delivery to the Sheriff. The writ of sale is delivered to the Sheriff with instructions to execute on the delinquent parcel. Levy by the Sheriff consists of posting notice on the delinquent property, followed by mailing of notice to the last known address of the legal owner and publication of the notice oflevy. Thereafter, the delinquent property owner is entitled to a redemption period of 120 days. Following such 120 day period, foreclosure proceedings can continue following the publication and mailing of a notice of sale of the delinquent parcel or parcels, which sale must be at least 20 days following such notice. The foreclosure process described above typically takes at least six months from the date on which a judgment is entered and can take substantially longer. '-ill' .., 37 AGENDA ITEM Np. 33 PAGE J?J'6 OF~ ~ CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (VISCA Y A) EFFECTIVE TAX RATES FISCAL YEAR 2005-2006 Land Use Land Use Land Use Land Use Home Special Tax Category Class 1 Class 2 Class 3 Class 4 Home Square Footage =>2350 sf 1950-2349 sf 1550-1949 sf <1550 sf Lowest Home Price $414,000 $397,000 $381,000 $363000 Base Property Tax (1.0000%) $4;140.00 $3,970.00 $3,810.00 $363,000.00 Taxes of all Agencies Metro Water West 1302999 (0.0052%) $20.59 $19.45 $18.67 $17.63 N.W. Mosquito & Vector Control District $10.60 $10.60 $10.60 $10.60 Flood Control & Stormwater / C]eanwater $3.75 $3.75 $3.75 $3.75 CSA 152 - Lake Elsinore Stormwater $6.64 $6.64 $6.64 $6.64 City of Lake Elsinore Citywide LLMD $24.90 $24.90 $24.90 $24.90 City of Lake Elsinore LLMD No. I NA NA NA NA MWD Water Standby West Charge $9.22 $9.22 $9.22 $9.22 /'"' Flood Zone 3 Benefit Assessment District $25.50 $25.50 $25.50 $25.50 City of Lake Elsinore CFD No. 2003-] $312.12 $312.12 $312.12 $312.12 Proposed CFD No. 2006-2 Special Tax for Services $242.00 $242.00 $242.00 $242.00 Proposed CFD No. 2006-2 Special Tax for Facilities $2.908.00 $2.711.00 $2 577.00 $2 398.00 Total Property Taxes $7,704.26 $7,336.37 $7,041.54 $6,681.61 Annual Home Tax Rate (%) 1.86% 1.85% 1.85% 1.84% Source: Harris and Associates ,.- 38 AClt:I~lJA n t..~, f"'~) ~ ., PACE I~ -OF ~__ Debt Service Coverage ...", The following table presents the projected annual coverage on the Bonds based upon the realization of certain assumptions and the aggregate Assigned Special Tax Rates. No allowance was made for delinquencies. The projection assumes build out at the following unit mix. TABLE NO.1 COMMUNITY FACILITIES DISTRICT NO. 2006-2 (VISCAYA) RATES AND LAND USE ASSUMPTIONS FISCAL YEAR 2005/06 House Square Footage No. of Units Assigned Tax Total Special Tax Less than 1,550 27 $2,398 $64,746 1,550 to 1,949 35 $2,577 $90,195 1,950 to 2,349 53 $2,711 $143,683 Greater than 2,349 53 $2,908 $154.124 168 $452,748 .....",. Source: Rate and Method of Apportionment (see "APPEDIX D" herein) Until such time as the receipt of Special Taxes from the levy of the assigned tax rate is sufficient to pay debt service on Bonds, the Rate and Method Apportionment provides for the levy of an undeveloped property tax (see "APPENDIX E - Rate and Method of Apportionment" and "Concentration of Property Ownership" above). The receipt of Special Taxes is subject to several variables described herein. The District provides no assurance that the Special Taxes and the coverage ratios shown will be achieved. .....", 39 ACENDA ITEM NO. ~ 7 PAGE /17) OF 3~ " TABLE NO.2 COMMUNITY FACILITIES D1STRICT NO. 2006-2 (VISCAYA) SPECIAL TAX BONDS 2006 SERIES A DEBT SERVICE COVERAGE Special Taxes Fiscal Assumed Administrative Net Special Coverage Year Assi2Ded Rate Expense Taxes Debt Service* Ratio 2007 $452,748 ($25,500) $427,248 $435,445 na 2008 461,803 (26,010) 435,793 392,735 1.11 2009 471,039 (26,530) 444,509 402,120 1.11 2010 480,460 (27,061) 453,399 411,070 1.10 2011 490,069 (27,602) 462,467 419,565 1.10 2012 499,870 (28,154) 471,716 427,563 1.10 2013 509,868 (28,717) 481,151 435,088 1.11 2014 520,065 (29,291) 490,774 443,163 1.11 2015 530,466 (29,877) 500,589 453,675 1.10 2016 541,076 (30,475) 510,601 459,400 1.11 2017 551,897 (31,084) 520,813 469,550 1.11 2018 562,935 (31,706) 531,229 478,800 1.11 2019 574,194 (32,340) 541,854 492,300 1.10 2020 585,678 (32,987) 552,691 499,800 1.11 2021 597,391 (33,647) 563,745 511,550 1.10 2022 609,339 (34,320) 575,020 522,115 1.10 ~ 2023 621,526 (35,006) 586,520 531,353 1.10 2024 633,957 (35,706) 598,250 539,540 1.11 2025 646,636 (36,420) 610,215 551,678 1.11 2026 659,568 (37,149) 622,420 562,503 1.11 2027 672,760 (37,892) 634,868 577,015 1.10 2028 686,215 (38,649) 647,565 584,790 1.11 2029 699,939 (39,422) 660,517 596,240 1.11 2030 713,938 (40,211) 673,727 611,100 1.10 2031 728,217 (41,015) 687,202 624,105 1.10 2032 742,781 (41,835) 700,946 635,255 1.10 2033 757,637 (42,672) 714,965 649,550 1.10 2034 772,789 (43,526) 729,264 661,725 1.10 2035 788,245 (44,396) 743,849 671,780 1.11 2036 804,010 (45,284) 758,726 689,715 1.10 * Preliminary, subject to change ~ 40 AGENDA I1fM NO. ? 2~ PAGI )t.f I ~ OF 3 f3la.. THE CITY ......, The City of Lake Elsinore (the "City") was founded in 1883 and incorporated on April 23, 1888, and in 1893 the Elsinore Valley, previously in San Diego County, became a part of the new County of Riverside. The City is located 73 miles east of Los Angeles, 472 miles south of San Francisco, and 74 miles north of San Diego. It covers an area of approximately 39.1 square miles with 10.5 miles of lake shore and elevation of 1,258 feet above sea level. The City is incorporated as a general law city. The City has a Council/Manager form of municipal government. The City Council appoints the City Manager who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. The City Council is composed of five members elected bi-annually at large to four-year alternating terms. The mayor is selected by the City Council from among its members. The City employs a staff of 37 full-time employees and 18 part-time employees under the direction of the City Manager. The City Council members and term expiration dates are as follows: Council Members Robert Magee, Mayor Robert Schiffner, Mayor Pro Tern Genie Kelley, Member Thomas Buckley, Member Daryl Hickman, Member Term Expires November, 2008 November, 2008 November, 2008 November, 2006 November, 2006 Current City administrative staff include: ......, Robert Brady, City Manager Matt N. Pressey, Director of Administrative Services Frederick Ray, City Clerk As of the delivery date of the Bonds, the District has retained Harris & Associates to assist in the preparation of the Special Tax roll and the determination of the amount of Special Taxes required in each Fiscal Year. '-' 41 AGENDA IT...,;! _.?? ~ PACE J <-f J- OF 0 ~ THE DISTRICT The information set forth herein regarding ownership of real property in the District, the Developer and any proposed development of property in the District was provided by the Developer and has not been independently verified. The District makes no representation as to the accuracy or completeness of any such information. This information has been included because it is considered relevant to an informed evaluation of the District. As development of property in the District has not been completed, no assurance can be given that it will occur, that it will occur as described herein, or that it will occur in a timely manner. The information should not be construed to suggest that the Bonds or the Special Taxes that will be used to pay the Bonds are personal obligations of the Developer. The owner of property within the District will not be personally liable for payments of the Special Taxes to be applied to pay the principal of and interest on the Bonds. Accordingly, the Developer s financial statements have not been included in this Official Statement. Furthermore, no representation is made that the Developer will have funds available to complete the development within the District. Boundaries of the District The District is located is located approximately 2 miles southwest of Interstate 15 freeway near the southwest corner of Lakeshore Drive and Riverside Drive. The District coincides with the boundaries of Tract No. 32008. The boundaries of the District coincide with the development generally known as Viscaya. The boundaries of the District are described on the reduced scale map entitled "Boundary Map of Community Facilities District No. 2006-2 (Viscaya)". A full scale map is on file with the Clerk of the City of Lake Elsinore and was recorded with the County Recorder, County of Riverside in Book _ Page _ of Maps of Assessment and Community Facilities District Districts, Document Number ~, Facilities and Fees to be Financed by the District The District is authorized to issue the Bonds to fund the planning, design, permitting and construction of public infrastructure consisting primarily of street, sewer, water, storm drain, park facilities as well as the funding of certain City and Elsinore Valley Municipal Water District fees (collectively the "Facilities"). The following table summarizes authorized District facilities and fees which are to be designed, acquired or constructed, or paid from proceeds ofthe Bonds: ,.... 42 "?? AGENDA ITEM.I~'~ PAGE /'f:J OF ~~ Aerial Photo ~ ~ ~ 43 ~ TABLE NO.3 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (VISCAYA) ELIGBLE FACILITIES COSTS (Estimated Costs) Facilities City of Lake Elsinore Fees Library Fee Master Plan of Drainage Park In-Lieu Fee Traffic Impact Fee Transportation Uniform Mitigation Fee Multiple Species Habitat Conservation Plan Fee Public Building Impact Fee Estimated Cost $1,869,901 18,300 101,023 195,200 167,018 884,256 201,422 302,682 City of Lake Elsinore Facilities Storm Drain Improvements Traffic Signal Improvements Lakeshore Drive Improvements $828,781 449,344 176,876 202,561 "...... Elsinore Valley Municipal Water District Fees Water Connection Fee Sewer Connection Fee Landscape Irrigation Meters - 2" Landscape Irrigation Meters - 1" $1,777,584 890,356 796,220 47,958 43,050 Elsinore Valley Municipal Water District Facilities Sewer Improvements Water Improvements Total Fees and Facilities $1,173,970 416,072 757,898 $5,650,237 Source: The Developer To the extent the proceeds of the Bonds are insufficient to fund all of the eligible costs for all of the Facilities, such costs will be borne by the Developer. ,..... 44 AGENDAlTfM NO. ?? PACE /45 OF~ ........" The Developer . The developer of the property within the Improvement Area is Corman Leigh- Tozai Lakeshore, LLC. Corman Leigh- Tozai Lakeshore, LLC is a single purpose entity organized to own and develop the property within the Improvement Area. Corman Leigh- Tozai Lakeshore, LLC is an affiliate of Corman Leigh Communities. Corman Leigh Communities is the managing member of Corman Leigh- Tozai Lakeshore, LLC and owns approximately 50% of the membership shares thereof. Corman Leigh Communities was founded by Daniel R. Leigh in 1987, and is a community developer/builder in Southern California. Corman Leigh Communities has completed a variety of projects ranging from commercial and industrial developments to residential communities. Recent single family residential projects competed or under development by Corman Leigh Communities or its affiliates in Southern California include the following: Units Sold Unit Size (As of (Square October J, Project Name Location Feet) Price Range Total Units 2005) Cimarron Beaumont 1700-2400 $200,000's 67 sold out Cimarron Heights San Bernardino 1400-2600 200,000's 100 sold out Sonata Fontana 1700-2400 200,000's 50 sold out Tawney Ridge Victorville 1500-2300 190,000's 38 sold out Ventana Lake Elsinore 2002-2932 300,000's 44 sold out '-'" Country Glen Yucaipa 1700-2400 200,000's 80 sold out Chandon French Valley 2141-2960 400,000's 34 sold out Escalade Moreno Valley 1707-2960 300,000's 114 sold out Stetson Beaumont 1638-2914 300,000's 194 sold out Heritage Perris 2002-2898 300,000's 99 sold out Traditions Perris 1638-2553 300,000's 101 sold out Source: Connan Leigh Communities. Management. Daniel R. Leigh is the founder and president of Corman Leigh Communities. Mr. Leigh has 18 years of experience in commercial and residential real estate development experience in Southern California, particularly with the development of master-planned residential communities. Mr. Leigh has experience with corporate acquisitions and dispositions, land development, home building, and corporate business development activities and has managed, developed and constructed numerous entry level to high-end new home communities. Mr. Leigh has a Bachelor of Science and an MBA in real estate and finance from San Diego State University. .."", 45 AGENDA ITEM NO. ~ PACE /4(P OF . '" Rick Scott is the Chief Operating Officer of Corman Leigh Communities. Mr. Scott joined Corman Leigh Communities in 2003 as the Chief Operating Officer. Before joining Corman Leigh Communities, Mr. Scott worked at Buie Communities as Director of Project Development, Assistant Vice President. Mr. Scott has twenty-five years of experience in real estate development, including experience in management, acquisition planning, project management, and project feasibility analysis. Mr. Scott has managed the development of over 5,000 for-sale residential units of various types and an additional 2,000 for-lease units. D~de Northup is the Chief Financial Officer of Corman Leigh Communities. Mr. Northup joined Corman Leigh Communities in 2004, as the Chief Financial Officer. Prior to joining Corman Leigh Communities, Mr. Northup was Vice-President of Commercial Loans for Union Bank of California. Mr. Northup has over twenty years of experience in the fields of real estate, banking and corporate finance. Mr. Northup's professional experience includes portfolio management, staffing, budgeting, and all aspects of acquisition, construction and permanent loan underwriting. Mr. Northup has a Bachelor of Science in Finance from the University of Tulsa and an MBA with a real estate emphasis from San Diego State University. Description of Development The following section describes the proposed development in terms of the size and prices of the units. There can be no assurance that the development plan described herein will be completed or that it will not be modified in the future. In addition, there can be no assurance that sufficient funds will or can be made available to complete the development plan or pay special taxes as described. The development consists of 8 phases with a total of 168 detached homes referred to as Viscaya. The ",..--. expected sales prices below reflect the most recent sales release The Developer expects to offer tfour different model types as follows: 1. Plan #1 is 1,1,506 square feet in size and is expected to be sold at a base price of $363,000. The current development plan shows 27 units of the Plan #1 units. 2. Plan #2 is 1,930 square feet in size and is expected to be sold at a base price of$381,000. The current development plan shows 35 units of the Plan #2 units. 3 Plan #3 is 2,239 square feet in size and is expected to be sold at a base price of $397,000. The current development plan shows 53 units of the Plan #3 units. 3 Plan #4 is 2,513 square feet in size and is expected to be sold at a base price of $414,000. The current development plan shows 53 units ofthe Plan #4 units The Market Absorption Study forecasts that an the units will close escrow in 2008. ",..--. 46 AGENDA IlCM NO. "3 '3 PACE 147 OF ~~- "-"" TABLE NO.4 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (VISCAYA) DESCRIPTION OF DEVELOPMENT (as of May 15,2006) Developer: Number of Homes: Number of Models: Size Range: Price Range (Base) for most recent sales release: Building Permits Pulled: Homes Under Contract with Homebuyers: Absorption Period: Source: The Developer Corman Leigh- Tozai Lakeshore, LLC 168 4 1,506 Sq. Ft. to 2,513 Sq. Ft. $363,000 to $414,000 46 119 fully absorbed in 2008 47 "-"" ......" 33 AGENDA ITEM NO. ~.- PACE J t./ ~ OF 3{X) - "'" TABLE NO.5 CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT 2006-2 (VISCAYA) DEVELOPMENT SCHEDULE The following table summarizes actual and projected development milestones as of May 15,2006. Activity 1. Grading Completed July 2005 2 Improvement Plans Approved July 2005 3. Final Map Recorded July 2005 4. Model Homes Started June 2005 5. Model Homes Completed December 2006 6. Production Homes Started November 2005 7. First Escrows Closing June 2006 Source: The Developer. r"' ,-... 48 AGENDA ITEM i~"'__h~3 PAOE 141 OF '3lXo_ Financing Plan ....., The following table summarizes the Developer's financing plan to acquire the land, complete the public infrastructure and complete the development of the development: Cost of Finished Lots Land Acquisition Due Diligence Tentative TM Cost Final Design Field Permit and Processing Impact Fees Off-Site Common Area Total Total $3,362,636 $30,995 $635,007 $705,055 $275,640 $722,687 $7,079,044 $5,880,190 $253,318 $18,944,572 Source: The Developer Spent to Date $3,362,636 $30,995 $564,537 $562,097 $275,640 $461,239 $2,480,227 $3,707,914 $55,385 $11,500,670 Remainina $0 $0 $70,470 $142,958 $0 $261,448 $4,598,817 $2,172,276 $197,933 $7,443,902 Corman Leigh- Tozai Lakeshore LLC intends to finance home construction through a combination of revenue generated from home sales revenue, reimbursement for District financed facilities completed and, to the extent necessary, borrowings under one or more construction financing loans. Corman Leigh- Tozai Lakeshore LLC has obtained a construction financing loan from PFF Bank & Trust for the first construction phase comprising 42 of the 168 units proposed to be constructed The aggregate commitment amount of this loan is $4,385,867 and the outstanding balance as of May 15, 2006 totaled $4,053,662. ....., Although Corman Leigh- Tozai Lakeshore LLC intends to obtain additional construction financing loans for the remaining construction phases, there are no commitments for any such loans at this time. There is no assurance that amounts necessary to finance Corman Leigh- Tozai Lakeshore LLC's remaining site development and home construction costs within the District will be available from Corman Leigh- Tozai Lakeshore LLC, or PFF Bank & Trust or any other source, when needed. Neither Corman Leigh- Tozai Lakeshore LLC or any of its members or affiliates, nor PFF Bank & Trust or any other lender, is under any legal obligation of any kind to expend funds for the development of the property in the District. Any internal funding by Corman Leigh- Tozai Lakeshore LLC or its members or affiliates, or borrowing under any loan arrangement, to finance its development and home construction costs is entirely voluntary.. History of Property Tax Payment; Loan Defaults; Bankruptcy. An officer or representative executing a certificate on behalf of the Developer will certify that, to his or her actual knowledge: . Such property owner has never defaulted to any material extent in the payment of special taxes or assessments in connection with the District or any other community facilities districts or assessment districts in California within the past five years. · Such property owner is not currently in default on any loans, lines of credit or other obligation related to its development in the District, the result of which could have a material adverse affect on the development by such property owner of its property in the District. 49 ......" ').. ~ AGENDA ITEM NO. ./ PACE ISO OF ~~ '"' . Such property owner is solvent and no proceedings are pending (with proper service of process having been accomplished) or, to its actual knowledge threatened in which such property owner may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from all of its respective debts or obligations, or granted an extension of time to pay its debts or obligations or a reorganization or readjustment of its debts. . There is no litigation or administrative proceeding of any nature which is pending against such property owner (with proper service of process having been accomplished) or to its actual knowledge, is threatened against such property owner, which if successful, would have a material adverse affect on the ability of such property owner to complete the development and sale of the property it currently owns within the District, or to pay the Special Taxes or ordinary ad valorem property tax obligations when due on its property within the District. ,.-- '"' 50 AGENDA ITeM NO. ~3 PAOE 151 OF (LXD~ LEGAL MATTERS ~ Enforceability of Remedies The remedies available to the Fiscal Agent and the Owners of the Bonds upon an event of default under the Fiscal Agent Agreement or any other document described herein are in many respects dependent upon regulatory and judicial actions which are often subject to discretion and delay. Under existing law and judicial decisions, the remedies provided for under such documents may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the Fiscal Agent Agreement is subject to limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and P!oceedings generally. Approval of Legal Proceedings Fulbright & Jaworski L.L.P., Los Angeles, California, as Bond Counsel, will render an opinion which states that the Fiscal Agent Agreement and the Bonds are valid and binding contracts of the City and are enforceable in accordance with their terms. Fulbright & Jaworski L.L.P. will render an opinion which states that the Fiscal Agent Agreement and the Bonds are valid and. binding contracts of the District and are enforceable in accordance with their terms. The legal opinions of Bond Counsel will be subject to the effect of bankruptcy, insolvency, moratorium and other similar laws affecting creditors' rights and to the exercise of judicial discretion in accordance with general principles of equity. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. The City has no knowledge of any fact or other information which would indicate that the Fiscal Agent Agreement is not so enforceable against the District, except to the extent such enforcement is limited by principles of equity and by state and federal laws relating to bankruptcy, reorganization, moratorium or creditors' rights generally. ~ Certain legal matters will be passed on for the City and the District by Leibold, McClendon & Mann, P.C., Laguna Hills, California, as City Attorney. In addition, certain legal matters will be passed on by Fulbright & Jaworski, Los Angeles, California, Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by McFarlin & Anderson LLP, Lake Forest, California, as Underwriter's Counsel. Fees payable to Bond Counsel, City Attorney, Disclosure Counsel and Underwriter's Counsel are contingent upon the sale and delivery of the Bonds. Tax Exemption The Internal Revenue Code of 1986 (the "Code") imposes certain requirements that must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in the gross income of the owners thereof for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to maintain the exclusion of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In the opinion of Fulbright & Jaworski L.L.P., Bond Counsel, under existing law interest on the Bonds is exempt from personal income taxes of the State of California and, assuming compliance with the aforementioned covenant, interest on the Bonds is excluded pursuant to section I03(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Bond Counsel is also of the opinion that, assuming compliance with the aforementioned covenant, the Bonds are not "specified private activity bonds" within the meaning of section 57(a)(5) of the Code and, therefore, the interest on the Bonds will not be treated as an item of tax preference for purposes of computing the alternative ~ 51 AOENDA ITEM NO. :3 3 PAGE 11j~ OF ~ ,.... ,,-... ,..... minimum tax imposed by section 55 of the Code. The receipt or accrual of interest on the Bonds owned by a corporation may affect the computation of its alternative minimum taxable income, upon which the alternative minimum tax is imposed, to the extent that such interest is taken into account in determining the adjusted current earnings of that corporation (75 percent of the excess, if any, of such adjusted current earnings over the alternative minimum taxable income being an adjustment to alternative minimum taxable income (determined without regard to such adjustment or to the alternative tax net operating loss deduction)). To the extent that a purchaser of a Bond acquires that Bond at a price that exceeds the aggregate amount of payments (other than payments of qualified stated interest within the meaning of section 1.1273-1 of the Treasury Regulations) to be made on the Bonds (determined, in the case of a callable Bond, under the assumption described below), such excess will constitute "bond premium" under the Code. Section 171 of the Code, and the Treasury Regulations promulgated thereunder, provide generally that bond premium on a tax-exempt obligation must be amortized on a constant yield, economic accrual, basis; the amount of premium so amortized will reduce the owner's basis in such obligation for federal income tax purposes, but such amortized premium will not be deductible for federal income tax purposes. In the case of a purchase of a Bond that is callable, the determination whether there is amortizable bond premium, and the computation of the accrual of that premium, must be made under the assumption that the Bond will be called on the redemption date that would minimize the purchaser's yield on the Bond (or that the Bond will not be called prior to maturity if that would minimize the purchaser's yield). The rate and timing of the amortization of the bond premium and the corresponding basis reduction may result in an owner realizing a taxable gain when a Bond owned by such owner is sold or disposed of for an amount equal to or in some circumstances even less than the original cost of the Bond to the owner. The excess, if any, of the stated redemption price at maturity of Bonds of a maturity over the initial offering price to the public of the Bonds of that maturity set forth on the cover of this Official Statement is "original issue discount" under the Code. Such original issue discount accruing on a Bond is treated as interest excluded from the gross income of the owner thereof for federal income tax purposes and exempt from California personal income tax to the same extent as would be stated interest on the Bond. Original issue discount on any Bond purchased at such initial offering price and pursuant to such initial offering will accrue on a semiannual basis over the term of the Bond on the basis of a constant yield method and, within each semiannual period, will accrue on a ratable daily basis. The amount of original issue discount on such a Bond accruing during each period is added to the adjusted basis of such Bond to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such Bond. The Code includes certain provisions relating to the accrual of original issue discount in the case of purchasers of Bonds who purchase such Bonds other than at the initial offering price and pursuant to the initial offering. Any person considering purchasing a Bond at a price that includes bond premium should consult his or her own tax advisors with respect to the amortization and treatment of such bond premium, including, but not limited to, the calculation of gain or loss upon the sale, redemption or other disposition of the Bond. Any person considering purchasing a Bond of a maturity having original issue discount should consult his or her own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering and at the original offering price, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes. . Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance of the Bonds may affect the tax status of interest on the Bonds or the tax consequences of the ownership of the Bonds. No assurance can be given that future legislation, or amendments to the Code, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exemption of interest on the Bonds from personal income taxation by the State of California or of the exclusion of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. Furthermore, Bond Counsel expresses no opinion as to any federal, state or local tax law consequences with respect to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the 52 ACENDA ITEM NO. PAGE ~ OF ~3 ~06 proceeds thereof predicated or permitted upon the advice or approval of bond counsel if such advice or approval is given by counsel other than Bond Counsel. Although Bond Counsel is of the opinion that interest on the Bonds is exempt from state personal income tax and excluded from the gross income of the owners thereof for federal income tax purposes, an owner's federal, state or local tax liability may be otherwise affected by the ownership or disposition of the Bonds. The nature and extent of these other tax consequences will depend upon the owner's other items of income or deduction. Without limiting the generality of the foregoing, prospective purchasers of the Bonds should be aware that (i) section 265 ofthe Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Bonds or, in the case of a financial institution, that portion of an owner's interest expense allocated to interest on the Bonds, (ii) with respect to insurance companies subject to the tax imposed by section 831 of the Code, section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15 percent of the sum of certain items, including interest on the Bonds, (Hi) interest on the Bonds earned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by section 884 of the Code, (iv) passive investment income, including interest on the Bonds, may be subject to federal income taxation under section 1375 ofthe Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income, (v) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, receipts or accruals of interest on the Bonds and (vi) under section 32(i) of the Code, receipt of investment income, including interest on the Bonds, may disqualify the recipient thereof from obtaining the earned income credit. Bond Counsel has expressed no opinion regarding any such other tax consequences. Bond Counsel's opinion is not a guarantee of a result, but represents their legal judgment based upon their review. of existing statutes, regulations, published rulings and court decisions and the covenants of the District described above. No ruling has been sought from the Internal Revenue Service (the "Service") with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Bonds is commenced, under current procedures the Service is likely to treat the District as the "taxpayer," and the owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Bonds, the District may have different or conflicting interests from the. owners of the Bonds. Public awareness of any future audit of the Bonds could adversely affect the value and liquidity of the Bonds during the pendency of the audit, regardless of the ultimate outcome. Absence of Litigation The City will furnish a certificate dated as of the date of delivery of the Bonds that there is not now known to be pending or threatened any litigation restraining or enjoining the execution or delivery of the Fiscal Agent Agreement or the sale or delivery of the Bonds or in any manner questioning the proceedings and authority under which the Fiscal Agent Agreement is to be executed or delivered or the Bonds are to be delivered or affecting the validity thereof. 53 AGENDA m;M~~. 33 PACE I OF '3~A ......., ......., "-'" ,- CONCLUDING INFORMATION No Rating on the Bonds The District has not made, and does not contemplate making, any application for a rating on the Bonds. No such rating should be assumed based upon any other City rating that may be obtained. Prospective purchasers of the Bonds are required to make independent determinations as to the credit quality of the Bonds and their appropriateness as an investment. Should a Bondowner elect to sell a Bond prior to maturity, no representations or assurances can be made that a market will have been established or maintained for the purchase and sale of the Bonds. The Underwriter assumes no obligation to establish or maintain such a market and is not obligated to repurchase any of the Bonds at the request of the owner thereof. Underwriting Southwest Securities, Inc., Newport Beach, California (the "Underwriter") is offering the Bonds at the prices set forth on the cover page hereof. The initial offering prices may be changed from time to time and concessions from the offering prices may be allowed to dealers, banks and others. The Underwriter has agreed to purchase the Bonds at a price equal to approximately % ($ ) of the aggregate principal amount of the Bonds, which amount represents the principal amount of the Bonds, less the Underwriter's discount of $ and a net original issue discount of $ . The Underwriter will pay certain of its expenses relating to the offering. Experts /"'"' The Market Absorption Study prepared by Empire Economics, Inc., Capistrano Beach, California, and the Appraisal prepared by Harris Realty Appraisal, Newport Beach, California, as well as the Special Tax projections prepared by Harris & Associates, Irvine, California, Special Tax Consultant, have been included in this Official Statement in reliance on and upon the authority of said firms as experts in the matters covered therein. The Financing Consultant The material contained in this Official Statement was prepared by Rod Gunn Associates, Inc., Huntington Beach, California, an independent financial consulting firm, who advised the City as to the financial structure and certain other financial matters relating to the Bonds. The information set forth herein has been obtained by Rod Gunn Associates, Inc. from sources which are believed to be reliable, but such information is not guaranteed by Rod Gunn Associates, Inc. as to accuracy or completeness, nor has it been independently verified. Fees paid to Rod Gunn Associates, Inc. are contingent upon the sale. and delivery of the Bonds. Additional Information .;-., The summaries and references contained herein with respect to the Fiscal Agent Agreement, the Bonds, statutes and other documents, do not purport to be comprehensive or definitive and are qualified by reference to each such document or statute and references to the Bonds are qualified in their entirety by reference to the form hereof included in the Fiscal Agent Agreement. Definitions of certain terms used herein are set forth in "APPENDIX A-Definitions of Certain Terms Used In the Fiscal Agent Agreement". Copies of the Fiscal Agent Agreement are available for inspection during the period of initial offering on the Bonds at the offices of the Underwriter, Southwest Securities, Inc., 620 Newport Center Drive, Suite 300, Newport Beach, California 92660, telephone (949) 717-2000. Copies of these documents may be obtained after delivery of the Bonds from the City through the City Manager, City of Lake Elsinore, 130 S. Main Street, Lake Elsinore, California 92530. 54 ACENDA IJEM NO. ~. PAOE /S; OF = References ......, Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and the purchasers or Owners of any of the Bonds. Execution The execution of this Official Statement by the City Manager has been duly authorized by the City of Lake Elsinore. CITY OF LAKE ELSINORE By: /s/ City Manager of the City, Acting on behalf of Community Facilities District No. 2006-2 (Viscaya) ......, ......" 55 AGENDA ITE"f NO. ? 3 PAOE I~ OF.2a2.- "'" APPENDIX A DEFINITIONS OF CERTAIN TERMS USED IN THE FISCAL AGENT AGREEMENT Unless otherwise defined in this Official Statement, the following terms have the following meanings. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the California Government Code. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Fiscal Agent, any fees for credit enhancement for the Bonds which are not otherwise paid as Costs of Issuance, any costs related to the CFD's compliance with State and federal laws requiring continuing disclosure of information concerning the Bonds and the CFD, and any other costs otherwise incurred by the City's staff on behalf of the CFD in order to carry out the purposes of the CFD as set forth in the Resolution of Formation and any obligation of the CFD hereunder. "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. . "Authorized Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (1) Direct obligations of the United States of America (including obligations issued or held in book- "'" entry form on the books of the Department of the Treasury, and CATS and TIGRS) or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America ("Direct Obligations"). "..-. (2) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): U.S. Export-Import Bank ("Eximbank") Direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration ("FmHA") Certificates of beneficial ownership Federal Financing Bank Federal Housing Administration Debentures ("FHA") General Services Administration Participation certificates Government National Mortgage Association ("GNMA" or "Ginnie Mae") GNMA-guaranteed mortgage-backed bonds GNMA-guaranteed pass-through obligations U.S. Maritime Administration Guaranteed Title XI financing U.S. Department of Housing and Urban Development mUD) A-I AGENDA ITEM NO. '3 ~ ,. /67 OF_ 3~ Project Notes Local Authority Bonds New Communities Debentures. U.S. government guaranteed debentures U.S. Public Housing Notes and Bonds. U.S. government guaranteed public housing notes and bonds ...." (3) Bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself: Federal Home Loan Bank Svstem Senior debt obligations Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") Participation certificates Senior debt obligations Federal National Mortgage Association ("FNMA" or "Fannie Mae") Mortgage-backed securities and senior debt obligations Student Loan Marketing Association ("SLMA" or "Sallie Mae") Senior debt obligations Resolution Funding Com. ("REFCORP") obligations Farm Credit Svstem CM. - Consolidated svstem-wide bonds and notes (4) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Securities Act of 1933, and having a rating by Standard & Poor's of AAAm-G, AAAm or AAm, and, if rated by Moody's, rated Aaa, Aal or Aa2 (including those of the Fiscal Agent and its affiliates). (5) Certificates of deposit secured at all times by collateral described in (1) and/or (2) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party and the Bondholders must have a perfected first security interest in the collateral. ...." (6) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC or which are with a bank rated AA or better by Standard & Poor's and Aa or better by Moody's (including those of the Fiscal Agent and its affiliates). (7) Investment Agreements with any corporation, including banking or financial institutions, provided that (a) the long-term debt of the provider of any such investment agreement is rated, at the time of investment, at least "AN' and "Aa" by the Rating Agency (without regard to gradations of plus or minus. within such category), and (b) any such investment agreement is collateralized with United States Treasury or agency obligations which at least equal 102% of the principal amount invested thereunder, and (c) any such agreement shall include a provision to the effect that, in the event the long-term debt rating of the provider of such agreement is downgraded below "AA-" or below "A a" by the applicable Rating Agency, the CFD has the right to withdraw or cause the Fiscal Agent to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to the Fiscal Agent Agreement. (8) Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's and "A-I" or better by ...." Standard & Poor's. A-2 AGENDA I1EM NO. -z:,.3 PAGE J51 OF 3~ ""'" (9) Bonds or notes issued by any state or municipality which are rated by Moody's and Standard & Poor's in one of the two highest rating categories assigned by such agencies. (10) Federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured or unguaranteed obligation rating of "Prime - I" or "A3" or better by Moody's and "A- 1" or "A" or better by Standard & Poor's. (11) Repurchase agreements collateralized by Direct Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer subject to the Securities Investors' Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated "P-I" or "A3" or better by Moody's, and "A-I" or "A-" by Standard & Poor's; provided: .(a) a master repurchase agreement or specific written repurchase agreement governs the transaction; and (b) the securities are held free and clear of any lien by the Fiscal Agent or an independent third party acting solely as agent ("Agent") for the Fiscal Agent, and such third party is (i) a Federal Reserve Bank, (ii) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50 million, or (Hi) a bank approved in writing for such purpose by Financial Guaranty Insurance Company, and the Fiscal Agent shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Fiscal Agent; and (c) a perfected first security interest under the Uniform Commercial Code, or book-entry procedures prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et seq. in such securities is created for the benefit of the Fiscal Agent; and (d) the repurchase agreement has a term of 180 days or less, and the Fiscal Agent or the Agent will value the collateral securities no less frequently than weekly and will liquidate the collateral securities if any ~ deficiency in the required collateral percentage is not restored within two business days of such valuation; . and (e) the fair market value of the securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least 103%. (12) Local Agency Investment Fund ("LA IF") of the State of California. (13) Any other investment which the CFD is permitted by law to make. "Authorized Representative of the CFD" means the Mayor, City Manager, Administrative Services Director, or any other person or persons designated by the Council and authorized to act on behalf of the CFD by a written certificate signed on behalf of the CFD by the Mayor or the City Manager and containing the specimen signature of each such person. "Bond Counsel" means an attorney at law or a firm of attorneys selected by the CFD of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Fiscal Agent shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bond Year" means the twelve month period commencing on September 2 of each year and ending on September 1 of the following year, except that the first Bond Year for the Bonds shall begin on the Delivery Date and end September 1, 2007 which is not more than 12 months after the Delivery Date. ,.-. A-3 '33 AOENDA rrEM NO. .!!!! PAGE /57 OF ~--. "Business Day" means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Fiscal Agent is located, are not required or authorized to remain closed. ....., "Certificate of Authorized Representative of the CFD" means a written certificate or warrant request executed by an Authorized Representative of the CFD. "CFD" means the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) established pursuant to the Act and the Resolution of Formation. "Code" means the Internal Revenue Code of 1986 and any Regulations, rulings, judicial decisions, and notices, announcements, and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Fiscal Agent and its counsel, legal fees and expenses, costs of printing the Bonds and the preliminary and final official statements for the Bonds, fees of financial consultants and all other related fees and expenses, as set forth in a Certificate of Authorized Representative of the CFD. "Council" means the City Council of the City of Lake Elsinore. "Defeasance Securities" means any of the following: (a) Cash (b) United States Treasury Certificates, Notes and Bonds (including State and Local Government Series - "SLGS") (c) Direct obligations of the U.S. Treasury which have been stripped by the U.S. Treasury itself, e.g., ....., CATS, TIGRS and similar securities. (d) The interest component of Resolution Funding Corp. strips which have been stripped by request to the Federal Reserve Bank of New York and are in book-entry form. (e) Pre-refunded municipal bonds rated "Aaa" by Moody's and "AAA" by Standard & Poor's. (f) Obligations issued by the following agencies which are backed by the full faith and credit of the United States: U.S. Export-Import Bank - direct obligations or fully guaranteed certificates of beneficial ownership Farmers Home Administration - certificates of beneficial ownership Federal Financinl! Bank General Services Administration - participation certificates U.S. Maritime Administration - guaranteed Title XI financing U.s. Department of Housinl! and Urban Development (HUD) - Project Notes, Local Authority Bonds, New Communities Debentures - U.S. government guaranteed debentures, U.s. Public Housing Notes and Bonds - U.S. government guaranteed public housing notes and bonds. "Delivery Date" means, with respect to the Bonds, the date on which the bonds of such issue were issued and delivered to the initial purchasers thereof. "Depository" shall mean The Depository Trust Company, New York, New York, and its successors and assigns as securities depository for the Certificates, or any other securities depository acting as Depository ....., under the Fiscal Agent Agreement. A-4 AGENDA ITEM NO. ?;; ;, PACE 106 OF ~-- ,...... "Fiscal Agent" means Union Bank of California, N.A., a national banking association duly organized and existing under and by virtue of the laws of the United States of America, at its principal corporate trust office in Los Angeles, California, and its successors or assigns, or any other bank or trust company which may at any time be substituted in its place as provided in the Fiscal Agent Agreement and any successor thereto. "Fiscal Agent Agreement" means the Fiscal Agent Agreement, together with any Supplemental Fiscal Agent Agreement approved pursuant to the Fiscal Agent Agreement. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next following June 30. "Independent Financial Consultant" means a financial consultant or special tax consultant or firm of either such consultants generally recognized to be well qualified in the financial consulting or special tax consulting field, appointed and paid by the CFD, who, or each of whom: (1) is, in fact, independent and not under the domination of the CFD; (2) does not have any substantial interest, direct or indirect, in the CFD; and (3) is not connected with the CFD as a member, officer or employee of the CFD, but who may be regularly retained to make annual or other reports to the CFD. "Interest Payment Date" means each March I and September I, commencing March 1, 2007, provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next preceding such date. "Investment Agreement" means one or more agreements for the investment of funds of the CFD complying with the criteria therefor as set forth in Subsection (7) of the definition of Authorized Investments. ~ "Maximum Annual Debt Service" means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of all Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Moody's" means Moody's Investors Service, its successors and assigns. "Nominee" shall mean the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Fiscal Agent Agreement. "Outstanding" or "Outstanding Bonds" means all Bonds theretofore issued by the CFD, except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with the Fiscal Agent Agreement; (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in the Fiscal Agent Agreement; and (3) Bonds which have been surrendered to the Fiscal Agent for transfer or exchange pursuant to the Fiscal Agent Agreement or for which a replacement has been issued pursuant to the Fiscal Agent Agreement. "Participants" shall mean those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Bonds as securities depository. ~ "Person" means natural persons, firms, corporations, partnerships, associations, trusts, public bodies and other entities. A-S AGENDA nEM NO. PAGE I fd '33 OFg~ "Principal Office of the Fiscal Agent" means the office of the Fiscal Agent located in Los Angeles, California or such other office or offices as the Fiscal Agent may designate from time to time, or the office of any successor Fiscal Agent where it principally conducts its business of serving as Fiscal Agent under ...., indentures pursuant to which municipal or governmental obligations are issued. "Project" means those public facilities described in the Resolution of Formation which are to be acquired or constructed within The District, including all engineering, planning and design services and other incidental expenses related to such facilities and other facilities, if any, authorized by the qualified electors within the CFD from time to time. "Project Costs" means the amounts necessary to finance the Project, to create and replenish any necessary reserve funds, to pay the initial and annual costs associated with the Bonds, including, but not limited to, remarketing, credit enhancement, Fiscal Agent and other fees and expenses relating to the issuance of the Bonds and the formation of the CFD, and to pay any other "incidental expenses" of the CFD, as such term is defined in the Act. "Rating Agency" means Moody's and Standard & Poor's, or both, as the context requires. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. "Regulations" means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to section 103 of the Code. "Reserve Requirement" means, as of any date of calculation, an amount equal to the lowest of (1) 10% of the issue price (as defined pursuant to section 148 of the Code), or (2) Maximum Annual Debt Service, or (3) 125% of the average Annual Debt Service of the Outstanding Bonds. "Resolution of Formation" means Resolution No. pursuant to which the Council formed the CFD. adopted by the Council on April 25, 2006 ...., "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedule set forth in the Fiscal Agent Agreement. "Special Taxes" means the taxes authorized to be levied by the CFD on parcels within The District in accordance with the Resolution of Formation, the Act and the voter approval obtained at the September 13, 2005 election in the CFD and any additional special taxes authorized to be levied by the CFD from time to time which are pledged by the CFD to the repayment of the Bonds, together with the prepayment thereof and proceeds collected from the sale of property pursuant to the foreclosure provisions of the Fiscal Agent Agreement for the delinquency of such Special Taxes remaining after the payment of all the costs related to such foreclosure actions, including, but not limited to, all legal fees and expenses, court costs, consultant and title insurance fees and expenses. "Standard & Poor's" means Standard & Poor's, a division of McGraw-Hill, its successors and assigns. "Supplemental Fiscal Agent Agreement" means any supplemental fiscal agent agreement amending or supplementing the Fiscal Agent Agreement. "Tax Certificate" means the certificate by that name to be executed by the CFD on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Term Bonds" means the Bonds maturing on September 1,2026 and September 1,2036. "Underwriter" means the institution or institutions, if any, with whom the CFD enters into a purchase contract for the sale of the Bonds. ......" A-6 AGENDA ITEM NO. 33 PAGE 1&)- OF ~ ,..... ~ /'"""" "Written Request of the CFD" means a request in writing executed by the Mayor; City Manager, City Treasurer, or written designee, on behalf of the CFD. A-7 AOENDA ITEM NO. 33 PAGE I ~ 3 OF 3/J)b ~ j ! I / APPENDIXB / SUMMARY OF THE FISCAL AGENT AGREEMEN~,/ The following is a summary of certain provisions of the Fiscal Agent Agreement and does no/purport to be a complete restatement thereof Reference is hereby made to the Fiscal Agent Agreement/or the complete terms thereof Copies of the Fiscal Agent Agreement are available from the City upon request. ...." Creation of Funds. There is created and established and shall be maintained by the Fiscal Agent the following funds and accounts: (1) The Special Tax Fund (the "Special Tax Fund") (in which there shall be established and created an Interest Account. a Principal Account. a Redemption Account. a Reserve Account and an Administrative Expense Account); (2) The Surplus Fund (the "Surplus Fund"); and (3) The Acquisition and Construction Fund (the "Acquisition and Construction Fund") (in which there shall be established a Costs of Issuance Account). The amounts on deposit in the foregoing funds. accounts and subaccounts shall be held by the Fiscal Agent in trust and the Fiscal Agent shall invest and disburse the amounts in such funds. accounts and subaccounts in accordance with the provisions of the Fiscal Agent Agreement and shall disburse investment earnings thereon in accordance with the provisions of the Fiscal Agent Agreement. Except as required to be segregated into funds and accounts as described in the Fiscal Agent Agreement, money held by the Fiscal Agent in trust hereunder need not be segregated from other funds except to the extent required by law. Deposits to and Disbursements from Special Tax Fund. The CFD shall. on each date on which it receives Special Taxes. transfer the Special Taxes to the Fiscal Agent for deposit in the Special Tax Fund in accordance with the terms of the Fiscal Agent Agreement. The Fiscal Agent shall transfer the amounts on ......, deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections. in the following order of priority. to: (a) The Interest Account ofthe Special Tax Fund; (b) The Principal Account of the Special Tax Fund; (c) The Redemption Account of the Special Tax Fund; (d) The Reserve Account of the Special Tax Fund; ( e) The Administrative Expense Account of the Special Tax Fund; and (f) The Surplus Fund. At the maturity of all of the Bonds and. after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Fiscal Agent have been paid in full. moneys in the Special Tax Fund and any accounts therein shall be transferred to the CFD and may be used by the CFD for any lawful purpose. Interest Account and Principal Account of the Special Tax Fund. The principal of and interest due on the Bonds until maturity, other than principal due upon redemption. shall be paid by the Fiscal Agent from the Principal Account and the Interest Account of the Special Tax Fund. respectively. For the purpose of assuring that the payment of principal of and interest on the Bonds will be made when due. at least five Business Days prior to each March 1 and September 1, the Fiscal Agent shall make the following transfers from the Special Tax Fund first to the Interest Account and then to the Principal Account; provided, however. that to the extent that deposits have been made in the Interest Account or the Principal Account from the proceeds of the sale of an issue of the Bonds. or otherwise. the transfer from the Special Tax Fund need not '-"" B-1 AGENDA iTEM NO._ :> 3 PACE I IlL} OF 306:?_ ,-... be made; and provided, further, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account: (I) To the Interest Account, an amount such that the balance in the Interest Account five Business Days prior to each Interest Payment Date shall be equal to the installment of interest due on the Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid. Moneys in the Interest Account shall be used for the payment of interest on the Bonds as the same become due. (2) To the Principal Account, an amount such that the balance in the Principal Account five Business Days prior to September 1 of each year, commencing September 1, 2007 shall at least equal the principal payment due on the Bonds maturing on such September I and any principal payment due on a previous September I which remains unpaid. Moneys in the Principal Account shall be used for the payment of the principal of such Bonds as the same become due at maturity. Redemption Account of the Special Tax Fund. (l) On each September 1 on which a Sinking Fund Payment is due, after the deposits have been made to the Interest Account and the Principal Account of the Special Tax Fund, the Fiscal Agent shall next transfer into the Redemption Account of the Special Tax Fund from the Special Tax Fund the amount needed to make the balance in the Redemption Account five Business Days prior to each September I equal to the Sinking Fund Payment due on any Outstanding Bonds on such September I; provided, however, that, if amounts in the Special Tax Fund are inadequate to make the foregoing transfers, then any deficiency shall be made up by an immediate transfer from the Reserve Account, if funded. Moneys so deposited in the Redemption Account shall be used and applied by the Fiscal Agent to call and redeem Term Bonds in accordance with the Sinking Fund Payment schedule set forth in the Fiscal Agent Agreement. ~ (2) After making the deposits to the Interest Account and the Principal Account of the Special Tax Fund and to the Redemption Account for Sinking Fund Payments then due,. and in accordance with the CFD's election to call Bonds for optional redemption, the Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the interest, the principal and the premiums, if any, payable on the Bonds called for optional redemption; provided, however, that amounts in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (3) All prepayments of Special Tax shall be deposited in the Redemption Account to be used to redeem Bonds on the next date for which notice of redemption can timely be given. ,-... (4) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds and in the case of an optional redemption to pay the interest thereon; provided, however, that in lieu or partially in lieu of such call and redemption, moneys deposited in the Redemption Account as set forth above may be used to purchase Outstanding Bonds. Purchases of Outstanding Bonds may be made by the CFD at public or private sale as and when and at such prices as the CFD may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, plus, in the case of moneys set aside for an optional redemption, the premium applicable at the next following call date according to the premium schedule established pursuant to the Fiscal Agent Agreement. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Payment Date. Reserve Account oftbe Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. The amounts in the Reserve Account shall be applied as follows: B-2 ACENDA ITeM NO. 3 '3 PAGE.-1!t.'6_0F 3~ (1) Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on any Bonds when due in the event that the moneys in the Interest Account and the Principal Account of the Special Tax Fund are insufficient therefor or moneys in the ..." Redemption Account of the Special Tax Fund are insufficient to make a Sinking Fund Payment when due. If the amounts in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on any Bonds when due, the Fiscal Agent shall withdraw from the Reserve Account for deposit in the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund, as applicable, moneys necessary for such purposes. (2) Whenever moneys are withdrawn from the Reserve Account, after making the required transfers referred to in the Fiscal Agent Agreement, the Fiscal Agent shall transfer to the Reserve Account from available moneys in the Special Tax Fund, or from any other legally available funds which the CFD elects to apply to such purpose, the amount needed to restore the amount of such Reserve Account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Fiscal Agent determines that such amounts will not be needed to make the deposits required to be made to the Interest Account, the Principal Account or the Redemption Account of the Special Tax Fund. If amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement, then the CFD shall include the amount necessary fully to restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maximum permitted Special Tax rates. (3) In connection with any redemption of the Bonds, or a partial defeasance of the Bonds, amounts in the Reserve Account may be applied to such redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such redemption or partial defeasance equals the Reserve Requirement. To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for the Bonds, amounts in the Reserve Account may be applied to pay the principal of and interest due on the Bonds in the final Bond Year for such issue. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the preceding provisions of this paragraph shall be withdrawn from the Reserve Account on the fifth Business Day before each March 1 and September 1 and transferred to the Acquisition and Construction Fund until the Fiscal Agent receives a Certificate of Authorized Representative of the CFD that all Project Costs have been funded, and thereafter to the Interest Account of the Special Tax Fund. ......, Administrative Expense Account of the Special Tax Fund. The Fiscal Agent shall transfer from the Special Tax Fund and deposit in the Administrative Expense Account of the Special Tax Fund amounts necessary to make timely payment of Administrative Expenses and shall be disbursed by the Fiscal Agent to pay Administrative Expenses, all as instructed by the CFD pursuant to a Written Request of the CFD. Moneys in the Administrative Expense Account of the Special Tax Fund may be invested in any Authorized Investments as directed by an Authorized Representative of the CFD. Surplus Fund. After making the transfers required by the Fiscal Agent Agreement, as soon as practicable after each September 1, the Fiscal Agent shall transfer all remaining amounts in the Special Tax Fund to the Surplus Fund, other than amounts in the Special Tax Fund which the CFD directs the Fiscal Agent by Written Request of the CFD to retain because the CFD has included such funds as being available in the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year pursuant to the Fiscal Agent Agreement. Moneys deposited in the Surplus Fund shall be transferred by the Fiscal Agent at the written request of the CFD (i) to the Administrative Expense Account of the Special Tax Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administrative Expense Account of the Special Tax Fund are insufficient to pay Administrative Expenses or, (ii) to the Redemption Account for the purpose of redeeming Bonds. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds. In the event that the CFD reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, upon the written direction of the CFD, the Fiscal Agent will segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the ......, B-3 ACENDA ITEM NO. 'b ~ PAOE i (per . OF~00 _ ;*""'"' Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a yield not in excess of the yield on the issue of Bonds to which such amounts are to be applied, unless, in the opinion of Bond Counsel, investment at a higher yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds which were issued on a tax-exempt basis for federal income tax purposes. Investments. Moneys held in any of the funds and accounts under the Fiscal Agent Agreement shall be invested at the Written Request of the CFD in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such funds and accounts. Any loss resulting from such Authorized Investments shall be credited or charged to the fund or account from which such investment was made, and any investment earnings on a fund or account shall be applied as follows: (i) investment earnings on all amounts deposited in the Special Tax Fund (exclusive of amounts transferred to the Reserve Account), Surplus Fund, Acquisition and Construction Fund and each Account therein shall be deposited in those respective funds and accounts, and (ii) all other investment earnings shall be deposited in the Interest Account of the Special Tax Fund; provided, however, to the extent moneys in the Reserve Account exceed the Reserve Requirement, such excess amounts shall be deposited and transferred pursuant to the Fiscal Agent Agreement. Moneys in the funds and accounts held under the Fiscal Agent Agreement may be invested by the Fiscal Agent at the Written Request of the CFD received at least 2 Business Days prior to the investment date, from time to time, in Authorized Investments subject to the following restrictions: (1) Moneys in the Interest Account, the Principal Account and the Redemption Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due. ~ (2) Moneys in the Acquisition and Construction Fund shall be invested in Authorized Investments which will by their terms mature, or in the case of an Investment Agreement are available without penalty, as close as practicable to the date the CFD estimates the moneys represented by the particular investment will be needed for withdrawal from the Acquisition and Construction Fund. Notwithstanding anything in the Fiscal Agent Agreement to the contrary, amounts in the Acquisition and Construction Fund on the Delivery Date for the Bonds shall not be invested at yields greater than those set forth in the Tax Certificate. (3) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than two years from their date of purchase by the Fiscal Agent, and one-half of the amount in the Reserve Account may be invested only in Authorized Investments which mature not more than three years from the date of purchase by the Fiscal Agent; provided that such amounts may be invested in an Investment Agreement to the final maturity of the Bonds so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with the Fiscal Agent Agreement; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the final maturity date of the Bonds. (4) In the absence of Written Request of the CFD providing investment directions, the Fiscal Agent shall invest solely in Authorized Investments specified in clause (4) of the definition thereof. ;*""'"' The Fiscal Agent shall sell at the best price obtainable, or present for redemption, any Authorized Investment whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the fair market value thereof and marked to market at least annually. Notwithstanding anything in the Fiscal Agent Agreement to the contrary, the Fiscal Agent shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of the Fiscal Agent Agreement. The Fiscal Agent or an affiliate may act as principal or agent in connection with the acquisition or disposition of any Authorized Investments and shall be entitled to its customary fees therefor. Any Authorized Investments that are registrable securities shall be registered in the name of the Fiscal Agent. The Fiscal Agent is authorized, in B-4 AOENDA ITEM NO. ~ :P fWliJ.!!LOf$Xo - making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with anyone or more of its affiliates, whether it or such affiliate is acting as an agent of the Fiscal Agent or for any third person or dealing as principal for its own account. ..." Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the CFD makes the following covenants with the Bondowners under the provisions of the Act and the Fiscal Agent Agreement (to be performed by the CFD or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the CFD to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (1) Punctual Payment: Against Encumbrances. The CFD covenants that it will receive all Special Taxes in trust and will immediately deposit such amounts with the Fiscal Agent, and the CFD shall have no beneficial right or interest in the amounts so deposited except as provided by the Fiscal Agent Agreement. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth in the Fiscal Agent Agreement, and shall be accounted for separately and apart from all other money, funds, accounts or other resources ofthe CFD. The CFD covenants that it will duly and punctually payor cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with the Fiscal Agent Agreement to the extent that Special Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and the Fiscal Agent Agreement, and that it will faithfully observe and perform all of the conditions, covenants and requirements of the Fiscal Agent Agreement and all Supplemental Fiscal Agent Agreements and of the Bonds issued hereunder. The CFD will not mortgage or otherwise encumber, pledge or place any charge upon any of the Special Taxes except as provided in the Fiscal Agent Agreement, and will not issue any obligation or security having a lien or charge upon the Special Taxes superior to or on a parity with the Bonds. Nothing in the Fiscal Agent Agreement shall prevent the CFD from issuing or incurring indebtedness which is payable from a ....., pledge of Special Taxes which is subordinate in all respects to the pledge of Special Taxes to repay the Bonds. (2) Levy of Special Tax. Beginning in Fiscal Year 2006-07 and so long as any Bonds issued under the Fiscal Agent Agreement are Outstanding, the CFD covenants to levy the Special Tax in an amount sufficient, together with other amounts on deposit in the Special Tax Fund and the Surplus Fund and available for such purpose, to pay (1) the principal of and interest on the Bonds when due, (2) the Administrative Expenses, and (3) any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement. (3) Commence Foreclosure Proceedings. The CFD covenants for the benefit of the Owners of the Bonds that it will determine or cause to be determined, no later than March I and August 1 of each year, whether or not any owner of the property within the District are delinquent in the payment of Special Taxes and, if such delinquencies exist, the CFD will order and cause to be commenced no later than April 15 (with respect to the March I determination date) or September 1 (with respect to the August 1 determination date), and thereafter diligently prosecute, an action in the superior court to foreclose the lien of any Special Taxes or installment thereof not paid when due, provided, however, that the CFD shall not be required to order the commencement of foreclosure proceedings if (i) the total Special Tax delinquency in the District for such Fiscal Year is less than five percent (5%) of the total Special Tax levied in such Fiscal Year, and (ii) the CFD shall have established from any source of lawfully available funds (other than Special Taxes) an escrow fund to provide for the payment of principal of and interest on the Bonds. Notwithstanding the foregoing, if the CFD determines that any single property owner in the District is delinquent in excess of ten thousand dollars ($10,000) in the payment of the Special Tax, then it will diligently institute, prosecute and pursue foreclosure proceedings against such property owner. Notwithstanding any provision of the Act or other law of the State to the contrary, in connection with any foreclosure related to delinquent Special Taxes: ..." B-5 AGENDA ITcWlI~V. :3 ~ PAGE (1P6 OF ~- ~ (a) The CFD or the Fiscal Agent is authorized to credit bid at any foreclosure sale, without any requirement that funds be set aside in the amount so credit bid, in the amount specified in Section 53356.5 of the Act, or such less amount as determined under clause (b) below or otherwise under Section 53356.6 of the Act. (b) The CFD may permit, in its sole and absolute discretion, property with delinquent Special Tax payments to be sold for less than the amount specified in Section 53356.5 of the Act, if it determines that such sale is in the interest of the Bond Owners. The Bond Owners, by their acceptance of the Bonds, consent to such sale for such lesser amounts (as such consent is described in Section 53356.6 of the Act), and release the CFD and the City, and their respective officers and agents from any liability in connection therewith. If such sale for lesser amounts would result in less than full payment of principal of and interest on the Bonds, the CFD will use best efforts to seek approval of the Bond Owners. (c) The CFD is authorized to use amounts in the Special Tax Fund to pay costs of foreclosure of delinquent Special Taxes. --- (d) The CFD may forgive all or any portion of the Special Taxes levied or to be levied on any parcel in the District so long as the CFD determines that such forgiveness is not expected to adversely affect its obligation to pay principal of and interest on the Bonds as such payments become due and payable. (4) Payment of Claims. The CFD will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Special Taxes or; other funds in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account), or which might impair the security of the Bonds then Outstanding; provided that nothing contained in the Fiscal Agent Agreement shall require the CFD to make any such payments so long as the CFD in good faith shall contest the validity of any such claims. (5) Books and Accounts. The CFD will keep proper books of records and accounts, separate from all other records and accounts of the CFD, in which complete and correct entries shall be made of all transactions relating to the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent or of the Owners of the Bonds then Outstanding or their representatives authorized in writing. (6) Tax Covenants. The CFD covenants that it shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, could cause the interest on any Bond to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owner thereoffor federal income tax purposes. "....... (7) Reduction of Maximum Special Taxes. The CFD finds and determines that, historically, delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in Southern California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason, the CFD determines that a reduction in the maximum Special Tax rates authorized to be levied on parcels in the CFD below the levels provided in the Fiscal Agent Agreement would interfere with the timely retirement of the Bonds. The CFD determines it to be necessary in order to preserve the security for the Bonds to covenant, and, to the maximum extent that the law permits it to do so, the CFD does covenant, that it shall not initiate proceedings to reduce the maximum Special Tax rates for the CFD, unless, in connection therewith, (i) the CFD receives a certificate from one or more Independent Financial Consultants which, when taken together, certify that, on the basis of the parcels of land and improvements existing in the District as of the July I preceding the reduction, the maximum amount of the Special Tax which may be levied on then existing Developed Property (as defined in the Rate and Method of Apportionment of Special Taxes then in effect in the District) in each Bond Year for any Bonds Outstanding will equal at least 110% of the sum on the estimated Administrative Expenses and gross debt service in that Bond Year on all Bonds to remain Outstanding after the reduction is approved, and (ii) the CFD finds that any reduction made under such conditions will not adversely affect the interests of the Owners of the Bonds. For purposes of estimating Administrative Expenses for the foregoing calculation, the B-6 AGENDA ITEM"hJ. ~ 3 PACE {(Pc, OF ~/Xa Independent Financial Consultant shall compute the Administrative Expenses for the current Fiscal Year and escalate that amount by two percent (2%) in each subsequent Fiscal Year. ......., (8) Covenants to Defend. The CFD covenants that in the event that any initiative is adopted by the qualified electors in the CFD which purports to reduce the maximum Special Tax below the levels specified in the Fiscal Agent Agreement or to limit the power of the CFD to levy the Special Taxes for the purposes set forth in the Fiscal Agent Agreement, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (9) Annual Reports to CDIAC. Not later than October 30 of each year, commencing October 30, 2006 and until the October 30 following the final maturity of the Bonds, the CFD shall cause the City to supply the information required by Section 53359.5(b) or (c) of the Act to CDIAC (on such forms as CDIAC may specify). (l0) Continuing Disclosure. The CFD covenants to comply with the terms of the Continuing Disclosure Agreement executed by it with respect to the Bonds. Supplemental Fiscal Agent Agreements or Orders Not Requiring Bondowner Consent. The CFD may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Fiscal Agent Agreements for any of the following purposes: (1) to cure any ambiguity, to correct or supplement any provisions in the Fiscal Agent Agreement which may be inconsistent with any other provision in the Fiscal Agent Agreement, or to make any other provision with respect to matters or questions arising under the Fiscal Agent Agreement or in any additional resolution or order, provided that such action is not materially adverse to the interests of the Bondowners; (2) to add to the covenants and agreements of and the limitations and the restrictions upon the CFD contained in the Fiscal Agent Agreement, other covenants, agreements, limitations and restrictions to be observed by the CFD which are not contrary to or inconsistent with the Fiscal Agent Agreement as theretofore in effect or which further secure Bond payments;......., (3) to modify, amend or supplement the Fiscal Agent Agreement in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; or (4) to modify, alter or amend the rate and method of apportionment of the Special Taxes in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on property within the CFD to an amount which is less than that permitted under the Fiscal Agent Agreement; or (5) to modify, alter, amend or supplement the Fiscal Agent Agreement in any other respect which is not materially adverse to the Bondowners. Events of Default. Anyone or more of the following events shall constitute an "event of default": (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) Except as described in (a) or (b), default shall be made by the CFD in the observance of any of the agreements, conditions or covenants on its part contained in the Fiscal Agent Agreement or the Bonds, and such default shall have continued for a period of 30 days after the CFD shall have been given notice in writing of such default by the Fiscal Agent or the Owners of 25% in aggregate principal amount of the ......., Outstanding Bonds. B-7 AGENDA ITEM Nu. PAOE-f7t:> OF ~ ~~ ,..... The CFD agrees to give notice to the Fiscal Agent immediately upon the occurrence of an event of default under (a) or (b) above and within 30 days of the CFD's knowledge of an event of default under (c) above. The Fiscal Agent shall not be deemed to have knowledge of any event of default unless a responsible officer shall have actual knowledge thereof or the Fiscal Agent shall have received written notice at its Principal Office. Remedies of Owners. Following the occurrence of an event of default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (1) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the CFD and any of the members, officers and employees of the CFD, and to compel the CFD or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Fiscal Agent Agreement; (2) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (3) By a suit in equity to require the CFD and its members, officers and employees to account as the fiscal agent of an express trust. ,,- Nothing in this article or in any other provision of the Fiscal Agent Agreement or the Bonds shall affect or impair the obligation of the CFD, which is absolute and unconditional, to pay the interest en and principal of the Bonds to the respective Owners thereof at the respective dates of maturity, as provided in the Fiscal Agent Agreement, out of the Special Taxes and other amounts pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in the Fiscal Agent Agreement. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the CFD and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy in the Fiscal Agent Agreement conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Fiscal Agent after an event of default shall be insufficient to pay in full the whole amount so owing and unpaid upon the Outstanding Bonds, then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. ,,- Defeasance. If the CFD shall payor cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in the Fiscal Agent Agreement or any Supplemental Fiscal Agent Agreement, then the Owner of such Bond shall cease to be entitled to the pledge of Special Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the CFD to the Owner of such Bond under the Fiscal Agent Agreement shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds, the Fiscal Agent shall execute and deliver to the CFD all such instruments as may be desirable to evidence such discharge and satisfaction, and the Fiscal Agent shall pay - B~ ~3 AGENDA ITEM I-.v. PAOE.J1LOf .7~ over or deliver to the CFD's general fund all money or securities held by it pursuant to the Fiscal Agent Agreement which are not required for the payment of the principal of, premium, if any, and interest due on such Bonds. ......", Any Outstanding Bond shall be deemed to have been paid if such Bond is paid in anyone or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; or (c) by depositing with the Fiscal Agent or another escrow bank appointed by the CFD, in trust, noncallable Defeasance Securities, in which the CFD may lawfully invest its money, in such amount as will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund (exclusive of amounts transferred to the Administrative Expense Account) and available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; then, at the election of the CFD, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the CFD under the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement with respect to such Bond shall cease and terminate, except for the obligation of the Fiscal Agent to payor cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the CFD contained in the Fiscal Agent Agreement or any covenants in a Supplemental Fiscal Agent Agreement relating to compliance with the Code. Notice of such election shall be filed with the Fiscal Agent not less than ten days prior to the proposed defeasance date, or such shorter period of time as may be acceptable to the Fiscal Agent. In connection with a defeasance under (b) or (c) above, there shall be provided to the CFD a verification report from an independent nationally recognized certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Fiscal Agent or the escrow bank to pay and discharge the principal of, premium, if any, and interest on all Outstanding Bonds to be defeased, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with the Fiscal Agent Agreement and any applicable Supplemental Fiscal Agent Agreement. If a forward supply contract is employed in connection with an advance refunding to be effected under (c) above, (i) such verification report shall expressly state that the adequacy of the amounts deposited with the bank under (c) above to accomplish the refunding relies solely on the initial escrowed investments and the maturity principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement executed to effect an advance refunding in accordance with (c) above shall provide that, in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement, the terms of the escrow agreement shall be controlling. ......, Upon a defeasance, the Fiscal Agent, upon request of the CFD, shall release the rights of the Owners of such Bonds which have been defeased under the Fiscal Agent Agreement and any Supplemental Fiscal Agent Agreement and execute and deliver to the CFD all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds, the Fiscal Agent shall pay over or deliver to the CFD any funds held by the Fiscal Agent at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of, premium, if any, or interest on the Bonds when due. The Fiscal Agent shall, at the written direction of the CFD, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased, in the form directed by the CFD, stating that the defeasance has occurred ....., B-9 ,?>'? ....~&;;l"Uf\ I 17 "') 3~ PAOi~ " OF - ~ '"' APPENDIX C MARKET ABSORPTION STUDY ~ ~ C-I 33 "'~"'~;~17? OF~~ - '-" '-" ....., CERTIFICATION OF INDEPENDENCE ,,-. The Securities & Exchange Commission has recently taken action against Wall Street firms that have utilized their research analysts to promote companies with whom they conduct business. citing this as a potential conflict of interest. Accordingly, Empire Economics (Empire), in order to ensure that its clients are not placed in a situation that could cause such conflicts of interest, provides a Certification of Independence. Specifically. the Certificate states that Empire performs consulting services for public entities only.in order to avoid potential conflicts of interest that could occur if it also provided consulting services for developerlbuilder. For example. if a research firm for a specific Community Facilities District or Assessment District were to provide consulting services to both the public entity as well as the property owner/developerlbuilder, then a potential conflict of interest could be created, given the different objectives of the public entity versus the property owner/developer. Accordingly. Empire Economics certifies that the Market Absorption Study for the CFD No. 2006-2 (Viscaya) of the City of Lake Elsinore was performed in an independent professional manner, as represented by the following statements: ~ Empire was retained to perform the Market Absorption Study by the City of Lake Elsinore, not the District's property owner/developer. Corman Leigh Communities. ,-- ~ Empire has not performed any consulting services for the District's property owner or the developerlbuilder during at least the past five years. ~ Empire will not perform any consulting services for the District's property owner or the developerlbuilder during at least the next three years. ~ Empire's compensation for performing the Market Absorption Study for the District is not contingent upon the issuance of Bonds; Empire's fees are paid on a non-contingency basis. Therefore. based upon the statements set-forth above, Empire hereby certifies that the Market Absorption Study for CFD No. 2006-2 (Viscaya) of the City of Lake Elsinore was performed in an independent professional manner. Empire Economics. Inc. Joseph T. Janczyk, President ~ Empire Economics ~3 AGENDA ITat ~ 1.2006 IWIi /1. OF '2y~- INTRODUCTION TO THE BOND FINANCING PROGRAM ~ The City of Lake Elsinore was previously petitioned by Corman Leigh Communities to form a Community Facilities District to assist with the financing of the infrastructure that is required to support the development of their residential project in the District, Viscaya; this is hereafter referred to as CFD No. 2006-2. The CFD No. 2006-2 Bond Issue proceeds will be utilized to provide funds for various infrastructure components, including road, water and sewer improvements, among others. The Bond Issue that is being considered at this time amount to some $6.6 million.; however, the specific size of the Bond Issue and the particular improvements included will depend upon various factors which will be finalized when these bonds are sold. According to Corman Leigh Communities, CFD No. 2006-2 (Viscaya) is expected to have a total of: 168 single-family detached homes that are priced at some $364,900 to $413,900 for some 1,506 to 2,513 sq.ft. ofliving area; this project is currently active, having entered the marketplace in Fall 2005. The City of Lake Elsinore has retained Empire Economics, an economic and real estate consulting firm, to perform a Market Absorption Study for the residential project in CFD No. 2006-2 (Viscaya). The purpose of the Market Study for CFD No. 2006-2 is to provide an estimate of the probable absorption schedule for the residential project, Viscaya. Specifically, from the viewpoint of prospective Bond Purchasers, the particular components of the infrastructure should be time-phased and location-phased in a manner that approximately coincides with the expected marketability/absorption of the projects/products in the CFD No. 2006-2. Otherwise, to the extent that the infrastructure is not appropriately phased, then the following types of market inefficiencies may occur: ...., On the one hand, if certain project/plans do not have the infrastructure that is required to support their development in a timely manner, then they would not be able to respond to the demand in the marketplace, resulting in a market shortaf!e. On the other hand, if too much irifrastructure is built, then project/plans for which there is not presently a market demand would incur high carrying costs due to the market sumlus. and this could adversely impact their financial feasibility. Thus, the Market Absorption Study formulates guidelines on the appropriate or optimal time-phasing and location-phasing of the infrastructure for the project/plans located in CFD NO. 2006-2 (Viscaya) ofthe City of Lake Elsinore, as a means of providing the Bond Purchasers with a reasonable amount of security from a market absorption perspective. ..., Empire Economics 2 ~~ AGElfDA I1EM f4Q..r 1. "I\I\~ PAGE /7~ .OF 3tx'L o Z Q ~ U \0 o o N ~ ::E C"') '" o 'S o s:: o o rOIil <l) .... .~ rOIil .~3 PAOli /11 OF t?:JOb- < '-" ~ f--4 ~ 1.0 0 0 N - < ~ ::E ::E --- < ~ < U r:/:J. ~ > '-' N I \0 0 0 N . 0 ~ '-" Z Q ~ U ~ ~ f--4 ~ 0 r./) ~ P2 '" 0 .s < 0 ~ 0 Q 0 li"l ~ ~ j 0 t::o '-" JIGENDA 11EM_ N}l.- '3> '3> .PAOE...I1L-OF 1;00- CHARACTERISTICS OF THE EXPECTED PRODUCT MIX FOR THE CITY OF LAKE ELSINORE CFD NO. 2006-2 ,...... CFD No. 2006-2, based upon their planning approvals as well as representations from the developer, Corman Leigh Communities, has one residential project, Viscaya, that is expected to have some 168 single-family detached homes with four plans; accordingly, their characteristics are now discussed. Plan No. 1 is currently priced at $364,900 for some 1,506 sq.ft. of living area, for a value ratio (pricelliving area) of $242; there are anticipated to be 27 homes with this plan. Plan No.2 is currently priced at $378,900 for some 1,930 sq.ft. of living area, for a value ratio of $196; there are anticipateq to be 35 homes with this plan. Plan No.3 is currently priced at $394,900 for some 2,229 sq.ft. of living area, for a value ratio of $177; there are anticipated to be 53 homes with this plan. Plan No.4 is currently priced at $413,900 for some 2,513 sq.ft. of living area, for a value ratio of$165; there are anticipated to be 53 homes with this plan. So, CFD No. 2006-2 (Viscaya) is expected to have 168 single-family homes has four plans that are currently priced at some $364,900 to $413,900, an overall average of $392,739, for living areas with a range of 1,506 to 2,513 sq.ft., an overall average of 2,140 sq.ft., for a value ratio of some $184. The overall tax burden is expected to amount to less that 1.90%; of this, 1.18% is for ad valorem and other basic charges, and some 0.69% is for Special Taxes. ".......... CFD NO. 2006-2 (VISCAYA) MARKETING STATUS FOR THE HOUSING PLANS 60 SO 40 30 20 JO 0 I I I Plan j I Plan 1I2 Planll3 Plan H 10 Forthcomin 27 I 35 I 53 I 53 IIlIOc.,.,;.d 0 I 0 I 0 I 0 ,...... Empire Economics 5 AGENDAt1fM'Na!6 3 ~__ _ PAOE nCLOF~: CFD NO. 2006-2 (VISCA Y A) PRICES FOR THE HOUSING PLANS $ 00,000 50,000 00,000 ~ 50,000 ~ 00,000 50,000 00,000 50,000 ~ $0 I I I Plan#) Plan # 2 Plan # 3 Plan # 4 1m Prices $364,900 I $378,900 I $394,900 I $413,900 ......., $450 000 $4 $3 $3 $2 $2 $1 $1 CFD NO. 2006-2 (VISCAYA) LIVING AREAS FOR THE HOUSING PLANS ......., 3000 2,500 2,000 1,500 1,000 500 0 I Plan # ) Plan # 2 I Plan # 3 I Plan # 4 Ita Living Areas $1,506 I $1,930 I $2,229 I $2,513 ........, Empire Economics 6 AGENDA JdMl4b2006 "'3'3 PAGE J~ OF ~ ;--.. ROLE OF THE MARKET STUDY IN THE BOND FINANCING CFD NO. 2006-2 (VISCAYA) The Market Absorption Study for CFD No. 2006-2 (Viscaya) has a multiplicity of roles with regards to the Bond Financing; accordingly, these are now discussed. Marketing Prospects for the Project/Plans Official Statement Prospective Bond Purchasers Aggregate Levels of Special Tax Revenues ".-.... Maximum Special Taxes for the Residential Project/Plans Conforming to the Issuer's Policies Share of Payments: Developer/Builder vs. Final-Users Determined by the Absorption Schedule Appraisal of Property Discounted Cash Flow - Present Value Absorption Schedules The Issuing Agency for the Bond Issue, CFD No. 2006-2 of the City of Lake Elsinore, along with the Finance Team, can utilize the Market Absorption Study, Appraisal, and Special Tax Revenue to structure the Bond Issue. ;--.. Empire Economics 7 AGENDA ITEM ~ 1,200633 PAGE_iZL~~OF ~ METHODOLOGY UNDERLYING THE MARKET STUDY FOR CFD NO. 2006-2 (VISCAYA) .~ To perform a comprehensive analysis of the macroeconomic and microeconomic factors that are expected to influence the absorption of the residential single-family detached project/plans in CFD No. 2006-2, Empire's Market Absorption Study conducts a systematic analysis of the following factors: MACROECONONUCFACTORS FOR CFD NO. 2006-2 MARKET AREA * Market Supply Planning Projections * Market Demand Economic Conditions * Reconciliation * Growth Potential for the Market Area MICROECONOMIC FACTORS FOR CFD NO. 2006-2 Regional Development Patterns Socioeconomic: School and Crime Housing Price Trends and Patterns Competitive Market Analysis - Product Types Residential Projects *Location *Product Type *Prices *Special Taxes/Assessments *F eatures/ Amenities ~ ESTIMATED ABSORPTION SCHEDULES Each of the Project's Plans *Residential Single-Family Detached Homes F our Plans *Market Entry to Build-Out Therefore, the Market Absorption Study systematically proceeds from the macroeconomic analysis of the Market Region's future housing, industrial and commercial growth to the microeconomic analysis of the estimated absorption schedules for the residential single-family detached project/plans ~ in CFD No. 2006-2. Empire Economics 8 _May 1 2006-:2-:l. AGENDA ITEM NO.' ;:;> -:.;J PAGE I~OF ~~ RECENT/EXPECTED ECONOMIC TRENDS/PATTERNS r" The purpose of this section is to discuss the recent/expected economic trends/patterns for the United States (US), California (CA), and Riverside County (RC), including Gross Domestic Product, employment, housing starts, mortgage rates and gas prices. Recent /Expected Real Gross Domestic Product Trends/Patterns With regards to the recent/expected growth rates for Gross Domestic Product (GDP) for the United States economy, they are as follows: . During 1999 and 2000, real GDP increased at strong rates of by 4.50% and 3.70%, respectively. . Then, in 2001 and 2002, as the economy slowed, real GDP increased by only 0.80% and 1.60%, respectively. . In 2003 and 2004, as the economy rebounded, real GDP increased by some 2.70% and 4.20%, respectively. . For 2005, real GDP growth moderated somewhat to a rate of3.15%. . For 2006, real GDP is expected to moderate further to a rate of some 2.85%. ,....... Next, with respect to the actual/expected rates of change for the various components of real GDP for 2005 as compared to 2006 are as follows: . Consumption, which increased at some 3.28% in 2005 is expected to moderate to a rate of some 2.78% in 2006. . Business investment, which increased at some 7.00% in 2005 is expected to moderate to 4.83% in 2006. . Finally, with respect to government purchases, which grew at a rate of 1.65% in 2005 are expected to increase by 2.13% in 2006. Therefore, comparing the rates of growth for the various components of real GDP for 2006 as compared to 2005 reveals that the overall rate of growth is expected to moderate somewhat while among the various sectors, consumption and investment are expected to moderate while the rate of growth for government spending rises. UNITED STATES REAL GDP AND ITS COMPONENTS: ANNUALLY ,.... 12% ... 10% ~ ...:I ~ 8% /' ~ A. ~ 6% .... I [';' -< - . 4% ro1 .. R5< ':>c..- - ~ C 2% - I.t'0,I ~ z ~ 1\ B8a I B88 ~ W ~ ~ 0% !;(<;('l u / 100 ,2% 0 \ / ro1 ~ -4% \ j -6% ..% \/...... ~ -l<We 1999 2000 2001 2002 2003 2004 200S 2006 =USo Ovenlll 4.50% 3.7M'. 0.80% 1.60'1. 2.70'1. 4.20% 3.IS% 2.850/. Conswnnlion 4.90% 4.70% 2.SO'I. 2.7M'. 2.900/. 3.90'1. 3.28% 2.78% ......;...; bwtstmenl 6.20% S.SO% ".00% -S.SO% 6.40% 9.80% 7.00% 4.83". 'Government 3.70% 2.10% 3.40% 4.40% 2.80% 2.)('-;. 1.6S% 2.13% Empire Economics 9 ACENDA ITEM~O.l, 2006'2:> 3> PAGE / 33 Of,~~ _ RecentlExpected Employment Trends/Patterns With regards to the recent/expected growth rates for employment, these are now discussed fori the United States, California, and Riverside County economies, both on an annual as well as a quarterly basis. .'-' For the United States economy, the recent trends/patterns for employment have been as follows: · In 1999 and 2000, employment growth was strong, some 2.44% and 2.20%, respectively. · Then, in 2001, due to the economic slowdown, employment was virtually stable. · For 2002, employment declined by -1.13%., followed by a decrease of -0.26% in 2003. · In 2004, as the economy moved into its recovery phase, employment rose by some 1.13%. . For 2005, as the economy expanded further, employment rose by 1.39%. · For 2006, as the economy slows, employment growth is expected to moderate to 1.16% California's employment followed a generally similar pattern: . Strong rates of employment growth in 1999 and 2000 of2.90% and 3.50%, respectively. . Then in 2001, employment rose only moderately, some 0.80%. · However, in 2002 to 2003, employment declined to -0.99% and -0.45%, respectively. · For 2004, the economy moved into a recovery, with an employment gain of 0.96%. . In 2005, the economy had stronger growth, with employment rising at a rate of 1.65%. . For 2006, as the economy slows, employment growth is expected to moderate to 1.38% Riverside-San Bernardino (R-SB) counties, on a comparative basis, have performed favorably: · R-SB counties experienced strong, though diminishing, rates of employment growth during 1999-2002, from 6.44% in 1999 to 3.38% in 2002. · Employment growth moderated in 2003, with a growth rate of 3.26%. '-' . Then, in 2004, employment rebounded to a rate of some 5.53%. . For 2005, employment growth continued at a strong rate of some 4.88%. . For 2006, the rate of employment growth is expected to moderate, to some 4.08% . Therefore, during 2006, the United States, California and R-SB counties economies are all expected to experience somewhat lower rates of employment growth. UNITED STATES, CAUFORNIA & RIVERSIDE - SAN BERNARDINO COUNTIES RECENTIEXPECTED EMPLOYMENT TRENDS: ANNUALLY 7% >- 6% '" '" ~ r- '" ~ 5% ..... '-..... V ~ z '-. z w. < .... ............. ./ . -'" ~ 3% - ~ _'\ 2% '\. U - ro. 1% ~ KX)4 ~ 0 "- ~ B8S B8S ~ ... 0% ~ ~ ~ -1% .2'Y. '999 2000 2001 2002 2003 200' 2005 2006 IllSZSIUnited States 2.44% 2.20% 0.00% -1.13% -0.26% L13% 1.39% 1.16% II-Califomil 2.90% 3.50-... 0.80% -<).99% -0.45% 0.96% 1.65% 1.38% """""R S8 6.44% 5.26". 4.18% 3.38% 3.26% 5.53% 4.88% 4.08% "'-' Empire Economics 10 AGENDA ITE~~' 2006 33 PAGE Ig2f OF 306- Recent/Expected Trends/Patterns for Housing Starts r-- With regards to the recent trends and patterns for housing starts, they are as follows: . The United States housing market experienced a strong growth during the 2000 to 2005 time period, with the number of new homes rising from 1,573,400 in 2000 to 2,044,125 in 2005. For 2006, the United States housing market is expected to moderate to some 1,803,550 new homes, due to the combined impacts of a slowing economy as well as higher mortgage rates. . For the California housing market, housing starts have had strong growth during 2000 to 2005, as the number of new homes rose from 139,073 in 1999 to 203,995 in 2005. The California housing market is expected to decrease somewhat in 2006 to some 177,049 new homes, also as a result of a slowing economy and higher mortgage rates. . Finally, with respect to Riverside County, housing starts rose dramatically during the 1999- 2004 time period, from 14,577 homes in 1999 to 33,543 homes in 2005. For 2006, the level of activity is expected to moderate somewhat, to some 30,837 homes, due to the expectation of higher mortgage rates as well as higher gas prices. So, for 2005, the United States, California, and Riverside County housing markets are expected 'to decline somewhat from their 2005 levels, due primarily to higher levels of mortgage rates as well as higher gas prices. ~ UNITED STATES, CALIFORNIA AND RIVERSIDE COUNTY HOUSING STARTS: ANNUALLY 2, 00,000 ~ 2,000,000 -- ~.. -- .. ~ " U) ~ w S -- .. ~ --.- - 1,500,000 ....... """""'...... 0 C w t: 1,000,000 Z ~ 500,000 . .... '!II' 0 1999 2000 2001 2002 2003 2004 2005 2006 - Left: United States 1,663,100 1,573,400 1,601,200 1,712,340 1,858,760 1,963,700 2,044,125 1,803,550 -+-Right: California 139,073 148,540 148,757 164,318 194,882 210,150 203,955 177,049 -+-Right: Riverside County 14,577 17,692 19,890 20,990 28,366 33,870 33,543 30,837 5 250,000 200,000 ~ Z ~ 0 U 150,000 C Z c:( ~ 100,000 Z ~ 0 lL :J 50,000 c:( U 0 r-- Empire Economics II AGENDA ITEI'l1m.I, 2006 2>3> PAOli Irs OF ~/7 - RecentlExpected Trends in Mortgage Rates The recent/expected trends/patterns for mortgage rates, including the 15 year fixed rate mortgage, as well as the 10-year Treasury Bond which influences the 15 year fixed rate mortgage, and the 1 year adjustable, are now discussed: ....., · During the 2000 to 2003 time period, the rates on the 10-year Treasury Bond, 15 year fixed mortgage and the 1 year adjustable mortgage all declined: the 10-year Treasury Bond from 6.03% to 3.95% (-2.08%), the 15 year fixed mortgage from 7.73% to 5.17% (-2.56%), and the 1 year adjustable mortgage from 7.05% to 3.76% (-3.29%). · From 2003 to 2005, the rates started to rise: on the to-year Treasury Bond from 3.95% to 4.29% (+0.34%), the 15 year fixed mortgage from 5.17% to 5.42% (+0.25%), and the 1 year adjustable mortgage from 3.76% to 4.49% (+0.73%). · For 2006 as compare to 2005, the rates are expected to rise further, the 10-year Treasury Bond from 4.29% to 4.74% (+0.45%), the 15 year mortgage from 5.42% to 6.07% (+0.65%), and the 1 year adjustable mortgage from 4.49% to 5.44% (+0.95%). So, during 2006, financial rates are expected to' rise at a faster pace, with an increase in the 10-year Treasury Bond driving up the 15 year fixed rates by some 0.65% while the increases in the federal fund rate by the Federal Reserve Board drives up the 1 year adjustable rate mortgages by some 0.95%. UNITED STATES MORTGAGE RATES: ANNUALLY ....., 9.00% 8.00% 7.00% > ....:l ....:l 6.00% < ~ 5.00% ~ I 4.00% ....:l riIil ;;> 3.00% riIil ....:l 2.00% 1.00% 0.00% 2000 __ 10- Yr Bond 6.03% ---+-1 Yr Adjustable 7.05% --k'15Year-Fixed 7.73% -30- Y ear Fixed 8.06% .... ......-.- -.-..-.-. 2001 2002 2003 2004 2005 2006 5.02% 4.61% 3.95% 4.27% 4.29% 4.74% 5.82% 4.62% 3.76% 3.87% 4.49% 5.44% 6.50% 5.98% 5.17% 5.25% 5.42% 6.07% 6.97% 6.54% 5.83% 5.89% 5.87% 6.50% ....., Empire Economics 12 ~.~ 1,2006 3 ") AGENDA ITEM NO. ~ PAGE / Y1~ OF ~lJiIo RecentlExpected TrendslPatterns for Gas Prices in California ,.... With regards to the recent/expected annual gas prices per gallon in California, they are as follows: . From 1999 to 2000, California gas prices rose significantly from $1.47 to $1.77, respectively, an increase of some $0.30. . Then, gas prices declined to $1.62 in 2002, a decrease of -$0.12 from $1.74 in 2001. . However, with the invasion of Iraq and uncertainty in the Middle East, California gasoline prices rose dramatically to $2.22 in 2004, an increase of $0.60 from 2002. . For 2005, gas prices rose further to $2.57, an additional increase of some $0.35 from 2004. . For 2006, gas prices are expected to increase again, to some $2.97, an increase of some $0.40 from 2005. So, during 1999 to 2005, California gas prices have risen significantly, by some $1.10 per gallon, and they are expected to continue to rise in 2006, by some +$0.40. CALIFORNIA GAS PRICES: ANNUALLY ~ $350 ;;.. ..:l :;1 ;:> ~ < I r.il U .... ~ j:l., $3.00 $2.50 $2.00 ~ .ooa $1.50 $1.00 $0.50 $0.00 1999 2000 2001 2002 2003 2004 2005 2006 Ie Gasoline Prices - CA $1.47 $1.77 $1.74 $1.62 $1.94 $2.22 $2.57 $2.97 ,.... Empire Economics 13 _May 1 2006 '13 AGENDA ITEM NO.' :;> PAGE If7 OF ~- SOCIOECONOMICS CHARACTERISTICS: CRIME LEVELS AND THE QUALITY OF SCHOOLS "'-'" When households consider the purchase of a home, the primary factors are the location (relative to their place of employment) and price (within their income/affordability levels). Furthermore, secondary socioeconomic factors that are significant are the safety of the neighborhood as well as the quality of the schools; accordingly, these are now discussed. Crime Levels and Neif!hborhood Safetv To gauge the safety of Riverside County and the CFD No. 2006-2 Neighborhood Area, information on crime levels was obtained utilizing the most recently available data from the Federal Bureau of Investigation (FBI) Index. The FBI Crime Index represents a compilation of crime data using the Uniform Crime Reporting system to ensure reliability and consistency among various geographical areas. The FBI Crime Index has two components for crime: violent crime and property crime. Violent crime consists of murder and non-negligent man-slaughter, forcible rape, robbery, and aggravated assault. Property crime consists of burglary, larceny-theft, motor vehicle theft and arson. For the state of California, approximately 88% of all crimes are property crimes whereas 12% are violent crimes. However, it should be noted that these statistics do not measure the "human or emotional" reactions of individuals to different types of crime. To adjust for the population differences of various geographical areas, Empire Economics divides the crime levels by the population to represent the number of crimes per 1,000 people. For California, as a whole, the average crime rate is approximately 40.2 per 1,000 people per year. For Southern California the rate is 39.1, which is slightly lower than the state average. While for Riverside County, the rate is 45.0, somewhat higher than for Southern California and also California. "'-'" According to the FBI index, Riverside County has a crime rate of about 45 per 1 ,000 people per year. With respect to the CFD No. 2006-2 Neighborhood Area, which includes the City of Lake Elsinore, has a slightly lower crime rate, some 43.4. RIVERSIDE COUNTY CRIME RATES BY CITY . DESIGNATES CITY IN THE CFD MARKET AREA 120 ~ 100 RiveJSide Countv Ave......e: 45.0 "" w ... 0 z 80 ~ ~ Zl F 60 ~ ~ * 0 .. w 40 ... ., w ~ 20 Rl .. I~ ~ ~ 0 . J I j ! r J i J i 'r 1 ~ J j i I f i ! ~ ~ I J J ~ i j ! I I ~ I '....., Empire Economics Qualitv of Schools and Education 14 AGENDA ITEM ~>' 1 ?OOt:>~ PAGE I~" OF? JtJf(2. ,...... To gauge the quality of schools in Riverside County and the CFD No. 2006-2 Neighborhood Area, information was compiled on educational achievement, specifically the SAT I scores. For the Southern California counties, as a whole, the SAT I scores (with 1,600 being the highest possible) were at a level of 1,014 and this is similar to the scores for California as a whole, some 1,015. While for Riverside County, in particular, the SAT I scores amount to 963, somewhat below the overall averages for California and also Southern California. For Riverside County, the average SAT I score was 963. For the school district in the CFD No. 2006-2 Neighborhood Area, the Lake Elsinore Unified School District, their SAT I score amounts to 982, and this is somewhat higher than for Riverside County as a whole. i 1600 Q := u < 1400 r.lz ~o 0- ...~ 1200 ~u ~8 ~: 1000 <0 ~Ii: <r.l gjQ 800 ~~ ,....... ~~ :=~ 600 ...Q ~@. tii 400 ~ u '" ... < '" SAT I TEST SCORES: MAm AND VERBAL AVERAGE (* DESIGNATES SCHOOL DISTRICT IN THE CFD) Riverside County Average: 963 / * 1013 1031 1034 1039 n..€ Q~lI 966 969 970 982 - QI? >''>1 - ~ 833 0/0 710' - - 1l ] ~ ] ] "" "" 1l "" ] "" ... 1l 1l "" 1l ] 1l " " " Jl .. " <0:: 0+:: <0:: <0:: <0:: :E <0:: <0:: <0:: <0:: <0:: .a .a :5 8 8 8 8 .a 8 8 .a .a .a .;:; 8 8 .;:; ::l ::l ::l ::l 5 ::l ::l ::l ::l >> l1f ~ " g .. i >> '" {l ~ 8 " !! I >> -= >> ..2 -g ~ " .. "" ..2 ..2 .;:; .$ :a " fa .e g 0 ~ ~ ~ .C 0 '" ~ i ;; fa ..... ;;: > Q. '" ~ .E 1! :Pi :I: > ~ ~ ~ 0 ~ '" t:: " ii! tI.l tl .. ;e fa e !! " '" " ~ B ] '" ;; " e j .~ ~ '" 0 0 " ::E u ::E Ii u I-< Therefore, from a socioeconomic perspective, Riverside County has a somewhat higher crime rate and a somewhat lower educational achievement level than California and also Southern California, as a whole. By comparison, the City of Lake Elsinore, wherein CFD No. 2006-2 is situated, has a slightly lower crime rate and the school district has a slightly higher educational achievement level than the county as a whole, and so CFD No. 2006-2 is considered to be in a generally desirable socioeconomic area. ,...... Empire Economics 15 AGENDA 11'EtetHO.l, 2006 :33 PACE IKf OF %- COMPETITIVE MARKET ANALYSIS OF THE PROJECT IN CFD NO. 2006-2 ~ The purpose of this section is to provide an overview of the currently active Planned Communities and their projects in the CFD No. 2006-2 Competitive Housing Market Area, and then to compare these to the expected characteristics of the active/forthcoming residential single-family detached project in CFD No. 2006-2. The CFD No. 2006-2 Housing Competitive Market Area currently has six Major Planned Communities (PCs) that are located in the City of Lake Elsinore: Shore Pointe II, Serenity, Viscaya, Rosetta Canyon, Alberhill Ranch and Tuscany Hills. These PCs, with their nineteen active projects, along with the active project in CFD No. 2006-2, have a total of 2,658 housing units: 2,490 homes in the currently active projects in the PCs and another 168 homes in the active project in CFD No. 2006-2; additionally 773 of these homes have closed escrow. ~ CFD No. 2006-2: I active project with 168 homes of which none have closed escrow. ~ Shore Pointe II: 2 projects. with 214 homes of which 143 have closed escrow. ~ Serenity: 2 projects with 232 homes of which 17 have closed escrow. ~ Canyon Hills: 6 projects with 727 homes of which 176 have closed escrow. ~ Rosetta Canyon: 4 projects with 509 homes of which 179 have closed escrow. ~ Alberhill Ranch: 3 projects with 549 homes of which 92 have closed escrow. ~ Tuscany Hills: 2 projects with 259 homes of which 166 have closed escrow. CFD NO. 2006-2 COMPETITIVE HOUSING MARKET AREA: MARKETING STATUS OF THE PROJECTS ......, 600 500 400 300 200 o CFD No. 2006-2 143 7J 176 551 179 330 92 457 166 93 100 o Escrows Oosed E3Funm Units The prices of homes in these projects, including the currently active comparable projects and also the projects in the CFD, are some $459,806 for some 2,569 sq.ft., on the average, and the prices for the ~ projects in the various categories are as follows: Empire Economics 16 AGENDA ITElWfiO. 2006 33 PAGE Iqi> OF3~- ~ ~ CFD No. 2006-2: $392,739 for some 2,140 sq.ft. of living area. ~ Shore Pointe II: $388,490 for some 1,943 sq.ft. of living area. ~ Serenity: $389,240 for some 2,176 sq.ft. of living area. ~ Canyon Hills: $432,056 for some 2,381 sq.ft. ofliving area. ~ Rosetta Canyon: $483,740 for some 2,862 sq.ft. of living area. ~ Alberhill Ranch: $513,323 for some 2,972 sq.ft. of living area. ~ Tuscany Hills: $590,833 for some 3,173 sq.ft. of living area. CFD NO. 2006-2 COMPETITIVE HOUSING MARKET AREA HOUSING PRICES AND LIVING AREAS ".-. S7oo,000 . S6OO,000 ... . '" S5oo,000 . t:: . z ;J . ~ . ~ $400,000 '" ;J 0 = foo S3oo,000 0 '" ~ u ;: S2oo,000 ... Sloo,ooo so CFD No. Shore Serenity Canyon Rosetta Alberhill Tuscany Totals! Aver 2006-2 Point. n Hill. Canyon Ranch Hill. ages i111 LEFT: Price S392,139 $388,490 $389,240 $432,056 $483,740 S513,323 S590,333 $459,806 I. RIGHT: Livin8 Area 2,140 1,943 2,176 2,381 2,862 2,972 3,173 2,569 3,500 3,000 !-o ~ f: 2,500 ~ < ;J 0' '" 2,000 0 < ~ 1,500 ~ ~ :l 1,000 foo 0 ~ !::l '" 500 0 To compare the prices of the homes in these projects, their value ratios are utilized, the price per sq. ft, of living area, since this effectively makes adjustments for differences in their sizes of living areas. Accordingly, the value ratios for all of the projects amount to $181 per sq. ft. of living area and their Special Taxes/Assessments amounts to some $2,949/yr. (0.64% as a ratio to the housing prices); accordingly, the value ratios and Special Tax/Assessment characteristics for the product types in CFD No. 2006-2 and the currently active comparable projects are as follows: r-- ~ CFD No. 2006-2: expected value ratio of $184 and the Special Taxes/Assessments amount to $2,71I1yr. (0.69%). ~ Shore Pointe II: expected value ratio of $202 and the Special Taxes/Assessments amount to $3,302/yr. (0.85%). ~ Serenity: expected value ratio of $180 and the Special Taxes/Assessments amount to $2,919/yr. (0.75%). ~ Canyon Hills: expected value ratio of $183 and the Special Taxes/Assessments amount to $1,623/yr. (0.37%). ~ Rosetta Canyon: expected value ratio of $171 and the Special Taxes/Assessments amount to $3,628/yr. (0.75%). ~ Alberhill Ranch: expected value ratio of $174 and the Special Taxes/Assessments amount to $4,363/yr. (0.85%). ~ Tuscany Hills: expected value ratio of $187 and the Special Taxes/Assessments amount to $3,247/yr. (0.55%). Empire Economics 17 AGSfDA f'l'EIrl1I6.1, 2006 3'3 PAGE I~ ~ OF JOG --._-. -~ CFD NO. 2006-2 COMPETITIVE HOUSING MARKET AREA VALUE RATIOS AND SPECIAL TAXES ~ $250 . < t.l . ~ ... $200 i $150 0 5 $100 ~ ~ $50 $0 CFD No. Shore Serenity Canyon Rosetta AIberlUlI T.....y Totals/Aver 2006-2 Pointc n Hills Canyon Ranch Hill, ages II LEFT: Value Ratio $114 $202 $180 $183 $171 $174 $187 $181 . RIGHT: Special Amntff.. $2,711 $3,302 $2,919 $1,623 $3,628 $4,363 $3,247 $2,949 $300 $5,000 ......, $4,500 ;.. ::l $4,000 I $3,500 ~ $3,000 ~ S2,500 B Ul ~ S2,OOO ~ S\,500 ... $\,000 ::s ~ $500 e; SO The currently active residential projects have experienced a sal.es rate/escrow closings at a rate of some 1,045 homes per year, for an average of some 55 units per project per year; the distribution of these sales among the various PCs/Projects is as follows: ~ Shore Pointe II: an overall sales rate of90 homes annually, some 45 per project/average. ~ Serenity: an overall sales rate of 110 homes annually, some 55 per project/average. ~ Canyon Hills: an overall sales rate of325 homes annually, some 54 per project/average. ~ Rosetta Canyon: an overall sales rate of 240 homes annually, some 60 per project/average. ~ Alberhill Ranch: an overall sales rate of 165 homes annually, some 55 per project/average. ~ Tuscany Hills: an overall sales rate of 115 homes annually, some 58 per project/average. ......, CFD NO. 2006-2 COMPETITIVE HOUSING MARKET AREA SALES RATES 1.6!lO 100 '" 1,400 60 SS S' SS 54 . ~ 4S . . . . 60 1,200 >- is . '" ~ 1,04S 40 ~ >: < 1.000 ~ ~ < >- t .. 800 a :l .. ~ .. .. '" 600 If ;! :a i: ~ 400 200 Shore Pointe n Serenity Canyon Hills Rosetta Canyon Albc:rhi:U Ranch Tuseany Hills TotalslAver88e1 ......, Empire Economics 18 AGENDA 1~~06 "33> PAGE ~ OF?4~ ~ ~, ~. J i S ~ '" '" ~ '" ~ '" ~ ~ ~ ~ ~ ~ ~ '" '" '" ~ '" , ~ ~ ~ ~ ~ ~ ~ I ill l'! ~ ~ ill ~ ill ill ,; ,; ,; ,; ,; ,; ,; ,; ,; ,; ,; ,; ,; 0 ,; ,; ,; ,; ,; ,; ,; ,; ,; I 1 ! 5 ~ ~ ~ II ~ i;; ~ il ~ g ~ 18 : il ~ ~ ~ * 2 ~ ~ ~ l:l l:l ::i l:l :; ;; :; :; ::i ::i ::i ;l Ol Ol Ol ::i l:l :;f oj :;f ;; oj ;l ! ! ! Ii ! e ~ ! e ~ e ~ ~ ~ ~ ~ ~ ! ~ ~ ! ~ ! ~ ~ ~ ~ ~ ~ ~ ! e ~ 18 N ~ . ! ~- !:i Ie i!! 8 l! ~ ; !l ~ ~ ~ ~ ! ~ N N N N ~ ri N ri N ri . ~ ri ri ri :; " :l ! ! f 0 i;; i ~ ! ~ ~ ! !8 ; ~ ~ ~ ! ~ :;: ! ~ ; ~ ~ S $ . N N . N N N N N N N ri ri ;:; ;:; ::l :< :; ~ ! 5 ~ :;: i! ~ l! ~- ; ~ ~ ~ ~ ~ ~ 0 ~ ~ ~ i ~ ~ l! e ; S ~ e e 0 . . .- . . N N . N N N N N N N - " " " 1 ~ il Ii il Ii tJ ~- !l ~ !l 8! il il Ii il il iil il !! 8 ~ ~ ! ~ ! i ~ s !l '" &l l! lB '" .; ! ~ I i Ii S " i i ,; " '" Sf " ;j l:l !i l:l !i l:l i Ol :i ii :i :i III III ii ~ ~ Ol El Ii Ol I r ~ ~ ~ il ~ ~ ~ ! ~ ~ ~ il ~ Ii ~ il ! ~ ~ ~ $ * S ~. ~ ~ f N i l a 18 a " lii ;:i N ,; l i N ~ a l!'" ~ ~ 5 a ~ ! ~ a a Ol a i :i Ol Ol i i :i III ill 5 ~ il il Ii il Ii! ~ 8 8 8_ il il Ii lii il il ill ill 8. 0 i ! i ~ $ ~ ., o. ! a lii . a ~ ~ ! ~ 8 a ! a ri i ~ ~ ! a g I $ ~ l:l w w Ol Ol Ol w !i Ol Ol ~ ! ! i ~ Oil Oil Ii! Ii! ill il ill ill Ii! ~ - Ii! Ii! ~ liI ~ Oil il ill ~ ~ - E * - - ! I 1 . ! ~ 1! ~ ~ ~ ! ! &l ~ - :l: ~ - - - - :; = l'! ;l ill ~ ~ ;: ;: . . ~ - 1 I ! ~ ~ ill 0 0 :: ~ ;0. 0 ~ 0 ~ . ~ ~ . ~ 0 l'l ~ I ~ - ~ - ~ ~ ! ~ ! ! :l: - - . ~ !'l - - :! - iO\ :0 il I !'! 1! ~ !! - ~ N a ~ ~ ~ n :l ! ! ~ ~ !i !i !i 8 ~ I ~ ~ ~ 8 8 ~ 8 i - N N . . - N 2 j :; ri N " .. .; .; '" ~ ~ .; .; .; .; " " " .; .; I ! I J J I I I I I ! ! ~ I I . . j j ! . I ~ j & ~ ~ i J J j ;r : J J ! J 4 4 4 j ; ~ . ~ ~ ~ ~ ~ ~ ~ , , , , , S S S I I ~ ~ ~ J " " j t t } 1 i I ~ 11 I I ~ ~ . J ~ ~ i ~ I I> i l j J " I " 11 a ~ I 1 ~ ~ ;0 4 oK I " ~ ~ ~ " " i . ! ! J J ~ ~ . 1 j ~ i ~ i i i i i ~ ~ ~ ~ ~ I ! ~ ~ ; ! ! ! ~ ! ! n . i 0 f ! ~ ~ ~ ~ ~ J J J J ! ~ ~ : ! ~ ~ " I i u i ~ 1 . ~ j J \0 o o C'l ~ ~ a.. .... tIJ (.) 's o s:: o (.) ~ e .~ ~ AGENDA ITEM ~. :,3 PAGE I?!; OF~ r./) ~ ~ ~ ~ ~ ~ :;E . 0 o u Z Q Q ~ ~ ~ o .....::l ~ ~ < .~ ~ 0 < z ~ 0 ~ ~ < u :;E 3 d ~ ~ ~ r./) < ::J :;E o ~ ~ 23 ~ ~ ~ < /"'" ESTIMATED ABSORPTION SCHEDULES FOR THE PROJECT/PLANS IN CFD NO. 2006-2 (VISCAYA) The purpose of this section is to estimate the absorption schedule for the active residential project/plans in CFD No. 2006-2 (Viscaya); accordingly, this is based upon a consideration of the following: First, the potential demand schedules for the residential project/plans for CFD No. 2006-2 were derived, based upon a consideration of the following: ~ The growth prospects for the Southern California Market Region, in general, and Riverside County, in particular. ~ How much of this growth the CFD No. 2006-2 Market Area is expected to capture, III particular. ~ The proportion of the Market Area demand that is expected to be captured by the project/plans in CFD No. 2006-2, based upon an evaluation of their competitiveness in the marketplace. ~ F or currently active projects in the Competitive Housing Market Area, their recent sales rates. ~ Expected changes in the current sales rate due to anticipated higher levels of mortgage rates and gas prices during the foreseeable future when the project/plans in CFD No. 2006-2 are on the marketplace. /"'" Thus, the result of this analysis is the POTENTIAL demand for the residential project/plans in CFD No. 2006-2. Next, the ability of the residential project/plans in CFD No. 2006-2 to respond to this demand is estimated. Accordingly, the infrastructure development schedule for the residential project/plans was obtained from the developer/builder. Specifically, this represents, from a time perspective, when the project/plans will have the infrastructure in place that is required to support their development. So, the result of this analysis is the INFRASTRUCTURE DEVELOPMENT of the projects in CFD No. 2006- 2, and this reflects their ability to respond to the demand in the marketplace. Then, based upon a consideration of the POTENTIAL demand and the INFRASTRUCTURE DEVELOPMENT, the absorption rate for the residential project/plans are calculated, from the year in which the project/plans are expected to enter the marketplace, and continuing thereafter on an annualized basis, until all of the units are occupied. The application of this algorithm results in the absorption schedules for the project/plans in CFD No. 2006-2; absorption represents the structures being constructed as well as being occupied by households. Accordingly, the estimated absorption schedules for the 168 homes in the CFD No. 2006- 2 project/plans for Viscaya are as follows: ~ Empire Economics 21 AGENDA ITEMlIO!, 2006 0'3 PAGE If?; OF~ Plan No. 1 is currently priced at $364,900 for some 1,506 sq.ft. of living area, for a value ratio (pricelliving area) of $242; there are anticipated to be 27 homes with this plan. These homes are expected to commenced escrow closings/move-ins during June 2006, and are expected to be absorbed at a rate of 10 homes in 2006, another 10 homes in 2007 and then the remaining 7 homes in 2008. ......., Plan No.2 is currently priced at $378,900 for some 1,930 sq.ft. of living area, for a value ratio of$196; there are anticipated to be 35 homes with this plan. These homes are expected to commenced escrow closings/move-ins during June 2006, and are expected to be absorbed at a rate of 14 homes in 2006, another 13 homes in 2007 and then the remaining 8 homes in 2008. Plan No.3 is currently priced at $394,900 for some 2,229 sq.ft. of living area, for a value ratio of$177; there are anticipated to be 53 homes with this plan. These homes are expected to commenced escrow closings/move-ins during June 2006, and are expected to be absorbed at a rate of 19 homes in 2006, another 22 homes in 2007 and then the remaining 12 homes in 2008. Plan No.4 is currently priced at $413,900 for some 2,513 sq.ft. of living area, for a value ratio of$165; there are anticipated to be 53 homes with this plan. These homes are expected to commenced escrow closings/move-ins during June 2006, and are expected to be absorbed at a rate of 20 homes in 2006, another 23 homes in 2007 and then the remaining 10 homes in 2008. The 168 single-family detached homes in CFD No. 2006-2 are expected to be absorbed during the 2006 to 2008 time period; the rate of absorption is estimated to be as follows: ""'" In 2006, some 63 homes in Phases 1 through 3 In 2007, some 68 homes in Phases 4 through 6 In 2008, the remaining 37 homes in Phases 7 and 8 as well as the four models The expected absorption schedule for the project in CFD No. 2006-2 can also be expressed as a capture rate of the expected market demand for the CFD No. 2006-2 MA, the southwestern portion of Riverside County. Specifically, the capture rate reflects the percentage of the MA's demand that is fulfilled by the absorption of the homes in CFD No. 2006-2. With respect to the capture rates of the demand in the Market Area, they are as follows: In 2006, as the project commenced escrow closings, the CFD No. 2006-2's capture rate on the MA's demand is some 1.8%. Then, during 2007, the capture rate is also 1.8%, and, finally, in 2008, as the remaining homes in the project are closed-out, the capture rate declines to some 0.9%. For the 2006-2008 time period, as a whole, the overall capture rate amounts to some 1.5% of the demand in the Market Area, on the average. ""'" Empire Economics 22 AOENDA ITEM ReDlY 1, 2006 t:> 3 PAGE )Cf If Of -;~ ~ ,,--... ~ The estimated absorption schedules for the residential project/plans in CFD No. 2006-2 is subject to change due to potential shifts in economic/real estate market conditions and/or the development strategy by the developer/builder, Corman Leigh Communities. For additional information on the estimated absorption schedules for the residential products in CFD No. 2006-2 (Viscaya), please refer to the following table and graphs. Please refer to the section following the tables and graphs of the estimated absorption schedules for the forthcoming residential products in CFD No. 2006-2 for a discussion of the "Potential Financial Risk Factors Underlying Land Secured Financings in Southern California". Empire Economics 23 AGENDA ITEM Nb!ay 1, 2006 "33 PAOE jq-; OF 3l11i2. - ~ <( t) en en w- ...JG =>N O. w<o I8 t)N en 0 zO OZ -0 ~u. a..t) O::w 00:: enO alZ <(- Oen W...J ~w <(w ~~ -<( ~...J enu. wo >- ~ t) c: o (J) oS; (I) 0:: o +-' +-' (.) (I) E :J en :i (f) ..- 00 E (0 (f) (0 ;:, ..- ..- 0 ~ ~ 0) (f) "i 0 ...... 0 ~ CO 00 00 0 ~ 00 (f) 00 ...... ;:, (0 0 (0 ci N ..- ..- (0 (0 (f) CD C ..- ..- 0 0) ~ ..- c (f) N c( ..- ~ ..,. 0 '* 0 =It 0) (f) 10 (f) (f) ~ cr) ..- (0 0 (f) 0 C") C 10 0 10 10 ..- N N ..- It) ClI ..- ..- N ~ 0: (f) ~ ~ C") 0 ~ 0 0) ...... =It 0 0) (f) (f) ~ N ...... 0) N N C") C 10 0 10 ~ ~ . ..- ..- N ..- It) ClI ..- 0) N ~ 0: (f) (f) ~ ~ CO (,) tn :> 0 N '* 0 0 (0 =It 0) 10 10 00 as (f) 0) ~ (f) 00 It) c (f) 0 (f) ci 0) ..- ..- ..- C") ClI ...... ..- ~ 0: N (f) ~ ..- 0 ~ 0 (0 N =It 0 0) 0 ~ 0 0 ...... ...... ...... ..- ...... C N 0 N cO ~ 10 N ..- ..- N ClI (0 ..- ~ 0: ..- (f) ~ - ClI ~ C) c "> :;:j (0 ...... 00 - 0 0 0 CD 0 0 0 U N N N ^ II) ";: II) CD !!::.. CD "0 U II) Q. ";: 0 ~ CD ClI c "a CD D.. ~ :;:: 0 ;:, .... C) ClI :;:: U ;:, lx: e- u - c ~ II) ;:, u ;:, ~ "iii CD 0 B "0 "i 0 u. ClI ;:, "> ;:, II) e - .r:. 0 "i ~ 0 0 D.. I- m :I: :;:j > I- <0 o o N ~ ~ CO ~ ""-"" \0 o o N ~ ::E ~""-"" '" u Os o r:: o u ~ Cl) .... o~ ~ ""-"" ITEM IlO ~ AO~AOE_/qi Of_ ~ \0 0 0 00 N 0 0 N 00 r- .- 0 ..... ..... ~ N ~ 00. ~ ~ ~ -.Q <~ ~= <u UOO OOZ ~O ~~ ~ M~ r- ~~ 0 l") N l") 0 ~. 0 N N ..... ..... =0 N I() =00. N ~= 0< ZQ Q~ ~~ U~ ~ ~ 00. ~ \0 OOO\"<:tO ON"'" ..... ..... N '" o .s o !': o o ~ ~ .~ ~ o 00 o r- o \0 o on o "<:t o l") o N 0 0 "<:t l") N ..... ..... =l:I: =l:I: =l:I: =l:I: ~ ~ ~ ~ ..... ..... ii: ii: ~ ~ IIlJ ~ m _ AGENDA ITEM NO. ~? PAOE /91 OF 7~ ,-. A'l'lVilNNV - S'JIWOH.tIO 1I'JIHW11N ~ E-c ~ ~ Q E-c ~ < u -~ ~= <E-c uOO 00< ~~ c,~ N~ ~~ =00 ~< .~ O~ ZQ ~~ e~ u 00 Z o ~ E-c ~ o 00 = < VIDIV .1IDIlIVW 0.1 O~:::> ~O 3:.1 VH IDIil.LdV:::> '-' '*- o o ....... '*- o 0\ '*- o 00 '*- o r- '*- o \0 '*- o on '*- o "<t '*- o M '*- o N '*- o ....... '*- o , , 00 8 M '*- N 00 r- I \0 N~ ": ?f:. \0 ....... ....... 0 ....... ....... III 0 ~ N ~ 'll '*- 0 ~ 0 0 0 = 0 00 on '*- 0 r- on 0 M O\~ 0\ = N M 0 r- oo '*- 0 00 on 0 \0 r-: 00 ~ N M ....... \0 0 '*- 8 M \0 "': \0 "1- oq ..... N M ....... 0 0 0 0 0 0 N I 0 0 0 0 0 \0 Q) 0 0 0 0 0 0 co:! ~ 0 00 ..a ..,; N 0 Q) ~ N -< ~ ....... 0 z ...... Q) Q) E 0 ] NOI.LdlIOSHV O~:::> ONV ONVW3:0 VIDIV .1IDIlIVW ~ ~ u ::E u II ~ ~ \0 o o N ~ :::E ~'-.J o o o N ....... '" u 's o = o u ~ ~ .~ ~ -.J AGENDA ITE~~_ "3 '?;> PAOE~OF 306- ,-.. POTENTIAL "FINANCIAL" RISK FACTORS UNDERLYING THE CREDIT QUALITY AND BOND SIZING FOR LAND SECURED FINANCINGS IN SOUTHERN CALIFORNIA . There has recently been a substantial amount of discussion on the potential for a housing market bubble, including remarks of "froth in some local markets" by the former Federal Reserve Board Chairman, Alan Greenspan, based primarily upon the use of exotic mortgage structures; these remarks have dealt with the housing market on a national as well as a regional level. However, developing Planned Communities have characteristics that differentiate them from broader markets: they represent the marketing of new homes to purchasers at current prices that exclusively utilize current mortgage rates and financing structures, and they are also concentrated in particular geographical locations. CHARACTERISTICS GENERAL MARKET COMMUNITY FACILITIES DISTRICT GeoaraDhical Location Broad CFD - Focused Area Time of Purchase Lona Time Soan: 10- 20+ Years Recent Amount of Eauity Sianificant" Accumulated Over Time Minimal Tvoe of Financina Structure Mostlv Fixed Predominantlv > Adjustable > Creative Timina of Loan Resets Minimal & Soread Over Time Most & Similar Time .~ The purpose of this section is to focus specifically on the potential implications of the recent use of adjustable rate and creative financing techniques that are presently available for home purchasers on the credit quality underlying land-secured financings in Southern California. There has been a fundamental shift in the driving force underlying the recent rates of housing price appreciation, from the historical role of employment growth as the driving force to the recent role of adjustable rate and creative financing techniques as the driving force. These financial factors have been the primary driving force underling the extraordinary rate of housing price appreciation in Southern California of more than 75% since January 2002. Consequently the current levels of housing prices and land values are subject to potentially substantial downward adjustments, due to mortgage rate resets (as mortgages are adjusted from teaser rates to market rates) as well as higher short-term rates (due to rate hikes by the Federal Reserve Board). These adjustments, in turn, may cause a softening in housing prices and land values that could adversely impact the credit quality underlying land-secured jinancings. Creative financing refers to the use of loan structures other than fixed-rate or 1 year adjustable, including the following: interest only, payment option loans as well as initial teaser rates (below market rates that are offered only for a limited time period) with very low initial payments that result in negative amortizations (higher principal balance), less stringent lending standards such as low/no documentation, and much higher mortgage payment to income ratios, among others. ,.... Empire Economics 27 3? AOENDA ITEM N8;!Y 1,2006 PAOE got OF ~ _ Structural Shift of Factors Underlying Housing Price Appreciation Since January 2002 there has been a fundamental shift in the primary factor underlying housing price appreciation in Southern California; the primary driving force was initially declining mortgage rates as well as the extensive use of adjustable and creative financing as compared to the traditional driving force of strong employment growth. "" Specifically, the term "driving force" is utilized herein to refer to a SIGNIFICANT CHANGE in a major economic/financial factor that has STRONG DISCERNIBLE IMPACT on housing prices. ~ January 2002 through June 2003: The rates on fixed 30-year mortgage loans declined to recent historic lows in June 2003, and were a driving force underlying the rate of housing price appreciation of some 13.2% on an annualized basis; however, since June 2003, fixed rate mortgages have been ABOVE their recent historic lows. ~ July 2003 to March 2004: As fixed mortgage rates rose, purchasers shifted to adjustable rate mortgages which offered significantly lower rates, and these were a driving force underlying the rate of housing price appreciation of some 16.2% on an annualized basis; however, since March 2004, adjustable rates have been ABOVE their recent historic lows. ~ April 2004 - Presently: As adjustable mortgage rates rose due to the Federal Reserve Board increasing the federal funds rate, home buyers shifted to various types of creative financial structures, and these were a driving force underlying the rate of housing price appreciation of some 22.2% on an annualized basis; however, since Fall-2005, some lenders have started to tighten their qualification standards. ""-'" Potential Adjustments for Mortgage Payments The extensive use of adjustable rate mortgages and also creative mortgage structures since June 2003 means that such homeowners have monthly mortgage payments which are subject to significant upward adjustments due to automatic mortgage rate resets as well as potentially higher interest rates: ~ Mortgage Resets (Stable Mortgage Rates) reflect the changes in mortgage payments that households with adjustable and creative mortgage structures will incur as the initial "teaser" rates are realigned with the current "market" rates. The dollar volume of mortgages subject to resets for the United States mortgage market is expected to increase from $83 billion in 2005 to more that $1 trillion in 2007. ~ Higher Mortgage Rates would result in even higher monthly payments for homeowners with adjustable rate mortgages as well as creative mortgage structures; the increase in their mortgage payments depends upon the degree to which short-term rates rise. The recent use of adjustable rate and creative financing techniques by home purchasers is especially significant for residential land secured financings, since these financings are predominately for developing Planned Communities that represent the marketing of new homes to purchasers at current prices that exclusively utilize current mortgage rates and financing structures and they are also concentrated in particular geographical locations. ......" Empire Economics 28 33 AGENDA ITEM NO. May 1. 2006 PAOE ~ doF <y]ff&1- Specific Impacts of Rate Resets and Higher Mortgage Rates on the Land Secured Credit Quality ,-.... To the extent that mortgage payments rise due to various possible combinations of automatic mortgage rate resets as well as potentially higher short-term rates that directly impact adjustable rate and creative mortgages, then the credit quality underlying recent land-secured financings may be diminished in the following ways: >> Lower housing prices resulting in a higher Special Tax to Housing Price Burden for homeowners, possibly in excess of the Issuer's policy ofa maximum total tax burden, typically some 1.8% to 2.0% of the initial sales prices, even though these maximums may have been satisfied at the time that the Special Taxes were established. >> Significantly lower land values resulting in a reduced ValuelLien ratio, possibly below the Issuer's policy of typically some 3 to 1 or 4 to 1 when the bonds are sold, thereby diminishing the security for bond holders. (The Appraisal for the Bond Issue is valid only for the stated Date of Value; it is not meant to be a prediction of future values.) ,-.... >> Higher levels of Special Tax delinquencies as monthly payments of owners increase resulting in diminishing the maximum Special Tax to the bond debt service coverage ratios for bond holders that may adversely impact the Issuer's ability to meet the debt service payments in a timely manner, possibly resulting in the use of the bond reserve fund. Adjustable rate mortgages (some 79% of current mortgages) have significantly higher delinquency rates than fixed rate mortgages; additionally, homeowners that use adjustable rate mortgages also have higher loan to value ratios as well, some 90% as compared to homeowners with fixed rate loans, some 81 %. Accordingly, in arriving at these conclusions, this section systematically discusses the following: I. Recent Shift in the Primary Factors Underling Housing Price Appreciation 2. Financial Factors "Driving" Recent Housing Price Appreciation 3. Mortgage Rate Resets: Realignment of Adjustable/Creative Loans to Market Rates 4. Mortgage Rate Increases: Potential for Further Federal Reserve Board Rate Hikes 5. Specific Impacts of Higher Mortgage Rates on the Land-Secured Credit Quality 6. Recent Trends/Pattems for "Notices of Default" for Mortgages This section should not be construed as a forecast that mortgage rates will rise significantly in the foreseeable future; rather, it sets forth the POTENTIAL risk factors that mortgage rate resets as well as higher mortgage rates along with the near-term policy of the Federal Reserve Board would have on the credit quality underlying land-secured financings. Empire Economics acknowledges that financial markets, due to their high degree of economic efficiency and complexity, are difficult to forecast, and, ,-... as such, the use ofthe term "Potential" Risk Factor is regarded as being appropriate. Empire Economics 29 33 AOENDA ITEM NO. May 1, 2008'~ PAGE db3 OF~ 1. Recent Shift in the PrimarvFactors Underlvinl! Housinl! Price Appreciation The primary factors underlying housing price appreciation in Southern California since January 2002, declining mortgage rates as well as the extensive use of adjustable and creative financing, represent a fundamental shift from the traditional factor, employment growth. ~ Specifically, the term "driving force" is utilized herein to refer to a SIGNIFICANT CHANGE in a major economic/financial factor that has STRONG DISCERNIBLE IMPACT on housing prices. ~ During 1984-2001 housing price appreciation was driven by employment growth, along with accommodating financial factors, such as stable or somewhat declining mortgage rates. During this time period financial factors played only a secondary role: for instance, during 1991-1993 when employment decreased, housing prices declined, even though mortgage rates fell by more than two percentage points from their 1989-1990 levels. ~ However, since January 2002, as housing prices escalated at strong rates, the primary fundamental factor, employment growth, has experienced only minimal growth, some 1 % per year, on the average. Instead, housing price appreciation has been driven primarily by financial factors, particularly the use of adjustable rate mortgages and creative financing techniques. SOUTHERN CALIFORNIA EMPLOYMENT, HOUSING PRICES AND MORTGAGE RATES, HOUSING PRICE CHANGES DRIVEN BY EMPLOYMENT CHANGES 30% MORTGAGE RATES 25% 10.31% . 9.86% . 7.75% 7.35% 7.26% ......." Qz ~ 5l 20% ~~ ~ ~ 15% g~ ~tj ~ ~ 10% "'~ ts~ ~ g 5% uti: 0% SINCE 2002, EMPLOYMENT GROwrn HAS BEEN MINIMAL YET PRICE APPRECIATION HAS BEEN STRONG STRONG EMPLOYMENT RESULTED IN STRONG HOUSING PRICE APPRECIATION Empire Econonaca: -5% 1984-1988 1989-1990 1991-1993 1994-1995 1996-1998 1999-2001 Jan. 2002- Currently _ Employment Changes .. Mortgage Rates - Fixed ..... Housing Price Changes Sources: Empire Economics, Employment Development Department, Freddie Mac & Office of Federal Housing Since January 2002, financial factors have been the strong driving force underlying the rates of housing price appreciation. Specifically, the rates of housing price appreciation have been generally similar among all of the Southern California counties, despite their differences in geographic location, employment growth and housing supply. '-' Empire Economics 30 3'3 AGENDA ITEM MJ.- Mav 1. 2006 PAOE~OF '3~ ""'" >> The rates of employment growth for the counties varied substantially during 2002 to 2005, from a low of -1.15% per year for Los Angeles County to a high of 4.60% per year for Riverside-San Bernardino counties. >> The supply of new housing has also exhibited a wide variation during 2002 to 2005 as compared to 1999-2001, from declines of -26% in Ventura County and -14% in Orange County to increases of 80% in Riverside-San Bernardino counties. Therefore, the financial factors have been so strong that they have effectively overshadowed other possible explanatory factors such as geographical location, employment growth and housing supply. 2. Financial Factors "Drivine" Recent Housine Price Appreciation in Southern California The particular factors that have been the driving forces underlying recent strong rates of housing price appreciation in Southern California during January 2002 through 2005 are now discussed. Specifically, the factors which have driven housing prices since January 2002 started with fixed mortgage rates declining to recent historic lows, then a shift to adjustable rate mortgages, and, most recently, a shift to "creative" mortgage structures. January 2002 to June 2003: Prices Driven by Declining Fixed Rates; Fixed Rates Now Higher >> Fixed-rate 30-year mortgage loans declined from 7.00% in January 2002 to a low of 5.23% in June 2003, and were a driving force underlying the rate of housing price appreciation of some 13.4% on an annualized basis. ,..-- >> Since June 2003, rates on fixed rate mortgages have been ABOVE their recent historic lows and, as such, they are no longer considered to be a driving force underlying housing price appreciation. 8.00% RECENT MORTGAGE RATE TRENDS: FIXED-RATE MORTGAGE LOANS 7.00% 6.()()4I1o e S.OOOIo ~ !j 4.00% ~ ~ o 3.00% :;: 2.00010 1.00% , . FIXED J. TE MORTGAGES AT HIST04C LOWS, JUNE 2003 0 I > e: ~ I > j;' t ! '< ! << If N ~ ~ ~ ~ 0.00-10 s ~ > ! j;' << N ~ ~ ,- Empire Economics 31 TRENDLINE FIXED RATE MORTGAGES RISE Ie......c. 0 I ~ ~ 0 f ~ t '" t ~ '" ~ ~ ~ ~ Sources: Empire Economics &. Freddie Mac 6? AGENDA ITEM N9.tay 1, 100{j PAGE ;:xb OF ~... July 2003 to March 2004: Prices Driven by Adjustable Rate Loans; Adjustable Rates Higher ~ Starting in July 2003, as rates on fixed rate mortgages rose, households shifted to adjustable rate mortgages which offered favorable terms, due to the Federal Reserve Board maintaining a low federal funds rate, and these attained a recent historic low of 3.41 %. During the July 2003 to March 2004 time period, adjustable rates were significantly below fixed rates of by some 215 basis points. The use of adjustable rates were a driving force underlying the rate of housing price appreciation of some 18.8% on an annualized basis. ......, ~ Since March 2004, the rates on adjustable rate mortgages have been ABOVE their recent historic lows, and, as such, they are no longer considered to be a driving force underlying housing price appreciation. RECENT MORTGAGE RATE TRENDS: I-YEAR ADJUSTABLE RATE WANS 6.00% 4.""" ~ I ''''''' ,& 2.0()% ..""" ADJUSTABLE RATE MORTGAGES 1 AT HISTORIC LOWS: MARCH 20041 IIlIRI.rn 0.""" f i ~ f I i ~ f I i ~ f I i ~ f I i I I I I ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Soun:eI; Empi~ Ecoftotnig ol Freddie Mac ......, ~ For Southern California, the percentage of adjustable rate loans has risen dramatically, from 19% in 2001 to 79% during 2005; conversely, fixed rate loans have decreased from 81 % in 2001 to only 21% in 2005. Additionally, each of the Southern California counties exhibited a similar pattern in the shift from fixed-rate to adjustable rate mortgages as well. TYPES OF MORTGAGE LOANS - SOUTHERN CALIFORNIA ,- 90% "'" 70% ~ 60% 50% ~ a 40% II> 30% "'" 10% 0% 2001 2002 SShare-Fixed 2003 2004 aShare-Variable 2005 Sources: Empin: Economics, MoJ'1Sllae Bankers AAociation .t Real Property '-' Empire Economics 32 3>3 AGENDA ITEM HOlY 1,2006 . ~~OF~ ,... ~ Furthermore, for Southern California, the ratio of the mortgage loans (first and seconds) to the housing purchase prices during 2001 to 2005 has risen for homeowners with adjustable rate mortgages as compared to homeowners with fixed-rate loans. For homeowners with adjustable rate loans, the ratio of their loans to the purchase price of the homes has risen from 85% in 2001 to 90% in 2005, a gain of five percentage points. While for homeowners with fixed-rate mortgages the ratio of their loans to the purchase price of their homes has declined from 87% in 2001 to 81 % in 2005, a decrease of six percentage points. So, homeowners with adjustable rate mortgages have substantially higher amounts of mortgage debt (90%) as compared to homeowners with fixed rate mortgages (81 %). LOAN TO VALUE RATIOS - SOUTHERN CALIFORNIA FIXED-RATE vs. V ARIABLE-RA TE LOANS ~ IOIW. 9S'-. ~ 90% g [S l:l IS% ~ '" so-/. 750/. 200] 2002 IIFixed: LoanIVaJue 2003 2004 DVariable: LoanIValue 200S Sources; Empire Economics, Mortgage Banken Association &: Real Property April 2004 to Present: Prices Driven by Shifting to Creative Loan Structures: ~ Since April 2004, as adjustable rates rose due to the Federal Reserve Board increasing the federal funds rate, home buyers shifted to various types of creative financial structures. These have been the driving force underlying the rate of housing price appreciation of some 24.1 % on an annualized basis. Creative financing refers to the use of loan structures other than fixed-rate or 1 year adjustable, including the following: interest only, payment option loans as well as initial teaser rates such as 1 % for the first year that results in negative amortizations (higher principal balance), less stringent lending standards such as low/no documentation, and much higher mortgage payment to income ratios, among others. ,... Since 2001, for the United States as a whole, there has been a dramatic shift from fixed rate to adjustable rate loans: fixed rate mortgage loans declined from 75% in 2001 to only 15% in 2005. Adjustable rates that were amortized (interest and principal) rose from 20% to 28% while adjustable rates that are interest only (no reduction of principal) rose dramatically, from 5% in 2001 to 57% in 2005. Empire Economics 33 33 AGENDA 1TEM~1j ?OO~ PACE 90 if ?;~ 100% 90% 8oo,;, ~ 70"10 III 60"/. ~ g 50"10 ~ ~ 40"10 ~ 30% l;l '" ... 20"/. 10"10 0"/. RECENT TRENDS FOR VARIOUS MORTGAGE LOAN STRUCTURES FIXED RATE, ADJUSTABLE RATE AND INTEREST ONLY --' Fixed Rate ARM- Amortized ARM-Interest Only 82001 El2002 rn2003 g2004 ~2005-Est. Sources: Empire Economics, Loan Performance & Mortgage Bankers Association Conclusions In conclusion, since January 2002, the primary driving force underlying housing price appreciation has been households initially taking advantage of recent historically low fixed rates through June 2003, then a shift to adjustable rate mortgages through March 2004, and finally, since then, the use of creative financing structures. Specifically, for the same monthly mortgage payment, the use of lower' mortgage rates and creative mortgage structures has bolstered housing prices substantially since January 2002. 70% 60% ~ ~ 50% '" ... ~ 40% e ~ 30% :z ~ ~ 20% ~ 10% 0% Empire Economics ......, RELATIONSHIP OF HOUSING PRICE APPRECIA nON AND TYPES OF MORTGAGE FINANCINGS Shift to Creative Structures; April 2004 to March 2006, A reciation: 44% Joo-2002 to June 2003 Appreciation: 20% Shift to Variable Rates: July-2003 to March 2004 Appreciation: 12% Sources: Empire Economics & Office of Federal Housing '-'" 34 AGENDA ITEM NOa,&I, 2006 ~;, PACE 8D7 F ~ The impacts of alternative mortgage financing structures on the price of housing can be gauged by estimating the prices that households could afford to pay utilizing the various structures; the starting price for housing, as of January 2002, is some $278,000, and households incomes are adjusted upwards at rate of some 3% per year. ,..... >- Fixed Rates: Based upon the recent historic low for fixed rates, which occurred in June 2003, the price amounted to some $350,000, an increase of $72,000; however, using current fixed rates, the most recent price amounts to some $331,000, which is below the peak level by some -$19,000. >-. Adjustable Rates: Based upon the recent historic low for adjustable rates, which occurred in March 2004, the price amounted to some $444,000, an increase of $164,000; however, using current adjustable rates, the most recent price amounts to some $363,000, which is below the peak level by some $81,000. >- Creative Financing: Based upon the rates for creative financing, the price currently amounts to some $475,000, an increase of$197,000. FINANCIAL FACTORS UNDERLYING HOUSING PRICE APPRECIATION ,..... $500,000 $475,000 ~ $450,000 g $425,000 ,.;j $400,000 ~ ~ $375,000 ; $350,000 ";' $325,000 '" ~ $300,000 ~ ro. $275,000 0 tl $250,000 i! $225,000 $200,000 N 1: N j ~ '" 8 < ~ r I '" :li _Fixed: 30-Y, I 8 1: 8 j 8 1: 8 j 8 1: 8 i 8 1: ~ '" '" '" "! ~ g "! < ~ fj "! < ~ "! < r r I 0 ~ I ~ b '" ~ .E: :li !l !l -Variable I-V, - Creative Financing 3. Morteaee Rate Resets: Realienment of Adiustable/Creative Loans to Market Rates There may be some softness in housing prices and land values even if mortgage rates remain stable during the foreseeable future, as households with various types of "adjustable rate" and "creative" debt structures have their initial teaser rates realigned to the current market rates. The resets are expected to generally result in higher monthly payments for homeowners since both the fixed as well as adjustable rate loans attained their recent historical lows in June 2003 and March 2004, respectively, and, since then, these rates have moved upwards: ,..... Empire Economics 35 3'3 AGENDA ITEM NOMay I, 2006 PAGE 9()~ OF ~tXa ~ Fixed Rate Loans were recently at some 6.53%, some 130 basis points above their recent historic low, and just -47 basis points below their January 2002 levels. ~ Adjustable Rate Loans were recently at some 5.66%, some +225 basis points above their recent historic lows and +48 basis points below their January 2002 levels. .."" With regard to the amount of mortgages that are subject to such resets, based upon data for the United States mortgage market as a whole, these are expected to rise dramatically, from some $0.83 billion in 2005 to more that $1.0 trillion in 2007. ESTIMATED MORTGAGE LOAN - RESETS VARIABLE RATE LOANS WITH ADJUST ABLE MORTGAGE RATES SI.20 SI.001 Sl.oo S6.083 a '" ~ so.so 3 ~ '" SO.6O ~ '" ~ -< \:) l; o :ll SO.4O SO.20 SO.oo 200S 2006 II Mortgage Loans - TRILLIONS 2007 ....."" Soun:es: Empire Econami.,. & DB Global MaJkets __ The specific types of resets that may occur for adjustable rate and creative loan structures as rates are realigned with the marketplace are as follows: ~ Adjustable Rate Mortgages are expected to have upward reset adjustments to their monthly payments as a result of the Federal Reserve Board's policy since June 2004 which has caused the short end of the yield curve to rise significantly. The one-year adjustable loans, which were at their recent historic lows in March 2004, have started to have higher monthly payments, and such loans are now some 225 basis points above their cyclical lows. For instance, a household that entered into an adjustable rate loan in March 2004 with a rate of 3.41% would encounter an approximate adjustment in March 2006 to a rate of 5.66%. This represents an increase of some 225 basis points which results in the household's mortgage payment rising by some +66%. So, for a household with a monthly mortgage payment of some $2,000 per month, their payment would increase to some $3,320 per month. ~ Creative Mortgage Structures will undergo reset adjustments over time as the starter teaser rates are adjusted to their market rates. Since creative mortgages are typically based upon short-term rates and also have further adjustments due to teaser rates, then the mortgage payments of such households may rise by much more than for adjustable rate mortgages. '-*" Empire Economics 36 33 AGENDA ITEM ~1 '3 PACE f7 OF~ So, households with adjustable and creative mortgage structures will encounter higher mortgage payments as their initial teaser rates are realigned to the market rates which have significantly higher mortgage payments due to the recent hikes of the federal funds rate by the Federal Reserve Board. ~ For example, the types of adjustments that may occur for various loan structures can be gauged by comparing their initial payments with their payments at the start of year six, after the five year time span during which rates are fixed at a low level; accordingly, these adjustments for various interest rate scenarios are as follows: Mortgage Loan of $500,000 Fixed Rate Hvbrid ARM ODtion ARM 30- Year Interest Only Initial Min. Pymts. Initial Pavments - First Five Years $2,998 $2,553 $1,608 (Interest & Princioal) -(Interest OnM (Minimum Payments) rTNeaative Amortization Rates Decline 100 BP Payment Start of Sixth-Yr. $2,998 $2,960 $3,289 Chance from Initial pymt. 0% 16% 105% Rates Stable Payment: Start of Sixth-Yr. $2,998 $3,260 $3,575 Change from Initial pymt. 0% 28% 122% Rates Rise 100 BP Payment: Start of Sixth-Yr. $2,998 $3,513 $3,928 Change from Initial Pymt. 0% 38% 144% ~ ~ . Homeowners with fixed rate mortgages can expect stable mortgage payments of some $2,998 per year for the entire term of the loan of 30 years, regardless of what happens to mortgage rates after they originate their loans. ~ Homeowners with Hybrid ARM Interest Only Loans have lower payments for the initial five years but can then expect higher mortgage payments starting in year six: from $2,553 to $3,260 (+28%) if rates are stable or, if rates rise by 100 basis points (one percent), from $2,553 to $3,513 (+38%). ~ Homeowners with Option ARMs that initially make mlDlmum payments (negative amortization) of some $1,608 can expect very significant increases in their monthly payments at the start of year six: from the initial payment of$I,608 to $3,575 (+122%) if rates are stable, or if rates rise by 100 basis points, from $1,608 to $3,928 (+144%). Additionally, the mortgage delinquency levels for homeowners with adjustable and creative mortgages have traditionally been significantly higher than for homeowners with fixed rate loans. This is typically attributed to homeowners with adjustable rate loans having difficulty with higher mortgage payments as rates rise as well as such households having "low" equity levels (due to higher loan to price ratios as well as negative amortization), and hence less of an incentive to "hold-on" to the home, especially if the rate of appreciation diminishes. During the 2000-2005 time period, the 5.4% delinquency rate for adjustable rate loans has been above the 3.6% delinquency rate for fixed rate loans by some 50% (5.4% vs. 3.6%.). ~. Empire Economics 37 3~ ACENDA ITEM NO. May 1, 2006 PACe ;)} D OF 3&X.a DELINQUENCY RATES: FIXED-RATE Vs. VARIABLE-RATE LOANS 7% 6% S% ~ 4% a !l ~ 3% i5 2% .. 1% 0% 2000 2001 2002 DFixed-RlIle ......, 2003 2004 2005 IIVariabl.,.RaIe Sources; Empire Economics &. National Delinquency 4. Morteaee Rate Increases: Potential for Further Federal Reserve Board Rate Hikes Since the financial markets, being very efficient, are difficult to forecast, especially mid-term and long- term rates, it is not the position of Empire Economics to forecast that mortgage rates will rise. Nevertheless, it is worthwhile to explore the potential implications of the Federal Reserve Board continuing its current policy of increasing the federal funds rate, since this directly impacts the short- end of the yield curve, and, in turn, adjustable rate mortgage rates as well as the creative mortgage structures. The Federal Reserve Board, according to some analysts, is expected to raise the federal funds rate above its current level of 4.75%, which is already significantly above its prior low level of 1.0% as of June 2004. Consequently, the primary driving forces underlying the strong rates of housing price appreciation, adjustable rates and creative financing structures, will diminish substantially over time. ....., (Note: Since the recent fixed rate of some 6.53% is some +87 basis points above the recent one-year adjustable rate of 5.66%, even a moderate decline in fixed rates would not become a driving force for further price appreciation because they are significantly higher than adjustable rates.) Therefore, further increases in the federal funds rate will result in the short-term rates rising, and this, in turn, will cause the following: ~ Existing Borrowers will have higher monthly payments as adjustable rate mortgages rise and creative teaser rates are realigned to HIGHER market rates, as compared to the current market rates. ~ New Borrowers will face HIGHER rates, reducing their ability to qualify for loans that support existing prices, thereby placing downward pressure on home prices. ......, Empire Economics 38 3'3 ACENDA ITEM NO(. ~f~' 1, 2996 PACE d( OF ~ RECENT MORTGAGE RATES FIXED AND ADJUSTABLE AND THE FEDERAL RESERVE BOARD 1.00% ~ PRICE APPRECIATION: -13o/Jyr 7.00% ~ 6.00'1. ~ ',00% i 4.00% ~ 3.00% .. \) ~ & 2.00% ~ 1.00% .1- IWJyr---1I 23o/Jyr 0.00% I i ~ \? I ~ ~ f I i i I f "' I ~ ~ ~ @ ~ ~ liliiii Federal Foods -Fixed: 30-Yr FEDERAL RESERVE BOARD RAISES nm FEDERAL FUNDS RATES DUE 10 POTENTIALINFU..TIONARY PRESSURES. \? I > ~ f I ;. f l I l ~ ~ ~ ~ -Variable I-Yr Sources: Empire Economics. Federal Reserve Board & Freddie Mac The use of creative financing by purchasers has diminished in recent months, due to the combined impact of the following: First, the recent increases in short-term rates are resulting in borrowers becoming more cautious about utilizing creative financing, since they realize that higher rates are likely. Secondly, the rate of housing price appreciation is diminishing, and so their expected rate of return from owning housing are declining. As a result of these two factors, there has been a significant ,...... decline in the market share of adjustable/creative loan structures: from some 73% during May to November 2005 declining to 64% in January 2005 and then further to 52% as of February 2006. The reduction in the use of creative financing is very significant, since the above analysis has demonstrated that creative loans have been the driving force underlying higher housing prices since March 2004. 100"1. 90% 80% 70% 60% 50% 40% 30"10 20"/. 10"/. 0% ~ Empire Economics RECENT SHARES OF ADJUTABLE/CREA TTIVE LOANS - CALIFORNIA 72% 72% 72% 71% 71%1 69% PEAK LEVEL FOR ADJUSTABLE AND CREATIVE :USE OF ADJUSTABLE/CREATIVE I LOANSDECLmESRAMDLY ! ~ ~ > '" Ji i ~ 3 ~ ~ if \? 8 lr :z ~ ~ q ! ~ ::' ~ ~ tl ~ ~ q ~ 39 63> AGENDA ITEM NO. l\Aa~' ~{\ PAGE ?-/ z" OF . . tf' - 5. Specific Impacts of Hieher Morteaee Rates on the Land-Secured Credit Qualitv The widespread use of adjustable rate and creative financing for newly developing residential projects has significant implications for the Credit Quality underlying Land Secured Financing: ....." ~ Special Tax Rates set-forth in the Rate and Method of Apportionment of Special Taxes are based upon current housing prices which have recently realized strong rates of appreciation as a result of the utilization of adjustable and creative financing techniques by home purchasers. Appraisals are based upon current land values, which, in turn, are derived from current housing prices, that have appreciated at a strong rate in recent years, and so they also reflect the use of adjustable and creative financing techniques. Furthermore, since the value of the land is a residual value, that is, the price of the home less the construction costs of building the home, most of the decline in the price of a home is passed through to the land, since construction costs are relatively stable in the short-run. For example, if a home with an initial price of $400,000 declines to $350,000, a reduction of some -$50,000 or -12.5%, the value of the finished lot for the same sized home declines from $149,000 to $113,600, a reduction of -$35,400 or -23.8%. Similarly, a decline in the price of a home by 25% results in a reduction of the value of a finished lot for the same sized home by some 48%! (Note: The above discussion focuses on the value of a finished lot which includes entitlements and infrastructure improvements; by comparison, the value of "raw" land, land without any entitlements or infrastructure improvements, may approach zero.) ...., CHANGES IN HOUSING PRICES AND FINISHED LOT LAND VALUES * LAND VALUES DELCINE AT A FASTER RATE 0% 0.0% O.(W. ~ -10% ~ ~ -20% ~ ~ -30% ... '" is i .40% is e -SO% e -60"/. Price $ 400,000 Price $ 400,000 10 Price $ 400,000 10 $37S,OOO $3SO,OOO Price $ 400,000 10 S32S,OOO Price $ 400,000 to $300,000 . Change in Housing Prices . Change in Finished Lot Value Therefore, the Credit Quality underlying Land Secured Financings reflects the use of current prices and land values, and, as such, includes, among other factors, the underlying use of ...., adjustable and creative loan structures by homeowners. Empire Economics 40 33 AOEN::UM ~~. ~~~ ,...., .--.. "...... Consequently, should mortgage rates rise significantly, the Credit Quality of the land secured bonds is subject to substantial weakening due to the following: ~ Lower housing prices resulting in a higher Special Tax to Home Price Burden for homeowners, possibly in excess of the Issuer's policy of a maximum total tax burden, typically some 1.8% to 2.0% of the initial sales prices, even though these maximums may have been satisfied at the time that the Special Taxes were established. ~ Significantly lower land values resulting in a reduced Value/Lien ratio, possibly below the Issuer's policy of typically some 3 to 1 or 4 to 1 when the bonds are sold, thereby diminishing the security for bond holders. (The Appraisal for the Bond Issue is valid only for the stated Date of Value; it is not meant to be a prediction of future values.) ~ Higher levels of Special Tax delinquencies as monthly payments of owners increase resulting in diminishing the maximum Special Tax to the bond debt service coverage ratios for bond holders that may adversely impact the Issuer's ability to meet the debt service payments in a timely manner, possibly resulting in the use of the bond reserve fund. Adjustable rate mortgages (some 79% of current mortgages) have significantly higher delinquency rates than fixed rate mortgages; additionally, homeowners that use adjustable rate mortgages also have higher loan to value ratios as well, some 90% as compared to homeowners with fixed rate loans, some 81 %. Therefore, as mortgage rate resets occur to the current market rates, and furthermore, to the extent that mortgage rates rise further, then the Credit Quality for Land Secured financing may be diminished, resulting in Higher Tax Burdens due to lower housing prices, Lower ValuelLien Ratios due to lower land values, and Higher Special Tax Delinquencies due to higher monthly mortgage payments. 6. Recent Trends/Patterns for "Notices of Default" for Mort2a2es A "leading" indicator of higher Special Tax delinquency rates may be "notices of default" (NOD) that are recorded against homes that are not making their mortgage payments on a timely basis. The NOD hit a prior peak. in 1996, due to the adverse impacts that the economic recession had on the housing market, and then declined thereafter. However, for 2005 as compared to 2004, the level of NODs began to rise, by some 15.6% for California, 19.6% for Southern California and 43.1% for Riverside County. So, although the number of NODs is well below the prior peak levels of 1996, the recent patterns of increases should be monitored carefully. RECENT TRENDS FOR "NOTICES OF DEFAULT" FOR MORTGAGES 300,000 50% 43.1% .It. 40% 250,000 30% 19.6%- ~ 15.6% A 200,000 ::> ~ 162.597 .. " l!s 150,000 15 .. ~ z 1DO,OOO 50,000 20%~ !II 10% ~ OJ .. 0% S ~ .. .-.. 0 .. o S! i 13.883 4,492 6,428 California II Prior Peak: 1996 Southem CalWomia Riverside County .. Change: 2005 vs.2004 D2004 92005 Source: Dalaqulck & Empire Economics Empire Economics AGENDA 1'I'EMtld: 2006:3 ~ PAGE.aL/ OF 3.etM 41 ASSUMPTIONS AND LIMITING CONDITIONS The Market Absorption Study for CFD No. 2006-2 is based upon various assumptions and limiting conditions; ~ accordingly, these are as follows: Title to Property No opinion as to title is rendered. Data related to ownership and legal description, obtained from governmental records related to the formation of the District that forms the basis for identifying the boundaries of CFD No. 2006-2 are considered reliable. Title is assumed to be marketable and free and clear of all liens, encumbrances, easements and restrictions except those specifically discussed in the report. The property is evaluated assuming to be under responsible ownership and competent management and available for development to highest and best use. Property Boundaries No surveyor engineering analysis of CFD No. 2006-2 property has been made by the market analyst; the District Engineer's report utilized for the Bond is deemed to be reliable. The market analyst assumes the existing boundaries to be correct, that no encroachments exist and assumes no responsibility for any condition not readily observable from customary investigation and inspection of the premises, which might affect the valuation, excepting those items which were specifically mentioned in the report. Accuracy of Information from Others In preparing this report, the market analyst was required to rely on information furnished by other individuals or found in previously existing records and/or documents. Unless otherwise indicated, such information is presumed to be reliable. However, no warranty, either expressed or implied, is given by the market analyst for the accuracy of such information and the market analyst assumes no responsibility for information relied upon and later found to have been inaccurate. The market analyst reserves the right to make such adjustments to the analyses, opinions and conclusions set forth in this report as may be required by consideration of additional data or more reliable data that may become available. Date of Study The date to which the conclusions and opinions expressed in this report apply as set forth in the study. Furthermore, the dollar amount of any price/value opinion rendered was based upon the purchasing power of the American dollar existing on that date. .....", Hidden or Unapparent Conditions The market analyst assumes no responsibility for hidden or unapparent conditions of the property, subsoil, groundwater or structures that render the subject property more or less valuable. No responsibility is assumed for arranging for engineering, geologic or environmental studies that may be required to discover such hidden or unapparent conditions. Opinions of a Legal/Specialized Nature No opinion is intended to be expressed for matters which require legal expertise or specialized investigation or knowledge beyond that customarily employed by the market analyst. Right of Publication of Report Possession of this report, or a copy of it, does not carry with it the right of publication except for the party to whom it is addressed. Without the written consent of the market analyst, this report may not be used for any purpose by any person other than the party to whom it is addressed. In any event, this report may be used only with properly written qualification and only in its entirety for its stated purpose. Soil and Geological Studies No detailed soil studies or geological studies or reports were made available to the market analyst. Assumptions employed in this report regarding soils and geologic qualities of the subject property have been provided to the client. However, such assumptions are not conclusive and the market analyst assumes no responsibility for soils or geologic conditions discovered to be different from the conditions assumed unless otherwise stated in this report. .....", Empire Economics 42 33 AGENDA'''' ~(\ PAOli ,:+rs OF ~ -- Earthquakes and Seismic Hazards The property which is the subject of this market analysis is within a geographic area prone to earthquakes and "'"' seismic disturbances. Except as specifically indicated in the report, no seismic or geologic studies have been provided to the market analyst concerning the geologic and/or seismic condition of the subject property. The market analyst assumes no responsibility for the possible effect on the subject property of seismic activity and/or earthquakes. Testimony or Court Attendance Testimony or attendance in court or at any other hearing is not required by reason of rendering this market analysis, unless such arrangements are made a reasonable time in advance of said hearing. Separate arrangements would need to be made concerning compensation for the market analyst's time to prepare for and attend any such hearing. Maps and Exhibits Maps, plat and exhibits included in this report are for illustration only as an aid in visualizing matters discussed within the report. They should not be considered as surveys, or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from the report. Environmental and Other Regulations The property is evaluated assuming it to be in full compliance with all applicable federal, state and local environmental regulations and laws, unless otherwise stated. Required Permits and Other Governmental Authority Unless otherwise stated, the property evaluated is assumed to have all required licenses, permits, certificates, consents or other legislative and/or administrative authority from any local, state or national government or private entity or organization that have been or can be obtained or renewed for any use on which the evaluation analysis contained in this report is based upon. ",-..... Liability of Market Analyst The liability of Empire Economics, the market analyst responsible for this report, is limited to the client only and to the fee actually received by the market analyst. Further, there is no accountability, obligation or liability to any third party. If this report is placed in the hands of anyone other than the client, the client shall make such party aware of all limiting conditions and assumptions of the assignment and related discussion. The market analyst is in no way to be responsible for any costs incurred to discover or correct any deficiencies or any type present in the property--physical, financial, and/or legal. Presence and Impact of Hazardous Material Unless otherwise stated in the report, the market analyst did not become aware of the presence of any hazardous material or substance during the market analyst's general inspection of the subject property. However, the market analyst is not qualified to investigate or test for the presence of such materials or substances. The presence of such materials or substances may adversely affect the evaluation of the subject property. The evaluation in this report is predicated on the assumption that no such material or substance is present on or in the subject property or in such proximity thereto that it would cause a change in the evaluation analysis. The market analyst assumes no responsibility for the presence of any such substance or material on or in the subject property, nor for any expertise or engineering knowledge required to discover the presence of such substance or material. Unless otherwise stated, this report assumes that subject property is in compliance with all federal, state and local environmental laws, regulations and rules. Structural Deficiencies of Improvements The market analyst has not performed a thorough inspection of the subject property, and except as noted in this report has not found obvious evidence of structural deficiencies in any improvements located on the subject property. Consequently, the market analyst assumes no responsibility for hidden defects or nonconformity with specific governmental requirements, such as fire, building and safety, earthquake or occupancy codes, unless inspections by qualified independent professions or governmental agencies were provided to the market analyst. Further, the market analyst is not a licensed engineer or architect and assumes no responsibility for structural deficiencies not apparent to the market analyst at the time of their inspection. "'"' Empire Economics 43 o~ AGENDA ITEM ~ I. 2006 PM&.i)I (p OF 1D~ - -- Presence of Asbestos The market analyst is not aware of the existence of asbestos in any existing improvements on the subject property. However, the market analyst is not trained to discover the presence of asbestos and assumes no responsibility should asbestos be found in or at the subject property. For the purposes of this report, the market analyst assumes the subject property is free of asbestos and the subject property meets all federal, state and local laws regarding asbestos abatement. ......" Acreage of Property The acreage has been abstracted from the documents relating to the District which is assumed to be accurate. If the Assessor's map or legal description is subsequently found to be in error, we reserve the right to amend the market analysis. Designated Economic Scenario The Market Absorption Study focuses upon the expected absorption schedules for the products in CFD No. 2006-2 according to the designated economic scenario. Specifically, this scenario represents the economic and real estate conditions for the Market Region and also the Market Area during the foreseeable future according to the most probable conditions, and this is regarded as being appropriate for the Bond Financing. However, the economic and market conditions which actually materialize on a year by year basis may differ from those presented according to the designated economic scenario, as a result of exogenous factors which are difficult to forecast/quantify. Accordingly, the designated scenario should be utilized as an economic framework' for evaluating the marketing prospects of the properties within CFD No. 2006-2 rather than a "literal" representation of what is expected to occur on a year/year basis during the foreseeable future. Provision of the Infrastructure; Role of Coordinator The Market Absorption Study assumes that the governmental agencies that supply public facilities and services, including water, provide these in a timely manner so that the proposed projects in CFD No. 2006-2 can respond to the expected market demand for their products. Otherwise, if the required infrastructure is not available in a timely manner, then the absorption of the projects could be adversely impacted. Developer/Builder Responsiveness to Market Conditions The Market Absorption Study assumes that the developer/builder in CFD No. 2006-2 respond to the market conditions with products that are competitively priced and have the features/amenities that are desired by the purchasers. Consequently, to the extent that the projects have prices/features that differ from the competitive market standards, then their absorption schedules would need to be modified from those presented according to the designated economic scenario. ....." Financial Strength ofthe Project Developer/Builder The Market Absorption Study assumes that Project developer/builder in CFD No. 2006-2 (and also their lenders) have sufficient [mancial strength to adequately funds including paying their Special Taxes/Assessments, and that they have sufficient financial reserves which could be utilized to supplement their cash flow positions, in the event that adverse economic or market conditions occur. Market Absorption Study Timeliness of Results The Market Absorption Study performs a comprehensive analysis of the relevant land-use, economic and residential market conditions that are expected to influence the marketing success of the properties/projects in CFD No. 2006-2. Nevertheless, the Study should be updated on a six-month basis, or even sooner, should these land-use and/or economic market conditions change significantly. ......". Empire Economics 44 AGENDAITEM~ 1,200633 ,. 'J-n OF ~dG- ,...... APPENDIX D APPRAISAL REPORT ,......... ~ 0-1 66 AGENDA ITEM NO. PAOE.2LLOF ~o1- ......, APPRAISAL REP CITY OF LAKE ELSI COMMUNITY FACILITIES DIS7i V1SCA YA ......, E ELSINORE Street A 92530 James B. Harris, MAl Berri J. Cannon Harris Harris Realty Appraisal 5100 Birch Street, Suite 200 Newport Beach, CA 92660 May 2006 "-" AGENDA ITEM NO. ?/~ PAGEd{1 OF~~_ ...-. ~ Mr. Matt N. Pressey Director of Administrative Services CITY OF LAKE ELSINORE 130 S. Main Street Lake Elsinore, CA 92530 Re: CFD No. 2006-2 Viscaya Dear Mr. Pressey: May 23, 2006 In response to your authorization, report that addresses all of the taxab Facilities District No. 2006-2 (CFD Market Value of the land and site . the ownership of one developer. The land ranges fli to n construction an a sel - ontained appraisal ndaries of Community I includes an estimate of ecial tax. This land is under Leigh-Tozai Lakeshore, LLC. ith dwelling improvements under r- Ac Commis to that own lines California Debt and Investment Advisory is val ed in bulk, representing a discounted value Based on appraisers and subJ this report, the followin analyses undertaken, our experience as real estate mises, assumptions and limiting conditions set forth in f Market Value is fOlimed as of May 15, 2006. TWENTY-EIGHT MILLION EIGHT HUNDRED THOUSAND DOLLARS $28,800,000 The estimated value assumes bond proceeds of approximately $5,288,000 for eligible facilities and/or fees, as described in the Community Facilities Report, are available at the time of sale. "....... -;:'3 AGENDA ITEM ~ PAOE 0 OF ~_ Mr. Matt N. Pressey May 23, 2006 Page Two ....., The self-contained report that follows sets forth the results of the data and analyses upon which our opinion of value is, in part, predicated. This report has been prepared for the City of Lake Elsinore for use in the issuance of Community Facilities District No. 2006- 2 bonds. The intended users of this report are the City of Lake Elsinore, its underwriter, legal counsel, consultants, and potential bond investors. This appraisal has been prepared in accordance with and is subject to the requirements of th ra' al Standards for land secured financing as published by the Californi 1:5 vestment Advisory Commission; the Uniform Standards of Profession prais fice (USPAP) of the Appraisal Foundation; and the Code of Profess he Standards of Professional Appraisal Practice of the Appraisallnstitut Berri J. Cannon Harris Vice President AG009147 ....., We meet the requirements of the Competency of Professional Appraisal Practice. A statem Addenda. James B. Harris, MAl President AG001846 ....., AOENDA ITEM NO. ?> '3 PAGE ~~LOF~- r'" r- ,..... AOEIIDA 1TEJ4~ 2>? PAGE~ OF ~~ SUMMARY OF FACTS AND CONCLUSIONS """""" EFFECTIVE DATE OF APPRAISAL DATE OF REPORT INTEREST APPRAISED LEGAL DESCRIPTION May 15,2006 May 23, 2006 Fee Simple Estate, subject to special tax liens Tract Map No. 32008 HIGHEST AND BEST USE -finished condition with s under construction. OWNERSHIP SITE CONDITION . n with floor et to 2,513 VALUATION CONCLUSION """""" "'" iv AOENDA ITEM NO. 33 PACE d-d5 OF~ ~ TABLE OF CONTENTS Section Paae Transmittal Letter................................................................................................................ Summary of Facts and Conclusions...... ............. ........... ....... .... ............. ......... .................... iii Aerial...... ............................... .......................................... ............... ......... ...... .......... ... ............ iv Introduction ................................................................... ........................... v Table of Contents..... ........ .......... ...................................... 1 Area Description............................................................... 12 Site Analysis................ ......... .......................... .......... 31 Improvement Description ........ ............ ..... ...... ...................... 38 Highest and Best Use.......................;..... ..... ............................... 41 ,-.. Valuation Methodology.................. . ......... .............. ................. 50 . .... .... .. .. ......... .. . . .. .... ... .. ......... ........... . . .. .... .... .... 52 ................................................................ 71 Certificat 72 Addenda Qualifications Empire Economics Site Cost ,-. v AGENDA. ITE~ 33 PAOi Of~~ INTRODUCTION ,...." Purpose of the Report The purpose of this appraisal is to estimate the Market Value for the fee simple estate, subject to special tax liens for all the taxable property within Community Facilities District No. 2006-2, located in the City of Lake Elsinore. The purpose of this appraisal is to estimate the "As Is" Market Value of the land and any improvements under the ownership of the developer/merchant builder. bond purchasers. The opinions set forth are subject to the as forth in this appraisal, and the appraisal guidelines as s iting conditions set Lake Elsinore. Function ofthe Report and Intended Use It is our understanding that this ap Facilities District bond financing purposes particularly within this report. The Community Facilities District A indebtedness for t d for Community operty is described more uant to the Mello-Roos maximum authorized bond ,...." ur client, the City of Lake Elsinore. The intended egal counsel, underwriter, consultants, and potential Scope of the Assianmen According to the CDIAC guidelines, the total value conclusion includes the "As Is" estimate of Market Value for the property under the ownership of the developer/merchant builder within the boundaries of CFD No. 2006-2. This is a fully documented self-contained appraisal report. Any lands designated for park, open space or civic uses within these tracts not subject to special tax are not included in this assignment. ...., 1 AOENDAITEM NO. 3? PAGE tJ-?5 OF~ ,...... The residential land is valued in its "As Is" condition as of the date of value. Site development for the subject property ranges from blue-top lot to near-finished lot condition. In addition, four model homes are complete and 42 production dwellings are under construction. We have analyzed the subject property based upon the proposed use and our opinion of its highest and best use. We have searched for sales of residential land to estimate the value of the property. 3. comparable merchant builder land sales market areas, and residential detached unit ct's primary and secondary market areas. Data om sources including, Comps.com, brokers, appraisers, ers active in the area and developers within the Southern California area. Where feasible, data were confirmed with both the buyer and seller. The data gathered are presented on summary data sheets within this report. The following paragraphs summarize t and reporting of data used in the analysis. 1. /"'"' 2. ood and reviewed proposed product ion of Highest and Best Use of the Date of Value and Report The opinion of Market Value expressed in this report is stated as of May 15, 2006. The date of the appraisal report is May 23, 2006. ,- 2 AGENDA ITEM NO. 3'? PACE ~ OF ~ Of;.- Date of Inspection The subject property was inspected on several occasions, with the most recent on May 17, 2006. ......, Property Riahts Appraised The property rights appraised are those of the fee simple estate subject to special tax liens of the real estate described herein. Property Identification The subject property consists of land under Elsinore. According to the City's Special Tax Consul as APN's 379-230-004, 006, 008, and 009. The subje t p Tract Map No. 32008. The subject property i f the L: Plan. The Specific Plan in its entirety co contains 15.6 net acres proposed for proposed for one residential project . the City of Lake -2 i identified ntified as ore Village Specific CFD No. 2006-2 District is currently ....., nd ownership for the subject property. ....., 3 AOENDA ITEM NO. 3 '3 PACE tB1 OF .~ ~ CFD No. 2006-2 r' ",.... 4 AGENDA ITEM NOd 33 PAGE d-d1 OF...2ti Property History ~ The current owner, Corman Leigh-Tozai Lakeshore, LLC or an affiliate has owned the property for more than three years. Definitions Market Value 1 The most probable price in terms of money which a p operty should bring in a competitive and open market under all conditions is it to a fair sale, the buyer and seller, each acting prudently, e nd assuming the price is not affected by undue stimulus. ICit i finition is the consummation of a sale as of a specified dat f title from seller to buyer under conditions whereby: (a) (b) Buyer and seller are typically motivated. Both parties are well informed what he considers his own bes A reasonable time is allowed Payment is made in financial arrangeme The price re un n for the property sold or sales concessions (c) (d) "'" (e) red by any other interest or estate subject ment. t to Special Tax and Special Assessment (and common sense) suggests that the selling prices of properti umbered by such liens are discounted compared to properties free and c ear of such liens. In new development projects, annual special tax and/or special assessment payments can be substantial, and prospective buyers take this added tax burden into account when formulating 1 Part 563, subsection 563.17-1a(b)(2), Subchapter D, Chapter V, Title 12, Code of Federal Regulations. 2 The Dictionary of Real Estate Appraisal, Third Edition, published by The Appraisal Institute, 1993, Page 140 "'" 5 AGENDA ITEM No.3? PAOE ~ OF 3t:)-b, ,..... their bid prices. Taxes, including special taxes, are legally distinct from assessments. The Market Value included herein, reflects the value potential buyers would consider given the special tax lien of Community Facilities District No. 2006- 2. Retail Value Retail value should be estimated for all fully improved and sold properties. Retail value is an estimate of what an end user would pay for a finished property under the conditions requisiteto a fair sale. ,....... Blue-Top Graded Parcel Blue-top graded parcel includes streets cut stubbed to the parcel and perimeter streets in. Finished Site3 Land that is improved so that it is rea (Improvements include padded lot, st required to issue a building permit pa Mass-Graded Parcels this report are subject to the following of the "Standards of Professional Appraisal Practice" s the appraisers to "clearly and accurately disclose any extraordinary assumption limiting condition that directly affects an appraisal analysis, opinion, or conclusion." In compliance with S.R. 2-1(c) and to assist the reader in interpreting the report, the following contingencies, assumptions and limiting conditions are set forth as follows: ",-- 3 Ibid, Page 334 6 ACENDA ITEM NO. 33 PACE ~ OF ~f).f,~ Contingencies of the Appraisal The appraisal is contingent upon the successful issuance and funding of bonds for Community Facilities District No. 2006-2 through the City of Lake Elsinore. The special tax formula was prepared on behalf of the City of Lake Elsinore by Harris & Associates, Special Tax Consultant. ~ The Market Value estimate reported in this report reflects a portion of the funding for the infrastructure improvements and fees from the proceeds of Community Facilities District No. 2006-2. The public improvements and fees subject to reimbursement include street improvements, traffic signal improvements, water & sewer fees and City develop nt impact fees. The total construction funds and fees with conti n . to possible reimbursement are $5,288,877. If the CFD is nd or the amount or timing of the reimbursements should cha th inion stated herein could change. Please refer to the Valua r detail of the reimbursements and timeline for reimbursem The appraisers have been provided with complete to finished site condition fro assumed that all conditions for si Conditions of Approval are includ assumption of this appraisal repo is The individual parcel size estimate is, in part, based ENCIVIL. Our value ation. ~ ns praisers for matters that are legal in and the property is appraised as The date of this report is M on the purchasing the opinions of Market Value are expressed in . The dollar amount of this value opinion is based r of the United States dollar on that date. Maps, plats, and exhibits included herein are for illustration only, as an aid for the reader in visualizing matters discussed within the report. They should not be considered as surveys or relied upon for any other purpose, nor should they be removed from, reproduced, or used apart from this report. Oil, gas, mineral rights and subsurface rights were not considered in making this appraisal unless otherwise stated and are not a part of the appraisal, if any exist. ~ 7 AGENDA fTEllll illO. 3 3 - PAGE'?-31 OF~, ~ A soils report was not provided for the appraiser's review. As of the date of value, the subject, proposed for 168 dwelling units has been graded to a blue-top to near-finished site condition. For purposes of this appraisal, the soil is assumed to be of adequate load-bearing capacity to support all uses considered under our conclusion of Highest and Best Use. The appraisers have been provided with one preliminary title report for TM No. 32008, dated March 24, 2005. For purposes of this appraisal, we are not aware of any easements, encroachments or restrictions that would adversely impact the value of the subject properties. A notice of special tax lien for CFD No. 2006-2 was not reported trust deed in the amount of $14,170,000 favoring PFF Bank d as recorded February 22, 2005. ,........ The appraisers have inspect however, it was impossible Therefore, no represent specifically in the ervation, the land; ions beneath the soil. these matters unless Information contained in this report has been are believed to be reliable, and, where feasi responsibility is assumed for the accuracy of info a Since earthquakes are common in the their possible impact on individual reports are made available. . ity for economic or physical factors of this aisal. The appraisers, in rendering respon ibility for subsequent changes in nmental regulations, economic, or physical ct said conclusions or opinions. No engineen , or engineering analysis has been made by us of this prope assumed that the legal description and area computations fu d are reasonably accurate. However, it is recommended that an analysis be made for exact verification through appropriate professionals before demising, hypothecating, purchasing or lending occurs. ,-.,. Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which mayor may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraisers become aware of such during the appraisers' inspection. The appraisers have no knowledge of the existence 8 ACENDA ITEM NO. 3 '3 PAGE ')3.)..-- OF '3 ~ of such materials on or in the property unless otherwise stated. The appraisers, however, are not qualified to test for such substances or conditions. "-' The presence of such substances such as asbestos, urea formaldehyde, foam insulation, or other hazardous substances or environmental conditions may affect the value of the property. The value estimated herein is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. e client is urged to retain an expert in the field of environmental im I estate if so desired. n land and Ization. The be used in The cost and availability of financing help d supply of real estate and therefore affect real es transaction price of one property may differ fro because financing arrangements vary. The distribution, if any, of the total val improvements applies only under separate allocations for land and conjunction with any other ap I a valuation process are t trends in the market. ....., to be in full compliance with all nmental regulations and laws, and nce w all applicable zoning and use therwise stated. The Arne s Act ("ADA'? became effective January 26, 1992. We h specific compliance survey and analysis of this property to de ether or not it is in conformity with the various detailed requirem f the ADA. It is possible that a compliance survey of the property, togeth r with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider possible non-compliance with the requirements of the ADA in estimating the value of the property. We shall not be required, by reason of this appraisal, to give testimony or to be in attendance in court or any govemmental or other hearing with ....., 9 AGENDA ITEM NO. 33 PAGE ~?/J O~ "'"' reference to the property without prior arrangements having first been made with the appraisers relative to such additional employment. In the event the appraisers are subpoenaed for a deposition, judicial, or administrative proceeding, and are ordered to produce their appraisal report and files, the appraisers will immediately notify the client. The appraisers will appear at the deposition, judicial, or administrative hearing with their appraisal report and files and will answer all questions unless the client provides the appraisers with legal counsel who then instructs them not to appear, instructs them no to produce certain documents, or instructs them not to answer tions. These instructions will be overridden by a court or ppraisers will follow if legally required to do so. It shall be t the client to obtain a protective order. Member, of Institute r distribu . Ex d pur the w written q underwrite Statement fo arris is an Associate raisa and Regulations of the emo Ire d, p t of pu cation. It may not be used for any an the party to whom itis addressed without raisers and in any event only with properly its entirety. The City of lake Elsinore, its el may publish this report in the Official nity Facilities District. r-- Neither all nor an part of the contents of this report (especially any conclusions as to value, the identity of the appraisers or the firm with which they are connected, or any reference to the Appraisal Institute or the MAl designation) shall be disseminated to the public through advertising media, public relations, news media or any other public means of communication without the prior consent and approval of the undersigned. The acceptance of and/or use of this appraisal report by the client or any third party constitutes acceptance of the following conditions: "'"' 10 3=3 AGENDA ITEM _~.- ~. PPJ;E$2:l-0F . The liability of Harris Realty Appraisal and the appraisers responsible for this report is limited to the client only and to the fee actually received by the appraisers. Further, there is no accountability, obligation or liability to any third party. If the appraisal report is placed in the hands of anyone other than the client for whom this report was prepared, the client shall make such party and/or parties aware of all limiting conditions and assumptions of this assignment and related discussions. Any party who uses or relies upon any information in this report, without the preparer's written consent, does so at his 0 risk. "-"" If the client or any third party bring Harris Realty Appraisal or the sig the appraisers prevail, the party action shall reimburse Harris Real the appraisers for any and all co including attorneys' fees, incurre . their ......" ......" 11 ACENDA ITEM N9c: 33 PACE ;;?J~ OF '3 ~--" ~ AREA DESCRIPTION The following section of this report will summarize the major demographic and economic characteristics such as population, employment, income and other pertinent characteristics for the Southern California region, Riverside County, City of Lake Elsinore and the subject market areas. Southern California Reaional Overview The Southern California region, as defined in thO counties including Los Angeles, Orange, Riversid Ventura Counties. The Southern California region e border on the south to the Tehachapi mountain rang Ocean on the west to the California-Arizona b estimated 38,242 square miles and embodie and level of urban development. Please re~ Population The South 1980 as indi passes six individual , San Diego, and ates, topography, e for a location map. ~ Finance, 7.7 million new residents since 14. According to the California Department of e that as of January 2006, the regional the region were an individual state, it would rank as population one of the mos Since 1981, an ation gains from natural increase and immigration have ranged from a low of 13, 0 persons in 2002 up to 568,645 persons in 1989. These figures represent annual gains of 0.7% to 3.5%. During the past five years, the population of the six-county Southern California region grew by 1.2% to 2.0% per annum. ~ 12 33 AGENDA ITEM NO. ~ PACE ~ OF3 ' ~ ~ ~ 13 AGENDA ITEM NO. 33 PAGE~OF 7;06__ ."....... As of January 2005 the population of the six-county area stood at 21,147,200 persons. Looking toward the future it is estimated that the region's population will continue to climb as new residents seek out the southern California area. During the economic downturn from 1992 through 1996, and continuing through 2006, the population growth rate declined compared to the growth experienced in the late 1980s. ,- Population Trends 1980-2006 1 April 1, 1980, 1990, and 2000, all other years January 1 Source: California Department of Finance. 5/06 The future rate of growth will depend on a number of factors that may dramatically affect the region. Some of the major factors include availability of developable land, availability of water, national economic climate, and public policy toward growth and the "....... assimilation of a large number of new foreign immigrants. The continued growth of the 14 33 AGBtDA ITEM NO. ~ PAGE ~8.J>F P ~ population within the region, even during periods of economic slow down, provides a positive indicator as to the desirability of the Southern California region. '-' Employment In conjunction with the population growth, a key indicator of the region's economic vitality is the trend in employment. The most common measure of employment growth is the change in non-agricultural wage and salary employment. The table below illustrates the . non-agricultural wage and salary employment trends in S ut Ca . omia. Southern California Employment Tren 1983-20051 '-' 1 2005 benchmark Source: Employment Development Department 5/06 In the Southern California region, average annual non-agricultural employment has grown from 5,691,000 jobs in 1983, to a then peak employment of 8,082,300 in 2001. '-' 15 03 ACENOA ITEM NO. .._^.~<~ PAO& Z,3~' OF J 0' - "..... Employment declined. to 8,073,100 in 2002. This decline was mostly caused by a 40,100 job decrease in Los Angeles County. In 2005, employment climbed to a new record level, 8,362,000. This was in spite of Los Angeles County only adding an additional 20,000:t jobs. This represents an increase of over 280,000 new jobs over the past five years. r- jobs or 1.7%. In 1992 when the full weight of the rece si suffered the highest annual decline in jobs register the 204,000 jobs or a percentage decrease of 2.9%. Thi declines of 103,300 jobs in 1993. It appears that by recovery finally began to take hold in the Southern California for 1994 indicated a slight increase of 37,3 employment issues experienced in the prior employment for 1995 exhibited a gain 1996 an estimated 119,400 new employment stood at 7.2 million, 2002, employme 0 mi that job gro As the economy entered into an economic recession during the latter part of 1990, employment growth slowed. The average annual gain in 1990 was approximately 119,200 It, area employment ecade, losing nearly rther employment th e annual average 2:0% increase, and for 1997, total non-agricultural high in 1990. As of year-end orecasts prior to September 11, 2001, indicate in 2001 and increase moderately over the orist attack on the United States and the re saying we were in a flat to slightly declining 2003, but that we began recovery during the second ncrease over the previous high mark in 2001. 2004 had a moderate gain over 2 ployment gains have recovered in 2005 with an additional 137,400 new jobs or a 1.7% increase. next one "..... Employment among the individual industry categories reflects some fundamental regional changes in the economy during the past decade. The level of mining activity in Southern California continues to steadily decline as reflected in the consistent decrease in mining employment. Construction employment, as of 1989, was at a high level in response to the level of construction activity that had occurred in the region during the past five 16 AOENDA ITEM N~ :>3 ~ PACE 'J OF '?JO ~ years. During the period from 1991 through 1994, construction employment declined in response to decreased residential and commercial construction activity. From 1994 through 2005, as the economy rebounded, residential construction increased bringing back more than the construction jobs lost during the recession. '-II' Total manufacturing employment in the region has exhibited little gain from the levels recorded in 1980. Due to the high labor, land, and capital costs in most of the Southern California region, some manufacturing firms hav a ed or relocated their manufacturing operations outside of the area. The finance, i as the econo -...II The Southern California economy, aerospace and defense related employment, has been reduction of the space program and redu fense manufacturers and suppliers, and second fr has had a ripple effect throughout the local spending will be impacted as the uni de employment. It is experienced during tH ployment category grew rapidly national recession. As the economy loyment sector exhibited little growth from facturing and aerospace jobs permanently displaced placed with administrative, marketing and research me that similar stagnant growth in this area will be The employment group that has contributed most to the employment growth in the region is the service sector. Since 1980, the majority of all new jobs have been created in the service category. The service sector was the leader in new job growth during the years that followed the economic recovery from the 1990 recession. Government employment tends to mirror the growth of the population that it services. It is expected that government employment will grow at a rate similar to the area -...II 17 AGENDA ITEM NO. "3 '3 PAGE~OF 006,_ "...... population. The future employment growth in the Southern California region is expected to continue but at a level moderately lower than recent years. Factors that will affect employment growth include the direction of the national economy, wage levels, housing prices, and population trends. Given the national disaster of September 11, 2001, government should not experience layoffs; on the contrary, growth particularly in the defense sector should occur. However, the California state budget deficit has negatively impacted both state and local government employment. Riverside County Riverside County consists of 24 individual communities. Riverside County is typically grouped wit to form the Riverside-San Bernardino Metropolitan Sta Istic commonly called the Inland Empire. Riverside ounde west, San Bernardino to the north, the state to the south. County ,-- The major urbanized are major incorporat rn portion of the County. The f Riverside, Corona, and Moreno Valley. These h during the mid 1980's until the recession passes Lake Elsinore, Murrieta, Menifee nced rapid growth since the mid 1980's. The areas e growth during the 1980s also suffered the most ver, since 1996, residential activity has increased due ore affordable pricing, and the general improvement in the took hol Valley and that have expe during the lengthy r to downsizing of produc regional economy. Population Riverside County has more than tripled its population, adding approximately 1,290,000 new residents since 1980 as illustrated in the following table. As of the 2000 Census, the countywide population stood at 1 ,545,387 residents. The 2006 estimate by the "...... State of California indicates that the County had 1 ,953,300 residents on January 1, 2006. 18 2>J AGENDA ITEM NO. ~ PACE ()4LoF Annual population gains, from natural increase and immigration, have ranged from 25,300 persons in 1997 up to 81,303 persons in 2004. From 1991 to 1996, the rate of growth in population declined moderately each year. Recent gains of 44,799 to 100,300 persons represent annual changes of 2.2% to 5.6%. .....", The future rate of growth within the County will depend on a number of factors. Some of the major factors include availability of developable land, availability of water, national and regional economic climate and public policy tow ro h. rgest share of the en Lake The areas within the County that will continue new population growth will be the Corona-Riverside Elsinore, Sun City and Temecula. ......, April 1, 1980, 1990, 2000; all other years January 1. Source: California Department of Finance, U.S. Census 5/06 .....", 19 AOENDA ITEM NO. D :3 PAGE 142/ OF ?:(j{,__ I""'" .~ """ Employment Employment data for Riverside County are compiled for the entire MSA, which includes San Bemardino and Riverside Counties. These counties have become a diverse economy, with manufacturing, construction and tourism the major industry groups. In conjunction with the rapid population growth experienced in the past two decades, the employment base has continued to grow and diversify. The Inland Empire's unemployment rate is moderately above the Southern California average and similar to the State. The higher unemployment rate is due to the seasonal nature of . ult al employment in the area. The following exhibit illustrates the area's unem ent red to California as of March 2006. Unemployment rates have declined 640 1993. California Inland Empire The nonagricultural employment. No During the 1980' is the increase in utlined in the following exhibit. s grown from an annual average of 443,100 jobs in is represents an increase of over 792,000 new jobs ct Riverside Counties during the past 22 years. As the economy rebounded from t e national recession in 1981-1982, annual employment gains jumped by approximately 30,500 new jobs in 1984. Job gains peaked in 1990 with 67,000 new jobs. During the economic recession of 1991 to 1996, increases ranged from 4,300 to 28,600 new jobs representing a 0.6% to 3.7% gain per annum. Since 1999, job increases have ranged from 34,100 new jobs to a near record increase of 59,300 new jobs in 2004. The percentage increases have ranged from 3.2% to 6.3%. The table below illustrates the 20 2J?7 AGEN:::2~~ OF 31X~ annual employment trends from 1983 through 2005. In March 2006, the non-agricultural employment had increased to 1,235,100, a 2.3% increase from March 2005. .~ Employment among the individual industry categories reflects changes in the Inland Empire economy during the past decade. Construction employment gains generally mirror the regional economy. In response to the high level of construction activity that occurred in the County during the period from 1984 to 1989, construction employment reached nearly three times the level recorded in 1982. From 1992 throu 1 co struction employment declined in response to decreased building activity, 2 els were more than double the 1993 low. '-" 2005 Benchmark Source: Employment Development Department 5/06 '-" 21 2>~ AOENDA IT~ ffl',- M= PAOE~OF B - ,-... The number of manufacturing jobs in the Inland Empire has increased over 45% from the levels recorded in 1991. However, manufacturing jobs declined 5.5% from the 2000 high of 120,000 jobs to 113,400 jobs by 2003, but increased back to 120,200 in 2005. Due to the high labor and capital costs in Los Angeles and Orange Counties, manufacturing firms have expanded or relocated some of their manufacturing operations to Riverside and San Bernardino counties to take advantage of the labor force and lower land costs. ,-... A significant number of the new jobs cr in the service sector. The service sector wi growth during the next few years. Gove in the Inland Empire due to the rapid population growth. In ory is still a small Transportation and public utilities employmen the Inland Empire the finance, insurance and real e segment of the employment picture. economists report we began recovery du pire is expected to continue as tage of lower land prices and the abundant loym owth include the direction of the state and dence. Due to the terrorist attack on September 11, r confidence has been negatively impacted. Most at economy in 2002 and the first half of 2003, but that cond half of 2003. The recovery continued into 2006. ,.... Income The average household income in Riverside County is estimated to be $63,592. The median household income stands at $48,384. These figures are moderately below the Southern California region average. The lower income level is due to the lower wages in agriculture, manufacturing, service and government employment. The household income distribution for Riverside County is illustrated in the following table. 22 2>~ AGENDA ITEM NO... - PACE ITlIS OF~ ,,-. County of Riverside Household Income Distribution 2005 ,--... Retail Sales Retail demand continues to previously. For Riverside County, 1985 to over $7.1 bill" 1994 years, annual increase of population as outlined creased from $3.9 billion in over $1 by 2004. During the past four an increase of $768 million in 1998 to an next table. Data for 2005 are not available are due to the exceptionally high County population growth rates experien g the period from 1983 through 1990. During the period from 1991 through 1993, retail sales were stagnant due to the economic recession. From 1994, and continuing through 2004, there was a significant rebound in retail sales. Official state reports for 2005 will not be released until later this year. In the future, retail sales growth should mirror the population growth in the County. ,,-. 23 o~ ACENDA ITE~~. ~ PACE Of Riverside County Retail Sales Trends 1/ 1985-2004 '-' '-' R' adjoining S international f1ig r airport, Ontario International, located in eral major airlines have flights into Ontario, while of Los Angeles International Airport. s most urbanized areas of the County. The major north- a (15) and Escondido (215) Freeways. The Pomona Freeway (60) provides east-west access to the Los Angeles area and the desert areas of Riverside County. The Riverside Freeway (91) provides access to Orange and Los Angeles Counties. Environmental Concerns The Endangered Species Act of 1973 precludes any activity that constitutes a '-"" 24 AGENDA 1TE!l11" 'b"3- PAGE OF~ - ,.... taking of a federally listed endangered species except by permit. Numerous areas within Riverside County have been identified as containing potential habitat of the Stephen's Kangaroo Rat, a listed species. The evidence of habitation by this rat has resulted in delays or substantial revisions of proposed developments. The California Department of Fish and Game is currently reviewing the status of additional wildlife for possible inclusion on a list of endangered or threatened species. A Multiple Species Habitat Conservation Plan (MSHCP) was approved by the County Board of Supervisors on June 17, 2003. The MSHCP is a comprehensive, multi-jurisdictional effort t at ud the County and 14 cities. This plan focuses on the conservation of 146 SHCP consists of a reserve system of approximately 500,000 acres of are within public ownership and approximately 153,000 acres are in priv se of the privately owned lands will be funded by an adopted 1,651 per dwelling unit is imposed for housing built in the ,.-- In summary, the region exhibited v during the 1980 to 1989 period. The population growth and resulted . seven years, as th stronger than region re Future gro Riverside Cou and employment growth had significantly slowed 990 to 1995. Over the past , populati employment growth have been of the 1980s. The long-term outlook for the dant affordable land and labor still exist. o be affected by the trends in the overall economy. ent should follow a path similar to that of the other ,.... Lake Elsinore The City of Lake Elsinore is located in the southwestern portion of Riverside County. The City of Lake Elsinore and the surrounding area to the southeast, most notably Murrieta and Temecula, experienced rapid development beginning in the early 1980's and late 1990's and was one of the fastest growing areas in Southern California. It has become a sprawling suburban bedroom community for Orange and Los Angeles counties. The area has attempted to retain the semi-rural, western atmosphere of the early residents. Please refer to the next page for a neighborhood map. 25 2J'3 ~ AOENDA ITE~ :.3IJi ~ OF """" """" """" 26 AGENDA ITEM NO. ~ 3 PAOE~OF~ ,,-.. During the past five to ten years, the City of Lake Elsinore has begun to add new residential and retail developments. Most of the newer retail commercial development has occurred adjacent to the Corona Freeway (1-15), which bisects the northern and eastern sections of the City of Lake Elsinore. The major community commercial retail development is concentrated near the intersection of the Corona Freeway (1-15) and Railroad Canyon Road, primarily along Mission Trails. A major retail development is under construction at the 1-15 and State Highway 74. There is older commercial development 10 Lakeshore Drive and Grand Avenue. The newest residential developments are locatea in City, in the vicinity of the Tuscany Hills, Rose and C Hills developments. In addition, there is some residential develo of lake Elsinore, ,--. along lake Avenue. Most of the new h mily detached product in master planned communities. T from entry-level homes in moderate price ranges to larger p homes. rket changed during the past recession, the re . the smaller homes with affordable prices. But welling size and sales prices. AlthougH Isinore, incorporated in 1888, is old by southern California standard ntil the 1980's that the City experienced significant population growth. Th of lake Elsinore has experienced moderate population increases during recent years as illustrated on the following exhibit. Since 1980, annual population gains of 400 persons to a peak of 2,700 persons have been recorded. The current population of the City of Lake Elsinore, as of January 2006, is estimated to be 41,000 persons. This is a 585% increase over the population recorded in 1980. Over the last three years, the City has averaged a 7.0% annual growth in population. ,,-.. 28 AGENDA I1EM NO. ~ ?1 PAGE ~F..J.)llL City of Lake Elsinore, CA Pqpulation Trends . 1980-2006 '-'" '-'" redominantly residential in nature, there are ved industrial development is limited with Lake Elsinore area is limited. The major employers in Manufacturina Labeda Wheels Pacific Clay Wieland Precision, Inc. EmDlovment 150 130 112 Product Racing Skates Building Products Tool & Dye '-'" 29 AGENDA ITEM NO. '], 3 PAOEJ:ro 11 OF "3 tJ b __ ,-..... Non-manufacturina Lake Elsinore USD Lake Elsinore Outlet Center Wal-Mart Lake Elsinore Storm Lake Elsinore Casino Albertsons Vons Stater Bros. EmDlovment 1,681 1,169 400 250 200 150 145 131 Most of the residents in Lake Elsinore work . residents drive considerable distances to work in counties. The housing market in Lake Elsinore i homes range from relatively entry-level horn lots up to larger move-up homes on 7,20 range in size from 2,000 to 3,000 sq master planned communities on ,-.. public se reaching f Product School Outlet Mall Retail Baseball Resort/Casino Supermarket Supermarket Supermarket e of the City. Many geles and Orange ily residences. New 5,000 square foot e majority of the homes rger subdivision tracts or conomy and population, only shortages of slump are likely to keep the City from Elsinore area, the Lak potential. ed future economic and population growth of the Lake area is considered to have average to good future growth Immediate Neiahborhood The subject property is located in the western portion of the City of Lake Elsinore. The District is in the Lakeshore Village Specific Plan area near the intersection of Lakeshore Drive and Riverside Drive (State Highway 74). The subject is about two miles ,-..... 30 AOENDA ITEM NO. 2>? PAGE i70LOF~ southwest of the 1-15 Freeway. The immediate neighborhood is older, with both residential ....., and commercial uses. Conclusion Lake Elsinore and the surrounding area has been experiencing rapid population growth during the past few years. New residents are being attracted to the area because of the affordable housing in comparison to the coastal regions of Los Angeles, San Diego and Orange counties. The subject's general neighborhood is experiencing new construction of single-family developments that exceeds the quality an a I 0 many of the existing neighborhoods. The demand for continued develo the build-out of the subject property. The economy has experienced economic growt be quarter of 2003, due largely to increased consumer anticipated continued strength should bring renewed ported to remain moderate, which should keep mortga ply while the economy gains strength. The Inland Empire' n recent signs of slowing. .......", Previously, builders in Riverside and for new housing permits 2004, and 34,330 residential permits in 2005. ase of 9.4% in the median home price from Riverside County was $409,000 in April 2006. San $360,000. Both of these prices are less than the er the last four years, the subject's market a~ea has continued to experien Clemand for detached single-family homes. However, over each of the last six months, the number of home sales has declined from the previous year. As long as the economy continues to grow, employment opportunities improve closer to the subject area, and the cities close to the more urbanized areas become even more expensive areas to live and operate a business in, the Lake Elsinore area and the District are anticipated to continue to experience moderate growth. a year ago. Bernardino's m "'" 31 -~OENDA ITEM NO. 2> ? PAGE>> OF 30'--- "..... SITE ANALYSIS General The subject property of this appraisal is identified as CFD No. 2006-2, Viscaya. The subject is proposed for 168 residential dwellings. Four model homes are completed for this project known as Viscaya. The lots within TM No. 32008 are from a blue-top to near- finished condition. Extensive street widening and off-site utility construction along Lakeshore Drive is nearing completion. CFD No. 2006-2 i a portion of the Lakeshore Village Specific Plan. Please refer to page 4 for a map 0 Current Site Condition e Specific Freeway. The erside Drive. Location The subject property is located in the City of portion of the County of Riverside. The District is within th Plan and is located about two miles sout e Inte development is near the southwest corner ~ top to near-finis widening an Lakesho o. 32008 improved to a blue- recorded on July 28, 2005. Significant street storm drains are nearing completion on mplete and 42 production dwellings are Size and Shape The overall shap No. 2006-2 is generally rectangular and contains 15.6 net acres, according to the CF report prepared by Harris & Associates. CFD No. 2006-2 has been subdivided into one recorded tract map. Please refer to the following table, which summarizes the tract. The following page shows a copy of the tract map. ,,- 32 AGENDA ITEM NO ~ 3 /- . PACE?-b1 OF~lJ6 _ ...." Tract No. 32008 ...." ~ 33 AGENDA rrEM NO. :3 ? PAGE ~~OF~ -""""" CFD No. 2006-2 Soils and Geoloav For CFD No. 2006-2, a geotechnical report was n are 168 lots currently under construction. The appra' allow all of the proposed development as discussed i this report and as proposed by the developerlbuilder. 2008, is zoned SP, Specific Plan, by the City of Lake r a variety of compatible uses, which originally were for single family residential, multi-family residential and retail development, according to the Lakeshore Village Specific Plan. Only the single-family residential uses are included in this CFD. The minimum lot size is 3,825 square feet. Most lots will range from 3,825 square feet to about 5,300 square feet. rain with padded within the proposed -- Topoaraphv and Drainaae The topography within the subject pI: lots. The site elevations will not facil development. Drainage is v' subject has be the site, w develop wand p . Storm drain capacity for the velopment process. During our inspection of at would not be cured by the proposed Zonina -""""" 34 ACENDAITEMNO. 3} PAGE J-(A OF 3 ())6 ~ As proposed, the subject project appears to be a legally conforming use. The ...., subject property is in conformance with all zoning requirements, and is assumed to be in conformance with all governmental regulations. Access and Circulation The City of Lake Elsinore is served by Interstate 15 which links the City with the major freeway network serving the region. 1-15 travels from the Mexican border north through Riverside and San Bernardino counties, to a and Salt Lake City, connecting with several east/west freeways. Full change facilities are located approximately two miles northeast of the t Riverside Drive (State Highway 74). ny easements, restrictions or conditions that would he subject property. It is a specific assumption of this appraisal that easements d encumbrances affecting the property are not detrimental to value. A notice of special tax lien was not reported for the City of Lake Elsinore CFD No. 2006-2. As the tract is improved, improvements. Sidewalks will be- installed a Drive is being widened and full stre completion of the subject dwelling u ......,. Easements 32008 of ith one preliminary title report for TM No. pared by Chicago Title Company, dated rt is retained in the appraisers' work files. Utilities The subject property is served by the following companies/agencies: Electricity Southern California Edison ......,. 35 AGENDA fTElC ~ 33 PACE___~~OF~ ",- Water Gas Sewer Telephone Elsinore Valley Municipal Water District Southern California Gas Company Elsinore Valley Municipal Water District Verizon Earthauake. Flood Hazards. and Nuisances The subject property is shown on the Riverside County National Flood Insurance Map Panel No. 060636-2061 F, dated August 18, 2003. According to the flood insurance rate map for the City of Lake Elsinore, the subject property' not located in a HUD flood hazard area. The subject is within Zone X, outside the Toxic Hazards led as property with historical, archaeological, or r knowledge, is not considered wetlands. The site is e property owner has reported that the property is not al issues. According to the California Division of Mines a not located in a seismic study zone; however, California. There are several faults in the vicinity Fault, Elsinore Fault, Willard Fault and the Jacinto (20 miles from the subject) and the ",- subject to the MSHC impacted by any environ ,........ Assessed Values. Taxes and Special Assessments The four individual assessor parcels have property taxes as shown on the following table. Pursuant to Proposition 13, passed in California in 1978, current Assessed Values mayor may not have any direct relationship to current Market Value. Real estate tax increases are limited according to Proposition 13 to a maximum of 2% per year plus bonds, 36 AGENDA ITEM NO. j 3 PAGE ;)t)1 OF~ if any. If the property is sold, real estate taxes are normally subject to modification to the ~ then current Market Value. Currently, there are special assessments for several agencies. In addition, there ~. will be special taxes for CFD No. 2006-2. The total tax rate is estimated not to exceed 2.0% of the base value of the proposed dwelling. CFD No. 2006-2 will have special taxes currently ranging from $2,016 to $2,608 per unit depending on dwelling unit size. The office of Harris & Associates esti undeveloped residential land within CFD No. 2 individual homes are also estimated. The estimated Q on the Special Taxes estimated for the ultimate ho property. the for the "-" The subject p within the taxing jurisdiction of the Riverside County Assessor's office. The p ed annual tax rate in this area is 1.00520%. All taxes for 2005-06 have been paid. The above taxes do not include CFD No. 2006-2 or the City's LLMD. The overall effective tax rate for the proposed homes will be approximately 1.8% to 2.0% of our appraised base values. This tax burden is common for Riverside County where tax rates in new home communities typically range from 1.70% to 2.00%. A survey of the subject's market area revealed that special Assessment Districts or CFDs ~ 37 AGENDA ITEM NO. '3"3 PACE :;or OF ~rJ.6f1. "'" encumber most of the competing residential subdivisions. There does not appear to be a great deal of resistance to the special assessments that do not increase the overall tax rat~ significantly above 2.00% of Assessed Value. According to the County's web site, the first and second installments of property tax due by December 10, 2005 and April 10, 2006 for fiscal year 2005-06 are paid in full. Eligi CFD No. 2005- cost to complete to r reimbursements Site Improvements As of the date of value, the subject is improve condition. Forty-two units are under construction and fo "........ The builder provided a summary $14,605,931. The costs are reported to i eligible from this CFD. A summary of t The costs are reported to bring th finished lot condition. Accordin expended as of t subject from' ddenda of this report. ion to a physical and legal mation, $7,621,410 has been ately $7,000,000 remain in costs to bring the . hed lot condition. astructure improvements and/or fee credits from ,300,000. Therefore, the net amount of remaining dition is approximately $1,700,000. ,...... It is a specific assumption of this appraisal, that the site costs provided by the developerlbuilder are all the site costs required to bring the land within CFD No. 2006-2, to a finished lot condition, ready to issue building permit condition for the 168 proposed dwellings within Tract Map No. 32008. This appraisal report and estimated value is based on the developer receiving reimbursements or fee credits of $5,288,877. If there is any change in the reimbursements, the value estimate would likely change. 38 AGENDA ITEM NO. 33 PAOE a51 OF ~/()L IMPROVEMENT DESCRIPTION '-"" General The proposed residential development known as Viscaya is located in the Lakeshore Village - Viscaya portion of the City of Lake Elsinore. The subject CFO is proposed to include 168 detached residential units within 15.6:t net acres. The following table summarizes the proposed floor plans within CFO No. 2006-2 as of the appraisal date. Occupancies of dwellings are scheduled to comme in June 2006. As of the date of value, 122 dwellings had been released fo dred nineteen had been reserved with cash deposits. """" current asking price, applied to closing cost. provi e have been provided with brochures of floor pans for the proposed project and they have t of some of the assumed general construction -family homes. Although the base sales price is the is offering concessions approximating $4,000 to be Construction Units are of Class "0" construction; wood frame and stucco siding with several elevation choices. Foundations Foundations are poured concrete. Particle board over wood floor joists for the second floor. '-"" 39 AOENDA ITEM NO. ~ 3> PAOE ~()_OF~ "...... Structural Frame Consists of 2" x 4" and 2" x 6" wood framing. Roofs Roofs are of concrete tile. Windows White framed vinyl windows with low-e glass. Floor Covering Floor coverings are wall-to-wall carpet in all living are and kitchen, bathrooms and laundry room are of . I. Interior Finish Custom trowelled ceiling and wall treatments. Kitchens Kitchens will be equipped with oak kitchen will include a 30" drop-in to HeatinglHVAC Energy efficient central air conditioning and .---.... ge doors are sectional steel roll-up. Site Impll The product! Side and rear y included. e concrete driveways and walkways to the front entry. are included. Front landscaping and irrigation system are Options Numerous options and upgrades will be available including flooring, cabinet, and countertop upgrades. Most options and upgrades, provided at competing similar quality developments, will be offered. "...... 40 AGENDA ITEM NO. "b~ PAOE ;)(Ol OF? I1L Conclusion of the Improvements ~ Based on review of the product information and physical inspection of similar products, we are of the opinion that the quality of the project is average and will generally meet buyer expectations for the subject's marketplace. Functional Utilitv It is an assumption of this appraisal that all of the floor plans are functional, and competitive with current design standards. rvice, is Remainina Economic life The total/remaining economic life, according to considered to be 50 years from date of completion. Homeowners Association The currently selling project, Vi a monthly association dues are repo ......, ~ 41 AGENDA I1EM NO. 3~ PAGE %2/ OF ~ ()6 __ ,,-.... HIGHEST AND BEST USE The term highest and best use is an appraisal concept that has been defined as follows: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physi al possibility, financial feasibility, and maximum productivity.4 restrictive. T codes. existing as though vacant and must be: legally imallY productive. These ract and, therefore, may ible, but it is irrelevant if it is ,,-.... The determination of highest and best use, t for the land as legally permitted, as if vacant. Next, the with its improvements must be analyzed to consi improvements from the ideal. "The highest and b property as improved must meet four criteri e hi permissible, physically possible, financial criteria are often considered seque also be considered in concert. site and its potential uses are often the most vernment regulations such as zoning and building ted in the City of Lake Elsinore. The subject is zoned for single-family residential development within the Specific Plan. This zone designation allows for detached single-family residential use with a minimum lot size of 3,825 square feet. CFD No. 2006-2 has one recorded tract map proposed for 168 dwelling units. The proposed development is a considered legal and conforming use. ,..... 4 The Dictionary of Real Estate Appraisal, 4th Edition, Pub. by the Appraisal Institute, Chicago, IL., p. 135. 42 ACENDA ITEM NO. ~ PACE alP 30 Phvsicallv Possible Use ...., CFD No. 2006-2 is generally rectangular in shape and contains approximately 15.6,:!: net acres according to its tract map. The site has a level topography, and is improved with padded lots. The residential development is a natural extension of existing nearby residential developments. The property adjacent to the north is improved with a neighborhood shopping center. Within TM No. 32008, all of the land is graded fro condition. Four model homes are complete and 42 pI" All normal utilities are available to serve the subject The property is generally bounded by commercial land. Access is considered to be good via La .ve, Ri Freeway. This appraisal considers the bene by CFD No. 2006-2. ~ Based on the physical numerous types location and residenti , the su rty appears to be viable for its size and topography. However, the site's suggest the lands have a primary use of e development of the subject property is based on its ability to generate su I come and value in excess of the costs to develop the property to its highest and best use. Please refer to the Valuation section of this report, which gives support to the financial feasibility of CFD No. 2006-2. 5 The Appraisal of Real Estate, 10th Edition, Pub. by the Appraisal Institute, Chicago, IL., p. 280. ......, 43 AOEN~::eEWt:~(!?:- ~ General Market Conditions - Riverside County The Inland Empire housing market has continued to increase in demand and price over the past several years. As in the past, the increased housing prices in Orange, San Diego and Los Angeles counties have encouraged buyers to look at alternative locations for homes. The Riverside County housing prices as of January 2006 were up 15.8% over the same month last year. The median detached new home price in the County hit a record high of $445,424 in December 2005, according to a survey by the Hanley Wood Market Intelligence. San Bern ounty had a median price of $363,816, up 3.5% in one year, but down tember 2005. Sales volume is still at historic highs for the month, up 2005. Only the Desert and North Central submarket had sales de ets had moderate increases. The subject property is located in the hich had a 4.5% increase in sales from one year ago. all su sales per project, with a decline of 13.6% ~ The current projection for t more balanced and normal mar and record high plateau or e longer expected t counties where sing e past se of record high sales volume have stabilized, causing property values to nland Empire is expected to stay stronger an on the coast. The Inland Empire is uyers from Orange, Los Angeles and San Diego ficantly higher. "........ onths, these three counties saw a decline in home sales from a year earlier, while the Inland Empire experienced its strongest or second strongest monthly sales rates. Most markets throughout Southern California plateaued during the last quarter of 2004 and the first two months of 2005. However, between March and November 2005, sales prices and sales rates improved. Sales have slowed over the last six months. ~ 44 AGENDA ITEM NO._ 3~_. u = PAGE ?/h Of ~nfi-- While overall inventory is up, the impact is to a more normal market especially '-'II' when it comes to supply and demand. Job creation was moderate over the past 24 to 30 months of recovery from the previous recession and the economy is still growing at a reasonable pace overall. Given the supply of new residential product in the Riverside County market, the subject tract should sell at a reasonable rate, but without the increases in price that have been experienced over the past several years. More and more news articles are suggesting that home prices are reaching a maximum level, and might even decline in 2006 or 2007. Builders within Riverside County sold 3,947 and 365 condominiums during the fourth quarter of 2 from the third quarter of 2005. This represents a decre se d product and 1.9% for attached product over the fourt ulk of the attached homes sold in Riverside County during is priced under $350,000 and comprise 86%::t of th priced between $250,000 and $350,000 continue , comprising 81 %::t of the "-' Riverside County increased by three project er of 2005. The submarket with the greatest number of pr: Stan old) attached inventory increased in the fourth quarter of 200 h quarter of 2004 to 181 units in Riverside County. This is up from thr end of the third quarter of 2005. At the current sales rate, that is less than a ek supply of attached homes. Attached total (built, under construction, planned) unsold inventory consisted of 2,627 units at the end of the fourth quarter of 2005, which is up from 2,526 units last year. At the current sales rates, this level of inventory equates to a 10.7 month supply, which is down from 34.7 months last year. Home prices continued to increase during the fourth quarter of 2005. However, in general, percentage increases have moderated since the first and second quarters of '-'II' 45 AGENDA fTEM NO. 'b? .... PAGL.ii., ~Q()F ~ ~ ~ 2004. Interviews with builders in the Inland Empire anticipate significantly smaller price increases per phase. Many tracts have begun offering incentives and concessions to buyers. The higher prices have prompted more people to sell their homes which is bringing the supply and demand into better balance. According to an interest rate survey published weekly in The Los Angeles Times, the typical 30-year, fixed rate conforming loan was between 5.75% and 6.50% as of the date of this report. Mortgage rates have been in the 5.0 .500 range over the past year, following more than a year of rates in the 60 a slight increase in rates may impact demand, we do not anticipate a s mand as long as rates remain near or below the 8% level. r" Riverside - South Submarket -Detac The subject property is situated in t for 969 detached sales during the fo rth share of the Riverside County mar his nu declined from 1,417 sales in the third quarter of 2005. Th ian price th submarket has decreased over the past y decrease. The fourth quarter price decreased 5.2% from t 492,233. The South submarket is one of the mor ounty with a price per square foot ratio of $177.00. T the subject's submarket increased by 7.3%, but declined by 9.8% to 2,637 square feet. r of 2005, the subject's submarket did not sell any new detached homes priced under $349,999; 155 detached homes priced between $350,000 and $399,999 were sold, 200 detached homes priced between $400,000 and $449,999 were sold, 334 detached homes sold between $450,000 and $549,999; and 280 homes sold over $550,000. There were 108 attached units that sold in the subject's submarket, all but 11 under $350,000. ~ 46 AOENDA ITEM NO. ? '3 PAQE~-c k..oF~3 ob___,- Within the South submarket there are 116 detached projects, which is eight more '-' than last year at this time. The subject's market area reports 70 unsold standing inventory units and 715 unsold units under construction. This is a 1.5 month absorption time for the units under construction. Total inventory which includes units built, under construction and future construction totals 4,741 units which equates to an 10.1 month supply at the current sales rate. One year ago total inventory was at 4,067 units, and the months to absorb based on last year's sales rate was 8.0 months. Feasibility It is not in the scope of this appraisal assign extensive independent market study/absorption an responsibility to address the reasonableness of the cone usi has been prepared by outside firms for the regional economic and/or social change development. raisers' e of real estate '-" In an attempt to arrive at Viscaya project No. prepared abs Market Ab Empire E portion of the e absorption schedule for the ers reviewed an independently the CFD. This independent study is titled istrict No. 2006-2 Isea a prepared by , 2006, for the City of Lake Elsinore. A copy of a ary is included in the Addenda of this report. The study re subject property will have a 3! year absorption time frame. The 168 homes a aya are estimated to absorb at 63 units in 2006, 68 units in 2007, and 37 units in 2008. The overall monthly absorption is 6! units per month. It should be noted that this appraisal values merchant builder land, while the market absorption report refers to homebuyers purchasing completed homes. It is our opinion, after surveying the competitive projects and analyzing the pricing, design, location differences and other pertinent factors, that the subject property '-" 47 AGENDA ITEM NO. '3 ~ PAOE Q(P70F ~/JY6.. '" should experience average to good absorption, similar to that reported by Empire Economics. The table on the following page reports the prices and absorption of six detached residential developments including Viscaya. Absorption has ranged from 2.7 units per month to 15.1 units per month for projects that have been in an active sales program for ~ ,...... 48 3~ ACENDA ITE.lv< .i_ ___ PACE d&~ OF~ ....." ~ ProlectlDeveloDer/Locatlon ~ 1 Vlscaya Plan 1 CLC Plan 2 Lakeshore Dr. @ Riverside Dr. Plan 3 Lake Elsinore Plan 4 TBM 865 J-3 Subject 2 Weatherly at Canyon Hills 131 4,900 16 4.3 Pulte Homes Jan-06 Angles Falls @ Chaparossa (Canyon Hills Community), Lake Elsinore TBM 867 E-6 """" 3 Cross Creek at Canyon Hills 1,671 $222.32 66 6.8 Pardee Homes 1,918 $203.60 Jul-05 Sweet Acacia Ct. 2,113 $192.62 (Canyon Hills Commu . 2,439 $179.81 TBM 867 E-6 4 Madison $388,990 1,975 $196.96 33 2.7 KB Homes $411,990 2,255 $182.70 May-05 Palomar @ Co $407,990 2,459 $165.92 TBM 896 H-4 $425,990 2,762 $154.23 5 Fairfield Plan 1 $366,990 1,740 $210.91 66 5.4 KB Homes Plan 2 $375,990 1,864 $201.71 May-05 Palomar @ Corydon, Lake Els Plan 3 $385,990 1,999 $193.09 TBM 896 H-4 Plan 4 $393,990 2,228 $176.84 6 Edgewater 4,000 Plan 1 $354,950 1,683 $210.90 88 11.5 Pardee Homes Plan 2 $372,725 1,983 $187.96 Sep-05 Cedar Creek Lane and Sage Lane Plan 3 $387,650 2,105 $184.16 (Canyon Hills Community), lake Elsinore TBM 867 0-5 """" 33 AGENDA ITEM NO. :.1J2i-, MaE lJ</f OF . ,....... 5 to 12 months. These absorption rates are down slightly from mid-2005. The subject's tract, Viscaya, opened for sales on September 17, 2005. The sales representative reports 122 homes released and 119 homes sold as of the survey date, May 15, 2006. This represents a monthly absorption of 15:1: units per month. Base prices have stayed stable over the last nine months with some slight increases. Most projects, including the subject, are offering concessions up to $5,000 to home buyers. Given the moderating demand ~ r r subject market area, it is our opin. at the highest land value and is, there e subject property, we ing the land uses the most Maximallv Productive In considering what uses would be maximally must consider the previously stated legal considerati allowed under the Specific Plan zone regulation with the productive uses that will be allowed at the present time. indicate that other alternative uses are not feas. r--- .~erside County and the as proposed provides the L ons have been analyzed to evaluate the This analysis is presented to evaluate the type of vel of future benefits possible from the land. highest an uses that will g After reviewing tti atives available and considering this and other information, it is the opinion of the appraisers that the highest and best use for the subject property, as vacant and as proposed, is for residential development similar to that proposed for the subject tract. The project appears to have the location, features, and pricing structure to obtain an average to good sales rate under normal financing and market conditions. ""' 50 AGENDA ITEM NO. 33 PAOli ~OF ') ~-- ....." As Vacant and As Improved After reviewing the alternatives available and considering this and other information, it is these appraisers' opinion that ultimate development of single-family detached for-sale homes similar to the current proposed product is considered the highest and best use of the property. ....." ....." 51 AOENDA ITEM NO. "3'3 ~OFSO' ,-. VALUATION METHODOLOGY Basis of Valuation Valuation is based upon general and specific background experience, opinions of qualified informed persons, consideration of all data gathered during the investigative phase of the appraisal and analysis of all market data available to the appraiser. Cost Approach that the value of the property tends refrom to the owner. It is, in effect, future income into present worth. This of net income, an analysis of all expense lization rate, and the processing of the net Imate. Valuation ADDroaches Three basic approaches to value are available ~ This approach entails the preparation of a r estimate of the subject property improv quality and utility) and then deductin age, wear and tear, functionally obs affecting the property. This is t en provide a value estimate. This to th appr items, income st ,...... This approach is based upon the principle that the value of a property tends to be set by the price at which comparable properties have recently been sold or for which they can be acquired. This approach requires a detailed comparison of sales of comparable properties with the subject property. One of the main requisites, therefore, is that sufficient transactions of comparable properties be available to provide an accurate indicator of value and that accurate information regarding price, terms, property description, and proposed use be obtained through interview and observation. 52 33 AGENDA ITEM NO. . Pia d1' .OF ?~ Static Residual Analysis is used to estimate the merchant builder land value when the proposed product is known. From the estimated base retail home price, all costs associated with the home construction including direct construction costs, indirect construction costs, financing and profit are deducted. Following the deduction of costs, the residual figure is an estimate of the merchant builder land value. ...., The residential land is valued by the Direct Comparison Approach and the Static Residual Analysis. The Income Approach is typically used when appraising income producing properties. This approach is not applicable in e f land as land is not typically held to generate monthly income, but ra product which mayor may not generate income. The tool in the valuation of land. Viscaya includes struction by the Inished condition. The The subject property is in completed model homes, and produ builder/developer. Most of the lots' Vi products being built are consider demand by the Rive ide Co improvements based on e of the property and are in omebuye ore, the partially completed e. The units under construction are valued ....., applied completed and adding $25, tage of completion. This percentage is price 0 the home for an indication of value. The sing the current base sales price for the floor plan e interior and exterior upgrade improvements. '-' 53 "33 AGENDA ITEM NO. PAGE '}- -,--;r OF 3~ ~ VALUATION OF CFD NO. 2006-2 General Information This section of the report will be to arrive at a finished lot value for the District. The "as is" value of the lots will be valued utilizing the finished lot value, deducting the remaining site costs and fees still required to get to a finished lot condition, while giving consideration to the bond proceeds from this CFD. necessa current merchant The subject parcel is anticipated to be de builder. The actual sales price of a particular pa indication of value, assuming the transaction is ar definition of Market Value. In the case of the subject p indicated by the merchant builder residentialla area. Six recent sales within the Lake Elsin comparison. are provided for /"" premise that, when a lue tends to be set by the purchase price titute property, assuming no costly delay ion and the market is reasonably informed. In e Principle of Substitution. This approac d of analyzing the subject property by comparison of actual sales of similar erties, when available. These sales are evaluated by weighing both overall comparability and the relative importance of such variables as time, terms of sale, location of sale property, and lot characteristics. For the purpose of this report, the unit of comparison utilized is the price per unit for the residential land. The indicated values reflect the finished lot values for merchant builder parcels. Please refer to the following page, which summarizes the sales considered similar to the '" subject parcel. 54 33 AGENDAITEMN~ .~ PAGE:?'J OF - ......, NO.1 Wasson Canyon Holdings, LLC 6105 191 $185,000 Raw oondition at sale SE of 1.15, SE of 8-74 Wasson Canyon Investments, L.P. 6.000 SF Min 1.9% tax rata @ 3nt St. & Old Ranch Road Lake Elsinora NO.2 Putte Homes 7105 131 $135,916 $200,3n Blua Top condition at sale E10 RaHroad Canyon Rd. Pardee Grossman 4,900 SF Min 1.8% tax rate NlO Canyon Hills Road Lake Elsinora NO.3 Putte Homes 7/05 143 Blue Top condition at sale E10 Railroad Canyon Rd. Pardee Grossman 5,000 SF Min 1.8% tax rate NIO Canyon HiDs Road Lake Elsinora NO.4 Covenant Homes Current 192 SEC Leon Rd. Rancon vy. V. 85 Escrovv 7,200 SF Min views & Patton Ava. Manifaa NO.5 Lennar Homes 7/05 WIS Leon Rd. BSC W. H. 260 SIO Patton Ave. Menifee No.6 Confidential Sold in raw oondition SWC Haun Roed & Bums Ranch, Inc. 1.9% tax rate Craig Avenue Menifaa .......", ......, ~3 AOENDA ITEM NOt t2L PACE '?7 OF '? ~ .",,-. Land Sale Data No.1 Location: Southeast side of 1-15, southeast of S-74 and east of the intersection of 3rd Street and Old Ranch Road, Lake Elsinore Legal Description: 347-330-019, 045, 046, 050, 051, 052, 053 and 347- 360-003 Buyer: Seller: Parcel Size: No. of Units: Lot Size: Zoning: Intended Use: Wasson Canyon Holdin Wasson Canyon I 59.4 acres 191 ",,-. Date Recorded: Sale Price: Price/Unit: Comments: Ie date with approved tentative tract map eller IIer, broker and Grant Deed e effective tax rate is estimated to be 1.9%. ",,-. 56 AOENDA ITEM NO. "33> PAOE2:.7'LOF ..1..11A", Land Sale Data No.2 ~ Location: East of Railroad Canyon Road, north of Canyon Hills Road, Lake Elsinore Legal Description: Tract No. 30493-4, Lots 26-55, 370-379; Tract No. 30493-5, Lots 56-84, 362-369; Tract No. 30493-6, Lots 5-102,326-361. Seller: Buyer: Pulte Home Pardee Home Parcel Size: No. of Units: 131 4,900 Lot Size: Zoning: ~ Intended Use: ed dwellings ranging in size 1,949 to square feet. The subdivision is as Weatherly, 05 Price/Unit: Finished Lot Cost: Site Condition: Blue-top at sale Financing: All cash to seller Verification: Seller & Buyer Comments: This property is encumbered by a CFD. This site is level to rolling hillside. It is within the Canyon Hills master planned community. '-' 57 ACENDA ITEM NO. "'2>3 PAGE;;r:r." OF ~ ~ Land Sale Data No.3 Buyer: East of Railroad Canyon Road, north of Canyon Hills Road, Lake Elsinore Tract No. 30493-7, Lots 103-116, 137-156; 188-198, 322-325. Tract No. 30493-8, Lots 117-136, 157-187; Tract No. 30493, Lots 199-222, 303-321. Location: Legal Description: Pulte Home Seller: Pardee Home Parcel Size: No. of Units: 143 Lot Size: ~ Zoning: Intended Use: ed dwellings ranging in size quare feet. The subdivision is Sale Pri Price/Unit: Site Condition: Blue-top at sale Financing: All cash to seller Verification: Seller & Buyer Comments: This property is encumbered by a CFD. This site is level to rolling hillside. It is within the Canyon Hills master planned community. ",...... 58 AGENDA ITEM NO. "3 ~ PAGE 1-'7( OF....1t26.- land Sale Data No.4 ......." Location: Southeast corner of Leon Road & Patton Avenue, Menifee Legal Description: Tentative Tract Map No. 30806 Buyer: Covenant Homes Seller: Parcel Size: Rancon Winchester Vall No. of Units: 192 Lot Size: Zoning: SP-7200 Intended Use: on 7,200 square Date Recorded: ......." Sale Price: Price/Unit: Finished L Financing: Verification: Comments: Listing broker A raw parcel in the Winchester Ranch Specific Plan area. This property will be subject to CFDs with a tax rate of 2.0%,:t. ......, 59 ACENOA ITElVll\l~,. "33> PAGE '>1 OF~ ~ Land Sale Data No.5 Location: West side Leon Road, south of Patton Avenue, Menifee Legal Description: Tentative Tract Map No. 31892 Buyer: Lennar Homes of California, Inc. ~ Date Recorded: BSC Winchester Hills 26 Seller: Parcel Size: No. of Units: 379 Lot Size: Zoning: SP-7200 Intended Use: on 7,200 square Sale Price: Price/Unit: Financing: Verification: Listing broker & Deed Comments: This is a raw parcel in the Winchester Ranch Specific Plan area. This property will be subject to CFDs with a tax rate of 2.0%:t,. ~ 60 AGENDA~_ 3~ PAGE OF 17. Land Sale Data No.6 "-"" Location: Southwest corner Haun Road and Craig Avenue, Menifee Legal Description: Buyer: Seller: Parcel Size: Portion SE Quarter Section 10, T6S R3W Confidential Burns Ranch, Inc. 64.55 acres 210~ 7,200 square fe R-1 Date Recorded: Sale Price: Price/Unit: Finished Lot Cost: Site Condition: Financing: Verification: idential , No. of Units: Lot Size: Zoning: Intended Use: "-"'" e property is scheduled to close in mid-2006. The g escrow period allows the buyer to process the provals and the site will close with the approval of e tentative tract map. The effective tax rate is 1.9%. The APNs are 360-240-034 and 360-260-005. ....., 61 "33 ACENDA 1lt:IYI 1_"'. ~ PAGE ~ OF a ~ We have surveyed residential sales in the Lake Elsinore and Menifee market areas. The six sales used in the analysis are the comparables considered most helpful in valuing the subject property. We have reviewed and inspected all of the data items. The previous table includes the raw land cost per unit, blue-top price per unit, and the finished lot prices for merchant builder parcels. The comparable land sales have sold in a raw condition and blue-top lot condition. Costs to bring the land from the condition at the time of al fini ed lot condition were made available to analyze the data. Therefore, the an finished lot value for the subject parcels, and then a finished lot condition to the "As Is" lot condition is mad purchase price for all the Data Items was helpful to arriv tract. Most weight was given to Data Nos. 1, 2 . hare t and size. e subject st similar in location .,.--, Analysis Financing cash transactions or financing considered to be re warranted. the transfer of the fee simple interest. The subject's IS report, and therefore, no adjustment is warranted. ,..... Time of Sale During the past 8 years, Southern California has sharply rebounded from its lengthy recession. Demand for land sales has dramatically exceeded supply. Prices paid for residential land increased annually by 15% to 20% and more from 1997 to 2000. However, 2001 saw a leveling of land prices, only for prices to increase again during 2002, 2003, and the first six months of 2004. Home prices have increased from the lows of 1996. The average new home price in Riverside County has increased from $156,907 in the first 62 AGENDA m.. .,,,. "3 ~ PACE ~ OF ~'3_ quarter of 1996 to $445,424 in the fourth quarter of 2005. The median price for an existing ..."" home increased 9.4% in the last 12 months. This is near the record high median price level for existing homes in Riverside County, which occurred in March 2006. However, while prices have continued up, the increase is significantly lower than in the previous 5,:!: years. Activity is reported to be decreasing over the past 5 to 6 months. The market in general began to plateau during August and September 2004 and continued through February 2005. Prices again increased between February 2005 and August 2005, although at a lower rate than previous years. However, during the Rast 6 onths, home prices have stabilized or decreased. Therefore, we are of a time adjustment is not warranted for sales that occurred during 20 adjustment is estimated for sales during 2004. For current listings a o/c wnward adjustment is estimated. Conditions of Sale Typically, adjustments for conditi ns . ations of the buyer and the seller in the transfer of real pr . The sale adjustment reflects the ~ difference between the actual sa nd its probable sales price if it ith typical motivations. Some circumstances of . elude sales made under duress, eminent arm's length. All of the transactions were ccordingly, no adjustment is indicated. Location The location a t is based on proximity to existing infrastructure and employment. The three sales located in the Menifee area are generally considered inferior and an upward adjustment is indicated. The three Lake Elsinore sales are in superior master planned communities and require downward adjustment. Entitlement/Map Status All of the sales are entitled. No adjustment is required. ~ 63 AGENDA ITEM NO.~ "3 ~ ,. a~2-- OF "3f1h.- - ,..... Tax Rate The subject is expected to have an average overall tax rate around 1.80% to 2.00% of base sales price. The comparable sales that have similar CFDs or Assessment Districts do not require an adjustment. The merchant builders of the land are aware of the various taxes and have factored the impact of the higher tax rates into the prices paid for the land. .--... Condition of Lots All of the data had prices b bring the subject parcel from fini at the Conclusio 4,900 square feet to feet. Interviews Elsinore Lot Size The comparables have minimum lot sizes t 7,200 square feet. The minimum lot size for the suI:) with sales persons indicated that lot size is an impo homebuyer. Downward adjustments are required for a 7,200 square foot minimum lot sizes. rent "As Is" condition is made PI for the Cljustment grid of the six comparable land consideration to all of the data, the comparable data er finished lot. .--.... 64 ~? ACENDA'TEM NO. fJJ.4 PACE_ y00F '? -"'" '0; s= !:: '6' c( o 10 r-. aj C') w _ CDI ON ..Iii) ?ft. o ..... . ~ !I ....0: ?ft. o :1 :; 3i 'C_ lLC ii: o o o Iii' ClO ..... ~ .2 .!I = III '0. C_ O III o "0 C j :t tll 0:: i~ ~ C W al ~ c W i CDI ON ..1- ...11) 00 0..1 Z c ~ .....IL 0)11) .....0 o o <D .. CDI .- -Ill ~O 10 o ;:: .... CI 00 Z~ .s B III 0 0..1 "0 ~ 0:: j:!"fi . c en", '00:: W32 enOe ~~.~ ,l.Ulm ~o~~ ~m@j C') ClO N <5 10 W ?ft. o ..... . ?ft. o ~ o o Q. .9 dl " in al ~ c W c ~ .....IL C')e/) .....0 o 0) .,f 10 ~ r-. -0 0::"0 C '" ~~ c '" tll= U:r "0 c e tll 0 0 ~ ~.~ "''''w NO::UQl ciQQ~ ZWZ..I o 10 at u; W ~ o o ..... . ?ft. o ~ o ?ft. 10 ..... . "0 Q) E i: W c ~ MIL ~e/) .....0 o o on 10 o ;:: -0 0::"0 5 ~ :-.0:: i~ U:r "0 c e '" 0 0 ~ ~.~ tll"'w C')o::uQ) '00..>< ~iiJzj o o 10 N ~ W ~ o o ~ ?ft. o ?ft. o ?ft. o N o o 10 N ~ W ?ft. IL? i: ~ ~ 0 " "' uw ~~ coo:( g 5 3l ~..Il6:t:: ci ~ D.. ~ Ze/)o!:l::!; o o o <5 co ..... ~ ~ o o ~ ~ o o ~ o o ?ft. o N o o o <5 co W ?ft. o o o o <5 co ..... ~ 10 ~ r-. CIi .> "000:( 0:: c c 0 g 16 Ql 1.()-1Q.~ . e/) 0 c ~~w~ o o co oi 10 W """ ?ft. o ~ ?ft. o ?ft. o ?ft. o N o o co oi 10 W ?ft. IL? o o o aj co ..... ~ ...., i: :t ~ ~ " ~ uw o!:l "0 '" o 0:: ~ c c " Ql ~~31 IOU C):t:: ci3:e ~ Ze/)U::!; ........., ?~ AGENDA 'T.E~~.-: ~ PAOE..ae:J-OF.3 ,,-... Static Residual Analysis CFD No. 2006-2 is being developed by Corman Leigh Communities. The subject area consists of one detached project. The development is proposed for 168 detached homes on minimum 3,825 square foot lots. The homes range in size. from 1,506 to 2,513 square feet with current base prices that range from $363,000 to $414,000. Four floor plans are offered. The development has not closed escrow on any individual dwellings. However, 122 dwellings have been released for sale and 119 are reserved, with cash deposits. Viscaya has met with good response fr the arket. Although 119 units have sold, only 42 units have begun vertic stru The sales staff was questioned about seller concessions. They stated t offered. /""" The merchant builder land is valued b the Static Residual Analysis. The purpose land assuming no direct construction h s t when development for a subdivisi competitive house sales are a commonly used uilde n Approach and by te a value for the d is particularly helpful t and best use and when Repo analysis is by far the most n determining price for land. ill have a typical holding period of one to two years I holding period sought by merchant builders. The Residual Analy investor's analysis when determining what can be paid for the land b ed product. Purchase of the land is simply treated as one of the components ary to build the houses to sell to the homeowner. When all the components of the end-product can be identified and reasonable estimates of costs and profit can be allocated, the Residual Analysis becomes the best indicator of value to a merchant builder for a specific product. The analysis uses an estimated average base sales price for a specific product, then deducts the various costs including direct costs of construction, marketing, taxes ~ and overhead, as well as the required profit margin to attract an investor in light of the 66 3? Aa!NDA ITEM NO. PAGE ?~S OF ~fl6. risks and uncertainties of the project. This analysis is most helpful when significant lot .., I and or view premiums are not present. When negotiating land price, builders typically will consider the value of lot premiums when they are significant, but typically do not give the premiums full consideration. When a downturn in the market occurs or there is a slight stall in a sales program, premiums are typically the first to be negotiated away. End-product Sales Prices The analysis uses the average base sales estimate of sales price includes a review of the reported by Corman Leigh Communities and price market area. estimates of direct construction costs this information with in-house data Direct Development Costs We have interviewed local build Emp market area for s. We have compared roughout Riverside County builder, rovided detailed cost to build as a direct cost of around $60.00 per square ve increased significantly over the past 12 oposed quality of construction, home size the builder appear reasonable and supportable. ...., lot premiums. Our ent sales prices as in the subject's months. found to be an industry aye been estimated at 4% of sales price, which is d used for this analysis. General and Administrative General and administrative costs are estimated at 4% of retail value. This category covers such expenses as administrative, professional fees, HOA dues, and miscellaneous costs. This estimate is typical and consistent with the market. ~ 67 33 AOENDA ITEM NO. PAOe~Of ~ab. ~ Marketing and Warranty Marketing and sales expenses plus warranty costs are estimated at 6% of retail value. This category covers such expenses as advertising and sales commissions and home warranties. This estimate is typical and consistent with the market. Developer Profit The line item for profit reflects the required margin to attract an investor in light of the risk and uncertainties of the specific project. This an 's a sumes a finished lot and no on-site construction. Therefore, additiona of opment is unknown. However, given the current residential market, an roposed project, the risk of development is less. units per Therefore, we Ii ments are typically o 6% and as high ucted and sold out in a require construction/sellout periods e accept ensive land cost areas where is proposed for detached homes on minimum d demand in Riverside County. Based on e subject's history, a sales rate of 5 to 6 e. The project should be sold within 3:f: years. line item for profit. .----- Based on surveys of builders and de between 7% and 12% of revenues, with 0 as 15%. These profit estimates are for two year period. Higher profits ca and riskier projects. Lower profi homes sell quic t pro lot size of 3, a review Interest During A typical allowance r financing during the holding period has been between 4% and 6%. Due to the lenders requiring a higher equity participation from the builders, the allowance for profit has been decreased. Based on recent interviews with builders in the subject's market area, we have chosen a 6% deduction for financing during the holding period. ,-. 68 AGENDA ITEM NO. 33 PACE ;) 1'1 OF '3I1Jl Site Costs Because this analysis residuals to a finished lot condition, deductions for costs to bring to a finished lot condition are not required to estimate the finished lot value. The following page illustrates the Static Residual Analysis for the average size unit of the existing project within CFD No. 2006-2. '-'" Finished Lot Value by Static Residual Analysis The indicated finished lot value for the 168 units $152,000. ,...., '-'" 69 ACENDA ITEM NO. 33 PACE~ OF ~1f}6~ ~ Finished Lot Plan Viscaya 1 2 3 4 Average Size 1,506 1,930 2,229 2,51 2 Base Price $363,000 $379,000 95,000 Less: Average Concession Average for 4 Proposed Floorplans Average Retail Value of Improvements /"'. Average Dwelling Siz& (Sq. Feet) Direct Building Cost Per Sq. Ft. Indirect Construction Costs General & Administrative Costs Marketing and Warra Builder's Profit Interest Durin Costs to bri $152,690 $152.000 Finished Lot 0.39 ,-.. 33 ACENDA ITI:J~ NO. . PAGE J.?l OF~~ Conclusion of Finished lot Values......" The following table summarizes the conclusions of finished lot value by the Direct Comparison Approach, the Static Residual Analysis and the concluded finished lot value. Valuation of land under Site Construction The subject project has 122 detached lots . in CFD No. 2006-2. Based on our analysis and the Static Residual Analysis, we conc e of $150,000 per detached lot. However, the lots uding remaining fees, paving, and sidewalks to get to ese costs, provided by the '-' builder, and the antic. d bon lied to the lots without ve"rtical ated at $7,000,000. CFD No. 2006-2 bonds total costs, from this bond issue. The net cost to lot condition is estimated $14,000 per $136,000 per detached lot. Based on the costs provided, the 1 in CFD No. 2006-2 have an estimated value of $16,600,000 as indic 122 lots X $136,000 = $16,592,000 Say $16,600,000 Valuation of Completed Models and Homes under Construction As previously described, the subject property is in various stages of construction from near finished lots to completed model units. This section of the report will value the completed models and units under construction as of May 15,2006. ~ 71 AGENDA ITEM NO. PACE 171 OaF 33 ~~ ~ Viscaya has four completed model homes. The model homes are valued based on the currently achieved average base sales price. Due to the exterior and interior upgrades to the model homes, an increase of $25,000 is added. The recapture rate is considered reasonable for the project based on its interior and exterior upgrades. ~ Units in various stages of construction were valued based on our inspection of the property. An estimate of completion (stated as a percent) of each unit as of the date of value is used to value the units. The estimate of compl been arrived at with input from the merchant builder and review of the b is then applied to the base sales price of the averag A physical inspection of the subject property in under construction. Six homes are near comp homes are in a color stucco coat conditio homes are framed and considered 500/< co to be 65% complete. There are 46 represents almost 27% of the ho % complete. Fifteen plete. Twenty-one 2 units are considered indicates timated values for CFD No. 2006-2 which 168 unitsllots in various stages of unit and igh Communities ownership. r- 72 AGt:I~DA 11'EMNO. 3? PAGE :Pi ( OF ~(}.1a VALUATION CONCLUSION "'-' Based on the investigation and analyses undertaken, our experience as real estate appraisers, and subject to all the premises, assumptions and limiting conditions set forth in this report, the following opinion of Market Value is formed as of May 15, 2006. TWENTY-EIGHT MILLION EIGHT HUNDRED THOUSAND DOLLARS $28,800,000 The estimated value assumes bond p" facilities and/or fees, as described in the Comm at the time of sale. 88,877 for eligible art, are available ....., "'-' 73 i'lCENDA ITEM NO. ~ (Jl; ~q7.A)F_ '? ~ ~ CERTIFICATION We hereby certify that during the completion of this assignment, we personally inspected the property that is the subject of this appraisal and that, except as specifically noted: We have no present or contemplated future interest in the real estate or personal interest or bias with respect to the subje alter or the parties involved in this appraisal. ~ To the best of our knowledge and belief, the this appraisal report, upon which the analyse expressed herein are based, are true and correct Our engagement in this assignment was n reporting predetermined results. The c the reporting of a predetermined val cause of the client, the amount of stipulated result, or the occurren 0 The appraisal assignment a specific valuation, or the conclusions were developed, and this with the requirements of the Code of ds 0 essional Appraisal Practice of the de the Uniform Standards of Professional ort, James B. Harris has completed the g education program of the Appraisal Institute. The reported ana , opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, unbiased professional analyses, opinions, and conclusions. No one provided professional assistance to the persons signing this report. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. In furtherance of the aims of the ,.-.... Appraisal Institute to develop higher standards of professional performance by its 74 AGENDA ITEM NO. ~ '3> PACE 213 OF ~ fJ.6 _ Members, we may be required to submit to authorized committees of the Appraisal Institute '-' copies of this appraisal and any subsequent changes or modifications thereof. Respectfully submitted, Berri J. Cannon Harris Vice President GOO 147 '-' '-' 75 33 AC,LhloolM l '.~ r,a d. ..-n/.1 ~~3~ "...... ,--.. "...... Ac;dDA 1TEM fICl. "33 ~ 2:'i~b Of. 3 0 , .. w - ......" HARRIS REA 5100 Bi[ Newp ......" ......., 33 AGENDA ITEM NO. PAGE ;;t1) OF ,~n~ .~ QUALIFICATIONS OF JAMES B. HARRIS, MAl PROFESSIONAL BACKGROUND Actively engaged as a real estate analyst and consulting appraiser since 1971. President and Principal of Harris Realty Appraisal, with offices at: 5100 Birch Street, Suite 200 Newport Beach, California 92660 Before forming Harris Realty Appraisal, in 1982, was employed with Real Estate Analysts of Newport, Inc. (REAN) as a Principal and Vice President. Prior to employment REAN was employed with the Bank of America as the Assistant Urban Appraisal Supervisor. vi mployed by the Verne Cox Company as a real estate appraiser. - 990 - 1983 to 1989 ittee -1985 - 1997 ~ Member of the Appraisal Institute, with MAl designation No. Director, Southern California Chapter - 1998, 1999 Chair, Orange County Branch, Southern Cali~ Vice-Chair, Orange County Branch, South Member, Region VII Regional Governing Member, Southern California Chapter Ex Chairman, Southern California Ch r S ar Chairman, Southern California C W rksh Member, Southern California r Admissi Member, Regional Standard fessional P Successfully complet Way Association: urses sponsored by the Appraisal Institute and the Right-of- Course I-A Course I-B Course II Course IV Course VI Course VIII Course SPP Course 401 rinciples of Real Estate Appraisal Capitalization Theory Urban Properties Litigation Valuation Investment Analysis Single-Family Residential Appraisal Standards of Professional Practice Appraisal of Partial Acquisitions .r-- Has attended numerous seminars sponsored by the Appraisal Institute and the International Right- of-Way Association. ACENDA ITEM NO. 33 ~ PAOE ~ if OF.3.OL TEACHING AND LECTURING ACTIVITIES Seminars and lectures presented to the Appraisal Institute, the University of California-Irvine. UCLA. '-'" California Debt and Investment Advisory Commission, Stone & Youngberg and the National Federation of Municipal Analysts. MISCELLANEOUS Member of the Advisory Panel to the Califomia Debt and Investment Advisory Commission. regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004) LEGAL EXPERIENCE Testified as an expert witness in the Superior Court of the County of L Bernardino and in the Federal Bankruptcy Courts five times con Bankruptcy, and Specific Performance. He has been depose other issues. This legal experience has been for both Pia inti numerous appraisals for submission to the IRS. without havin with numerous Bond Counsel in the completion of 100 L appraisals over the last five years. Feasibility and Consultive Studies Angeles and the County of San e i es of Eminent Domain. concerning these and Iients. He has prepared e has worked closely I Bond Financing Feasibility and market analyses, including the us developments and investment properties such s condominium projects, hotels. and residen . '-'" Appraisal Projects Has completed all ty completed out-of- Oklahoma, Ore unit developments. mobile home parks. Office buildings, ho neighborhood shoppin otels, retail store buildings, restaurants, power shopping centers, enters. and convenience shopping centers. Industrial Multi-tenant industrial parks. warehouses. manufacturing plants, and research and development facilities. Vacant Land Community Facilities 'Districts. Assessment Districts, master planned communities, residential, commercial and industrial sites; full and partial takings for public acquisitions. '-'" -03 Avt:I"~ ~~Of...lt1L ,..... QUALIFICATIONS OF BERRI J. CANNON HARRIS PROFESSIONAL BACKGROUND Actively engaged as a real estate appraiser since 1982. Vice President of Harris Realty Appraisal, with offices at: 5100 Birch Street. Suite 200 Newport Beach, California 92660 Candidate of the Appraisal Institute for the MAl designation. Co-Chair, Southern California Chapter Ho Chair, Southern California Chapter Res e A praisal Corporation as I was employed with Before joining Harris Realty Appraisal was employed with Inte Assistant Vice President. Prior to employment with Int te Real Estate Analysts of Newport Beach as a Research ant. PROFESSIONAL ORGANl Women in Commercial Real Estate, Member /"" Chair. Special Events - 1998. 1 2 Second Vice-President - 1996. Treasurer - 1993. 1994, 19 Chair, Network Luncheon rses sponsored by the Appraisal Institute: eal Estate Appraisal tion Procedures Capita tion Theory and Techniques - A Capitalization Theory and Techniques - B Report Writing and Valuation Analyses Standards of Professional Practice Case Studies in Real Estate Valuation Has attended numerous seminars sponsored by the Appraisal Institute. Has also attended real estate related courses through University of California-Irvine. .--' ~1TE!i1~ OF~~ LECTURING ACTIVITIES Seminars and lectures presented to UCLA, California Debt and Investment Advisory '-" Commission, and Stone & Youngberg. MISCELLANEOUS Member of the Advisory Panel to the California Debt and Investment Advisory Commission, regarding Appraisal Standards for Land Secured Financing (March 2003 through June 2004) SCOPE OF EXPERIENCE Residential subdivisions, condominiums, parks, apartment houses, and single-famil Francisco, California. 1 Appraisal Projects Has completed all types of appraisal assignments from Also has completed out-of-state appraisal assignments Residential Commercial Office buildings, retail store bui retail centers. od-shopping centers, strip """'" Industrial es, manufacturing plants, and research and Residen planned u Facilities Dist tes, industrial sites, large multi-unit housing, master nd agricultural acreage. Specializing in Community ent District appraisal assignments. """'" "33 AGENDA ITEM NO. M; PAGE .Yi~ OF ~ ~ PARTIAL LIST OF CLIENTS Lending Institutions Bank of America Bank One Commerce Bank Downey S&L Assoc. Fremont Investment and Loan Institutional Housing Partners NationsBank Preferred Bank Santa Monica Bank TokaiBank Union Bank Wells Fargo Bank DMB - Ladera Foothill Ranch Compa Hon Development Co. Irvine Apartment Communiti The Irvine Company. Public Agencies Army Corps of Engineers California State University Caltrans City of Aliso Viejo City of Beaumont City of Corona City of Costa Mesa City of Encinitas City of Fontana City of Fullerton City of Hesperia City of Honolulu ~ City of Huntington Beach City of Indian Wells City of Irvine City of Lake Elsinore City of Lorna Linda City of Los Angele City of Moreno City of New~ City of Oc Lennar Homes Rancho Mission Viejo Santa Margarita Company Shapelllndustries Sterling Development Law Firms ,...... Arter & Hadden Bronson, Bronson & McKinnon Bryan, Cave, McPheeters & McRoberts Richard Clements Cox, Castle, Nicholson Gibson, Dunn & Crutcher Hill, Farrer & Burrill McClintock, Weston, Benshoof, Rochefort & MacCuish Palmiri, Tyler, Wiener, Wilhelm, & Waldron Sonnenschein Nath & Rosenthal Strauss & Troy Wyman, Bautzer, Rothman, Kuchel & Silbert AGfNDAITEM NO. '33 --??f$ PAGE ?t:P OF ....., -....,,;If ......., 33 AGENDA ITEM 1'4"_ PAOE 3c/ OF 3~_ ,-.. --- SIT ,--. AGENDA ITEM NO. 33 PAOE~2- OF ~~.... APPENDIX E RATE AND METHOD OF APPORTIONMENT """'" ....., """'" E-I AGENDA rrEM NO. -:3 3 PAOE '3 6~ OF "b~ ,,-.. APPENDIX F FORMS OF CONTINUING DISCLOSURE AGREEMENTS ,...... ,...... F-I 1'\C~NDA n i;;1V! i';1 \..I , 3 :3 PACE "'261 OF ?:iiP __ APPENDIX G PROPOSED FORM OF BOND COUNSEL OPINION .."" City of Lake Elsinore 130 S. Main Street Lake Elsinore, California 92530 $ City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A Members of the City Council: We have acted as bond counsel to the City of Lake Elsinore (the "City") in connection with the issuance of the $ aggregate principal amount of City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) Special Tax Bonds, 2006 Series A (the "Bonds"), pursuant to the provisions of Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part I, Division 2, Title 5, or the Government Code of the State of California (the "Act") and pursuant to a Fiscal Agent Agreement, dated as of June 1, 2006 (the "Fiscal Agent Agreement"), by and between the City of Lake Elsinore Community Facilities District No. 2006-2 (Viscaya) (the "District") and Union Bank of California, N.A., .."" as fiscal agent (the "Fiscal Agent"). We have examined the Act and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the District contained in the Fiscal Agent Agreement and in the certified proceedings and certifications of public officials and others furnished to us, without undertaking to verify the same by independent investigation. Based upon the foregoing we are of the opinion, under existing law, as follows: I. The Fiscal Agent Agreement has been duly and validly authorized, executed and delivered by the District and, assuming such Fiscal Agent Agreement constitutes the legally valid and binding obligation of the Fiscal Agent, constitutes the legally valid and binding obligation of the District enforceable against the District in accordance with its terms. 2. The Bonds constitute valid and binding limited obligations of the District as provided in the Fiscal Agent Agreement, and are entitled to the benefits of the Fiscal Agent Agreement. 3. The Bonds are secured by a valid pledge of the Special Taxes (as defined in the Fiscal Agent Agreement) and all moneys in the funds and accounts under the Fiscal Agent Agreement, including all amounts derived from the investment of such moneys, subject to the application thereof on the terms and conditions as set forth in the Fiscal Agent Agreement. 4. The Internal Revenue Code of 1986, as amended (the "Code") sets forth certain requirements that must be met subsequent to the issuance and delivery of the Bonds for interest thereon to be and remain excluded from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause the interest on the Bonds to be included in gross '-' G-I AGtNDA II CIVi ''110. ~? PAD& 36) OF 3D0 __ " income retroactive to the date of issue of the Bonds. The District has covenanted in the Fiscal Agent Agreement to maintain the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In our opinion, under existing law, interest on the Bonds is exempt from personal income taxation of the State of California and, assuming compliance with the aforementioned covenant, interest on the Bonds is excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. We are further of the opinion that under existing statutes, regulations, rulings and court decisions, the Bonds are not "specified private activity bonds" within the meaning of section 57(a)(5) of the Code and, therefore, the interest on the Bonds will not be treated as an item of tax preference for purposes of computing the alternative minimum tax imposed by section 55 of the Code. The receipt or accrual of interest on Bonds owned by a corporation may affect the computation of the alternative minimum taxable income, upon which the alternative minimum tax is imposed, to the extent that such interest is taken into account in determining the adjusted current earnings of that corporation (75 percent of the excess, if any, of such adjusted current earnings over the alternative minimum taxable income being an adjustment to alternative minimum taxable income (determined without regard to such adjustment or to the alternative tax net operating loss deduction)). Except as stated in the preceding two paragraphs, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Bonds. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect" to the Bonds, or the interest thereon, if any action is taken with respect to the Bonds or the proceeds thereof predicated or permitted upon the advice or approval of other bond counsel. No opinion is expressed herein on the accuracy, completeness or sufficiency of the Official Statement or other offering materials relating to the Bonds. ",--.. The rights of the owners of the Bonds and the enforceability of the Bonds and the Fiscal Agent Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as ofthe date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Respectfully submitted, .....- G-2 AGENDA ITEM NO. 3') PAG& .~ ()II ~ ~ CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL .....", TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DATE: JUNE 27, 2006 SUBJECT: AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE BACKGROUND In December 2004, the California Regional Water Quality Control Board, Santa Ana Region (SARWQCB), approved Resolution No. R8-2004-0037 (attachment) adopting the Lake Elsinore and Canyon Lake Nutrient Total Maximum Daily Load (TMDL) Program. On September 30, 2005, the TMDL Program was formally approved by the U.S. Environmental Protection Agency. ....." The goal of the TDML Program is to reduce nutrient pollution and attain specified water quality targets for Lake Elsinore and Canyon Lake over the next fifteen years through a phased program. Under the mandate of the Federal Clean Water Act, the SARWQCB determined the maximum mass of nutrients that can flow to the lakes without impairing their beneficial uses. This total mass was then divided and allocated to each major pollutant source for nutrients. Examples of pollutant sources include urban, agriculture, septic systems and internal in-lake loading. By the year 2020, all the major stakeholders identified by the SARWQCB will be required to meet their waste load allocation for nutrients. The Nutrient TMDL Program mandates a series of implementation tasks to be performed by named watershed stakeholders to monitor, study, and employ measures to restore the beneficial uses of two impaired waterbodies, Lake Elsinore and Canyon Lake. This phased program acknowledges the scientific uncertainty in the data and thus allows for review and adjustments to the regulations every three years. In order to gather scientifically defensible data for the waste load allocations and to ensure stakeholders meet the compliance schedule to attain the water quality targets for the lakes, the SARWQCB required a number of "tasks" be completed by the stakeholders. DISCUSSION The City of Lake Elsinore is conditioned, along with many other agencies, in completing five of the fourteen tasks. These tasks can be performed individually or collectively by stakeholders. AGENDA ITEM NO._~_ K PAGE' OF 10 . .....", ,-.. REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE #2 The total annual estimated cost to stakeholders to comply with the joint regulatory tasks, shared with the City of Lake Elsinore, ranges from $665,000 to $972,000. In order to pool resources and apply for grant funding, a stakeholders group has been meeting regularly over the last few years to develop an organizational agreement and funding plan to complete the tasks. The stakeholders group finalized an agreement and budget on June 13,2006 to form the "Lake Elsinore and Canyon Lake TMDL Task Force". Highlights of the agreement are... 1. LESJW A, Lake Elsinore/San Jacinto Watershed Authority, shall act as the Task Force Administrator. 2. Votes allotted to members shall be proportional to the member's annual budget contribution, with one vote for each $1,000 increment of the annual budget. The City will be allocated approximately 15% of the vote. ,,-. 3. Actions shall pass on a simple majority vote or >50% of all votes allocated based on the annual budget. 4. The budget shall be approved annually by member agencies. The annual budget shall be capped at $800,000 unless amended by a two-thirds vote. Due to delays in formulating an agreement, an exception is made for the first budget period to be an 18-month period at $972,600. 5. The City's share of the budget is primarily related to regulatory compliance for supplemental water addition to the Lake, in the amount of $96,600 for the first 18 month budget period. In addition, the City will participate as an MS4 Stormwater Co-permittee, in the amount of $8,692. 6. The agreement shall terminate on June 30, 2010. Alternatively, any member may withdraw from the Task Force upon a sixty (60) day written notice; however prior funding commitments shall remain in effect through the current fiscal year. 7. Appointments - The City Council will need to appoint one primary and one alternate representative to the Task Force. Considering the annual budget is approved by the City Council each year and the implementation of specified regulatory tasks are of a technical nature; Staff recommends the Director of Lake and Aquatic Resources Department serve on the Task Force. /""" 3l-\ A(;EN;~:E:;O. OF' 7OQ- . REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE #3 '-' FISCAL IMPACT Approval of this agreement and budget authorizes the City to expend $105,292 on this item during FY' 06-07. This amount includes all costs allocated to the City for Task Force related expenses from January 1, 2006 to June 30, 2007. This allocation is included in the City's approved General Fund Budget for FY'06-07 under the Lake and Aquatic Resources Department. RECOMMENDA TION 1. Staff recommends the City Council approve the "Agreement to Form the Lake Elsinore and Canyon Lake TMDL Task Force" and associated budget, and authorize the Mayor to execute the agreement. 2. Staff recommends the City Council appoint Pat Kilroy, Director of Lake Department as the City's primary representative and Bob Brady, City Manager, as the alternate representative to the Task Force. '-' PREPARED BY: Pat Kilroy, Director of Lake and Aquatic Resources Department APPROVED FOR AGENDA BY: ~ '-\ '-' AGEN~~:~O. OF (Q6 _ - _. .",.... ~ AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE This Agreement, entered into as of this day of , 2006, to form the Lake Elsinore and Canyon Lake TMDL Task Force (hereinafter "AGREEMENT") is made by and among the following entities, which are hereinafter sometimes collectively referred to as "TASK FORCE AGENCIES" or individually as ''TASK FORCE AGENCY": United States Department of Agriculture, Forest Service (Forest Service) US Air Force (March Air Reserve Base) March Air Reserve Base Joint Powers Authority California Department of Transportation California Department of Fish and Game County of Riverside City of Beaumont City of Canyon Lake City of Hemet City of Lake Elsinore ~ City of Moreno Valley City of Murrieta City of Perris City of Riverside City of San Jacinto Elsinore Valley Municipal Water District Eastern Municipal Water District Western Riverside County Agriculture Coalition on behalf of the Agricultural Operators in the San Jacinto River Basin Western Riverside County Agriculture Coalition on behalf of the Dairy Operators in the San Jacinto River Basin Riverside County Flood Control and Water Conservation District I. RECITALS A. Whereas, in 1998, the Santa Ana Regional Water Quality Control Board (hereinafter "Regional Board") designated Lake Elsinore and Canyon Lake in the Lake Elsinore and San Jacinto Watersheds (Collectively the "Watersheds") as "impaired water bodies" pursuant to Section 303( d) of the federal Clean Water Act because of high levels of algae in both lakes and low dissolved oxygen in Lake Elsinore, attributed to excess phosphorus and nitrogen (NUTRIENTS). As a result of said Section 303 designation, the Clean Water Act requires that total maximum daily loads (hereinafter "TMDLs") be established by the Regional Board for these waterbodies. B. Whereas, in response to the Section 303(d) designation, the Regional Board adopted a Resolution R8-2004-0037 on December 20,2004 amending the Water Quality Control Plan for the Santa Ana River Basin (BASIN PLAN AMENDMENT) to incorporate nutrient TMDLs for Canyon Lake and Lake Elsinore. The Basin Plan Amendment specifies, among other things, an Implementation Plan (TMDL IMPLEMENTATION PLAN), which holds specified stake holders (TASK FORCE AGENCIES) individually and/or jointly liable for complying with the TMDLs by means of specific tasks to be completed by specified dates under penalty of law. These tasks include development and implementation of a watershed-wide nutrient water quality monitoring program, development of an in-lake nutrient monitoring AGENDA ITEM NO. ~ PACiE 4 Of ~!( ~ 1 ,"Y" ," program for Canyon Lake and Lake Elsinore, development of a plan and schedule for in-lake sediment nutrient reduction for Lake Elsinore, development of a plan and schedule for evaluatin~ in-lake sediment nutrient strategies for Canyon Lake, updating watershed and in-lake nutrient"""'" TMDL water quality models, developing a pollutant trading plan, and reviewing and revising the TMDL to reflect updated data and science. C. Whereas, the purpose of this AGREEMENT is to form a task force (hereinafter "TASK FORCE") to implement certain tasks identified in the TMDL IMPLEMENTATION PLAN and to pursue TMDL related tasks agreed upon by TASK FORCE AGENCIES, and D. Whereas, the TASK FORCE AGENCIES agree that the purpose of this TASK FORCE is to (1) review and develop recommendations to update the TMDL BASIN PLAN AMENDMENT based on the best available scientific information, and (2) implement TMDL IMPLEMENTATION PLAN Tasks identified below and jointly assigned to TASK FORCE AGENCIES, and (3) propose appropriate revisions to the TMDL BASIN PLAN AMENDMENT to the Santa Ana RWQCB by June 30, 2010, and (4) allow watershed stakeholders to participate in efforts to meet appropriate water quality standards so that Canyon Lake and/or Lake Elsinore can be de-listed from the Clean Water Act Section 303(d) list of impaired water bodies, and E. Whereas, hundreds of individual agricultural and dairy operators are subject to the Canyon Lake and Lake Elsinore TMDLs and its component TMDL IMPLEMENTATION PLAN, and F. Whereas the Western Riverside County Agricultural Coalition(WRCAC) is a non- profit organization representing the interests of agricultural and dairy operators within the San""'" Jacinto Watershed, and G. Whereas WRCAC's membership is open to any and all agricultural and dairy operators within the San Jacinto watershed, and H. Whereas, March Air Reserve Base (MARB) is an installation of the United States Air Force, and the San Bernardino and Cleveland National Forest are on federal lands under the administration and management of the Forest Service. Both are agencies of the federal government, and are therefore subject to limitations in their ability to comply with every provision stated herein to the same extent that other non-federal TASK FORCE AGENCIES are able to comply. These limitations are based upon, but not limited to, those identified in the federal Clean Water Act, the federal Antideficiency Act, the principle of sovereign immunity and the holdings of the Supreme Court of the United States, and other binding federal court decisions, as they interpret those sources of federal law. The limitations so mentioned include, but are not limited to, the availability of federal funding to pay for participation in this program, and the ability of MARB and Forest Service to participate directly in sampling, research or data gathering activities which are not located on or near MARB or National Forest System lands or a point source of water discharge arising on MARB or National Forest System lands, or other activities not specifically authorized by the Federal Clean Water Act section 313. To the extent that the limitations described herein prevent MARB or Forest Service from fully participating in any aspect of this program, they reserve the right, in their sole discretion, to participate in the program as a matter of comity. By entering into this agreement, MARB and Forest Service do"""" not authorize any of the TASK FORCE AGENCIES to exercise regulatory authority over them. MARB and Forest Service agree that State and federal regulatory agencies that ~, ~r may AOENDA ITEM NO. ,,~ 2 PAGE 5" 0' b~ -~ ,- become members of this TASK FORCE have regulatory authority over MARB and Forest Service only to the extent permitted by State or Federal Law. I. Whereas, the TASK FORCE AGENCIES acknowledge and agree that the effectiveness of the TASK FORCE may be improved by the inclusion of other agencies as additional TASK FORCE AGENCIES to the TASK FORCE, and J. Whereas, the Riverside County Flood Control and Water Conservation District (RCFC&WCD) serves as the Principal Permittee for the National Pollutant Discharge Elimination System (NPDES) Municipal Separate Storm Sewer System Permit (MS4) for the Santa Ana Region of Riverside County, and K. Whereas, the County of Riverside and Cities of Beaumont, Canyon Lake, Hemet, Lake Elsinore, Moreno Valley, Murrieta, Perris, Riverside, San Jacinto are MS4 CO- PERMITTEES for the NPDES MS4 Permit for the Santa Ana Region of Riverside County, and L. Whereas, the MS4 PRINCIPAL PERMITTEE and MS4 CO-PERMITTEES collectively represent the MS4 PERMITTEES within the San Jacinto Watershed, and ~ M. Whereas, the NPDES MS4 Permit for the Santa Ana Region of Riverside County is regulated by the REGIONAL BOARD and subject to the requirements of the nutrient TMDLs for Canyon Lake and Lake Elsinore, and N. Whereas RCFC&WCD has agreed to provide services on behalf of itself as an NPDES MS4 PERMITTEE and on behalf of the MS4 CO-PERMITTEES for the purposes of this AGREEMENT, and O. Whereas RCFC&WCD has prepared and reviewed the MS4 CO-PERMITTEES cost share allocation with MS4 CO-PERMITTEE staff at the NPDES MS4 Permit Technical Advisory Committee Meetings and with the affected City Managers and County Executive Office, or designated representatives thereof during the NPDES MS4 Permit Management Steering Committee Meeting of February 16, 2006, and P. Whereas, the TMDL assigned nutrient waste load allocations for supplemental water (herein SUPPLEMENTAL WATER) addition to Lake Elsinore to stabilize the Lake's elevation, and Q. Whereas, the nutrient waste load allocation for SUPPLEMENTAL WATER, which includes Island Well water, EVMWD treatment plant effluent, and other sources of non- stormwater, may reduce the TMDL waste load allocation and TMDL load allocation of other point and non-point sources because in-lake nutrient capacity was not adjusted to account for increased lake levels associated with the addition of SUPPLEMENTAL WATER, and ~ R. Whereas, the assumptions regarding load allocations for SUPPLEMENTAL WATER may not be consistent with the actual operation of SUPPLEMENTAL WATER sources, and 3 AGENDA ITEM NO. 34 PAGE 4:> OF "t.o~_ ., " S. Whereas, the City of Lake Elsinore and EVMWD previously entered into an agreement to equally share the cost of SUPPLEMENTAL WATER addition to the Lake undeJ the "Lake Elsinore Comprehensive Water Management Agreement", and '-' T. Whereas, for the purposes of this AGREEMENT, the City of Lake Elsinore shall be acknowledged and recognized as a separate and equal contributor with EVMWD for the cost and voting rights accorded under this AGREEMENT attributed to EVMWD for SUPPLEMENTAL WATER addition, and u. Whereas, the TASK FORCE AGENCIES have considered many alternative cost sharing methodologies based on TMDL assigned load allocation, load reduction, and permutations thereof; and V. Whereas, certain TASK FORCE AGENCIES were strong proponents of cost sharing based on load allocation and other TASK FORCE AGENCIES were strong proponents of cost sharing based on load reduction, and W. Whereas, these TASK FORCE AGENCIES have been unable to agree upon a methodology for distributing costs based on either an allocation or a load reduction methodology; and x. Whereas, the TASK FORCE AGENCIES have reviewed and agreed upon an interim negotiated cost allocation methodology acceptable to all TASK FORCE AGENCIES for the purposes of initiating the TASK FORCE, based on consideration of TMDL assigned load allocations, load reductions, and permutations thereof, and '-' Y. Whereas, the TASK FORCE AGENCIES agree that certain nutrient dischargers have been either inappropriately named or not named as responsible parties for various tasks in the BASIN PLAN AMENDMENT; and z. Whereas, the TASK FORCE AGENCIES agree that agricultural and dairy lands are converting to urban and open space lands, and AA. Whereas, the TASK FORCE AGENCIES agree that an amendment to the TMDL to address, at minimum, the proper naming of responsible parties for various tasks in the TMDL IMPLEMENTATION PLAN, to correct the load allocation and waste load allocations to properly address the impacts of SUPPLEMENTAL WATER on Lake Elsinore, and to revise the load allocation and waste load allocations to address the ongoing conversion of agriculture and dairy lands to urban and/or open space should be addressed as part of a revision to the TMDL IMPLEMENTATION PLAN, and BB. Whereas, the TASK FORCE AGENCIES agree that upon amendment of the existing BASIN PLAN AMENDMENT, including the TMDL IMPLEMENTATION PLAN, by the Regional Board to address, at a minimum, the issues described in Recital Z, the TASK FORCE AGENCIES will amend this AGREEMENT to revise the cost allocation methodology for future fiscal years to incorporate a task-specific cost sharing methodology, based on assigned load allocation or waste load allocation of TASK FORCE AGENCIES, or categories of TASK'-' FORCE AGENCIES, responsible for each TMDL IMPLEMENT A TION PLAN task, and AGENDA ITEM NO.~ 4 PAGE 7 J'~ "..... CC. Whereas, MARB agrees to budget for and to participate in the TASK FORCE, provided that sufficient funds are appropriated by the Congress, in FY 06-07 and future years, and on the condition that funding requirements under this agreement do not violate the Anti- deficiency Act, and provided that the Task Force Agencies agree to relocate the proposed monitoring station from Kitching Channel to the Heacock drainage channel, and use any fees provided by MARB, for participation in this program, to establish and monitor this station. r-- r-- 5 AOENDA ITEM NO. .3'1 PACE R OF 0& II. COVENANTS NOW, THEREFORE; in consideration of the foregoing recitals and mutual covenants-' contained herein, the TASK FORCE AGENCIES agree as follows: 1. Creation of a Task Force. There is hereby created a "Lake Elsinore and Canyon Lake TMDL Task Force" (''TASK FORCE") initially consisting of the TASK FORCE AGENCIES and certain Non-Voting, Non-Funding Members as more specifically provided for in paragraph 2 below. 2. Representation on the Task Force. a. Appointment. Concurrently with the execution of this Agreement, each TASK FORCE AGENCY shall, in accordance with such TASK FORCE AGENCY's own governing provisions, appoint one primary representative to the TASK FORCE and one alternate representative to act in the absence of the primary representative (hereinafter collectively referred to as "REPRESENTATIVES" or individually as "REPRESENTATIVE"). The REPRESENTATIVES shall have the authority to act on behalf of its appointing TASK FORCE AGENCY. The REPRESENTATIVES shall serve at the pleasure of the appointing TASK FORCE AGENCY and may be removed at any time, with or without cause by such TASK FORCE AGENCY; provided, however, that the TASK FORCE AGENCIES acknowledge and agree the continuity 0 representation on the TASK FORCE is important to the overalt-' effectiveness of the TASK FORCE, and the TASK FORCE AGENCIES further agree to ensure such continuity whenever possible. b. Additional Agencies. The TASK FORCE AGENCIES acknowledge and agree that the effectiveness of the TASK FORCE may be improved by the inclusion of other agencies as additional TASK FORCE AGENCIES to the TASK FORCE. Such agencies may join the TASK FORCE on such written terms and conditions as are acceptable to all then existing TASK FORCE AGENCIES of the TASK FORCE, including, but not limited to, agreed-upon cash contributions for past, present, and/or future work, of the TASK FORCE. The inclusion of such agencies as additional TASK FORCE AGENCIES to the TASK FORCE shall be effected by a written amendment to this AGREEMENT signed by all then existing TASK FORCE AGENCIES. Such additional TASK FORCE AGENCIES shall each appoint their TASK FORCE primary REPRESENTATIVE and alternate REPRESENTATIVE as provided in Section II.2.a. above or in said written amendment. The following agencies will be considered for inclusion as additional TASK FORCE AGENCIES in future amendments to this AGREEMENT within the meaning of this section: Any other named stakeholder in any future amendments of the BASIN PLAN AMENDMENT. "" AGENDAJTEM NO.& PAGEt}.O'1 -- - 6 r'- /'""' /'""' c. Non-Voting, Non-Funding Members. The Regional Board, Lake Elsinore and San Jacinto Watersheds Authority and the San Jacinto River Watershed Council are hereby appointed as Non-Voting, Non-Funding Members of the TASK FORCE. Additional Non-Voting, Non-Funding Members may be appointed by a majority vote of the TASK FORCE representatives. Non-Voting, Non-Funding Members appointed herein, and any appointed in the future are authorized only to make recommendations upon the functioning of this TASK FORCE and the development of this program. Federal, State and local regulatory agencies acting as Non-Voting, Non-Funding Members, now or in the future, retain authority to regulate TASK FORCE MEMBERS only to the extent that they are so authorized under state and federal law . d. Dairy and Agricultural Operators. The TASK FORCE AGENCIES acknowledge that the Western Riverside County Agriculture Coalition (WRCAC) shall represent the collective interest of both agricultural and dairy operators in the San Jacinto River Watershed in the TASK FORCE at this time. WRCAC shall appoint two primary TASK FORCE REPRESENTATIVES and two alternate REPRESENTATIVES as provided in Section II.2.a. One set of REPRESENTATIVES shall be designated for agricultural operator interests, the other set of REPRESENTATIVES shall be designated for dairy interests for the purposes of this TASK FORCE. e. Committees. The TASK FORCE may establish subcommittees, consisting of REPRESENTATIVES and Non-Voting, Non-Funding Members who shall be selected by, and serve at the pleasure of, the TASK FORCE. f. Task Force Administrator. A TASK FORCE administrator (hereinafter "TASK FORCE ADMINISTRATOR") shall be appointed by the TASK FORCE. The TASK FORCE ADMINISTRATOR shall have the following administrative responsibilities: (1) Organizing and facilitating TASK FORCE meetings; (2) Secretarial, clerical, and administrative services; (3) Managing TASK FORCE funds and preparing annual reports of TASK FORCE assets and expenditures; (4) Retaining TASK FORCE-authorized consultants; and (5) Seeking funding grants to assist with achieving the work of the TASK FORCE and other goals and objectives approved by TASK FORCE AGENCIES. The TASK FORCE AGENCIES hereby appoint the Lake Elsinore and San Jacinto Watersheds Authority as the initial TASK FORCE ADMINISTRATOR. AGENDA ITEM NO. '3L'\ PAGE If) -0'. ((Z~ 7 .. g. Meetin~s of the Task Force. (i) Frequencv and Location. The TASK FORCE shall, by resolution--'" or motion, agree upon the time and place for holding its regular meetings. Special meetings may be called at the request of the TASK FORCE ADMINISTRATOR or by a majority of the TASK FORCE REPRESENTATIVES. (ii) Task Force Chair. The TASK FORCE REPRESENTATIVES shall select a chair and a vice-chair. The term of the chair and vice-chair shall be one year and shall be rotated among the TASK FORCE REPRESENTATIVES interested in serving as chair. (iii) Quorum. One half or more of the REPRESENTATIVES of the TASK FORCE shall constitute a QUORUM. (iv) Voting. Actions of the TASK FORCE shall be validly taken only when a QUORUM is present and upon the affirmative vote of a MAJORITY of the TASK FORCE REPRESENTATIVES. A MAJORITY of the REPRESENTATIVES shall be determined as follows: Each TASK FORCE AGENCY shall have one vote (herein VOTE) assigned for each $1,000 increment of PRO RATA COST SHARE, as described in Paragraph II.5 below, contributed to the"'"' TASK FORCE budget developed for a given fiscal year (hereinafter "BUDGET"). A MAJORITY of the REPRESENTATIVES shall consist of greater than 50% of the total VOTES based on the BUDGET for the fiscal year during which the action is taken. (v) Brown Act. All meetings of the TASK FORCE or any of its committees shall be conducted as may be required by any applicable provisions of the Ralph M. Brown Act (California Government Code ~~54950 et seq.). The provisions contained in the Ralph M. Brown Act shall prevail in the event of any conflict with provisions contained in this AGREEMENT. The TASK FORCE may adopt such additional rules and regulations as may be required for the conduct of its affairs so long as such rules and regulations do not conflict with this AGREEMENT. 3. Work of the Task Force. The TASK FORCE shall perform the following tasks in accordance with guidelines established by the Regional Board: a. To retain consulting services to review scientific and other assumptions contained within the TMDL. Consultant(s) shall provide a report"'"' identifying preliminary TMDL opportunities such as site specific objectives, pollutant trading strategies, and integration strategies. Jp.e final 8 AGENDA ITEM NO.~-.-:1_~"" . PACE (~ _fit ~ ,,-. scope of work shall be approved by the Task Force. The report shall specifically consider assumptions supporting the TMDL. The report should also provide preliminary analysis of the ability to achieve in-lake nutrient reductions and verify that load assignments are appropriate. Upon completion of the report, Consultant(s) shall also review work described herein, and make recommendations to ensure that work is specifically designed to resolve any deficiencies, where appropriate. Consultant(s) shall also coordinate development of BASIN PLAN AMENDMENT language, in coordination with the Regional Board, which can be used to revise the TMDLs as part of the Regional Board's Triennial Reviews at a minimum, or no later than by June 2010. b. TMDL IMPLEMENTATION PLAN Task 4 - Develop and Implement a Watershed-wide Nutrient Monitoring Program. This program shall obtain data necessary to update the Lake Elsinore and Canyon Lake Nutrient TMDL, and to determine compliance with interim and final nitrogen and phosphorus allocations, and compliance with the nitrogen and phosphorus TMDLs. Monitoring and management of monitoring data to update the Lake Elsinore and Canyon Lake Nutrient TMDL shall commence immediately upon approval of this AGREEMENT. An annual report summarizing the data collected for the year shall be submitted to the Regional Board by August 15 of each year commencing in 2007. ,....... c. TMDL IMPLEMENTATION PLAN Task 4 - Develop and Implement a Lake Elsinore and Canyon Lake Nutrient Monitoring Program. This program shall obtain data necessary to update the Lake Elsinore and Canyon Lake Nutrient TMDLs, and to determine compliance with interim and final nitrogen, phosphorus, chlorophyll a and dissolved oxygen numeric targets. In addition, the monitoring program shall determine the relationship between ammonia toxicity and the total nitrogen allocation to ensure that the total nitrogen allocation will prevent ammonia toxicity in Lake Elsinore and Canyon Lake. Monitoring and management of monitoring data shall commence immediately upon approval of this agreement. An annual report summarizing the data collected for the year shall be submitted to the Regional Board by August 15 of each year commencing in 2007. ",....... d. TMDL IMPLEMENTATION PLAN Tasks 9 and 10 - Develop and Implement a Plan to Reduce NUTRIENTS in Lake Elsinore sediments and develop a sediment nutrient treatment evaluation plan for Canyon Lake. The plans shall evaluate the efficacy of various in-lake treatment technologies to prevent the release of NUTRIENTS from lake sediments as a long-term strategy for control of NUTRIENTS in the sediment. The program may also include a sediment nutrient monitoring program to evaluate the effectiveness of any technologies that may be implemented. Target Date for Completion: March 31, 2007. e. TMDL IMPLEMENTATION PLAN Task 11 - Develop and Implement a Plan and Schedule for Updating the Existing Lake Elsinore/San Jacinto 9 AGEN=l~.~~ River Watershed Nutrient Model and the Canyon Lake and Lake Elsinore In-Lake Models. Develop and implement a plan and schedule to update ....., and execute Watersheds and in-lake models to track the progress of TMDL efforts. In-lake models should be analyzed as soon as sufficient data becomes available. Target Date for Completion: March 31, 2007. f. TMDL IMPLEMENTATION PLAN Task 12 - Investigate. Develop and Implement a Pollutant Trading Plan. Investigate the feasibility of pollutant trading in the Watersheds, and develop a feasibility plan for Regional Board review and approval. Target Date for Completion: September 30, 2007. g. Investigate Long Term TMDL Implementation Structure. Cost Sharing Formula and Funding Sources. Investigate possible long term administrative structures, cost sharing formulas and funding sources that can be used to obtain compliance with the TMDL requirements. Target Date for Completion: June 30, 2010. h. Other Tasks. The TASK FORCE may undertake such other plans, programs and studies as authorized by the TASK FORCE pursuant to IL2.g. of this AGREEMENT. 1. Limitations on MARB and Forest Service. As described above in Section LH, MARB is an agency of the federal government and is therefore unable to participate in each and every aspect of Section 3 to the same extent as ......" other TASK FORCE MEMBERS. To the extent that it is unable to participate in any tasks under section 3, it reserves the right, in its sole discretion, to participate to the fullest extent that it is able, as a matter of comity . 4. Budgets. Beginning in FY2007-2008, the total annual budget (BUDGET), adjusted to remove in-kind services, grant funding and funding credits associated with this AGREEMENT shall not exceed $800.000, except as authorized by the TASK FORCE via two-thirds approval via VOTES based on the BUDGET for the then current fiscal year pursuant to II.2.g. of this AGREEMENT. The TASK FORCE ADMIN S TRA TOR shall prepare and submit a proposed BUDGET for each fiscal year of this AGREEMENT to the TASK FORCE AGENCIES by November 30th. The proposed BUDGET shall include all anticipated costs for the scope(s) of work developed by the TASK FORCE for the next fiscal year. The TASK FORCE REPRESENTATNES shall approve the BUDGET by December 31st. Each TASK FORCE AGENCY shall pay its PRO-RATA SHARE of the approved fiscal year's TASK FORCE BUDGET and arrears by August 31 st of the following year. The BUDGET for the eighteen (18) month period starting January 1, 2006 and extending through June 30, 2007 and estimated fiscal year BUDGETS through June 30, 2010 are included as Attachment A to the AGREEMENT. Approval of this AGREEMENT shall constitute approval of the BUDGET through June 30, 2007. Payment of the BUDGET through June 30, 2007 shall be by August 31, 2006, or within 30 days 10 "-tIJI AGENDA ITEM NO. ~ - PAGE/~ ~ ~ -"'"" -"'"" of the approval of this AGREEMENT by each TASK FORCE AGENCY, whichever is sooner. The TASK FORCE ADMINISTRATOR shall endeavor to minimize carry-over fund balances to those necessary to complete work of the TASK FORCE and to maintain contingencies limited to those necessary to ensure work of the TASK FORCE is not impeded. Excess not necessary to complete budgeted work of the TASK FORCE or maintain adequate reserves shall be credited back to the TASK FORCE AGENCIES in the BUDGET consistent with the PRO-RATA SHARE methodology described in Paragraph II.5 below. THE TASK FORCE AGENCIES shall agree to a reasonable reserve balance as part of each year's BUDGET. After September 30 of each year, the TASK FORCE ADMINSTRATOR shall provide an accounting of all PRO RAT A SHARES collected via cash or in-kind contributions. If PRO RATA SHARES collected are less than BUDGET, the TASK FORCE shall meet with Regional Board staff to determine appropriate priorities for scheduled TASK FORCE work. and revise BUDGET based on available funds. 5. Pro-Rata Share Calculation. The annual PRO-RATA SHARE shall be calculated in the following manner: The PRO-RATA SHARE for MS4 CO-PERMITTEES, Agricultural Operators and EVMWD shall be based on the BUDGET reduced by the value of available grant funding identified in Section 1 of Attachment A and in-kind services identified in Section 3 of Attachment A (LINE lk BUDGET). The PRO-RATA SHARE for MS4 CO-PERMITTEES, and Agricultural Operators shall each be 28.5% of the LINE lk BUDGET. Based on the prior agreement of EVMWD and the CITY OF LAKE ELSINORE involving the sharing of cost for supplemental water into Lake Elsinore, the PRO-RATE SHARE for EVMWD and the CITY OF LAKE ELSINORE shall each be 14.25% of the LINE lK BUDGET. The PRO-RATA SHARE for Dairy shall be 5% of the LINE lk BUDGET. The PRO-RATA SHARE for RCFC& WCD shall be the cash value of the in-kind services described in Section 3 of Attachment A. The PRO-RATA SHARE for all other TASK FORCE AGENCIES shall be as a base amount set forth in the BUDGET. The PRO-RATA SHARE for additional TASK FORCE AGENCIES shall be per in kind services and/or an amount agreed upon via written amendment of this AGREEMENT per Section II.2.b. If the estimated funds collected under the PRO-RATA SHARE calculations exceed the BUDGET, the contributions of MS4 CO-PERMITTEES, EVMWD, City of Lake Elsinore, Agricultural Operators, Dairy and other TASK FORCE 11 NiENDA IfE~B. ~. PACE J. OF .& AGENCIES contributing in excess of the base amount shall be raised or reduced proportionately based on the percentage of their PRO-RATA SHARE, until thr estimated total PRO-RATA SHARES equals the BUDGET. ""'-'" RCFC&WCD shall provide the TASK FORCE ADMINSTRATOR with annual individual MS4 CO-PERMITTEE cost share distribution of the MS4 CO- PERMITTEES PRO-RATA SHARE for budgets following Fiscal Year 2006-07. The methodology used by RCFC&WCD to calculate the MS4 CO-PERMITEE cost share distribution may be amended at the NPDES MS4 Management Steering Committee. 6. In-Kind Credits. The PRO-RATA SHARE of a TASK FORCE AGENCY shall be reduced by the value of IN-KIND CREDITS provided toward agreed-upon budgeted tasks by, or on behalf, of the TASK FORCE AGENCY(S). Credits shall be applied to each budget period and adjusted at the end of each budget year based on actual verified costs. 7. Modifications to the TASK FORCE PRO-RATA SHARE methodology. The methodology deriving the TASK FORCE PRO-RATA SHARE as provided in Section n.5 of this AGREEMENT may be modified upon written approval of all then existing TASK FORCE AGENCIES whose PRO-RATA SHARE would be affected. 8. The TASK FORCE AGENCIES shall cooperate fully with one another to attai~ the purposes of this AGREEMENT. 9. Nothing in this AGREEMENT, nor the work set forth in this AGREEMENT, nor any activity approved or carried out by the TASK FORCE AGENCIES hereunder, is intended to be nor shall be interpreted as a waiver by TASK FORCE AGENCIES of the "Maximum Extent Practicable" standard set forth in the Clean Water Act (33 U.S.C. Section 1251 et seq.). 10. Each TASK FORCE AGENCY shall indemnify, defend, and hold each of the other TASK FORCE AGENCIES, including their special districts, officials, agents, officers, and employees, harmless from and against any and all liability and expense arising from any act or omission of such TASK FORCE AGENCY, its officials, agents, officers, and employees, in connection with this AGREEMENT, including but not limited to defense costs, legal fees, claims, actions, and causes of action for damages of any nature whatsoever, including but not limited to bodily injury, death, personal injury, or property damage; provided, however, that no TASK FORCE AGENCY shall indemnify another TASK FORCE AGENCY for that TASK FORCE AGENCY's own negligence or willful misconduct. MARB and the Forest Service, as agencies of the federal government, are unable to indemnify or hold harmless any other TASK FORCE AGENCY for any ""'-'" liability arising under this agreement. MARB and the Forest Service expressly do not indemnify or hold harmless any TASK FORCE AGENCY for any injuries or 12 ACENDAITEM NO. 2J-\ PACE IS" OF ~~ ~ 11. ..--.- ~ liabilities, to itself, to any third party or to MARB, or the Forest Service, or its employees under this agreement or any activities carried out under authority of this agreement. In light of the provisions of Section 895.2 of the Government Code of the State of California imposing certain tort liability jointly upon public entities solely by reason of such entities being parties to an agreement (as defined in Section 895 of said Code), each of the TASK FORCE AGENCIES hereto, pursuant to the authorization contained in Sections 895.4 and 895.6 of said Code, shall assume the full liability imposed upon it or any of its officers, agents, or employees by law for injury caused by any act or omission occurring in the performance of this AGREEMENT to the same extent that such liability would be imposed in the absence of Section 895.2 of said Code. To achieve the above stated purpose, each of the TASK FORCE AGENCIES indemnifies, defends, and holds harmless each other TASK FORCE AGENCY for any liability, cost, or expense that may be imposed upon such other TASK FORCE AGENCY solely by virtue of said Section 895.2. The provisions of Section 2778 of the California Civil Code are made a part hereof as if incorporated herein. MARB and the Forest Service, as agencies of the federal government, are unable to indemnify or hold harmless any other TASK FORCE AGENCY for any liability arising under this agreement. MARB and the Forest Service expressly do not indemnify or hold harmless any TASK FORCE AGENCY for any injuries or liabilities, to itself, to any third party or to MARB or Forest Service or their employees under this agreement or any activities carried out under authority of this agreement. Tort liability for federal employees, including employees of MARB and Forest Service, is expressly authorized and limited by the Federal Tort Claims Act, which will control liability of MARB and the Forest Service and their employees under the terms of this agreement. 12. All obligations of CALTRANS under the terms of this AGREEMENT are subject to the appropriation of the resources by the Legislature and the allocation of resources by the California Transportation Commission. This AGREEMENT has been written before ascertaining the availability of Federal or State legislative appropriation of funds, for the mutual benefit of the TASK FORCE AGENCIES in order to avoid program and fiscal delays that would occur if the AGREEMENT were executed after that determination was made. This AGREEMENT is valid and enforceable as to CAL TRANS as if sufficient funds have been made available to CAL TRANS by the United States Government or California State Legislature for the purposes set forth in this AGREEMENT. If the United States Government or the California State Legislature does not appropriate sufficient funds for CALTRANS to participate in this AGREEMENT, this AGREEMENT may be amended in writing by the TASK FORCE AGENCIES to reflect any agreed-upon reduction in the percentage of funds contributed by CALTRANS to continue its participation in this AGREEMENT. CALTRANS, however, has the option to withdraw from this AGREEMENT in the event sufficient funds are not appropriated for CAL TRANS. Should CALTRANS exercise its option to withdraw from this AGREEMENT, CALTRANS shall remain responsible ~ r its AOENDA ITEM NO. 13 PAGE J~ OF share of liability, if any, incurred while participating in this AGREEMENT. 13. No TASK FORCE AGENCY shall have a financial obligation to any other T AS:K.'-' FORCE AGENCY under this AGREEMENT, except as expressly provided herein. 14. Any notices, invoices, reports, correspondence, or other communication concerning this AGREEMENT shall be directed to the TASK FORCE AGENCY REPRESENTATIVE on file with the TASK FORCE ADMINISTRATOR, except that any TASK FORCE AGENCY may change its name or address by giving the other TASK FORCE AGENCIES at least ten days written notice of the new name or address. 15. The TASK FORCE AGENCIES are, and shall at all times remain as to each other, wholly independent entities. No TASK FORCE AGENCY to this AGREEMENT shall have power to incur any debt, obligation, or liability on behalf of any other TASK FORCE AGENCY unless expressly provided to the contrary by this AGREEMENT. No employee, agent, or officer of a TASK FORCE AGENCY shall be deemed for any purpose whatsoever to be an agent, employee or officer of another TASK FORCE AGENCY. 16. This AGREEMENT shall be binding upon and shall inure to the benefit of the respective successors, heirs, and assigns of each TASK FORCE AGENCY. 17. This AGREEMENT shall be governed by, interpreted under and construed an~ enforced in accordance with the laws of the State of California, except as to the Forest Service and the March Air Reserve Base to whom federal law is applicable. 18. If any provision of this AGREEMENT shall be determined by any court to be invalid, illegal or unenforceable to any extent, the remainder of this AGREEMENT shall not be affected and this AGREEMENT shall be construed as if the invalid, illegal, or unenforceable provision had never been contained in this AGREEMENT. 19. Each individual TASK FORCE AGENCY has been represented by its own separate counsel in the preparation and negotiation of this AGREEMENT. Accordingly, this AGREEMENT shall be construed according to its fair language and any ambiguities shall not be resolved against the drafting TASK FORCE AGENCY. 20. Each of the persons signing below on behalf of a TASK FORCE AGENCY represents and warrants that he or she is authorized to sign this AGREEMENT on behalf of such TASK FORCE AGENCY. 21. Duration of Agreement. This AGREEMENT shall terminate June 30, 2010 (unless extended by mutual agreement of all TASK FORCE AGENCIES),........" provided that all debts and liabilities of the TASK FORCE are satisfied. Notwithstanding the foregoing, each TASK FORCE AGENCY reserves the right 14 AGENDA ITEM NO. 3'-l PAGE 11 OF~~.~ "....... 22. 23. 24. ,....... ,....... to withdraw from the TASK FORCE at any time, upon sixty (60) days' prior written notice to the TASK FORCE. TASK FORCE contingency, projects and studies underway at the time of withdrawal shall continue to be fully funded by the withdrawing TASK FORCE AGENCY until the end of the fiscal year in which the TASK FORCE AGENCY gave notice to withdraw. Counterparts. This AGREEMENT may be executed simultaneously or in any number of counterparts, each of which shall be deemed an original and together shall constitute one and the same instrument. Amendment. This AGREEMENT may not be amended except in a writing signed by all the TASK FORCE AGENCIES. Effective Date. This AGREEMENT shall become effective when it has been executed by all of the TASK FORCE AGENCIES. 15 AGENDA ITEM NO. oi.,iU"- PAGE (X ~ IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" has beer executed as of the day and year first above written. ....., LAKE ELSINORE AND SAN JACINTO WATERSHED PROJECT AUTHORITY BY TITLE DATE APPROVED AS TO FORM ......." By Attorney ......." 16 ACENDA ITEM NO. 2J-\ PACE (9 OF 'to:B \~.... -,'~:.'-'-"" Y', r--- IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" UNITED STATES DEPARTMENT OF AGRICULTURE FOREST SERVICE (SAN BERNARDINO AND CLEVELAND NATIONAL FOREST MANAGEMENT ZONES) BY TITLE DATE ,-... APPROVED AS TO FORM By Attorney ,-... 17 AGENDA ITEM NO. D<i PAOE iJ iJ OF Ib~ IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMEN1'-' TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" US AIR FORCE (MARCH AIR RESERVE BASE) BY TITLE DATE APPROVED AS TO FORM '-' By Attorney -...",,; 18 AGENDA ITEM NO. PACiE ~ I D<-t OF 1;8 /"" IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" MARCH AIR RESERVE BASE JOINT POWERS AUTHORITY BY TITLE DATE APPROVED AS TO FORM ".-.. By Attorney /"" 19 AGENDA ITEM NO. ~ PACE ~ ~-:-~L IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" ......, CALIFORNIA DEPARTMENT OF TRANSPORTATION BY TITLE DATE APPROVED AS TO FORM By Attorney .......", 20 ......, ACENDA'TEM Nfj 3i PAGE~" -~ - --4o..o0F - .. . ""'" IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" CALIFORNIA DEPARTMENT OF FISH AND GAME BY TITLE DATE APPROVED AS TO FORM ,--.. By Attorney ~ 21 AGENDA lTE,! 119._ 3'1 PACE~OF ~= - IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" ....", ELSINORE VALLEY MUNICIPAL DISTRICT BY TITLE DATE APPROVED AS TO FORM By Attorney ....., ......", 22 ACENDA ITEM NO. ~LJ PACE~ OF b8 -= ~ IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" EASTERN MUNICIPAL WATER DISTRICT BY TITLE DATE APPROVED AS TO FORM ,-- By Attorney ,-- 23 ACENDA ITEM NO. 3L\ PACE ~(o OF b'8 IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" ....., WESTERN RIVERSIDE COUNTY AGRICULTURE COALITION BY TITLE DATE APPROVED AS TO FORM By Attorney ....., ....., 24 ACENDA ITEM NO. 'Ol..\ PACE d1 OF b-g ,-... IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" RECOMMENDED FOR APPROVAL: By WARREN D. WILLIAMS General Manager-Chief Engineer APPROVED AS TO FORM JOE S. RANK County Counsel By DAVID HK. HUFF Deputy County Counsel .,.--.- ,-... RIVERSIDE COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT By MARION ASHLEY, Chairman Riverside County Flood Control and Water Conservation District Board of Supervisors ATTEST: NANCY ROMERO Clerk to the Board By Deputy (SEAL) 25 ACENDA ITEM NO. 3L\ PACE (}.X OF .(p~ _ IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" "WI' COUNTY OF RIVERSIDE RECOMMENDED FOR APPROVAL: By LARRY PARRISH County Executive Officer By BOB BUSTER, Chairman Riverside County Flood Control and Water Conservation District Board of Supervisors APPROVED AS TO FORM ATTEST: JOE S. RANK County Counsel NANCY ROMERO Clerk to the Board By DAVID H.K. HUFF Deputy County Counsel By Deputy (SEAL) "WI' ...." 26 AGENDA ITEM NO. 3Li PAGE ;;1,1 OF loR _ ~ IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" CITY OF BEAUMONT BY Mayor DATE APPROVED AS TO FORM By /"'"' City Attorney /"'"' 27 ACENDA ITEM NO. PACE~ 2M OF 10 R IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" ~ CITY OF CANYON LAKE BY Mayor DATE APPROVED AS TO FORM By City Attorney ......" f ......" 28 AGENDA ITEM NO.~ PAGE 3/ OF lax ",....... ".-.. ",....... IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" CITY OF LAKE ELSINORE BY Mayor DATE ATIEST: City Clerk APPROVED AS TO FORM By City Attorney 29 AGENDA ITEM NO. 2Jl.\ PACE 3 ~ OF 108 IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" ~ CITY OF MORENO VALLEY BY Mayor DATE APPROVED AS TO FORM By City Attorney """'" """'" 30 AGENDA ITEM NO. 1>'-\ PACE.33 OF ibB.:.. JII""'" .--' ,....... IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" CITY OF MURRIETA BY Mayor DATE APPROVED AS TO FORM By City Attorney 31 ACENDA ITEM NO. ol.\ PACE 31 OF (ojj IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" ....."" CITY OF PERRIS BY Mayor DATE APPROVED AS TO FORM By City Attorney '-' ~ 32 ACENDA ITEM NO. O~ PACE 36" OF /Pi r--- r"' r"' IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" CITY OF RIVERSIDE BY Mayor DATE APPROVED AS TO FORM By City Attorney 33 ACENDA ITEM NO. ol..\ PACE:?iLJ OF 1(2" ._~ IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" ....., CITY OF SAN JACINTO BY Mayor DATE APPROVED AS TO FORM By City Attorney """ """ 34 AG~DA ITEM NO. ~ PACE;'3? OF . -"'. IN WITNESS WHEREOF, the Parties have executed this Agreement entitled "AGREEMENT TO FORM THE LAKE ELSINORE AND CANYON LAKE TMDL TASK FORCE" SANTA ANA REGIONAL WATER QUALITY CONTROL BOARD BY TITLE DATE APPROVED AS TO FORM -'" By Attorney JEU:cw P8\ 6/6/06 -'" 35 AGENDA ITEM NO. 2t\ PACE 3'8 .OF~ Attachment A - lake Elsinore & Canyon lake Nutrient TMDl Task Force Implementation Schedule and Budget 1 R o E A """" is 1b 1c 1d 1. if 19 1h 11 c G 1j 111: 11 s 1m 2 28 2b 2c 3 .~ 38 3b 3c 3d 38 Notes: FIac8I Vur : July 1 - June 30 FY ~7 : 18 Month Budget starting Jan 1, 2006 """"" C:IDocumenls and SetlingslmarielDesktop\Final Att A Fnl02 09 06 TMDL Malrix6I9/2006 AGENDA ITEM NO. .-1tL__ PACe2f1 _OF~ 4e 4f 4g 4z "'a '. iIiMI ~1Dyon'Lake aridLait~... V. 11.0 4i4l........ Plan ". . '.' . 11 1 waw...hed and Canyon Lake and Lake Elainont In- . Lake Model U~ 4ad 11.2 UpcI. of SCAG Land Use .tab .tae 3O-Jun-oe $ 70.000 $ 140" 3O-Jun-09 $ 20.000 ",...... R R R S S R C R S R G o o s x x x x R s o s R G o G R o o C:\Documents and SettingslmarielDesktop\Final At! A FnlO2 09 06 TMDL Matrix6/912006 ACENDA ITEM NO. PACiE 4v Di O~ .h2 .... 4af 4ag ..... 4111 Notes: Task Budgets : Estimallls taken from TMDL Monitoring Report prepal8Cl by TetraTech, Inc. c- : Task funded by Stakeholder Contingency Funds C:\Documents and Settingslmarie\DesktoplFinal Att A Fnl02 09 06 TMDL Matrix61912006 R R R ACENDA ITEM NO. PAGE 1./ I "w/If "--' :b~ OF 6.i """" 5 Sa IIS4 Co-Pennlttees (Total) 200,700 Riverside County 64,347 TIlO TBD TBO City of Beaumont 3,318 TBO TBD TIlO ,..... City of Canyon Lake 4,118 TBO TBO TBD City of Hemet 25,028 TBO TBO TBO City of Lake Elsinore 8,692 TBO TBD TBO City of Moreno VaHey 56,813 TBO TBD TBO City of Murrieta 1,000 TBO TBO lBO City of P....... 16,829 TBD TBO lBO City of RIYlII'BIde 2,323 TOO TBD TBD City of San Jacinto TIlO TBD TBD 6b RCFC&WCD 6c Lk Elsinore Comp Water Mgt Agnnt (Total) % $ 193,200 $ 203,400 $ 200,700 $ 166,100 Elsinore Valley Municipal Wafar Diat &0 $ 96,600 $ 101,700 $ 100,350 $ 83,050 City of lake Elsinore 50 $ 96,600 $ 101,700 $ 100,350 $ 83,050 6d San Jacinto Agricultural Operators $ 193,200 $ 203,400 $ 200,700 $ 166,100 58 San Jacinto Dairy & CAFO Operators $ 33,900 $ 36,700 $ 35,200 $ 29,100 6f CAL TRANS - freeway $ 16,000 $ 10,000 $ 10,000 $ 10,000 6g CA DF&G . San Jacinto Wetlands $ 16,000 $ 10,000 $ 10,000 $ 10,000 6h US Forest Service Area 61 Eastern Municipal Water District 6j .arch ARB Joint Powers Authority 6k US Air Force (March Air Reserve Base) 61 6 Sa MS4 Co-Permittees (Total) ~ Riverside County 28,591 lBO City of Beaumont 1,474 TBD TIlO TBD City of Canyon Lake 1,830 TBD TBD TBD City of HlIIllel 11,121 TBD TBD TBD City of Lake Elsinore 3,862 TBD TBO lBD City of Moreno Valley 25,244 lBD TBD lBD City of Murrieta 1,000 TBD TBD TBD City of Perrls 7,478 TBD TBD lBD City of Riverside 1,032 TBD TIlO TBD City of San Jacinto 6b RCFC&WCD 6c Lk Elsinore Comp Water Mgt Agrmt (Total) % 12,000 $ 46,200 $ 86,200 $ &0,600 Elsinore VaHey Municipal Water Diat &0 6,000 $ 23,100 $ 42,600 $ 25,300 City of Iske Elsinore &0 6,000 $ 23,100 $ 42,600 $ 25,300 6d San Jacinto Agricultural Operators 193,200 203,400 200,700 $ 166,100 6e San Jacinto Dairy & CAFO Operators 35,700 36,200 $ 29,100 6f CAL TRANS - freeway $ 10,000 6g CA DF&G - San Jacinto Wetlands $ 10,000 6h US Forest Service Area 61 Eastern Municipal Water District $ 16,000 $ 10,000 $ 10,000 $ 10,000 6j March ARB Joint Powers Authority $ 16,000 $ 10,000 $ 10,000 $ 10,000 6k US Air Force (March Air Reserve Base) $ 15,000 $ 10,000 $ 10,000 $ 10,000 61 Total: $ 400,600 $ 474,700 $ &07,BOO $ 397,900 ".-.. C:lDocuments and Settingslmarie\Desk1op\Final All A Fnl02 09 06 TMDL Matrix6l9l2006 ACENDA ITEM NO. PAGE fJ. ~'i OF 6K 7 7a M54 Co-PennItt8es (Total) RIverside County 180 TBO TBD City of Beaumont TBO TBO TBO City of Canyon Lake TBO 180 TBO ......., City of Hemet 180 TBO TBD City of Lake Elslno,. TBO TBD TBO City of Moreno Valley TBO 180 TBD City of Murrieta TBO TBD TBD City of Penta 1'8D 180 TBD City of Rlvtnlde TBO TBO TBD City of San Jacinto 180 180 180 7b RCFC&WCD 1711 77 f1I 77 7c Lk Elsinore Comp Water Mgt Agmrt (Total) % 193 203 200 1" Elelnore Valley Municipal Wllt8r Diet 50 96 101 100 83 City of lake ElelnOnl 50 96 101 100 83 7d San Jacinto Agricultural Operators 193 203 200 166 7e San Jacinto Dairy & CAFO Operators 33 3S 3S 29 7f CAL TRANS - freeway 16 10 10 10 7g CA DF&G - San Jacinto Wetlands 16 10 10 10 7h US Forest Service Area 16 10 10 10 71 Eastern Municipal Water District 15 10 10 10 7j March ARB Joint Powers Authority 15 10 10 10 7k US Air Force (March Air Reserve Base) 16 10 10 10 71 Tota : 69B 627 699 610 C:\Documents and Setlingslmarie\DesklDp\Final Att A Fnl02 09 06 TMDL Matrix6I912006 ACENDA ITEM NO. PACE 1./3 ......., 3'1 OF /oJ ....." ~ California Regional Water Quality Control Board Santa Ana Region RESOLUTION NO. R8-2004-0037 Resolution Amending the Water Quality Control Plan for the Santa Ana River Basin to Incorporate Nutrient Total Maximum Daily Loads (TMDLs) for Lake Elsinore and Canyon Lake WHEREAS, the California Regional Water Quality Control Board, Santa Ana Region (hereinafter, Regional Board), finds that: 1. An updated Water Quality Control Plan for the Santa Ana River Basin (Basin Plan) was adopted by the Regional Board on March 11, 1994, approved by the State Water Resources Control Board (SWRCB) on July 21, 1994, and approved by the Office of Administrative Law (OAL) on January 24, 1995. 2. The Basin Plan specifies the following beneficial uses for Lake Elsinore: warm freshwater aquatic habitat (WARM), body contact recreation (REC1), non-body contact recreation (REC2) and wildlife habitat (WILD). ~ 3. The Basin Plan specifies the following beneficial uses for Canyon Lake: warm freshwater aquatic habitat (WARM), body contact recreation (REC1), non-body contact recreation (REC2), wildlife habitat (WILD), municipal and domestic water supply (MUN), agriculture water supply (AGR) and groundwater recharge (GWR). 4. The Basin Plan specifies the narrative water quality objective for algae for inland surface waters, including Lake Elsinore and Canyon Lake, that waste discharges shall not contribute to excessive algae growth in receiving waters. 5. For WARM designated inland surface waters, the Basin Plan specifies the narrative objective that dissolved oxygen levels shall not be depressed below 5 mg/L. 6. The narrative water quality objectives pertaining to excessive algae growth and dissolved oxygen are not being met in Lake Elsinore, as demonstrated by a history of significant algae blooms and low dissolved oxygen concentrations. Lake Elsinore beneficial uses adversely impacted include WARM, WILD, REC1 and REC2. 7. The narrative objectives pertaining to excessive algae growth and dissolved oxygen are not being met in Canyon Lake, as demonstrated by occasional excessive algae growth, and by low dissolved oxygen concentrations. Canyon Lake beneficial uses adversely impacted include MUN, WARM, WILD, REC1 and REC2. 8. As a result of the beneficial use impacts to the two lakes, the Regional Board listed Lake Elsinore and Canyon Lake as water quality limited in accordance with Section 303(d) of the Clean Water Act. Section 303(d) requires the establishment of a Total Maximum Daily Load (TMDL) for the pollutant(s) causing the impairment. Phosphorus and nitrogen are the ~ nutrients causing the impairment. Section 303(d) also requires the allocation of the TMDL among the sources of nutrient inputs. State law requires an implementation plan and ACENDA ITE~ f/.q. 11-\ PACE L..Jq OF h~ Resolution No. RB-2004-0037 page 2 of 4 schedule to ensure that the TMDL is met and that compliance with water quality standards is achieved. """ 9. The Basin Plan amendment shown in the attachment to this Resolution was developed in accordance with Clean Water Act Section 303(d) and Water Code Section 13240 et seq. The amendment is proposed for incorporation into Chapter 5 "Implementation", of the Basin Plan. The proposed Basin Plan amendment includes background information concerning the water quality impairment being addressed, and the sources of nutrients to Canyon Lake and Lake Elsinore. The proposed TMDL is supported by a detailed report prepared by Regional Board staff and titled "Lake Elsinore and Canyon Lake Nutrient Total Maximum Daily Loads", June 2004 (hereinafter, "TMDL Report"). 10. The Basin Plan amendment specifies final numeric targets for total phosphorus for both Lake Elsinore and Canyon Lake, and final numeric targets for total nitrogen for both lakes. Control of nitrogen and phosphorus is needed to ensure compliance with relevant numeric and narrative water quality objectives specified in the Basin Plan, including those pertaining to excessive algae growth and dissolved oxygen. 11. The Basin Plan amendment specifies interim and final response numeric targets for chlorophyll a and dissolved oxygen for both Lake Elsinore and Canyon Lake. These response numeric targets provide a method to track improvements in water quality resulting from reduction in the loading of nitrogen and phosphorus. 12. The Basin Plan amendment specifies final TMDLs, waste load allocations for point source discharges (WLA), load allocations for nonpoint source discharges (LA) for total phosphorus for Lake Elsinore and Canyon Lake. The Basin Plan amendment specifies final TMDLs, wasteload allocations for point source discharges and load allocations for non point source discharges for total nitrogen for both lakes. """ 13. The Basin Plan amendment specifies an implementation plan for nutrient reduction. The implementation plan includes compliance schedules for the numeric targets, TMDLs, waste load allocations and load allocations, as well as a monitoring program to track progress toward compliance. 14. The Basin Plan amendment will assure the reasonable protection of the beneficial uses of surface waters within the Region and is consistent with the state's antidegradation policy (SWRCB Resolution No. 68-16). 15. The Regional Board has considered the costs associated with implementation of this amendment, as well as costs resulting from failure to implement nutrient control measures necessary to prevent adverse effects on beneficial uses. The implementation plan in the Basin Plan, which includes extended compliance schedules and employs a phased TMDL approach to provide for refinement based on additional studies and analyses, will ensure that implementation expenditures are reasonable and fairly apportioned among responsible parties. 16. The proposed amendment results in no potential for adverse effects, either individually or cumulatively, on fish and/or wildlife species. ACENDA ITEM NO. PACE '16 'bL\ OF ~"X :: """ Resolution No. R8-2004-0037 page 3 of 4 I"""'" 17. The adoption of these TMDLs is necessary to reduce loadings of nutrients to Lake Elsinore and Canyon Lake and to address water quality impairments that arise therefrom. 18. The proposed amendment meets the "Necessity" standard of the Administrative Procedure Act, Government Code, Section 11352, subdivision (b). 19. The Regional Board submitted the relevant technical documents that serve as the basis for the proposed amendment to an external scientific review panel and has considered the comments and recommendations of that panel in drafting the amendment. 20. The proposed amendment will result in revisions to the Basin Plan Chapter 5 "Implementation" . 21. The Regional Board discussed this matter at a workshops conducted on June 4, 2004 and September 17, 2004 after notice was given to all interested persons in accordance with Section 13244 of the California Water Code. Based on the discussion at those workshops, the Board directed staff to prepare the appropriate Basin Plan amendment and related documentation to incorporate the Lake Elsinore and Canyon Lake Nutrient TMDLs. 22. The Regional Board prepared and distributed written reports (staff reports) regarding adoption of the Basin Plan amendment in accordance with applicable state and federal environmental regulations (California Code of Regulations, Section 3775, Title 23, and 40 CFR Parts 25 and 131). ~ 23. The process of basin planning has been certified by the Secretary for Resources as exempt from the requirement of the California Environmental Quality Act (Public Resources Code Section 21000 et seq.) to prepare an Environmental Impact Report or Negative Declaration. The Basin Plan amendment package includes staff reports, an Environmental Checklist, an assessment of the potential environmental impacts of the Basin Plan amendment, and a discussion of alternatives. The Basin Plan amendment, Environmental Checklist, staff reports, and supporting documentation are functionally equivalent to an Environmental Impact Report or Negative Declaration. 24. On December 20, 2004, the Regional Board held a Public Hearing to consider the Basin Plan amendment. Notice of the Public Hearing was given to all interested persons and published in accordance with Water Code Section 13244. 25. The Basin Plan amendment must be submitted for review and approval by the State Water Resources Control Board (SWRCB), Office of Administrative Law (OAL) and U.S. Environmental Protection Agency (USEPA). Once approved by the SWRCB, the amendment is submitted to OAL and USEPA. The Basin Plan amendment will become effective upon approval by OAL and USEPA. A Notice of Decision will be filed. 26. The Notice of Filing, the TMDL Report, environmental checklist, and the draft amendment were prepared and distributed to interested individuals and public agencies for review and comment, in accordance with state and federal regulations (23 CCR 93775, 40 CFR 25 and 40 CFR 131). ",,-- ACENDA ITEM NO. PAGE i/ /P 3L\ OF IPS Resolution No. R8-2004-0037 page 4 of 4 27. For the purposes of specifying compliance schedules in NPDES permits for effluent limitations necessary to implement these TMDLs, the schedule(s) specified in these TMDLs shall govern, notwithstanding other compliance schedule authorization language in the Basin Plan. ......" NOW, THEREFORE BE IT RESOLVED THAT: 1. The Regional Board adopts the amendment to the Water Quality Control Plan for the Santa Ana River Basin (Region 8), as set forth in the attachment. 2. The Executive Officer is directed to forward copies of the Basin Plan amendment to the SWRCB in accordance with the requirements of Section 913245 of the California Water Code. 3. The Regional Board requests that the SWRCB approve the Basin Plan amendment, in accordance with Sections 913245 and 913246 of the California Water Code, and forward it to the OAL and U.S. EPA for approval.. 4. If, during its approval process, the SWRCB or OAL determines that minor, non-substantive corrections to the language of the amendment are needed for clarity or consistency, the Executive Officer may make such changes, and shall inform the Board of any such changes. 5. The Executive Officer is authorized to sign a Certificate of Fee Exemption in lieu of payment of the California Department of Fish and Game filing fee. "-tIll I, Gerard J. Thibeault, Executive Officer, do hereby certify that the foregoing is a full, true, and correct copy of a resolution adopted by the California Regional Water Quality Control Board, Santa Ana Region, on December 20, 2004. Gerard J. Thibeault Executive Officer AO~NDA 'TEM NO. MOl ,/7 3~ OF (12 'i "-tIll IAttachment to Resolution No. R8-2004-0037 Page 10f21 ~ ATTACHMENT TO RESOLUTION NO. R8-2004-0037 Chapter 5 - Implementation Plan (NOTE: The following language is proposed to be inserted into Chapter 5 of the Basin Plan. If the amendments are approved, corresponding changes will be made to the Table of Contents, the List of Tables, page numbers, and page headers in the plan. Due to the two-column page layout of the Basin Plan, the location of tables in relation to text may change during final formatting of the amendments. For formatting purposes, the maps may be redrawn for inclusion in the Basin Plan, and the final layout may differ from that of the draft.) Lake Elsinore/San Jacinto River Watershed The Lake Elsinore/San Jacinto River Watershed is located in Riverside County and includes the following major waterbodies: Lake Hemet, San Jacinto River, Salt Creek, Canyon Lake and Lake Elsinore. The total drainage area of the San Jacinto River watershed is approximately 782 square miles. Over 90 percent of the watershed (735 square miles) drains into Canyon Lake. Lake Elsinore is the terminus of the San Jacinto River watershed. The local tributary area to Lake Elsinore, consisting of drainage from the Santa Ana Mountains and the City of Lake Elsinore, is 47 square miles. Land use in the watershed includes open/forested, agricultural (including concentrated animal feeding operations such as dairies and chicken ranches, and irrigated cropland), and urban uses, including residential, industrial and commercial. Vacant/open space is being converted to residential uses as the population in the area expands. The municipalities in the watershed include the cities of San Jacinto, Hemet, Perris, Canyon Lake, Lake Elsinore and portions of Moreno Valley and Beaumont. ~ 1. Lake Elsinore and Canyon Lake Nutrient Total Maximum Daily Load (TMDL) Lake Elsinore and Canyon Lake are not attaining water quality standards due to excessive nutrients (nitrogen and phosphorus). Reports prepared by Regional Board staff describe the impact nutrient discharges have on the beneficial uses of Lake Elsinore and Canyon Lake [Ref. #1, 2] Lake Elsinore was formed in a geologically active graben area and has been in existence for thousands of years. Due to the mediterranean climate and watershed hydrology, fluctuations in the level of Lake Elsinore have been extreme, with alternate periods of a dry lake bed and extreme flooding. These drought/flood cycles have a great impact on lake water quality. Fish kills and excessive algae blooms have been reported in Lake Elsinore since the early 20th century. As a result, in 1994, the Regional Board placed Lake Elsinore on the 303( d) list of impaired waters due to excessive levels of nutrients and organic enrichmentllow dissolved oxygen. Canyon Lake, located approximately 5 miles upstream of Lake Elsinore, was formed by the construction of Railroad Canyon Dam in 1928. Approximately 735 square miles of the 782 square mile San Jacinto River watershed drain to Canyon Lake. During most years, runoff from the watershed terminates at Canyon Lake without reaching Lake Elsinore, resulting in the buildup of nutrients in Canyon Lake. While Canyon Lake does not have as severe an eutrophication problem as Lake Elsinore, there have been periods of algal blooms and anecdotal reports of occasional fish kills. Accordingly, in 1998, the Regional Board added Canyon Lake to the 303( d) list of impaired waters due to excessive levels of nutrients. A TMDL technical report prepared by Regional Board staff describes the nutrient related problems in Canyon Lake and Lake Elsinore in greater detail and discusses the technical basis for the TMDLs that follow [Ref. # 3]. /"'" AGENDA ITEM NO. PAGE t{i D~ OF ~~ 2Attachment to Resolution No. R8-2004-0037 Page 2 of21 A. Lake Elsinore and Canyon Lake Nutrient TMDL Numeric Tarl!ets ..." Numeric targets for Lake Elsinore and Canyon Lake are based on reference conditions when beneficial uses in the lakes were not significantly impacted by nutrients. Table 5-9n shows both "causal" and "response" interim and final numeric targets for both lakes. Causal targets are those for phosphorus and nitrogen. Phosphorus and nitrogen are the primary limiting nutrients in Lake Elsinore and Canyon Lake, respectively. However, under certain conditions, nitrogen may be limiting in Lake Elsinore and phosphorus may be limiting in Canyon Lake. Targets for both nutrients are therefore necessary . Reduction in nitrogen inputs will be necessary over the long-term and only fmal targets are specified. Response targets include chlorophyll a and dissolved oxygen. These targets are specified to assess water quality improvements in the lakes. Finally, ammonia targets are specified to prevent un-ionized ammonia toxicity to aquatic life. Table 5-9n Lake Elsinore and Canyon Lake Nutrient TMDL Numeric Targets* Ammonia nitrogen concentration (Final) [Ref. #4] Annual average no greater than 0.1 mg/L; to be attained no later than 2020 Annual average no greater than 0.75 m ; to be attained no later than 2020 Calculated concentrations to be attained no later than 2020 Acute: I-hour average concentration of total ammonia nitrogen (mg/L) not to exceed, more than once every three years on the average, the CMC (acute criteria), where CMC = 0.4111(1 + 107.204-pH) + 58.4/(1 + 1 QPH-7.204) Chronic: thirty-day average concentration of total ammonia nitrogen (mg/L) not to exceed, more than once every three years on the average, the CCC (chronic criteria) CCC = (0.0577/(1+ 107.688-PH) + 2.487/(1+1QPH-7.688)) * min 2.85,1.45* 100.028<2S-1) Summer average no greater than 40 ug/L; to be attained no later than 2015 Summer average no greater than 25 ug/L; to be attained no later than 2020 Depth average no less than 5 mg/L; to be attained no later than 2015 No less than 5 mglL I meter above lake bottom; to be attained no later than 2020 Annual average no greater than 0.1 mg/L; to be attained no later than 2020 Annual average no greater than 0.75 m ; to be attained no later than 2020 Calculated concentrations to be attained no later than 2020 Acute: I-hour average concentration of total ammonia nitrogen (mg/L) not to exceed, more than once every three years on the average, the CMC (acute criteria), where CMC = 0.4111(1+107.204-pH) + 58.4/(1+ 1 QPH-7.204) ..." Chronic: thirty-day average concentration of total ammonia nitrogen (mg/L) not to exceed, more than once every three years on the average, the CCC (chronic criteria) CCC = (0.0577/(1+107.688-pH) + 2.487/(1+ 1 QPH-7.688)) * min 2.85,1.45* 100.028(2s.T Annual average no greater than 40 ug/L; to be attained no later than 2015 Annual average no greater than 25 ug/L; to be attained no later than 2020 Minimum of 5 mg/L above thermocline; to be attained no later than 2015 Daily average in hypolimnion no less than 5 mg/L; to be attained no later than 2020. * compliance with targets to be achieved as soon as possible, but no later than the date specified .....", ACENDA ITEM NO. 0'1 PAce11 OF 6g 3Attachment to Resolution No. R8-2004-0037 Page 3 of21 ,.... B. Lake Elsinore and Canyon Lake Nutrient TMDLs. Wasteload Allocations. Load Allocations and Compliance Dates As discussed in the technical TMDL report, nutrient loading to Canyon Lake and Lake Elsinore varies depending on the hydrologic conditions that occur in the San Jacinto watershed. As part of the TMDL analysis and development, three hydrologic scenarios and the relative frequency of each of these conditions (based upon an 87 year record of flow data at the USGS Gauging station downstream of Canyon Lake), were identified as shown in Table 5-90. The resulting TMDLs, wasteload allocations and load allocations are based on 10-year running flow weighted average nutrient loads, taking into account the frequency of the three hydrologic conditions and the nutrient loads associated with each of them. Phosphorus and nitrogen TMDLs for Canyon Lake and Lake Elsinore are shown in Table 5-9p. The TMDLs, expressed as 100year running averages, will implement the numeric targets and thereby attain water quality standards;. Phosphorus and nitrogen wasteload allocations for point source discharges and load allocations for nonpoint source discharges, also expressed as 10-year running averages, are shown in Tables 5-9q and 5-9r. No TMDLs, wasteload allocations or load allocations are specified for chlorophyll a, dissolved oxygen or ammonia. Chlorophyll a and dissolved oxygen targets are intended to serve as measures of the effectiveness of phosphorus and nitrogen reductions implemented to meet TMDL requirements. Until ammonia transformations, and nitrogen dynamics in general, are better understood, no ammonia TMDLs, wasteload allocations or load allocations are specified. ,--.. Table 5-90 San Jacinto River Hydrologic Conditions with Relative Flow Frequency at the USGS Gauging Station Downstream of Canyon Lake (Station No. 1170500) Moderate ]994 36 4] Both Canyon Lake and Mystic Lake overflow; flow at the USGS gauging station]] 070500 ] 7,000 AF or eater No Mystic Lake overflow; Canyon Lake overflowed; flow at the USGS gauging station] 1070500 less than ]7,000 AF and eater than 27] AF No overflows from Mystic Lake or Canyon Lake; flow at the USGS gauging station] 1070500 37] AF or less Dry 2000 37 43 ,--.. ACENDA ITEM NO. '6~ PACiE 6[) OF bK 4Attachment to Resolution No. R8-2004-0037 Page 40f21 Table 5-9p ....., Nutrient TMDLs and Compliance Dates for Lake Elsinore and Canyon Lake Canyon Lake 8,691 37,735 Lake Elsinore 28,584 239,025 a Final compliance to be achieved as soon as possible, but no later than December 31, 2020. b TMDL specified as 1 O-year running average. Table 5-9q Canyon Lake Nitrogen and Phosphorus Waste load and Load Allocationsa ....., WLA Supplemental water Urban CAFO 6,248 366 3974 1908 LA 8205 31 487 Internal Sediment 4,625 13,549 Atmospheric Deposition 221 1,918 Agriculture 1 183 7,583 Open/Forest 2,037 3 587 Septic systems 139 4,850 a The TMDL allocations for Canyon Lake apply to those land uses located upstream of Canyon Lake. b Final allocation compliance to be achieved as soon as possible, but no later than December 31, 2020. C TMDL and allocations specified as 10-year running average. AGENDA ITEM NO. 3~ PACE 51 OF 68 ilL ......, 5Attachment to Resolution No. R8-2004-0037 Page 5 of21 "....... Table 5-9r Lake Elsinore Nitrogen and Phosphorus Wasteload and Load Allocationsa TMDL ",-... Internal Sediment Atmospheric Deposition Agriculture Open/Forest Septic systems CL Watershed e 2,770 20,774 a The Lake Elsinore TMDL allocations for urban, agriculture open/forest, septic systems and CAFOs only apply to those land uses located downstream of Canyon Lake. b Final allocation compliance to be achieved as soon as possible, but no later than December 31, 2020. C TMDL and allocations specified as lO-year running average. d WLA for supplemental water should met as soon as possible as a 5 year running average. e Allocation for Canyon Lake overflows 28,584 239,025 3,845 7,791 3,721 7,442 124 349 0 0 21 969 210461 21,554 197,370 108 11,702 60 213 178 567 69 608 WLA Supplemental water d Urban CAFO LA The TMDL distributes the portions of the waterbody's assimilative capacity to various pollution sources so that the waterbody achieves its water quality standards. The Regional Board supports the trading of pollutant allocations among sources, where appropriate. Trading can take place between point/point, point/nonpoint, and nonpoint/nonpoint pollutant sources. Optimizing alternative point and nonpoint control strategies through allocation tradeoffs may be a cost-effective way to achieve pollution reduction benefits. (See Section E. TMDL Implementation, Task 11, below). ,--. AGENDA ITEM NO. PACE S:L OF lr\ 6g 6Attachment to Resolution No. R8-2004-0037 Page 60f21 C. Marein of Safety ....." The Canyon Lake and Lake Elsinore Nutrient TMDLs include an implicit margin of safety (MOS) as follows: . the derivation of numeric targets based on the 25th percentile of data for Lake Elsinore; Canyon Lake numeric targets to be consistent with the Lake Elsinore targets; . the use of multiple numeric targets to measure attainment of beneficial uses and thereby assure TMDL efficacy; . the use of conservative literature values in the absence of site-specific data for source loading rates in the watershed nutrient model; . the use of conservative assumptions in modeling the response of Lake Elsinore and Canyon Lake to nutrient loads; and . requiring load reductions to be accomplished during hydrological conditions when model results indicate, in some instances, that theoretical loads could be higher. D. Seasonal Variations/Critical Conditions The Canyon Lake and Lake Elsinore Nutrient TMDLs account for seasonal and annual variations in external and internal nutrient loading and associated impacts on beneficial uses by the use of a IO-year running average allocation approach. This IO-year running average approach addresses variation in hydrologic conditions (wet, moderate and dry) that can dramatically affect both nutrient loading and lake response. Compliance with numeric targets will ensure water quality improvements that prevent excessive algae blooms and fish kills, particularly during the critical summer period when these problems are most likely to occur. ......." E. TMDL Implementation Typically, under dry and moderate conditions, the internal nutrient loading drives the nutrient dynamics in both Canyon Lake and Lake Elsinore. However, it is the extreme (albeit infrequent) loading that occurs during wet conditions that provides the nutrients to the lakes that remain in the lakes as internal nutrient sources in subsequent years. Given the complexity of the San Jacinto River watershed hydrology, control of nutrients input to the lakes is needed for all hydrologic conditions. Collection of additional monitoring data is critical to developing long-term solutions for nutrient control. With that in mind, the submittal of plans and schedules to implement the TMDLs should take into consideration the need to develop and implement effective short-term solutions, as well as allow for the development of long-term solutions once additional data have been generated. Implementation of tasks and schedules as specified in Table 5-9s is expected to achieve compliance with water quality standards. Each of these tasks is described below. ACENDA ITEM NO. 3<-t PACE 63 OF. hlr" - ......., ~ 7Attachment to Resolution No. R8-2004-0037 Table 5-9s Page 70121 Lake Elsinore and Canyon Lake Nutrient TMDL Implementation Plan/Schedule Report Due Dates TMDL Phase 1 Task I Task 2 Task 3 Task 4 Task 5 Task 6 ~ Task 7 Task 8 Task 9 Task 10 Task II Task 12 Task I3 Task 14 Establish New Waste Discharge Requirements Revise Existing Waste Discharge Permits Identify Agricultural Operators Nutrient Water Quality Monitoring Program 4.1 Watershed-wide Nutrient Monitoring PIan(s) 4.2 Lake Elsinore Nutrient Monitoring PIan(s) 4.3 Canyon Lake Nutrient Monitoring Planes) Agricultural Discharges - Nutrient Management Plan On-site Disposal Systems (Septic Systems) Management Plan Urban Discharges 7.1 Revision of Drainage Area Management Plan (DAMP) 7.2 Revision of the Water Quality Management Plan (WQMP) 7.3 Update ofthe Caltrans Stormwater Management Plan and Regional Plan 7.4 Update of US Air Force, March Air Reserve Base SWPPP Forest Area - ReviewIRevision of Forest Service Management Plans Lake Elsinore In-Lake Sediment Nutrient Reduction Plan Canyon Lake In-Lake Sediment Treatment Evaluation Watershed and Canyon Lake and Lake Elsinore In-Lake Model Updates Pollutant Trading Plan Review and Revise Nutrient Water Quality Objectives Review ofTMDL/WLAlLA [Note: BP A => Basin Plan Amendment} ",..... March 31, 2006 March 31, 2006 October 31, 2005 . Initial plan/schedule due December 31, 2005 . Annual reports due August 15 . Revised plan/schedule due December 31, 2006 Plan/schedule due Septe~ber 30, 2007 Dependent on State Board approval of relevant regulations (see text). Plan/schedule due: 7.1 August 1,2006 7.2 August 1,2006 7.3 April I, 2006 7.4 Dependent on Task 3 results. See text. Plan/schedule due September 30, 2007 Plan/schedule due March 31, 2007 Plan/schedule due March 31, 2007 Plan/schedule due March 31, 2007 Plan/schedule due September 30, 2007 December 31, 2009 Once every 3 years to coincide with the Regional Board's triennial review AGENDA ITEM .~P, . 2>Y PAGEg, - Or 6,8 ~'L..:_ \. 8Attachment to Resolution No. R8-2004-0037 Page 8 of21 Task 1: Establish New Waste Discharge Requirements ...." On or before March 31, 2006, the Regional Board shall issue new waste discharge requirements (NPDES permit) to Elsinore Valley Municipal Water District for supplemental water discharges to Canyon Lake that incorporate the appropriate interim and fmal wasteload allocations, compliance schedule and monitoring program requirements. Other proposed nutrient discharges will be addressed and permitted as appropriate. Task 2: Review and/or Revise Existing Waste Discharge Requirements There are five Waste Discharge Requirements (WDRs) issued by the Regional Board regulating discharge of various types of wastes in the San Jacinto watershed. On or before March 31, 2006, each of these WDRs shall be reviewed and revised as necessary to implement the Lake Elsinore and Canyon Lake Nutrient TMDLs, including the appropriate nitrogen and phosphorus interim and final wasteload allocations, compliance schedules and/or monitoring program requirements. 2.1 Waste Discharge Requirements for the Riverside County Flood Control and Water Conservation District, the County of Riverside and the Incorporated Cities of Riverside County within the Santa Ana Region, Areawide Urban Runoff, NPDES No. CAS 618033 (Regional Board Order No. R8- 2002-0011). The current Order has provisions to address TMDL issues (see Task 7.1, below). In light of these provisions, revision of the Order may not be necessary to address TMDL requirements. 2.2 W atershed- Wide Waste Discharge Requirements for Discharges of Storm Water Runoff Associated with New Developments in the San Jacinto Watershed, Order No. 01-34, NPDES No. CAG 618005. It is expected that this Order will be rescinded once the Regional Board/Executive Officer approves a ...." Water Quality Management WQMP) under Order No. R8-2002-0011 (see 2.1, above and Task 7.2, below) 2.3 General Waste Discharge Requirements for Concentrated Animal Feeding Operations (Dairies and Related Facilities) within the Santa Ana Region, NPDES No. CAG018001 (Regional Board Order No. 99-11). 2.4 Waste Discharge and ProducerlUser Reclamation Requirements for the Elsinore Valley Municipal Water District, Regional Water Reclamation Facility Riverside County, Order No. 00-1, NPDES No. CA8000027. Revised permit specifications will take into consideration the Lake Elsinore Recycled Water Pilot Project findings. 2.5 Waste Discharge Requirements for Eastern Municipal Water District, Regional Water Reclamation System, Riverside County, Order No. 99-5, NPDES No. CA80001881. Revised permit specifications will take into consideration the Lake Elsinore Recycled Water Pilot Project findings. 2.6 Waste Discharge Requirements for US Air Force, March Air Reserve Base, Storm Water Runoff, Riverside County, Order No. R8-2004-0033, NPDES CA 00111007 1 Contingent on Eastern Municipal Water District discharge ofrecycled water to Lake Elsinore. AGENDA ITEM NO._~. ......., PACE 5o~ 9Attachment to Resolution No. R8-2004-0037 Page 90f21 '" Task 3: Identify Agricultural Operators On or before October 31,2005, the Regional Board shall develop a list of all known agricultural operators in the San Jacinto watershed that will be responsible for implementing requirements of this TMDL. The Regional Board will send a notice to these operators informing them of their TMDL responsibility and alerting them to potential regulatory consequences of failure to comply. Task 4: Monitoring No later than December 31,2005, the US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department ofFish and Game, the County of Riverside, the cities of Lake Elsinore, Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Murrieta, Riverside and Beaumont, Eastern Municipal Water District' , Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators within the San Jacinto watershed shall, as a group, submit to the Regional Board for approval monitoring program as required by Tasks 4.1, 4.2 and 4.3. ~ If modifications to the monitoring program are warranted, no later than December 31, 2006, the US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department ofFish and Game, the County of Riverside, the cities of Lake Elsinore, Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Murrieta, Riverside and Beaumont, Eastern Municipal Water District', Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators within the San Jacinto watershed shall, as a group, submit to the Regional Board for approval a revised proposed Watershed nutrient monitoring program (Task 4.1), Lake Elsinore monitoring program (Task 4.2) and Canyon Lake nutrient monitoring program (Task 4.3). In lieu of this coordinated monitoring plan, one or more of the parties identified above may submit a proposed individual or group monitoring plan for Regional Board approval for the monitoring program specified in tasks 4.1,4.2 and 4.3. Any such individual or group monitoring plan is due no later than December 31,2005. Ifneeded, any individual or group revised monitoring plan is due no later than December 31, 2006. 4.1 Watershed-wide Nutrient Water Quality Monitoring Program The US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department ofFish and Game, the County of Riverside, the cities of Lake Elsinore, Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Murrieta, Riverside and Beaumont, Eastern Municipal Water District', Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators within the San Jacinto watershed shall, as a group, submit to the Regional Board for approval a proposed watershed-wide nutrient monitoring program that will provide data necessary to review and update the Lake Elsinore and Canyon Lake Nutrient TMDL. Data to be collected and analyzed shall address, at a minimum: (1) determination of compliance with interim and/or final nitrogen and phosphorus allocations; and (2) determination of compliance with the nitrogen and phosphorus TMDL, including the WLAs and LAs. At a minimum, the stations specified in Table 5-9t and shown in Figure 5-3, at the frequency specified in Table 5-9t, shall be considered for inclusion in the proposed monitoring plan. If one or more of these monitoring stations are not included, rationale shall be provided and proposed alternative monitoring '" locations shall be identified in the proposed monitoring plan. In addition to water quality samples, at a minimum, daily discharge (stream flow) determinations shall be made at all stations shown in Table 5-9t. ACENDA ITEM i\1C. 1>'-\ PACE 510 OF--b~"~' IOAttachment to Resolution No. R8-2004-00J7 Page 10 of21 At a minimum, samples shall be analyzed for the following constituents: ....., . organic nitrogen . nitrite nitrogen . total phosphorus . total hardness . total suspended solids (TSS) · biological oxygen demand (BOD) . ammonia nitrogen . nitrate nitrogen · ortho-phosphate (SRP) . total dissolved solids (IDS) . turbidity . chemical oxygen demand (COD) . pH . water temperature The proposed monitoring plan shall be implemented upon Regional Board approval at a duly noticed public meeting. An annual report summarizing the data collected for the year and evaluating compliance with the WLAs/LAs shall be submitted by August 15 of each year. In lieu of this coordinated monitoring plan, one or more of the parties identified above may submit a proposed individual or group monitoring plan for Regional Board approval. This individual monitoring plan shall be implemented upon Regional Board approval at a duly noticed public meeting. An annual report of data collected pursuant to approved individual/group planes) shall be submitted by August 15 of each year. The report shall summarize the data and evaluate compliance with the WLAs/LAs. It may be that implementation of these monitoring requirements will be required through the issuance of Water Code Section 13267 letters to the affected parties. The monitoring planes) will be considered by the Regional Board and implemented upon the Regional Board's approval. ....., _ Lakes . Instreem TMDL Stations N Streams (RF3) DSen JacintoWatershed(HUC 1807020) N A 5 Figure 5-3 - San Jacinto River Watershed Nutrient TMDL Water Quality Stations Locations ,....., ACENDA ITEM i~C. PACE 57 OF :;~ ~X= IIAttachment to Resolution No. R8-2004-0037 Page 11 of21 "'. Table 5-9t Lake Elsinore and Canyon Lake Watershed Minimum Required Sampling Station Locations 792 San Jacinto River @ Cranston Guard Station 318 Hemet Channel at Sanderson Ave. 745 Salt Creek @ Murrieta Road 759 San Jacinto River @ Goetz Rd 325 Perris Valley Storm Drain @Nuevo Rd. 741 San Jacinto River @ Ramona Expressway 827 San Jacinto River upstream of Lake Elsinore 790 Fair Weather Dr. Storm Drain in Canyon Lake 357 4 Corners Storm Drain in Elsinore 714 Ortega Flood Channel in Elsinore 324 Lake Elsinore Outlet Channel 712 Leach Canyon Channel in Elsinore /"'"' 834 Sierra Park Drain in Canyon Lake 835 Bridge Street and San Jacinto River 836 North Side of Ramona Expressway near Warren Road 837 Mystic Lake inflows 838 Mystic Lake outflows 841 Canyon Lake spillway Frequency of sampling at all stations: dry season - none; wet season; minimum of 3 storms/year whenever possible and 8 samples across each storm hydrograph 4.2 Lake Elsinore: In-Lake Nutrient Monitoring Program "..... The US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department ofFish and Game, the County of Riverside, the cities of Lake Elsinore, Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Murrieta, Riverside and Beaumont, Eastern Municipal Water District], Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators within the San Jacinto watershed shall, as a group, submit to the Regional Board for approval a proposed Lake Elsinore nutrient monitoring program that will provide data necessary to review and update the Lake Elsinore Nutrient TMDL. Data to be collected and analyzed shall address, at a minimum: determination of compliance with interim and final nitrogen, phosphorus, chlorophyll a, and dissolved oxygen numeric targets. In addition, the monitoring program shall evaluate and determine the relationship between ammonia toxicity and the AGENDA ITEM NO. PAGE 5'i j1 OF" &'K" 12Attachment to Resolution No. R8-2004-0037 Page 12 of21 total nitrogen allocation to ensure that the total nitrogen allocation will prevent ammonia toxicity in Lake Elsinore. ~ At a minimum, the proposed plan shall include the collection of samples at the stations specified in Table 5-9u and shown in Figure 5-4, at the specified frequency indicated in Table 5-9u. With the exception of dissolved oxygen and water temperature, all samples to be analyzed shall be depth integrated. The monitoring plan shall be implemented upon Regional Board approval at a duly noticed public meeting. An annual report summarizing the data collected for the year and evaluating compliance with the TMDL shall be submitted by August 15 of each year. LE 14 Lake Elsinore - inlet LE 15 Lake Elsinore - four comers LE 16 Lake Elsinore - mid-lake Frequency of sampling at all stations: monthly October through May; bi-weekly June through September. ....., / L~ke Elsitiore LE 16 LE 14 N /, 2000 . SamplingStalions Figure 5-4 Lake Elsinore TMDL monitoring Stations AGENDA ITEM NO. :?1 ,AGE 51 OF bJ -. ~1Il4l:1::7 ....., '.- 13Attachment to Resolution No. R8-2004-0037 Page 13 of21 ~ At a minimum, in-lake samples must be analyzed for the following constituents: . specific conductance . water temperature . pH . chlorophyll a . organic nitrogen . nitrite nitrogen . organic phosphorus . total hardness . total dissolved solids (TDS) . chemical oxygen demand (COD) . dissolved oxygen . water clarity (secchi depth) . ammonia nitrogen . nitrate nitrogen . turbidity . ortho-phosphate (SRP) . total suspended solids (TSS) . biological oxygen demand (BOD) In lieu of this coordinated monitoring plan, one or more of the parties identified above may submit a proposed individual or group monitoring plan for Regional Board approval. This individual monitoring plan shall be implemented upon Regional Board approval at a duly noticed public meeting. An annual report of data collected pursuant to approved individual/group planes), shall be submitted by August 15 of each year. The report shall summarize the data and evaluate compliance with the numeric targets. It may be that implementation of these requirements will be required through the issuance of Water Code Section 13267 letters to the affected parties. The monitoring planes) will be considered by the Regional Board and implemented upon the Regional Board's approval. ,....-- 4.3 Canyon Lake Nutrient Monitoring Program The US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department ofFish and Game, the County of Riverside, the cities of Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Murrieta, Riverside and Beaumont, Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators within the San Jacinto watershed shall, as a group, submit to the Regional Board for approval a proposed Canyon Lake nutrient monitoring program that will provide data necessary to review and update the Canyon Lake Nutrient TMDL. Data to be collected and analyzed shall address, at a minimum: determination of compliance with interim and final nitrogen, phosphorus, chlorophyll a, and dissolved oxygen numeric targets. In addition, the monitoring program shall evaluate and determine the relationship between ammonia toxicity and the total nitrogen allocation to ensure that the total nitrogen allocation will prevent ammonia toxicity in Canyon Lake. At a minimum, the proposed plan shall include the collection of samples at the stations specified in Table 5-9v and shown in Figure 5-5, at the specified frequency indicated in Table 5-9v. Discrete samples in Canyon Lake are to be collected in the epilimnion, hypolimnion and thermocline when and where appropriate. The monitoring plan shall be implemented upon Regional Board approval at a duly noticed public meeting. An annual report summarizing the data collected for the year and evaluating compliance with the TMDL shall be submitted by August 15 of each year. ,....-- ACENDA ITEM NO. PAOE /cO OF tf1 b~ 14Attachment to Resolution No. R8-2004-0037 Table 5-9v Canyon Lake Minimum Required Sampling Station Locations CL07 CL08 CL09 Canyon Lake - At the Dam Canyon Lake - North Channel Canyon Lake - Canyon Bay CL 10 Canyon Lake - East Bay Frequency of sampling at all stations: monthly October through May; bi-weekly June through September. N t\ 200(} , o 2000 Feel .. . Sampling Stations /,Canyon Lake /,/ ;,/ / .~-- Darn CL07 Figure 5-5 - Canyon Lake Nutrient TMDL Monitoring Station Locations ACENDA ITEM NO. PACE IoJ Page 14 of21 ....." ......" 3'1 OF~ "'-"" ISAttachment to Resolution No. R8-2004-0037 Page 15 of21 ""..... At a minimum, in-lake samples must be analyzed for the following constituents: . specific conductance . water temperature . pH . chlorophyll a . organic nitrogen . nitrite nitrogen . organic phosphorus . total hardness . total dissolved solids (TDS) . chemical oxygen demand (COD) . dissolved oxygen . water clarity (secchi depth) . ammonia nitrogen . nitrate nitrogen . turbidity . ortho-phosphate (SRP) . total suspended solids (TSS) . biological oxygen demand (BOD) In lieu of this coordinated monitoring plan, one or more of the parties identified above may submit a proposed individual or group monitoring plan for Regional Board approval. This individual plan shall be implemented upon Regional Board approval at a duly noticed public meeting. An annual report of data collected pursuant to approved individuaVgroup planes) shall be submitted by August 15 of each year. The report shall summarize the data and evaluate compliance with the numeric targets. It may be that implementation of these requirements will be required through the issuance of Water Code Section 13267 letters to the affected parties. The monitoring planes) will be considered by the Regional Board and implemented upon the Regional Board's approval. .~ Task 5: Agricultural Activities No later than September 30, 2007, the agricultural operators within the Lake Elsinore and Canyon Lake watershed (see Task 2), in cooperation with the Riverside County Farm Bureau, the DC Cooperative Extension, Western Riverside County Ag Coalition shall, as a group, submit a proposed Nutrient Management Plan (NMP). The Nutrient Management Plan shall be implemented upon Regional Board approval at a duly noticed public meeting. In lieu of a coordinated plan, one or more of the parties identified above may submit a proposed individual or group Nutrient Management Plan to conduct the above studies for areas within their jurisdiction. Any such individual or group plan shall also be submitted for Regional Board approval no later than September 30, 2007. This Nutrient Management Plan shall be implemented upon Regional Board approval at a duly noticed public meeting. At a minimum, the NMP shall include, plans and schedules for the following. In order to facilitate any needed update of the numeric targets and/or the TMDLs and/or agricultural LA, the proposed schedule shall take into consideration the Regional Board's triennial review schedule. . implementation of nutrient controls, BMPs and reduction strategies designed to meet load allocations; evaluation of effectiveness of BMPs; development and implementation of compliance monitoring; and development and implementation of focused studies that will provide the following data and information ~ inventory of crops grown in the watershed; . . . ~ AGENDA ITEM NO. 3 L.\ . . PACE b~ OF._",~__-: 16Attachment to Resolution No. R8-2004-0037 Page 16 of21 ~ amount of manure and/or fertilizer applied to each crop with corresponding nitrogen and phosphorus amounts; and ~ amount of nutrients discharged from croplands. ....", The Regional Board expects that the NMP will be submitted and implemented pursuant to these TMDL requirements. Where and when necessary to implement these requirements, the Regional Board will issue appropriate waste discharge requirements. Compliance with the agricultural load allocation may be achieved through a Regional Board approved pollutant trading program. Task 6: On-site Disposal Systems (Septic System) Management Plan No later than 6 months after the effective date of an agreement between the County of Riverside and the Regional Board to implement regulations adopted pursuant to Water Code Sections 13290-13291.7, or if no such agreement is required or completed, within 12 months of the effective date of these regulations, the County of Riverside and the Cities ofPerris, Moreno Valley and Murrieta shall, as a group, submit a Septic System Management Plan to identify and address nutrient discharges from septic systems within the San Jacinto watershed. The Septic System Management Plan shall implement regulations adopted by the State Water Resources Control Board pursuant to California Water Code Section 13290 - 13291.7. At a minimum, the Septic System Management Plan shall include plans and schedules for the development and implementation of the following. In order to facilitate any needed update of the numeric targets and/or the TMDLs and septic system LA, the proposed schedule shall take into consideration the Regional Board's triennial review schedule. . public education program; · tracking system, including maintenance thereof; . maintenance standards; . enforcement provisions; . monitoring program; and . sanitary survey. ~ In lieu of a coordinated plan, one or more of the agencies with septic system oversight responsibilities may submit an individual or group Management Plan to develop the above Plan for areas within their jurisdiction. Any such individual or group plan shall also be submitted no later than March 31, 2006. This Septic System Management Plan shall be implemented upon Regional Board approval at a duly noticed public meeting. Compliance with the septic systems load allocation may be achieved through a Regional Board approved pollutant trading program. Task 7: Urban Discharges Urban discharges, including stormwater runoff, are those discharges from the cities and unincorporated communities in the San Jacinto River watershed. These discharges are regulated under the Riverside County MS4 NPDES permit, the San Jacinto Watershed Construction Activities Storm Water permit, the State Board's General Permit for Storm Water Runoff from Construction Activities, and the State Board's General Permit for Storm Water Runoff from Industrial Activities. Nuisance and stormwater runoff from state highways and right of ways is regulated under the State of California, Department of Transportation AGENDA 'TEM NO. 0<1 PACE h3 OF &,j'- ....", 17Attachment to Resolution No. R8-2004-0037 Page 17 of21 ,-.. (Caltrans) statewide general NPDES permit. Finally, nuisance and stormwater runoff from the March Air Reserve Base is also regulated through an NPDES permit. 7.1 Revision to the Drainage Area Management Plan (DAMP) Provision XIll.B. of Order No. R8-2002-00Il (see 2.1, above) requires the permittees to revise their Drainage Area Management Plan (DAMP) to include TMDL requirements. By August 1,2006, the permittees shall review and revise the DAMP and or WQMP (see 7.2 below) as necessary to address the requirements of these nutrient TMDLs. Further review and revision of the DAMP needed to address these TMDLs shall be completed in accordance with the requirements of Order No. R8- 2002-0011 or amendments/updates thereto that are adopted by the Regional Board at a public hearing. The DAMP revisions shall include schedules for meeting the interim and final nutrient wasteload allocations. In order to facilitate any needed update of the numeric targets and/or the TMDLs and urban discharge WLA, the proposed schedule shall take into consideration the Regional Board's triennial review schedule. The revised DAMP/WQMP shall also include a proposal for 1) evaluating the effectiveness of BMPs and other control actions implemented and 2) evaluating compliance with the nutrient waste load allocation for urban runoff. The proposal must be implemented upon approval by the Regional Board after public notice and public hearing, or upon approval by the Executive Officer if no sigt}ificant comments are received during the public notice period. 7.2 Revision of the Water Quality Management Plan (WQMP) ,..... Provision VIII.B. of Order No. R8-2002-00II (see 2.1, above) requires the permittees to develop and submit a WQMP by June 2004 for approval. On September 17, 2004, the Board approved a WQMP developed by the permittees. The approved WQMP includes source control BMPs, design BMPs and treatment control BMPs. Further revisions to the WQMP and/or the DAMP may be necessary to meet the WLA for urban runoff. By August 1, 2006, the permittees shall submit a revised WQMP and/or revised DAMP (see 7 .1 above) that addresses the nutrient input from new developments and significant redevelopments to assure compliance with the nutrient wasteload allocations for urban runoff. The WQMP shall also address requirements currently in Order No. 01- 34 (see 2.2, above). Once the WQMP is approved, Order No. 01-34 may be rescinded. Further review and revision of the WQMP necessary to assure that TMDL requirements are addressed shall be completed in accordance with the requirements of Order No. R8-2002-00 11 or amendments/updates thereto that are adopted by the Regional Board at a public hearing. 7.3 Revision of the State of Cali fomi a, Department of Transportation (Caltrans) Stormwater Permit Provision E.I of Order No. 99-06-DWQ requires Caltrans to maintain and implement a Storm Water Management Plan (SWMP). Annual updates of the SWMP needed to maintain an effective program are required to be submitted to the State Water Resources Control Board. ,-.. Provision E.2 of Order No. 99-06-DWQ requires Caltrans to submit a Regional Workplan by April 1 of each year for the Executive Officer's approval. By April 1, 2006, Caltrans shall submit a Regional W orkplan that includes plans and schedules for meeting the interim and final nutrient wasteload allocations, and provides a proposal for 1) evaluating the effectiveness of BMPs and other control actions implemented and 2) evaluating compliance with the nutrient waste load allocations for urban runoff, which includes runoff from Caltrans facilities. In order to facilitate any needed update of the numeric targets and/or the TMDLs and urban discharge WLA, the proposed schedule shall take into consideration the Regional Board's triennial review schedule. The proposal shall be implemented upon the Executive Officer's approval. Annual updates to the Regional Workplan AGENDA ITEM NO. PAGE M 3~ OF '1n-S" ISAttachment to Resolution No. R8-2004-0037 Page 18 of21 shall include, as necessary, revised plans and schedules for meeting the interim and final nutrient wasteload allocations and revised proposals for evaluating the efficacy of control actions and compliance with the nutrient wasteload allocations. ......, 7.4 Revision to the United States Air Force, March Air Reserve Base, Stormwater Permit Order No. R8-2004-0033 specifies monitoring and reporting requirements for stormwater runoff from the US Air Force, March Air Reserve facility. Provision C.17 indicates that the order could be reopened to incorporate TMDL requirements. Provisions C.18.a and C.18.b require that March Air Reserve Base submit a report and revise the Stormwater Pollution Prevention Plan (SWPPP) to address any pollutants that may be causing or contributing to exceedances of water quality standards. Results from the TMDL nutrient monitoring program conducted pursuant to Task 3, shall serve as the basis for revision of the SWPPP and/or reopening the order. Development of the Municipal permittee's WQMP and revisions to their DAMP, development of the Caltrans SWMP and Regional Workplan, and Revision to the March Air Reserve Base SWPPP, shall address the urban component of the nutrient TMDL. Compliance with the urban wasteload allocation may be achieved through a Regional Board approved pollutant trading program. Task 8: Forest Area -Identification of Forest Lands Management Practices No later than September 30,2007, the US Forest Service shall submit for approval a plan with a schedule for identification, development and implementation of Management Practices to reduce nutrient discharges emanating from the Cleveland National Forest and the San Bernardino National Forest. The Plan shall identify watershed-specific appropriate Best Management Practices (BMPs) that will be implemented to achieve the interim and final load allocations for forest/. The proposal shall include specific recommendations and a schedule for 1) evaluating the effectiveness of control actions implemented to reduce nutrient discharges from forest and 2) evaluating compliance with the nutrient load allocation from forest/open space. The revised watershed-specific Management Practices shall be implemented upon Regional Board approval at a duly noticed public meeting. ......, Compliance with the open space/forest load allocation may be achieved through a Regional Board approved pollutant trading program. Task 9: Lake Elsinore Sediment Nutrient Reduction Plan No later than March 31, 2007, the US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, the State of California, Department of Transportation (Caltrans), the State of California, Department ofFish and Game, the County of Riverside, the cities of Lake Elsinore, Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Murrieta, Riverside and Beaumont, Eastern Municipal Water Districtt, Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators within the San Jacinto watershed shall, as a group, submit to the Regional Board for approval a proposed plan and schedule for in-lake sediment nutrient reduction for Lake Elsinore. The proposed plan shall include an evaluation of the applicability of various in-lake treatment technologies to prevent the release of nutrients from lake sediments to support development of a long- term strategy for control of nutrients from the sediment. The submittal shall also contain a proposed sediment nutrient monitoring program to evaluate the effectiveness of any strategies that are implemented. The Lake Elsinore In-lake Sediment Nutrient Reduction Plan shall be implemented upon Regional Board approval at a duly noticed public meeting. AGENDA ITEM Nt, 1>-\ PAGE ~.-OF~~1i8::: ......, .. 19Attachment to Resolution No. R8-2004-0037 Page 19 of21 ,,-.... In lieu of this coordinated plan, one or more of the parties identified above may submit a proposed individual or group In-lake Sediment Nutrient Reduction Plan for approval by the Regional Board. Any such individual or group Plan is due no later than March 31, 2007 and shall be implemented upon Regional Board approval at a duly noticed public meeting. Compliance with the Lake Elsinore Sediment Nutrient Reduction Plan requirement may be achieved through a Regional Board approved pollutant trading program. Task 10: Canyon Lake Sediment Nutrient Treatment Evaluation Plan No later than March 31, 2007, the US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department of Fish and Game, the County of Riverside, the cities of Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Murrieta, Riverside and Beaumont, Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators within the San Jacinto watershed shall, as a group, submit to the Regional Board for approval a proposed plan and schedule for evaluating in-lake sediment nutrient treatment strategies for Canyon Lake. The proposed plan shall include an evaluation of the applicability of various in-lake treatment technologies to prevent the release of nutrients from lake sediments in order to develop a long-term strategy for control of nutrients from the sediment. The submittal shall also contain a proposed sediment nutrient monitoring program to evaluate the effectiveness of any strategies that are implemented. The Canyon Lake In-lake Sediment Nutrient Treatment Plan shall be implemented upon Regional Board approval at a duly noticed public meeting. /"'"' In lieu of this coordinated plan, one or more of the parties identified above may submit a proposed individual or group In-lake Sediment Nutrient Treatment Evaluation Plan for approval by the Regional Board. Any such individual or group Plan is due no later than March 31, 2007 and shall be implemented upon Regional Board approval at a duly noticed public meeting. Task ll: Update of Watershed and In-Lake Nutrient Models No later than March 31, 2007, the US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department of Fish and Game, the County of Riverside, the cities of Lake Elsinore, Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Riverside and Beaumont, Eastern Municipal Water District1, Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators shall, as a group, submit to the Regional Board for approval a proposed plan and schedule for updating the existing Lake Elsinore/San Jacinto River Nutrient Watershed Model and the Canyon Lake and Lake Elsinore in-lake models. The plan and schedule must take into consideration additional data and information that are generated from the respective TMDL monitoring programs. In order to facilitate any needed update of the numeric targets and/or the TMDLs/WLAs/LAs, the proposed schedule shall take into consideration the Regional Board's triennial review schedule. The plan for updating the Watershed and In-lake Models shall be implemented upon Regional Board approval at a duly noticed public meeting. ~ In lieu of this coordinated plan, one or more of the parties identified above may submit a proposed individual or group plan for update of the Lake Elsinore/San Jacinto River Nutrient Watershed Model and the Canyon Lake and Lake Elsinore in-lake models. The plan and schedule must take into consideration additional data and information that are generated from the respective TMDL monitoring programs. In order to facilitate any needed update of the numeric targets and/or the TMDLs/WLAs/LAs, the proposed schedule shall take into consideration the Regional Board's triennial review schedule. Any such AGENDA ITEM NO. ~~ PAGE I,b=;f ..:Jii1~~;; 41. 20Attachment to Resolution No. R8-2004-0037 Page 20 of21 individual or group Plan is due no later than March 31, 2007 and shall be implemented upon Regional Board approval at a duly noticed public meeting. ..., Task 12: Pollutant Trading Plan No later than September 30,2007, the US Forest Service, the US Air Force (March Air Reserve Base), March Joint Powers Authority, California Department of Transportation (Caltrans), California Department ofFish and Game, the County of Riverside, the cities of Lake Elsinore, Canyon Lake, Hemet, San Jacinto, Perris, Moreno Valley, Riverside and Beaumont, Eastern Municipal Water District!, Elsinore Valley Municipal Water District, concentrated animal feeding operators and other agricultural operators shall, as a group, submit to the Regional Board for approval a proposed Pollutant Trading Plan. At a minimum, this plan shall contain a plan, schedule and funding strategy for project implementation, an approach for tracking pollutant credits and a schedule for reporting status of implementation of the Pollutant Trading Plan to the Regional Board, The Pollutant Trading Plan shall be implemented upon Regional Board approval at a duly noticed public meeting. In lieu of this coordinated plan, one or more of the parties identified above may submit a proposed individual or group Pollutant Trading Plan. Any such individual or group Plan is due no later than September 30, 2007 and shall be implemented upon Regional Board approval at a duly noticed public meeting. Task 13: Review and Revision of Water Quality Objectives By December 31, 2009, the Regional Board shall review and revise as necessary the total inorganic nitrogen numeric water quality objectives for Lake Elsinore and Canyon Lake. In addition, the Regional Board shall evaluate the appropriateness of establishing total phosphorus and un-ionized ammonia numeric water quality objectives for both Lake Elsinore and Canyon Lake. Given budgetary constraints, completion of this task is likely to require substantive contributions from interested parties. "will' Task 14: Review/Revision of the Lake Elsinore/Canyon Lake Nutrient TMDL The basis for the TMDLs and implementation schedule will be re-evaluated at least once every three years2 to determine the need for modifying the load allocations, numeric targets and TMDLs. Regional Board staffwill continue to review all data and information generated pursuant to the TMDL requirements on an ongoing basis. Based on results generated through the monitoring programs, special studies, modeling analysis, and/or special studies by one or more responsible parties, changes to the TMDL, including revisions to the numeric targets, may be warranted. Such changes would be considered through the Basin Plan Amendment process. The Regional Board is committed to the review of this TMDL every three years, or more frequently if warranted by these or other studies 2 The three-year schedule will coincide with the Regional Board's triennial review schedule. '?~ AOEN;:;ez NJj'-oF_~61; .t~ '--' ~ ~ ~ 21Attachment to Resolution No. R8-2004-0037 Page 21 of21 References 1. California Regional Water Quality Control Board, Lake Elsinore Nutrient TMDL Problem Statement, October, 2000. 2. California Regional Water Quality Control Board, Canyon Lake Nutrient TMDL Problem Statement, October 2001. 3. California Regional Water Quality Control Boar:d, Total Maximum Daily Load for Nutrients in Lake Elsinore And Canyon Lake, May 2004 4. Environmental Protection Agency, Update of Ambient Water Quality Criteria for Ammonia. EPA- 822-R-99-014,1999. AGEN~~~_~ "...... CITY OF LAKE ELSINORE REPORT TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DA TE: JUNE 27, 2006 SUBJECT: OPERATION & MAINTENANCE AGREEMENT FOR DIFFUSED AERATION SYSTEM AND GRANT OF EASEMENT BACKGROUND The Lake Elsinore/San Jacinto Watershed Authority hired Dr. Arlo Fast, an internationally recognized lake aeration expert, to develop a conceptual plan to aerate Lake Elsinore for the purpose of reducing the frequency and severity of algae blooms and fish kills. The conceptual /'""' plan called for a two phased system with the first phase consisting of twenty (3-Hp) axial flow pumps and a second phase consisting of a diffused aeration system utilizing four (200-Hp) air blowers. The axial flow pump destratification system was installed by the City and is currently operational. The diffused aeration system was under design by PACE Engineering for several years and placed out to bid by LESJW A earlier this year. The lowest responsible bid received by LESJW A to construct the diffused aeration system was in the amount of $2,525,000. LESJWA has only $1.55-million remaining from the State Prop-13 grant funds; therefore a $975,000 shortfall in capital funding exists for this project. Two property locations are required for placement of the land based air blowers on opposite sides of the Lake, thus one would be located in the County and one in the City. The City needs to provide a "Grant of Easement" for construction and operation of the system upon City property located at 1306 Lakeshore Drive. DISCUSSION This project is essential to the rehabilitation of the Lake in order to reduce the frequency and severity of algae blooms and fish kills, as well as obtain the nutrient offsets required by EVMWD's NPDES permit to allow recycled water addition to the Lake. /'""' To make-up the shortfall in capital funds and to provide for operation of the diffused aeration system into the future, Staff from the County, EVMWD and City have developed an agreement to equally share the one time capital cost and ongoing operation and maintenance expense. AGENDA ITEM Wi PAGE l . 35 OF ~3 REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE #2 ....." Under the terms of the agreement, EVMWD will act as the lead agency in constructing the system and will own, operate and maintain the system. The system is scheduled to become operational by spring 2007. A "Grant of Easement" to EVMWD from the City is necessary for construction and maintenance of the diffused aeration system upon City owned property. FISCAL IMPACT Approval of this agreement authorizes the City to make a one time capital expenditure in the amount of $325,000 in capital improvements for the project and annually recurring payments of $100,000 for the operation and maintenance of the diffused aeration system. Considering the project will not become operational until the spring 2007, Staff budgeted only $25,000 forO&M duringFY'06-07. This allocation is included in the City's approved General Fund and Capital Improvement Projects (CIP) Budgets for FY'06-07. RECOMMENDATION 1. Staff recommends the City Council approve the "Agreement for the Operation and Maintenance of the Lake Elsinore Phase II Aeration System" and authorize the Mayor to execute the agreement. ....." 2. Staff recommends the City Council approve the "Grant of Easement" to Elsinore V alley Municipal Water District for City owned property located at 1306 Lakeshore Drive (APN 374-211-040 & 374-212-040) and authorize the Mayor to execute the document. PREPARED BY: Pat Kilroy, Director of Lake and Aquatic Resources Department APPROVED FOR AGENDA BY: ......., AGENDA ITEM NO. PACiE c:l. D'S OF~3 06119/06 ,.-. AGREEMENT FOR THE OPERATION AND MAINTENANCE OF THE LAKE ELSINORE PHASE II AERATION SYSTEM THIS AGREEMENT is made and effective this _ day of , 2006 by and among the COUNTY OF RIVERSIDE ("COUNTY"), the CITY OF LAKE ELSINORE ("CITY") and the ELSINORE V ALLEY MUNICIPAL WATER DISTRICT ("DISTRICT"). The COUNTY, CITY and DISTRICT are sometime collectively referred to as the "PARTIES". RECITALS A. The COUNTY, CITY and DISTRICT are Member Agencies of the Lake Elsinore and San Jacinto Watersheds Authority, a joint powers public agency, formed for the purpose of implementing projects and programs to rehabilitate and improve the San Jacinto and Lake Elsinore Watersheds and the water quality of Lake Elsinore ("LESJW A"). LESJW A has been awarded $15 million fromthe Safe Drinking Water, Clean Water, Watershed Protection and Flood Protection Bond Act of 2000 (the "Bond Act"). ,r- B. LESJW A is in the process of designing, constructing and installing a project commonly known as the "Lake Elsinore Phase II Aeration System", consisting of two compressor buildings, piping and two water quality buoys, all as depicted on Exhibit "I", attached hereto. The PARTIES entered into an agreement on February 11, 2003 for the Operation and Maintenance of a companion lake treatment system known as the Axial Flow Pump Destratification System which became operable in July 2004. The Destratification System and the Aeration System are intended to reduce fish kills and algal densities in Lake Elsinore by: 1. Preventing lengthy periods of thermal and chemical stratification; and 2. Increasing dissolved oxygen in Lake bottom waters. On December 20, 2004, The California Regional Water Quality Control Board, Santa Ana Region adopted the Lake Elsinore and Canyon Lake TMDL (Board Resolution R8-2004-0037) which addresses the water quality impairments in Lake Elsinore. The TMDL assumes that the proposed Aeration System and Destratification System will reduce internal phosphorus loading from lake bottom sediments by about 35%. The implementation plan for the TMDL assigns responsibility jointly and severally to all dischargers named in the TMDL for implementation of in-lake treatment technologies to prevent the release of nutrients from lake sediments in Lake Elsinore. The TMDL implementation plan also contemplates the formulation of a nutrient pollutant trading plan amongst the named dischargers to provide flexibility in achieving TMDL compliance. In addition, Board Order R8-2004-oo11 requires DISTRICT to offset excess phosphorus and nitrogen contributions associated with the discharge of supplemental water to Lake Elsinore. ,r-. C. On April 20, 2006, the Board of Directors of LESJW A, utilizing Bond Act Funds, authorized the grant of $1,550,000.00 to the DISTRICT to construct the Aeration System by contract with Metro Builders and Engineers Group, LID ("Metro"). Metro bid $2,171,711.00, ACENDA ITEM NO. ?f5 PAGE 3 OF ~3 which bid amount, plus design, engineering and other expenses, exceeds funds available to LESJW A by $975,000, as shown in Exhibit~. To close this financial gap in funding, the PARTIES propose to contribute the difference, $975,000, in equal shares. ......", D. The Aeration System is expected to be operational by early 2007. Once operational, the Aeration System is expected to avoid the substantial adverse environmental and aesthetic impacts that result from harmful algae blooms and resultant fish kills which, in turn, hurt the economy of the region and severely impacts tourism. For those reasons, the PARTIES have agreed to share equally the cost of operating and maintaining the Aeration System. E. By separate agreement the DISTRICT has accepted the conveyance of title to the Aeration System from LESJW A. A true and correct copy of said agreement is attached hereto as Exhibit 3. F. By this Agreement, the PARTIES intend to form a technical committee to oversee the operation and maintenance of the Aeration System, and to set forth the terms and conditions by which the DISTRICT shall operate and maintain the System at the expense of the PARTIES. NOW, THEREFORE, in consideration of the facts recited above, and the covenants, conditions and promises contained herein, the PARTIES mutually agree as follows: AGREEMENT 1. Formation of the Technical Oversight Committee. As a means of ensuring the ~ most optimal operation of the Aeration System in order to maximize its benefits, there is hereby established the "Technical Oversight Committee", consisting of one knowledgeable representative appointed by each PARTY. Each such representative shall serve as a member of the Committee at the appointing PARTY's pleasure and expense. The Committee shall meet at such times and places as its member may agree upon. The primary purpose of the Committee shall be to oversee the operations and maintenance activities of the DISTRICT, and to develop and refine parameters, processes and procedures needed to maximize the effectiveness of the Aeration System in a manner that will realize all of the benefits the System is anticipated to produce. Initially, the Committee shall operate the Aeration System in accordance with the operational parameters outlined on the "Lake Elsinore Aeration System Process Flow Diagram" attached hereto as Exhibit "4" and made a part hereof. 2. Capital Construction Contribution. The PARTIES shall, on a pro-rata basis and as described in Paragraphs 3(c), 4(a) and 5(a) below, jointly contribute in equal shares the total sum of $975,000 for the purpose of assisting in the funding of the construction of the Aeration System ("Contribution"). The COUNTY's share is due on or before 120 days from the award of the construction of the Aeration System. 3. DISTRICT's Obligations. Subject to all of the provisions of this Agreement, the DISTRICT hereby agrees: '-'" ACENDA ITEM NO. 1;5 PACE 1 20F ~3 ,... a. Hold Title to Aeration System: To hold title to the Aeration System for the term of this Agreement. b. Provision of Services: To provide, or cause to be provided, all labor, tools, equipment, vehicles, materials, supplies and qualified personnel necessary to manage, operate, monitor, maintain and repair the Aeration System subject to the approved budget as set forth in Section 3.g., the PARTIES' payment of financial contributions as set forth herein, and the operation and maintenance parameters and procedures established from time-to-time by the Technical Oversight Committee. c. Financial Contribution: To contribute its pro-rata share (as established annually by mutual agreement of the PARTIES) of the cost of constructing, managing, operating, monitoring, maintaining and repairing the Aeration System. d. Compliance: To comply with the requirements of all federal and state statutes, rules and regulations governing the Aeration System, and the directions of the Technical Oversight Committee. ~ e. Monitoring and Remote Access to Data: To develop and, with the approval of the Technical Oversight Committee, implement a field testing, sampling and monitoring program that will, among other things, measure dissolved oxygen and temperature in Lake Elsinore. To supply a remote access internet site for displaying monitoring information accessible by the PARTIES. This site shall include real-time data or recently past (i.e. 24 hours) information for viewing purposes only. The "real time" file will be replaced about every 15 minutes to provide a snap shot of the current data. All data collected will be placed on the DISTRICT FTP site accessible by the PARTIES. f. Reports: To prepare and submit quarterly and annual reports summarizing operation, maintenance and monitoring activities and other matters of interest as agreed upon by the PARTIES. The DISTRICT shall also provide such other written or oral reports regarding the operation and maintenance of the Aeration System as may be reasonably requested by any PARTY; ,-, g. Budget: To prepare, in cooperation with the Technical Oversight Committee, and submit an annual budget to the COUNTY and the CITY, for review and approval not later than ninety (90) days before the commencement of any fiscal year (July 1 to June 30), which budget shall estimate the expenditures necessary for the operation, maintenance, repair and replacement of the Aeration System, and to provide a financial statement showing the revenues and expenditures from the previous year's budget. A form of such a budget is attached hereto as Exhibit "5". In the event a budget acceptable to the PARTIES is not obtained prior to the start of a fiscal year, the DISTRICT shall continue to operate the Aeration System to the fullest extent possible, within the reasonable discretion of the DISTRICT, at the level of expenditure authorized by the last approved budget, and the PARTIES shall fund such budget until a new budget is approved. ACENDA ITEM NO. PACE 5 'YJ 3 OF~ h. Books and Records: Maintain, and retain for a period of not less than four (4) years following termination of this Agreement, full and accurate books and "wt/II accounts in accordance with the practices established by or consistent with those utilized by the Controller of the State of California for public agencies. Such books and accounts shall be maintained on a fiscal year basis (July 1 to June 30). Such books and accounts shall be maintained by the DISTRICT as public records. i. Safety: The DISTRICT shall be responsible for the safety of all persons and property relative to the Aeration System. This responsibility shall be continuous and not be limited to normal working hours. The DISTRICT's duty to ensure safety shall include, without limitation, the placement of buoys and lights and to take all other precautions necessary to protect boaters, skiers and swimmers in Lake Elsinore ("Safety Activities"). Because the CITY has rights and responsibilities related to recreation on Lake Elsinore not enjoyed by the DISTRICT, including but not limited to enforcement of CITY ordinances and the Lake Elsinore Lake Use Guidelines, Safety Activities conducted pursuant to this subparagraph shall not be completed without first obtaining the advice and approval of the CITY. The PARTIES acknowledge that some modifications to existing CITY ordinances and the Lake Use Guidelines may need to be undertaken in order to carry out the Safety Activities. j.. Inspection: To permit inspection of the Aeration System by representatives of the COUNTY, CITY and/or LESJW A and regulatory agencies. k. Liaison: To designate the General Manager or hislher designee as the ,...., DISTRICT's representative on the Technical Oversight Committee; provided, however, the DISTRICT reserves the right to change, from time-to-time, this designation. 4. COUNTY's Obligations. The COUNTY agrees to: a. Financial Contribution: To contribute its pro-rata share (as established annually by mutual agreement of the PARTIES) of the cost of constructing, managing, operating, monitoring, maintaining and repairing the Aeration System. b. Liaison: To designate the County Executive Officer, or his/her designee, as the COUNTY's representative on the Technical Oversight Committee; provided, however, the COUNTY reserves the right to change, from time-to-time, this designation. c. Cooperation with the DISTRICT: The COUNTY shall cooperatively assist the DISTRICT, as appropriate and necessary, in performing its duties hereunder. 5. CITY's Obligations. The CITY agrees to: a. Financial Contribution: To contribute its pro-rata share (as established annually by mutual agreement of the PARTIES) of the cost of constructing, managing, operating, monitoring, maintaining and repairing the Aeration System. '-'" ACENDA ITEM NO. PACE to 7:fj OF ~3 ,........ b. Liaison: To designate the City Manager or his/her designee as the CITY's representative onthe Technical Oversight Committee; provided, however, the CITY reserves the right to change, from time-to-time, this designation. c. Cooperation with the DISTRICT: The CITY shall cooperatively assist the DISTRICT, as appropriate and necessary, in performing its duties hereunder. d. Permission to use CITY Property: The CITY hereby grants the DISTRICT permission to construct, install, operate and maintain the Aeration System on its property. The location of the Aeration System on CITY property is approximately depicted on Exhibit 1 and Exhibit 6. e. Temporary Permission to use CITY Property to Construct: The CITY hereby grants the DISTRICT temporary permission to use the CITY property to construct the Aeration System described as APN 374-211-04, APN 374-212-04 and the Acacia Street Right-of-Way as approximately depicted on Exhibit 6. ~ 6. Term. The DISTRICT shall begin rendering services hereunder immediately following the date of completion of construction of the Aeration System (as signified by the issuance of a notice of completion by DISTRICT'S governing board) and shall continue to operate and maintain the System for an initial term terminating on June 30, 2011 (the "Initial Term"). Commencing 180 days prior to the expiration of the Initial Term, the PARTIES shall meet and confer in good faith in order to determine whether DISTRICT shall continue to render services hereunder for an additional term under such terms and conditions as shall be negotiated (the "Extended Term"). In the event that DISTRICT determines, in its sole and absolute discretion, not to render the services hereunder following the expiration of the Initial Term or discontinues its operational responsibilities as provided below, the CITY may, at its options, agree to render the services hereunder. In the event that City determines not to render the services hereunder, the COUNTY may, at its options, agree to render the services hereunder. The PARTY agreeing to operate the Aeration System, whether during the term of the Agreement or following termination of the Agreement, shall be granted, without charge or cost, full legal title to the Aeration System and any easement, licenses and permits for the CITY or COUNTY necessary to operate the Aeration System so long as and on the condition that PARTY does operate the Aeration System. A PARTY charged with the operation of the Aeration System may, in its reasonable discretion, discontinue its operational responsibilities in the event that operation of the Aeration System is infeasible due to material increases in operational costs, legal restrictions imposed by other regulatory agencies, or the inability of the Aeration System to provide material environmental benefits to the Lake. ",-- This Section 6 shall survive the termination of the Agreement. ACENDA ITEM NO. PACE 1 ?:6 O~ c:J3 7. Distribution of Surplus Funds. If, upon termination of this Agreement there are any unexpended funds related to the purpose of this agreement, in the custody or control of the ~ DISTRICT including, but not limited to, reserve funds, as depicted on Exhibit 5, or funds from the sale of the Aeration System equipment and material, such funds shall be distributed to the PARTIES in proportion to their respective financial contributions hereunder. 8. Nutrient Pollutant Mitigation Credits. The PARTIES are informed and believe that the California Regional Water Quality Control Board, Santa Ana Region, a water quality regulatory agency, may approve a pollutant trading program for the Lake Elsinore and Canyon Lake TMDL as provided in Task 12 of the TMDL. Moreover, it is the common understanding of the PARTIES that a pollutant trading program would necessarily involve pollutant credits based upon in-lake nutrient load reductions for phosphorus and nitrogen. In the event that the Aeration and/or Destratification Systems achieve internal nutrient load reductions of any level for nitrogen or in excess of the TMDL's 35% assumption for phosphorus then there may be an opportunity that the systems will create pollutant credits on behalf of the PARTIES based on their role as owners of the Aeration System. As a result, the PARTIES may have the right to trade pollutant credits for valuable consideration to other dischargers named in the TMDL. Therefore, the PARTIES agree that any such pollutant credits arising from the operation of the Aeration and/or Destratification Systems shall be allocated among the PARTIES in equal shares or in such other proportions as the PARTIES may mutually agree upon. The PARTIES further agree that the DISTRICT shall have the right of first refusal to acquire for valuable consideration any pollutant credits for phosphorous or nitrogen sought to be traded by the CITY or COUNTY to other dischargers named in the TMDL. DISTRICTS right of first refusal shall only extend to those pollutant credits that DISTRICT seeks to use for the exclusive purpose of meeting its legal ~ obligations under Board Order R8-2004-0011 in connection with the discharge of supplemental water to Lake Elsinore. 9. Indemnification. a. DISTRICT agrees to fully indemnify the COUNTY, CITY, and LESJW A against, and hold each of them and their respective employees and agents completely free and harmless from any cost, expense, claim, demand, judgment, loss, injury and/or liability of any kind or nature, including personal injury, death or property damage, asserted, or otherwise, whether in contract or tort, that may arise from, directly or indirectly, or be occasioned by, or be in any way connected with the DISTRICTs performance, and/or failure to perform, under this Agreement of the maintenance and operation of the Aeration System or any negligent act or omission of the DISTRICT, its employees, agents and/or subcontractors. b. CITY agrees to fully indemnify the COUNTY, DISTRICT, and LESJW A against, and hold each of them and their respective employees and agents completely free and harmless from any cost, expense, claim, demand, judgment, loss, injury and/or liability of any kind or nature, including personal injury, death or property damage, asserted, or otherwise, whether in contract or tort, that may arise from, directly or indirectly, or be occasioned by, or be in any way connected with the CITY's performance, and/or failure to perform, under this Agreement or any negligent act or omission of the 2P OF ~3 ~ AGENDA ITEM NO. PAGE 8 r-- CITY, its employees, agents and/or subcontractors. c. The indemnification obligations set forth in subparagraph "a", above, shall cease and be of no further effect if, and at the time, the DISTRICT decides to no longer render the services described above pursuant to the provisions of Paragraph 6, if the DISTRICT no longer owns the Aeration System, or upon termination of this Agreement. The indemnification obligations set forth in subparagraph "b", above, shall cease upon termination of this Agreement. 10. Miscellaneous Provisions. a. 'Independent Contractor: The DISTRICT shall perform the services required hereunder in the DISTRICT's own way as an independent contractor, and not as an employee of the COUNTY or the CITY. b. Subcontractors: The DISTRICT may, at its sole cost and expense, employ such competent and qualified professionals, consultants and subcontractors as the DISTRICT deems necessary. r-- c. Disposition of System. The DISTRICT shall not abandon, substantially discontinue the use of, lease, assign or otherwise dispose of the Aeration System or any significant part or portion thereof, during the useful life of the Project without the prior approval of the COUNTY, CITY and LESJW A. d. Amendment. This Agreement may be amended in writing by mutual agreement of the PARTIES. This is the entire Agreement between the PARTIES and supersedes any prior written or oral agreement inconsistent herewith. e. No Third Party Beneficiary. This Agreement between COUNTY, CITY and DISTRICT is intended for the mutual benefit of the three signing PARTIES only. No rights are created under this contract in favor of any third party or any party who is not a direct signatory to this contract. f. Venue and Attorneys' Fees. Any action at law or in equity brought by any of the PARTIES hereto for the purpose of enforcing a right or rights provided for by this Agreement shall be tried in a court of competent jurisdiction in the County of Riverside, State of California, and the PARTIES hereby waive all provisions of law providing for a change of venue in such proceedings to any other county. In the event any of the PARTIES hereto shall bring suit to enforce any term of this Agreement to recover any damages for and on account of the breach of any term or condition of this Agreement, it is mutually agreed that the prevailing party in such action shall recover all costs thereof including reasonable attorneys' fees to be set by the court in such action. ~ g. Assignment. It is mutually understood and agreed that this Agreement shall be binding upon each of the PARTIES and their successors. Neither this Agreement AGENDA ITEM NO. '1::>"0 PAGE 9 OF 7:;;.3 I I I / / / / / / / / / / / / / / I / / / / / / / / / / / / nor any part thereof may be assigned by any party without the prior written consent and approval of all PARTIES. ~ h. Notices. All notices, requests, consents, approvals or other communications between the parties in connection with this Agreement shall be deemed given if addressed to the recipient party at its last known address and, with postage prepaid, deposited in the United States mail. The current addresses of the PARTIES are as follows: City City of Lake Elsinore Attn: City Manager 130 S. Main Street Lake Elsinore, CA 92530 County County of Riverside Attn: Executive Office 4080 Lemon Street Riverside, CA 92501 District Elsinore Valley Municipal Water District Attn: General Manager 31315 Chaney Street Lake Elsinore, CA 92531 Each party, upon notice to the others, may from time to time change its mailing address. ......" i. Severability. If any provision of this Agreement shall be determined by any court to be invalid, illegal or unenforceable to any extent, the remainder of this Agreement shall not be affected and this Agreement shall be construed as if the invalid, illegal, or unenforceable provision had never been contained in this Agreement. j. Counterparts. This Agreement may be executed simultaneously or in any number of counterparts, each of which shall be deemed an original and together shall constitute one and the same instrument. ~ ACENDA ITEM i'~0. PACE 10 35"' o OF 013 I""'"' k. Effective Date. This Agreement shall become effective when it has been executed by all of the PARTIES. IN WITNESS WHEREOF, the PARTIES have caused this Agreement to be effective as of the day and year first above written. CITY OF LAKE ELSINORE Dated: By Mayor ELSINORE V ALLEY MUNICIPAL WATER DISTRICT Dated: By President, Board of Directors COUNTY OF RIVERSIDE ,,--, Dated: By Chairman, Board of Supervisors APPROVED AS TO FORM: By Deputy County Counsel ,,-- ACENDA m:1Vi hi\.;. PACE II 2f5 Qj cJ3 ~ \l'OO1OO €l!l'm ~oo ....." ....." ?:fS '" OFcX3 ~ EXHIBIT 2 Lake Elsinore Phase II Aeration System Capital Cost and Grant Funding Shortfall Description Amount Metro Builders and Engineers Bid Amount $ 2,171,711 Change Orders (-3% of Bid Amount) $ 60,000 Inspection (-5% of Bid Amount) $ 100,000 PACE (Engineering during Construction) $ 83,880 Subtotal $ 2,415,591 District Engineering and Project Mngt $ 30,000 District Overhead $ 79,409 Grand Total $ 2,525,000 Less LESJWA Grant Amount $ (1,550,000) Grant Funding Shortfall $ 975,000 ,,-.. ----- ACENDA ITEM NO. PACE 13 'b5 OF ,:;.3 EXHIBIT 3 IMPLEMENTATION AGREEMENT for the ....." LAKE ELSINORE DIFFUSED AERATION SYSTEM THIS AGREEMENT is made and effective this 20th day of April, 2006 by and between the LAKE ELSINORE & SAN JACINTO WATERSHEDS AUTHORITY ("LESJW A") and the ELSINORE VALLEY MUNICIPAL WATER DISTRICT ("DISTRICT"). LESJW A and DISTRICT are sometimes collectively referred to herein as the "PARTIES". RECITALS A. LESJWA is a joint powers public agency, formed for the purpose of implementing projects and programs to rehabilitate the San Jacinto and Lake Elsinore Watersheds and to improve water quality in Lake Elsinore. The DISTRICT is a Member Agency ofLESJW A. B. LESJWA has been awarded $15 million from the Safe Drinking Water, Clean Water, Watershed Protection and Flood Protection Bond Act of 2000 (the "Bond Act"). Utilizing Bond Act funds, LESJW A conducted a study and found that the water quality in Lake Elsinore will be substantially improved by the enhanced circulation of Lake water by means of a diffused aeration system. Such a system would reduce fish kills and algal densities in Lake Elsinore by: 1. Reducing internal phosphorus loading from lake bottom sediments; ...."" 2. Preventing lengthy periods of thermal and chemical stratification; and 3. Increasing dissolved oxygen in lake bottom waters. C. Consequently, LESJW A has determined to implement the Lake Elsinore Diffused Aeration System Project. ("PROJECT".) D. LESJW A has further determined to delegate the responsibility of implementing the PROJECT to the DISTRICT, and it is the purpose of this Implementation Agreement to set forth the terms and conditions by which the DISTRICT shall implement the PROJECT. NOW, THEREFORE, in consideration ofthe facts recited above, and the covenants, conditions and promises contained herein, the PARTIES mutually agree as follows: AGREEMENT 1. DISTRICT's Obligations. Subject to all of the provisions of this Agreement, the DISTRICT hereby agrees to: a. Implementation of PROJECT: Provide, or cause to be provided, all labor, tools, equipment, vehicles, materials, supplies and qualified personnel to implement the PROJECT. ACENDA ITEM NO. 215 ....." PAOEJ1 OF c:23 ~ b. Accept Title: Upon completion, the DISTRICT shall accept the conveyance, by LESJW A, oftitle to the PROJECT. c. Compliance: Comply with the requirements of all federal and state statutes, rules and regulations. d. Reports: Prepare and submit to LESJW A biweekly reports summarizing PROJECT implementation activities and other matters of interest as agreed upon by the PARTIES. The DISTRICT shall also provide such other written or oral reports regarding the PROJECT as may be reasonably requested by LESJW A. e. Indemnification: Fully indemnify LESJW A against, and hold it and its members, officers, employees and agents completely free and harmless from any cost, expense, claim, demand, judgment, loss, injury and/or liability of any kind or nature, including personal injury, death or property damage, asserted or otherwise, whether in contract or tort, that may arise from, directly or indirectly, or be occasioned by, or be in any way connected with, the DISTRICT's performance and/or failure to perform under this Agreement or any negligent act or omission ofthe DISTRICT, its employees, agents and/or subcontractors. f. Project Cost: All PROJECT costs in excess of the grant made hereunder shall be borne by the DISTRICT. ~ g. Time for Completion: The DISTRICT shall complete the implementation of the PROJECT and submit its final invoice for payment by March 31, 2007. 2. LESJW A's Obligations. Subject to all of the provisions of this Agreement, LESJW A hereby agrees to: a. Grant: LESJW A shall grant to the DISTRICT the not-to-exceed sum of $1,550,000 for the purpose of implementing the PROJECT as described herein, such grant to be delivered to the DISTRICT in increments based on the progress of the PROJECT, and the following additional conditions: (i) Upon receipt and approval of DISTRICT invoices, LESJW A shall only compensate the DISTRICT for actual expenditures incurred; and (ii) Because Bond Funds for the payment for each invoice are to be obtained incrementally from the SWRCB, the PARTIES acknowledge and agree that there may be periodic delays in payment; and (iii) LESJW A shall retain from the DISTRICT's last incremental payment an amount equal to 10% thereof, to be finally paid upon satisfactory completion of the PROJECT and delivery to LESJW A of proof of payment for all labor and materials. .~ b. Convey Title: Upon completion of the PROJECT, LESJW A shall convey title to it to the DISTRICT. 1::J'O 0/3 2 ACENDA ITEM NO. PAGE I~ OF 3. Independent Contractor. The DISTRICT shall perform the services required hereunder in the DISTRICT's own way as an independent contractor, and not as an employee of LESJW A. ~ 4. Subcontractors. The DISTRICT may, at its sole cost and expense, employ such competent and qualified professionals, consultants and subcontractors as the DISTRICT deems necessary . 5. Assignment. This Agreement shall not be assigned or otherwise transferred by the DISTRICT without the prior written consent of LESJW A. 6. Amendment. This Agreement may be amended in writing by mutual agreement of the PARTIES. 7. Inspection. The DISTRICT shall permit inspection ofthe progress ofthe work authorized hereunder by representatives ofLESJW A upon reasonable notice. 8. Arbitration. Any dispute which may arise by and between the PARTIES to this Agreement shall be submitted to binding arbitration. Arbitration shall be conducted by the Judicial Arbitration and Mediation Services, Inc., or its successor, or any other neutral, impartial arbitration service that the PARTIES mutually agree upon in accordance with its rules in effect at the time of the commencement of the arbitration proceeding, and as set forth in this Paragraph. The arbitrator chosen must decide each and every dispute in accordance with the laws of the State of California, and all other applicable laws. The arbitrator's decision and award are subject to judicial review by a Superior Court of competent venue and jurisdiction, only for material errors of fact or law. Upon a showing of good cause, the arbitrator may permit limited discovery in the arbitration proceeding. Unless the PARTIES enter into a written stipulation to the contrary, prior to the appointment of the arbitrator, all disputes shall first be submitted to non-binding mediation, conducted by the Judicial Arbitration and Mediation Services, Inc., or its successor, or any other neutral, impartial mediation service that the PARTIES mutually agree upon in accordance with its rules for such mediation. ...., 9. Drug-Free Workplace Certification. By signing this Contract, the DISTRICT hereby certifies under penalty of perjury under the laws of the State of California that the DISTRICT will comply with the requirements of the Drug-Free Workplace Act of 1990 (Government Code Section 8350 et seq.) and will provide a drug-free workplace. 10. Non-Discrimination. During the performance of this Agreement, DISTRICT shall not unlawfully discriminate, harass, or allow harassment against any employee or applicant for employment because of sex, race, color, ancestry, religious creed, national origin, physical disability (including mv and AIDS), mental disability, medical condition (cancer), age (over 40), marital status, and denial of family care leave. DISTRICT shall insure that the evaluation and treatment of their employees and applicants for employment are free from such discrimination and harassment. DISTRICT shall comply with the provisions of the Fair Employment and Housing Act (Government Code, Section 12290 et seq.) and the applicable regulations promulgated there under (California Code of Regulations, Title 2, Section 7285 et seq.). The applicable regulations of the Fair Employment and Housing Commission implementing Government Code Section 12990 et seq., set forth in Chapter 5 of Division 4 of Title 2 of the California Code of Regulations are incorporated into 5" AGENDA ITEM NO. 2> ...., PAGE J Ie, OF d~ 3 ,......... this Contract by reference and made a part hereof as if set forth in full. DISTRICT shall give written notice of their obligations under this clause to labor organizations with which they have a collective bargaining or other agreement. DISTRICT shall include the non-discrimination and compliance provisions of this clause in all subcontracts to perform work under the Contract. 11. State of California Disclosure Requirements. DISTRICT shall include the following disclosure statement in any document, written report, or brochure prepared in whole or in part pursuant to this contract: "Funding for this project has been provided in full or in part through a contract with the State Water Resources Control Board (SWRCB) pursuant to the Costa-Machado Water Act of 2000 (Proposition 13) and any amendments thereto for the implementation of California's Nonpoint Source Pollution Control Program. The contents ofthis document do not necessarily reflect the views and policies of SWRCB, nor does mention of trade names or commercial products constitute endorsement or recommendation for use." 12. Enforced Delay; Extension of Times of Performance. In addition to specific provisions of this Agreement, performance by any party hereunder shall not be deemed to be in default, and all performance and other dates specified in this Agreement shall be extended, where delays or defaults are due to: war, terrorism, moratorium, insurrection, strikes, lockouts, riots, floods, earthquakes, fires, casualties, acts of God, acts of he public enemy, epidemics, quarantine restrictions, freight embargoes, lack of transportation, governmental restrictions or priority, litigation, unusually severe weather, inability to secure necessary financing, labor, ,......... materials or tools; delays of any contractor, subcontractor or supplier; acts or omissions of the other party, acts or failures to act of any other public or governmental agency or entity (other than the acts or failures to act of the PARTIES), or any other cause(s) beyond the control or without the fault of the party claiming an extension of time to perform. Notwithstanding any to the contrary in this Agreement, an extension of time for any such cause shall be for the period of the enforced delay and shall commence to run from the time of the commencement of the cause, of notice by the PARTY claiming such extension is sent to the other PARTIES within thirty (30) days of the commencement of the cause. IN WITNESS WHEREOF, the PARTIES have caused this Agreement to be effective as of the day and year first above written. LAKE ELSINORE & SAN JACINTO WATERSHEDS AUTHORITY Dated: By Phil Williams, President, Board of Directors ELSINORE VALLEY MUNICIPAL WATER DISTRICT ,......... Dated: By President, Board of Directors ACENDA ITEM NO. PACE /1 3D OF ~~ 4 The aeration sY$temautomatio$~nceof operation shall be inaorotdanoe Withthef()IIoWing~ '-' Figure 1 Lak~Elsinpre Aeratic:m$Y$lem Proce$SFI9* D~gt;lm (Modified from Dr. Arlo Fast 111281(4) 1~ON.;e.l~:r~vg, POa,,,,(future bottom}. & WIND SPEED YES NO YES 3. 1$ ~vg("'tu'.bottom) >OOmJn1? NO '-' 4_.tsOOavg (futU"'~c)rnr< . DQrqllln yes \ NO 5,1SW1ND.sPEfiOavg< NIN SPEED YES NO AGENDA ITEM NO. ::;s- PAGE IX OF ~3 """'" ,........ ,r- ...J tS ~ o UJ en ::> CJ) I- ::> D.. Z r:x:: ~ ~ o ,r-- (J:) '.;;t II II ~ '.;;t ('Sl ....... I <o:t <:> .~ <'j4 Ie <:> :3 le G .c :0 ~ 0 ~ .c ......... c: (.) G (I) 'm 'e' 0- S! .!.2 Ol S! 0 .S 0 ...... "Q m (I) .c U) ......, :0 (1) .... .fa :0 ...... e: .a '0. 0- .S <<I c: - Q) <<I Q) "Q U) U) ! :;:J .2 .e :> Q) c e e (1) 0- ;; ~ ~ "'- '0 0 >< .... e: :c 0 Q) G B .0 = en "Q E <<I %>.. :;:J .... ro e: ::J e (5 "Q U) I I .... Q) U) " Q) g is c ':.... .c . . l- e: ~ (J:) If II 'li :::J o .c <o:t ('Sl ~e, 8 t> ..... U) o B - m i ~ 8-5 II) .... "Q ..e e: .~ S ...... (.) c' S '2 (5 .~ .~ ~ m (1) - "Q (0 "Q .5 .c Q) (.) U) :c ::J 3= g .E ~ ~ "Q ... 0 co 'C 16 8- "Q Q) 'Oe j!! .. .. ~ e: 0 ~ 'S; Q) e 0. 0. 'ti I I e: 3: . I: 0. '0 . . ~ 0 It) It) <:> N ci . ..... ..... <'II <:> ;-- II II II II II I. CJ) ~ D.. t:i CJ) r:x:: ~ uJ o --~ o II) Q) e 5r '0 It) . <:> ~ ~ Q) :0 ~ o <( e :0 e 'x m ::i I >< ~. ...J :r"es __ e ..~ S2. . <:> 0 ...... ......... o 0 "-"0 o Ci iI ., ....... "Q .<i)....c:; .m.. . .- 0.. ~ ~a [e ~ e ~ "-" ~ c8 i G e 0- m :J CJ) e..!.... ?l!. ::J e: .t:::: e :E .~ '2 :e "t:l e ..c; e: :J - 8 e le Q) .- iL (J) .5 I I := ..... N I >->- N .,.....,. 'i ; aG '" .c ..c:; 0 I ~ ~ ~d 0"-" "-" .>. >. m .!! 1) ! (:) ~ .1 co .- l- e I- u.. 'cZ u.. Cl.. 0 0 ACENDAITEM Nt:. oS PACE I CJ OF cZ3 EXHIBIT 5 LAKE ELSINORE PHASE II AERATION SYSTEM ANNUAL OPERATIONS, MAINTENANCE AND REPLACEMENT COST FY 2006 - 2007 """"" OPERATIONS & MAINTENANCE Preventative Maintenance 1 $ 20,000 Compressor Overhaul 2 $ 5,000 Service Check 3 $ 19,000 Aeration Lines and Pump Station Maintenance 4 $ 3.000 PLC Proarammina and Consultina Services 5 $ 5,000 Power 6 $ 160,000 SUBTOTAL $ 212,000 $ 17 ,000 $ 45,000 $ 26 000 $ 88,000 I TOTAL 1$ 300,000 1. Preventative maintenance includes all parts, labor and expenses to care for the unit per the manufacturer's maintenance schedule. Assumes 8,000 hours per year operation (24 hours a dayl7days per week operation). Maintenance occurs 2 times per year. 2. Overhauls include the compressor unit only. Drive Motors, and associated components (motor starters) are not included. Overhauls occur every 100,000 hours of operation. Assuming 8000 hours per year, overhauls occur once every 12 years. $14,000 per unit every 12 years. 3. Service check occurs weekly. Need to check and verify that all compressors, valves, meters, controls, etc are operating normally. Two- person crew, Four Hrs. per Week, $90/hr, 208 hours. 4. Aeration lines need to be lifted from the bottom of the lake to the surface and cleaned out properly. 4 person crew 8 hr/yr at $180/hr. Perform necessary maintenance per the manufacture's maintenance manual for all meters, valves, blowers, pumps, etc. 5. Program adjustments to the PLC and anticpated annual consulting. 6. 2,400 Hours of operation, all compressors running. 7. Replacement of the compressor screw element which occurs once every 50,000 hours of operation. At 8,000 hours of operation per year (maximum), replacement occurs every 6 years. Replacement of the sensor buoys and calibration solutions every 5 years at 8,000 hours of operation per year (maximum). General and preventive maintenace and service for all other equipments/materials as required for minor wear and tear damages (including pipes, valves, and blowers). """"" 8. Structures, Mechanical Equipment, Piping, Compressors. $1.2 M Capital Cost, 40 year life, 3% Escalation. 9. Water Quality Profiler, Weather Station, and Water Quality Maintenance. $0.2 M Capital Cost, 20 year life, 3% Escalation. ~ AGENDA ITEM NO. .=-'<"""'''''' PAGE ~?J_OF a3 '--' ,,-.-. Record1ng requested by and when recorded return to: Engineering Dept. Elsinore Valley Municipal Water District PO Box 3000 Lake Elsinore, CA 92531-3000 APN: Exempt - Gov't Code 6103 CERTIFICATE OF ACCEPTANCE This is to certifY that the interest in real property conveyed by this instrument is hereby accepted by the undersigned Agency on behalf of the Board of Directors of the Elsinore Valley Municipal Water District pursuant to authority conferred by Resolution No. 649 adopted by said Board November 17, 1980 and the grantee consents to recordation thereof by its duly authorized officer. ,,-.-. Ronald E. Young, General Manager ELSINORE VALLEY MUNICIPAL WATER DISTRICT DOCUMENTARY TRANSFER TAX No Documentary Transfer Tax due - Grantee is a public agency (Rev. & Tax. Code Section 11922) GRANT OF EASEMENT FOR VALUABLE CONSIDERATION, the CITI OF LAKE ELSINORE, a public agency_, Grantor, hereby grants to the ELSINORE VALLEY MUNICIPAL WATER DISTRICT, a public agency, Grantee, and assigns, the following described easement and rights in and upon that certain real property located in the City of Lake Elsinore, State of California, described on Exhibits "A", Legal Description, and "B", Plat Map, attached hereto and by this reference made a part hereof. An easement in, upon, over, under and across the property described on Exhibits "A" and "B" attached hereto for the construction, reconstruction, replacement, repair, operation, maintenance and use of an access road, building and pipelines for lake diffused aeration purposes together with all necessary fIXtures and appurtenances at such locations and elevations, upon, along, over and under said real property as Grantee may now or hereinafter deem convenient and necessary from time to time, together with the right of ingress thereto and egress therefrom, to and along said easement by a convenient route or routes in, upon, over and across the said described property . Grantee shall have the further right to use during the construction of said access road, building and pipelines such areas adjacent to the easement herein granted as may be reasonably necessary for the performance of the work and for access to the work during construction. Grantor shall not erect any building, fence or other structure upon said easement which will in any way unreasonably interfere with Grantee's rights and operations hereunder. .,-.. F:Engln \ VaI\Form \Grant of Easement ACENDA ITEM NO. PACE c:l J 35 OF ~3 Grantor shall not increase or decrease or permit to be increased or decreased, the now existing ground elevations of said easement without the prior written consent of Grantee. Grantee shall make every effort to cooperate with other utilities in sharing the use of the easement herein granted provided that such sharing will not adversely effect Grantor's use of the easement as described herein. This instrument shall be binding upon and encumber the benefit of the successors and assigns of Grantor. The parties hereto acknowledge and agree that the foregoing grant of easement is exclusively for the lake diffused aeration system. Should such purpose be terminated or otherwise abandoned, the foregoing grant of easement shall be terminated and Grantee shall be responsible for restoring the property to the extent required by State and federal law. Additionally, the foregoing grant of easement does not constitute an easement for any purposes related to the Lake Elsinore Advance Pumped Storage Project or such other projects except that specified herein. IN WITNESS WHEREOF, Grantor has caused this instrument to be executed this day of , 20_. ....." GRANTEE: GRANTOR: (Signature) (Signature) (Print name, Title) (Print name, Title) (Company Name) (Company Name) .....". (Street Address) (Street Address) (City, State. Zip) (City, State, Zip) State of California ) County of Riverside) ss. before me, On personally appeared personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) subSCribed to the within instrument, and acknowledged that _ executed the same, in his/her/their authorized capacity. WITNESS my hand and official seal Notary Public in and for said County and State AGENDA ITEM NO. 1JS PAGE ~:J.. OF 93 '-' F:Engln \ VaI\Fonn \Grant of Easement X.efo: rath :ite pm I profle.<kj IAnocde . I; LTscaIe . 05: PSItscaIe . I; kaJ Vw:. . 160s II.MS Toehl; Visretdn . I ~ ~~ ~::O' @ , tlRNot4 P.M ~ ~lFl.fN~W'~.r.f.~g ~ 5 I~~~~. SUlCJ2~200 09/21/05 PH nJ.4) -.-"7!K:lO ~N< C'7t<4) ...o1--r.I9'J ..a!I NO. 7830-60 n:,h\I:{[3: ~~D~@OO[!: @& P.\76'lOE\Enjreeri>j\7630-6OIFncI ~\Leqa I:.Isaption\I-7630 le<JaI [l,c AG Ol.<kj - TIi>. l<>j",1J ill)' pmorel on Ssp. 2b, 2005 al1054 om ."...... I~ ~ "...... U>-~ OJ I~~~ ;~~~;li ~~~ ~ " Z -~ :J: ~Hl2~ ~~~ 3: ~~2@.2!1 > ~~~~ ~ifi~~ffi ^' 8~i: ;7'; ~~~~ ~~~::!~ ~~$ :I:~:!l~:i! :<i ~~~- . ~~ u; ~Q U> ~~ Iil_ ~ ifiZ5 pl~ ~~EIil ~-;~ ,z ~-;C!I ~-~~ ~~ i02~ ~~ mii~ ~ . !;; ~~~ :>:Y'~ -;"1] Iil~f!i~ iliffi-; 2!1~~m ~$i ~$~~ ~' ~ ~Iil~ >Iil_ ~;-~ ~~m Jllil - ~~ 5-; n1~ ~Iil~~ ~ ~ . ;>> ii~ ~ ~tpr r ~~ m (j) ~ - ~z f= .... , ~2p! ~ !>! ~ ~ i~~ ~ ~ ^' Ui~ ~~~ =0 tS~ ~ -I ~2 .... ...oS 0 ~~ , :z: '" ;::; ~~ ~~ 'i? ~i!! $~ ~m ~6 .~ ~Iil u; ~~ ~ Iil~ ~ ~lll ~ ;; .t>- Iil~ 0 22~ J\.J i~ 0 O. .t>- o "...... 50. 00' o. 12"W 12"W 12"W -0- - ~ LAKESHORE DRIVE - - - - - - -"" Tl~ [b&~@; @:[b@O~@~@: &@:~& li'O@~ ~@~li'G:J @Oli'@: [b@;@&[b lID Of ;2 =l ",..- CITY OF LAKE ELSINORE REPOR'I TO CITY COUNCIL TO: MAYOR AND CITY COUNCIL FROM: ROBERT A. BRADY, CITY MANAGER DA TE: JUNE 27, 2006 SUBJECT: JOINT POWERS AGREEMENT WITH LAKE ELSINORE UNIFIED SCHOOL DISTRICT FOR USE OF LAKESIDE HIGH SCHOOL SWIMMING POOL AND AQUATIC STAFF JOB TITLES AND SALARY CLASSIFICA TIONS BACKGROUND /"'"'"' In the summers of 1992 and 1993, the City of Lake Elsinore offered community-wide aquatic programs at the swimming pool at Lake Elsinore High School. With the emergence of competitive swim teams and related programs, pool availability for community-wide activities was eliminated. DISCUSSION The City and the School District have been in negotiations for the past four months regarding the development of a Joint Powers Agreement (JPA) for use of the swimming pool at the new Lakeside High School for community swim programs. The JP A is consistent in form and content with current JP A agreements with the District with modifications and changes significant to the high school. The agreement is for 25 years (Section 2) and provides for termination (Section 3) should the high school's demand for pool usage increase in the future. ",..- The City will be required to pay a flat rate of $100 per day for use and maintenance of the facilities which will be evaluated annually and adjusted as required (Section 6, c). j.\~~,;....A tTC:~'i ;'dO. ~ PAc::-L__'.__J3 REPORT TO CITY COUNCIL JUNE 27, 2006 PAGE 2 ....." To operate and staff the pool facility will require the hiring of several summer staff to provide lessons, and lifeguards for open swim and special evening events for families. Attached is a classification and salary list for City Council review and authorization. Staff has met with both the Swim Coach and Water Polo Coach at Lakeside High School and will be utilizing their athletes to staff the summer aquatic programs once certified. FISCAL IMPACT No impact will be seen with the approval of the JP A. The staff costs associated with the aquatics programs will be offset by lesson revenues. RECOMMENDA TION It is staff's recommendation that the Mayor and City Council approve the JP A with the Lake Elsinore Unified School District for use of the Lakeside High School swimming pool and authorize the classifications and salary ranges as provided for operation of the aquatic programs. ....." PREPARED BY: C OR OF COMMUNITY SERVICES APPROVED FOR AGENDA BY: ......, AOr:NDA ITEM NO. 5-P... PAC;: a OF -1.3 ,,- JOB CLASSIFICATIONS AND SALARY RANGES POOL MANAGER Range 27z AQUATICS STAFF WATER SAFETY INSTRUCTOR Range 21z POOL LIFEGUARD Range 15z /""'"' SWIM AIDE Range 07z ,,-- $13.01 - $16.66 $10.71 - $13.67 $ 9.21 - $11.79 $ 7.58 - $ 9.67 AGEr~DA ITEM NO. (j(.p PACE <-3 OF-t3 AGREEMENT FOR JOINT USE, MAINTENANCE, AND OPERATION OF COMMUNITY RECREATION FACILITIES BETWEEN THE LAKE ELSINORE UNIFIED SCHOOL ,....", DISTRICT AND THE CITY OF LAKE ELSINORE (LAKESIDE HIGH SCHOOL) THIS AGREEMENT FOR JOINT USE, MAINTENANCE, AND OPERATION OF COMMUNITY RECREATION FACILITIES (Lakeside High School) (the "Agreement") is entered into by and between the Lake Elsinore Unified School District ("District") and the City of Lake Elsinore ("City"). WHEREAS, Chapter 10, Part 7, Division 1, Title 1 of the Education Code of the State of California authorizes and empowers school districts and cities to organize, promote and conduct programs of community recreation which will contribute to the attainment of general educational and recreational objectives for children and adults of this State; and WHEREAS, School District is the owner of the Lakeside High School which is located at 32693 Riverside Drive in the City of Lake Elsinore; and WHEREAS, District and City desire to establish a basis for the cooperative use of certain specified recreational and educational facilities located at the School Site ("Recreational Facilities") and identified in Attachment "A"; and WHERAS, the District and the City desire this Agreement to provide for terms and conditions for the joint use of the Recreational Facilities located on the District's premises pursuant to former Education Code section 39500, et seq. and in accordance with Education Code section 35160, et seq. .......", NOW, THEREFORE, the City and the District hereby mutually covenant and agree with each other as follows: 1. General Principles District and City shall cooperate in utilizing the Recreational Facilities for joint educational and community recreation purposes pursuant to this Agreement. 2. Term Subject to the provision for termination set forth herein, District agrees to keep and maintain the Recreational Facilities for the benefit of the residents of the City for a period of twenty-five (25) years, subject to this Agreement. At the expiration of such term, this Agreement shall be automatically extended for additional terms of ten (10) years, unless either City or District provides written notice to the other at least six (6) months before the end of the term of this Agreement, or an extension, that it .......", -1- AGErmA ITEM NO. '2::f..p PACE if- or _~3 ~ desires to terminate said Agreement. In that event, the Agreement shall expire at the end of the term. The term of this Agreement shall begin on the last execution date set forth below. Notwithstanding the foregoing, the City's obligations, under paragraphs 5 and 6( c), to maintain Recreational Facilities shall not begin until acceptance of the improvements constructed pursuant to Section 3 by City. 3. Termination before Expiration of the Term District may, in the exercise of its reasonable discretion, determine that Recreation Facility is no longer available for community recreation purposes. In the event that District makes such determination, District shall provide notice to City of such determination 90 days in advance of its intent to terminate this Agreement. Following such notification, District agrees to meet and confer with City in good faith within such 90 day period to determine the appropriateness of alternative that may not result in termination of the Agreement. 4. Scheduling of Use a. District agrees that City may use the Recreational Facilities for community use provided, however, that the community use of the Recreational Facilities shall not interfere with District's use for public school purposes or constitute a violation of the provisions of California or Federal law . ,..--.. b. District shall have exclusive use of the Recreational Facilities during the school calendar year, unless other arrangements are agreed to in this Agreement or by the parties. c. City shall use its best efforts to schedule use of the Recreational Facilities during non- school time. d. City shall give District first priority in scheduling use of the Recreational Facilities during non-school time with notification 30 days prior to the time needed. e. A schedule of dates and times for the use of the Recreational Facilities shall be established in advance at a meeting between the District and the City. The schedule shall be arranged to avoid a conflict between the District's and City's use of the Recreational Facilities. ' 5. Maintenance a. District shall maintain the Recreational Facilities through its own staff, or by contract (Attachment "A"). ,..--.. -2- ACiEr~CA ITEM rm.(;;J..p PAC;:: .5 cr...J 3 b. District shall set-up for its own use, and City shall set-up for City's use. Materials or equipment used shall be approved by District. .......", c. At the completion of activities by City or by District, the user shall be responsible for costs to clean up. d. All costs incurred for repair of damages shall be borne by user. 6. Apportionment of Maintenance Costs a. Cost of maintenance shall be apportioned as follows: District shall be responsible for the cost of maintaining the Recreational Facilities. b. Utility costs shall be apportioned as follows: District shall be responsible for all utility costs associated with the Recreational Facilities. c. The Recreational Facilities, as developed by the parties for community recreation purposes under this Agreement, shall be adequately maintained by the District to ensure proper and safe use, appearance, and longevity, according to initially agreed upon standards. City to reimburse District for use of Recreational Facilities (Pool) based on a flat daily rate. Rate to be set by District and re-evaluated annually. Any and all rate changes will be effective January 1. The District will notify the City in writing of the rate change. '...." 7. Indemnification a. District shall indemnify and hold harmless City, its officers, agents, and employees from any and all claims, demands, actions, causes of action, damages or liability (including attorney's fees and court costs) for injury to or death of persons, or for damage to property resulting from or arising out of any act or omission of the District, its officers, agents, or employees in the use or maintenance of the Recreational Facilities, or in the exercise of any other right or privilege by District pursuant to this Agreement. b. City shall indemnify and hold harmless District, its officers, agents, and employees from any and all claims, demands, actions, causes of action, damages, or liability (including attorney's fees and court costs) for injury to or death of persons, or for damage to property resulting from or arising out of any act or omission of City, its officers, agents, or employees, in the use or maintenance of the Recreational Facilities, ......" -3- AGENDA ITEM NO. "i:J..!' PACE fp c;:. /3 I"""" ",--... I"""" or in the exercise of any other right or privilege granted to City pursuant to this Agreement. 8. Insurance District and City shall at all times during the term of this Agreement, procure and maintain public liability and property damage insurance with an insurance company licensed to do business in California, which company must have a B+ excellent rating in the current issue of Best Insurance Guide, to protect against loss from liability imposed by law for damages on account of bodily injury, including death therefrom, suffered or alleged to be suffered by any person or persons whomsoever, resulting directly or indirectly from any act or activities of District and City on premises or any person acting for District or City or under District's or City's control or direction on their respective premises. Such public liability and property damage insurance shall be maintained in full force and effect during the entire term of this Agreement, in the amount of not less than: a. $1,000,000 (One Million Dollars) for injury to or death of one person and, subject to the limitation for the injury or death of one person, of not less than $5,000,000 (Five Million Dollars) for injury to or death of two or more persons as a result of anyone accident or incident; b. $500,000 (Five Hundred Thousand Dollars) for property damage; c. $1,000,000 (One Million Dollars) combined single limit per accident; and d. Workers' Compensation Insurance. A program of Workers' Compensation Insurance in an amount and form so as to meet all applicable requirements of the Labor Code of the State of California, including Employer's Liability with Two Hundred Fifty Thousand Dollars ($250,000) limits, covering all persons providing services on behalf of District and City, except District volunteers, and all such risks to such persons under this Agreement. Each of the parties shall submit a policy of said insurance to the other party on or before the commencement of this Agreement indicating full coverage of the contractual liability imposed by this Agreement and stipulating that the insurance selected by each party shall not be subject to cancellation, any change in coverage, reduction in limits or non-renewal, except after written notice to each party by certified mail, return receipt requested, not less than thirty (30) days prior to the effective date thereof. Each party shall name each other as additional insured on all insurance policies procured pursuant to this Agreement. The adequacy of the amount of insurance shall be reviewed by the parties every five (5) years and shall be increased or decreased by mutual agreement of the parties. -4- ACENDA ITEM NO. PACE 7 ~ OF-13 Notwithstanding the foregoing, the District acknowledges that the City is a member of self- insurance pool known as the California Joint Powers Insurance Authority. Accordingly, District agrees that such coverage, as presently provided, satisfies the requirements set forth in this section. '-'" 9. City Employees a. Employees of City. In performing their duties and responsibilities under this Agreement, any and all City agents and/or employees shall be solely agents and/or employees of the City and shall not be deemed in any manner whatsoever to be acting as agents or employees of the District. b. Staffing. City represents and warrants that all times during City's use of the Recreational Facilities, City will staff the Recreational Facilities with sufficient trained personnel employed by the City to supervise the Recreational Facilities and to assure safe operation and use of the Recreational Facilities. c Training. City represents and warrants that all persons employed by City in use of the Recreational Facilities shall be properly trained and possess all appropriate certifications of such training, including, but not limited to, all applicable CPR certifications, Lifeguard/Life Safety Certifications, and certification to handle any chemicals or hazardous materials. 10. Alcohol. Tobacco and Drugs """ The City shall not allow alcohol, tobacco or illegal drugs to be sold, used or consumed at the Recreational Facilities. 11. Notices Any notice, demand, request, consent, approval, designation, or other communication which either party is required or desires to give or make or communicate to the other party shall be in writing and shall be personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, at the following addresses: District: Lake Elsinore Unified School District 545 Chaney Street Lake Elsinore, CA 92530 Attention: Assistant Superintendent, Business Services ....."" -5- AGENDA ITEM NO. PACE ~ 3tP OF 13--" ---' ~ City: City of Lake Elsinore 130 South Main Street Lake Elsinore, CA 92530 Attention: City Manager 12. City Rights This Agreement shall not be deemed or interpreted so as to modify, limit, or otherwise affect any right or interest which City may have in the Recreational Facilities under any provision of law or existing contractual agreement. 13. General Provisions a. Representatives of both District and City shall regularly confer and keep minutes of such meeting with regard to the development, use, and maintenance of the Recreational Facilities. The representatives may establish procedures to administer this Agreement and may provide from time to time for th~ proposed amendment of this Agreement or proposed separate agreements to provide for the development, use, and maintenance of other Recreational Facilities. b. After completion of any additions to the Recreational Facilities, nothing shall be done by either District or City, or be authorized by them to be done by a third party which would interfere with the intended use of the Recreational Facilities which have been installed. ~ c. There shall be no additional development of the Recreational Facilities (Attachment "A") or changing of the Recreational Facilities after they have been installed without prior written consent of the District and City, which consent shall not be unreasonably withheld. d. Dispute Resolution. If, from time to time, disputes arise which are not resolved through the efforts of the District's and City's representatives, then it is the intent of both the District and City in this Agreement to provide the following procedures to resolve disputes relative to maintenance and scheduling and other items of interpretation of the provisions of this Agreement. In the event of such a dispute, a representative of the District and a representative of the City, as appointed by the Board of Education and the City Council, shall meet and agree upon the appointment of a third person to assist in the resolution of the dispute. Such third party shall be any person mutually agreed to by both the District and the City representatives. If the dispute is not resolved through this procedure, then the matter shall be referred to a joint meeting of the District and City for resolution. ~ -6- zjp ACENDA ITEM NO._ PACE 1 Of: _L3 e. Binding on Successors. This Agreement shall be binding on and shall inure to the benefit of the administrators, successors, and assigns of District and City, but nothing contained in this section shall be construed as a consent by District to any assignment of this Agreement or any interest in this Agreement by City. ~ f. Recitals. The Recitals are incorporated into this Agreement as though fully set forth herein. g. Entire Agreement! Amendment. This instrument contains the entire agreement between the District and the City respecting the Recreational Facilities, and there are no other promises, conditions or other agreements, whether oral or written, between the parties. The Agreement may be modified or amended in writing, if the writing is signed by the parties obligated under the amendment. Said amendment shall subsequently become part of this Agreement for the remainder of term thereof. h. Severability. IT any portion of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall remain valid and enforceable. IT the court finds that any provision in this Agreement is invalid or unenforceable, but that by limiting such provisions would become valid and enforceable, then such provision(s) should be deemed to be written, construed and enforced as so limited. i. Waiver. The failure of either party to enforce any provision of this Agreement shall not be constituted as a waiver or limitation to that party's right to subsequently enforce and compel strict compliance with every provision of the Agreement. ~ J. Assignment. Neither District nor City shall sell, assign, or sublease its rights under this Agreement without the prior written consent of the other party. Consent in one instance shall not prevent this provision from applying to a subsequent instance. k. Cumulative Rights. The parties under this Agreement shall not be construed as exclusive unless otherwise required by law. 1. Governing Law. This Agreement shall be construed in accordance with the laws of the State of California 14. Authorization This Agreement has been approved and authorized to be executed by: Action of the Board of Education taken at its meeting of ,2006. ......., -7- ACENDA ITEM NO. CJ.-p PAC:: yO OF _...i:!:>. .r-- Action of the City Council taken at its meeting of ,2006. Executed on the date set forth below at Lake Elsinore, California. Attest: LAKE ELSINORE UNIFIED SCHOOL DISTRICT By: Secretary, Board of Education President Date: r-- APPROVED AS TO FORM: ,,-. -8- 7:J.-p AGENDA \TEM NO. . PACE-U- OF -L3. Attest: Frederick Ray, City Clerk APPROVED AS TO FORM: Barbara Leibold, City Attorney CITY OF LAKE ELSINORE By: Date: -9- Robert E. Magee, Mayor 24 AGENDA \TEM NO._, . . PAcedl ~ Of- -1-3 "wtt1II "wtt1II ...., ~ ~ ,,--... Attachment "A" - Lakeside High School Swimming Pool - Lakeside High School Shower/Restroom Area of Swimming Pool - Adjacent On-site Parking Areas For Community/Patron Use -10- alp AGENDA ITEM NO._r_ PACt:-1-3-C'~ /3